Rather like the car industry, there are few UK-based consumer electronics companies that can hold their own against the Germans and the Japanese when it comes to mass-market brand names.
Alba is proving to be something of an exception. The ambitious Essex group has agreed to buy Grundig of Germany, which has recently fallen on hard times.
From April Alba will add Grundig to a stable of brand names, either owned outright or used under licence, that already includes Bush, Goodmans, Breville, Roadstar and the Nicky Clarke range of hair care equipment.
Alba’s business model is in tune with the spirit of the age, if you subscribe to the view that owning the means of innovation is more valuable than owning the means of production.
Most of its engineers are product designers and developers who create devices that appeal to consumers in the mid-price to cheap-and-cheerful end of the market.
Most of its manufacturing is done at low cost in the Far East, with the finished products re-imported for sale in the UK.
Its TVs, DVD players and other domestic appliances typically end up piled high in supermarkets and high-street electrical outlets.
The UK accounts for the vast majority of Alba’s sales, which is why the Grundig deal is seen as a key step for the company.
The German business is languishing in administration, but still managed to generate sales of e778m (£530m) in 2002.
It is also one of Europe’s best-known names in consumer electronics, and will give Alba a significant foothold outside the UK market.
Together with a joint venture partner, Turkish electronics group Beko, Alba will pay a maximum of e80m for a range of Grundig’s assets. These include the German company’s patents, trademarks, brand names, tooling and sales networks.
If the deal gets the go-ahead from German competition authorities, it will be a very good business move for Alba. The company has already said that if the takeover does go through it will make significant savings by closing Grundig’s existing TV manufacturing unit.
Further economies of scale will accrue by streamlining Grundig to fit in with Alba’s existing operations, and the UK group hopes that the newly-acquired business will be a net contributor to its profits within a few years.