maytag - COMPREHENSIVE CASE MAYTAG: EXPANDING THE APPLIANCE...

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COMPREHENSIVE CASE MAYTAG: EXPANDING THE APPLIANCE PORTFOLIO “Ol lonely.” the famous Maytag Company repairman, may not have enough to do, but his employer’s parent, Maytag Corporation, has been quite busy. Always one of’ the most profitable firms in an industry dominated by giant companies, Maytag often earns a higher return on stockholder’s equity (for example, 27 percent in l988) than any other company in its industry. For the five-year period from 1983 to l987. Maytag’s sales grew at an annual rate of more than 5 percent while its net income grew at almost 9 percent. Maytag achieved record sales of’ $1.9 billion in l987. Facing the 1990s, Maytag is acquiring new product lines and adjusting its portfolio in response to a changing environment. Traditionally. Maytag manufactured a limited line of appliances and marketed its washers, dryers, and dishwashers under a family name. Its strategy has simply been to make the best products and charge accordingly: thus the company slogan—“Built to Last Longer.” May-tag products generally cost more than competitors’ ma-chine—roughly $100 more on average. With its reputation for making trouble-free appliances, Maytag has always targeted the upscale end of the market. In addition, by offering premium-priced products, Maytag has typically catered to second-time buyers. This replacement market slowed in the later 1970s but was strong again starting in l982-1983: Even Maytag’s appliances wear out—typically after l0 to l2 years. Maytag shied away from the cyclical home-builders’ segment—tough negotiators who, in the past, wanted well-known brands at low prices—and the new-household segment—always price-conscious because of the multitude of products customers need to buy in a relatively short time period. Since the early 1980s, however, changing conditions in the appliance market have made Maytag consider whether it should change its traditional high-quality, high-priced strategy. Consumers and retailers have regarded Maytag’s laundry appliances as top-of-the-line. But the premium-quality niche for laundry and kitchen appliances targeted by both Maytag and competitor KitchenAid (long the market leader in the high-quality, high-price segment) may he eroding. Although there is no solid evidence of’ this trend, many people
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maytag - COMPREHENSIVE CASE MAYTAG: EXPANDING THE APPLIANCE...

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