Maytag - Case Study

• Cost Focus

Competitive strategy that focuses on a particular buyer group or geographic market and attempts to serve only this niche, to the exclusion of others. It seeks a cost advantage in its target segment. The cost focus strategy is valued by those who believe that a company. Its narrow strategic target more efficiently that can its competition.

• Differentiation Focus

Concentrate in a particular buyer group, product, line segment, or geographic market. This strategy is valued by those who believe that a company or a unit that focuses its efforts is better able to serve the special needs of a narrow strategic target more effectively than can its competition.    

 

DIRECTION OF DEVELOPMENT

• Do nothing

• Withdrawal

To retire from the industry

• Market penetration

Strategy where the business focuses on selling existing products into existing markets.

Market penetration seeks to achieve four main objectives:

• Maintain or increase the market share of current products – this can be achieved by a combination of competitive pricing strategies, advertising, sales promotion and perhaps more resources dedicated to personal selling

• Secure dominance of growth markets

• Restructure a mature market by driving out competitors; this would require a much more aggressive promotional campaign, supported by a pricing strategy designed to make the market unattractive for competitors

• Increase usage by existing customers – for example by introducing loyalty schemes

A market penetration marketing strategy is very much about “business as usual”. The business is focusing on markets and products it knows well. It is likely to have good information on competitors and on customer needs. It is unlikely, therefore, that this strategy will require much investment in new market research.

• Market development

Strategy where the business seeks to sell its existing products into new markets.

There are many possible ways of approaching this strategy, including:

• New geographical markets; for example exporting the product to a new country

• New product dimensions or packaging: for example

• New distribution channels

• Different pricing policies to attract different customers or create new market segments

• Product development

Strategy where a business aims to introduce new products into existing markets. This strategy may require the development of new competencies and requires the business to develop modified products which can appeal to existing markets.

                                                                                               

• Diversification

Strategy where a business markets new products in new markets.

This is an inherently more risk strategy because the business is moving into markets in which it has little or no experience.

For a business to adopt a diversification strategy, therefore, it must have a clear idea about what it expects to gain from the strategy and an honest assessment of the risks.

• Related
• Unrelated
• Conglomerate

METHODS OF DEVELOPMENT

• Internal
• External

• Strategic Alliance: a partnership of two or more corporations or business units to achieve strategically significant objectives that are mutually beneficial.
• Joint Venture : an independent business entity created by two or more companies in a strategic alliance.
• Merges: the fusion of two or more business units or companies
• Acquisitions: to purchase other company or corporation

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MAYTAG CORPORATION

In 1893 Fred L. Maytag joined three other men to found the Parsons Band Cutter and Self Feeder Company.Which produced attachments to improve the performance of threshing machines. (farm equipment), invented by one of the founders.

To fill the seasonal slumps and have year-round production, in 1907, they built its first washing machine, Pastime; which introduce the company to what became its main industry as in 1909 Maytag, became sole owner and changed the company’s name to The Maytag Company as well as its efforts focus to washing machines.

With the aid of Howard Snyder who led the development department, the company generated a series of product and process improvement, such as the Gasoline-powered washer (pioneered by Maytag) that became popular with rural customers without electricity and got to dominate small town and farmer market.

From 1920 to 1926, under Lewis Maytag leadership, the company expanded into a national company. By then it had a board of Directors, where Fred Maytag participated.

In 1922, the washer machine, Model 80 -with a radical new gyrator- was introduced and became the support for the company to move to the next stage (stage II) as sales jumped from 16 000 units to 258 000 in 1926, changed the $280 000 loss to profits exceeding $6.2 millions. Gaining a market share of 40%-45% in washing machines.

During the great depression Maytag never suffered a loss.

Top managers became less interested in innovation and marketing than it was in quality and cost control practices; and in 1945 Bendix introduced an automatic washing machine, but Maytag was slow to convert to automatic washers because of its quality standards. After 9 years, as it had a backlog of orders, and did not go into debt to finance new manufacturing facilities, the company lost its industry leadership; market share fell to 8%. Even though, the company was still a profitable manufacturer of high-quality, high-price home laundry appliances.

