GLOBALIZATION AT WHIRLPOOL

1. GLOBALIZATION AT WHIRLPOOL 06国贸3班 组员：3206004427邝乃英(question3) 3206004428黎丽仪(question1,2) 3206004429李曼丽(question5) 3206004430梁玉婷(question4)

2. 1）To what extent is the appliance market regional rather than global?（黎丽仪） • 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.

3. 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 cabinet. In Japan, refrigerators tend to have several doors in order to keep different compartments at different temperatures and to isolate odors. Also, because houses are smaller in Japan, consumers desire quieter appliances.

4. It would be extremely difficult for a home appliance company, such as Whirlpool, to compete in these countries if it does not meet these specific requirements. Furthermore, 300 local manufacturers in developed markets like Europe created very intensive competitions. This is another reason why the appliance market was not very attracted to go global.

5. What Whirlpool did first to transform a largely domestic operation into a global powerhouse was purchasing the European appliance business of Dutch consumer goods giant Philips Electronics. • The Whirlpool strategy called for reversing the decline in European market share and improving profitability. In order to achieve this Whirlpool had to change product designs and manufacturing processes and also by switching to centralized purchasing. The successful transformation cut its list of 1,600 suppliers by 50% and it converted the national operations to regional companies.

6. 2）What seem to be the key success factors in the appliance business?（黎丽仪） • The key success factors in the appliance business are to cut cost, produce innovative products continuously, and meet or exceed customer preferences. These are factors that all appliance businesses intend to focus on. In my opinion, cutting cost is the most important factor in the appliance business.

7. Introducing innovative products continuously is another important factor in the appliance business. Whirlpool also introduced new product line-up in clothes washing, refrigeration, air conditioning and cooking in order to stay competitive in the market • Customer satisfaction is also a very important factor. Customer preferences differ from market to market, and meeting these requirements is very essential to many companies. For example, Danes need to spin-dry clothes while Italians often line-dry due to its different climates. The British are more concerned with well constructed products while Italians and Germans are concerned with childproof safety and the environmental friendly features.

8. These three key factors are very essential to any companies that are involved in the appliance market. In order for a company to aggressively lower the costs, it needs to focus on improving efficiency and productivity. Generating quality innovated products and creating these products adjust to customer preferences are also important in order to survive in the appliance market.

9. The case question is: • 2. Are Whirlpool’s difficulties with its global strategy due to internal factors or to external factors beyond its control? • 邝乃英

10. The Solutions are as follows: • Both internal and external factors in different countries created enormous difficulties for Whirlpool. • First，.The external factors -- the global financial crisis extended… • I would like to take a look at external factors that put negative impacts on Whirlpool. As the global financial crisis extended from Asia and Russia into Latin America, Whirlpool's Brazilian operations have been thrown into chaos. To guard against an attack on its currency, Brazil doubled interest rates in October 1997 and again next autumn after they had slowly fallen back. As a result, Whirlpool's appliance sales in Brazil fell sharply by about 25 percent in 1998.

11. In a battle to increase the Brazilian market, the company has invested hundreds of millions of dollars to modernize and reduce costs in Brazil and consolidateits position as the market leader in refrigerators, room air-conditioners, and washers (Janesurak, 1995).

12. Second，other external factors -- The language issues and cultural differences… • The language issues and cultural differences are other external factors that created difficulties for Whirlpool across Europe and Asia. • The language barrier is the biggest problem with many U.S. companies that are trying to invest abroad. It is extremely difficult to negotiate and communicate business deals between different languages. I know for a fact that sometimes it is impossible to translate the complete meaning of one language to another.

13. Cultural difference is another factor that caused difficulties for Whirlpool. As I mentioned earlier, 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 cabinet. In Japan, refrigerators tend to have several doors in order to keep different compartments at different temperatures and to isolate odors. Also, because houses are smaller in Japan, consumers desire quieter appliances. • Another example, the green movement is a major market issue in Europe, and consumers will evaluate appliances in terms of their energy efficiency, water conservation, compact size, uses of recyclable materials, nature of packaging material used, and environmental consciousness of the manufacturer. Whirlpool failed to understand this type of external factors, and it resulted the decline of sales (Quintanilla & Carlton, 1997).

14. Third, the internal factors -- the different competitors and distribution channels • Some of internal factors also existed for Whirlpool across Europe and Asia. • Whirlpool failed to recognize the different competitors and distribution channels in Europe countries. This type of internal factors created manufacturing inefficiencies. One concern over Europe was that it was extremely fragmented and hence not easy to achieve economies of scale.

15. In Japan, there was already a strong presence of Japanese appliance manufacturers although Japan was also a site for potential growth. Whirlpool acquired Philips' Major Domestic Appliance Division, 47% in 1989 and the remainder in 1991. • Initially, margins doubled as predicted. However, local competitors responded by better tailoring their products and cutting costs; Whirlpool's profits then began to decline. Whirlpool applied the same strategy to Asia, but GE was outperforming Whirlpool there by tailoring its products as part of its regional strategy (Johansson, 2000).

