Company strategy

At a time when life is really tough for manufacturers in the developed world, Miele’s strategy for survival is to break almost all the rules. The German company, a global leader in high-quality domestic appliances such as washing machines and vacuum cleaners, is known for its high manufacturing standards and its refusal to move down-market and compete on price.

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Miele bases nearly all its manufacturing in high-cost Germany. Rather than outsource to low-cost suppliers, it makes 4 million electric motors a year in its own plant. Keeping the manufacturing base in the company’s own plant is essential to maintaining its quality standards. Sales last year were 2.3 billion euros.

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The company sells appliances ranging from dishwashers to coffee machines, at a price which is up to 70% higher than the price of the competitors. It spends 12% of the revenue on product development. Miele’s attention to detail is legendary. Ovens are tested using machines that open and shut their doors 60,000 times to simulate the use they will have in the kitchens.

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Even though Miele’s manufacturing costs are higher than those of its competitors, these are justified by its ability to produce appliances that people want to buy despite their high prices. About 50% of the costs come from components it makes itself compared with 30 % for other companies. But most Miele’s appliances will work for 20 years, which is longer than their competitors’ products. This is linked to the reliability of individual parts.

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Miele once had a letter from an old lady in Eastern Germany. She said she didn’t have much money bur she was ready to pay 50% more for a Miele washing machine because she knew it would last for the rest of her life. Such feelings are common. The company has built a tremendous loyalty among consumers who know that the brand stands for quality.

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Miele faces a tough few years as it tries not only to keep ahead of competitors at the top end of the white goods market but also to interest new generations of cost-conscious consumers in buying machines that are the equivalent of luxury Swiss watches, only in terms of kitchens.

III. Tick the factors below which contributed to Miele’s success.

1. It has excellent quality control in its factories.

2. It changes its position in the market according to demand and fashions.

3. Its prices are very competitive.

4. It uses a lot of outside suppliers.

5. It spends more money than other manufacturers on creating new products.

6. It does a lot of testing.

7. It focuses on every detail of production.

8. Each component lasts a long time.