We want to be able to take the best capabilities we have and leverage them in all our companies worldwide. David Whitman, Whirlpool CEO, 1994
Quoted in the Harvard Business Review
In 1989, Whirlpool Corporation (Whirlpool) embarked on an ambitious global expansion with the objective of becoming the world market leader in home appliances. Beginning with the purchase of a majority stake in an appliance company owned by Philips, the Dutch electronics firm, Whirlpool purchased a majority stake in an Indian firm, established four joint ventures in China, and made significant new investments in its Latin America operations.
However, by the mid-1990s, serious problems had emerged in the company’s international operations. In 1995, Whirlpool’s European profit fell by 50% and in 1996, the company reported a $13 million loss in Europe. In Asia, the situation was even worse. Although the region accounted for only 6% of corporate sales, Whirlpool lost $70 million in Asia in 1996 and $62 million in 1997. In Brazil, Whirlpool found itself a victim in 1997, and again in 1998, of spiraling interest rates. Despite the company’s investments of hundreds of millions of dollars throughout the 1990s to modernize operations there, appliance sales in Brazil plummeted by 25% in 1998. Whirlpool expected that 1999 would be the third straight year of declining sales for the Brazilian subsidiary. In response to these problems, Whirlpool began a global restructuring effort. In September 1997, the company announced that it would cut 10% of its global workforce over the next two years and pull out of two joint ventures in China. In announcing the cuts, Whirlpool’s CEO David Whitwam said, “We are taking steps to align the organization with the marketplace realities of our industry.”1 In Latin America, 3,500 jobs were abolished, and significant investments were made to upgrade plants and product lines.
After the optimism of the early 1990s, what went wrong with Whirlpool’s global strategy? Was the company overly ambitious? Was there a lack of understanding about how to create an integrated global strategy? Or, were the problems the result of changes in the competitive and economic environments in Europe, Asia, and Latin America? Should Whirlpool have foreseen the problems and reacted earlier?
C. Quintanilla and J. Carlton, “Whirlpool Announces Global Restructuring Effort,” Wall Street Journal, 19 Sept. 1997: A3, A6.
Copyright © 2000 Thunderbird, The American Graduate School of International Management. All rights reserved. This case was prepared by Meredith Martin, Simon Algar, and Vipon Kumar under the supervision of Professor Andrew C. Inkpen for the purpose of classroom discussion only, and not to indicate either effective or ineffective management.
The Appliance Industry in the late 20th Century
Approximately 120 million home appliances are sold in developed countries each year.2 The appliance industry is generally classified into four categories: laundry, refrigeration, cooking, and other appliances. Appliances are constructed in capital intensive plants, and design usually varies among countries and regions.
The North American Industry
Although it was estimated that 46 million appliances were sold in North America annually, the market was expected to grow little in the late 1990s. Saturation levels were high, with virtually 100% of households owning refrigerators and cookers and over 70% owning washers. Because of the limited growth opportunities, competition was fierce. In the United States, the industry had consolidated in the 1980s, leaving four major competitors: Whirlpool, General Electric, Electrolux, and Maytag (see Exhibit 1 for more detail). These four firms controlled about 80% of the market.3 Each firm offered a variety of products and brands segmented along price lines. Distribution of these appliances was generally through sales to builders for new houses...
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