Analyzing Trade Margins in a Competitive Market

Abstract

During recessionary periods of low demand and high levels of competition, corporations must study and become aware of every detail in their business to maximize profitability and reduce the effects of the economic recession. This Senior Individualized Project (SIP) is based on the author’s experience with Whirlpool Corporation during the summer of 2012. His project is based on analyzing Whirlpool's trade partners' margins from selling Whirlpool manufactured products. To maintain anonymity, the six channels, or retailer groups, are referred to as Retailers A, B, C, D, E, and F. The author reviews the structure of the corporation and how relationships with their retailers are managed. He introduces the pricing and negotiation processes during which a retailer's margin on a product is established. The author reviews the drivers of the decision, such as profitability estimates, product line, competition, brand, and channels. He then reviews Whirlpool Corporation's current trade margin strategy for the refrigeration product category, one of Whirlpool's six core categories. Whirlpool believes it can influence trade partners to sell different products depending on the trade margins offered on those products; the author refutes this idea and recommends a strategy for Whirlpool Corporation based on his data.