In the home appliances industry, there are important underlying market structures that tend to largely affect the manner in which Whirlpool conducts its operations. Some of the underlying structures in the home appliances industry include perfect competitions, monopolies, oligopolies as well as monopolistic competition.
In view of these structures, the market is fragmented in a manner that yields high profitability or low profitability. In many aspects, whirlpool is largely operating in an oligopolistic market since there are few companies with significant market share in the home appliances industry. For instance, whirlpool, General Electric, and Electrolux are the only few top three companies in the home appliance industry.
Whirlpool’s oligopolistic driven market has pros and consequences. In this kind of market, there are few players that are interdependent. This means that the action of one player affects the actions of another (Vives, 2001). For instance, it is illegal to fix prices in the United States but lowering of prices is allowed. The characteristic nature of this market is a strategic determination of the possible reaction of one company in relation to the strategies of another.
If one company in the oligopolistic market lowers the prices of its goods and services in order to attain optimal sales, other companies in direct competition will also do the same and thereby ensuing into price wars. The price war competition from firms like Electrolux, Samsung, as well as LG have made Whirlpool to carry out research in order to match is at par with them scheme by scheme.
Moreover, in products that are less competitive, Whirlpool is making use of penetration pricing strategy as well as pricing strategies that are linked to value added to products based on the notion that consumers are now becoming aware of high quality branded products. In addition, to hedge itself against price wars, Whirlpool has channeled a huge allocation of its budget for research purposes in order to improve the quality of their products.
In addition, the companies in this market structure including Whirlpool emphasizes on massive advertising in order to show case the superiority of their products as compared to those of competition. Therefore, whirlpool endeavors to understand the market they are operating in and are cautious in every of their strategic move not to provoke adverse reactions from other players in the industry.
Whirlpool Corporation has established itself as a dominant market player apart for other few three-tier companies like General Electric. The oligopolistic nature of the home appliances industry limits the penetration of new entrance into the market. Typically, big industry players such as whirlpool have made significant presence in the industry and they offer premium products and services that other small new entrants may not match up with.
Therefore, new prospective companies that ventures into home appliance industry find it difficult to break into it. Besides, oligopolistic market requires massive financial outlays to operate in. Whirlpool being a market leader is able to take advantage of huge economies of scale because of its large capital base. This enables them to operate at a much lower overheads as compared to other small companies in the home appliances market.
It is important to also note that new entrants have limited capacity to leverage on the industry economies of scale because of their low funding capacity (Klepper, 2002). Therefore, the oligopolistic nature of Whirlpool’s market is a struggle to break into as it require he capital outlays.
Brand identity and advertising
Whirlpool’s market dominance has been largely a consequence of its established brand name. Through in-depth market analysis and concise strategy formulation, the company has managed to successfully pass a strong brand message to its market. Whirlpool has massive campaigns the project the uniqueness of their products. For instance, Whirlpool campaigns ads depicts their products as compact in sizes, faster in operation and occupy less space.
Moreover, the campaign ads also brings out a strong message latest technology applications which includes energy saving modes as well as ability to last for durably long. In addition, the contents of the ads includes the fact that over five hundred of Whirlpool’s products have been selected for ”Energy Star Label”. Further, beside Whirlpool providing eco-friendly products and various services to its customers, most of whirlpool’s home appliances come with one year warranties that cover parts and labor.
For instance, if your product gets damage upon delivery, the company will take full responsibility to replace with a new one. Therefore, whirlpool has remained a competitive household brand. Moreover, with the emergence of environmental concerns, whirlpool is now strategizing to become a brand of the future that meets both changing environmental and market dynamics.
Whirlpool has also used celebrity campaigns that have caused them to enter into contract with celebrity couple Ajay Devgan and his wife as their brand ambassador. This is seen in most Whirlpools’ television advertisements, magazines and also on radio.
The oligopolistic nature of the home appliance industry has seen companies like Whirlpool enter into mergers and collusions with other industry players. Company mergers in the market bring two or more different market players together in order to eliminate competition and thereby leading to high profits at the expense of consumers (Porter, 2001). For instance, companies may collude in setting levels of output or price levels. Many a time the mergers have taken the form of acquisition of controlling interests in other companies.
For instance, market penetration in the oligopoly market is quite cumbersome. In a bid to penetrate into overseas markets such as European home appliance market, Whirlpool acquired a controlling stake in the Dutch electronics company, Philips. This created a joint synergy for Whirlpool-Philips to produce products for the international markets. The acquisition made Whirlpool-Philips to be the world’s largest home appliance company. Whirlpool’s aggressive international ventures are a clear indication that the company is seeking to increase overseas sales in order to plug its domestic flat market.
Further, the interdependence of firms in this market structure is quite high. Every player in this industry keeps an eye on what the competition is doing. Decisions made by one firm in this kind of structure affect the decision of another firm. For instance, Whirlpool has focused on non-price competition strategies in order to avoid possible adverse reaction from other market competitors. The company has majored in product differentiation, advertising as well as collaborating with other companies to prevent new entrants into the industry.
Whirlpool started strategizing to go beyond its borders by first entering markets like Canada and Brazil. In Europe for instance, Whirlpool has made significant inroads into the huge European home appliances market and is currently controlling a huge market than its closest competitor General Electric. Among the strategies that Whirlpool employed in order to penetrate into European market is by first entering into joint ventures with other home appliances companies such as Philips and later own acquired full ownership.
In the United States, Whirlpool undertook segmentation of its brands in accordance with consumer needs with an aim of achieving differentiation and loyalty. Whirlpool uses competitive pricing strategy in most of its products that has enabled them to establish a strong customer base. However in areas such as European markets, Whirlpool used price discrimination strategy in order to appeal to all segments of the market.
Moreover, in a move to achieve better economies of scale, Whirlpool came up with a pan-Asian brand targeted for the Asian market. Market segmentation brings out different customer clusters in the market with similar purchasing attributes and thereby makes it easy to formulate strategies for a specific market (Wedel et al, 2012). Comparing with other competitors in the industry, Whirlpool undertakes segmentation of its market with brands for each market segment.
This is contrary to what other companies in the home appliance industry does, for instance, Electrolux strategy for globalization is by keeping one brand for the entire global market. Therefore, Whirlpool enjoys a high competitive edge in the home appliance industry as compared to other players.
Klepper, S. (2002). Firm survival and the evolution of oligopoly. RAND journal of Economics, 37-61.
Porter, M. E. (2001). Competition and antitrust: toward a productivity-based approach to evaluating mergers and joint ventures. The Antitrust Bulletin, 46(4), 919-958.
Vives, X. (2001). Oligopoly pricing: old ideas and new tools. MIT press.
Wedel, M., & Kamakura, W. A. (2012). Market segmentation: Conceptual and methodological foundations (Vol. 8). Springer Science & Business Media.