MAYTAG CORPORATION
INTRODUCTION
Maytag has been in the USA market since 1893. The company started from farm machine and soon moved to washing machines segment in which the company currently holds 21.6% market share in home appliances. Also, Maytag has limited premium share in the commercial appliance. Maytag has come long way to the current strategic position with a central focus on the home market of North America. The company’s strategic moves in international markets have not proved to be fruitful. Currently, Maytag has maintained focus on the local market of local North America.
ANALYSIS
SWOT analysis has been used to analyze the internal strengths and weaknesses of the company as well as to analyze the opportunities and threats in the external environment.
- MayTag has a long history of well-developed name in the home appliances mainly in the home market. Currently, holds 21.6 percent share in the home market.
- Product range for serving different market segments of home appliances such as Maytag for masses, Amana for up-scale and Jenn Air between the two. Strong position in premium market in commercial appliances
- The company is second to leaders in the category of dishwashers, dryer, and washer. Third leadership position in refrigerator segment.
- Quality and durability has remained the defining attributes of the products from the home of Maytag that the company has won the market.
- USA’s 15th most strong brand in terms of consumer recognition and quality perception. Award winning marketing campaign of “O! Lonely” and also winner of corporate innovator award.
- Maytag has also developed long history of growth with innovation and acquisitions and has also developed abilities to generate synergies from complimentary acquisitions.
- Maytag has a strong capability to penetrate in the market as it expanded from a niche player to a mainstream player.
- Successful innovation in the concept of distribution stores with a home experience and rapid expansion of the concept with 11 stores between 1999 and 2001.
- Strong corporate culture with concern for customers, employees, society and innovation.
- Increased focus on strategic alliances with the limited number of suppliers as compared to an independent system of action of Maytag. Also, this has increased the company’s ability of issue resolution.
- Yearly increment of R&D budget with close to 20% with award winning consumer orientation.
- Heavy capital investment in upgrading plant and system integrations such as lean manufacturing for generating efficiencies. For example, SGA reduction by 2%.
- Combination of the centralized and decentralized organizational approach has generating benefit from both approaches.
- Company offers greater protection to shareholder on company decision making.
WEAKNESSES
- History of executive turnover has affected the organization’s future strategic direction and performance.
- Consistently fluctuating profits, earnings and share price is a big weakness despite increase in revenue.
- Increased cost pressures from marketing and distribution affecting revenue.
- Acquisitions for growing in the international market have failed to duly evaluate the opportunity. For example, after acquisition it was found that Hoover requires heavy investment in the renovation.
- Consistent reversals of the strategic moves have raised questions on the clarity of the management in the future direction. For example, diversification in 1997 with the acquisition of Blodgett Corporation was reversed in 2001, to refocus on core business. Similarly, MayTag reversed from the international business to focus on North America only.
- Falling market share in floor care appliances despite industry growth despite heavy advertisement and restricting of the sales organization
- Commercial appliances only constitute 5.3% of the company revenue and serves only premium market.
- Low end home appliances brands such as Admiral, Norge and hardwick received no or little share in marketing.
- Revenue was heavily dependent on the appliances that have limited future like spare parts, dryer,etc.
- Inability to align the cultural difference into a unified set of best practices caused failure of the business.
- Labor relations are now weakening mainly due to a large number of employee layoff and laying off with notice.
- Financial performance of the company has declined over the past few years.
- Management of the company retain right to make a decision and considers the shareholders voting as an advise only that needs assessment.
- Company has executive officer for the Maytag international with no performance.
OPPORTUNITIES
- Market share and operation efficiencies are the factors to drive survival of players in the industry.
- Combo of quality and durability with prices are factors valued by the customers.
- Fragmented market of Asia with 5-6% annual growth offers an attractive opportunity of establishing global footings.
- Potential in the microwave oven and ranges (gas and electric) and floor care appliances in the USA.
- Increased customer awareness with increased emphasis on strategic marketing has the potential to increase market share in home appliances.
- Research revealed that after sales service increases consumer loyalty to a much higher level as compared to the time of consumer purchase.
