In 1986 appliance market in US was completely saturated. Whirlpool decide to expand its market into European market. They thought that there is similarity between two markets. Therefore, they believe that they have success in European market like in US market. Their strategy in Europe focus on brand segmentation and operational efficiency. They created a brand portfolio segmented by price. For example, Bauknecht is a high-end product while Inis is a low-end, value brand. The Philips/Whirlpool brand filled the middle range. In 1995, Whirlpool was the most recognized appliance brand name in Europe. Moreover, they also increased their operational efficiency through reducing costs, reducing the number of suppliers, and managers were regularly rotated between Europe and the United States. To do this strategy, in Europe, Whirlpool acquired Philips' Major Domestic Appliance Division, 47% in 1989 and the remainder in 1991. The Whirlpool strategy called for reversing the decline in European market share and improving profitability. In order to achieve this Whirlpool had to change product designs and manufacturing processes and also by switching to centralized purchasing. The successful transformation cut its list of 1,600 suppliers by 50% and it converted the national operations to regional companies. As I mentioned before, Whirlpool also reduce cost through three actions: + Economies of scale
+ Reducing the number of suppliers
+ Using common parts in its products
Initially, when intergrated with Philips, its margins doubled as predicted. However, local competitors responded by better tailoring their products and cutting costs; Whirlpool's profits began to decline. In 1995, Whirlpool’s European profit fell by 50% and in 1996, the company reported a $13 million loss in Europe. Why did they fail? Whirlpool failed to recognize the different competitors and distribution channels in Europe countries. This...