Written Strategic Audit: For the 1993 Maytag Corporation Case

Written Strategic Audit: For the 1993 Maytag Corporation Case

Prepared by: Salim Mohamed K (46) Krishna Kumar (24) Shyamjith (59)  Nishi (37)

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An important part of business strategy is concerned with ensuring that these resources and competencies are understood and evaluated - a process that is often known as a "Strategic Audit". The process of conducting a strategic audit can be summarized into the following stages:

(1)

Resource Audit:

(2)

Value Chain Ch ain Analysis:

(3)

Core Competence Analysis:

(4)

Performance Analysis

(5)

Portfolio Analysis:

(6)

SWOT Analysis:

(1) Resource Audit: 

The resource audit identifies the resources available to a  business. Some of these can be owned (e.g. plant and machinery, trademarks, retail outlets) whereas other resources can be obtained through partnerships, joint ventures or simply supplier arrangements with other businesses.

(2) Value Chain Analysis: 

(1) Primary Activities - those that are directly concerned with creating and delivering a product (e.g. component assembly);

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(2) Support Activities, which whilst they are not directly involved in production, may increase effectiveness or efficiency (e.g. human resource management). It is rare for a  business to undertake all primary and support activities.

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Value Chain Analysis is one way of identifying which

activities are best undertaken by a business and which are best  provided by others ("outsourced").

(3) Core Competence Analysis: 

Core competencies are those capabilities that are critical to a  business achieving competitive advantage. The starting point for analyzing core competencies is recognizing that competition  between businesses is as much a race for competence mastery as it is for market position and market power.

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Senior management cannot focus on all activities of a business and the competencies required to undertake them. So the goal is for management to focus attention on competencies that really affect competitive advantage.

(4) Performance Analysis 

The resource audit, value chain analysis and core competence analysis help to define the strategic capabilities of a business. After completing such analysis, questions that can be asked that evaluate the overall performance of the business. These questions include:

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- How have the resources deployed in the business changed over time; this is "historical analysis"

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- How do the resources and capabilities of the business compare with others in the industry - "industry norm analysis"

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-  How do the resources and capabilities of the business compare with

"best-in-class"

-

wherever

that

is

to

be

found-

"benchmarking" 

- How has the financial performance of the business changed over time and how does it compare with key competitors and the industry as a whole? - "ratio analysis"

(5) Portfolio Analysis: 

Portfolio Analysis analyses the overall balance  of the strategic  business units of a business. Most large businesses have operations in more than one market segment, and often in different geographical markets. Larger, diversified groups often have several divisions (each containing many business units) operating in quite distinct industries.

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An important objective of a strategic audit is to ensure that the  business portfolio is strong and that business units requiring investment and management attention are highlighted. This is important - a business should always consider which markets are most attractive and which business units have the potential to achieve advantage in the most attractive markets.

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Traditionally, two analytical models have been widely used to undertake portfolio analysis:

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- The Boston Consulting Group Portfolio Matrix (the "Boston Box");

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- The McKinsey/General Electric Growth Share Matrix

(6) SWOT Analysis: 

SWOT is an abbreviation for Strengths, Weaknesses, Opportunities and Threats. SWOT analysis is an important tool for auditing the overall strategic position of a business and its environment.

A. Current Performance Poor financials, high debt load, first losses since 1920s,  price/earnings ratio negative.  First loss since 1920s  Laid off 4,500 employees at Magic chef.  Hoover Europe still showing losses. B. Strategic Posture 

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1.Mission Developed in 1989 for the Maytag company: ―To provide our customers with products of unsurpassed performance that last longer, need fewer repairs, and are produced at the lowest possible cost.‖ Updated in 1991: ‖Our Collective mission is world class quality.‖ Expands Maytag’s belief in product quality to all aspects of operations.

  2.Objectives 

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To be profitability leader in industry for every product line Maytag manufactures.‖  Selected profitability rather than market share. ―To  be number one in total customer satisfaction. ‖ Doesn’t say how to measure satisfaction. ―To  grow the North American appliance business and  become the third largest appliance manufacturer (in unit sales) in North America.‖ To increase profitable market share growth in North American appliance and floor care business, 6.5% return on sales, 10% return on assets, 20% return on equity, beat competition in satisfying customers, dealers, builder and endorser, move into third place in total units shipped per year. Nicely quantified objectives. “

3. Strategies 

Global growth through acquisition and alliance with BoschSiemens.

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Differentiate brand names for competitive advantage. Create synergy between companies, product improvement, investment in plant and equipment.

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4. Policies   

Cost reduction is secondary to high quality Promotion from within Slow but sure R&D. Maytag slow to respond to change in market.

A.

Board of Directors 1. 2. 3.

B.

Fourteen members — eleven are outsiders Well respected Americans, most on board since 1986 or earlier No international or marketing backgrounds

Top management 1. 2. 3. 4.

Top management promoted from within Maytag company Very experienced in the industry Responsible for current situation May be too practical for global industry. May need new  blood.

A.

 Natural environment 1. 2.

B.

Societal environment 1. 2. 3. 4.

C.

Growing water scarcity Energy availability a growing problem Economic Technological Political — Legal Socio cultural

Task environment

A. B. C.

Corporate structure Corporate culture Corporate resources 1. 2. 3. 4. 5. 6.

Marketing Finance R&D Operation Human resources Information systems

A.

Situational analysis(SWOT) 1.

Strengths a.

Quality Maytag culture

 b.

Maytag well-known and respected brand

c.

Hoover’s international orientation

d.

Core competencies in process R&D and manufacturing.

2.

Weakness a.

Lacks financial resources of competitors

 b.

Poor global positioning.

c.

Product R&D and customers service innovation areas of serious weakness

d.

Dependent on small dealers

e.

Marketing needs improvement.

3.

Opportunities

a.  b. c.

4.

Economic integration of European community Demographic favor quality Trend to superstores

Threats

a.  b. c.

Trend to superstores Aggressive rivals –  Whirlpool and Electrolux Japanese appliance companies –  new entrant?

B. Review of current mission and objectives a.  b.

Current mission appears appropriate Some of the objectives are really goals and need to be quantified and given time horizons.

A.

Strategic Alternatives 1. 2. 3.

B.

Growth through concentrate diversification Pause strategy Retrenchment

Recommended strategy 1. Recommend pause strategy, at least for a year, so Maytag can get on its European operation and consolidate its companies in a more synergistic way. 2. Maytag quality must be maintained, and continued shortage of operating capital will take its toll, so investment must be made in R&D.

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The only way to increase profitability in North America is to further involve Maytag with the superstore retailers; sure to anger the independent dealers, but necessary for Maytag to complete. Board members with more global business experience should be recruited, with an eye towards the future, especially with expertise in Asia & Latin America R&D needs to be improved, as does marketing, to get new product online quickly.

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MIS need to be developed for speedier evaluation and control. The acquired companies do not all shares the Midwestern work ethic or the Maytag corporation culture, and Maytag’s managers must inculcate these values into the employees of all acquires companies Systems should be developed to decide if the size and location of Maytag manufacturing plants is still correct and to plan for the future.