Maytag current situation is its being ranked from second to fourth in terms of market share of its core products like refrigerator, washing machines, dishwashers and dryers. The company wants to have a better position in the industry by improving on matters of quality, product development and cost reduction (Hunger, 2002). How is Maytag doing financially? The company is doing well financially in terms of profitability, liquidity and solvency. It had increasing sales and profitable operation as shown in the graph below: Source: Hunger (2002)
Does Maytag have a sustainable competitive advantage? Its being profitable, liquid and solvent are its strengths since being profitable could assure the company’s liquidity and solvency. Its being liquid enable the company to sustain it relationship with creditors and its solvency or financial leverage could allow the company to expand by investments of its resources in fixed assets using debts while not making the company too risky still. In addition the company has been known for being a manufacturer of high-quality, high-price home appliances.
The company can capitalize on this to have better quality. It is being known for selling high-quality product may be a competitive advantage (Porter, 1998) but its sustainability depends much on its being able to balance the same with cost requirements. What are Maytag’s weaknesses? Are any critical? The company’s weaknesses include its increasing cost of production or cost of goods sold thus it had a low net profit margin for the last five years under review at an average of 5% (Hunger, 2002).
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It this is not corrected, the company could continue to have lower profitability in the future, and a trend in fact has already surfaced for the last five years. This weakness is critical as it would affect the very financial performance of the company if not addressed. Recommended Strategic plan for Maytag. Strategic Alliance with Supplier This strategy would take advantage of industry opportunities and protect the company from industry threats. One of industry threats is the strong bargaining power of suppliers.
By making strategic alliance with them, the power of these suppliers will be neutralized. This would speed up the application of new technology as it had done in the past with one of its suppliers, Honeywell’s Microswitch (Hunger, 2002). This will also make use of company’s strengths good liquidity and good financial leverage since excess funds will generate above cost of capital, thus increasing the stockholder’s wealth and contributing to long-term health of the company. Continue or Make further investments with Research Development
The company may have invested in research development as per case facts but since it desires better quality with lower cost, the only strategic choice is to continue or make further improve on such kind of investment. The company can have many chances of reducing cost by the use of this strategy including improved product development and better efficiency in its management of cost. This strategy will also take advantage of industry opportunity of low availability of product substitute as it would place more consumers in valuing the company’s improved product quality thus preventing switching by customers as well.
This will also reduce the industry threat brought by strong bargaining power of suppliers. This will also make use of the company strengths of good liquidity and solvency as way of using funds more productively and will help the company improve on its weakness of high cost of production or cost of good sold since one objective or improved R & D is reduced cost.
References: Hunger (2002) Case Study of Maytag Corporation: Focus on North America. Porter (1980) Competitive Strategy, Free Press, London, UK Porter (1998) Competitive Advantage, Free Press, UK