General Management| Course: International Business Strategies 2012-2013 (BKM06GM) | Learning Questions Whirlpool| Dan Beseda [email protected] nl 11/5/2012 | Introduction This first part of this paper analyses appliances industry and identify globalization drivers. The second part argues whether Whirlpool should continue its global expansion strategy. Last part examine why Whirlpool struggled with the expansion and what lesson could we take from this case. The appliances industry and identify globalization drivers The globalization in the appliances started in 80’s.
Therefore, the analysis starts at this point. For purpose of the analysis I used the theoretical framework of Yip (1989). Yip distinct between six teen different globalization drivers categorize in four groups: Markets, Cost, Government, Competitive. The appliances industry in 80’s had several main characteristics that drive players to globalization. First were the market drivers. The market was highly saturated and it was not expected to grow much in the future. Even though, Yip does not recognize this drive, it is very important in this case. This pushed companies to look for another markets.
Whirlpool saw several possible markets for expansion. First market was Europe because Whirlpool CEO thought that European and U. S. market are very similar and therefore ideal from expansion. Furthermore, Whirlpool saw European market as highly fragment. This was seen as possible advantage because players in Europe could not leverage the economics of scale as much as Whirlpool. Second market was Asia which was fragmented and was the fastest growing market in 80’s. Third market was Latin America which was mainly chosen because of the future predicted growth and lower appliance penetration ates. This was also reason for choosing Asia and Easter Europe. Second were cost drivers. The industry environment was hypercompetitive. There were only few players that hold similar shares of the market. This also means that market players had to largely focus on cost reduction and product quality. This pushed on industry players to go global because they could create or improve economics of scale and scope which would helped them to cut costs. Third, Whirlpool was driven to globalize to be able better compete with its rivals.
By going global it match it domestic competitors who also went global. Last drivers are Government. The economic stability which occurs in 90’s made the region more attractive for investments. Furthermore, the government was decreasing tariffs which increase attractiveness of industry even more. As seen above at this time there was many drivers for globalization. However, what is the situation today should Whirlpool continue its global strategy? I argue that Whirlpool over globalized and should return more to Multidomestic strategy.
Whirlpool over estimated how homogenous are the wants of markets. For example in Europe Whirlpool ignore the huge diversity in the wants of costumers. Also in Asia in the biggest problem was that the market got faster overfilled with homogenous product. The appliance customers’ needs are clearly not as homogenous as whirlpool thought. Therefore, it would be better for Whirlpool to differentiate its products according to market’s needs and decrease the level globalization. Expansion problems Even though, Whirlpool expansion started smoothly soon it become face several problems.
The main problem of Whirlpool expansion was a wrong prediction and misanalyse of markets. The biggest mistake was misinterpretation of European Market which Whitman describe as similar to U. S. whether in the reality European markets had far more diverse wants than U. S. market. Moreover, the competitors in new markets were far more efficient and aggressive as it was expected by Whirlpool. That was special true about Asia region where local competitors where able to fast imitate Whirlpool strategy and overfilled the market. Whirlpool predicted that the market going to growth faster than they did. However, marketed became saturated faster than expected from many different reasons. For example, Latin America was a faster growing market. However, thanks to the growing interest rates the demand after appliances dropped rapidly. This could be hardly predicted, but it still cost Whirlpool a lot of money. Purchasing Global strategy is costly and should be therefore carefully plan. Before purchasing global strategy we should be sure that the markets are suitable for homogenous products. Moreover, we should constantly monitor environment as it can changes, because changes in environment may have a big consequences for our strategy.
References Beamish, B. A. (2007). Transnational Management: Text, Cases and Readings in Cross-Boarder Management. McGraw-Hill. Martin, M. , Algar, S. , Kumar, V. , Inkpen, A. C. (2001). Whirlpool corporation’s global strategy. Thunderbird Case TB0175. Yip, G. S. (1989). Global strategy… in a world of Nations? Sloan Management Review, 31(1). Pp. 29-41.