'Windmere Corporation'- Case Study

• Technology Development. Value added can be gained through the development of existing products.  Windmere has sought to use technology available to them to carry out perpetual upgrading.  They have upgraded mature products such as the hands free dryer with a hands free design and the addition of an appliance leakage circuit interrupter, which protects against electric shock.  This was in keeping with newly an implemented safety standard. Windmere has also made ‘new’ products by combing existing ones such as the lighted make-up mirror with a wall-mounted hair dryer.  Product customization is also very important for entering new markets.  Products adapted for new markets included a mini-dual voltage hair dryer for worldwide travel.

Windmere Corporation has a Global perspective to the configuration of the value added chain. According to Terpstra & Sarathy (6th edition) ‘combining value-added chain analysis with the complexities of global markets requires the firms to make decisions about both configuration and coordination. Configuration refers to the decision about where a firm’s value-added activities are carried out. Configuration decisions can result in a company having presence in more than one national market.’ This is evident in that Windmere sells its products to a wide cross section of countries without having to change their products too much. The global perspective is also brought out in the innovativeness of new products, which helps to give a competitive advantage.

3. Analyze Windmere’s strategy in terms of comparative and competitive advantage. Do you see any weaknesses in its strategy choices?

Comparative advantage – the country tends to produce and export those goods in which it has the greater comparative advantage and import those goods in which it has the least comparative advantage (Terpstra & Sarathy, 6th edition). According to Doole and Lowe (2001) comparative advantage can be achieved in a variety of ways.

Through:

1. Sustained period of investment
2. Lower labour cost
3. Proximity of raw matirilas
4. Subsidies to help native industries
5. Building expertise in certain key areas.

According to Windmere Corporation Revenue Breakdown by Geographic Region yearly figures majority of its income is from sales to the US market. Sales to rest of the international market place are far below that of the US. Even though in 1985 the decision to involve a third party business was made because excessive capacity developed, as a result of reduction in Windmere purchases from durable because of poor sales in the US.

 Comparative Advantage is achieved by matching a firm’s capabilities with the chain of value-added activities (Terpsta and Sarathy, 6th edition). It can switch overtime as the economy grows and acquire technology, capital & skilled labour force.  There are five generic building block of competitive advantage. These are the following:

• the efficiency of a company,
• the quality of its products,
• the new innovative capabilities the company posses to produce its products,
• the speed in which the company is able to respond to its customers need.

Companies like Windmere Corporation that operate in global market place are usually faced with two main competitive pressures such as cost reduction and local responsiveness. Based on Windmere case at hand, there is a strong indication that Windmere is mostly focus on the Cost Leadership approach to competitive advantage.

• Windmere chose to build a joint venture with Durable as its local partner because of its contacts and expertise in the People’s Republic of China.
• Durable is one of the largest low cost producers in the Far East of small appliances, which 80 percent owned by Windmere.
• Though Windmere was face with production constraint in Hong Kong because of the scarcity in labor force and the rising wage rates, they were still able to achieve success with Chinese labor, which paid thirty cents per hour.
• Through operation in China Windmere was able maintain a continuous flow of new products with innovative designs that lowered cost of production.
• The availability of tools for new products at low cost was at their disposal.       Windmere enjoyed flexible production scheduling which enable the company to accelerate or reduce production of product items based on sales performance, thus in turn reduce inventory buildup and the risk of obsolescence.
• Windmere used independent distributors to penetrate new markets in Japan and Australia. They also enjoyed marketing its product lines under various
• Over a few years Windmere Corporation was able gain accumulative earnings of $67 million from its foreign operations on which no taxes were charged because the profits were not repatriated to the Unites States, but were used to reinvest in expanding foreign operations.

But there are some weaknesses in Windmere’s strategic choice. They focused on low cost leadership, which is a good strategic management technique in accomplishing comparative and competitive advantage, but there was not enough evidence of its focus on product differentiation. Product differentiation can be an extremely effective strategy for defending marketing position and obtaining above average financial returns. Also, Windmere has faced many weaknesses and is exposed to threats because of its strategic technique in gaining competitive and comparative advantage for its company due to low product differentiation focus.

4. What are the risks to Windmere of manufacturing in China? What other risks does Windmere face?

Windmere Corporation face’s numerous risks as a result of manufacturing in China. These risks range from economical to political. The main risk that is identified is the possibility of the USA government acting adversely towards Windmere because taxes from production in People’s Republic of China aren’t sent back to the United States, Windmere’s home country.

The other risks are as follows increase transportation cost, decrease in sales, producing at a lost. As a result of the distance between the factories in China and the principal market in the USA, the risk of increased transportation cost, as air freighting is the most suitable means of transportation, thus adding cost to the overall delivery cost.

Windmere faces political risk as they are operation in a country, because China’s laws and regulation differ from those U.S. This scenario lead to an economical risk, as investors became sceptic about the safety of the environment and also causing the US government to levee high tariff on gods coming from China, as a result the products coming from China stand on chance of being competitive on the market.

Other risks that Windmere faces are the risk of customer responsiveness and customer retention.

5. Analyze Windmere’s product line. Are these different products? What is your estimate of the demand for such products over the next three to five years in the United States, Europe, Japan, and the Far East? Could competition easily arise in these product lines?

