Micro Economic Paper Whirlpool

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  • Topic: Economics, Whirlpool Corporation, Maytag
  • Pages : 5 (1473 words )
  • Download(s) : 64
  • Published : March 6, 2012
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The four economic concepts I employed in my report are:
1. Cost Control
2. Pricing Strategy
3. Fighting competition through innovation & branding
4. People

I previously worked for the home appliance industry Whirlpool Corporation for about six years. The corporate office of Whirlpool is in Benton Harbor, Michigan in the United States. Whirlpool transformed itself from a regional manufacturing and trade-focused business into a global enterprise, with more than 80,000 employees and over 60 manufacturing and technology research centers worldwide. In 2006, Whirlpool made an aggressive move to strengthen its increasingly competitive global home-appliance industry by acquiring the Maytag Corporation for $2.7 billion. This move made Whirlpool the world's leading manufacturer and marketer of major home appliances, with annual sales of approximately $20 billion. However, Whirlpool is facing significant economic challenges. The US and Europe home appliance market have reached saturated penetration rates. Their population growth has been on a decline that means that the scope of future growth in these regions is limited. The burst of the bubble in the housing market in the United States and the global recession in 2008 significantly reduced the demand for home appliances. Whirlpool realized that in order to sustain growth, it needed to target areas of high population growth rates, which included the rapidly expanding economies and income of Asia and Latin America. Back in mid-1990, Whirlpool established a global presence into these emerging markets through significant financial investments and joint ventures. Unfortunately, the business people of Korea and Japan saw the growth potential in this area and started to make an aggressive move into these emerging markets in early 2000. LG and Samsung of Korea and Matsushita of Japan, both have been working hard to introduce new products and launch them at a financial loss just to penetrate into the market first. Although Whirlpool is not capable of taking such financial measures, recently, the CEO of Whirlpool initiated some economic strategies to manage current challenges.

Cost Control
In 2009, Whirlpool implemented the P3B initiative. This initiative put expectations on the company to save $1 billion dollars, globally, per year for the next three years. To meet to this challenge, Whirlpool restructured its organization to be more product and customer focused. There was enormous consolidation of plants globally to achieve economies of scale, product synergies and strong brand presence. They shifted labor-intensive manufacturing products to low cost countries helped to increase productivity and reduce operating cost. Design engineers standardized product design to tailor to local needs. This allowed for the standardized product to be used in different countries with minimum modifications or adaptations. Applying six sigma and lean initiatives, has transformed Whirlpool to be more quality-focused organization. These quality improvement tools have helped the organization reduce the overall cost for poor quality and to streamline its operations and eliminate defects. Thereby, increasing customer satisfaction and enhancing its bottom line. The purpose for these improvements is to have marginal revenue equal to marginal cost in order to maximize overall profitability.

Pricing Strategy
Global competition has made choosing the right price one of the most important and difficult challenges for Whirlpool. Global customers buy on a centralized basis, taking advantage of a discount of large volume. Having a single global procurement agency makes it easier...
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