This case highlights Whirlpool’s problems in China during the 1990s and contrasts competitive advantage between global firms and local competition in the appliance industry. The case briefly discusses what went wrong in China for Whirlpool like not managing distribution channels, bribery problems, wrong product decisions, not understanding local competition and so on.
- Introduction – Whirlpool’s entry into China
- What went wrong in China?
- Working with local partners and system hassles
- Bribery Scandal
- Numerous small local firms that dominated the market
- Competing with Chinese Appliance Makers
- Underestimating Local Competition
- Not managing the distribution channels efficiently
- Wrong product decisions – Not keeping local needs in mind
- Foreign Managers not understanding Chinese management culture
- Market Saturation
- Distribution System and labor hassles
- Whirlpool in Asia
- Whirlpool – Quick Facts
- Exhibit 1 – Whirlpool’s joint ventures with local companies in China in 1995
- Exhibit 2 – Whirlpool’s leadership position in various regions in 1999
- Exhibit 3 – Whirlpool – Globalization – Entry into Foreign Markets
- Exhibit 4- Competitive Advantages of Global firms in the appliance industry
- Exhibit 5- Whirlpool and GE between 1995 and 1997
Sample Case Page
1. Introduction – Whirlpool’s entry into China
“We entered China pretty early compared to most companies. It was pretty much an unknown.”
– Michael Todman, president of Whirlpool International in 2007
Since 1988, Whirlpool has followed an aggressive globalization strategy under the leadership of former CEO, David Whitman. China had been one of its main entry targets and also fit into its global strategy of becoming the market leader in Asia. Whirlpool formed several joint ventures in China and India in the mid-1990s signaling a big push into the Asian market. However, in 1996, revenues from Asian operations were far from being profitable and accounted for only 6 percent of the total revenues of $8.5 billion. The company made losses to the tune of $70 million in Asia alone that year. Between 1994 and 1997, it invested over $300 million in four JVs in China. Two joint ventures in China were unsuccessful and loss-making. A year later, in 1997, with tough competition in China’s market and continued losses, Whirlpool decided to pull out of two joint ventures in China as part of a global restructuring exercise. (See Exhibit 5- Whirlpool and GE between 1995 and 1997 on page 8 ) Whirlpool’s efforts in the world’s most-populous country were not fruitful. Whirlpool’s then CEO David Whitman remarked, “We are taking steps to align the organization with the marketplace realities of our industry.”
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Sales: In 2011, Whirlpool’s global sales were $18.67 billion with sales in China and Taiwan at $1 billion (sales increased by 30 to 40%).
Whirlpool in Asia: In India, Whirlpool is one of the largest foreign appliance makers behind LG. In China, Whirlpool’s market share for washers and refrigerators is in single figures.
Local alliances: In March 2012, Whirlpool announced an alliance with Chinese retailer Suning Appliance Co. for sales and distribution. Suning has a network of approx. 1,700 stores in 300 cities across China. This move will help Whirlpool reach other retailers in small cities of interior China.