- Strengthening distribution channel with independent retailers of home appliances has the potential to expand the market reach as well as winning the distributors’ loyalty by offering them breathe for survival.
- Potential to reduce the SGA (Selling, General and Administrative expenses) for improving margins.
- Changes in the consumer perception of the product have much potential for industry to grow.
- Moving manufacturing and other facilities internationally for the cost control.
THREATS
- USA home appliances market has reached maturity, as a result the industry has consolidated from 300 players to few in the 2002.
- Market has become increasingly competitive with the market potential growth reported to be only 1.9% from the years 2001- 2005.
- Cost of raw material poses a considerable threat for the industry participants.
- Government regulations for producing environmentally safe products with efficiency in water and energy consumption are increasing pressures on cost and margins of players.
- Global competitors are attempting to enter the USA market such as Haier is developing manufacturing facilities in North America.
- Cultural difference in different market is a consistent challenge for the new firm entering the market.
- Suppliers’ integration as partners with the industry players threatens the forward vertical from suppliers.
STRATEGIC RECOMMENDATIONS
SWOT analysis revealed that Maytag has considerable internal strengths; however, despite these strengths Maytag has not been able to exploit the market potential as number one leader. Therefore it is critical for the company to make the most of its strengths. The company is faced with the competitive pressures while lacking its ability to expand internationally. Externally, the local market has reached the maturity stage where competitive pressure from local as well as international players is increasing. There are also limited opportunities present in the local market as compared to the considerable potential in the international market. so, it is important for the firm to identify and prepare a plan to capitalize these opportunities in order to maximize its profits.
Hence, following strategies are proposed to the company for sustaining in the competitive marketing conditions:
- Expand in the local market with increased emphasis on marketing. Maytag can increase the local market share by changing the product perception into the lifestyle product. This can be done by exploiting its capability to innovative marketing concepts. Also, the low-end products shall be allocated a share in marketing budgets to expand the market. This move will contribute in companies’ market share as well as economies of scale. In addition to this, the product line such as range (gas and electric) also offers potential to achieve a leadership position. Such penetration in the local market shall also be supported by vertical integration. For instance, as a survey has revealed that consumer loyalty increases at a much higher pace on giving after sales service to customers.
- Using Ansoff’s recommended market strategy matrix, Maytag is required to develop a product line of commercial for the mass market. It is critical for it reducing the company dependency on the home appliances that are considerably vulnerable to mature situation of the industry. In addition to expanding customer base, this strategic measure will also contribute to the company’s operational efficiencies.
- Maytag’s strong competence of product development also requires that the company shall now diversify other related industries in the local market on the ground of its brand acceptance. Also, its successful brand reputation for its quality and durable products can endorse its presence its presence in the new market. Complete kitchen and home appliances offer potential of market growth. This will allow Maytage to leverage its expertise as well as synergies to the new market selected for entry.
- Furthermore, it is also important for an organization to further reduce the board member mainly by replacing Craig Breese (President of Maytag International) as the member does not have any contribution in the company reports. Instead, it is high time that Maytag adds international strategist to its board.
All these measures are considerably necessary for the organization to sustain its competitive position in the market. Also complimented with the company’s increased protection to shareholders’ approval of integrating takeover potential, these strategies make organization considerable attractive stock buying option.
In addition to this, company is also in critical need to expand its footings in the international market. It is critical in a situation where local market has become mature, and any shock from the external environments such as economic shock can have considerable impact on the company’s ability to sustain. Also, it is mandatory for the fact that companies from the global market are attempting to enter the international markets for expanding their portfolio. International market expansion that offers five to six percent growth, mainly in fragmented Asian markets, is an attractive opportunity to exploit. Maytags is recommended to enter a new market with localized strategy as Maytag’s recent position as the company has not been able to sustain the local cultural pressures. Expansion in the new market can be done, either by buying a percentage of stake in the market or expand it with the passage of time in order to take care of its lack of ability to adapt culture. Maytag has already developed a sound ability to transform the consumer preferences into lifestyle product, therefore, by leverage such capability Maytag has much potential to grow in the international market.
