MG514 Managerial Economics v 2.0

Project Submission The Feasibility Report presented before you will summarize two firms, the Whirlpool Corporation and General Electric Company detailing the industries, products, supply and demand, scope of production, cost structure, market condition impact and performance in which the industry can operate optimally.
In regards to the hypothetical firm that has decided to set up a production plant. This report will explore the various aspects of the proposed project and a recommendation if whether the project is feasible. The Whirlpool Corporation and General Electric Company are in the industry associated in the manufacturing consumer durable “white goods” (Thefreedictionary.com, 2012). Whirlpool and General Electric are common household appliance brands and one of the products that every household carries is the typical standard household refrigerator or other derivative designs. The prevalent demand and supply structure in the industry of consumer durable white goods is that the global major appliance industry is expected to record close to 4% yearly growth in demand through 2015 to reach a volume of 400 million units. The United States white goods market is witnessing recovery due to recovery in the wider economy. Demand is expected to come from housing market recovery in 2015, and also because consumers are beginning to upgrade to superior equipment as income levels rise (Reportlinker.com, 2012). Shipments of refrigerators represented the largest share of the appliance industry and refrigerator-freezers were the most popular major appliance in the world. The total value of industry shipments in 2008 was $5.1 billion, down from the previous year's total of $5.74 billion and the 2006 total of $6.15 billion. The industry reported estimated revenues of $3.7 billion in 2010, a reflection of the struggling economy. There are an estimated 60 million units manufactured each year and some 500 million refrigerator-freezers in use worldwide. The industry was considered one of the most efficient in the country, leaving little room for foreign products to take any significant market share. In addition, prices of U.S. refrigerators and freezers remained reasonable. Several stylish European appliances found a small market in the United States, but they were unlikely to take any significant market share because of their expense (Business.highbeam.com, 2012). The prevalent demand and supply structure in the industry is that Whirlpool Corporation and General Electric Company are leaders in white goods manufacturing. The demand is there to expand its market share demographically in the domestic and international market. The industry also has an environmental focus on Green Marketing Eco-Friendly (Referenceforbusiness.com, 2012) as well a reputable brand name reputation. The market forms in which the industry can operate optimally, the industry operates optimally in all locations worldwide. The consumer wants a good, reputable durable appliance such as a refrigerator, and both firms offer that. The scope of production and techniques used for in production for Whirlpool Corporation and General Electric Company encompassed the following areas: 1. Materials, planning for procurement of raw materials, components and spare parts in the right quantities and specifications at the right time, from the right source and at the right price. 2. Purchasing, storage, inventory control, standardization, variety reduction, value analysis and inspection are the other activities associated with materials. 3. Methods, choosing the best method of processing from several alternatives. 4. Machines and equipments, manufacturing methods related to production facilities available in the production system; such as planning, capacity planning, allocation and utilization of plant and equipments / machines. An equipment replacement policy, maintenance policy and maintenance schedules, tools manufacture and maintenance of tools. 5. Manpower, planning for manpower (labor, supervisory and managerial levels) with appropriate skills and expertise. 6. Routing, determination flow of work, material handling in the plant and sequence of operations or processing steps (shop layout and plant layout temporary storage locations for raw materials, components and semi-finished goods and of materials handling systems). 7. Estimation of operation times leading to fixation of performance standards both for workers and machines. 8. Loading and scheduling, proper allocation of jobs to machines in conjunction with routing and with due consideration for capacity of machines and priority for jobs in order to utilize the machines to the maximum possible extent. 9. Scheduling of parts, sub-assemblies and finished products are completed as required by delivery dates. This also provides a time table of manufacturing activities ensures a balanced load on all work centers and ensures even flow of work through the manufacturing facilities. 10. Dispatching is the execution of the planning functions, release of orders and instructions for the starting of production in accordance with the route-sheets and schedule charts. 11. Expediting and following up progress as well provides an efficient feed-back and prompt review of targets and schedules. 12. Inspection and maintenance of quality in production and of evaluating the efficiency of the processes, methods and labor so that improvements can be made to achieve the quality standards set by product design. 13. Evaluating objective to improve performance of machines, processes and labor. 