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Case Study: Changes of Whirlpool

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 * Environmental analysis (PESTEL, 5 forces)

Political

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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 KintchenAid as c compared to Frigidaire or Rapor brands

Social

Increase in 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 competences)

Critical Success Factors (CSFs) of Whirlpool are:

Operational Excellence
Marketing Power
The organisation 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 Operations>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 organisation 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
Accumulated knowledge of operations and industry

*Organisational context (stakeholder analysis, organisational 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 compare, 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 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 tests 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 difference 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 need to strengthen this component effecting 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 an emergent or an intended strategy. In 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 involvement of the whole organisation. 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 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 capitalise 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 not, it should be liquidated.

Rivkin, JW, Leonard, D, & Hamel, G 2005, ‘Change at Whirlpool Corporation A (9-705-462)`, Harvard Business School.

Cite this Case Study: Changes of Whirlpool

Case Study: Changes of Whirlpool. (2016, Jun 16). Retrieved from https://graduateway.com/case-study-changes-of-whirlpool/

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