During 1960s and 1970s Consumers Reports rewarded Maytag for its heavy orientation on quality, which led to an excellent marketing campaign “01 lonely”-repairmen had nothing to do and were thus lonely-. Profits enable the company invest in building capacity, improve its dishwasher line, and change the design of its clothes dryers.

Maytag’s plants were perceived at that time to be the most efficient in the industry.

Its share market increased to 15% in both washer and dryer machines.

In 1978 under the leadership of CEO Daniel Krumm, Maytag company got revitalized by the strategic decision of growing by acquisition within the appliance industry through debt and sale of stock. Maytag would no longer continue as a specialty manufacturer operating only in the high-price end of the laundry market.

• In 1981, Maytag purchased Hardwick Stove Company, low-priced manufacturer of gas and electric ranges.

• In 1982, it acquired Jenn-Air, a niche manufacturer of high-quality built-in electric grill ranges.

• In 1986, it purchased Magic Chef Inc, manufacturer of mass-marketed appliances in the mid-price. It included also appliances sold under the Admiral, Norge, and Warwick label, as well as, Dixie-Narco.

All together became Maytag Corporation

In 1988, Maytag reached maturity in US, which led to the next stage (stage III), so it extended its growth strategy to international arena by purchasing Chicago Pacific Corporation the owner of Hoover company; getting nine manufacturing operations in the United Kingdom, France, Australia, Mexico, Colombia, and Portugal. Hoover was known worldwide for its floor care products and throughout Europe and Australia for its washers, dryers, dishwashers, microwave ovens, and refrigerators.

By 1995, Maytag Corporation was internationally oriented, full-line major home appliances manufacturer. However, its profits had deteriorated.

Top management had focused in the vacuum cleaner business instead of investigating further into Hoover’s. Industry analysts concluded that Hoover acquisition had been a strategic error. It increased the long-term debt and the sell of more stock. Some of the actions taken were:

• In 1995 it sold Hoover’s Australia and New Zealand as well as Europe, to focus on the growth of North American based business.

• In 1996 join venture with China’s Hefei Rongshida to make washers and dryers and  ended it in2001 as the market share had failed to grow.

• In 1997 acquired G.S.Blodgett Corporation (food service equipment) with major hotels, restaurant chains and institutions as customers.

• In 1999 purchased Jade Range, ultra-premium commercial ranges and outdoor grills. Also bought a line of premium-quality commercial clothes washer form Primus.

In the begging of the 21st century, leaded by Ward and subsequently by Hake;

Maytag had several product initiatives and acquired Blodgett, Jade Range, and Amana.

Maytag Corporation successfully introduced its revolutionary Neptune front-loading washer and dryer, Gemini and other products.

Made a strategic move to diversify into the commercial side of major appliances.

2001 sold Blodgett, as a strategic decision to focus on the core home appliances and vending business. The company used the proceeds of sales to reduce corporate dept.

But also purchased Amana Appliances, company with a premium brand strategy remarkably similar to Maytag’s what provided great cost efficiencies.

Although it had withdrawal from international operations, it intended to be aggressive in North America. It planned to implement an integrated brand strategy to position them in the kitchen using Jenn-Air and Amana brands.

AS INDUSTRY

Major home appliances in US and Western Europe had made and sold more units in 2001 than any year. The market had reached maturity. Annual sales were expected to increase only 1.9%. Operating margins had been dropping as prices had to be low to be competitive even though costs kept increasing

Markets in Asia, Eastern Europe and Latin America had become more important as more countries has changed to a free market economy. Also, the industry was under pressure from governments around the world to make environmentally safe products plus significantly improve appliance efficiency in terms of energy usage and water consumption.

The consolidation of the industry was the result of a fierce domestic competition.

