Indesit Company's Regional Strategy
2007 | Case No. IB68
Despite its humble beginnings as a small, family-run enterprise headquartered in rural central Italy, by the end of 2005 the Indesit Company (known until January 2005 as Merloni Elettrodomestici SpA) had grown into one of the top competitors in Europe in the household appliance industry. It had become second in terms of market share with 13.8 percent of the greater European household appliance market, on revenues of €3 billion in a €37 billion market. Strong leadership and foresight by the company’s founder and chairman, Dottore Vittorio Merloni, and well-timed acquisitions of competitors, had been critical to this success. The company’s flexible organization structure had allowed for successful integration of acquisitions into Indesit’s existing brand portfolio. But many challenges remained for CEO Marco Milani, who was appointed in 2004 amid tough competitive conditions. An engineer by training, Milani had spent most of his career at Merloni Elettrodomestici. As such, he had seen its evolution first-hand. The company had been successful as the demand for household appliances expanded during the 1970s and 1980s, but in 2005 product penetration in Western Europe hovered around 100 percent for some appliances, inhibiting growth. Indesit’s acquisition of Stinol, the leading Russian refrigerator manufacturer, and production facilities in Russia and Poland had given Indesit a considerable first-mover advantage in the emerging markets of Eastern Europe and Russia, but it was uncertain for how long that advantage would last. And low-cost competitors based in Asia were a potential threat. Asia presented substantial opportunities (and risks) with its growing consumer demand for household appliances. However, entering the Asian market would entail a significant shift in corporate strategy. In addition, the company had only a small presence in the large U.S. market, which was dominated by Whirlpool, GE, and Maytag. In this competitive environment, Milani was faced with difficult questions: Should Indesit adopt a global strategy towards the appliance market or continue with its successful European-focused strategy? Would a global strategy give Indesit a stronger position against competitors such as Whirlpool, Electrolux, and LGE, whose business was more global? If so, could Indesit expand beyond Europe without stretching its resources?
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