Whirlpool Case Study Essay
Whirlpool Corporation got its start back in November 1911 with founders Louis and Emory Upton. It was originally called the Upton Machine Company before going through a couple of name changes.
The first was the change to Nineteen Hundred Corporation after Upton merged with Nineteen Hundred Washer Company in 1929. It then changed to Whirlpool Corporation in 1950 and it has remained the same ever since. In 2011, 100 years after gettings its start, the company was the “is the world’s leading manufacturer and marketer of major home appliances, with annual sales of more than $19 billion” according to its website.
It also states that the company has “68,000 employees, and 66 manufacturing and technology research centers around the world”. This is very important as Whirlpool continues to look for opportunities in the global marketplace. Whirlpool made their first move into the global marketplace in 1958 when they entered into a partnership with Brazil’s Brasmotor S.
A. which was the parent company of appliance maker Multibras S. A. Eletrodomesticos. It took some time but in 1990, they continued their global expansion by moving into parts of Europe, Latin America, Asia and parts of Africa.
Whirlpool markets many different brand names across nearly very country in the world. Some of the more recognizable names in the United States include Whirlpool, Maytag, KitchenAid, Jenn-Air and Amana. Brastemp and Consul are big brand names in Brazil while Bauknecht is a regional brand in Europe. Global Marketing Strategy Whirlpool started their global journey by acquiring an existing company in Europe and working their way into people’s homes through brand awareness. They continued to make their international product by utilizing the extensive product strategy, where they offer their product virtually unchanged, in the global market.
Whirlpool used a strategy that worked well in the United States and tried to make it work in the emerging markets. In the early 90’s Whirlpool’s then Chairman David Whitwam stated that in the latter part of the 90’s the majority of Whirlpool’s revenues would come from overseas. Whirlpool learned that extending a product that worked well in the U. S. does not mean it will carry the company on the global front.
Europe was heavily saturated with appliance brands. In order to be successful, with both sales and revenue, Whirlpool was going to have to trim their price.Whirlpool recognized in order to make the most competitive product they needed to listen to consumers and focus on market research. A key factor in their marketing strategy was the purchase of two local appliance brands, Brastemp and Consul, in Brazil. This was a smart move for whirlpool because they identified that even their lower end products were too pricey to fit the incomes of emerging markets. By purchasing a company with lower end, economic products, they could keep the quality associated with the Whirlpool brand and market the lower end products under the Consul name.Whirlpool was able to cut costs and streamline their products by having what they call platforms.
The platform is the very basic core of an appliance that is used in the US, Brazil, India, China, and any other country they decide to infiltrate. From the platform the rest of the appliance is built, and can be country or region specific. Thus, Whirlpool converted to the adaptation strategy which involves changing elements of the design, function or packaging, in response to needs or conditions in the particular market they are looking to excel in.
By migrating to the adaptation strategy, the company was able to reduce the number of platforms from 135 to 65 and thus create a product that is adapted to each specific country. While Whirlpool talks about reducing the number of platforms used to make production easier to manage, Whirlpool specifically talks about color differences in various countries. Specifically talking about Brazil, they associate white with cleanliness so the only color available for their washers is white. In India, they provide green and blue in addition to white.They also put the washers on casters so they can be moved easily.
China has the belief that the color white shows dirt easily so it isn’t as desirable as in other countries. For that reason they offer light blue and gray as color options. Another example of platform variation is the labeling of products.
Since many in China use bicycles as their mode of transportation, the washer’s heavy duty wash cycle is labeled as “grease removal”. Through market research, Whirlpool was able to figure out that different consumers wanted different features included in the products.The market research was a driving force to Whirlpool developing an adaptation strategy for local markets. New products were released in the global market which addressed the specific needs the emerging market customers and is what assisted Whirlpool in becoming a global contender. Why People Buy Appliances Appliances are just like computers, cell phones, and automobiles.
The main reason a person buys appliances is because they are modern conveniences. In a first world country nearly every home has a refrigerator in their kitchen.In the United States people purchase appliances primarily to add convenience to their everyday lives, almost every household in America has a washer, dryer and a refrigerator. These are considered common household items in first world countries such as the United States. If you were to ask someone from the United States, “Why do you own a washing machine? ” the obvious answer will be, “to clean my clothes. ” But all people have the ability to wash their clothing without any machines or electricity. Appliances make everyday tasks like washing clothes, doing dishes, cooking food and storing food much easier and more efficient.People in the United States for the most part do not buy appliances to show off to friends and family like they would a sports car.
This brings us to the secondary reason for owning major appliances; the status people receive from owning appliances. In other emerging markets purchasing major appliances are a very strong symbol of status. Owning a washer and dryer is a major purchase and a rewarding experience. In China for example, owning a refrigerator is considered an accomplishment.
