Star Appliances Inc. – 5 Year Plan Table of Contents Mission Statement Company Objectives Company Overview 1. Historical Outline 2. Products and Services 3. Financial Statements SWOT Analysis An analysis of companys strengths An analysis of companys weaknesses An analysis of companys opportunities An analysis of companys threats Business Strategy Marketing Mix Product Pricing Place Promotion Analysis of Major Competitors in the Field Kenmore Whirlpool Kirby Maytag GE International Expansion 1.
Hungary External Environment Industry Analysis Recommended Entry Mode 2. Japan External Environment Industry Analysis Expansion Strategy for the Future Five Years 4. Canada External Environment Expansion Strategy for the Future Five Years 5. Mexico External Environment Industry Analysis Expansion Strategy for the Future Five Years Growth Forecasts for Years 2000, 2001, 2002, 2003, 2004 Implementation The View Ahead Star Appliances Inc. Mission Statement Quality For over thirty years, Star Appliances Inc. has been helping people to manage their homes.
Today, Star Appliances Inc. is one of the major competitors in the household industry and one of the most selling brand in America. Star Appliances Inc. Mission is to: Achieve technology excellence in current and future generations of products, processes, and services. Develop innovations by creating entirely new business opportunities.
Help solve critical technical challenges. Attract and develop new technical leaders. Ensure leadership technology in all departments of Star Appliances. Drive corporate initiatives across Star Appliances. Expand its market by exploring a global economy Satisfaction All Star Appliances products contain proper warranty information.
Each appliance comes with a pledge of Satisfaction Guaranteed or your money back. Star Appliances offers maintenance agreements and annual check-ups to keep your appliances running right. And should anything ever go wrong with your Star appliance (and we hope it never does), we offer a nationwide network of service technicians to make sure it gets fixed fast and fixed right. Value When you compare feature-for-feature, youll find that Star Appliances offers more for the money than any other brand. Maybe thats why s leading consumer magazine recently ranked Stars washers, dryers, and vacuums NUMBER ONE in their respective categories.
Have questions or need more information about new Star products? Call 1-888-1ST-STAR or speak to a Customer Service Representative For service information or to schedule a service, call 1-800-4MY-STAR. Star Appliances Inc. Company Objectives Integrity Integrity is an uncompromising characteristic for all Star Appliances employees. It is an implicit factor in customer relationships and the cornerstone of all Star Appliances business activities. Along with the company’s reputation for innovation, growth and success, we value integrity among the essential and critical elements in our employees.
It is the baseline by which we measure everything else and from which we never compromise. Creativity Stars continued success is the result of its employees creativity. Every day, teams of Star Appliances people push the frontiers, developing new products and services to serve their customers. Focusing on highly specialized financial services segments, our people develop a unique understanding of customer requirements as they apply their collective talents to solving industry challenges. Intellect At Star, we’ve never separated ideas from actionsboth are essential elements of the competitive equation. Developing the most advanced financial product or innovative service is meaningless if you don’t move quickly to get it to market and delivered to customers. The people from Star understand the importance of both ideas and action to maintain the company’s position as one of the leaders in the market.
Quality as a corporate objective: Company-wide Quality, as a corporate objective, means attaining a level of overall performance and attitude that makes Star Appliances the natural choice of customers and earns the respect of all those affected by the Company’s activities. Company-wide Quality, as an individual objective, is achieved by employees who aspire to be better than the best. Star Appliances is committed to providing flexibility in the design, calibration, repair, and testing services to customers while maintaining a consistent, optimum level of quality. The services we offer include standard service packages as well as customized service capabilities to accommodate unique customer requirements. Our business-wide commitment to meet the needs of customers is the foundation for the Quality System.
Star Appliances is dedicated to maintaining close relationships with our suppliers. The overall objective is to make certain that we exceed our customer’s expectations. Company Profile q Historical Outline Star Appliances Inc. designs, manufactures, sells and supports a line of household appliances. The company was started in 1970 and has grown steadily to its current size.
