Executive Summary The Household Appliance Manufacturing industry felt the pressure in the past five years to 2012 due to the effects of the changing real estate market. Like most producers of household goods, appliance manufacturers watched demand grow during the real estate surge through 2006 and then watched it decline when the housing market weakened. As consumers move into new homes, they will more than likely purchase new appliances. Therefore, activity in the residential real estate market directly affects household appliance manufacturers. As a result of the subprime crisis and housing market collapse, industry revenue has declined at an estimated average annual rate of 6.3% to $15.2 billion in the five years to 2012.

Introduction The household appliance industry is an innovative industry depending upon the ever changing market. We take into consideration the five environs of a situation analysis including: competitive, political, social, cultural and economical environment to assess the nature of the industry presently and to predict the direction of the market. We need these set of environs to effectively conduct a long term marketing plan for a company that is thriving in this industry. We will attempt to outline the industry overview, competitive landscape and the products, operation, & technology to further conduct our analysis in a detailed scope of the market. Our perspective will be reflected in our outlined short and long term strategic recommendations compiled from our company findings.

Industry Overview There is a veritable cornucopia of different household appliance manufacturers meeting product demand from all over the world. These companies are producing products ranging from ovens, stovetop ranges, refrigerators, washers, and dryers, amongst many others. The many companies that operate within this industry have a huge range of products and world markets. Because of the vastness of this industry it is more efficient to compare companies that sell their product domestically and have the largest revenues. The revenue leading U.S. based household appliance companies are Whirlpool Corporation, AB Electrolux, General Electric Company, and LG Electronics. Whirlpool ended its 2011 fiscal year with nearly 19 billion dollars of total revenue. AB Electrolux had 101 million in revenue for their 2011 year. General Electric and LG produced similar levels of revenue for their 2011 fiscal year. In all four major firms there is a common trend in generated sales. Overall, as the housing market increases so does the household appliance market, likewise, as the housing market falls so does the average sales of any given household appliance manufacturer. This can be observed directly from viewing any of these major appliance companies’ income statement. During the early 2000s, when the housing market was at its highest, there has a corresponding surge in the sales of all four major marketing firms. Unfortunately from about 2005-2007 there was a drastic decline in average sales for the entire major appliance manufacturing companies due to the collapsing housing marketing and hastily degrading economy. In recent years there has been a unanimous marketing strategy from these main appliance producers to focus their advertising campaigns on the more energy efficient, cost saving, products available. While this tactic has not been meet with as much sales generating energy as the previous booming housing market, it has helped balance the industry’s overall sales and put many of its respective companies’ back on track.

Major Players in this industry include Whirlpool Corporation, General Electric Company, AB Electrolux, and LG Electronics. The industry is in the mature phase of its life cycle because of its high market concentration, product saturation, low growth rate and market acceptance. This industry is highly concentrated, characterized by the top four major players that hold a combined market share of about 92.0%. Product & Market Trends The recovery in the housing market will bode well for appliance manufacturers. Because new homeowners comprise a significant portion of appliance sales, the anticipated rise in housing creation/acquisition will bring increased demand to the industry. However, appliance manufacturers will continue to face rising input costs, particularly plastic. With financial assistance from federal tax credits expiring, many operators will cope by moving their production to lower labor-cost countries like China or Mexico.
The global household appliance industry used to be one that was essentially centered in US and UK based productions, but has recently seen an influx of manufacturing activity in less developed countries like India, China, Russia and Mexico. The global household appliances industry experienced a downturn in 2009, but 2010 began its gradual recovery. This recovery has been attributed to an increase in consumer spending on a global level. Robust growth rates have been witnessed in countries in the Asian and Latin American regions. In terms of demand increase, the energy-saving and eco-friendly products have dominated the landscape, as emerging markets have joined US and UK consumers in their desire for more eco-conscious living.

Segmentation According to prweb.com, vacuum cleaners constitutes the largest segment of the major household appliances industry, though the website also states that in the near future sales of microwaves, refrigerators and “room air conditioners” will show impressive-enough growth rates to combat vacuum cleaner segment. This may prove to be an indicator of an impressive economic recovery, as these growth rates are anticipated to be a part of overwhelming demand for these products in the developing nations of Asia-Pacific and Latin America. As it concerns the small appliances category, electric irons is said to represent the largest segment, followed by coffee makers and toasters.
Market Share Europe, the US, and Asia lead the production of appliances, accounting for nearly 80% of global production. Low labor and manufacturing costs make the Asia-Pacific region an ideal destination for multinational companies to setup their manufacturing base, and South Korea and China are the leading Asian markets. Major electric household appliances companies are expected to boost production to meet the increasing demand for their products from the Asia-Pacific market. Korea and the Japanese are thought to have expertise in refrigeration, while Europeans are seen as more proficient in the area of cookware and dishwashers, and the US is particularly strong in the manufacture of washing machines.

