258-Whirlpool and Electrolux Blink

The home appliance market has been a difficult place to compete during several periods over the last thirty years. It is tough again today. Sales of large appliances have fallen steadily since 2007. Competition is intensifying with the pressure of the South Korean competitors, LG Electronics and Samsung Electronics, on Whirlpool Corp and Electrolux AB. Whirlpool and Electrolux are suffering from rising costs for steel, copper, plastics and other raw materials. To offset these cost increases, the two companies plan price increases of 8% to 10% in the spring.

The problem: the Koreans aren’t playing ball. The two South Korean firms are pricing aggressively and have been doing so since Thanksgiving 2010.

The South Koreans are formidable competitors. At one time, LG was known as Lucky Goldstar, a seller of low-end, cheaply made, products. Today, it has a much better brand name and sells quality products. Samsung does as well. It is a leader in the large screen TV market. The products that the South Korean companies are pricing aggressively are not the low-end products. They are the mainstream, heart-of-the-market, products.

The domestic U.S. market is slow growing. So is the market in the rest of the world. The North American market is growing 2% to 3% a year. Europe is growing 2% to 4%, while Latin American and Asia grow in the 5% to 10% range. Large appliance companies will have no trouble supplying all the capacity the market needs at these demand growth rates. The industry is likely to have excess capacity for the foreseeable future.

If the two Western competitors institute their price increases without the two South Korean companies in a lock-step march, they will be in a Leader’s Trap. A Leader’s Trap occurs when one or more of the leading companies in an industry holds its prices high in the mistaken belief that customers will stay loyal despite the lower prices of competition. Leader’s Traps rarely end well. Either the Western competitors will lose market share or they will ultimately rescind their price premiums.

These four giant large appliance competitors are peers of one another. The only way to stop the Koreans from discounting against the Western competitors is to have a cost structure that scares them out of the discounts. The discounting competitors have to see that their discounts will only cost them margins because the other peer competitors in the market will match their low prices since they have equally low cost structures.

Posted 3/23/11


The North American large appliance market is no longer hostile and has good odds of staying that way.

Prices are high in 2022 due both to Covid induced parts shortages and to significant increases in demand. The two large Korean manufacturers active in the North American market, Samsung and LG, tend to be the industry’s price setters. They set the prices and others either match their prices or shave a bit against them. Both manufacturers are highly respected for their quality, style and reliability.

The industry has seen a good deal of consolidation through acquisitions. Whirlpool and Electrolux have been particularly aggressive acquirers. In 2016, the Haier Group acquired GE appliances and immediately became a major player in the North American market.  See HERE and HERE for some perspective on acquisitions.

In 2022, the top five large appliance suppliers to the North American market attracted over 75% of the industry’s product revenues.  With that concentration among the top suppliers, the industry stands a good chance of avoiding future hostility events.  These large competitors are unlikely at this stage of the industry’s evolution to fail their customers on Function, Reliability, Convenience, or Price.  Share will be very difficult to shift because a change in share depends so much on a competitor’s failure to meet customer expectations. See HERE for some perspective on the importance of failure in changes in market share and HERE for some thoughts on the end of hostility.




If you face a competitive marketplace, read these blogs. We wrote them to help you make better decisions on segments, products, prices and costs based on the experience of companies in over 85 competitive industries. Much of the world suffered a severe recession from 2008 to 2011. During that time, we wrote more than 270 blogs using publicly available information and our Strategystreet system to project what would happen in various companies and industries who were living in those hostile environments. In 2022, we updated each of these blogs to describe what later took place. You can use these updated blogs to see how the Strategystreet system works and how it can lead you to better decisions.