Star Appliances has its head office in Bridgeport, CT and about 8 domestic branch offices. The two major factories are located in Iowa and Texas. Star Appliances Inc employs approximately 500 personnel. The company went public in 1984. Today, Star Appliances Inc has taken around 15% of the U.S.
household appliances industry. Star Appliances Inc. has international markets, including Canada, Japan, and Mexico. v Focused Management With premium business management teams, we can provide our customer better service, sharpen our product focus and increase the efficiency of our own personnel. v Accelerated Sales By consistently creating the leading products in our respective markets, Star Appliances Inc. has developed valuable brand equity and an enviable record of sales growth.
The increased breadth of our product line, the organization of our sales and marketing, the diversity of our complementary markets and our refocused R&D all work to enhance Stars sales potential. v Scale Star Appliances Inc. has nearly doubled the number of our facilities, greatly increasing our capacity and resources. We, a large size company, enable us to successfully complete and fulfill significantly larger orders, increase the comfort large customers have in doing business with us and provide opportunities in the future further development of our company. q Financial Statements SWOT Analysis Strengths Complete product line Good reputation Customer loyalty Employees creativity Being in business nearly thirty years.
High quality products Excellent after-sale services Experienced management teams Experience in foreign exporting Excellent performance in foreign markets Sufficient capital resources to support expansion. Sales increasing steadily Well-trained repair technicians Weaknesses Unfamiliarity with foreign markets due to insufficient research Small market shares in the U.S. Infrequent participation in exhibitions, thus, lack of exposure to potential buyers Minimal advertising and weak promotion Infrequent participation in exhibitions, thus, lack of exposure to potential buyers Opportunities International Expansion Innovative R&D Further developments in unsaturated markets of Japan, Canada, and Mexico Developing online interactions with customers in Japan, Canada, and Mexico Relatively less American competitors in Hungary Hungarian standards of living are fast growing Threats Intense competitions New competitors in the same industry Business Strategy Business Strategy Product niche; Price competitiveness; Appropriate after-sales service; Right Voltage (220 not 110) Hungary Marketing Mix Product Star Appliances produces complete lines of basic and major household appliances. Household electrical appliances include housekeeping appliances (washing machines, vacuum cleaners, electric irons), cooking and kitchen appliances (refrigerators, microwaves ovens, toasters), air conditioning equipment (air conditioners, fans, air purifiers). We are going to promote three different categories of our products, which are washer, dryer, and vacuum cleaner, in our new market Hungary.
We select seven kinds of products from those three categories to enter the foreign markets first. While in Mexico, Japan, and Canada, which are our existing markets, Star Appliances, Inc will keep the same product categories and introduce innovative small appliances to those markets. By setting up the manufacturing plant in Mexico, Star Appliances, Inc will manufacture the whole lines of household appliances. Total output will depend on production capacity, demand forecast, quarterly financial planning and other related cost. Output of each line of appliances will mainly depend on estimated demand and inventory level.
According to industrial needs and upon customers request, Star Appliances, Inc will make certain customization while maintain our quality standards. Price As of the Hungarian Market, reliability and appropriate credit, guarantee and servicing terms are all those factors which are taken into account by the Hungarian end-users and distributors in the purchase decisions. Home delivery is an attracting factor used by many retailers over a certain purchase value mostly above HUF 50,000 (USD 240) and after-sales services are also essential because Star Appliances, Inc is determined to establish a significant long-term presence in Hungary. Star Appliances, Inc. will offer competitive prices compared to our competitors. Star Appliances, Inc.
provides two-year warranty for washing machines dryers, and vacuum cleaners, which is double the warranty time than other suppliers. Place – Foreign brands distributors have either established their own distribution operations and exclusive product showrooms in major Hungarian cities or find it easier and more convenient to appoint a local agent / distributor who acts on a commission basis while distributing their products. Star Appliances, Inc will find a local distributor in the capital city, Budapest, to distribute our products. The local partner should be capable of waging promotional campaigns, maintaining spare parts and accessories and carrying sufficient stocks. Reliability, timely deliveries and efficient, low-cost, and after-sale service capabilities are key factors in Hungary. Since Hungary is a sophisticated but relatively small market, it is advisable to negotiate an exclusive distribution arrangement when the right company is located.
Promotion Star Appliances, Inc. wishes to market our household appliances to Hungary and wants to appoint an exclusive local agent/distributor who acts on a commission basis. The representative should be able to set up promotional campaigns with the financial help of Star Appliances, Inc. and maintain an extensive household appliance inventory carrying a large range of stock kept in a bonded warehouse. There is a wide range of commercial television, radio, newspapers and magazines advertisements as well as direct mail services. We decide to use television advertising, because it can reach more than 80 percent of Hungarians.
