Strategic Alliance Between Whirlpool Corporation And Inland Steel

Whirlpool’s Sourcing Strategy Challenges

Cost Cutting and Supply Chain Precision

Part a:

Buyers and sellers often enter into partnership to enhance their business position which may long a long time to generate the target business outcomes (profits). The buyers here are composed of business firms which acquire materials from specific suppliers of the raw materials, the sellers. The multinational companies like Whirlpool Corporation require to maintain uniformly high quality of the products to ensure continuous customer satisfaction creation and revenue generation. These two business needs namely, customer value creation and revenue generation require these companies to acquire raw materials from a number of suppliers (Kamal and Sundaram 2016). These multinational firms in order to gain higher level of economies of scale and maintain uniform quality of their finished product often restructure their vast supply chains and select a few suppliers with which they partner to develop their products instead of merely purchasing them. The suppliers of raw materials today also in order to ensure more profit and reduce their bad debts, are also opting for supplying raw materials to a limited number of manufacturing companies (Hartmann, Wieland and Vargo 2018). As far as Whirlpool is concerned, the American electronics giants in order to ensure that it acquires uniform high quality steel for its electronics products, decided to partner with Inland Steel. Here, Whirlpool was the buyer while Inland Steel was the seller. The two companies entered into partnership to gain competitive advantage and help each other reduce cost of production yet maintain their product quality. This is where the strategic fit comes into play. The two partners need to match their management and organizational policies to be able to operate profitably. The employees of the two organizations need time to gain familiarity and mutual acceptance of each other’s modes of operations. Thus they take time to reach an optimum level of collaborative productivity. As far as the given case study is concerned, Whirlpool and Inland Steel partner and the two organization establish strategic fit. They collaborate not only in the operational level but at the management level as well. The two companies collaborated to solve issues and avoid conflicts, thus boosting mutual productivity. However, as Burns (2016) points out failed partnerships can lead to loss of productivity in venturing companies ultimately leading to collapse of the partnership. Thus one can summarize that it takes years for collaborating to establish strategic fit and reach high level of productivity.

Inland Steel’s Customer Relationship Management Approach

Part b:

The business organisations involved in business partnerships can measure the profitability of the venture by considering several parameters. They can judge both external and internal parameters to judge and measure the success of the venture. As far as the external parameters are concerned, the companies can consider profit generated and market position improvement post partnership. The internal parameters like employee turnover reduction would show the level of success of the partnership (Nielsen and Vilson 2014).

The parameters like profit and employee turnover can be measured to indicate the level of success of the partnership. For example, the increase in profits in the companies post partnership period would indicate the success of the partnership, Again, if the share price of the partnering companies increase post release about the partnership in the market, this would indicate high future capital generation that would indicate high level of success of the partnership. The internal parameters would also indicate the level of success of partnership. If the partnering companies experience high employee turnover, it would indicate that the employees of the companies are not able to accept the organisational policies and culture of the other companies (Kolk, Vock and van Dolen 2016). This high employee turnover would indicate strong probability of the failure of the partnership venture. Low employee turnover would on other hand indicate future success of the partnership. Thus, both internal and external parameters can be used as indicators of measuring strategic fit of partnership.

2.Part a.

There are several advantages of having point-to-point contact between the employees of partnering companies. The case study mentions that the two companies namely, Whirlpool Corporation and Inland Steel collaborate on point to point partnership basis. Like the manufacturing departments of both the companies would directly contact each other. The following are the strengths of such contact pattern:

More business aligned communication:

The point-to-point communication process ensures that the two companies collaborate and communicate on a deeper scale. The communication regarding crucial business processes are not necessarily routed through the complex hierarchical pyramid of the two companies and the personnel involved in similar functions can communicate directly. For example, the manufacturing personnel of Whirlpool could directly communicate with the counterparts in Inland Steel. This would facilitate faster decision making and the communication can be aligned to the business needs to a greater extent (Kotula et al. 2015).

Risk management:

The point-to-point communication enables higher level of risk management among the companies involved in the partnership. One can point out that the collaboration to boost business productivity is more prevalent in multinational companies which invest high amount of funds into production of goods. The manufacturing activities in these companies are complex and attract amount of risks like financial risks and technological risks. When departments involved in similar manufacturing processes in Whirlpool and Inland Steel communicate on one-to-one basis, they are able to handle risks involved in manufacturing more efficiently. Thus, point-to-point communication help in more prompt risk management (Rim, Yang and Lee 2016.).

The Need for an Alliance between Whirlpool and Inland Steel

Point-to-point communication between two partnering companies have certain disadvantages as well. The management of the two companies often give more autonomy to employees involved in the partnership processes. This give the employees of one company opportunities to poach the employee of the other. The second disadvantage of point-to-point communication is that it gives employees to pass sensitive data which might harm one or all the partnering companies, thus ultimately leading to the collapse of the partnership.

Part b:

It is important to have strategic fit between partnering companies due to various reasons. Strategic fit refers to the degree to which organisation seeking to enter into partnership or acquisition and merger relationship match their resources and capabilities. Considering this factor, it is important for partnering decide the level of strategic fit. Firstly, high level of strategic fit means that the companies are able to match and share their resources like human resources, technological resources, material resources and financial resources. For example, Whirlpool and Inland Steel partner in the given case study. Their successful collaboration clearly indicate their high level of strategic fit. Thus, high level strategic fit ensures high level of collaboration of resources and profitability.

The second reason for which strategic fit is significant is that it results in more profitable business partnership. Considering the high profitability of Whirlpool and Inland Steel partnership, one can infer that they share high level of strategic fit. One can point, that if the two companies enter into partnership lack strategic fit and there happens to be vast difference in their resources strength, the partnership would fail.

Two:

It is not prudent to consider single sourcing strategy to develop the strengths of the product portfolios. The case study mentions that Whirlpool and Inland Steel enter into single sourcing partnership and are successful. However, one should point that such successful partnership based on single-sourcing is risky and less profitable in most of the cases. This is because, when two companies enter into single sourcing contract, they are bound to purchase and sell products among themselves. The companies often have to cede their supply chains with suppliers and limit their supply chains to each other. If, the company supplying raw materials become bankrupt or fail the meet the demand of the purchasing, the production of finished goods in the purchasing suffers. This in turn affects the revenue generation in the manufacturing companies. Similarly, if among the partnering companies, the company purchasing raw materials fails to make timely payments to the supplier company, the revenue generation of the latter suffers. This extreme dependence of the single partnering companies on each other ultimately leads to business failures for both the companies.

Single-sourcing partnership lead to lack of variety of products the manufacturing companies. When companies limit their supply chains to the limited one or two suppliers, they are not able of to acquire variety of raw materials and in turn are forced to limit their product portfolio. This entering into partnerships with a small number of producers ultimately impedes the customer value creation power of companies owing to the limited variety products which in turn leads to reduction in revenue generation.

Single sourcing of raw materials strategy would leverage the operations of companies which produce fixed assets or heavy goods. The construction and mining industries often use single supplier strategy to ensure that the provider of materials and the equipment are equipped financially, technologically and human resources to provide the former with continuous operation support. Similar strategy is prevalent in the automobile and heavy engineering industries. This ensures the manufacturers of automobiles and machinery are able to obtain high quality parts from the selected supplier base to ensure production of high quality automobile and machine pieces respectively.