Situational Analysis

Cultural Environment Home appliances are mechanical or electrical machines, which accomplish household functions, such as cooking and or cleaning. Key external drivers in the household appliance manufacturing industry, according to IBIS World are housing starts, price of plastic materials and resin, trade-weighted index, world price of steel, per capita disposable income, tax credits for energy efficiency. This industry is in direct correlation with the housing market. Therefore, when the economy is in the midst of a recession and the housing market is down, the home appliance industry will be as well. According to the Home Appliance Manufacturers Industry Yearbook, “The aging population and slow growth in the number of households will help to keep growth in the household-appliance industry at moderate levels.” There are two categories of home appliances. The two types of home appliances are major appliances and small appliances. Major or large appliances are usually a part of the house or unit when sold in the real estate market. The major appliances, such as stoves, air conditioning systems, refrigerators and dishwashers, are large and therefore require a substantial amount of electricity to operate properly. According to the market research website, “The demand for products within the major appliance industry is reliant on personal income of the consumer, home sales, home remodeling, and replacement of an appliance in the event of production failure.” Small appliances are easily mobile products that are typically placed on countertops or tables to perform household tasks. Examples of small appliances are blenders, toasters, coffee makers, vacuum cleaners and curling irons. According to the market research website, these products are made from plastic and steel. The sale of small appliances is directly correlated with income and home sales.

Consumers
A vast number of adults in the United States population have daily contact with home appliances. Home appliances are in the mature phase of the product life cycle. The products in this industry have been on the market for a great while and as a result consumers are extremely familiar with them. Home appliances account for two thirds of electricity generated in the home. Consequently, the most recent trend is the need for more energy efficient home appliances. According to Intertek, “A greater focus on health and well-being is one lifestyle trend carrying over into home appliance selection and consumer expectations. With the increase in social and environmental consciousness, many consumers are looking for ways to reduce their impact on the environment. Driven by the desire to help the environment and to save money, consumers will seek appliances that are energy-efficient and cost-effective. In an effort to cut manufacturing and shipping costs as well as to be responsive to consumers’ desires, many companies are now realizing the direct and indirect cost benefits of going green.” (2010)

Economic Environment New housing construction is one of the largest factors determining the purchase of new major household appliances. The rate of housing starts indicates the level of residential construction activity. As more homes are built, the demand for new appliances increases. Housing starts are expected to increase during 2012, presenting a potential opportunity for the industry. Plastic is used as a raw material in the manufacturing of many major household appliances, such as washing machines, clothes dryers and refrigerators. As the price of plastic increases, the cost of manufacturing appliances rises. To cope with rising costs, firms usually raise product prices, which can dampen sales. The price of plastic materials and resin is expected to increase slowly during 2012 and poses a potential threat for the industry. Steel is a raw material used in the manufacture of major household appliances such as refrigerators, ovens and ranges. As the price of steel increases, the cost of manufacturing appliances rises. Some manufacturers will pass on the higher input costs to consumers in the form of higher prices. Higher prices often deter customers from purchases, decreasing the industry’s revenue. This driver is expected to decrease in 2012.
Technological Environment With the advent of smartphones and tablet computers, people are able to stay connected at all times and live more seamless lives when it comes to technology. As the cost of technology used to manufacture power smart appliances decreases, consumer expectation for the next generation of smart appliances have increased. These expectations have impacted technological advancement in the manufacturing of home appliances resulting in the manufacturing of appliances that provide greater interconnectedness, intelligence, longevity, energy efficiency and reduced impact on the environment. Technologies such as variable-speed motor control allow appliances to be more energy efficient and home networking allows home owners to control and monitor the energy usage of all household appliances that are connected to the same network. With a growing middle class, more consumers call for appliances that provide more modern features like touch-screen controls, integrated security camera, remote controls and monitors. Most home appliances use programmable logic devices (PLDs) due to their lower cost per function as opposed to microcontrollers which are more expensive. The two types of PLDs include Field-Programmable gate array (FPGA) – these devices are composed of configurable programmable logic cells that can be configured to perform a variety of functions. Complex programmable logic device (CPLDs) – Programmable logic device made up of several simple PLDs with a programmable switching matrix in between the logic blocks. CPLDs typically use EEPROM, flash memory, or SRAM to hold the logic design interconnections. There is a great amount of pressure on appliance manufactures from consumers, the government and competitors of similar products to remain competitive in reinventing their products. The U.S. is still dominant in smart appliances but it is predicted that emerging markets like China will increase in the next four years. The U.S. Department of Energy sets national energy efficiency standards for major household appliances. In addition to setting energy standards, the Department with the U.S Environment Protection Agency created the Energy Star label in 1996 which is used to identify the more energy efficient products on the market. In response to consumer demand and economic necessity, even large corporations have identified sustainability as a key strategic goal, thereby driving their supply chain to comply by manufacturing ENERGY STAR qualified appliances. A more cash conscious consumer base that is aware of environmental issues has put pressure on manufacturers to earn energy efficiency certifications for their appliances. This has resulted in manufacturers partnering with testing and certification laboratories allowing them to not only fulfill government requirements, but also gain insight into regulations that shape the industry. This partnership helps manufacturers to simplify their energy verification process, while producing products with a competitive edge and allowing them to achieve first-mover advantage.
Social Environment The environment of the Home Appliance Manufacture Industry has steadily changed over the past three decades from a social standpoint. Traditionally Americans could expect to live an estimated life of 74 years in the 1970’s and 1980’s. Due to the amount of advanced technology Americans are now living approximately 79 years; that is five years longer than twenty years prior. This shift in the norm will allow for an increase in household products to be produced for today and future households. It is projected that according to the Bureau of Economic Analysis, “spending by households on many of modern life's "basics" such as food at home, automobiles, clothing and footwear, household furnishings and equipment, and housing. Utilities fell from 53% of disposable income in 1950 to 44% in 1970 to 32% today.” Families across the nation and globally have desired a more convenient way of living sparking an innovative today for the home appliance manufacture industry. Companies such as GE Appliances, EcoSmart Products and Fire Magic to name a few have created newer products to satisfy consumer trends for the optimistic economy. According to the Wall Street Journal, “construction of single-family homes climbed 18.5% in December from the prior year. The annual sales pace of new homes was on track to be 23% higher last year than the record low in 2011. These statistics directly relate to the Home Appliance Industry leading one to believe there will be an increase in spending in the industry. It has also been speculated that the new industry product designs may become a demanded household standard allowing for appliance replacements in not only newer model homes but for older homes and offices as well.

