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Transcript of Investigating Whirlpool
Porter's Generic Strategies
Key Success Factors
Grand Strategy Matrix
Key Strategic Issues
Global kitchen appliance industry product sector includes refrigeration, cooking, washing appliances and dishwashers.
Mature, saturated market.
Market grew by 7.1% in 2012 to reach a value of $157.6 billion.
Forecasted to increase by 22.4% ($193 billion) by 2017.
over 65% of global appliance sales are through speciality retailers.
European market very highly regionalized with diversified preferences across countries.
In 2000 Asia was the second largest and fastest growing market.
Porter's Five Forces
What are the key strategic issues facing Whirlpool?
Is Whirlpool’s belief that it is necessary to become a global player in this industry correct?
If so, how important is it for them to gain first mover advantage?
- Strategic Approach: “Dominant Consumer Franchise”.
- Business structure: “Global Functional Structure” and employed cross-functional teams.
- Segmented their customers into six groups:
- Strategic approach: “Customers for life” strategy.
- Formed a wholly owned subsidiary to contract marketing and industrial activities to increase market volume, economies of scale and financial return.
Regionalised strategic approach
As one of the largest companies in this sector Whirlpool had to take action in order to maintain or improve their 35% market share in their domestic market
Their actions included aggressive global integration tactics and strengthening worldwide networks
Business Model, Direction and Position
Product and Branding
In a mature market global growth is a necessary path taken by Whirlpool
At certain times a strategic window may open for businesses where they get an opportunity to expand into new areas and can arise from:
preemption of assets
buyer switching costs
First Mover Advantage
- Entry strategy: Joint venture with Phillips
- Strategic approach: “Customer Focused Business” strategy.
- Business structure: “Global Functional Structure”.
- Operating in different countries incurred problems with differing customer requirements and norms so Whirlpool utilised their broad brand portfolio.
- Entry strategy: Joint ventures and Greenfield plants.
- Strategic approach: A pan-Asian platform, meet regional preferences which rested on the “Five Ps”:
- Business structure: A functional structure subdivided this market into
four operating regions:
North Asia based
Southeast Asia based including Australia and New Zealand.
Bartlett and Ghoshal
Washers and dryers
Central heating and cooling business
Product and Branding
Refrigerators and ranges
Wide range of products adapted to local needs (style/size)
Product reliability/Recognised brand?
Good energy ratings
Cost efficiency and financial strength
Differentiation (from mergers/acquisitions) can yield substantial price premium but imitation is rapid
Increase market share and knowledge (acquisitions)
Economies of scale
Cost efficiency – focused plants
Build relations - distribution, suppliers
Research and development - improve technology, innovation
Corporate and Business level contradictions - decline in performance
3 main key strategic factors:
Cosolidation of competitors
Advances in technology
Record earnings in 2013
It is correct that Whirlpool believe they should become a global player
It is more important to understand customers, manage innovation and adapt rather than to enter the market first
Rethink global sourcing and manufacturing strategies into a true global context
Focus on new channels in saturated markets such as
house contractors, hotels etc
Rivalry fierce in an oligopolistic market
Buyer power is moderate but weakened by low levels of loyalty and wide choice
Supplier power is moderate due to varying costs of raw materials
New entrants is weak due to fixed costs, industry standards and economies of scale
Substitutes weak as appliances are convenient but strengthened by sites such as freecyle and craigslist
Key: 1 (low) - 5 (high)
The industry as a whole strives to reduce costs.
The DCF approach - "when customers insist on our brands for reasons other than price, when they view our products as clearly superior to other appliances".
Super Efficient Refrigerator Programme
Whirlpool's foreign operations have evolved, maintaining a strong cost focus and adapting to specific regional environments.
to integrate our geographical businesses wherever possible, so that our most advanced expertise in any given area, isn’t confined to one location or division
In the late 1980s sales of microwave ovens tripled
Sales dropped drastically due to market maturation
General Electric dominated market share
Increase in sales
Whirlpool was strong
in this sector
Sold in mid 1980s following limited growth
Due to limited growth of established markets senior management decided, "
to remain focused on major home appliances but to expand into markets not already served by Whirlpool
...what we do differently to create value....
...create loyal customers
Key Success Factors
Goals and Objectives
- Cost efficiency
- Create successful relations with suppliers and distributors
- Continuous research and development
- Maintain or increase 35% market share
- Meet and exceed government environmental regulations
- Vertical integration to acquire businesses that have core competencies in areas that
Whirlpool lack e.g. Brasmotor
- Increase efficiencies and productivity in each business unit
- Expand global presence
- Integrate the Whirlpool network
- Regional product development to become a globally integrated group
- Cost advantage for early entrants
- Can generate substantial entry
barriers and industry standards
- R&D and patents
- Control assets
- Raise advertising costs for late movers
- Competitor "free ride" - experience, knowldege and education
- Unknown market increases risk
- Imitate at 65% of original cost
Lieberman and Montgomery 1988
Whirlpools aggressive global approach did not initially lead to profit, restructuring had time and financial cost.
Competitive advantage: INNOVATION