Maytag Strategic Analysis

I. Executive Summary

Maytag Corporation was founded in 1893 by Fred L Maytag and two other men. The company built its first washing machine in 1907. From there the company quickly expanded into a national corporation. With the sweeping globalization movement of the 1990’s, Maytag has attempted to establish a presence as a global competitor in the appliance industry.

As the company has tried to establish itself in the developing global marketplace, it has had difficulties. Not only were consumers taste and preferences changing in the domestic market, but the company needed to develop products that would appeal to the new global markets. Maytag will need a great deal of money to make these large changes.

The current strategy that Maytag has used was to buy small companies in countries where the company wished to compete. Yet, these companies are not falling in line with Maytag’s strategic mission and values. So, the company must decide how to better handle its international expansion.

Currently, Maytag has spent a great deal of money to develop global operations. Then, these new global companies are not adding enough to the bottom line to cover their costs. So, Maytag is currently must find a way to make more money and to operate its new international operations more effectively.

II. External Analysis

A company must begin its external analysis may scanning its external environment for strengths and weaknesses. In scanning the environment Maytag must look at its society environment that includes general forces that do not affect the short-run activities of the organization but influence long-term decisions. There are four forces that a company must look at. First, sociocultural forces are those that regulate the values, mores, and customs of society. Second, are economic forces that regulate the exchange of materials, money, energy, and information. Third, are political-legal forces that allocate power and provide constraining and protecting laws and regulations. Fourth, are technological forces that generate problem-solving inventions.

In scanning Maytag’s environment in 1993, there are several social trends that are taking place. The Wal-Martization, the spreading of the culture and business practices of Wal-Mart, of America is taking place. Smaller stores are disappearing and they are being replaced by massive retail companies that compete with each other to offer the lowest prices. Also, the mid-90’s is when the baby boomers begin to demand higher quality products that are aesthetically appeasing. It is interesting to look at appliances from before the mid-90s and then look at appliances now to see how styling and design has changed drastically to appeal to those with more disposable income. People at this time are also starting to seek products that are more environmentally friendly.

Economic forces are also changing very quickly in 1993. One of the biggest economic changes since the industrial revolution, globalization is beginning to bring products from all over the world into the domestic marketplace. Foreign companies are now sending their products to the United States and Maytag must compete with those companies.

Political-legal forces that are occurring at this time highly reflect what is occurring in the social and economic forces. With the social change in consumers demanding more environmentally friendly products, the government has also created laws that require appliances to consume smaller and smaller amounts of electricity and water over the specified time frame. There are also people at this time who feel globalization of trade markets is beneficial so free trade programs like NAFTA are created. Then there are those who do not want globalization so there was a movement to encourage Americans to Buy American. Wal-Mart had a campaign that advertised everything in its store as “100% American Made.” Also, with the success of foreign car companies like Toyota, international quality standards like ISO 9000 are developed to assure consumers that they are receiving quality products when they are ISO 9000 certified.

Technological forces also made a very large change in the mid-90s. With Microsoft’s launch of the first user friendly Windows program, home computer usage began to increase. Also Al Gore helped the world-wide web launch during this time frame. With access to the internet, companies were also able to use electronic data interchange (EDI) to help make purchase orders, schedule delivers and other functions that are available when companies share data. Maytag also at this time is using fuzzy logic in appliances. More technology will continue to be required in appliances as time moves on.

Porter’s five forces are used to determine the competitive intensity and attractiveness of a market. These are close forces that affect a company’s ability to make a profit and serve customers. If any of these forces change, a company must reassess its marketplace. The five forces include: the threat of substitute products, the threat of the entry of new competitors, the intensity of competitive rivalry, the bargaining power of customers and the bargaining power of suppliers.

Porter’s five forces can be used to analyze Maytag. First, the threat of substitute products is low. The only substitute for a washing machine is a large sink and a great deal of manual labor. Many of the appliances have substitutes, but because those substitutes are so old and outdated there is not a threat from them.

Second, the threat of entry of new competitors is high. Building appliance assembly plants is very capital intensive. So, a company must have a great deal of money before it can start making appliances. Yet, at the time of this case, the world market was starting to globalize and companies around the world who already were making appliances in their home country were starting to export those appliances to the United States. Globalization will be a major issue that Maytag must deal with if they are to remain competitive.

The third force is the intensity of competitive rivalry which high. There is a great deal of domestic rivalry in the appliance industry with Whirlpool, AB Electrolux, and GE. These companies all have a great deal of money and power. But, now with globalization there even more companies in the industry but the same number of consumers. So, rivalry is high between all of these groups.

Fourth, the bargaining power of customers like retail and Mom & Pop stores is high. The Walmartization or McDonaldization effect is in full swing in 1993. Companies like Lowes, Home Depot, and other mass discount home improvement