Political Environment The political environment for the household appliance manufacture industry revolves around the fluctuating reactions and attitudes of the general population, social standards, and current business ethics. Approval/disapproval of any of these elements can have an effect on the business practices of one of the many companies within the household appliance manufacture industry. For example, if a particular appliance if proven, or even just suggested as unsafe, wasteful, or produced unethically, there is usually a political response made to correct this product defect. The political environment can be used as an advantage for an adaptive, opportunistic company. For instance, whirlpool has embarked on a fairly successful marketing campaign to showcase many of its products has highly efficient. This efficiency is then equated to utility savings for the consumer. In poor economic times this tactic has been effective at generating sales for companies that adopt this marketing strategy.
Legal Environment This environ contains a magnitude of federal, state, and local legislation concentrated at preserving both business competition and consumer rights. In the past, legislation has been a force of social and political attitudes and has been used to restrict many business practices. Historically this has been a source of business constraint, used to lessen negatively viewed business behaviors. A basic example is restricting cigarette sales to adults. Clearly tobacco companies would like to gain the additional sales that selling to minors would provide, however, this business behavior is considered unethical and thus legal regulation has made the practice of selling tobacco to minors illegal. Like the political environ, the legal environment can be an opportunity as well. Many companies market the fact that they are “equal opportunity” employers as a strategy. Despite the historic trends of restriction and constraint found with the legal environment, there has been a shift towards deregulation in recent years. Most of the deregulation has been involved in the financial services industry and telecommunication industry. Due to the nature of the many products that the household appliance manufacturer industry produces, there hasn’t been a surge of new laws allowing a change in business behavior for these companies. That being said, most firms assert that the recent emphasis on deregulation will help companies increase business efficiencies and better manage their profits.

Competitive Environment The household appliance manufacture industry has taken a decline in the last five years due to the recession. When consumers by houses they need, new appliances so the collapse in the home buying sector directly effects demand of the household appliance manufacture industry. New appliances do not run cheap so declining wealth, rising unemployment and tight credit markets have created uncertainty for retail sales of large appliances. Food and cooking trends affect demand for certain types of appliances. Different types of foods have different storage, preservation and preparation requirements. Eating out may reduce demand for some household appliances, and the rising incidence of all adults in a household being in the workforce has increased the incidence of eating out. Just like with consumer, the household appliance manufacture industry demands are driven by home construction and home sales.

