Whirlpool Corp. Defying Doubters, Appliance Maker Sets Example Of How To Go Global

Some people wondered if Whirlpool Corp. was about to get caught in a financial wringer when it took its first big step toward becoming the world’s largest home appliance maker.

It had just agreed to pay $1.1 billion for the appliance division of Dutch electronics conglomerate NV Philips a big, inefficient producer in the highly fragmented European market.

Adding to the risk, the deal required Whirlpool to relinquish Philips’ wellknown brand name within a decade. The Whirlpool label was virtually unknown to Europeans.

Six years later, Whirlpool is Europe’s top-selling nameplate and the continent’s third-biggest appliance maker. It is No. 1 in North America and Latin America, and positioning itself to become a major force in Asia.

It’s no surprise, then, that Whirlpool critics are hard to find these days. Analysts and academics now cite the Benton Harbor, Mich.-based company as a textbook example of how to take a big business global.

Jonathan Goldfarb, an appliance industry analyst with Merrill Lynch, said Whirlpool “has done just about everything right” in transforming itself from the No. 2 domestic appliance maker behind General Electric Co. to the world leader.

“Whirlpool is probably responsible for the development and acceptance of the now-conventional wisdom in the industry: that the industry eventually is going to be populated by a handful of global giants,” Goldfarb said.

Whirlpool first went abroad in 1958 when it bought an interest in a Brazilian appliance maker. It also has been exporting appliances to Asia for 30 years on a small scale.

It didn’t decide to go overseas in a big way until the late 1980s. The North American market was well-developed by then, with only four major players and no prospect for robust growth.

“It was clear to us the only reason we were defining our industry as a slowgrowth industry is that we were confining it to the U.S. market,” said David R. Whitwam, Whirlpool’s chairman and chief executive officer.

Whirlpool decided globalization was inevitable and it wanted to be the leader. Indeed, each of its domestic competitors - General Electric, Maytag Corp. and Sweden’s Electrolux AB - has added overseas operations since 1989, although not as extensively.

Rather than jump deeper into the potentially explosive Asian and Latin American markets, Whirlpool’s first big move overseas was into another “mature” market, Europe.

Whitwam said the Philips purchase offered a culturally familiar place to launch Whirlpool’s expansion with far less risk than other regions.

The European appliance market in 1989 was in the same place the U.S. market had been in the 1960s: It had a lot of players and was ripe for consolidation. Whirlpool figured its experience could help turn Philips around while giving both operations a chance to adapt to Whitwam’s vision of a global company.

A big part of his strategy involved winning over the hearts and minds of his new employees overseas, and changing a conservative, parochial corporate culture back home.

“We made a conscious decision that we weren’t going to go and send in hundreds upon hundreds of Americans to change the business to our liking,” Whitwam said.

“We were, rather, going to send a few people and try to get alignment of the new organization to our vision.”

Today, Whirlpool has just 33 Americans in Europe.

Whitwam foresaw a corporate structure that drew on the strengths of its various parts around the world and focused on what consumers needed in each market. He said he didn’t want to “merely plant flags” and have American engineers telling Germans, Brazilians and Chinese how to build appliances for their consumers.

Creating that team structure has been a key to Whirlpool’s success, said Aneel G. Karnani, an associate professor of corporate strategy and international business at the University of Michigan.

“One of the things they’re doing right is they’re not looking at these different parts of the world as independent moves. They’re looking at it is as an integrated, global company.”

As it continues to expand, Whirlpool’s biggest challenge will be to keep costs down while still satisfying customers with widely different needs. One-size-fits-all thinking won’t work, even within the same country.

“We’re finding, for instance, that in the north of China they like much smaller freezer compartments,” said Bob Frey, president of Whirlpool Asia. “In the south they want much bigger vegetable bins.”