Jeff Dyer - BYU THE NEED FOR GROWTH: THE U.S. APPLIANCES INDUSTRY MARKET AND ENVIRONMENTAL FORCES

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 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). WHIRLPOOL ACQUIRES PHILIPS

Jeff Dyer - BYU High Low High GlobalStrategy(Cost) Transnational or Mass Customization Strategy (some functions are global, some are local) Multi-DomesticStrategy(Differentiation) TYPES OF INTERNATIONAL STRATEGY: A FRAMEWORK Local Strategy Forces for Local Differentiation (Differences in Customer Needs) Forces for Global Integration (cost sharing across countries)

Jeff Dyer - BYU Function/ActivityNationalRegionalGlobal Research & Development Product Design Components Assembly Marketing Sales & Distribution Service X X X X X X X X X X X WHIRLPOOL: ACHIEVING BOTH INTEGRATION AND DIFFERENTATION X

Jeff Dyer - BYU Cost Structure Sensitivity Analysis 10%20%30%40%50% Percent of cost structureinfluenced by global scale Experience Curve Slope 90% 80% 70%

Jeff Dyer - BYU IN SUMMARY: DIFFERENT STRATEGIC POSITIONS HAVE DIFFERENT MANAGERIAL REQUIREMENTS Pressures for Global Integration Pressures for Local Differentiation Global Strategic Management Central direction and national affiliates in supporting roles Multi-Domestic Management Management A federation of autonomous subsidiaries sharing some central services Trans-NationalManagement Some functions global, some local, semi-autonomous subsidiaries, and close coordination Home Market Base Opportunistic export/investments Source: J. de la Torre

Jeff Dyer - BYU Pressures for Global Integration Pressures for Local Differentiation DIFFERENT INDUSTRIES HAVE DIFFERENT POSITIONS Semiconductors Cons. electronics Mainframe Computers Pharmaceuticals Specialty Chemicals Autos Civilian Aircraft Bulk Chemicals Telecom Prof. Services (e.g., M&A) Agricultural Equipment Beer Packaged Foods Retail Banking Food Retailing Appliances Household Services Industrial Services Source: J. de la Torre

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