The strongest competitors in the U.S. during the five-year period from 1996 to 2001 were Whirlpool, Maytag, and Electrolux. Both Whirlpool and A.B. Electrolux were global competitors, with strong positions in the Americas, Europe, and Asia.  General Electric was also strong in North and South America; Maytag was the only major competitor without any operations outside of North America.

In 2002, Maytag Corporation was organized for official reporting purposes into two business segments: home appliances and commercial appliances.  For practical purposes, it was managed as three distinct businesses:

major home appliances (Maytag, Jenn-Air, Amana, and Magic Chef brands), floor care appliances (Hoover) and commercial appliances (Dixie-Narco and Jade Range’s Dynasty brand).  

Major Home Appliances

Maytag was the most desired brand by consumers (when price was not considered), and the most reliable.

Positioning

2nd place

dishwashers, washer machines, dryers

3rd place

Refrigerators

Drop

Electric, gas ranges

     

Market emphasis was on the premium price segment and the upscale builder market.  

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Actions in acquired companies

Admiral

The corporation had originally invested $60 million in the Galesburg plant to improve production efficiencies, enhance product quality, and increase capacity plus another $160 millions in 1995 to further upgrade the facility.

Jenn-Air

"The Kitchen Equipment Expert", its high quality cooking expertise complemented Maytag Company's high quality image in laundry appliances. Jenn-Air’s Indianapolis manufacturing plant had been closed when production of ranges was concentrated at Magic Chef’s Cleveland, Tennessee facilities

Magic Chef

Manufactured in Cleveland facilities, for the Admiral, Jenn-Air, Maytag brands; gas and electric ranges, also refrigerators, dishwashers, laundry equipment, and microwave ovens under the Magic Chef brand to the mid-price segment.

Maytag Corporation had invested $50 million in the Cleveland facilities, from which new lines of Magic Chef and Maytag brand ranges came.

Jackson Dishwashing Products  

Produced dishwashers for the Maytag, Admiral, Jenn-Air, and Magic Chef brands.

Floor Care Appliances

The Hoover Company manufactured and marketed to all price segments, vacuum cleaners, complementors, floor polishers, shampooers, and central cleaning systems.

In 2001 Hoover was the 1rst place in residential full-size vacuum cleaners and in the floor polisher market.

Hoover introduced a series of new products in 2001 and was working with an Israeli company to build a robotic vacuum cleaner

Commercial Appliances

Composed of Jade Range’s commercial cooking and refrigeration equipment

Dynasty’s commercial washers and dryers

Dixie-Narco’s vending equipment

The primary product lines of Jade Range were ultra-premium commercial ranges sold under the Jade brand and outdoor grills sold for residential use under the Dynasty brand.  

Dixie-Narco, Inc. made canned and bottled soft drink and juice vending machines. In 1989 it moved all of its vending machine production from its old plant in Ranson, West Virginia to the new Williston plant. It sold directly to independent bottlers and full- service operators. While, international sales had been increasing thanks to the introduction in 1994 of its glass-front merchandiser without coin slots.  

Benefits:

• Mechanically, vending machines are refrigerators. Same line production.
• Marketing assignment same as commercial laundry
• Has a different set of competitors, allowing important earnings stream and international exports.

In 1978, Krumm developed strategic planning task force. Asked to the Assistant Controller and two other people from manufacturing and marketing :  "If we keep doing what we're now doing, what will the Maytag Company look like in five years?"  this way the force developed "what if" scenarios, which show that a large part of Maytag's profits was coming from products and services with no future:  repair parts, portable washers and dryers, and wringer washing machines. This was a crucial time for the company.  The Board of Directors was becoming less conservative as more outside directors came from companies that were growing through acquisitions.  With the support of the board, Krumm promoted Hadley to the new position of Vice President of Corporate Planning.  Hadley was given the task of analyzing the industry to search for acquisition candidates.  Until that time, most planning had been oriented internally with little external analysis.  From that time forward, the job of the Director of Corporate Strategy has been to work closely with the company’s business units to coordinate and facilitate strategic planning throughout the company.

