Whirlpool Case Study (Research Paper Sample)

Whirlpool Case Study
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Whirlpool Corporation is a home appliance maker situated in Benton Harbor, Michigan. During the 1990’s period, the company went through hard economic times that nearly brought it into looming extinction (Woods, Dan, & Thomas 386). In fact, the intense state of domestic competition along with increased buyer needs and demands threatened its business viability in the marketing front. However, through internalization, Whirlpool acquired Maytag Corporation in the year 2006 and also adopted a global strategy that enabled it to develop a unique market niche based upon its innovative products and brands.
In the long run, the company attained 26% increase in its annual sales and revenues, which amounted to a tune of $19 billion. Nevertheless, the sheer nature of whirlpool’s domestic and international business presents various opportunities as well as risks. It is upon this rationale that this paper seeks to establish a critical analysis of Whirlpool’s spectacular turnaround through internalization by answering the following questions.Q1. What is the nature of Whirlpool’s domestic and international business environments? What type of risk does the firm face?The nature of the firm’s domestic and even international business takes varied forms, both in the domestic and international market fronts. First and foremost, its domestic market during the late 1990’s was full of firm competition and increased consumer needs and demands, which resulted into decreased profit margin (Handfield 172). This however was fundamental, as a result, of the maturity of the entire US market in that period of time. The aforementioned setbacks forced the management to adopt a global strategy in order to salvage the existing menace associated with new consumer attributes.Secondly, unlike its domestic market that is coupled with unprecedented setbacks, the company’s international market provides viable opportunities of growth and expansion. Based upon reason, the inexistence of trade barriers in the international market resulted into sudden growth of customer affluence (Hitt, Michael, & Robert 178). Eventually, the state of capitalism flourished paving way for further economic stability. In this regard, the management was fully convinced that concentrating on a global approach would facilitate economies of scale within the firm’s manufacturing and even assembly operations. Besides, this unique market has cost reduction mechanisms particularly in R&D, processing, manufacturing, assembly, and services by means of locating its international plants in lower-cost areas such as Mexico, China, and Poland. In review, the firm’s international market environment has the following attributes: Global expansion strategy: this is also known as the acquisition strategy. Through this strategy, the company acquired the lucrative Phillips appliance market in Europe, purchased Poland’s 2nd appliance manufacturer, acquired 65% of the Italian cooling compressor maker (Aspera), and developed a joint venture for producing air conditioners in Asia; specifically China region.Differentiation campaign: as a result of poor market reception that the ‘White Goods Business’ and the ‘Sea of White’ appliances witnessed from the market, Whirlpool Corporation launched differentiation campaigns meant to distinguish itself from these enterprises.Knowledge management: the international market has a well established knowledge management site along with a DIY course that enhances thrilling innovations. This intranet site yields significant potential through innovative ideas on a global perspective workforce. Besides, the knowledge management team collaborates with cross-regional teams in order to enhance local preferences and adapt innovations even further to local demands. As a result, revenue quadrupled since the year 2003.Consequently, the aforementioned business environment presents a number of risks as initially noted. These risks camouflage in the following forms; cross cultural, county, currency, and competitor as discussed in subsequent paragraphs.Cross-cultural risk: even as the firm adapts the global strategy, language differences globally pose a significant challenge and risk. This setback is specifically evident in Italy, Benton Harbor, and Brazil. These cultural differences may finally lead to severe challenges in the company’s quest to attain optimum objectives within its knowledge management site.Country risk: each country has its own tax tariffs framework, and therefore internalizing may pose a significant challenge to its strategy. Moreover, unpredictable government intrusions on pricing may present a feasible risk altogether.Currency risk: the valuation of assets in the event of acquisitions and mergers may result to higher risks, for instance, in the period when the dollar is lower than the Euro.Competitor Risk: with a steadfast increase of competition in the industry, Whirlpool risks losing their already established market share. For example, Hailer Corporation is one of their strongest rivals globally. Strangely enough, Whirlpool lacks patents on most of its value added appliances are thus presenting an opportunity for competitors to replicate their hard, innovative efforts.Q2. How can Whirlpool benefit from going international? What types of advantages can the firm obtain? What advantages acquired abroad can help management improve whirlpool’s performance in its home market?International BenefitsBy the firm going global, there are a number of benefits associated with this resolute move. To start with, internationalization increases focus on innovation. Basically, internationalization increases Whirlpool’s desire for innovation in its quest to increase its competitive advantage globally. In addition, the firm’s highly developed expertise in technological appliances along with production and distribution mechanisms facilitates Regional Divisions integration.The knowledge management scheme for the company created Value Added Services to most of their business ventures across the divide. These advancements are mainly seen in the development of microwave ovens, innovation of a built-in washer sensor, and wash cycle. In essence, the abovementioned VAS can actually be integrated to whirlpool’s domestic market. Finally, the acquisition and mergers by the firm is likely to enable Whirlpool create synergy within the entire organization thereby reducing cross-regional risks.AdvantagesThe Company’s intent to go global has various advantages as shall be discussed under this section of this writing. Generally they are; revenue surge, cost reduction advantages, exchange rate benefit, and knowledge management advantage. With regard to revenue surge; the system adopted by internationalizing was anticipated to yield an estimate of about $3 billion of annual sales. On the other hand, by reducing is R&D cost through strategic positioning of plants and operations at low-cost locations such as Poland, China, and Mexico resulted into cost reduction advantages. In the same regard, the cost reduction advantages pave way for a significant exchange rate benefit, which minimizes the cost of production greatly. Finally, through internationalizing, Whirlpool stands a better chance of retaining trained and highly skilled workforce through a well structured knowledge managementAdvantages acquired abroadFrom abroad; Whirlpool is able to integrate its local divisions by sharing the most advanced expertise in the production of its appliances within its home market. Correspondingly, the unique and outstanding strategy of acquiring noteworthy application businesses abroad can actually be replicated and adopted within the domestic market. This will guarantee that the Whirlpool develops a spectacular competitive advantage within its entire domain.Q3. What actions has Whirlpool management taken to ensure that the firm succeeds in local markets throughout the wor...