The International Home Appliance Industry - Dissertation Example

?Marketing Strategies, Analysis and Recommendation of WHIRLPOOL Washing Machine Table of Contents Introduction 3 Whirlpool Corporation 4 Financial Condition 4 Current Market Share 5 Strategies 6 SWOT 7 Strengths 8 Weaknesses 9 Opportunities 9 Threats 10 Recommendations 11 Segmentation, Targeting and Positioning 11 Marketing Goals and Objectives 11 Conclusion 12 References 14 Introduction The international home appliance industry is considered as one of the largest industries in the world due to its size. The 120 billion dollar industry is comprised of some of the biggest companies in the world like Whirlpool, LG, Samsung, GE Appliances etc. The company that has been dominating this huge industry for a long period of time is Whirlpool. Success of any organization in such a big industry is hugely dependent on the marketing strategies that are adopted by the particular company. Hence, it is quite expected that Whirlpool has used effective marketing strategies over the years in order to sustain its dominance in the industry. This paper tries to investigate the current situation of Whirlpool as well as several of its strategies. It includes valuable information regarding Whirlpool’s current market share, sales volume and profitability. The paper mainly focuses on the washing machine industry which is an important part of the home appliance industry. Strategic tools like SWOT are in use to analyze the current situation of Whirlpool as a washing machine producer. Once the analysis is done recommendations are made for the company. Recommendations are mainly in the form of segmentation, targeting and position as well as in the form of marketing goals and objectives that should be achieved by the company in order to stay ahead of its competitors. Whirlpool Corporation Whirlpool Corporation is one of the leading names in the world of home appliances. The company is involved in the manufacturing and marketing of different products starting from washing machine to microwave, from air conditioners to refrigerators. Major brands that are marketed by the company include Whirlpool, KitchenAid, Maytag, Amana, Jenn-Air, Consul, Bauknecht and Brastemp (Whirlpool Corporation-a, n.d.). The USA based company was founded in 1911 by Lou Upton. At present the company has significant presence in almost all the countries in the world. It runs almost 67 manufacturing and research & development centers throughout the world. Furthermore, the company employs close to 70,000 people. The vision statement (Every Home… Everywhere… with Pride, Passion and Performance) of Whirlpool reflects that the company considers each and every home as its domain and every customer and his/her activity as an opportunity (Whirlpool Corporation-a, n.d.). The mission statement of the company is “Everyone, Passionately Creating Loyal Customers for Life” (Whirlpool Corporation-a, n.d.). It defines the point of area where the company is focusing now. It is very difficult for any organization to retain its leading position for a period of almost 100 years and without strong values it is next to impossible. Whirlpool’s success is greatly dependent on its values. Five major values that Whirlpool believes in are respect, teamwork, integrity, diversity and spirit of winning. Financial Condition With net sales of almost $18 billion, Whirlpool is one of the financially sound organizations throughout the world. However, the recent global financial crisis has affected the company’s overall performance as the demand of various home appliance products was decreased dramatically. In 2007 Whirlpool’s net sales were reported to be almost $19.4 billion, but in the next year the figure was lowered to $18.9 billion and in 2009 the company’s net sales were $17.1 billion. However, with the recovery of all the major economies in the world, Whirlpool has pulled and placed itself again in the positive growth track. According to the company’s last annual report it has a long term debt of $2,195 million (Whirlpool Corporation-b, n.d.). However this figure is lowered by almost $300 million from the previous year’s figure. In a recent report it is said that Whirlpool is likely to spend almost $1 billion on its U.S. operations by the end of 2014. The company has a target of taking its revenue to 24 billion dollar within the same time period (Detroit Economic Club, 2011). The report says that out of this $1 billion, $300 million could be spent in the research and development as well as in the design related work (Detroit Economic Club, 2011). So, overall it can be said that Whirlpool has enough financial capabilities to support all its strategies that are adopted to achieve its overall corporate objectives. Current Market Share It is found from the research that Whirlpool has almost 30% share in the global washing machine market. It is well ahead from one of its competitors Bosch which has been able to capture almost 23% share in the global market. However, the Asian giant LG, with almost 35% share is found to be the market leader (Appliance Today, 2010). Over the past few years Whirlpool has focused