In its foreign operations in the early 1900s, Ericsson failed in its ambition to establish itself in the US, the birthplace of the telephone, despite the fact that conditions were more stable than in many of the European countries where the company started manufacturing plants. The background to Ericsson's failure in the US is as follows.
When British operations proved successful, Ericsson hoped that a similar initiative would blossom in the US. As in Great Britain, Ericsson decided to expand an existing sales office into a telephone production plant, which began operations in Buffalo, New York, in 1907. Because the mighty Bell companies, market dominance increased at the expense of independent telephone companies, order volumes at the Buffalo plant never grew to any significant extent, and the business reported a loss.
In conjunction with a reorganization of operations in Buffalo in 1914, Ericsson decided that production should be focused primarily on ignition systems for cars, but these operations were also loss-generating. Lacking operating capital and following various deliberations, the company was forced to discontinue operations in 1920. In early 1923, Ericsson sold all its American assets. At that time, the total loss for Ericsson amounted to nearly SEK 9 million. Ericsson's operations in the US thus developed in a completely different direction than other operations in Sweden, Russia, Great Britain and Central Europe.
What was the reason for Ericsson's failure in the US? The answer must be sought in a combination of all too optimistic market forecasts and an underestimation of the Bell companies market dominance, a lack of synchronization with production in other Ericsson companies, an erratic business strategy for the Buffalo plant and financial lassitude on the part of the parent company.
It is interesting in this connection to compare the development of Ericsson in Buffalo with AB Separators American subsidiary in New York. Despite competition from many large enterprises in the US agricultural machinery industry, Separators US subsidiary controlled one third of the US separator market in 1900. Through its US subsidiary, Separator in Stockholm received much valuable information about conditions in the separator industry in the US.
Because Ericsson in Buffalo soon began producing other products than telephones, the company did not closely monitor the development of automatic telephone systems in the US. If telephone manufacturing had been retained in Buffalo, it would have been possible to follow US developments at close range. The company could have acted as an important information channel for senior management in Stockholm. Discontinuation of telephone manufacturing in Buffalo was therefore one of the reasons why Ericsson in Stockholm during the 1910s lost valuable information about American automation technology that could have been strategically important for its own operations.
Author: Jan Kuuse