A single showing of a 30-seconds commercial in Hungarian costs between USD 5,000-8,000 depending upon program ratings and timings. A 30-second radio advertising at a national commercial radio station would cost around USD 600. We will also look into other promotional methods such as participation in international trade fairs, exhibitions and business to business promotions. Analysis of Major Competitors in Household Appliance Industry Kenmore – The Kenmore company has been on the market for over 70 years. Today, it is one of the best selling brands of home appliances in America. Kenmore sells its products through Sears, a large appliance retail chain.
Every Kenmore appliance comes with Sears pledge of Satisfaction Guaranteed or persons money back. Sears offers maintenance agreements and annual check-ups to keep the appliances running right. Sears offers a nationwide network of technicians to make sure that their products get fixed fast and fixed right. Whirlpool – Whirlpool Corporation is the one of the world’s leading manufacturers and marketers of major home appliances. The company has principal manufacturing operations and marketing activities in North and South America, Europe, and Asia.
Whirlpool’s primary brand names — KitchenAid, Roper, Bauknecht, Ignis, Brastemp, Consul and its global Whirlpool brand — are marketed in more than 170 countries worldwide. In North America, Whirlpool is the largest supplier of major appliances to Sears, Roebuck and Company under the Kenmore brand. Whirlpool manufactures and markets a full line of appliances in each market it serves worldwide: clothes, washers and dryers, refrigerators, freezers, dishwashers, ranges, compactors, room air conditioners and microwaves, together with portable appliances such as stand mixers, hand mixers and blenders. Kirby – The Kirby Company has been in the market for more than 85 years. As a Division of The Scott Fetzer Company, they have produced fine Home Care System in the world.
Kirby focuses on providing quality, reliability and service. Although their prices are much higher than those of other vacuum cleaner producers they have enjoyed a steady flow of new customers who are more interested in quality. Kirbys vacuum cleaners are designed for people who have higher income and who appreciate cleanliness. Kirby products are only sold though in-home demonstrations. Through their 85-year history, Kirby has shown that the in-home demonstration allows potential customers the chance to see how the system can meet their unique cleaning needs.
Maytag – Maytag was founded in 1893. Maytag Corporation is a leading producer of home and commercial appliances. Its products are sold to customers throughout North America and in targeted international markets. Maytag also is the majority owner in a China joint venture with Hefei Rongshida, a leading washing machine company that is expanding into the refrigeration business. The company produces premium brand major appliances such as washers, dryers, dishwashers, cooking appliances, refrigerators, vacuum cleaners, extractors, commercial cooking, laundry, floor care equipment, and vending machines.
In 1999 the company increased its sales to 4.3 billion dollars from 4.07 billion dollars in 1998. As a result of this, gross profits rose by 70 million. The company currently pays .72 dollars per share to its shareholders. Net income rose by 48 million dollars. GE – GE is a diversified services, technology and manufacturing company with a commitment to achieving customer success and worldwide leadership in each of its businesses.
GE operates in more than 100 countries and employs nearly 340,000 people worldwide, including 197,000 in the United States. John F. Welch has been Chairman and Chief Executive Officer of GE since 1981. The Company traces its beginnings to Thomas A. Edison, who established Edison Electric Light Company in 1878.
In 1892, a merger of Edison General Electric Company and Thomson-Houston Electric Company created General Electric Company. GE is the only company listed in the Dow Jones Industrial Index today that was also included in the original index in 1896. Revenues of the company for 1999 are $111.6 Billion. 1999 Net Earnings are $10.7 Billion and the number of shareowners is about 2.1 Million International Expansion 1. External Environment Demographic The population was 10,208,127 (July 1998 est.) Age structure was as follows: 0-14 years: 18% (male 915,412; female 872,706) 15-64 years: 68% (male 3,413,170; female 3,533,085) 65 years and over: 14% (male 550,974; female 922,780) (July 1998 est.) The population growth rate was -0.23% (1998 est.) Ethnic groups are Hungarian 89.9%, Gypsy 4%, German 2.6%, Serb 2%, Slovak 0.8%, Romanian 0.7%. Hungarian is the major language. Other language speakers are only 1.8% of the population.
