Custom «Whirlpool Corporation » Essay Paper Sample
Would you have recommended a Greenfield investment strategy for Whirlpool Slovakia rather than a joint venture?
Whirlpool Corporation is situated in Michigan, USA. It is a firm that manufactures home appliances such as washing machines and more. It has a subsidiary firm by the name Whirlpool Europe B.V which is primarily based in the European Continent. On the other hand, Tatramat is a firm that is situated in Poprad, Slovakia. It specializes in the manufacture of washing machines and also boilers. In the year Nineteen hundred and ninety two (1992), Whirlpool Europe B.V entered into a joint venture with Tatramat. In the tenth month (October) of the year 1996, Whirlpool purchased the outstanding shares from Tatramat (Ferencikova and Pucik, 1998).
A Greenfield investment strategy is defined as the investment in terms of tangible assets by a multinational corporation in a particular country. It is a kind of an investment that is usually preferred instead of other forms of investment such as mergers. In particular, this form of investment is characterized by the construction of novel buildings and installation of machines which will subsequently be used to manufacture goods. I would not have recommended a Greenfield investment strategy for Whirlpool Slovakia. I attribute this to the fact that at the venture changed the manner of thinking of its employees and therefore the working conditions improved considerably. This resulted into improved output. A joint venture would have permitted Whirlpool to realize synergies. This is due to the fact that the market structure would not have altered because both Whirlpool and Tatramat would have stayed autonomous (Nocke and Yeaple, 2007).
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Would you have recommended a direct acquisition of Tatramat for Whirlpool rather than a joint venture?
An acquisition can be defined as the takeover of 1 company by a different company either partially or completely through purchase of ownership. Under normal circumstances, a company that is enthusiastic on acquiring a different company may possibly pay more money so as to finalize the acquisition transaction(s). According to me, I would have recommended Whirlpool to enter into a joint venture with Tatramat. This is because it would have enabled it to set up a completely owned subsidiary. The second reason as to why I would have recommended Whirlpool to enter into a joint venture as opposed to the direct acquisition is that normally, when an overseas company acquires a local company, fear grips in. This is due to the fact that Whirlpool would have 'stripped' Tatramat of its technology. Consequently, it is believed that it would have exported it to its headquarters in Michigan, USA (Nocke and Yeaple, 2007).
How would you assess the control versus risk trade-off by Whirlpool?
The risk trade-off can be defined as the theory in which prospective return escalates with an upsurge in risk. This means that low levels of uncertainty are linked to low prospective returns. As far as high potential levels of uncertainty are concerned, they are linked to high prospective returns. This theory further states that invested money may possibly turn into higher profits under one condition. That is the money ought to be have a likelihood of being lost. Whirlpool must be conscious of its risk tolerance whilst selecting investments for its portfolio. The company took the risk of purchasing Tatramat, relocating its headquarters' and subsequently changing its name to Whirlpool Slovakia in 1996. The process of taking risk by Whirlpool is the price of achieving returns. The threshold is that if a company desires to make profit there is no way that it can avoid risks. The takeover of Tatramat by Whirlpool generates trade-offs for the preference between Foreign Direct Investment Modes (Markusen, 2002).