International Marketing Essay Sample
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International Marketing Essay Sample
While the European market has always been large, the peculiarities of each European country kept the ‘white goods’ [appliances such as refrigerators, dishwashers, ovens, clothes washers and dryers] market fragmented in to many different, often relatively small markets. Different countries use different power connections for electrical appliances and also there are differences in the voltages supplied to homes. Consumer tastes vary as well. French consumers tend to prefer top-loading washing machines whereas many others in Europe prefer front-loading machines. German cooks prefer different types of hot plates and burner arrangements, and heat sources on ovens. French cooks do not. Further, many Europeans still like to hang their washing out to dry–unlike Americans.
About the only constant across Europe is product size. Australian and US consumers are used to large appliances where homes usually have a separate room for washers and dryers. However, homes in Europe are much smaller, with limited space for appliances. Moreover, many Europeans buy fresh foods daily, thereby decreasing the need for refrigerated storage. As a result, appliances in Europe are smaller than their counterparts elsewhere. In addition, in some product lines, the European market is considered underdeveloped by standards in other western countries. Fewer than twenty percent of European homes a dishwasher or clothes dryer. Even as consumer tastes change, size still remains an issue. In United Kingdom, one popular appliance is a combined clothes washer and dryer.
While goods manufacturers believe that the emergence of a single market in Europe has changed the way they will, and must, do business. Previously, they had to customize their products to meet the often conflicting standards of the EU’s national governments. Harmonised product standards allow them to standardize their products, thereby permitting them to cut product development and production costs. Reduced barrier to internal trade allow them to concentrate on production in one factory that can serve markets throughout the EU. Reduced barriers to internal trade allow them to standardize products, thereby permitting them to cut product development and production costs. Reduced impediments to cross-border advertising make it easier to develop pan-European brands, which in turn reduce marketing and distribution costs. The arrangement also eliminates physical barriers at points.
Nevertheless, the challenges of operating in the EU’s single integrated white goods market are not for the faint-hearted. Firms which fail to adjust are doomed. One of the most aggressive firms seeking to conquer the European market is Whirlpool, the world’s largest manufacturer of white goods. Whirlpool controls 13 percent of the European white goods market. The firm wants increase this substantially and has a clear view of the market: First, Consumers in Europe spend significantly higher proportion of their income on appliances as compared to their counterparts outside Europe, creating a ‘value gap’.
Second, industry profit margins in the region are traditionally much lower than those of manufacturers in the Western countries. The reason for this was cultural: historically the industry was organized to do business in individual national markets, an approach with inherent cost inefficiencies. Now, however, Whirlpool believes that it can use its unique regional position to deliver greater home-appliance value to its customers and in turn establish h a competitive edge for itself. A strategy to do so suggests that the opportunity to eliminate costs which do not add to consumers’ perceptions of value-and invest some of the savings in to product and service characteristics that do add value—will be substantial.
One of the key strategies adopted by Whirlpool was the purchase of the appliance business of Philips Industries, the large Netherland-based MNC, thereby obtaining control over Philips’ European white goods production facilities and distribution systems. To build brand recognition with European consumers, Whirlpool initially marketed its appliances using the brand name Philips Whirlpool and gradually phased out the Philips label on its products.
It produced and marketed three well-established pan-European brands purchased from Philips: Bauknecht, a premium up-market product; Philips Whirlpool, for the broad middle segment of white goods market; and Ignis, its low–price “value’ brand aimed at price-sensitive customers. This comprehensive strategy allows Whirlpool to fully utilise its European production facilities and distribution systems and market its goods to Europeans at all income levels. It consolidated thirteen separate national sales offices for these products into five regional operations to cut costs, coordinate pan-European promotional campaigns, and enhance the productivity of its sales force. It centralized Whirlpool’s European logistics, information technology and consumer services operations. It redeployed its manufacturing capacity to take advantage of elimination of national trade barriers. It encouraged technology transfer between its European and North American operations.
While Whirlpool’s European sales, and profit and market share are encouraging, it knows that competing firms see the same opportunities in Europe as it does. Whirlpool’s chief competitor in Europe is the Swedish firm Electrolux. Electrolux’s other brand names include Frigidaire and Kelvinator; in Europe, it sells these products under the names Electrolux and Zanussi. Electrolux also purchased the appliance business of AEG. Already controlling 20to25percent market share in Europe, it increased its market share by about 6 percentage points through acquisition of AEG. Even more important, the acquisition put Electrolux on near equal footing with Whirlpool in the global white goods market. Whirlpool must also counter competitive pressures from other white goods manufacturers like General Electric and Maytag.