16. My idea is that face to its global strategy ,Whirlpool should correct its attitudes: • The European countries may be fragmented, but there is evidence that there is increased future collaboration amongst the countries and their purchasing decisions. • In my opinion, Whirlpool can cut costs by vertically integrating its components and changing only the exterior of the appliances if necessary. • Moreover, I strongly believe that the joint venture with Phillips would benefit Whirlpool due to Phillip抯 strong international presence and its strong appliance division. Whirlpool should consider concentrating on expansion in Europe and Asia with the solutions for these external and internal factors that caused the company complexity. • 邝乃英

17. To what extent does Whirlpool’s experience suggest that globalization is not a good idea in the appliance business? Explain fully. 4 梁玉婷 QUESTION

18. 梁玉婷 Here are some key points. • Fragmented distribution network in Europe • Different consumer needs and preferences • External and internal factors that mentioned on Question 3 • High costs due to tailored products in Europe and Asia. • The innovation from the local R&D groups resulted in products that were R&D driven instead of market driven

19. 梁玉婷 Where there's smoke, there's fire. In my opinion, there are many reasons why Whirlpool experiences suggest the globalization is not a good idea in appliance business. Now, let me mention some difficulties that Whirlpool faced in its globalization.

20. 梁玉婷 Whirlpool’s failed experiences • In Europe , in 1995, Whirlpool European profit fell by 50% and in 1996, the company reported a $13 million loss . • In Asia, the situation was even worse. Although the region accounted for only 6% of corporate sales, Whirlpool lost $70 million in Asia in 1998 and $62 million in 1997. • In Brazil, Whirlpool found itself a victim in 1997, and again in 1998, of sky-rocked interest rates. Despite the company investments of hundreds of dollars throughout the 1990s to modernize operations there, appliance sales in Brazil plummeted by 25% in 1998.

21. 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 cabinet. In Japan, refrigerators tend to have several doors in order to keep different compartments at different temperatures and to isolate odors. Also, because houses are smaller in Japan, consumers desire quieter appliances. 梁玉婷 Some prefer turnips and others pears. Different consumer needs and preferences

22. 梁玉婷 I strongly believe that Whirlpool had extremely difficult experiences in globalizing their market because the company did not meet the customer preferences. Here are some examples in difference markets. ＊In the European market ＊In the Asian market

23. 梁玉婷 The European market • The European market consisted of more than 320 million consumers whose preferences varied by country and by region. For example, • Swedes preferred galvanized washing machines to withstand the damp salty air. • The British washed their clothes more often than the Italians did, and wanted quieter machines. • The French liked to cook on gas at high temperatures, splattering grease on cooking surfaces, and so preferred self-cleaning ovens, • while the Germans liked to cook on electric stoves at lower temperatures and did not need such features .

24. 梁玉婷 The Asian market Asian consumer preferences were different from those in Europe or North America. Kitchen appliances needed to be smaller to fit in Asian kitchens. Lack of space sometimes required the consumer to store the appliance in an outside hallway and transport it into the kitchen for use. Also refrigerators also tended to be smaller and more colorful. When Asian countries first began to experience significant economic growth, some East Asians viewed their refrigerators as status symbols .

25. These external factors put numerous pressures on Whirlpool. In addition, other external factors- intensified competition in Europe, Mexico Peso devaluation crisis, unprecedented raw materials cost increases- did not help to improve the situation either. The internal factors, such as manufacturing inefficiencies, start-up costs associated with production of a redesigned mid-size refrigerator and restructuring of the pan-European sales forces, also created many complexity for the company. 梁玉婷

26. 梁玉婷 Conclusion From what is mentioned above we can reach the conclusion that globalization is not a good idea in the appliance business, suggested by Whirlpool’s experience .

27. Question 5 To what extent should Whirlpool adapt its global strategy?(李曼丽)

28. (1) Few companies or industries lend themselves to "naive" global strategies. • All require some degree of adaptation to regional and national conditions. • (2)The international strategy agenda has over- emphasized standardization. Integration and coordination bring great benefits if companies are sufficiently skilled to implement them effectively.

29. (3) Not all companies will be able to allocate the resources or develop the capabilities for such management of quality and responsiveness across wider and wider geographic boundaries (Babyak, 1995). • Companies are also in danger of foregoing the benefits of differentiation from recognizing and capitalizing on country-specific and regional opportunities. In pursuing a global strategy, companies

30. should not ignore the existence of individual countries altogether. • (4)Many successful product or service innovations have resulted from ideas observed else where. A presence in international markets creates tools for gathering market intelligence and is considered an important benefit of a varied international presence and a factor that is leading to centralize operations.

31. (5)Indeed Whirlpool has come a long way since embarking on its global strategy. Revenues have doubled more than 80 billion. The company now reaches markets in more than 140 countries, leading the markets in both North America and Latin America. • Whirlpool is now number three in Europe and the largest Western Appliance Company in Asia.