Environmental analysis (PESTEL, 5 forces)
Political
The political changes are likely to influence Whirlpool only insomuch it can affect the markets the company sells to, causing political instability that will wreak havoc in the economy. The company has already sustained, for instance, losses in South America – it can suffer more if the region experiences riots or major political upheavals
Economic
- The organization is affected by the prosperity of people in the markets it targets that will translate into changes in both replacement purchases and level of activity in construction companies
- Economic activity will affect the relative weight of upscale brands such as KitchenAid as c compared to Frigidaire or Rapor brands
Social
- An increase in the importance of family values can drive sales up
- Adolescents leaving home earlier can also contribute to sales revenue
- Technological
- Speed of innovation in electronic appliances
- Possible merging of digital, information, and household appliances technologies
- Environmental
- Demands of environmental groups can affect manufacturing
- Government regulations for environmental reporting
- Legal
- Safety issues in production that can cause lawsuits
- Non-discrimination in the workplace
- Safety of equipment usage
Strategic capability (CSFs, value chain, resources, and competencies)
Critical Success Factors (CSFs) of Whirlpool are:
- Operational Excellence
- Marketing Power
- The organization has to preserve its advantage in the first, as proficiency in operations will drive its profits even in the face of stagnating or even declining revenues.
On the other hand, it has to realize that in the contemporary market for consumer appliances, it fell behind competitors in terms of building the power of its brands, and now is the time to overcome this drawback.
The value chain of an organization includes:
- Suppliers of Inputs
- Manufacturing Operation
- Sales and Marketing
- Logistics
- Distribution through Retail
In this chain, the company can increase its capabilities by relocating more production to the suppliers of inputs. Although this strategy has a risk since it makes Whirlpool dependent on other companies, it can also save space in the factory and simplify operations.
- The core competencies of the organization include:
- Production of consumer household appliances of high quality
- Operating throughout the world
- Building successful relations with distributors
Whirlpool’s resources include:
- Well-known consumer brand
- A stable workforce with long tenure in the company
- The accumulated knowledge of operations and industry
Organizational context (stakeholder analysis, organizational culture)
The list of Whirlpool’s stakeholders will include a large number: employees, customers, shareholders, suppliers, professional associations, suppliers, interest groups including environmentalists, the community, the press, analysts, etc. Prioritization of these stakeholders, relying on the current strategy of Brand Creation should perhaps place customers on top and make their concerns a priority as compared, for instance, with those of employees who have to cater to clients’ demands. In the long run, such prioritization should deliver value to shareholders as well. In general, Whirlpool can identify those stakeholders it wants to:
- Manage Closely: customers, shareholders
- Keep Satisfied: employees, suppliers
- Keep Informed: interest groups, community
- Monitor: the press, analysts, professional associations
- Whirlpool’s organizational culture as envisaged by employees seems to be relatively risk-averse. The negative side of it is that it does not encourage innovation and initiative, the thing the management will want to change in the implementation of its new plan that will reshape the strategic thinking at the company. On the other hand, such a change can prove stressful to employees who have got used to working in “small-town” conditions where their environment is more or less safe.
Generation of strategic direction (Ansoff matrix)
Choosing the strategy from Ansoff’s matrix, Whirlpool can follow the strategy of Market Penetration for established markets and Market Development for emerging markets. In markets like the US where it is well-established, Whirlpool’s strategy of brand value creation can be realized by repositioning the brands. They have to be given new distinct images that will permit customers to take a new look at old things. New promotions have to be developed that will target consumers who previously would not have thought of buying a Whirlpool appliance.
The brand value creation strategy can also be useful to Whirlpool in emerging markets where it will follow the Market Development strategy. Whirlpool goods can be introduced into the market in a new light that will parallel the brand image the company creates in its traditional markets. This will single out Whirlpool products from the rest of the market and make them an impressive novelty in these markets.
Strategy selection & evaluation (suitability, feasibility, accessibility)
- The strategy of brand value creation can be tested for :
- Suitability: it can be poorly compatible with the current risk- and change-averse culture
- Feasibility: the projected cash generation from the increase in brand value can be mapped out in order to see whether this will be appropriate
- Accessibility: the company can test what marketing promotions and other measures it can undertake to make its brands work
Implementation (force field analysis, change kaleidoscope)
The force field analysis has identified the following forces for and against change:
Restraining Forces Driving Forces
Market Stalemate (-2) → ← Need to prepare for stalemate (+3)
Culture lacking innovation (-4) → ← Management determination (+2)
Change aversion (-3) → ← Presence of strong brands (+1)
Emphasis on operational excellence (-1) → ← Globalization drives (+4)
The sum of the forces appears to be in balance since the sum of restraining forces equals the sum of the driving forces:
-2-4-3-1=+3+2+1+4
To tilt the balance further toward change, the management can implement training for personnel that will help create greater initiative and reduce risk aversion.
The change kaleidoscope will produce the strategy as a result of the following eight factors:
- Time: Whirlpool has to move toward change quickly, getting its brands out before the industry stalemate begins
- Scope: To avoid radical change, the company can choose to realign its existing brands rather than introduce a large-scale transformation.
- Preservation: Preserving operational excellence is a key challenge.
- Diversity: There can be differences between management and staff.
- Capability: Need to strengthen the marketing staff.
- Capacity: Whirlpool’s healthy profits ($688 million in 1998) enable it to implement change.
- Readiness for change: There is a need to strengthen this component affecting changes in culture.
- Power: Power is at this point vested with the management because of the centralized structure, so the management has the power to implement change.
Process of strategy development (intended, emergent)
Whirlpool can choose to follow either emergent or an intended strategy. In the case of the intended strategy, the company can develop a coherent plan of action that will target the development of new brands and value creation through the involvement of the whole organization. The plan can include, for instance, the creation of the marketing plan that will outline product development, promotion, distribution, and pricing strategies; the initiatives to be implemented respectively in Marketing, Financial, Manufacturing, IT & R&D departments; and mechanisms for control of the implementation process. The outcome can be thought of in terms of measurable results, for instance, increasing the market share of Whirlpool brands in the core appliance market from 21.1% to 30% within 5 years. The achievement of these results will serve as a basis for understanding whether the organization has achieved its intended strategy or whether it is going to turn into an Unrealized Strategy.
The emergent strategy can arise out of a set of measures that do not appear as a pre-planned complex, but rather emerge out of incremental decision-making. Thus, Whirlpool can realize a strategy that will help it strengthen its brands gradually over time. In addition, the company can implement measures that will help employees achieve a more pro-change attitude.
Current strategies (BCG)
The BCG, or the growth-share matrix, separates products into stars, question marks, cash cows, and dogs. The Whirpool brands can be sorted out in the following manner:
KitchenAid: the market share actually declined from 2.9% in 1994 to 2.1% in 1998. However, the market for upscale kitchen appliances is growing; therefore, this brand can be considered a question mark. The company can choose to capitalize on the upscale position of the brand, investing money to increase its market share; alternatively, it can be sold off or used for cash generation.
Whirlpool brands: demonstrate a relatively large market share (about 15%), but the market growth rate is expected to be relatively stagnant. It can be considered therefore a cash cow. Investments have to be modest inasmuch they are necessary for upholding the position in this market.
Roper and others: low market share (4%) in addition to stagnant market makes this product a dog. The case does not mention if it is profitable or not; if it is not, it should be liquidated.
- Rivkin, JW, Leonard, D, & Hamel, G 2005, ‘Change at Whirlpool Corporation A (9-705-462)`, Harvard Business School.