According to Doole and Lowe (2001) ‘the complexities and dimensions of the product portfolio analysis increase considerably when applied to the firm’s international portfolio, since the competitive positions occupied by a product are likely to differ significantly from one market to another, as indeed will the nature and intensity of competition. Comparing the strength of portfolio across a variety of markets becomes difficult as the analytical base constantly changes.’  The product line of Windmere Coporation can be analyzed based on the width and depth.  The width refers to the number of distinct and independent products or product line that is carried.  This might also be measurement of the different market share in various countries.  Windmere in this context is said to have a wide range.  The depth refers to the total number of products carried; this also measures market segmentation and the volume, which is a measure of the different lines.

Windmere Corporation has five main product lines:

1. personal care products
2. professional care products
3. home electric appliances
4. environmental products
5. hotel amenities

All of their products are manufactured under specific brand names in order to establish brand loyal, to differentiate there products from competitors, to increase their brand equity and to take advantage of brand extension.

First of all, it’s the Personal and Professional Care Products form the Bensons division are marketed under Salon Designs, Prostar and other premier brands. Their Professional Nail Care Product are marketed under the names Comare, cosmetics are via Jerome Alexander.  A new development which clothes shavers and Crimpers has led it’s extend its customer base and market segments.  Professional product though similar to the Personal Care Line consists of more mature products.

Secondly, it’s the Home Electrical Appliance line consisting of household appliance also benefit from the Appliance Leakage Circuits Interrupters, which are also made by Windmere as optional parts for earlier models. Windmere has converted these products into shockproof safe appliances.  These products are marketed under the Windmere brand.

Also, their environmental products such as air learning devices and fragrance air freshener are marketed to marketed segment that are concerned with safety, cleanliness and stability.  New research has been added to this product line through technology, which is aimed at eliminating aerosol sprays or powders.

Finally, the Lodging industry has a line of hotel amenities, which are marketed under the Jerdon brand.  Windmere has also tried to increase market segments by crossing product lines.  The lodging line and the Professional sales line are been combined to develop a lighted make-up mirror with a wall mounted hair dryer.

Demand for Products. 

According to Doole and Lowe (2002), today we see substantive changes in global competitive structures as emerging markets strengthen their economic foundations and regional trading areas become more cohesive. Europe has monetary union. Free trade areas are emerging in Asia, Pacific and the Americas, moving world trade from global focus to a more regionally focused pattern.

United States. The Americans are very demanding when it comes to the types of product s they purchase and use. Their main concerns are over the advantages they gain from the product, to themselves, to the environment, their community and their country. The Americans are particularly interested in products that are technologically able and have augmented service, reduce time, and reduce energy consumption. Products such as the hair dryers and the air filtration appliance will have a great demand over the next three to five years but in order to keep that demand and stay in the market the product need to be restricted for greater efficiency, smaller frames, more accessibility and offer a specific lifestyle. The personal care and professional product line needs to have a celebrity and professional appeal through high-class lifestyle advertising and information needs to be available for products use and disposal. There are a lot of different companies competing in the US market and therefore it will be very difficult and will involve a lot of effort to stay ahead of this competition.

Europe is a very different and difficult market and therefore it is important to change packaging to different cultures and countries of the continent in the European Union. It is also important to consider moving some of the Windmere’s operations to the country; this will increase awareness and ignite demand. The completion is sill high and may arise easily.

 Market in Japan is very concentrated with technologically capable products. The Japanese along with the Chinese are very culturally oriented. There has been a cultural feud between the Chinese and the Japanese. This need to be address as Windmere’s product are manufactured in China, therefore there will be concern as to whether to purchase products made in the enemy country. Demand for such product lines as personal care and environmental product will be high but will be less over the next three to five years as technology is been dominant and the product may become absolute. It will be very hard to compete in this market and Windmere might be unable to compete with giants of Japanese appliances industry. This will lead to a less demand in Windmere products.

Far East is also a very difficult market with specific needs and rules. People in the Far East are very religious so some products will not be in demand. Windmere has to take into consideration that parts of the continent has rivals and feuds with US, corporations home country, have different way of life and are not particularly interested in their products. All of that can lead to a low demand or no demand at all.

Therefore, there are no such markets where competition would not arise and demand will always be high.

6. What do you recommend that Windmere do over the next two to three years? For the longer term?

I would give the Windmere Corporation the following recommendations:

1. Windmere should employ very competent, professional and talented managers, because the most successful organisations are those organisations whose managers can master the strategic and organisational dilemmas that the modern competitive world creates.

 2. Over the next three to five years Windmere should try to develop customer service bases to increase customer – manufacturer relationship and through this they will be able to keep and possibly gain customer.

3. Windmere should maintain an external focus in everything they do and always seek to build relationships with those individuals and organisations that can assist them, understand the nature and value of the competitive advantage that they posses, and learn from their own experience and those of others.

Bibliography

1. V. Terpstra & R. Sarathy, International Marketing, 6th edition.
2. I. Doole & R.Lowe, International Marketing Strategy, 3rd Edition, 2001.
3. K. Laudon  & P. Laudon, Essentials of Management Information System, 5th Edition, 2003.
4. G. Johnson & K. Scholes, Exploring Corporate Strategy, 6th Edition, 2002
5. www.windmere.com