Strategic Alliance

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Strategic Alliance – Whirlpool Corporation and Inland Steel CASE Faced with intense competition, increasing expectations from customers, reduced product life cycles, and localized geographic markets, Whirlpool Corporation (a Fortune 500 manufacturer of appliances) realized that the need to achieve a competitive advantage from its sourcing and material efforts was greater than ever. Part of the strategy to achieve this advantage involved pursuing an alliance with a key steel supplier. Steel is a major component used across all of the company’s finished products (such as washing machines, dishwashers, refrigerators, and others). The purchasing managers at Whirlpool faced a number of questions with regard to their purchasing strategy:…show more content…
The strategy of forming a formal buyer-supplier partnership was a relatively new one. As these two companies explored the idea, it became obvious that a complementary common strategic vision existed between the two companies, which could make such a partnership a reality. This common vision was based on the fact that the Whirlpool Corporation needed to sustain a competitive advantage and support its direct customer relationships, while Inland needed to manage the transition inherent in a customer-focused market strategy. Thus, Whirlpool Corporation sought to work with Inland Steel to realize reduced costs vis-à-vis the competition, and Inland sought to obtain a major share of Whirlpool’s steel contract. While this initial concept seemed straightforward, it required almost seven years to make it a reality. The vision was made a reality by first understanding that reducing cost did not simply mean lowering the price paid per ton of steel, but rather to take cost out of the business processes, which takes much more time. Linkages throughout every step of the value chain, not just between purchasing and sales, had to be established (See Exhibit 1). The end goal became to maximize profitability at both companies, while not relying on explicit formulas and equations formalized in contract form. Along the way, the companies encountered a number of obstacles. However, as the vice president of
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