It gives people the feeling of arrival to the middle class.It is not uncommon common in China to see a refrigerator in the living room as the centerpiece of attention. When producing lower end washing machines in Latin America, Whirlpool is aware that the people in Brazil want their washing machine to look nice. This is so others can see it and say “look what he/she they can afford. ” Status from owning a major appliance is not just limited to the low income markets. Even in the United States, if they can afford it, people will buy the higher end refrigerator even if it does much more than they need it to do.Americans want their friends to see the new stainless steel refrigerator with a color touch screen so they can also say, “look what he/she they can afford.
” But in the U. S. , we will keep the refrigerator in the kitchen and let the 70” flat screen TV be the centerpiece of attention in the living room. The Role of Market Research Whirlpool uses empirical and exploratory research methodologies to understand their customer. In one study, engineers and designers stood behind a two-way mirror and watched as a volunteer put away groceries in a Kenmore Elite refrigerator.
Empirical studies like this gives the Whirlpool team a chance to see how the consumers interact with the product. They are able collect important data such as the amount of time it takes the volunteer to put the groceries away, and how many different features they use on the appliance. The results from studies such as these help designers create appliances with a distinctive look and feel that are focused on the customer. It also helps eliminate features that consumers do not use and will create a better product. Market research also drives the search for new products that will address the specific needs of developing markets.Whirlpool speaks with different focus groups to find out what the consumer’s wants and needs are when it comes to major appliances.
This is a very important research process that whirlpool is currently doing very well. They figured out that the easiest and most effective way of finding out what your customers want from your product is by simply asking them. Whirlpool also sent research into low-income homes to see firsthand how consumers used their appliances, where their appliances were located in the house, and how they display their appliances.This gave whirlpool an advantage and they were able to market products that appealed to their target audience. The book (What book? ) states, “Research tells us that the trends, preferences and biases of consumers, country by country, are reducing as opposed to increasing”. The results from studies such as this one helps designers create appliances with a distinctive look and feel, as well as help eliminate features that consumers do not use. Without this research methodology, Whirlpool would have never found out some very critical information.
An example of this information includes that smaller capacity washers are more acceptable in lower income households because they tend to do laundry more often and also Brazilian housewives like to wash the floors underneath furniture. This allowed them to create an affordable washing machine to market in Brazil that sits high on four legs versus the traditional washing machine that sits low on the ground. Research can be very expensive, especially empirical research. Whirlpool made a significant investment and took on a financial risk when they decided to conduct the extensive research on their new target markets.Setting up tests and observations carries a lot of risk for a company because of the type of data they are getting.
If they don’t get a large enough sample size, their data could be skewed and not culturally significant as a whole. Companies, such as Whirlpool, have to make a strategic decision on how much they are willing to spend to get the appropriate amount of data. Research is an excellent way to understand the customer and it can be a disadvantage to companies that do not have the capital to be able to conduct the amount of research that Whirlpool did. Key Lessons LearnedKey lessons that can be learned from Whirlpool’s experience in emerging markets are: understanding the customer, the importance of creating products for specific market segments, American marketing does not work on the global stage, and domestic companies have issues trying to become international. Whirlpool shows the importance of research.
Research is needed to understand the customer as well as the customer’s culture. This is important because ignorance can waste a company’s money. By not looking at a customer’s wants and needs, there is a low possibility that a product will sell or make any money.Another reason research is so important is because it is not guaranteed that a product that does well in one area, or country, will do well in another area, or country. Market research insures that a strategy a company plans to implement will match the location being targeted. Without the research up front, a company is at a higher risk of failure. A company’s goal is to minimize losses whenever possible and in depth research is the way to do that. Whirlpool’s experience also shows if a company streamlines their products, the company is probably operating cost effectively.
This is proven with a quote from Whirlpool: “Whitwam believes Whirlpool is on track. Besides its sophisticated marketing and inroads with local distributors, the company reorganized its global factory network. For all appliances, it devises basic models that use about 70% of the same parts. Then it modifies its machines for local tastes. ” Whirlpool also proves the importance of adaptation to the market’s demands. Whirlpool showed this by changing the color of the machine, the height, and even the sizes of the machines. In response to their adaptations, Whirlpool received more sales.Summary While the extension strategy does work for some companies, Whirlpool has recognized the most productive and successful strategy is by adapting their product to meet the needs of the consumer.
As U. S. citizens, we take appliances in our home for granted while there are other citizens that view appliances as a luxury. Whirlpool consistently asks it’s consumers what they want from their appliance and are able to deliver the product, all at various price points, thus being able to have a fair marketshare on multiple segments within the industry.