Assignment
Write a 3-4 page paper in APA format (not including the cover page and reference page). Below is a recommended outline.
Read the case: Will Whirlpool Clean Up in Europe. Prepare your composition to cover the following topics or questions with in the Body section of the paper described for this assignment. Be sure to specifically address topics covered in this unit, which includes: international trade policy, economic integration, and foreign exchange.
A) What are the advantages of consolidating production of product lines at single factories in the EU? What are the disadvantages?
B) Should Whirlpool continue to produce and market in Europe its three product lines (Bauknecht, Whirlpool, and Ignis), which span the entire white-goods market, or should it focus on one market niche?
C) What benefits will Whirlpool gain by broadening the Whirlpool brand name from a North American brand to a global one?
D) In light of the aggressive responses of Electrolux and Bosch Siemens Hausgeräte, should Whirlpool revise or abandon its European strategy?
E) Do you think it is possible to design and sell the same basic appliance around the world? Why or why not?
Below is a recommended outline.
Cover page
1. Introduction
A thesis statement
Purpose of paper
Overview of paper
2. Body (Cite sources using in-text citations.)
Main issue 1.
Main issue 2.
Main issue 3.
(There may be additional sections of your paper)
3. Conclusion - Summary of main points
4. Lessons Learned and Recommendations
5. References - List the references you cited in the text of your paper according to APA format.
Reference Textbook:
Griffin, R. W., & Pustay, M. W. (2015). International business: A managerial perspective (8th Edition). Boston, MA: Pearson Publishing.
Will Whirlpool Clean Up in Europe?
For years, international businesses looked forward to the EU's emergence as a single, integrated market. Among these firms are ones that produce so-called white goods, or appliances such as refrigerators, dishwashers, ovens, washers, and dryers. (In the past kitchen and laundry room appliances mostly came in white, hence, the industry's name. Consumer electronics such as radios, televisions, and stereos came in brown, so these consumer durables are called "brown goods." Today's widespread use of color in appliances makes these labels somewhat anachronistic.) The emergence of a single market in Europe has changed the way white-goods manufacturers do business. Previously, they had to customize their products to meet the often conflicting requirements of the EU's 28 national governments. Fortunately, the Single European Act promoted harmonized product standards, thus allowing the manufacturers to cut product development and production costs. Reduced barriers to intra-EU trade allow them to concentrate production in one factory that can serve markets throughout the EU. Reduced impediments to cross-border advertising make it easier to develop pan-European brands, which in turn reduce marketing and distribution costs. Elimination of physical barriers at border crossing points and of restrictions on trucking competition by national governments leads to productivity gains in logistics and physical distribution management.
One of the most aggressive firms seeking to conquer the European market is Whirlpool, one of the world's largest white-goods manufacturers. The firm's managers have a clearly defined view of this market: Among the truths about the European home-appliance market, there are two whose net effect Whirlpool has a particular interest in: first, consumers in Europe spend up to twice as many days of household income for appliances as do their U.S. counterparts, creating a consumer "value gap"; second, industry profit mar- gins in the region are traditionally much lower than those of North American manufacturers. The reason for this truth is cultural: historically, the industry was organized to do business in individual, national markets, an approach with inherent cost inefficiencies. Now, however, with barriers to pan-European business disappearing, Whirlpool believes that it can use its unique regional position to deliver greater home- appliance value to customers and, in turn, establish a competitive advantage for itself. A strategy to do so suggests that the opportunity to eliminate costs which do not add to consumers' perceptions of value and invest some of the savings into product and service characteristics that do add perceived value will be substantial.
For the past decade Whirlpool's managers have been attacking the European white-goods market by translating these words into concrete actions. One key element of the firm's strategy was the purchase of the appliance business of Philips Industries, the large Netherlands-based MNC; this gave Whirlpool control over Philips' European white-goods production facilities and distribution systems. Whirlpool has also sought many other operating and marketing economies:
• It produces and markets three well-established pan- European brands: Bauknecht, a premium upscale product; Whirlpool, for the broad middle segment of the white-goods market; and Ignis, its low-price "value" brand aimed at price-sensitive consumers. This comprehensive product strategy allows Whirlpool to fully utilize its European production facilities and distribution systems and market its goods to Europeans at all income levels.
• It consolidated 13 separate national sales offices for these three product lines into five regional operations to cut costs, coordinate pan-European promotional campaigns, and enhance the productivity of its sales force.
• It centralized Whirlpool Europe's logistics, information technology, and consumer services operations to ease the task of warehousing products and distributing them throughout the EU.
• It has redeployed its manufacturing capacity to take advantage of the elimination of national trade barriers. For example, it concentrates its production of refrigerators for its European customers in Trento, Italy, and that of automatic washers in Schondorf, Germany, thus allowing it to achieve significant manufacturing economies of scale. Similarly, its factory in Wroclaw, Poland-completed in 2005- produces cook top and oven appliances for the entire European market.
• It has encouraged technology transfer between its European and North American operations, a task made easier by the centralization of its European operations. For example, Whirlpool Europe now produces a line of clothes dryers that features easier loading and unloading and gentler treatment of clothes, features first developed by Whirlpool's division in Marion, Ohio. Conversely, European engineers are helping Whirlpool's U.S. engineers adapt energy-efficient, horizontal-axis washing machines (which are common in Europe) for the North American market to meet federal energy-efficiency standards.
Whirlpool is targeting two important segments of the European market: the emerging markets of Central and Eastern Europe, dominated by price-sensitive customers, and the richer countries of Western Europe, whose residents are willing to pay premium prices for premium products. To implement its European strategy, Whirlpool spent $3 billion to expand its manufacturing and distribution capabilities. In addition to upgrading and modernizing its European factories, Whirlpool also made strategic acquisitions. For example, Whirlpool acquired Polar SA, a Polish appliance manufacturer, which offers a low-cost production platform that can serve the entire EU market. In 2007, it introduced its upscale Kitchen Aid line of appliances to the European market to increase its share of this high-margin, fast- growing market segment. Of course, Whirlpool's EU competitors have not stood still while Whirlpool has invaded their home markets. Germany's Bosch Siemens Hausgera¨te, for example, has poured money into R&D to maintain the innovativeness of its appliances. It has dramatically increased the efficiency of its dishwashers, reducing their energy usage by 62 percent and their water usage by 34 percent compared to the machines it made two decades ago. It has also spent $350 million automating its production facilities in Germany and built new factories in Poland, Spain, and the Czech Republic to reduce its dependence on high-cost German labor.
Sweden's Electrolux purchased the appliance business of AEG Hausgera¨te from Daimler AG. Already control- ling a 20 to 25 percent market share in Europe, Electrolux increased its market share by about 6 percentage points through this acquisition. Electrolux is also aggressivelymoving to control its costs by closing 25 factories and reducing its payrolls by 12,000. Despite this intensified competition, Whirlpool remains optimistic that its European strategy will be successful. It has already established itself as the number-three white- goods manufacturer in Europe. In 2012, Europe generated $2.8 billion in revenue for Whirlpool, or 16 percent of its global sales revenue of $18.1 billion. And new product innovations, coupled with the increased penetration of the Whirlpool brand, have increased the company's market share and raised its profit margins in Europe.