Global Cost Structure Analysis
In 1986, Whirlpool Corporation was considering expanding into Europe by acquiring Philips’ Major Domestic Appliance Division. From the framework of customers, costs, competitors, and government, there were several pros and cons to this proposed strategy.
Pros
Internal component of the appliances could be the same, offering economies of scale.
The cost to customize the outer structure of the appliances was relatively low.
The appliance industry was mature with low growth. the acquisition would offer an avenue to continue growing.
Cons
- Fragmented distribution network in Europe.
- Different consumer needs and preferences. For example, in Europe refrigerators tend to be smaller than in the U.S., have only one outside door, and have standard sizes so they can be built into the kitchen cabinet. In japan, refrigerators tend to have several doors in order to keep different compartments at different temperatures and to isolate doors. Also, because houses are smaller in Japan, consumers desire quieter appliances.
- Whirlpool already was the dominant player in a fragmented industry.