Competitive Landscape The home appliance manufacturing industry is a $15.2 billion revenue-generating industry. This industry has high barriers of entry, therefore major competitors in this industry have been around for a while. The top companies in this industry in ranking order of market share Whirlpool Corporation (42.8%), AB Electrolux (22.8%), General Electric Company (17.2%) LG Electronics (10.5%). This industry also faces competition from cheaper imports from S. Korea and Mexico, which have a lower cost of production. (Household Durables; Jim C. Yin, Standard & Poor’s) According to the International Trade Journal, “Until 1991, in spite of a few cross-regional acquisitions by largest actors, competition can be regarded as mainly regional. The global restructuring process and interregional trade of products and components are still limited to certain minor segments of the industry.” The Association of Home Appliance Manufacturers enhances this industry by verifying that all home appliance manufacturers are in compliance with the association’s quality standards. There are labels for consumers to quickly identify the attributes of appliance. The appliance labels include Energy Star for energy efficient products, Linear Motor for appliances with linear motors, and Smart Appliance for those products that save energy by knowing when to operate and when to not. General Electric Company with a market share of 17.2% expects its sales to increase as residential construction increases and consumers feel more confident about the state of the economy. Demand in the household appliance manufacturer industry is driven by growth in consumer income and by home sales. The profitability of individual companies depends on efficient operations and effective marketing. With the top four major household appliance manufacturers accounting for over 92% of the industry's revenue, concentration in this industry is high. GE’s top competitors include US-based GE and Whirlpool (owner of the Maytag brand, among others), and Electrolux AB (Sweden), BSH Bosch (Germany), LG Electronics (South Korea), and Haier (China).. During the economic recession, many firms left the industry because they were unable to weather the rapid revenue decline however, the number of major household appliance manufacturers is expected to increase along with revenue over the next five years. Competition is fierce in this industry and comes from a number of companies globally and a large number of competing brands. The bases of competition in this industry include price; product features, quality, styling and performance; service capabilities and levels; warranty periods; and brand names. The household appliance manufacturer industry has a high level of globalization because two major players are foreign-owned enterprises and imports satisfy more than 40.0% of domestic demand. Within the last five years, foreign firms have strengthened their market presence in the United States. The global household manufacturing industry generates about $160 billion in annual revenue and the European Union accounts for about $73 billion; China for about $13 billion. LG Electronics with a market share of 10.5% is a South Korea-based company that specializes in producing telecommunication and electronics products. Its home appliance division produces refrigerators, washing machines, microwave ovens, vacuum cleaners, motors and more. In 2004, the company began focusing on providing home appliances in the United States. By 2008, LG ranked highest in customer satisfaction in washing machines in the J.D. Power and Associates 2008 Laundry Appliances Study. Research has shown that about 20.0% of company's sales are generated from its home appliance segment and that about 24.0% of overall revenue is generated in the United States. 10.5% Whirlpool, with a market share of 40%, specializes in laundry appliances, refrigerators and freezers, cooking appliances, dishwashers, and compressors, which are sold under a bevy of brand names, including Whirlpool, Amana, KitchenAid, Maytag, and Roper. The company markets and distributes these major home appliances in North America, Latin America, EMEA (Europe, the Middle East, and Africa), and Asia. It has manufacturing operations in about a dozen countries. Major customers include retailers Lowe's, Home Depot, Sears, and Best Buy. AB Electrolux, with a market share of 22.8% and based in Sweden, has a product range that includes ovens, refrigerators, freezers, dishwashers, washing machines, tumble-dryers and vacuum cleaners. Electrolux sells more than 40 million products to customers in 150 different countries marketed under the brands Electrolux, AEG-Electrolux, Eureka and Frigidaire. North America accounts for about 33.0% of the company's net sales and 23.0% of core appliance sales (excluding vacuum cleaners).

Indirect Competitors Home appliances in the United States of America are, to many, mundane and a part of a daily routine. The home appliance manufacturing industry, GE specifically, has several direct as well as indirect competitors. The direct competitors, such as Whirlpool and AB Electrolux, are fairly easy to place and analyze, the indirect competitors however are not. The home appliance manufacturing industry has existed for decades and as a result, these products are difficult to replace or reinvent. Consequently, indirect competitors of this industry typically conflict with the retail or distribution of the products to the consumer. Therefore, major indirect competitors include, laundry mats and restaurants, which deter consumers from buying their own appliance. Other indirect competitors are pawn shops, Goodwills, and websites similar to Craigslist that resell a home appliance for a discounted rate. According to a website titled, Personal Dividends, pawn shops are popular when people are selling previously-used products. “If you’re moving, you can sell your refrigerator, dish washer, washer and dryer combos, and ovens, or smaller appliances. “ Moving from an old home to a new one requires a great deal of time and can potentially become a hassle. Loading and lifting large appliances is tedious and some consumers rather sell the products to a Pawn Shop or donate them to a local Goodwill instead of moving them. Consumers, particularly Generation Y, or tech-savvy consumers, have begun to sell and purchase appliances on websites, such as eBay and Craigslist. According to Steadfastfinances.com, “Generation Y have developed a preference for used products, such as cars and laptops.” In addition, the article, Young, Smart and Broke? Budgeting Tips for Generation Y said, “The age group is more comfortable with the Internet and technology…and there is simply no excuse not to get good deals on housewares and home appliances. More often than not, a used product can be found on the Internet that performs just as well as a new one for much less money.” The theory of buying an appliance that performs as well as those sold in major retail chains, for a significantly cheaper price, is the reason why indirect competitors have become a major opponent of the home appliance industry. The Laundromat industry is has 4.4 billion dollars of revenue which is one of the major indirect competitors of the Household Appliances Industry and GE. In the years since the recession, demand has increases slightly due to the fact that more Americans have begun renting homes, which represents a core target market for the industry. Due to the recession and the decline in home buying, renters are using local Laundromats and apartment complexes which offer them the convenience of having Laundromats in their complex. On average, Americans eat out about five times a week, according to the National Restaurant Association. For some people cooking is something that just doesn’t happen if you can’t put it in a microwave. This ultimately hurts the household appliances industry because these people are not concerned with buying new appliances because they are rarely putting them to use anyway.

