Case Nineteen: Maytag Corporation 2002: Focus on North America
In the beginning, Maytag was extremely competitive and popular. The company made its mark as the high quality, high price home laundry appliance maker. They were successful with making themselves leader in washing machines. As time passed, Maytag began to lose their competitive advantage. Maytag was slow to develop new innovations and models which cost the company to lose its leadership of the industry. This loss was very hard to recover from due to new competitors beginning to arise in this industry.
At the Maytag shareholders’ meeting held on May 9, 2002, many shareholders were anticipating an interesting meeting. There were many questions that needed to be answered and Ralph Hake would be the one to answer the questions and ease the shareholders’ mind. Ralph Hake, Chair and CEO of Maytag Corporation, made his speech and voiced two goals. These goals were to return the corporation to the historic earnings levels under Leonard Hadley and exceed those earnings. These goals would take the effort of everyone within the Maytag Corporation to make this possible. His speech spoke of problems that the company had encountered and was addressing. They were not going to let the company lose anymore customers or market share.
Does Maytag Corporation have what it takes to succeed in this increasingly competitive industry? Is this a good time to buy or to sell Maytag stock? This was is the mind of one shareholder who seems to have doubts in the company. These doubts were spurred due to the fluctuating profits, market share, and stock prices over the past years. Stock prices was at a high of $70 in mid 1999 but dropped to under $30 during the fourth quarter of 2000. Currently the stock was selling at $46.07. This fluctuation had the shareholder worried. These changes over the years were due to many things. Maytag tried to become an international competitor, but it was not as successful as they had hoped. Also, Maytag had acquired many companies during its acquisition of companies such as Amana, Magic Chef, and Jenn-Air. These companies had to be converted to be a Maytag company. Some changes, renovations, and improvements had to be made with the companies which cost money. For example, when Maytag acquired Hoover, the U.K. facilities needed to be modernized. Top management of Maytag committed millions of dollars to renovate the laundry and dishwasher plant. By having to pay for the acquisition of Hoover, management had increased long term debt to its highest level and had to increase the sell of stock. This then caused lower corporate profits and decreasing earnings per share. These kinds of decisions had shareholders concerned and put doubts in their minds about management.
Maytag can succeed in an increasingly competitive industry. If the company continues to follow its three key initiative, quality, product development, and cost reduction, then it will be able to better reposition itself in the industry. Currently the industry is dominated by a few major players and Maytag continues to be one of them. Maytag is considered to be the brand most desired by consumers and the most reliable. In 2001, the company’s market share in dishwashers, dryers, and washers allowed them to be ranked the number two choice of consumers. This is a great motivation for the company to strive to be the best and to grow. That is why Maytag developed a cross- functional new product development team for innovation. New products for floor care and refrigeration are being introduced to gain more market share. The key point shareholders have to remember is that they are in a “wear out” industry. People wait until their appliance wears completely out to get a replacement. Maytag is trying to change the industry to be considered a “want in” industry. This can be made possible by continuous research development, but they would have to continue to focus on their quality. Maytag’s quality has always been considered the best and most desired.
Maytag needs to focus on developing the products they already have and enhancing them. Technology is constantly changing making new opportunities available. Maytag was a pioneer in the industry they operate in. There were problems with top management, i.e. Ward, but the company took care of that problem. If the company and its top management stay aware of their changing environment in the industry and with the employees, Maytag will be successful. I believe Maytag is at a point where the companies they have acquired and they can work together with ease. Time had to be spent on renovation, company structure, and relocation of plants to get the company in position to focus on growth. With that time and expenses behind them, I believe the company will gain more market share and stock prices will raise. I think the shareholders should support Maytag because growth is to come.
Maytag management has decided to market their products again by using television commercials of the sidekick repairman for the refrigerator, commercials for the vacuum cleanser, and for the Maytag store. Maytag is trying to get recognition for their products and their ads to entice people to buy their products. By also using their money for magazine ads will be helpful. In my opinion, money should be allocated for marketing efforts to develop strong brand recognition. The company needs to target women especially family oriented women. The commercials will be memorable, but clearly defining a target market will be beneficial. This could be helpful to boost their sales. Maytag is headed for success.