MARKET AND

ENVIRONMENTAL FORCES

THE NEED FOR GROWTH:

THE U.S. APPLIANCES INDUSTRY

Jeff Dyer - BYU

Jeff Dyer - BYU
BYU
students
with
refurbished
fridge in
Singapore

Jeff Dyer - BYU

 APPLIANCE INDUSTRY:
STRATEGIC IMPERATIVES

FOR THE 1990s and BEYOND:

• Find growth opportunities overseas; U.S.

markets are saturated (2% growth) and the
industry has consolidated.
• Achieve Economies of Scale in R&D and
Manufacturing (particularly components)
• Conduct final assembly close to final
customer (high cost to ship).
• Ensure products meet needs for local
differentiation

Jeff Dyer - BYU

 RESPONSE TO
STRATEGIC IMPERATIVES

• Electrolux enters U.S. market with acquisition

of White Consolidated Industries (Frigidaire,
Westinghouse, Gibson)
• Whirlpool acquires Philips in Europe; enters
South America and Asia
• Maytag acquires Hoover in Europe (U.K.)
• GE enters emerging Asian countries
(Thailand, Indonesia, Vietnam) through Joint
Ventures with local companies.

Jeff Dyer - BYU

 WHIRLPOOL ACQUIRES PHILIPS

Actions:
• Rationalized assets: (e.g., 36 to 16 warehouses;
cut suppliers by 50 percent).
• Redesigned products around common platforms/components
• Merged national affiliates into a regional company for Europe
• Established Whirlpool brand presence (co-brand with Philips for two
years); establishing a brand is single largest expense.

Outcomes:
• European market share up, margins doubled initially.
• Globalization model now being applied in India, East Asia.
• Local competitors are developing customized response strategies and
are lowering costs; Whirlpool’s profits are declining. GE is out-
performing Whirlpool in Asia by tailoring products to local markets
through joint ventures with local partners (a more multi-domestic
strategy). Jeff Dyer - BYU
 TYPES OF
INTERNATIONAL STRATEGY:
A FRAMEWORK

High Transnational or
Global
Mass Customization
Strategy
Strategy
(Cost) (some functions are
Forces for
Global global, some are local)
Integration
(cost sharing
across countries)
Multi-Domestic
Local Strategy
Strategy (Differentiation)
Low
Low Forces for Local High
Differentiation
(Differences in Customer Needs)
Jeff Dyer - BYU
 WHIRLPOOL: ACHIEVING BOTH
INTEGRATION AND DIFFERENTATION

Function/Activity National Regional Global

Research & Development X X
Product Design X X
Components X
Assembly X X
Marketing X X
Sales & Distribution X X
Service X
Jeff Dyer - BYU
 Cost Structure Sensitivity Analysis
Experience Curve Slope
90% 80% 70%

1% savings 2% 3%
10
%
Percent
2% 4% 6%
of cost
structure 20
influenced % 3% 6% 9%
by global
scale 30
4% 8% 12%
%

5% 10% 15% savings

40
%
Jeff Dyer - BYU
 IN SUMMARY: DIFFERENT STRATEGIC
POSITIONS HAVE DIFFERENT
MANAGERIAL REQUIREMENTS

Trans-National
Global Strategic Management
Management
Pressures Some functions
for Global Central direction global, some local,
Integration and national semi-autonomous
affiliates in subsidiaries, and
supporting roles close coordination

Multi-Domestic
Home Market Base Management
A federation of
Opportunistic autonomous
export/investments subsidiaries sharing
some central services

Pressures
Source: J. de for Local
Jeff Dyer - BYU
la Torre Differentiation
 DIFFERENT INDUSTRIES
HAVE DIFFERENT POSITIONS

Mainframe
Pharmaceuticals
Computers
Civilian
Aircraft Appliances
Pressures Autos
for Global Semiconductors Specialty
Integration Cons. electronics Telecom Chemicals

Bulk Prof. Services

Chemicals Industrial (e.g., M&A) Beer

Services Agricultural
Equipment Packaged
Foods
Household Food
Services Retailing Retail Banking

Pressures
Source: J. de for Local
Jeff Dyer - BYU
la Torre Differentiation
 THE KEY TO SUCCESS:

Distinguish Between What CAN and

SHOULD Be Integrated

Versus

What MUST Be Differentiated to Satisfy

Local Tastes and Requirements

Jeff Dyer - BYU