Products, Operations, & Technology The Home Appliance Manufacture Industry includes several primary activities including house-hold type cooking appliances and manufacturing, household type laundry equipment manufacturing, dishwashers manufacturing, water heaters manufacturing, garbage disposal units manufacturing, household type refrigerators manufacturing, upright and chest freezers manufacturing researched in IBIS World. These activities create our products that consumers use every day and are steadily demanding additional products. Some major products and services in the industry are not limited to household cooking appliances, household refrigerators and home freezers, household laundry equipment, water heaters, other appliances. According to IBIS World, “Manufacturers in the Major Household Appliance Manufacturing industry produce and sell a defined set of finished household appliances to downstream wholesale and retail industries who then sell them to end-consumer households.” Statistics show that the largest industry product portion is household refrigerators and freezers, which grossed an estimated 25.0% of industry revenue in 2012. “Home builders and retailers purchase refrigerators and freezers to sell to US consumers. Commercial builders and offices purchase refrigeration appliances for employees to use. Some companies focus on going “Green” and practice corporate responsibility investing in new energy efficient products. (IBIS World, 2012) The household laundry equipment places second for an estimated 24.0% of industry revenue in 2012. This division includes washing and drying machines. The amount of shipments of household laundry machines and parts is expected to decrease at an average annual rate of 3.3% in the five years through 2012. This division is expected to surge in 2012 due to consumers increasing their spending for an optimistic real estate market. Also, GE Appliances says its Café French Door refrigerator is the industry's first fridge that can quickly heat 10 ounces of water allowing them to be the most innovative company in Home Appliances. Household cooking appliances is placed third for an estimated 21.0% of industry revenue in 2012. A few examples are as follows: electric ranges/stoves, ovens, surface cooking units, equipment and parts which were estimated 55.0% of the total; gas ranges and cooking equipment accounted for about 35.0%; and other household ranges and cooking equipment accounted for the remaining 10.0%. These statistics were provided by IBIS World statisticians. Closely following are the water heater appliances estimated at 13.0% of industry revenue in 2012. Electric water heaters will make up approximately 40.0% of the value of this segment's shipments, with other water heaters accounting for 60.0%. An increase will emerge during the colder months. Other major household appliance manufacturing will account for an estimated 17.0% of industry revenue in 2012. This segment includes microwave ovens, dishwashers and garbage disposals.
Production Process The appliance industry is becoming increasingly global, thus manufactures must comply with increasing number of standards and regulations both domestically and in foreign markets. Countries around the world are starting to restrict lead, mercury, cadmium, hexavalent chromium and certain polybrominated flame-retardants from electric and electronic equipment. This has affected manufacturing processes by challenging Companies to come up with substitute products. The European Union WEEE Directive of 2005 for example, call for mandatory collection of electrical and electronic equipment to stem Europe’s growing waste problem. As a result, Companies have to register with a member state or a collection scheme to pay for the collection and treatment of e-waste.
Distribution Process Most retailers rely on the Just in Time inventory distribution strategy which responds quickly to customer demand. Most appliances sold in U.S. markets were imported from manufacturing bases in Asia. Major Household appliance Companies use major shipping companies such as COSCO that provide supply chain management based on their strong global network resources. These partnerships enable Household appliance companies explore business opportunities overseas. Government environmental regulations is one of the greatest hurdles facing appliance markets. Access to global markets can only be achieved by producing appliances that meet electromagnetic compatibility (EMC) requirements across multiple markets. Partnering with a testing and certification lab is the best approach to assessing the applicable regulations and standards for Companies specific product and region to avoid obstacles and delays. Companies sell their products through stores or through the Internet, staff knowledge about the products, the image designs on the internet and sellers promotion are the most important factors that affect sales.

Concerns for Industry

Market Saturation As the home appliance market approaches saturation, industry expansion is difficult to obtain through price reductions or quality improvements. The global appliance industry is expected to record close to 4% yearly growth in demand through 2015 to reach a volume of 400 million units, reports Freedonia. Demand is expected to come from housing market recovery in 2015, and also because consumers are beginning to upgrade to superior equipment as income levels rise. Growth in other established markets is likely to be more modest in the future.

