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International Business: Cases
Case 1: Whirlpool
Whirlpool’s Dramatic Turnaround through Internationalization Whirlpool exemplifies how internationalization can rejuvenate declining sales and optimize cost structures. Background Headquartered in Benton Harbor, Michigan, Whirlpool Corporation makes washers, dryers, refrigerators, dishwashers, freezers, and microwave ovens in 13 countries and sells them in 170 others, under brands names such as Whirlpool, Maytag, Magic Chef, Jenn Air, Amana, KitchenAid, Kenmore, Brastemp, and Bauknecht. In 2006, Whirlpool acquired competitor Maytag (horizontal integration) and its brands (Amana, Jenn Air, Magic Chef, and Maytag). Whirlpool generated over $19 billion in 2006 annual sales: 60 percent from North America, 25 percent from Europe, 15 percent from Latin America, and 2 percent from Asia. Operate with 60 manufacturing and technology centers worldwide and 80,000 employees. International Expansion Domestically: (1) The U.S. appliance market matured in the 1990s, and Whirlpool faced low profit margins, intense competition, and more demanding buyers, pressuring management to consider international markets. Internationally: (1) Trade barriers fell, consumer affluence grew, and capitalism flourished. (2) A “global” approach would yield economies of scale in manufacturing, assembly, appliance technology and distribution. (3) Whirlpool sought cost reductions in R&D, manufacturing, and services by locating plants in lower cost locations such as China, Mexico and Poland. Strategy Global expansion Whirlpool: Acquired the appliance giant Philips in Europe Bought 65 percent of Italian cooling compressor manufacturer Aspera Acquired control of Kelvinator of India Purchased Poland's second largest appliance maker Formed a joint venture in China to produce air conditioners. Established a corporate headquarters and product development/technology center in Shanghai Opened regional offices in Hong Kong, New Delhi, and Singapore Acquired Vitromatic, a former joint venture partner in Mexico Developed low cost versions of popular models to target customers in low income emerging markets such as Latin America, China, and India Created subsidiaries to sell and service appliances in Bulgaria, Hungary, Romania, Russia, Slovakia, and the Czech Republic Innovation 1999 Whirlpool launched a differentiation campaign to distinguish it from the other “sea of white” appliances. A knowledge management intranet site yielded high potential, innovative ideas from the global workforce. Since 2003 revenue has quadrupled annually. Local Preferences Cross regional R&D teams collaborate to adapt innovations to local demands.
Whirlpool struggles to remain a world class player in a key industry, and continually faces new challenges. For example, Haier, China’s largest appliance maker, has captured 20% of the window air conditioning and 50% of the small refrigerator markets. The opportunities of emerging markets must be balanced with the threats of global rivals (from China and elsewhere) competing in their home market. 1. What is the nature of Whirlpool’s international business environment? What types of risk does the firm face? Environment: Complex and risky All FOUR types of risks in international business: Cross cultural risk Whirlpool manufacturers in 13 countries and sells in 170 others. Differences in language, lifestyles, attitudes, customs, and religion, where a cultural miscommunication jeopardizes a culturally valued mindset or behavior. Cultural blunders hinder the effectiveness of foreign managers. Language critical dimension of culture a window to people’s values Language differences impede effective communication. Cultural differences may lead to suboptimal business strategies. Country risk (also known as political risk) Differences in host country political,...
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