Analysis based on Five Forces objectively focuses on establishing how Whirlpool can achieve and nurture a sustainable competitive edge over its rivals in the Appliances industry

Analysis based on Five Forces objectively focuses on establishing how Whirlpool can achieve and nurture a sustainable competitive edge over its rivals in the Appliances industry. The company management may not only use this analytical tool in developing strategies, but it can also help in assessing profitable business opportunities available in the sector of consumer goods at large. As the name suggests, the five forces comprise five primary variables namely: threats of new entrants; supplier bargaining power; buyer bargaining power; the threat of substitute products/services; rivalry among competitors.
i. Threats of New Entrants
Entry of new companies in the Appliances industry poses a significant threat to Whirlpool Corporation as the new entrants come in with innovation and increase competition in the market. The new firms also exert pressure on Whirlpool by providing new and unique value propositions, reducing costs, and lowering prices. The corporation must find its way of managing all these encounters effectively and devise countermeasures for it survive and remain profitable. Such measures may vary depending on what the strategists have deemed favorable in safeguarding the company’s competitive edge. For example, Whirlpool may focus on the innovation of new products and services to retain and attract more customers (Muller and Hutchins 38). Capacity building, research, and development are also necessary as they help in setting high standards that new entrants may not afford a window of extraordinary profits.
ii. Supplier Bargaining Power
Virtually, all organizations in the Appliances industry have a range of suppliers from whom they buy raw materials. This situation subjects some suppliers to cut down their margins to a favorable level that is comfortably affordable to the Whirlpool Company. However, some dominant suppliers are presumably believed to command the market with their high bargaining power and sell to the manufacturers at higher prices (Muller and Hutchins 39). The resultant effect of this phenomenon is lowering the net revenue generated by the appliances. Whirlpool can counteract such negative impacts by establishing an efficient broad-based supply chain. In addition, the company can explore new sources/types of raw materials that can substitute the existing ones in the event of high pricing in the market.
iii. Buyer Bargaining Power
Buyers often have the tradition of demanding a lot at a relatively lower price. High bargaining power by the buyers is increasingly becoming a serious concern because of technological advancement that promotes high production volumes and quality goods. Whirlpool operates in a commodity market that is subject to cost switching (Whirlpool Corp. 4). The buyers have options of switching from one seller to another depending on the strategic relationships between them.
The availability of options in the market promotes high bargaining power among the customers of appliances which in subsequently compels Whirlpool to offer discounts on its sales. The ultimate consequence is characterized by lower profitability relative to the projected revenue income. Whirlpool is dealing with the challenges of high customer bargaining power through consistent innovation and broadening its customer base in the global economy. Rapid innovation of new products attracts more customers and discourages the allowance of substantial discounts because customers always desire the latest inventions. Change of quality goods also facilitates the retention of the existing customers (Muller and Hutchins 37).
iv. The threat of Substitute Products/Services
The existence of substitute products and services is usually a threat to all business entities because it creates a potential window for customer defection. When there are some different types of goods/services that yield similar customer satisfaction at a lower cost, a company’s profitability often suffers. According to Lasseter, the obsolescence of products in Appliances industry is generally flat . Whirlpool management needs to be free from such kind of threat because there are no aggressive substitutes in the market.
v. Rivalry among Existing Competitors
The home appliance industry is experiencing stiff competition. Whirlpool’s main competitors include Arcelik, Electrolux, Bosch Siemens, General Electric, Kenmore, LG, and Samsung (Chakraborty). Most of these rival companies increasingly adopt expansion beyond their current manufacturing footprint. Furthermore, the firms’ customer base classy customers having multiples of choices; they demand competitive products/services at relatively lower prices. The market competition relies on a myriad of factors, which include product design and features, price, innovation, performance, quality, energy efficiency, distribution, cost, and financial incentives.
Financial incentives refer to promotional commitments such as co-marketing funds, advertising, volume rebates, salesperson incentives, and terms. Whirlpool management believes that they can survive in the existing environment through innovation of new products, establishing a strong corporate brand, continuous global business expansion, and enhancing customer-consumer trade value. Additionally, Whirlpool considers increasing its productivity, lowering costs, improving quality, and implementing other measures that will boost the business efficiency (Whirlpool Corp. 6).