During 1992, in Hoover floor care products, management restructured the sales organization to better serve the "power retailers." (dealers)

Beginning in mid-2002, the ad/marketing campaigns were to play to the strengths of the Maytag’s Corporation power brands. For Maytag, it will be dependability and performance.  For Amana, it will be clever conveniences and styling.  And for Jenn-Air, innovation, elegance, and high-end performance. Maytag Coporation employed different ad agencies which used print and television ads.

Maytag received four Gold EFFIE in eight years.

Maytag also sponsored the Women’s United Soccer Association (WUSA) hopping to gain greater access to a key target market: affluent women.  

Few people realized that appliance manufacturers like Maytag did not do their own repair work, it was said that “No one exclusively repaired Maytag brand appliances because he would starve.”

Although the corporation was currently satisfied with its interim brand positioning/distribution strategy, longer term marketing strategies needed to be developed. Through the 1990s, the Maytag brand sales slowly changed from being distributed only through its 725 independent dealers to being heavily sold through the “power retailers” of Sears, Best Buy, Circuit City, Sam’s Club, Home Depot, and Lowe’s. This significantly boosted sales.

On the other hand, in 1999 Maytag opened a new style of appliance store designed, the new approach involved setting up appliances in a more home-like setting. By 2001 eleven stores had been successfully opened.

CORPORATE CULTURE

The intense Maytag corporate culture had traditionally been one of the company’s key strengths. Most of it derived from F. L. Maytag's personal philosophy, which was felt in commitment to quality, concern for employees, community, innovation, promotion from within, dedication to hard work, and emphasis on performance.

The devotion to quality was exemplified by a corporate policy that no cost reduction proposal would be approved if it reduced product quality in any way.

Maytag ranked second in corporate reputation of all U.S. firms, in 2000.

Without explicitly stating it, Maytag management expected any acquired company to adopt Maytag’s culture. To forge synergies among the Maytag companies, while simultaneously allowing the expertise among those units to flourish.  

Admiral was looking forward to being part of Maytag Corporation and adopt its corporate culture. While Hoover North America had their own corporate culture, which endorsed Maytag’s core values. For this reason it was allowed to operate autonomously. However, Hoover Europe had a cultural dissonance with Maytag, for this and other matters Maytag was unable to adequately deal and sold it in 1995.With Amana the cultures were very much the same and the strengths of one complement the other.

Eventhough 22 top executives left Amana because of job duplication with Maytag management, the typical employee accepted Maytag as being a “good company”.

Until the mid-1990s, most of the Maytag Corporation Executive Officers had worked their way up through the corporation and had spent most their careers immersed in the Maytag Company culture.  

RESEARCH AND DEVELOPMENT

Maytag Company had always been interested in internal improvements related to quality, durability, and safety. It took 15 years to replace the venerable Helical Drive transmission with a new Dependable DriveTM , to be sure it covered the quality standards. However, this way it might miss out on potential innovations, for this reason Maytag made strategic alliances with its suppliers to speed up the application of new technology to new products and processes.  Maytag made the alliance with Honeywell's Microswitch Division, that was expertise in fuzzy logic technology, resulting Maytag's new IntelliSense™ dishwasher. By this kind of alliances, Maytag encouraged supplier’s participation in its product design and production-planning processes.

Technical groups interact with their supplier counterparts, this way specific projects are assigned to joint task teams oriented to new-product-design oriented or continuous improvement of current products or processes.

Maytag used cross-functional teams that helped cut development time in half from what it used to be, by having input from all areas early in the development cycle, issues were resolved before becoming problems.

• In1998 Maytag applied the science of ethnography, literally having researchers live in a consumer’s home to understand his or her lifestyle, then designing products to serve that lifestyle.

