Marketing Management

Reinhard Zinkann tries to break in to the conversation, but Markus Miele won’t let him. ‘Just let me finish,’ says Mr Miele, a trifle testily. Mr Zinkann shrugs his shoulders, settles back in his chair and waits a few minutes before he gets his say. This interaction between the men – two halves of an unusual but successful partnership in charge of Miele, the family-owned German manufacturer of upmarket domestic appliances – gives some clues as to how they make their collaboration work. The pair – both wearing navy suits and red ties – insist the occasional argument is healthy, and that their respective strengths and weaknesses are complementary. ‘It would be wrong to say we never have an emotional discussion,’ says Mr Zinkann. ‘But if this happens, then it does not take too long before either he or I step in to each other’s office to talk about the matter. We always find a joint solution.’ Aged 50, Mr Zinkann, who has a marketing background, is nine years older than his fellow managing artner and both are great-grandsons of the two men who started the business in 1899. They have followed a family tradition: the management of the company has always been handed down to male heirs of the founders, who run it jointly, making the current incumbents the fourth Miele–Zinkann duo to be in charge. The company, which has a long-standing reputation for quality, remains 51 per cent owned by the Miele family, with 49 per cent belonging to the Zinkanns. Mr Zinkann, the stouter and more relaxed of the two, is expansive to the point of philosophical, on the topic of dishwashers and tumble dryers. In contrast, Mr Miele has the manner and temperament of an engineer, discussing in detail the company’s unashamedly expensive products. He is particularly animated when it comes to the special ‘honeycomb drums’ inside Miele’s washing machines that provide a thin film of water, preventing damage from the clothes rubbing too much against the side. We are talking in the newly opened Miele showroom in central London and surrounded by the company’s latest products. Somewhat grandly, the company calls these places ‘galleries’. There are about 25 of them around the world, where shoppers can not only look at the latest Miele models but also take part in seminars on how to get the best use out of their cookers or washing machines. For a small fee, they can even cook lunch there under the direction of a top chef. Mr Miele describes one such ‘gallery’ in Hong Kong: ‘Upstairs from this [showroom] is a very famous hairdresser. While [women] are having their hair done, we will wash the clothes using one of our achines.’ Such showrooms may sound excessive for a domestic appliance maker, but they make sense if one considers the prices. A top-of-the-range, jumbosized Miele refrigerator, brimming with speciality controls and sensors, sells in the US for more than $7,000 (£4,400, €4,900) or seven times higher than more standard machines. This is due in part to the rigour of the company’s legendary product testing. To check that the cables in Miele’s vacuum cleaners are satisfactory, they are flexed backwards and forwards 100,000 times in the laboratory. Miele – unlike most other domestic appliance makers, such as Whirlpool of the US or Electrolux of Germany – has only one, top-end brand, rather than a number of names standing for different quality or price levels. ‘We put all our power in marketing and engineering into just the one Miele brand,’ says Mr Zinkann. ‘Perhaps in this way we are a bit like the husband or wife in a monogamous marriage.’ Miele’s sales in the year ending June 2009 were €2.8bn, 71 per cent of this coming from outside its home country, where it employs 10,000 of the company’s 16,000 workers. Unlike many of its rivals, who outsource manufacturing to low-cost countries, the company makes many of its own components in its own plants in Germany, even commonplace items such as electric motors. Mr Zinkann says having an integrated view of production and design – with Germany at the centres – enables Miele to make a better product. ‘God creates man with a brain, a heart and a body,’ he says. ‘Of course, you could design a person with a brain, heart and body that all belonged to someone different, but I think it’s better if they all fit with each other.’ The two men say the recession has not hit Miele too badly. While sales in 2008–2009 were slightly down year on year, the company has not had any redundancies. ‘I think that in a recession people turn towards quality,’ says Mr Miele. ‘They are more likely to spend their money on something that’s going to last than [an appliance] at the low end.’ Following another family tradition, profits are not disclosed. However, Mr Zinkann says they are buoyant. ‘The figures would make the stock market happy. But, unfortunately, if you are outside the company you will never know what they are.’ Mr Zinkann became a managing partner at Miele in 1999, three years before his younger colleague. After attending Gordonstoun, the Scottish boarding school, famous for having educated three generations of the British royal family, Mr Zinkann had stints at four universities, studying philosophy, history, musicology and business economics. ‘I tried to change universities as much as possible just to see new aspects of life. I was interested in a lot of things and my father encouraged me,’ he says. After graduating, he had a three-year spell in the sales and marketing division of the luxury car maker BMW in Munich. Mr Miele stayed closer to home. He went to school in Gutersloh – the small north German town where the company is based and where both men live within 300 metres of each other – before pursuing a more conventional university career. The two did not see much of each other until Mr Zinkann was in his 30s and Mr Miele in his 20s. The two families, says Mr Miele, have always made a point of keeping ‘a respectful and friendly distance’. Which may explain, he says, how they have ‘been able to keep peace and harmony . . . for more than a century.’ Both men were aware from an early age that there was an expectation that they would eventually succeed their fathers and run the business. But they insist there was no pressure on them. ‘In Germany, we’ve seen many examples of family companies where the son or daughter was more or less forced into the top job,’ Mr Miele says. ‘But then you end up not having success in the market. It’s better to leave the [son or daughter] to choose. It is preferable [for them] to become a good lawyer, a good surgeon or a good author, then a bad manager,’ he adds

1 What are the key resources that have made Miele a successful company so far? Which of these are marketing assets?

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2 Miele are now facing more and more competition in a changing market? Do their resources provide them with a sustainable competitive advantage?

3 What new resources might they need to develop/acquire to remain successful in the future?

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