Political/Legal – Country name in the conventional long form is Republic of Hungary, and in conventional short form is Hungary. The local long form is Magyar Koztarsasag and the local short form is Magyarorszag. The Government type is republic. The national capital is Budapest. Economic Hungary has consolidated its March 1995 stabilization program and undergone enough restructuring to become an established market economy.
Consequently, Hungary’s economy has been growing rapidly over the last six years. Hungary has made significant progress in stabilizing inflation through effective implementation of monetary policy. In the early 1990s, Hungary’s economy experienced high rates of inflation, reaching a peak of 30 percent in 1992-93. With the help of market stabilizing efforts the inflation rate dropped to an annual 12 percent by the end of 1998. The targeted rate for 1999 is to reach single digits.
The government’s main economic priorities are to complete structural reforms, particularly the implementation of the 1997 pension reform act (the first in the region), taxation reform, and planning for comprehensive health care, local government finance reform, and the reform of education at all levels. Foreign investment has totaled more than $17 billion through 1997. In recognition of Hungary’s improved macro-economic situation, all major credit-rating agencies listed the country’s foreign currency debt issuances as investment grade in 1996. The current IMF stand-by arrangement expired in February 1998, and Budapest and the IMF agree that there is no need to renew it. The OECD welcomed Hungary as a member in May 1996, and in December 1997 the EU invited Hungary to begin the accession process.
Forecasters expect 4%-5% growth in 1998. GDPs purchasing power parity is $73.2 billion (1997 est.) GDPs real growth rate is 4.4% (1997 est.) GDP per capita purchasing power parity is $7,400 (1997 est.) Inflation rate–consumer price index is 18% (1997 est.) Unemployment rate is 9% (1997 est.) As a small country with a relatively small domestic market Hungary’s economy is highly dependent on foreign trade. International trade in goods and services amounted to approximately 80 percent of the GDP during the last three years. Sociocultural – English is regularly used in business contexts. There are, of course, firms, especially smaller ones, whose principals do not speak English. In these instances, an interpreter is often made available.
It is nonetheless prudent to ask in advance what interpretation provisions have been made for a meeting. Hungarians address each other by their family names first, followed by their given names (e.g., Smith John). Business cards follow this convention unless printed in English. It is always advantageous to learn basic greetings in Hungarian. Even the most minimal efforts will be appreciated by Hungarian business partners.
Global Real wages especially in the private and banking sector are expected to increase 3-4 percent in 1999 and beyond during the following years. The recovery should result in excess disposable household income and could stimulate further demand for small household appliances such as toasters, sandwich makers, fryers etc., which were not typically a part of Hungarian households in the past. Additionally, there is a developing and distinctly upwardly mobile entrepreneurial class, which accounts for about 5 percent of the total population. This segment of the population has more income to spend on luxury goods and is less price-conscious. This group has easy access to household appliances and it is the main purchaser of more upscale items such as automatic dishwashers, washer-dryers, etc. Imports have increased as a result of CEFTA liberalization of trade policies and the potential threshold membership with the European Union.
The free trade agreements called for elimination of all duties on products with the exception of textile and steel products and have increased business opportunities for European firms through liberalization of trade. U.S. imports face a more difficult situation due to comparatively higher import duties for imported American products. 2. Industry Analysis v Household Appliances Industry Summary 1. The total market for household consumer goods in Hungary was $589 million in 1998. Consumption is expected to grow slightly and the total market for household appliances might reach $620 million by the end of 1999.
2. Since the beginning of the 1990s, there has been a much larger product selection in the Hungarian market in household appliances – especially the white goods – owing to increased imports and increased local manufacturing of Western brands which has contributed to rising consumer demand. This development is somewhat surprising due to an overall drop in real wages over the same period. Further growth can be expected over the coming years as consumption levels began to increase last year. Foreign and domestic brand competition has tightened, and both quality and price now play an important role in consumers’ decisions. 3.
The Hungarian market for household appliances relies on imports from a mix of countries; among the most important ones are European Union countries (led by Germany), Japan and the U.S. During 1997, the market for appliances in Hungary grew by more than 8 percent over 1996. The total market is expected to continue to grow at about an annual 4-5 percent over the next three years. Imports in 1998 were $320 million, representing a 7 percent increase over the previous year. Imports from the U.S. amounted to $22 million, a slight 2 percent increase over 1997 import level.