• In 1999, Maytag announced the formation of its World Innovation Network, an integrated set of strategic partnerships, alliances, and engineering resources focused on delivering continuous discovery, invention, and rapid deployment of innovation.  

• In early 2000, Maytag acquired an ownership position in e-Vend.net, a company making technology to control vending machines and appliances over the Internet.
• Also made an agreement with Microsoft to develop “smart” appliances that can interact with each other and the Internet.  

• In 2003 Maytag’s new products were: the Maytag Jetclean II Dishwasher (the first dishwasher with three full racks), the Jenn-Air Luxury Series Built-in Refrigerator (capable of being personalized for the buyer), and the Maytag Gemini Gas and Electric Ranges (containing twin ovens that operated independently).  

HUMAN RESOURCES AND LABOR RELATIONS

Maytag’s employees were organized into various labor unions:

• United Auto Workers in Newton, Iowa
• International Brotherhood of Electrical Workers, Hoover North America  
• International Association of Machinists and Aerospace Workers, Magic Chef and Amana facilities

All the presidents of union locals belonged to the Maytag Council, which met once a year to discuss union issues.

During 1990-92 the corporation reduced employment by 4,500 people.

Members of the International Association of Machinists and Aerospace Workers at the Galesburg (Admiral) refrigeration plant overwhelmingly approved a 5-year agreement in November, 1994 that would allow the company to expand production during the peak summer months instead of closing down for two weeks for vacations

Until 2000, the corporation had not had any strikes by any of its unions since 1974.

In 2000, 1,200 members of the International Association of Machinist and Aerospace Workers at Maytag’s Herrin, Illinois washing machine plant went on strike for nine days while disagreements with a proposed five-year contact were settled.

As Maytag grew, its employees and financial instability did too.

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Maytag Corporation began as a very small company, but with its high quality and innovating strategies, it gained an important position in what is know as the “white goods.” Industry.

The first 14 years of what will become Maytag’s corporation, was a small company which stayed in the first stage until it diversified and finally change its industry. This important change could be seen as the rebirth of the organization, which started with a sole entrepreneur management. Fred Maytag made all the decisions and establish as a strong base his values which later would become the corporate culture, one of the corporation’s greatest strengths. Continuing in the First stage, Maytag made its way by the innovation of products as well as the quality oriented strategies which led it to the company’s national expansion.  

Having more people involved in the management of the company as well as departmentalization and specialization in the laundry industry, Maytag moved to the next stage. This has been achieved because of the equilibrium between authority and responsibility of its top managers, which brought product development and as an unexpected result great benefits in 1922. It was until 1945 that Maytag lost the industry’s leadership for its great commitment to quality when Bendix introduced an automatic washing machine. After this stop in the company’s development, Maytag took knew forces to continue. It developed a marketing campaign which increased its reputation and income; making possible the investment in building, capacity, design and the strategic decision of growing by acquisition, supported also by loans and stock sales.

Maytag’s company acquired  Jenn-Air and Magic Chef Inc (Admiral, Norge, Warwick, and Dixie-Narco labes). Becoming a Corporation, which led from the 2nd to the 3rd development stage after some innovations, movements, investments, and by establishing an international growth strategy. Even though, Maytag corporation could not achieve the next stage because of the series of problems that came with the new acquisitions such as corporates’ culture dissonance and financial losses, from which it recovered by focussing on American based business.

Maytag’s Corporation stayed on the 4th stage, because it followed growth and product diversification strategy; by acquiring G.S.Blodgett, Jade Range and Amana, applying the science of ethnography, forming World innovation network and finally withdrawal the international operation to continue with product development and market penetration by reinforcing its marketing.

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References

Wheelen, Thomas L.; Hunger, J. David; “Strategic Management and business Policy” Prentice Hall, ninth edition.

Wheelen, Thomas L.; Hunger, J. David; “Strategic Management and business Policy” Prentice Hall, tenth edition.

1984“Asnoff’s Matrix”(online). Available from : , 2007)

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