Whirlpool Corp.: Structuring the Deal to Acquire Hefei Rongshida Sanyo Electric Company – Case Solution

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Whirlpool Corp.: Structuring the Deal to Acquire Hefei Rongshida Sanyo Electric Company Case Answers

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Company Overview – Whirlpool Corp.

Whirlpool Corp. was established in 1911 as a motor-driven washing machine producer. Its product portfolio includes Refrigerators, Air conditioners, and Cooking stoves, among others. Additionally, it is considered the largest “White goods” manufacturer in the world.

The company is focusing on stringent cost control and restructuring its business. At present, Whirlpool Corp. is trying to acquire Hefei Rongshida Sanyo Electric Company to enhance its strategic positioning in China.

Economy analysis

• The growth in the national economy is considered lower because of the recent financial crisis.
• Higher demand for white goods and other consumer products points to a higher disposable income of people.
• The increasing entry of global business giants points out development in the national economy.
• The exchange rate of the national currency (RMB) is considered stable.

Industry analysis

Porter five forces

• Threats of new entrants in this industry are relatively low.
• Rivalry among existing competitors is high in terms of the price of the product and the volume of sales per year.
• The bargaining power of suppliers is high as there is a limited number of suppliers.
• The bargaining power of buyers is high.
• The threat of substitutes is high.

PESTLE analysis

Political

• The rules and regulations regarding the business activities of foreign companies in China are severed (Need to establish JV). In addition, it is pretty hard and time-consuming to get approval for a merger and acquisition with a Chinese company.

Economic

• The cost of operating a business and maintenance as a foreign company in China has increased, and it offers lower competitiveness.
• Finding a joint venture with Chinese companies seems less fruitful, and it failed to offer the expected economic benefit to the company.

Social

• At present, people are becoming more dependent on using White goods and consumer products.
• Because of the development trend and higher disposable income in Chinese society, people tend to buy more and intend to use foreign goods.

Technological

• The presence of new technology and efficient usage might cause a further reduction in the product and service price.
• In order to ensure higher safety and increased production efficiency, new technology needs to be implemented.

Legal

• The industry is highly regulated in terms of foreign companies operating in China.
• In order to do a merger or acquisition, it is required to get permission from multiple authorities like NDRC, CSRC, MOFCOM, and the local government.

Environmental

• The environmental activists are pointing out the production process and raw materials used in producing these consumer products.
• Because of the severe carbon emission reduction policy, a company that emits a higher amount of carbon will face negative consequences like a higher tax burden.

Company analysis (SWOT analysis of Whirlpool Corp.)

Strengths

• Strong product portfolio.
• Strong market positioning all over the world.
• Economies of scale.

Weaknesses

• Failure in positioning in the Chinese market.
• Inefficiency in management and operation in the foreign market (China).
• Strong binding of govt. rules and regulations.

Opportunities

• Building a long-term relationship with other peer companies.
• Increased demand for White goods and consumer products.
• Opportunity to use the supply and distribution channel of the other company.

Threats

• Legal and regulatory issues.
• Lower acceptance among Chinese people.
• Negative pressure from the recent financial crisis

Country Risk