Of the $22 million, $16 million were large appliances, chiefly washers, dryers, dishwashers, refrigerators and freezers, and $6 million were small appliances. Best prospects in this category are washing machines, dryers, vacuum cleaners, hair dryers, HI-FI sets and VCRs. The Hungarian market for household appliances has shown an overall improvement over the past three years, and is considered to be a promising market for American products. 4. Household appliances include the following: – Non-kitchen appliances, e.g. washing machines & dryers; – Small appliances, e.g.
hair dryers, irons; – Kitchen appliances, e.g. refrigerators, microwaves and dishwashers; – Household electronics, e.g. TV sets, VCRs, HI-FI sets. 5. Market Highlights STATISTICAL DATA (USD million) 1998 1999 2000 Import Market 320,2 339,2 359,5 Production 410,2 417,5 428,3 Exports 141,0 143,5 144,2 Market Size 589,4 613,2 643,6 US Exports to Hungary 22 23,1 24,3 Exchange Rates 192 240 278 Source: Figures are based on preliminary and partial data of the Central Statistical Office 1998 Publications, Budapest, Hungary, on Foreign Trade Statistics issued by the Ministry of Economy, 1998 and U.S.-Hungarian Statistics issued by Kopint-Datorg Market Research Company. Estimated Future Inflation Rate: 10% Last Year’s Import Market Share (Percent for Major Competitors and US): Germany: 28%, France: 23% Japan: 21% Austria: 13% Italy: 9% U.S.: 6% Estimated Future Inflation Rate: 10% or below USA: 8%, EU: 37%, Japan: 20%, Korea: 17%, Others 12%.
6. According to market research, there is continued demand for household appliances in Hungary. A reason for that is the wide selection of internationally well known brands already available on the domestic market. Previously, limited only to products produced by Hungarian manufacturers (Energomat washing machines or Elekthermax cookers), and based on poor East-European quality, consumers are now confronted with thousands of products — from relatively inexpensive Hungarian and former Eastern brands (Vjatka – Russian, Eta former East-German) to the most expensive brands (Electrolux, Whirlpool, Bosch etc.). 7.
The total number of households in Hungary is 3.9 million. Hungarian households spent about an annual 6-7 percent of their annual income on household consumer goods during the past three years. Most popular items include: refrigerators, freezers, microwave ovens, washing machines, spin-dryers, vacuum cleaners and sewing machines. 8. Household appliances are typically products that are purchased approximately every 5-7 years and Hungarian populations are considered to be potential customers for these products. The only variation is that customers either purchase these products in specialized retail shops and stores or sample black market products in an attempt to try to save money.
The black market continues to be significant for household appliances. Consumers purchase small kitchen appliances (mixers, coffee/tea makers, and irons) and even microwave ovens or TV sets and VCRs in the black market. The price level of such products is much lower than of those in legitimate stores but no warranty is offered on them. 9. Hungary’s GDP growth for 1999 is approximately 4 percent, with a USD 3,600 GDP per capita.
Due to import liberalization policies and Hungarian consumers’ preferences for foreign products, now is a good opportunity for European Union countries and American firms to penetrate this market. The size of the Hungarian market for household consumer goods reached $580 million in 1998, and is expected to grow to $600 million by the end of 1999. 10. Based on a marketing survey, only few homes have electric razors for women or wet-dry vacuum cleaners. Hungarians prefer Braun; Elin, Moulinex and Philips household appliance brands but Hungarian-made Hajdu/Energomat hoovers and coffee makers produced in Szarvas (central Hungary) are also among the top favorites.
