Introduction
Whirlpool has managed to make some organizational improvements but which brought it to the third position in the European consolidated market but to achieve better results it has to improve in other directions as well. This paper aims to critically review the key changes the company made in its strategy to conquer the EU market and suggest ways for development. Whirlpool seems rather confident in the strategy that it has been following for some time and achieved certain organizational and financial success. It has claimed positions in all three price segments covering high-income, middle-income, and low-income customers (Griffin & Pustay, 2015). Whirlpool also united 13 sales offices into five operation centers together with centralizing control over logistics. It has established manufacturing of different products in different countries and managed to establish a technological exchange between its facilities in the EU and U.S (Griffin & Pustay, 2015). However, its competitors have also been improving, which makes this case study particularly interesting.
Advantages and Disadvantages of Consolidating Production Lines
One of the main advantages is the opportunity to economize on organizational costs. Fewer offices often mean less staff, less paperwork, and a faster decision-making process. What is more, the European market has become more homogenized than some 10 or 20 years ago, which allows for more unified solutions. In the past, it was a challenge to adapt to each country’s regulations and national preferences. Nowadays, such a measure allows cutting operational costs at almost no losses. The increased scale of production has managed to solve the problem that small factories had. This problem was that products that were manufactured, for example, in Poland may be excessive for the Polish market alone. However, if a huge factory situated in Poland would serve Poland and the countries across the EU, then production volumes could be readjusted or raised with relative ease.
On the other hand, uniting all manufacturing capabilities at several places could be detrimental in a number of ways. Firstly, logistics could be put at risk. Transferring wares from a Polish cook and oven appliances factory across the whole of Europe to Spain, for example, could be expensive. Thus, the Spanish market for such products could be occupied by companies with closer-situated production facilities. In addition, there is a much greater risk of losing such a joint operation center. If factory workers go on strike in one of such centers, then all the supply processes to the European market will be paralyzed. Above that, a change in the legislation of one country could easily make a production line there unprofitable. Moving such a large facility to a place with better conditions will not be an option.
Niches of the Market
Whirlpool took on a great challenge by deciding that it would compete for all three price segments at once. On the one hand, it gives the privilege to enjoy larger margins selling products to different audiences, but there are also significant drawbacks in such a strategy. By choosing to produce wares for all three segments, whirlpool significantly thinned its resources. Now it has to race with competitors in all three segments instead of focusing on domination on its primary middle-price one. Due to the fact that Bosh and Electrolux have been heavily investing in technology, Whirlpool will likely have a hard time competing with them, having to invest in three different branches at once. The higher price segment requires the best technical capabilities since money is not the issue for such customers (Rugman & Verbeke, 2017). Given that Bosh and Electrolux have already upgraded their technology and are able to satisfy wealthy customers, Whirlpool will only have to catch up. Therefore, it would be best to abandon the chase in the upscale segment and concentrate efforts on middle and low ones.
Whirlpool America vs. Whirlpool Global
Competing for a share in the international trade is always a step up for a successful business such as Whirlpool. The decision to expand was advantageous in a manner that it increased the recognition of the brand. With recognition grows the perceived reliability and, therefore, sales. An average consumer train of thought maybe the following: if a company trades its goods worldwide and people around the world are eager to buy them, then the company’s products may be worth buying. Another advantage of international expansion is the opportunity to cover the losses in one country by gains in another (Rugman & Verbeke, 2017). In such a way, a company always has time to rethink its local strategy elsewhere and try once more or withdraw and seek other prominent markets. In a globalized world where information travels fast, the successes of Whirlpool in one country could automatically create fertile ground in another provided there is an adequate advertising campaign prior to deployment.
European Strategy of Whirlpool after the response of Bosh and Electrolux
Whirlpool should definitely change or rather upgrade its strategy in order to remain competitive. It has done a huge organizational work, which set up a basis for expansion but further advancements may be costly. Bosh and Electrolux saw one of the key costs of the operation in Europe, which is expensive labor. They took the right course by limiting the number of workers through automatization. Whirlpool also has to repeat this experience and do it for a minimal period of time if it wants to continue the competition. By consolidating their production lines, Whirlpool simplified this task because it now has fewer production facilities to upgrade, hence, the costs of doing so would be significantly lower than those of their competitors.
Selling Same Product around the World
Having concentrated on one specific type of product Whirlpool addressed its technological problem. It does not have to invest much to upgrade all appliances. By choosing to produce something that people across the world use, one opens a vast pool of potential clients (Rugman & Verbeke, 2017). Something like mittens, for example, will not be selling as well in Turkey where temperatures do not fall low enough as in Norway or Canada. However, cooking ware is more or less used in every kitchen across the globe. The design is not too costly to rework for each specific market, and it is not that big of an obstacle. It is indeed possible to trade one product across the world, provided national preferences of use and design are thoroughly researched.
Conclusion
Whirlpool company has done great work in organizing its operations into a sustainable entity. However, in light of its competitor’s responses, it has to update its strategy to remain competitive. In particular, the corporation has to think of creating additional production lines in order not to put all eggs in one basket and enhance its coverage of Europe. It may also think about abandoning the high-tier market because it has lost the technological competition. Now it has to research into advancing and automating its production in order to cut its production costs even further and focus on middle and lower niches. On Whirlpool’s example, one can see that it is possible to trade one type of product across the world while staying relatively successful. In addition, this case study has given an insight into how international business can be operated.
References
Griffin, R., & Pustay, M. (2015). International business (8th ed.). London, UK: Pearson.
Rugman, A. M., & Verbeke, A. (2017). Global corporate strategy and trade policy (Vol. 12). London, UK: Routledge.