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Whirlpool's Quest for Global Leadership

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by

A Sheikh

on 20 March 2014

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Transcript of Whirlpool's Quest for Global Leadership

Whirlpool’s Quest for Global Leadership
Who is Whirlpool?
Is it correct for Whirlpool to believe that becoming a global player in this industry is necessary?
Who is Whirlpool?
A financial perspective
Leads to job cuts to the developing countries, weakens environmental policies and weakens policies in labour
Nationalization
Economies are unpredictable, economic risk presents executives with tremendous challenges.
What sells well in one country may not necessarily sell well in another.

Increases sales and profits
Generates economies of scale in production.
Enhances local competitiveness and paves the way to larger, more lucrative customers.
Cuts costs through global outsourcing.
Reduces dependence on existing markets.

Highlighted figures are 'total revenue generated'.
We'll take questions now.
Arshi, Faraz, Filsan, Gregg
"Without pre-rinsing.... adjustable racks...". Convenience for the consumer.
"Dishwashers that help...Quietly yet so powerfully". Consumer's expectations of appliances.
During the 1980s, their objective was to focus on major home appliances, but to expand into markets not already served by Whirlpool.



Their strategy consisted of better understanding of consumer needs, improving product quality and keeping costs low.

Objective was to become more consumer-orientated.​

Who is Whirlpool?
Their strategy involved gaining a better understanding of customer needs, improving product quality. Keeping costs low was considered necessary, but was not enough on its own.
1. What are Key Strategic Issues facing Whirlpool?
2. Is Whirlpool's belief that it is necessary to become a global player in this industry correct and if so,
how important is it for them to gain first mover advantage?
Overview
1911 - Founded as Upton Machine Company
1929 - Merged with Nineteen Hundred Corporation
1950 - Renamed Whirlpool Corporation. Post-war boom.
A closer look at what's to come.
First top-loading automatic washer sold.
1984 - Concluded a 2-year study and adopted a plan for the next 5 years.
Globally leading manufacturer of household appliances.
Washers and dryers
Microwave ovens
Refrigerators
Ranges and ovens
Appliances such as:
"Without wasting time". Saves time, efficient.
"You and Whirlpool... How to make a home run". Consumer-focused objective and household penetration.
US market (1995)
•Generally classified as laundry, refrigeration, cooking and other appliances.
•Distribution of appliances were made directly through to home builders or indirectly through local builder suppliers.
•Retail sales represented 2nd distribution channel.
•The consolidated appliance distribution led to 45% of total appliances being sold through 10 mega retailers.
•The introduction to microwave ovens led to a point where manufacturers realised they must offer a complete line of appliances.
•In 1995 5 major competitors had control of the appliance market with 98% control.​
Manufacturing costs high (75% of operating cost), scale-sensitive.
Key Strategic Issues
Introduction.

Globalisation of Whirlpool and Industry.
Conclusion
Inside the market (1994).
Total revenue has risen
substantially
over the nine years.
Cost of raw materials increased. Expanding globally allows exploitation of other regions' resources.
Patents do not last longer than a year. Risk of imitation due to intensive competitive rivalry.
Domestic market was saturated (majority owned by major five competitors), with annual market growth being merely 3%. Highly competitive rivalry also.
In 1995, 5 major competitors had control of the appliance market with 98% control.
The industry leaders owned the vast majority of the market for each home appliance with the exception of the microwave oven.
This segment was controlled by far east competitors from Korea and Japan. Which led to a growing concern of foreign competitors expanding into other segments.
Generally classified as laundry, refrigeration, cooking and other appliances.
Distribution of appliances were made directly through to home builders or indirectly through local builder suppliers.
Retail sales represented 2nd distribution channel.
The consolidated appliance distribution led to 45% of total appliances being sold through 10 mega retailers.
The introduction to microwave ovens led to a point where manufacturers realised they must offer a complete line of appliances.

PEST Analysis (Regional)
Political: Changes in Europe integrated the countries into the world trade system; the EU.
Economic: Markets were made up of smaller individual markets corresponding to their respective countries; many featured strong competitors.
Social: Consumer preferences vary amongst countries.
Technological: Products faced acceptance problems in European markets. Innovation.
Political: Two largest markets; China and India.
Economical: Huge competition in face of local producers
Social: World’s most populous states India and China
Technological: Intensive development of technology in general and in home appliance industry in particular

Political: Political instability in Latin America
Economy: Hyperinflation and economic mismanagement
Social: Low labour cost
Technological: Same products as in US produced locally
Whirlpool’s characteristics
Disadvantages/ advantages of being a global company.
What can Whirlpool gain by being a first mover?
Get control over new entrants through:
Knowledge of the market
Existing Market share
Established distribution channel
Brand loyalty
Best retail outlets
Home appliance industry.
Globalisation of home appliance industry.
Conclusion
Key Strategic Issues:
1958 -Entered Brazil via partnership with Brazil's Brasmotor S.A.
Later - International expansion into Mexico and several acquisitions/ mergers.
1990s - Accelerated global expansion into Europe, Latin America, Asia and parts of Africa.
Europe
Latin America
Asia
High costs attributable to
manufacturing
and
raw materials.
with low annual growth.
Domestic market saturated
Global presence:
Economic and political risks
Benefits outweigh the drawbacks.
First mover advantage:
Advantageous as it allows for
when entering foreign markets.
growth, brand loyalty and access to
patents.
Full transcript