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Maytag Case Study

Maytag Case Study

Executive Summary
The Maytag Company was created in 1909 because F.L. Maytag had found a niche in the market by producing washing machines. They were extremely successful and held 40-50% of the market share throughout the 1920’s and 30’s. F.L. Maytag had created a product that was known for its quality and was a product that targeted the high-end consumer. Maytag continued to enjoy market leadership, market share growth, and profits until they tried to expand globally in 1988.

Expanding globally seems to be the root cause of Maytag’s problems they are currently facing. They seemed to have leapt into the global market and due to their losses they were not prepared to enter this market.

Upon realizing this Maytag took on a retrenchment strategy that caused them to fall behind their competition in the North American market and allowed their main competitors to have an advantage over them because they had been focusing on the North American market while Maytag was focusing on global operations.

Basic Analysis
– Maytag had three CEO’s in only a five-year span. This created changes in the company’s strategies and they had to spend a significant amount of time reversing the implementation of projects started by Ward.

– Maytag took significant losses when it had to retrench from the global market. Maytag tried to enter a new market too quickly and this was the root cause of their problems. During this time their competitors were able to remain profitable which Maytag was trying to reduce their losses by selling off operations soon after they were bought and significant investments had been made in them. This caused Maytag to fall behind their competitors and have been trying to catch up ever since.

– Industry experts stated that Maytag’s marketing strategy was confusing. The brand Maytag was a high end product but they were selling this line through discount stores. Maytag did have products for all markets – and experts stated that their lower end products should be sold at discount stores and not the high end products. This could cause consumers to question the quality of their high end product if it is sold at discount stores and in competition with brand that are not of the same quality as the Maytag line.

– Maytag’s competitors such as Whirlpool and Electrolux were expanding to international markets while Maytag was in the process of retrenching and re-establishing itself in the North American market. This shows that they are behind their competition and must find a way to catch up with them in order to maintain and grow their market share.

– Maytag has also lost market share in the North American industry because they were concentrating on retrenchment from the international market. This gave their competitors a chance to take some of their market share and move on to global entry while Maytag was moving in the opposite direction. It was stated by a financial analyst, Lawrence Horan, after the shareholders meeting in 2002 that Maytag had in so many words admitted that they have lost market share and the only reason their sales increased in 2001 was due largely to the acquisition of Amana.

– In 2002 the U.S. and Canadian markets had reached maturity, future sales were only expected to grow 1.9% annually, and sell pricing were forced to remain low to be competitive although operating costs were increasing.

– Maytag’s debt to equity ratio has been increasing significantly which shows that they are investing more borrowed money than investing capital.

– Maytag was known as a high quality product. They received several awards such as and EFFIE in 98 and in 1999 they were awarded Outstanding Corp. Innovator.

– Maytag put significant funds into R&D but they were slow to introduce new improvements due to their systematic approach. Due to this Maytag developed closer relationships with key suppliers and created strategic alliances with them.

– Maytag has products to cover all markets. The company had the “power” lines of Maytag, Amana, and Jenn Air that were marketed to the high-end consumer, while they also had two “value brands” Magic Chef and Admiral.

– In a survey of Americans, Maytag was 15th on the list of strongest brand names. The survey was done based on quality and consumer recognition.

– Hake stated at the stockholders meeting in 2002 that they were going to reduce their purchased materials cost by opening a component plant in Mexico. This should help Maytag to increase profitability by decreasing their manufacturing costs.

– Maytag’s culture focuses on quality and customer satisfaction. Their goal is to make a quality product and service their customer so they will keep coming back and purchasing from Maytag.

– Due to Maytag’s quality products the culture of the employee’s has always been pride in the products they are producing. When Maytag acquired Admiral the employees of Admiral had questioned Hadley, the CEO at the time, when the name on the water tower would be changed to Maytag from Admiral, Hadley’s response was “when you earn it”. This goes to show that the employees of Maytag must care about the quality of the product they produce.

Root Cause Analysis
In 1988 Maytag tried to expand into the international market because management had felt the U.S. major home appliances had become a mature market. They expanded internationally by acquisitions. Maytag was unable to become successful in the international market due to their inability to overcome the culture changes and it seems there was lack of research done on the facilities they were acquiring because many of them needed renovations and upgrades. Due to Maytag’s inability to make their entrance into the global market successful, they suffered significant losses in both profits and in capital that was invested into oversea facilities for improvements. The investments made were lost when they had to retrench and sold off almost all of their international operations in 1994 and 1995.

At this time Maytag’s competitors were able to run profitability and Maytag had taken considerable losses. This put Maytag in an undesirable position that the have been trying to overcome. In 1997 they hired Ward as CEO to implement a successful company strategy by reducing costs and speeding up development in order to be able to introduce new products to the market faster. It was not long before Maytag’s Board of Directors realized through significant stock price decreases and differences in Ward’s strategy for Maytag that he was not the right fit for the company and he was asked to resign in 2000. This was another significant setback for Maytag because they spent the next year or more undoing all the changes that Ward had implemented.

The recommended strategy I would recommend for Maytag to take at this point would be to focus on stability. They need to re-establish themselves in the North American market while their competitors are trying to make an entry into the global market. Maytag already has experience in the global market and if anything they have learned from their endeavor, they have learned what steps they took that caused them to fail. While their competitors are focusing on the global market they can focus their attention on gaining market share back in the North American market. Maytag is now in the position their competitors were in back in 1998 and it is not know how successful either of their competitors will be in the global market. This could give Maytag a chance to get back on their feet in this market, streamline their operations, and increase their profits and market share. Once they have accomplished this successfully they can take on a growth strategy and enter the international market again with their own knowledge from their first experience and also learn from the success or failure of their competitors. I believe it will only take Maytag a year or so to be able to stabilize themselves and then can take on a growth strategy. They should not wait too long to grow into the international market because industry analysis show predict that there will not be much growth in the North American market, however they can focus on taking market share from Whirlpool while they are focusing overseas.

I do not feel they need to follow a retrenchment strategy any longer because they have sold off a majority of their international operations and they should not decrease their product lines they offer. They have already done the retrenchment necessary and should focus on regaining their market share and becoming and industry leader.

Maytag’s growth strategy at this point is external growth, as it has been historically. They have expanded mostly through acquisitions. This has been a hit or miss strategy with them because most of their North American acquisitions have been a success for them while their international acquisitions were not. When Maytag is able to stabilize themselves in the North American market, which should not be difficult for them to do because they have past success in this for many years, they should grow into the internationals market. When they take the growth strategy on, they must use their past mistakes as experience and enter the market correctly this time. I do not feel they were prepared for the cultural differences when they first tried to enter the international market and they should hire a consulting firm to help them develop their international markets. Maytag has tried to operate internationally they way they do in the U.S. and must learn to adapt to different cultures in order to be able to be successful internationally.

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