The world is experiencing a third wave in the economy and many changes are taking place. One of these changes is the growing corporation that decides to go global. Most U.S. companies, both large and small, are rapidly acknowledging the necessity of global marketing. The demand for foreign products in the fast-growing economies of Europe, South America, Asia, and Pacific Rim nations offer one example of the benefits of global thinking. One company that has adapted to this new economy by globalizing has been Whirlpool.
In 1989, Whirlpool Corporation embarked on an ambitious global expansion with the objective of becoming the world market leader in home appliances. However, by the mid-1990s, serious problems had emerged in the company’s international operations. Whirlpool’s European profit fell by 50%, lost $70 million in Asia, appliance sales in Brazil plummeted by 25% although the company invested hundreds of millions of dollars to modernize operations. In response to these problems, Whirlpool began to question the problems and called for the global restructuring effort (Johansson, 2000).
What went wrong with Whirlpool’s global strategy? Did Whirlpool have enough understanding of how to create a global strategy? Was the appliance industry more suited for regional than global? What are some key success factors in appliance industry that Whirlpool did not have? Was it possible for Whirlpool to identify the problems and reacted earlier? In this case study, I intend to answer all of these questions that are mentioned above regarding to the appliance industry and Whirlpool Global strategies. There are four separate sections in this paper- the first two questions are related to the appliance industry in general and the last two questions regard to specific questions on Whirlpool global strategies.
1. To What extent is the appliance market regional rather than global?
During the last half of the twentieth century, many barriers to international trade fell and a wave of firms began pursuing global strategies to gain a competitive advantage. However, some industries benefit more from globalization than do others, and some nations have a comparative advantage over other nations in certain industries. To create a successful global strategy, companies first must understand the nature of global industries and the dynamics of global competition.
The furniture industry is an example of an industry that did not lend itself to globalization before the 1960's. Because furniture has a high bulk compared to its value and because furniture is easily damaged in shipping, transport costs traditionally were high. Government trade barriers also were unfavorable. The Swedish furniture company IKEA pioneered a move towards globalization in the furniture industry. IKEA's furniture was unassembled and therefore could be shipped more economically. The company also lowered costs by involving the customer; the customer carried the furniture home and assembled it himself (Babyak, 1995).
The differences between regional and global market concept in the appliance industry certainly play a big part. In the regional market, products are customized for each market, and local-decision-making puts enormous impact on companies. Product differentiation, local responsiveness, minimized political risk, and minimized exchange rate risk are just few advantages of the regional market concept. On the other hand, the global market favors centralized control, which little decision making authority on the local level. Reduced costs, coordinated activities, faster product development are the advantages over regional market.
I strongly believe that the appliance industry is regional than global in terms of product customization and competitions. 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...