SKF Bearings Series – Case Analysis- C6

SKF Bearings that was started by chance had been through a journey from scratch to
becoming the world’s leading bearing company. The CEO Mauritz Sahlin has envisioned a
need for restructuring of the company. The company is trying to change its orientation from a
product focused strategy to a market focused one.
Currently the consumers of the company are categorised as

Sales
Automotive OEM
32%
41% 32%

27% Machinery OEM

27%

Automotive OEM Machinery OEM

Aftermarket
Aftermarket
41%

Proposed restructuring
It was proposed to split the organisation into 3 teams.
1) Bearing Industries: Producing “standard bearings” for OEM’s both machinery and
automotive and sale in the countries where factories are located.
2) Bearing Services: Formed from the global sales organisation to cater to the
aftermarket customer segment and small OEMs
3) Speciality Bearings: Customised products for various other industries like aerospace,
medical equipment etc.

Need for restructuring

 More potential of sales in the aftermarket. The Cash cow or the most profitable
customer segment of the company.
 Myopic push strategy followed – no customer need gap analysis – no long lasting
differentiation
 No particular preference for SKF brand in the after market
 Aftermarket: The distance to the final user is longer and customers prefer the
independent distributors whereas pour own distributors in the vehicle aftermarket
contribute only 3-4%
 Changing purchase patterns - garage and fleet owners shifting their business to the
independent distributor
 Limitations with the current strategy:
 Reduced scope for further differentiation
 Can’t pull out cash from the R&D department
  Customer orientation to prevent the undetected decay and be in the continuous
growth phase.

Evaluation of restructuring
 The restructuring according to the customization and specialization levels makes
sense. Since the processes in each of these business units would vary greatly , it might
provide more operational ease and manufacturing flexibility to keep these units
separate according to the different customer segments they cater to
 Customers with distinct needs and purchase behaviors targeted differently through the
various divisions.
 Bearing services – aftermarket and small OEMs focused – potential cash cows
 Benefits of customer orientation over production orientation: prevent undetected
decay

Strategy
 Customer centricity through marketing efforts and a dedicated Bearing services team
for the aftermarket
 Marketing given equal emphasis as production unlike the trends of the time
 SKF should view the distributors as a channel in the supply chain to reach the end-
customers
 A separate profit center will enable SKF to measure the Aftermarket’s segment
performance.
 SKF bearings’ quality should translate into a preferred brand by the customers
 Fast and efficient services to be value addition

Implementation
 The Bearing Services may be further divided into two divisions – one each for
Industrial and Automotive for better coordination and control over profitability.
 Customer should be the end users not just the distributors because it is the final
customers who are unpredictable and uncertain
 It is important to place friendly peers at the interfacing departments of each business
unit.
 As decided by Sahlin, the push for sudden and monumental changes are not to be
implemented as they are aiming at service which needs a longer timeline.
 Convincing people is the major challenge here to orient them towards Marketing.
Change the attitude of employees from believing that the manufacturing function held
higher precedence over the marketing function.