Indesit Strategic Analysis: Europe vs. Global Expansion

Indesit's Competitive Advantages

Indesit has a number of sources of competitive advantage. It has a brand that is widely recognized in Europe, supported by strong distribution channels and a good reputation among consumers. The company has a capable executive team that was able to run the company without incident when CEO Milani was injured in a motorcycle accident. The company's products are generally popular — for example, the Aqualtis washing machine challenged the company's factories to keep up with demand. Indesit, by virtue of its manufacturing and supply chain strategies, has also been able to undercut the industry leaders, which gives it the ability to succeed in markets around the periphery of Europe, where consumers are significantly less likely to afford premium brands relative to those in Europe's most developed economies.

Some of these advantages are transferable to a global context, but some are not. Brand recognition and distribution networks are local advantages that can help Indesit fend off competition from Arcelik, Haier, and other new entrants; however, the absence of distributors or brand recognition outside Europe will make it more difficult for Indesit to compete against established players in those markets. Globalization was providing strong growth opportunities for many of Indesit's competitors, and Indesit was at a competitive disadvantage by not focusing on global growth as well. There was also a trend toward smaller European companies exporting early in their existence, before they had fully exploited their domestic markets (Moen, 2002).

Thus, leaders need to understand which advantages in the local market will translate to the global market. Indesit has several that should work. There are a number of strategies to help firms globalize, including building a globalized production network, even when that results in some knowledge transfer. For Indesit, knowledge is not necessarily its primary strength, so allowing for some knowledge diffusion in order to lower production costs and generate opportunities to enter new markets is a strategy that should hold considerable appeal (Ernst & Kim, 2001).

Key Strategic Issues and Priorities

The issues at the center of this case are: the choice between pushing for market leadership in Europe or going global — which management appears to have framed as mutually exclusive options — the German market challenge, the emergence of a new competitor from Turkey, and what to do about the company's marketing capabilities.

In a sense, many of these issues are interconnected, and it may be a mistake to prioritize them as though they are entirely separate. Improving marketing will support whatever the company chooses to do about the Europe-vs.-global question. Any incremental success in Germany will be specifically tied to whether the company wants to pursue more growth in Europe, given that Germany is the largest market in Europe and Indesit is underrepresented there. Milani has also identified the brands as a focus area, but this too will support whichever strategy he chooses to pursue. Lastly, the Turkish company Arcelik is threatening Indesit by entering Europe, and how much Indesit cares about that threat will depend on how much importance it places on its European position.

Thus, the overarching decision between a regional and a global strategy is the key to all other strategic questions. Milani needs to answer that question first, and when he does, the other issues will fall into place. That makes this the most important strategic question facing the company. Many firms have become very large with regional strategies, so there is something to be said for playing to one's strengths and staying within a familiar region (Rugman & Verbeke, 2004). If the company chooses to focus on Europe, it will need to address both the German market and the threat posed by new entrants seeking to gain share there. Defending Europe will never be easy, but it may be more achievable for Indesit than building itself into a multinational company from scratch.

References

Ernst, D. & Kim, L. (2001). Global production networks, knowledge diffusion, and local capability formation: A conceptual framework. Nelson & Winter Conference, Aalborg, Denmark.

Houston, M., Ratneshwar, S., Ricci, L., & Malter, A. (2010). Dynamic strategic goal-setting: Theory and initial evidence. Review of Marketing Research. ISSN: 1548-6435.

Moen, O. (2002). The born globals: A new generation of small European exporters. International Marketing Review, 19(2/3), 156–172.

Porter, M. (2008). The five competitive forces that shape strategy. Harvard Business Review. Retrieved from https://hbr.org/2008/01/the-five-competitive-forces-that-shape-strategy

Rugman, A. & Verbeke, A. (2004). A perspective on regional and global strategies of multinational enterprise. Journal of International Business Studies, 35, 3–18.