14. Cost control is measured by manufacturing wastage reduction, value analysis, inventory control and efficient utilization of all resources. The cost structure required to produce the product varied from firm, for General Electric Company refer to annual report 2011 p. 72 (http://www.ge.com/ar2011/pdf/GE_AR11_EntireReport.pdf) and for Whirlpool Corporation refer to annual report 2011 p. 44 (http://www.whirlpoolcorp.com/2011Annual/downloads/WHR2011AR.pdf). The prevailing market conditions and the impact on the Whirlpool Corporation was forced to operate under uncertain and volatile global conditions for most of 2011, experiencing higher material costs, recessionary demand levels in developed markets and slowing growth in emerging markets. For the Whirlpool Corporation to succeed in that environment, it announced aggressive actions to improve overall operating performance and financial condition, including cost-based price increases across all markets and plans to reduce cost structure and production capacity, primarily in North America (whirlpoolcorp.com, 2012). General Electric Company and its industrial peers began a long-term trend to outsource their supply chain to other companies. This made sense in an era when labor was expensive and material was cheap. Today, material costs are more important, so control measures were utilized in the supply chain to achieve long-term productivity. To control product cost, leverage was required of both human and technical innovation. Human innovation comes in the form of lean manufacturing. One team mentality was imposed to drive down manufacturing hours. In 2010, General Electric Company (GE) introduced the GE Advantage to drive operating results (GE.com, 2012). Performance with reference to sales and profits for both firms are: General Electric Company Product Services were $41.9 billion in 2011, an increase of 14% compared with 2010, and operating profit from product services was $11.8 billion in 2011, an increase of 15% compared to 2010. Both the sales and operating profit of product services increases were at Energy Infrastructure, Aviation, Transportation and Healthcare (GE.com, 2012). Whirlpool Corporation is the world’s leading manufacturer of major home appliances with revenues of approximately $19 billion and net earnings available to Whirlpool of $390 million in 2011. All leading portfolio brands includes: Whirlpool, Maytag, Kitchen Aid, Brastemp and Consul , each having annual revenues exceeding a $ 1billion (Whirlpoolcorp, 2012). These two firms were chosen was because of its stability of necessity of a white product to be utilized in just about every dwelling in a global scale. The firms have always introduced and produced durable consumer goods that consumers continue to purchase based on reputation and durability. Finally, the firms are well established with extensive history of production, manufacturing and innovation on a global scale. The methodology utilized in collection of relevant data on the Whirlpool Corporation and General Electric Company was based on reviewing the provided annual reports that are furnished to shareholders to describe their operations and financial conditions. The report is composed by a combination of graphics, photos and an accompanying narrative, all of which chronicle the company's activities over the past year. The back part of the report contains detailed financial and operational information. In extrapolating and interpreting the data, as an MBA graduate student I utilized and relied on the references from Managerial Economics: Economics Tools For Today's Decision Makers. (6th ed.) (Keat & Young, 2009). I respectfully submit this feasibility report with my upmost confidence in my graduate studies. As the manager and author of this study, it is my final recommendations and solution for the firm based on the following: The firm has decided to set up a production plant, for the production plant project to be feasible, the firm must incorporate commercially viable production technique given its superiority in terms of quality, cost and production rate as compared to the scope of production of Whirlpool Corporation and General Electric Company. This study has investigated and assessed the market demand or marketability of potential products, as such like the white goods produced by Whirlpool Corporation and General Electric Company. It is recommended that these factors be assessed. Market demand should be quantified and analyzed against production and set-up costs in order to establish the optimal scale of production. The firms production plan projects is deemed feasible if the recommendations are considered are designed to produce substantial economies of scale and result in decrease in the number of competitors in the industry. In conclusion, this study has brought forth the comparison of two firms that are well established and operating optimally. The firm’s decision to set up a production plant has been considered and recommendations with solutions have been offered to the firm to consider in its decision to set up a production plant.

Reference
Business.highbeam.com (2012). Household Refrigerators and Home and Farm Freezers. Retrieved from http://business.highbeam.com/industry-reports/equipment/household-refrigerators-home-farm-freezers
GE.com (2012). GE annual report 2011. Retrieved from http://www.ge.com/ar2011/#!section=ge-2011-annual-report
Keat, P. G. & Young, P. K. Y. (2009). Managerial Economics: Economics Tools For Today's Decision Makers. (6th ed.). Upper Saddle River, NJ: Pearson Education, Inc.
Referenceforbusiness.com (2012). Green Marketing. Retrieved from http://www.referenceforbusiness.com/encyclopedia/Gov-Inc/Green-Marketing.html
Reportlinker.com (2012). Global Major Appliance Industry - Major Appliance Industry: Market Research Reports, Statistics and Analysis. Retrieved from http://www.reportlinker.com/ci02164/Major-Appliance.html
Thefreedictionary.com (2012). White Goods. Retrieved from http://www.thefreedictionary.com/white+goods
Whirlpoolcorp.com (2012). Whirlpool 2011 Annual Report. Retrieved from http://www.whirlpoolcorp.com/2011Annual/downloads/WHR2011AR.pdf