on the developing markets like China and India. However, the global economic crisis forced the company to limit its aggressive growth plans. It even decided to close a part of its operation in China. Prior to this economic crisis (in 2008) Whirlpool has a share of 3.4% in the Chinese washing machine market and further increased to 6.4% in 2009 (Ying, W. 2009). Apart from China, the company has a strong position in India which is another fast growing nation in the world. In 2009 Whirlpool had almost 15% of Indian washing machine market which is a $21 billion industry (ET Bureau, 2009). At present the company holds more than 25% of the Indian market. Strategies Whirlpool is one of the most successfully marketed brands in the world and it reflects the fact that the company has adopted very clear and effective corporate and marketing strategies over the decades. What distinguishes Whirlpool from its rivals is its commitment in building a loyal customer base and a strong brand. Being, one of the leading washing machine producers, Whirlpool has focused on the strategy of ‘value creation’. Innovation, quality, cost productivity and consumer value are the four main aspects based on which Whirlpool’s strategies are developed. Over the years, the company has been trying for improving its supply chain network so as to reach the trade partners and the final customers more effectively (Whirlpool Corporation, n.d.). Whirlpool washing machines are sold through various retail chains like Sears, Home Depot, Lowe’s and Best Buy. Almost 65% of the company’s sales take place through the large retails chains. However, there are number of independent retailers who sell Whirlpool’s products throughout the world. Sales strategies of Whirlpool are found to be varying with the nature and size of retailers. In other words the company adopts different sales strategies for different retailers. However, the main objective is to become trusted trade partner of the retailers. In order to achieve this objective the company always tries to provide more and more value added services. For instance, the sales people of the company give some additional information to some of the selected retailers. This information can be regarding the performance of those retailers. Information related to market share, advertising effectiveness, and average price is also shared with these selected retailers. Such information helps retail customers to take more effective decisions (Ingram, LaForge & Avila, 2008). In the present age, it is very crucial for the home appliance makers like Whirlpool to understand the consumer buying behavior properly. Today there are consumers who like to have more features within the existing price range, whereas there are consumers who want products in different styles and designs. Whirlpool is found to be very much aware of this situation as it gives significant importance on the aspects like pricing and segmentation. In the developing markets like India, the company started off as a ‘premium player’ and then it decided to become a ‘mass player’. It has introduced products that are available in different price ranges and the main objective behind such strategy is to become the preffered washing machine brand in the huge market of India. The company has launched several successful marketing campaigns including the famous ‘mummy’s magic’. Whirlpool offers healthy incentives with the purpose of influencing thousands of retailers in the country so that they keep its products. Furthermore, the company employs special contractors who are familiar with different languages that are spoken in the country (Onkvisit & Shaw, 2004). SWOT SWOT is one of the most widely used strategic tools in the world. It is actually the abbreviated form of Strengths, Weaknesses, Opportunities and Threats. The first two represents the internal situation of a particular organization whereas the final two represents the condition of the external environment of the organization. Strengths Brand Image: Whirlpool is considered as one of the top washing machine brands in the world. Not only in washing machine sector but it is one of the most popular brands in the global home appliance industry. Strong brand image is certainly the most important strength of the company. Whirlpool Corporation is comprised of some of the top home appliance brands starting from Whirlpool to Maytag. Strong brand image has helped the company to introduce new products and brands successfully by using the concept of brand extension. Furthermore, using this brand equity the company has been able to attract and retain a very talented workforce. Experience: Whirlpool is dealing with products like washing machine for almost a century. Staying in an industry for such a long period of time has given the company an incomparable dept of knowledge. Whirlpool understands this industry better than any of its rivals. It is very much aware about the changes that are taking place inside and outside the industry. It has a very clear understanding regarding the way in which consumers’ behavior has changed over the years. Huge experience in the industry has placed Whirlpool