Generic Strategies and Whirlpool Operations - Case Study Example

Generic Strategies and Whirlpool Operations Introduction Whirlpool Corporation was one of the leading home appliance manufacturing companies in the world which dominated many markets including US. The era during 1990s and early 2000s witnessed a complete domination of the company in many world markets including Asia. Company set up its manufacturing facilities in more than 14 countries and 4 continents whereas it marketed its products to almost 170 countries. Such large and diversified operations therefore required the company to manage and maintain its operations management in a manner which can allow it to become more flexible and fluid enough to meet the challenges posed by each market segment across the world. The product ranges included Deep Freezers, Refrigerators, Microwave Ovens, Washing Machines, Hand Dryers, pressure cookers, and Air Conditioners etc and also included many important brands such as Whirlpool itself. It is also important to note that the company also supplies to other brands such as Sears, Roebuck whereas it also sells its products under a different brand name of Kenmore. During 1990s and 2000s Whirlpool initiated certain important changes in its operations in a bid to restructure itself to become more efficient and productive. Such initiatives included global procurement, Inventory Management, Push to Pull Manufacturing as well as other initiatives which saw an unprecedented growth of the company. This paper will discuss and provide an overview of the Whirlpool’s environment and its strategies in terms of its initiatives for operations management initiatives. Further, two different models will be used to discuss each of the three questions. Q#1 Operations at Whirlpool Whirlpool started to restructure its operations during 1990s in order to achieve efficiencies as well as to allow itself to emerge as a true global leader. In order to achieve more operational efficiency, it took significant steps such as internal-reorganization of the different departments and processes, formation of various strategic alliances as well as taking other miscellaneous steps which basically ensured that the firm remains competitive in extremely competitive environment. The initiation of the six sigma as well as operational excellence programs, the firm basically attempted to step into lean manufacturing era. Thus a new set of initiatives started to emerge such as extensive use of information technology as the strategic tool to achieve significant competitive advantage over the competitors in almost every market. The global product development as well as its global platform allows it to transfer its key processes across its different manufacturing facilities as well as various brands that it markets across the world. Analyzing the operations management and various initiatives undertaken by the Whirlpool with the help of following two models will further allow critical analysis of the different initiatives. Value Chain Analysis In-bound Logistics The in-bound logistics at Whirlpool were completely revamped as a result of the use of the information technology such as EDI system which allowed the firm to keep track of the movement of the inventory across the different processes. This use of information technology further improved the process of inventory management s well as handling. Its global procurement initiatives were largely focused on arranging the movement of inventories in a manner that can lead to the maximum efficiency as well as effectiveness in achieving the competitive advantage. Use of technology also allowed to keep in constant touch with its suppliers for efficient inventory management at global level. Operations Whirlpool started global product development during 1990s in order to ensure that different markets are served through regional manufacturing hubs. Coupled with global procurement, the global product development therefore further led to the networking of its regional operations with that of its global operations. Further, the integration of technology with the different strategic moves such as improved work force led to the efficient transformation of input into outputs. Marketing & Sales Whirlpool initiated a global strategy of dominating its markets by virtually operating from every country of the world. It markets its products across to almost 170 countries. The marketing and sales became part of the global strategy of the firm as Whirlpool attempted to focus on regionalization however, with constant focus on achieving truly global marketing and sales initiatives. Services Whirlpool ensures the after sales services through its various strategic partners who are geographically scattered according to the area of the operations of the firm. However, all the service partners are streamlined with the global platform of the firm. Having discussed the operations of the firm through primary value chain activities, next strategic model of Generic Strategies will further discuss the Operations at Whirlpool. Generic Strategies and Whirlpool Operations Differentiation Strategy Critically analyzing the operations of the Whirlpool from the perspective of the differentiation strategy will indicate that the firm has been engaged in the highly creative product development. The global strategy adapted by the firm ensured that the overall product development. The initial focus of the firm was to leverage its strategy in a manner that can allow it to formulate a basic uniform platform under which all product development take place. The initiative of the global strategy for leveraging the different geographical businesses of the firm therefore was an effort in that direction. The product design at the firm was done in a manner which incorporated the consumer preferences within the design of the products rolled out by the firm.