Question 1: What is the nature of Whirlpool’s domestic and international business environments? What type of risk does the firm face?
Domestic market * Maturity of the US market in the 90s accompanied stiff competition, more demanding buyers which resulted in low profit margin and the need for management to consider internationalising.
International market * Fall of trade barriers, customer affluence grew and capitalism flourished. * Management was quick to understand that a more global approach would encourage economies of scale in the firm’s manufacturing and assembly operations. * The firm sought cost reduction mechanisms in R&D, manufacturing, and services by locating plants in lower-cost locations like China, Mexico and Poland. * Global expansion strategy (Acquisition) – Acquired the appliance market of Phillips in Europe, 65% of Italian cooling compressor manufacturer (Aspera), purchased Poland’s second appliance maker, and formed a joint venture to produce air conditioners in China etc. * The firm launched a differentiation campaign to distinguish itself from the ‘Sea of White’ appliances and the ‘White goods business’ perception that the industry witnessed. * A knowledge management intranet site and a DIY course in innovation yielded high potential, innovative ideas from the global workforce. * Local preferences – cross-regional teams collaborate to adapt innovations to local demands. * As a result, since 2003, revenue quadrupled.
Risk
Cross-cultural risk * Language differences whilst assigning groups to Benton Harbor, Italy and Brazil. * Cultural differences may lead to inability to achieve optimum objectives within the whole knowledge management intranet site.
Country risk * Differences in tax tariffs when internationalizing may pose a challenge to Whirlpool’s strategy. * Government