in a position where it can make more effective strategic decisions. Strong product portfolio: Whirlpool Corporation is known for offering washing machines, refrigerators, dishwashers, microwave ovens and air conditioners. The company has a brand portfolio that includes brands like Whirlpool, KitchenAid, Maytag, Amana, Jenn-Air, Consul, Bauknecht and Brastemp. Most of these brands are found to be successful in their respective sectors. Weaknesses One of the major business problems for Whirlpool is the fact that some of its trading partners (retailers) are shifting away from it and preferring rival brands. For instance, Sears which is one of the largest customers of Whirlpool is selling other brands like LG and Electrolux more. In the recent years the volume of Whirlpool’s supply to Sears has declined significantly. Furthermore, there are some retail chains that have started to sell their private brands. This has certainly affected the revenue of Whirlpool. The recent financial crisis has greatly affected Whirlpool’s sales figure. It was declined by a significant amount during the period of 2008-09. In spite of being one of the largest corporations in the world, Whirlpool could not safeguard itself from the economic turmoil. Opportunities The developing Asian and Latin American markets can be considered as the biggest opportunity for Whirlpool. In Asia, India and China are the two biggest markets. These two countries are growing at a very fast rate (8%-9%). With such a growth rate demand for home appliance products is increasing continuously. In 2009 almost 49.4 million washing machine sets were produced. Almost 26.8 million machines were sold in the domestic market of the country. Both these figures are increased by 12-13% from the previous year’s figure (PRLog, 2010). These facts reflect the size of the Chinese market. On the other hand India has market of 21 billion dollar for washing machine. In China Haier is the leading washing machine brand (PRLog, 2010). Whirlpool has a great opportunity of increasing its presence in this part of the world. This can be done by strengthening distribution network and by aggressive brand promotion. As far as India is concerned the company has already captured almost one fourth of the market. It has already placed itself as the leading washing machine brand. Now it has the opportunity of capturing huge the untouched market of the country. Whirlpool is one of the premium brands in the global washing machine market and this brand image can be used in the process of introducing and marketing of new washing solutions. Furthermore, the company has enough financial capabilities to support any kind of experiments regarding innovative washing solutions that can be used in near future. Being, a financially strong organization it can also acquire some local companies that are having significant distribution network in the developing markets like China and India. Threats Whirlpool is operating in an industry that includes the players like LG electronics, Haier, Samsung, GE Appliances and many more. Quite obviously Whirlpool faces its biggest threat from the competitors. Asian companies like LG and Samsung have already started to gain their market share in both US and Europe market. There are several other local companies that are looking for becoming international. Presence of so many players makes the industry more competitive and forces the companies to bring down the price. As a result of this, companies’ revenues get affected. Another major threat is the increasing price of raw materials. Both metal prices and oil prices have been volatile over the past few years and this has certainly influenced the companies’ strategies. Increase in the raw material cost means decrease in profit margin. Recommendations Segmentation, Targeting and Positioning Segmentation, targeting and positioning (STP) are the three main pillars of marketing. In the present competitive world success of any marketing campaign is hugely dependent on these three aspects. Like any other consumer goods company, Whirlpool also has to focus on STP in order to achieve more success in future. Whirlpool should conduct extensive market research before segmenting any particular market. The company can outsource the research project to some of the companies that are specialist in conducting such researches. Once the detail findings are obtained, Whirlpool can start segmenting on the basis of various demographic and geographic factors. The company’s main focus should be on the developing markets of Asia for practicing these activities. In countries like China and India it is very important to find the appropriate target market before launching any product and the marketing campaign related to it. In these two countries there are large numbers of people who fall in the middle and lower-middle income group. Among the lower-middle income group there is a significant section that is yet to be covered by the US based washing machine producers like Whirlpool. Furthermore, the company should position itself as a brand for everyone, from high income group to low and lower-middle income group. It should