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This sample is an excerpt from my portion of contributions to a team based case study to update Whirlpool's marketing strategy. I was tasked to deliver projected financial results. The text is my written script for the presentation.
Greetings, this is Nick Smith, and we are Team 4 discussing Part 2 of our Final case analysis of Whirlpool and this our assessment of the financial results
Whirlpool’s current financials exemplify the company’s commitment to cost leadership. Year over year since 2018, Whirlpool has successfully reduced expenses annually with a notable stated company standard in place to cap R&D costs at 3% of revenue. We can see there is a historical downward trend in revenue with a notable uptick for the 2021 fiscal year. The Cost of Goods Sold for the company has averaged 81.5% over this period. This is well above industry standards in comparison with successful competitors LG at 73%, Samsung at 59.5%, and Haier at 69% COGS. Meanwhile Whirlpool’s operating expenses have followed a cost reduction trend. The company’s R&D has consistently stayed under its 3% benchmark averaging 2.5% annually. The remaining SG&A costs have consistently been 7.5% of revenue.
Whirlpool reports an assortment of non-regular expenses on its 10-K. We have bucketed these into an “Other” category for this report. These include Impairment of Goodwill, Gains on sale and disposal of businesses, and restructuring costs. And so once we back out depreciation and Amortization from this, we find an EBITDA that lives around 10-12% with a notable exception for 2018 where Whirlpool expensed ~$750M in Impairment of Goodwill
However, it is vital that Whirlpool’s financial structure going forward models an approach to position itself to succeed and hold onto its customer base as we have reviewed in our strategy thus far.
Notable changes to Whirlpool’s financial model include a reduction in Cost of Goods as indicated and consistent with the reduction in brand portfolio to Whirlpool and JennAir. Reducing brands reduces manufacturing costs and allows the company to intensify its focus on concentrated manufacturing efforts and distribution channels. A modest and reasonable decrease in COGS frees up capital to invest in product development to match consumer wants and needs in the modern connected home. Here, We have broken through Whirlpool’s 3% R&D glass ceiling to an allocated 3.25% for R&D annually (over its 2.5% actual R&D expense) with an additional .75% in 2022 to help kickoff the campaign. SG&A remains the same at 7.5%. Assumptions for "Other" costs are averages of the previous 4 actual periods. Depreciation and Amortization is taken off at an averaged rate of 9% from those same periods and flatlined for a conservative assessment of profitability. All in all, these efforts place Whirlpool at an expected EBITDA while improving overall product quality.
Reviewing projected revenue we expect Whirlpool to gain market share to fuel its revenue growth. In this model we apply a broad revenue range to allow for uncertainty with a low point annualized growth at .5% and an optimistic growth at 10% annually on the high end.
And now looking at Whirlpool’s projected profitability through EBITDA, we apply the expense model we discussed in our forecast and applied our top and bottom revenue ranges to that forecast to find this outcome. While the actual numbers will certainly vary, the key indicator to take away from here is that the percentages generally remain constant. This will allow Whirlpool to operate with a degree of certainty that the company will have a comparable expected profitability with these changes to its expense model.
We expect Whirlpool to gain much of its revenue by acquisition of market share through competitive advantage gained by the changes we have discussed here. The expectation is that there will continue to be laggards in the market late in adopting developments and trends in technology. And Whirlpool’s product initiatives combined with its brand equity will thereby help the company gain the market share we expect.
In conclusion we expect Whirlpool to have positive change from this strategy. The updated mission statement trickling down into revised marketing strategies will help Whirlpool deliver desirable results with expected growth in the appliance market in the coming years.
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