11. Based on another public opinion poll, 6 percent of those asked consider purchasing washing machines and microwave ovens for their households. Only 3 percent is planning to buy deep-freezer, 2 percent is planning to buy fryers and only 1 percent said they plan to buy a dishwasher. If these plans are carried out, Hungarian households with microwave ovens will reach 40 percent next year, while the ratio for washing machines will be 55 percent. There was a heavy increase in front-loading washing machines; while only 8 percent of families had such washing machines in 1995 this number increased to 14 percent by the end of 1998. The top-loading washing machines have a 40-percent market share but most of the households still have the traditional washing machines and spin-dryers. 12. End users for household consumer goods include the following business and private entities: Importers/Distributors specializing in household consumer goods, Retail stores selling mixed product lines but representing one or few brands of household appliances, General Public, End Users and Hotels and Hospitals.
v Competitive Analysis: 1. Domestic Production The major domestic producers are Electrolux Lehel Hutogepgyar Kft., Hajdusagi Iparmuvek and Elekthermax Rt. Electrolux Lehel Hutogepgyar Kft. established in 1991 over 3,600 employees. Their manufacturing unit located in Jaszbereny (North-East Hungary).
Electrolux-Lehel is the largest unit manufacturing Electrolux appliances in Central-Eastern Europe. It manufactures mainly refrigerators with Zanussi and Electrolux brands. The vacuum cleaner production was taken over by the Jaszbereny factory only in 1997 when the Italian Electrolux production unit refused to work in two shifts. More than 80 percent of the production goes for exports providing good turnover for the company. Hajdu Hajdusagi Iparmuvek Rt. the oldest manufacturer of washing machines in Hungary.
established in 1952 and transformed into Plc. in 1993. more than 1,000 employees. It has been manufacturing non-automatic washing machines since the 1970s but introduced the new automatic, oEnergomato branded top-load washing machine in the middle of the 1980s. These brands have been popular in the market for a long time as spare parts supply was always assured at a reasonable price and the retail price of these items made them extremely competitive with the better but more expensive Western brands.
Recently, the price level of Energomat machines has reached the level of its Western competitors so the number of consumers buying alternative products increased. Hajdusagi Iparmuvek manufactures not only washing machines but spin-dryers and other small household machines as well in accordance with Western ISO 9001 standards. Elekthermax Rt. originally established in 1920 but was privatized in 1990. Currently, the Dutch Elekthermax Holding holds 97 percent of the shares and the employees hold 3 percent. around 800 employees manufactures electric and gas-operated owens, cookers and heaters as well as rost-free taps.
Most of its exports are shipped to Germany, Poland and The Netherlands. Szarvasi Vas- es Femipari Rt. established in 1952 and transformed into a Plc. in 1997. over 400 employees.
Its main activity is production of electric tea and coffee makers, deep fat fryers and lighting appliances. Its main export markets are Germany, Romania, Bulgaria, Slovakia and Sweden. 2. Foreign Competitors a) Third-Country Competition Third-country competition for household appliances is extremely significant. In general, European Union manufacturers have gained the largest market shares in the past seven years. German, French, Dutch, Korean and Italian companies’ products are available in all shops and stores specializing for household appliances.
The product lines include refrigerators, washing machines, vacuum cleaners, hair dryers, and kitchen appliances. Dutch and German companies concentrate on offering a wide range of kitchen appliances, washing machines, irons etc. The following European companies are active on the Hungarian market: Company Source Country Available Products Bosch-Siemens Germany kitchen appliances, vacuum cleaners, irons Braun Germany hair dryers, irons, kitchen appliances AEG Germany washing and drying machines Samsung Korea TV/video sets, microwave ovens Goldstar Korea TV/video sets, microwave ovens Philips Netherlands kitchen appliances, HI-FI sets Hitachi Japan TV/video sets, kitchen appliances Sharp Japan TV/video sets, HI-FI sets Panasonic Japan TV/video sets, HI-FI sets Moulinex France kitchen appliances Candy Italy washing and drying machines Philips: Philips is one of the major third-country competitors in the household appliances market. Philips is not only selling but also manufacturing many of its products in Hungary. It opened its household appliance factory in Kaposvar (SW Hungary) in September 1998. The new factory employs 300 people and by 2000, the plant expects to turn out two million home appliances.
Philips has invested about USD 100 million in Hungary through the end of 1997 and will be investing another USD 75-100 million in 1998-1999. Philips has a final assembly factory in Szekesfehervar (Central Hungary) where it produces VCRs, stereo and combi TV sets. Philips has interests in other ventures in Hungary such as in Philips Car Systems Kft., Philips Monitor Hungary KFt., PolyGram Publishing KFt., Passive Components and Philips Key Modules Hungary KFt. b) U.S. Market Position American brands such as Whirlpool and Melissa Butler are becoming mo …