Global Competitors The US, EU and Asia lead global appliance production, accounting for around 80% of overall production. Asia-Pacific benefits from low manufacturing and labor costs, attracting multinational manufacturing facilities to the region. China and South Korea are the two largest Asian markets, while Japan and Korea are known for specializing in refrigeration. The EU has expertise in dishwashers and cookware, while the US is well established in washing machine manufacturing.

Electronic and E-commerce Trends The 2012 Consumer Electronics analysis witnessed broad and innovative shifts in smart appliances, which incorporated smartphone capabilities, smart grid technologies and functionalities geared towards consumers’ lifestyles. More important was the evolution of bottom-up development infrastructure which can actually support smart appliances, which was maturing. This advance is likely to bolster sales of smart appliances, and expand the functionality and connectivity of many major as well as small appliances. Internet retailing increased steadily over the last few years, and in 2012 online sales made substantial gains in both major and small appliances. Many retailers, as well as manufacturers, adapted to shift towards the online distribution of appliances changing the way in which major appliances were offered, promoted and shipped.

Possible Joint Venture
Back in 2008, General Electric Company considered unloading its appliances division to seek a joint venture. The company is considering a sale, spin off, or strategic partnership to focus on “faster growth” opportunities. The move would have been part of a company trend that began in 2003 to sell slower growth and more volatile businesses primarily because of the weak consumer spending and the declining housing market. The company does not want its success to be tied to the rise and all off of a single market, the housing market. Weak consumer spending and a drop in home improvement sales and residential construction is a major concern for General Electric Company Appliances Division.

Supply Prices The impact of escalating steel prices in the US is starting to filter through supply chains, with companies that buy and process steel raising their own prices, stockpiling in advance of possibly more increases and boosting volume to offset costs. Steelmakers have increased prices six times, for a total increase of 20% to 30%, used in all sorts of things from cars, to toasters, to offset higher input costs of raw materials, such as iron and coal. Higher costs for steel are prompting additional price increases. The biggest impact is felt by companies whose sole business is buying steel directly from steelmakers and stamping, bending, coating and cutting that steel for equipment makers, directly effecting the stainless steel markets within the home appliances industry.

Decline in the Housing Market The recovery in the housing market will definitely help appliance manufactures. The anticipated rise in housing starts will increase the demand of the home appliances industry because new homeowner are a significant factor of appliance sales. However, appliance manufactures will continue to face rising input costs, particularly plastic. With financial assistance from federal tax credits expiring, many operators will cope by moving their production to lower labor cost countries like China or Mexico.

Shipping Concerns Shipping is a primary concern for both GE and the home appliance industry due to the globalization of the industry. According to Neilson, the fact that the major home appliance industry remains profitable in the United States may serve as a bit of a misnomer, as currently there is not much opportunity for growth. The industry is mature and saturated and it is estimated that appliance shipments over the next few years will remain constant or increase very slightly. As a result, many of the top manufacturers of major appliances are looking to foreign markets to try to increase sales.
Two important trade agreements have had a direct impact on the major appliance industry, the Uruguay Round of the trade agreement reduced tariffs on all goods by roughly 40% in developed countries from 1995 to 2005. The North American Free Trade Agreement (NAFTA) went into effect in 1994 and eliminated or reduced tariffs between the U.S. and Mexico. Duties charged on shipments between the U.S. and Canada were eliminated under the U.S.-Canada Free Trade Agreement in 1989 and tariffs between these two countries are currently nonexistent. Asia has become more committed to open-market economic policies since the early 80’s and posted the most rapid growth rate in the world in 1995. Trade/Government Restrictions According to the Institute for International Economics, trade barriers cost American consumers $80 billion a year, or more than $1,200 per family, in increased prices for goods such as sugar (and foods made with it) and appliances made from steel. Subsidizing exports can cost governments much more money than would programs designed to shift uncompetitive production into more efficient or internationally competitive sectors. An example of this can be seen in the American Automobile Industry. Another criticism of import restrictions and export subsidies is that they discourage the protected firms and industries from making the changes necessary to challenge foreign competition. Once the protected companies have received government support in the form of import restrictions or export subsidies, they may have less incentive to improve their efficiency and management, eventually even becoming dependent on government support for their survival.
Finally, trade restrictions are a major impediment to development efforts. Developing countries are unable to sell their products abroad because of high tariffs and quotas. Additionally, their domestic markets are flooded by cheaper, subsidized products from abroad. In response to the known problems associated with trade restrictions, the World Bank offers three suggestions that the G20 countries could adopt. These leading countries could: (a) commit to greater transparency by agreeing to provide quarterly reports on new trade restrictions, and industrial and agricultural subsidies to the WTO; (b) advocate greater Aid for Trade for low income countries; and/or (c) seize the opportunity to support global trade in a time when it desperately needs to be supported. Issues of Low Differentiation
Low differentiation between products in the home appliance industry is a problem because it creates a barrier between companies, their newer products and their customers. The primary reason this separation exists is the fact that there exist few reasons for consumers to explore other brands. There are few exclusive attributes available to home appliance manufacturers that would entice consumers to switch from a currently preferred brand to our company, GE. When there is low product differentiation, companies may look to other ways to separate their products from their competitors in the minds of consumers. Alternatively, a company can obtain competitive advantage by differentiating itself from the competition along the line of services, channels, people or image. Once a company identifies its points of differentiation, if it has more than one it must then decide which ones to use, how to use them and to what target market to direct them. Because of the potential costs associated with the choice of differentiation the most effective difference or differences must be chosen carefully. The factors worth considering when making this choice can often lead companies to consider whether it is important, distinctive, superior, communicable, preemptive, affordable, and profitable.

