Whirlpool Case Study in Intetrnational Business
Q1 - Whirlpool Case Study in Intetrnational Business introduction. What is the nature of Whirlpool’s domestic and international business environments? What types of risk does the firm face? The nature of the domestic and international business environment of Whirlpool : Whirlpool is a home appliance maker, based out of US. The firm has manufacturing units in 13 countries and sells them in 170 countries across the globe. Whirlpool generates 60% of its sales from North America, 25% from Europe, 15% from Latin America & just 2% from Asia. The nature of domestic and international business environment of Whirlpool is highly competitive in nature.
There are a number of opportunities to make a mark with the type of product that is more preferred at a certain place but at the same time the level of risk involved sees no bounds. The company feels that this competitive environment has a single solution of internationalization. Hence, the company has not only expanded its business in USA but it has also gone a huge leap forward in making a mark in countries like Bulgaria, Hungary, Russia, Slovakia, Russia and also Czech Republic. In India, Whirlpool has made a name for itself.
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The company has come up with a variety of products so as to suit the dynamic environment at both local and international levels. But as we know, a larger return would only come from a bigger risk, there are also various amounts of risks associated with the company’s proceedings. Risks that the firm face: The company was forced to invest lesser in the research and development in some of the lower-cost locations. This can be an advantage for the new entrants. Other than this, the company had to face declining sales in USA with its expansion strategy as the focus on the home country shifted elsewhere.
The threats from competitors to the country are also ever-increasing. The reason for the same is that as Whirlpool is expanding its market to Asia as well, companies like Haier are giving it immense competition. So, there are chances that the company’s cost of investment in these countries might not reach break-even as predicted. These are some of the vital risks that Whirlpool is associated with in its international expansion program Q2. How can Whirlpool benefit from going international? What type of advantages can the firm obtain?
What advantages acquired abroad can help management improve Whirlpool’s performance in its home market? No comments Join Now For Free Whirlpool can benefit from going international: * A well designed global strategy can help a firm gain a competitive advantage. The advantage can arise from the following sources: a) Efficiency : * Economies of scale from access to more customers & products * Exploit another country’s resources – labor, raw materials * Extend product life cycle-older products can be sold in other countres * Operatonal flexibility – Shift production as costs, exchange rates ,etc change over time. ) Strategic: * Fist mover advantage and only provider of aproduct to market * Cross subdization between countries * Transfer price c) Risk: * Diversify macroeconomic risks * Diversify operational risks (labor problems, earthquakes,wars) d) Learning * Broaden learning opportunities due to diversity of operating environments e) Reputation * Crossover customers between markets – reputation and brand identification Following advantages acquired abroad can help management improve Whirlpool’s performance in its home market: * Good brand recognition Exposure to multi cultural and diversified market
* High ROI * Cost efficient manufacturing processes Q3. What actions has Whirlpool management taken to ensure that firm succeeds in local markets throughout the world? To what extent is the appliance business local/regional rather than global? Actions taken by Whirlpool management to ensure that firm succeeds in local markets throughout the world: * Lower costs , improve efficiency and productivity: It cut costs by revising suppliers/ sourced down its 936 suppliers in 1996 to 135 suppliers in 1999. Increasing market share and services: Whirlpool acquired companies operating in the local markets like Philips in Europe. Created subsidiaries to sell & service appliances in countries like Hungary & Romania. * Introducing innovative products continuously: created a “Galaxy initiative,” a line-up of nine new products. * Meeting demands of local consumers: cross regional R&D teams worked to meet the local demands in international environment. 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. To what extent is the appliance business local/regional rather than global? 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. 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. French are concerned about the refrigerator’s capacity to keep fruit and vegetables fresh while Spanish are concerned with meats. In Japan, refrigerators tend to have several doors in order to keep different compartments at different temperatures and to isolate odors. 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. However, the appliance market can be global in terms of reducing costs and maximizing profits. Q4. How can Whirlpool effectively compete with new rivals originating from low cost countries, such as Haier from China? Should Whirlpool’s response differ in its home and foreign markets? If so, how? Whirlpool’s response should differ in home and foreign markets, as the basis of competition in these markets are different. In international market company can pose challenge to Haier on basis of providing low cost customized products.
Company has been doing this in other European and Asian countries. In this way company can pose tough challenge to Haier to maintain its customer base in China. In domestic market company cannot fight on margins, it has to fight on better services and more customized products. Company can benefit from it’s cross- regional R&D team to manufacture customized products at low cost. Q5. Go to career section of Whirlpool’s website, look for opportunities. Report type of jobs available Locations of these positions worldwide What position interest you most Would you like to work, which location, why or why not ?