Whirlpool Corporation’s Global Strategy

Whirlpool Corporation’s global strategy

International Business Strategy – Part II

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290691-2387

Copenhagen Business School 2014

April 3

Character count: 21153 = 9,3 standard pages

Table of Contents

Is the global appliance industry an oligopolistic industry?        

Case study: Whirlpool        

US market        

European Market        

Asian Market        

Global expansion – international or regional?        

From interregional to international oligopoly        

Explain Whirlpool’s expansion using IPM        

Internationalization process in Europe        

Internationalization process in Asia        

Internationalization Process in Latin America        

References        

 Is the global appliance industry an oligopolistic industry?

An oligopoly is a structure of competition in between perfect competition and monopoly. In an oligopoly suppliers can control price by controlling supply. According to Knickerbocker, the oligopoly structure consists of few sellers controlling a majority of the market, supplying substitutable products where firms experience close market interdependence in competitive policies. (Ietto-Gillies 2005)

Case study: Whirlpool

The competition in the global appliance industry is highly inter-regionalized, where transnational corporations compete in multiple markets. Furthermore, there is a clear distinction between developed markets like the US and Europe and developing markets such as Latin America and Asia, whereas developed markets tend to have small clusters of big firms controlling large market shares in contrast to developing markets with more and smaller firms competing in a dynamic setting.

US market

The US appliance industry experienced high competition in the early 1990s and there was a general consensus to focus on cost reduction, product efficiency and product quality. The region has a market structure of 5 firms controlling 80% of the market. Due to heightened competition they segmented their products, but the firms still struggled to enhance their competitive situation. (Meredith Martin 2000)

This evidence could be explained by looking to the theory of Knickerbocker who states that in oligopoly, price warfare should be abandoned since the oligopoly conditions exist due to high similarity in strengths of the competing firms. There therefore exists interdependence in production and the firms should instead compete on intangible traits like advertising in order to maintain the oligopolistic equilibrium (Ietto-Gillies 2005)

European Market

In Europe, the market for appliances is a much more regionalized, where the firms have historically been forced to segment their products for consumer needs for the 320 million consumers. Despite this, there are still only 5 producers controlling 70% of the market. (Meredith Martin 2000)