Internal Analysis
General Electric Company is an American multinational conglomerate corporation incorporated in Schenectady, New York and headquartered in Fairfield, Connecticut, United States. The company operates through four segments: Energy, Technology Infrastructure, Capital Finance and Consumer & Industrial. In 2011, GE ranked 6th in the Fortune 500 as the largest firm in the U.S. by gross revenue. GE also ranked as the 14th most profitable. However, the company is currently listed the 3rd-largest in the world among the Forbes Global 2000, further metrics being taken into account. General Electric’s slogan, “We Bring Good Things to Life,” embodies the pride the company markets to its consumers. GE is a well-known brand with operations in 130 countries across the world. The culture in a particular country determines the types of goods that the company will produce. GE has a variety of customers for each of its product lines. GE product lines include: appliances, consumer electronics, home improvement, housewares, lighting products and personal healthcare. The company has one of the most diversified product portfolios. In order for GE to be successful, the company must respond to the changes in these particular countries and cultures, whether it is a political or economic issue. Economic issues are significantly important since GE’s home appliances and housewares are in direct correlation with the housing market. GE target market includes residences, as well as restaurants, which may be operated differently and require various appliances or housewares. By offering rebates, discounts, financing and customer training, GE demonstrates how valuing the customer is a part of its corporate culture. In addition, GE values it customers by practicing Six Sigma, which allows the company to deliver minimum defects and near perfect products. GE Appliances, led by President and CEO Chip Blankenship, is a $5 billion business headquartered in Louisville, Kentucky. GE Appliances is at the forefront of building innovative, energy-efficient appliances that improve people’s lives. GE Appliances employs more than 10,000 people. GE Appliances is at the forefront of building innovative, energy-efficient appliances that improve people's lives. GE Appliances' products include refrigerators, freezers, cooking products, dishwashers, washers, dryers, air conditioners, water filtration systems and water heaters. General Electric offers industry-leading products that stem from its consumers having larger families and higher resources which demands innovative products. The company has exceeded expectations by adding elements to their products that stay abreast of health related concerns from the environment. For instance, the company provides a state of the art purifying system for its health conscious consumers that demands cleaner water. Also, for its coffee or tea consumers, it offers hot water from its GE Profile refrigeration appliance set to release in 2013. The benefit segmentation strategy is carefully implemented in manufacturing each product from GE appliance. We believe the marketing executives uses their expertise that continue to leverage the company socially. GE's diverse set of four businesses naturally creates the most diverse industrial lab in the world. From aircraft engines to power generation to our financial businesses and even television network and movie studios, GE leverages technology across industries and across scientific disciplines. GE’s strength lies in their robust set of core technologies and how they apply breakthroughs to their businesses. GE lives by the mantra: "What we can imagine, we can make happen." With exciting discoveries in such fields as medical technology, power generation, and lighting, the GE tradition of innovation continues to evolve. More people are working harder in more areas than ever before, and in more places, like the Technology Center in China. Innovation at GE extends from advances in the detection and diagnosis of cancer to work on the International Space Station. GE constantly looks for ways to improve today’s standards to help create a better, more convenient world for tomorrow. GE is one of the participants responding to the increase in interest in appliances with lower operating costs, and in cooperation with environmental groups, appliance manufacturers signed the Energy Efficient and Smart Appliance Agreement of 2010, which promoted improved efficiency standards and tax policies for industry. Targeted appliances included refrigerators, freezers, washers and dryers, dishwashers, and room air-conditioners. The goal for the dishwasher segment of the industry was to meet standards that represented a 14 percent increase in energy savings and a 23 percent increase in water savings beginning in January 2013. General Electric produces a wide range of household appliances to nearly every corner of the globe. With its prolific distribution network, GE is faced with a variety of political and legal hoops to jump through. These hoops often manifest themselves into the product marketing mix that GE creates. For instance, many of the city-living Japanese residents are forced to live in very restricted housing. Many of the families in these urban areas live in apartments just 500 square feet. These housing restrictions limit the size of their appliances. Thus GE produces and markets several “urban living” diminutive appliances to meet this legal element. Many of the washers and dryers produced for these markets are small enough to fit inside a standard cabinet. While this comically small appliance wouldn’t meet the laundry demands of many American Households, it does open another market that is limited by legal restriction. Another political product marketing plan has existed across the world and recently come to fruition in the states. This is the regulation of water consumption. In many countries the government limits the availability of water. This has created a demand for highly water efficient household appliance. GE again reacts to these demands and creates and markets many low water usage washer, dryers, and dishwashers. These political restrictions have stretched across our borders to many U.S States. As several U.S. states become more burdened by drought due to global warming, there is a surge in political action limiting water availability. This has further strengthened the water efficient appliances marketed by GE. The home appliance manufacturing industry is a $15.2 billion revenue-generating industry. This industry has high barriers of entry, therefore major competitors in this industry have been around for a while. The top companies in this industry in ranking order of market share Whirlpool Corporation (42.8%), AB Electrolux (22.8%), General Electric Company (17.2%) LG Electronics (10.5%). This industry also faces competition from cheaper imports from S. Korea and Mexico, which have a lower cost of production. General Electric Company with a market share of 17.2% expects its sales to increase as residential construction increases and consumers feel more confident about the state of the economy. Demand in the household appliance manufacturer industry is driven by growth in consumer income and by home sales. The profitability of individual companies depends on efficient operations and effective marketing. With the top four major household appliance manufacturers accounting for over 92% of the industry's revenue, concentration in this industry is high. GE’s top competitors include US-based GE and Whirlpool (owner of the Maytag brand, among others), and Electrolux AB (Sweden), BSH Bosch (Germany), LG Electronics (South Korea), and Haier (China).. During the economic recession, many firms left the industry because they were unable to weather the rapid revenue decline however, the number of major household appliance manufacturers is expected to increase along with revenue over the next five years. Competition is fierce in this industry and comes from a number of companies globally and a large number of competing brands.