(Siegel, 2006). Company hired Chuck Jones of Xerox to lead its product development team which focused on creating differentiation by integrating consumer preferences along with the innovation to achieve a kind of different brand image in the eyes of their customers. This strategy therefore further led to the development of products and services which basically allowed the firm to achieve differentiation from the outset. This also created a strong corporate reputation of Whirlpool for its innovative products which appealed to the consumers besides allowing it to develop its unique competitive advantage solely through the modifications into its operations. If one only considers the global product development as the hallmark of Whirlpool’s global strategy for operations, the same will be sufficient to assess that the operations of the firm were radically redesigned to achieve a true global dominance over the home appliances market. Q#2 E-Initiatives As discussed above that the Whirlpool started its journey towards the changes in its operations with the integration of the information technology with its major operations. The electronic data interchange allowed it to remain in communication with its suppliers who were carefully chosen based on their reputation and reliability in the market. The information technology set of the firm was largely centralized however, later on company started to invest in the telecommunication technologies in a bid to streamline the data flow between various departments of the firm. Whirlpool also integrated with its global information system a new web based portal of supply chain management which can further allow it to track the inventory as well as understand the changing consumer preferences in a broader manner. It also integrated a new CSR software procured from Siebels Systems Inc with its new call center which again will provide a better customer service to the customers of the firm.(Greenmeier,2001). In order to further analyse the e-initiatives by the Whirlpool, the use of following strategic tools may be of great help: Differentiation Strategy Differentiation strategy is one of the generic strategies which can be employed by the firms to achieve the competitive advantage. The introduction of different e-initiatives by Whirlpool can be seen as an effort in that direction also. Currently, Whirlpool is using a new technology called “SEEBURGER” which can allow it to easily and seamlessly integrate its different processes with each other. This technology is considered as the State of the Art and an initiative which can further improve the efficiency at the firm by allowing it to become a more innovative firm offering products and services which are in-line with the consumer preferences. The differentiation strategy asks for creating the competitive advantage through different sources and product and processes development is one of the sources through which firms can achieve the competitive advantage. Thus the different e-initiative such as integration of its EDI through SAP and SEEBURGER will further allow it to streamline its process in a manner which will further reduce cost and improve efficiency in product design and development, inventory handling, suppliers and customers management as well as forming a seamless interaction with the support services providers such as strategic partners of Whirlpool offering after-sales services to the customers. Further the use of SEEBURGER will reduce the reliance of Whirlpool on using third party services for different processes by strategically streamlining almost all the processes under single architectural platform. This integration of the information technology with the organizational processes therefore allowed Whirlpool to achieve the objective of following a global strategy and leveraging the power of its regional presence. The improvement in inventory handling, the achievement of seamless interaction with the suppliers and customers etc therefore are some of the benefits which firm enjoyed as a result of initiating important changes that resulted into further strengthening of the information technology base of the firm. it also indicates that the Whirlpool has used information technology as a strategic tool to overcome its structural deficiencies. Alignment Model In order to further discuss the different e-initiatives of Whirlpool and their impact on the organization, strategic analysis through alignment model will also be a more suitable option. The different initiatives that were taken by the Whirlpool basically were an effort to align the operations of the firm with the overall strategic direction of the firm. Whirlpool adapted the global strategy and as such all its operations were globalized in the sense that critical processes such as product development and procurement became global. In order to align rest of the processes with this new strategy the different steps were taken to align the different processes with this strategic direction. For example, integration of SEEBURGER with the existing technologies of the firm was an effort to make adjustment in processes which were not aligned with the overall strategy of the firm. (Seeburger.com, 1999). What is also important to understand that Whirlpool took such steps because it was facing multitude of problems on global as well as regional level therefore it was necessary that there must be a complete revamping of the strategy of the firm besides allowing the alignment of its different processes with each other. The integration of information technology processes therefore resulted into the further integration of the organizational processes with the information technology initiatives. The system approach to innovation that was