Whirlpool Europe Harvard Case Solution & Analysis

Q#01:

There are several benefits as well as costs that are attached to the Enterprise Resource Planning system. It can be mentioned that Whirlpool Corporation was considered to be the market leader in the home appliance industry. The reason behind its success was also its vast experience of almost ten years in terms of selling to the European market, which resulted in its increased market share by almost 13%.

Moreover, after undertaking this project, there is a possibility that this venture will result in the improvements of operating effectiveness and as well as the operating efficiency in the sales and marketing of Whirlpool. This acquisition will also result in the improvement of logistics and operations of Whirpool, respectively.

On the other hand, by taking into account the after-tax cash flows as per the exhibits, it can be seen that the cash flows are showing an increasing trend through the fiscal year of 2007. Hence, in the fiscal year 2000, the cash flows were $196,683 and the after-6 tax cash flows in 2007 are $1,284,971.

Apart from that, there are also substantial costs that are attached to this project because in order to earn sufficient amount of returns, there is a need to incur higher initial expenditure. Furthermore, if Whirlpool will take into consideration this Project Atlantic, then it will enable Whirlpool to serve its consumer market quite effectively.

The other major benefit of this project will be to increase the existing product availability by 94% and this project also seeks to determine the increased gross margins by a certain percentage once the implementation reaches the completion stage. Despite this, there are several assumptions regarding this Enterprise Resource Planning under which the first assumption is regarding the increase in the revenue and gross margin, respectively.

On the other hand, the projections also make an assumption that the undertaking of Enterprise Resource Planning will bring changes in the process and these changes will enable Whirlpool to realize an increase in the unit sales that will be equal to 25%. This 25% is based upon the improvements in the product availability.

Moreover, it is also assumed that the Enterprise Resource Planning system will also make Whirlpool to bring transparency and efficiency in its supply chain. In addition, this will result in the elimination of reserved and obsoleted units, which will ultimately result in the reduction of inventory holding costs.

Under the current information and the information system, Whirlpool was having difficulties therefore,by integrating its system with the suppliers; this will enable them to predict the demand for the required level of inventory. Hence, the Enterprise Resource Planning had the capability of taking into account these considerations.

Moreover, if Whirlpool goes with this project, then it will allow Enterprise Resource Planning system to develop the products based on the specific orders from the customers. Overall, by taking account of the above factors as well as the present value of cash flows and the positive net present value, it is worth mentioning that the benefits and costs form this project seems to be reasonable.

Q#02:

As per the exhibits, the calculations regarding the cash flows have been performed. Hence, the after-tax cash flows in the year 1999 are $90,180 and the cash flows obtained in the year 2007 are $1,284,971 but before adding terminal value. Despite this, these cash flows have been arrived after taking an account of the total cash inflows and as well as the cash outflows.

The income tax rate that has been used by Whirlpool in order to evaluate the after-tax cash flows of this venture in order to determine the income tax expense is almost 40%. Furthermore, after netting the amounts of the total cash inflows and cash outflows, the operating cash flows value has have been derived.

Hence, after incorporating the terminal value of $14,739,892,the present value of cash flows in the fiscal year 2007 is $16,024,862 regarding the proposed Enterprise Resource Planning (ERP). Thus, since the fiscal year 2000,this is showing an increase of almost 80.00%. After taking into account these present values, the discount rate of almost 9.00% has been applied to evaluate NPV.

Q#03:

There are certain factors on which the decision to incorporate the terminal value beyond 2007 is based. The most crucial factor that can be considered is the continuation of the Venture Atlantic beyond the fiscal year 2007. Moreover, the cash flows that are having a relation to this project will merely take place beyond 2007 only if the company has not made any plans regarding the abandonment of this project.................................

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