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MGT 618
“Will Whirlpool Clean Up in Europe”
Barry Bland
California Intercontinental University
MGT 618 – International Business
Introduction
The European Union’s (EUs) development as a single unified market was long awaited
by the international business, it created lots of excitement. One enterprise that patiently awaited
these unshattered waters was the companies known as the white goods corporations, which was
because most appliances manufactured (washers, dryers, oven stoves, refrigerators, etc.) were
white in color. In the same era, consumer electronics (radios, cassette players, television, stereo
or record players, etc.) were brown in color. However, all that have changed, appliance
manufacturers now use variety of colors (Griffin and Pustay, 2015). “Whirlpool corporation is
the world's leading manufacturer and marketer of major home appliances, with annual sales of
more than $18 billion, and more than 70 manufacturing and technology research centers around
the world” (Whirlpool, 2007).
The way appliance manufacturers conduct business in Europe has changed drastically as
a result of the development of European Union’s (EUs) single unified market. The appliance
companies in the past had to customize or tailor their products to specification of each of the 28
countries in Europe. “Fortunately, the Single European Act promoted harmonized product
standards, thus allowing the manufacturers to cut product development and production costs.
Reduced barriers to intra-EU trade allow them to concentrate production in one factory that can
serve markets throughout the EU” (Griffin and Pustay, 2015). Pan European product brands were
easier to develop as a result of lessened obstruction of cross-border marketing, in turn lessened
promotion and distribution costs. Besides, productivity return’s and physical distribution
, management increased, as a result of the removal of barriers at country-to-country border
crossings and of limitation on trucking rivalry by domestic governments.
Advantages and Disadvantages of Production Consolidation
The organization re-channeled its manufacturing capability while taking advantage of the
exclusion of national trade barriers. For instance, “it concentrates its production of refrigerators
for its European customers in Trento, Italy, and that of automatic washers in Schondorf,
Germany, thus allowing it to achieve significant manufacturing economies of scale. Similarly, its
factory in Wroclaw, Poland—completed in 2005—produces cook top and oven appliances for the
entire European market” (Griffin and Pustay, 2015). Whirlpool is aggressively seeking to
position itself in the European market. One of the largest white-goods products are sold in the
European market. Whirlpool managers have a distinctly amorphous view of the European
market: Whirlpool is seriously interested in the European home-appliance market with two net
impact. “Consumers in Europe spend up to twice as many days of household income for
appliances as do their U.S. counterparts, creating a consumer “value gap”; second, industry profit
margins in the region are traditionally much lower than those of North American manufacturers”
(Griffin and Pustay, 2015). Originally, the European home-appliance market was designed and
organized to conduct business in singular, national markets, a strategy with in-built cost
ineptitudes.
No doubt, that with the elimination of European nations border Whirlpool was afforded
the opportunity to achieve substantial economies of scale through production consolidation of its
product lines at single manufacturing plant. It is true that overhead cost is reduced drastically
when an organization like Whirlpool operates from a single manufacturing plant in regard’ to
equipment, portfolio, resources, and employment. However, there are disadvantages with single
manufacturing plant such as shutdowns due to strikes, economic slowdowns, which could
potentially impact the production. Whereas, an organization with several manufacturing plants,
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