come up with different products that are available at different prices. The entire product portfolio should be aggressively promoted in all the major markets so that the desired position can be attained. Marketing Goals and Objectives Whirlpool should have SMART (Specific, Measurable, Attainable, Realistic and Time bound) objectives so that it can achieve its mission and vision successfully. The company’s vision statement says “Every Home… Everywhere… with Pride, Passion and Performance”. In order to achieve this vision Whirlpool has to increase the sales volume. It should have the objective of increasing its sales by at least 12% by the end of next financial year. Furthermore, in the developing markets like India the company should aim at a market share of at least 30% by this timeframe. With the current market share of almost 25% this objective is very much realistic. Whirlpool should also focus on its branding activities in the emerging markets of Asia, Africa and Latin America. The objectives regarding sales and market share can only be attained if the company constantly improves its branding activities. Acquisition of some of the local producer may also be helpful in order to increase the market share. Furthermore, Whirlpool should improve its distribution network especially in the rural and semi-rural markets that are mostly untouched till now. In addition to the above mentioned objectives, Whirlpool should have an objective of achieving a specific level regarding product innovativeness. In this competitive market innovation is the only thing that can assure success for a long period of time. Whirlpool should try to come up with more innovative products. The company should develop a special rating system in order to measure the innovativeness. With the help of feedbacks from the consumers and this rating system the company should improve the product innovativeness by almost 15% within the next financial year. Conclusion Whirlpool has been dominating not only the global washing machine industry but the entire home appliance industry for a long period of time. At present it is the proud owner of brands like Whirlpool, KitchenAid, Maytag, Amana, Jenn-Air, Consul, Bauknecht and Brastemp. The company has excellent presence throughout the world. By merger and acquisition it has strengthened its position in the developing markets of Asia. Whirlpool’s performance was significantly affected by the recent global economic crisis, but with its strong distribution network and excellent brand equity the company has regained the momentum of growth. Whirlpool is one of the most experience washing machine producers in the world and this is its main strength. However, it is facing intense competition from its rivals especially from the Asian players. As most of the Asian companies are trying to improve their presence in the markets of US and Europe, Whirlpool should focus on the developing Asian markets. The century old company is expected to achieve its mission as well as vision if it can improve its business in the emerging markets like India and China. In the process of doing this Whirlpool should emphasis on the aspects like brand positioning, distribution and supply chain network and merger and acquisition. References Appliance Today, 2010, Compare Laundry Washing Machines – LG, Whirlpool and Bosch, [Online] Available at: http://appliancetoday.info/compare-laundry-washing-machines-lg-whirlpool-and-bosch/ Accessed on April 3, 2011. Detroit Economic Club, 2011, Whirlpool's Investment Plan Targets up to $300 million for Michigan, CEO says, [Online] Available at: http://www.econclub.org/Media/2010%20-%202011%20SEASON/NewsArticles/Whirlpoolinvestmentplan.aspx Accessed on April 3, 2011. ET Bureau, 2009, Whirlpool eyes 22% share of washing machine market, The Economic Times, [Online] Available at: http://articles.economictimes.indiatimes.com/2009-01-21/news/28478598_1_washing-machines-whirlpool-india-machine-market Accessed on April 3, 2011. Ingram, T. N., LaForge, R. W. and Avila, R. A. 2008, Sales Management: Analysis and Decision Making, M.E. Sharpe Onkvisit, S. and Shaw, J. 2004, International marketing: analysis and strategy, Routledge PRLog, 2010, China Home Appliance Industry Report, PRLog Press Release, [Online] Available at: http://www.prlog.org/10821701-china-home-appliance-industry-report-2009-2010-by-research-in-china-now-available-at-reportsandrepo.html Accessed on April 3, 2011. Whirlpool Corporation, No Date, Strategy Execution, Our Strategy, [Online] Available at: http://www.whirlpoolcorp.com/about/strategy.aspx Accessed on April 3, 2011. Whirlpool Corporation-a, No Date, About Whirlpool Corporation, [Online] Available at: http://www.whirlpoolcorp.com/about/overview.aspx Accessed on April 3, 2011. Whirlpool Corporation-b, No Date, Financial Statements, Financial Information, [Online] Available at: http://www.whirlpoolcorp.com/about/overview.aspx Accessed on April 3, 2011. Ying, W. 2009, Whirlpool to close washing machine plant in Shanghai, China Daily, [Online] Available at: http://www.chinadaily.com.cn/bizchina/2009-04/10/content_7664973.htm Accessed on April 3, 2011. Read More