Cross - Border Strategy

By Ruben Mata  

Manufacturing strategies (including plant location decisions) in the major household appliance sector are influenced by transportation costs, national consumer preferences, availability and cost of skilled workers, proximity of suppliers for components and raw materials, quality of transportation and manufacturing infrastructure, availability of support services, and local laws and practices regarding foreign investment. For the most part, producers make appliances targeted to match the consumer preferences of their national or regional markets. The U.S. and Canadian markets (and industries) are typically oriented towards large appliances with special features. European and Japanese markets and industries are oriented towards high quality, energy-efficient, but smaller appliances. Producers in Mexico, Brazil, Korea, China, and India make entry-level, small-sized appliances in order to keep costs low and maximize the number of people in their national or regional markets that can afford to buy them.

Companies tend to export appliances to markets with similar consumer preferences. For example, appliances made in Korea have a small-but-growing share of the Mexican market, whereas appliances made in Mexico supply markets for appliances in Central America and the Caribbean Basin. Rarely do foreign companies modify their manufacturing lines to produce appliances specifically for the U.S. market. When they do, it is usually in conjunction with an established U.S. producer that is attempting to complement its high-end U.S. production with imports of less-expensive products from countries with lower labor costs. Some Asian and European producers have established production facilities in the United States, Canada, and/or Mexico to supply the North American market. Conversely, most U.S. producers have established plants or joint ventures in Europe, Mexico, Brazil, Australia, and China to make appliances designed for local national or regional markets. In most cases, U.S. appliance firms rely on these countries as a base to export to other countries in their manufacturing regions. U.S. producers continue to export top-of-the-line appliances from the United States to niche markets for these products throughout the world.

U.S. appliance producers have taken different approaches toward investment in foreign production facilities. Both Whirlpool and GE, the two largest domestic appliance firms, have a strong presence in most of the important appliance markets worldwide in addition to their rationalized North American operations. Both firms are known for collaborating on engineering breakthroughs across manufacturing regions and for local purchasing of raw materials and components. While Electrolux services the U.S. and Canadian markets from plants in both countries, it supplies Mexico and other markets in Latin America from plants in Brazil and the European market from its home-base plants in that region. In contrast, Amana has continued to focus primarily on the U.S. market and ...

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