1989 Ambitious global expansion emerged:
•Objective: becoming the world market leader in home appliances. •Purchase of a majority stake in an appliance company owned by Philips. •Purchased a majority stake in an Indian firm.
•Established four joint ventures in China.
•Made new investments in its Latin America operations.
1990 Serious problems emerged in the international operations: •1995 European profit fell by 50 percent.
•1996 Reported $13 million loss in Europe.
•1996 Whirlpool lost $70 million in Asia.
•1997 Lost $62 million in Asia.
•1997/1998 Victim of spiraling interest rates in Brazil.
•1998 Appliance sales in Brazil plummeted by 25%.
•1999 Third straight year of declining sales in Brazil.
1997 In response to these problems, Whirlpool began a global restructuring effort: •Announced that it would cut 10 percent of its global workforce over the next two years. •Pulled out of two joint ventures in China.
•In Latin America 3,500 jobs were abolished and significant investments were made to upgrade plants and product lines.
What went wrong with Whirlpool’s global strategy?
Appliance industry in the late 20th century
The appliance industry is in general classified in 4 categories being laundries, refrigeration, cooking and other appliances, usually varies among regions. An overview of the regions US, Latin America, Europe and Asia:
The US market:
•World’s largest home appliance market
•Highly consolidated, there are only four players
•High saturation level of the market, therefore limited growth opportunities. •Focus should be on cost reduction, productive efficiency, and product quality as well as product innovation. •Focusing primarily on replacement purchases and purchases for new housing development.
The European market:
•Market structure is in a trend to become more concentrated. •Mature market with a high concentration rate (70% market share for the five largest firms). •Highly regionalized industry, consumer preferences vary from country to country •Distribution mainly through independent retailer.
•Retailers have more bargaining power.
•Upcoming trend that low-end products gain more market share.
The Asian market:
•Second largest home appliance market
•Fastest growing market, with annually growth rates between 8 and 12%. •Customer preferences are different from US and European market. •Traditionally distributed through small retail shops but beginning to shift to big retailers. •In Asia the market penetrations varies.
Whirlpool was founded in 1911 as The Upton Machine Co. in St. Joseph, Michigan, to produce an electric motor-driven wringer washer. The Whirlpool brand was introduced in 1948 and trough a series of acquisitions and mergers, the company emerged as a leading force in the U.S. appliance industry with annual revenue reaching $2 billion in 1978. As of 1998, Whirlpool Corporation manufactured in 13 countries and marketed its products under 11 major brand names to over 140 countries. Sales were $8.2 billion in fiscal year in 1997.
Globalization of Whirlpool
By the mid 1980’s, Whirpool saw that its profit margins were rapidly decreasing in North America. Top management settled on further global expansion for two main reasons: the company wished to take advantage of less mature markets around the world and it did not want to be left behind its competitors, which had already begun to globalize.
Whitwam’s vision and Platform Technology
Whitwam vision was to integrating Whirlpool’s geographical business so that the company’s expertise would not be confined to one location or product. He wanted to standardize the company’s manufacturing processes and produce single Appliances that could be sold anywhere.
Given the view that standardization should be the focus, Whirlpool planned to base all its products, wherever they were built or...