undertaken at the Whirlpool also meant that the overall success and failure of the different information technology initiatives to be taken by the firm has to correspond to the overall strategies of the firm and as such the alignment of different strategies with that of the overall mission and vision statement of the firm. Q#3 Push and Pull Strategies The basic differences between the push and pull manufacturing philosophies also outline the basic difference between the approaches adapted by various firms. The pull strategy is followed by the firms who adapt the strategy to base their production not on the actual demand of their products whereas push strategy is adapted when the production is actually linked with make to order strategy. What is important to understand here is the fact that a push system almost disregards what customers need whereas pull system always attempt to take into account the needs and preferences of the customers. (Slack,1992). Pull based manufacturing therefore requires very little excessive inventory at hand and focus on setting up production system in a manner that will further reduce the costs. Thus pull scheduling of the production processes not only reduces the over-production but also allow firms to arrange the movement of inventory in a manner that reduce the overall costs. What is however, also significant to note that to manage a pull strategy, firms are required to manage effective relationships with their suppliers. This therefore means that the firms may also be required to invest significant resources into its information technology infrastructure besides developing strategic relationships with their suppliers. Push strategy, on the other hand, may be necessary under certain conditions such as firm has strong brand image and value so that its products will be sold out in the market in any quantity under normal business. Such strategy however, can result into extra costs which a firm may have to incur in a bid to maintain a consistent level of inventories to meet the demand. Differentiation and Pull Strategy The differentiation strategy adapted by the Whirlpool also includes handling of inventory and redesigning the production process in a lean manner. The pull strategy of the Whirlpool again indicates the relative degree of innovativeness in the product development process of the firm. The reduced cost as a result of pull strategy will also mean that the customers of the firm will get products that are of high quality at relatively less cost and manufactured with State of the Art production system. What is also significant to understand that the various outsourcing efforts undertaken by Whirlpool can also be attributed to this strategy of achieving efficiency in the core competencies of the firm. (Bowen,2007). Whirlpool has been able to outsource its some of the activities including document management etc which further allowed it to focus its energies on the core functionalities of the firm rather than investing time and energy on non-productive functionalities. Scenario Planning Scenario planning is an important strategic tool that can be used to further discuss the pull strategy adapted by the firm. It is important to understand that the overall changes that were taking place in the market and overall situation faced by the Whirlpool during 1990s demanded that firm’s higher management must look into the different scenarios that might have emerged in the future and subsequent strategic development therefore was directed appropriately. The revamping of the production process and the shift towards the lean production requires that the firm must develop different scenarios such as worst case and best case under which the firm may further decide as to what course of action to take. Thus pull strategy may have been seen as a best case scenario whereas push strategy may be considered as worst case scenario in a complex and business environment faced by Whirlpool. Outsourcing by Whirlpool As discussed above that the Whirlpool outsourced its non-core activities whereas at the same time adapted the activities at the global level. Whirlpool already outsourced its document management facilities to third party vendors whereas it also entered into agreements with companies like Accenture for management and support services for the SAP installed at Whirlpool. Similarly, it has also entered into agreements with numerous third parties to offer repairs and maintenance services to its customers across the world. The outsourcing efforts therefore also indicate that the firm is heading towards a completely new approach of focusing on the needs of its customers. The emphasis on the development and management of core competencies is therefore indicating firm’s total commitment towards excellence in its production processes. References 1. Bowen, G (2007) Outsourcing Simplifies the Paperwork for Appliance Manufacturer Whirlpool Outsourcing Journal, Available: http://www.outsourcing-journal.com/feb2007-whirlpool.html Last accessed 12th November, 2009 2. Greenemeier , L (2001) Whirlpool's Web Chain Information Week, Available: http://www.informationweek.com/news/software/crm/showArticle.jhtml?articleID=6507890 Last accessed 12th November, 2009 3. Seeburger.com, SEEBURGER Technology To Simplify Trade Customer Integration, Advance SAP NetWeaver and UCCnet Initiatives for Whirlpool Corporation (2009) Seeburger Inc, Available: http://www.seeburger.com/whirlpoolpr/ Last accessed: 12th November, 2009 4. Siegel, R (2006) Meet the Whirlwind of Whirlpool Business Week, Available: http://www.businessweek.com/innovate/content/apr2006/id20060411_379955.htm Last accessed 12th November, 2009 5. Slack, N (1992) The Flexibilities of Push and Pull. International Journal of Operations & Production Management. 12 (14) 82-91 Read More