GE SWOT Analysis

Marketing Plan
Marketing Strategies * Implement a market development strategy by tapping into underdeveloped markets (countries with the potential to house large and small appliances that may require a lot of energy) * Market penetration through the research of Best-Buy product exchange/trade-in after five years. * Partner with Restaurant owners and franchisees. * Partner with home building companies. * Tap into a creative niche, such as tiny home appliances for dorm-rooms (students) or on-the-go/portable products/disposable income, travel (frequent travelers) ex: portable washers * Focus on Sustainable and energy efficient consumers who purchase smart houses (partner with home builders of smart houses)

As noted in the text, General Electric is a global corporation that views the entire world as one major market. G.E. uses its resources, assets, specialized techniques, and unique marketing plan to integrate its product across the globe. One major component to G.E.’s marketing strategy is marketing development approach. This marketing system utilizes new and existing customers within potential markets. G.E. has established itself in these foreign markets by capitalizing on four distinct components of their potential market. These components are existing customers, competitors’ customers, non-buying customers, and new customers. By efficiently targeting these elements G.E.’s has structured its marketing product development plan and increased total revenue in foreign markets. General Electric also employs a market penetration strategy as part of its product-market growth matrix. This tactic utilizes targeting a market in which users of similar products already exists. G.E. has been successful at this strategy through capturing competitor markets segments, as well as, attracting potential new users within those competitor markets. G.E. has increased it target market through market penetration by contracting with homebuilders, establishing commercial restaurant equipment, developing miniature dorm/metropolitan style appliances, and establishing a “green” marketing plan. General Electric has implemented several strategies in previous years including product development attempts to broaden its marketing strategy tactic. As consultants for General Electric our research indicates an opportunity to update its long term strategy to be to pursue a Market Development and Market Penetration Strategy to expand its services and operations. As GE expands its market, it will consistently focus on finding new ways to market its products in the right direction. General Electric provides innovative industry leading technology to service its consumer base as well as its potential markets. The company uses a financing approach to assist businesses build and grow their operations not limited to a few acquisitions in the past. Market penetration could be the future of GE with the implementation of such as to provide an extended warranty service to existing products similar to other electronic companies, in particular Best Buy. Best buy offers a product replacement plan which guarantees the replacement of a defective product with two years of the purchase date. This opportunity cost is low and market share increase is likely. Targeting those customers who values warranted on similar products such as its electronic washers, dryers, etc. GE currently offers a generic replacement plan on certain items such as water filters with a certain cost. GE is currently providing the traditional sized home appliances. GE could work in a cross functional setting to pitch ideas about the current appliances and have them optimize market development for college student dorm-rooms and studio apartments in areas such as Africa, China, and Australia where the number of educated individuals are increasing. General Electric holds a great amount of power in its industry. By collaborating with home builders and providing better homes for the citizens can be a good strategy to complete the overall idea of a market development strategy. GE can enter into an agreement with the builder to establish a larger international and welcoming presence. This will allow for easier entry into undeveloped places. These countries usually have the potential to house large and small appliances that may require a lot of energy to use.

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