Type: Analytical Essays
Sample donated: Janie Parker
Last updated: April 19, 2019
1. Has Windmere been successful? What are the elements of Windmere’s international strategy?Windmere Corporation is one of the largest suppliers of various personal care products, professional sales products, home electrical appliances, environmental products and hotel amenities in the United States. It celebrated its 25th anniversary in business in 1988.
Most of products they produce were manufactured by their subsidiary Durable in Hong Kong and People’s Republic of China. These subsidiaries were low cost producers and were able to constantly improve and expand their facilities due to Durables success in the early 1980’s.However, this changed in the late 1980’s due to a weak retail environment in U.S and higher tariff on Chinese imports and United States legislative changes. This led to a decrease in the demand for Durable products and made Windmere Chinese import into the United States not very competitive.
Due to all of these factors, during the late 1980’s into the early 1990’s Windmere Corporation was not a successful business venture. In order to stabilise and become more competitive, the Windmere tried to expand their sales by upgrading mature product, creating different brands for each product line, establishing independent distributors and developing innovative products.According to Johnson and Scholes (2002) the success of international company depends on the ability simultaneously to achieve global competences, local responsiveness and organisation wide innovation and learning.The key elements of Windmere’s international strategy are:* Compete as a low cost producer due to the low cost of labour.* Establish joint ventures to gain market share and to reduce financial risk.
* Diversify its production lines.* Differentiate their product by creating specific brand names and identities for each product line and product respectively.* Reduce the amount of products manufactured in order to lower their cost of production and in turn break-even.* Develop new products.* Upgrade the mature products.* Overcome government barriers to trade that would prevent competition such as tariffs and anti-dumping are issues that were raised.* Develop new market segments.
2. What choices has Windmere made with regards to value added? How has it configured the value-added chain? Why?The Value Chain describes the activities within and around the organisation which together create a product or service( Johnson and Scholes (2002)). Each of the activities in the value added chain of Windmere highlights those primary and secondary activities of the corporation that add a margin of value to achieve a competitive advantage. In is very important to configure the value added chain when managing organisation and assessing a competitor. The value added would affect customer preferences and ultimate satisfaction. According to Laudon and Laudon (2003), value can be added in two main activities, namely primary value activities and secondary activities that are further divided into many sub-divisions.Primary and Secondary Value Activities. Primary Value activities are directly concerned with the creation or delivery of a product or service and include inbound logistics, operations, outbound logistics, sales and marketing.
Secondary Value activities include the organization’s infrastructure, human resources, technology and procurement (purchasing input).* Operations. Windmere has realized their potential of being one of most successful low-cost producer because of their geographically dispersed manufacturing. Factories in Hong Kong and China enable the organization to cut prices to gain market share. Being able to offer their goods at a lower price than their competitors was the key factor for their initial success. Their main market the United States, where there are many manufacturers selling the same goods.* Outbound Logistics. Good management of channels of distribution is very important to the business success, because they reduce the amount of work that must be done by both the producers and the consumers.
This ensures there is a smooth flow and that goods are marketed effectively. Independent distributors are especially useful in penetrating new markets. Where seen fit Windmere made alliances with other companies that have prior knowledge or possessed the financial capabilities need for market extension, for instance, the 50% owned joint venture with Paragon Sales, which is one of the largest distributors of electric of electric oscillating fans in the United States.* Marketing and Sales.
Marketing and sales involves promoting and selling of Windmere’s products. Windmere Corporation has used communication in the form of a national TV campaign to add value to its products. The theme of this particular campaign was “It doesn’t cost a fortune to look like a million,” and solidifies Windmere’s position as a cost leader in terms of offering quality* 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:a. Sustained period of investmentb. Lower labour costc. Proximity of raw matirilasd.
Subsidies to help native industriese. 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 products2. professional care products3. home electric appliances4. environmental products5. hotel amenitiesAll 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.