Thread: CASE STUDY - QUESTION - Whirlpool

Globalization Headaches at Whirlpool
Discussion Questions:-
1. To What extent is the appliance market regional rather than global?
We believe that the appliance industry is regional than global in terms of product customization and competitions. In the regional market, products are customized for each market, and local-decision-making impacts the companies. For example, in Europe refrigerators tend to be smaller than in the U.S., have only one outside door, and have standard sizes so they can be built into the kitchen cabinet. French are concerned about the refrigerator’s capacity to keep fruit and vegetables fresh while Spanish are concerned with meats. In Japan, refrigerators tend to have several doors in order to keep different compartments at different temperatures and to isolate odors. Also, because houses are smaller in Japan, consumers desire quieter appliances. The Danes need to spin-dry clothes while Italians often line-dry due to its different climates. The British are more concerned with well constructed products while Italians and Germans are concerned with childproof safety and the environmental friendly features.
If Whirlpool do not meet these local needs and customer specifications in these regional markets than it would be difficult for it to compete globally. For example, there are 300 local manufacturers in developed markets like Europe. This is another reason why the appliance market, require more regional focus, if it has to achieve success globally.
However, Whirlpool has to go Global to maximize profit margin. There is huge market for appliances in developing countries .The appliance sales were growing at double-digit percentage rates in developing countries. Because of the different preferences of consumers in different markets, Whirlpool has to understand and meet the regional requirement first to be successful globally.

2. What seem to be the key success factors in the appliance business?
The key success factors in the appliance business are to come up with innovative products, cut cost, operating more efficiently. Cutting cost is the most important factor in the appliance business. According to G.E. Appliances CEO David Cote, “This industry doesn’t reward investment, so we have to spend money sparingly and carefully.”
Example- Maytag cut cost by revising its suppliers. Sourcing down its 936 suppliers in 1996 to 135 suppliers in 1999. GE also concentrated on cutting cost by creating joint ventures with companies abroad like Godrej and Philacor. Through this successful partnership with these suppliers, GE was able to cut cost and generate $6.4 billion in sales in 1996.
Introducing innovative products continuously is another important factor in the appliance business. For example- Whirlpool introduced new product line-up in clothes washing, refrigeration, air conditioning and cooking in order to stay competitive in the market.
3. Are Whirlpool’s difficulties with its global strategy due to internal factors or to external factors beyond its control?
Both internal and external factors in different countries created enormous difficulties for Whirlpool.
External Factors like – Hyperinflation in Brazil, as a result, Whirlpool's appliance sales in Brazil fell sharply by about 25 percent in 1998. Mexico’s peso devaluation crisis declined the sales figure for Whirlpool.
Cultural difference is another factor that caused difficulties for Whirlpool. Europe refrigerators tend to be smaller than in the U.S., have only one outside door, and have standard sizes so they can be built into the kitchen cabinet. In Japan, refrigerators tend to have several doors in order to keep different compartments at different temperatures and to isolate odors. Also, because houses are smaller in Japan, consumers desire quieter appliances.
Another example, The DOE had been prodding manufacturers to produce front-loading washing machines. The green movement is a major market issue in Europe, and consumers will evaluate appliances in terms of their energy efficiency, water conservation, compact size, uses of recyclable materials, nature of packaging material used, and environmental consciousness of the manufacturer. Whirlpool failed to understand this type of external factors, and it resulted the decline of sales.
Internal factors -
Whirlpool failed to recognize the different competitors and distribution channels in Europe countries. Europe was extremely fragmented into different countries and hence not easy to achieve economies of scale. The internal factors, such as manufacturing inefficiencies, start-up costs associated with production of a redesigned mid-size refrigerator and restructuring of the pan-European sales forces, also created many complexity for the company.

4. To what extent does Whirlpool experience suggest that globalization is not a good idea in the appliance business? Explain fully.
There are many reasons why Whirlpool experiences suggest the globalization is not a good idea in appliance business:
•Fragmented distribution network in Europe
•Different consumer needs and preferences. For example, in Europe refrigerators tend to be smaller than in the U.S., have only one outside door, and have standard sizes so they can be built into the kitchen cabinet. In Japan, refrigerators tend to have several doors in order to keep different compartments at different temperatures and to isolate odors. Also, because houses are smaller in Japan, consumers desire quieter appliances.
•Whirlpool already was the dominant player in a fragmented industry.
•High costs due to tailored products in Europe and Asia.
•The innovation from the local R&D groups resulted in products that were R&D driven instead of market driven.
•External and internal factors.
In 1995, Whirlpool’s European profit fell by 50% and in 1996, the company reported a $13 million loss in Europe. In Asia, the situation was even worse. Although the region accounted for only 6% of corporate sales, Whirlpool lost $70 million in Asia in 1998 and $62 million in 1997. In Brazil, Whirlpool found itself a victim in 1997, and again in 1998, of sky-rocked interest rates.
Whirlpool had extremely difficult experiences in globalizing their market because the company did not meet the customer preferences. For example, Swedes preferred galvanized washing machines to withstand the damp salty air. The British washed their clothes more often than the Italians did, and wanted quieter machines. The French liked to cook on gas at high temperatures, splattering grease on cooking surfaces, and so preferred self-cleaning ovens, while the Germans liked to cook on electric stoves at lower temperatures and did not need such features These external factors put numerous pressures on Whirlpool.

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