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 outperforming 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
Forces for
Global
Integration
Global
Strategy
(Cost)
Transnational or
Mass Customization
Strategy
(some functions are
global, some are local)
(cost sharing
across countries)
Low
Local
Strategy
Low
Multi-Domestic
Strategy
(Differentiation)
Forces for Local
Differentiation
High
(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
X
Components
Assembly
X
X
X
Marketing
Sales & Distribution
X
Service
X
X
X
Jeff Dyer - BYU
Cost Structure Sensitivity Analysis
Experience Curve Slope
10%
Percent
20%
of cost
structure
influenced 30%
by global
scale
40%
50%
90%
80%
70%
1% savings
2%
3%
2%
4%
6%
3%
6%
9%
4%
8%
12%
5%
10%
15% savings
Jeff Dyer - BYU
IN SUMMARY: DIFFERENT STRATEGIC
POSITIONS HAVE DIFFERENT
MANAGERIAL REQUIREMENTS
Pressures
for Global
Integration
Global Strategic
Management
Central direction
and national
affiliates in
supporting roles
Home Market Base
Opportunistic
export/investments
Source: J. de
la Torre
Trans-National
Management
Some functions
global, some local,
semi-autonomous
subsidiaries, and
close coordination
Multi-Domestic
Management
A federation of
autonomous
subsidiaries sharing
some central services
Pressures
for Local
Differentiation
Jeff Dyer - BYU
DIFFERENT INDUSTRIES
HAVE DIFFERENT POSITIONS
Pressures
for Global
Integration
Civilian
Aircraft
Mainframe
Computers
Pharmaceuticals
Appliances
Autos
Semiconductors
Cons. electronics Telecom
Bulk
Chemicals Industrial
Specialty
Chemicals
Prof. Services
Beer
(e.g., M&A)
Services
Household
Services
Source: J. de
la Torre
Agricultural
Equipment Packaged
Foods
Food
Retail Banking
Retailing
Pressures
for Local
Differentiation
Jeff Dyer - BYU
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