Miele focuses on old-fashioned quality

At a time when life has rarely been tougher 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 renowned for its high manufacturing

standards and its refusal to move downmarket

and compete on price.

Miele bases nearly all its manufacturing in high-cost Germany and is self-sufficient to a high degree.

Rather than outsource to low-cost suppliers, it makes 4 million electric motors a year (enough for all its

products) in its own plant near Cologne. Keeping the manufacturing base in the company's own plant is,

Miele believes, essential to maintaining its quality

standards. Sales last year were €2.2billion (£1.5billion).

The approach is respected by Miele's industry peers. Andrea Guerra, Chief Executive of Merloni, the Italian

white goods maker, regards it as the icon of quality in the industry - 'with a fantastic position at the top end'.

The company sells appliances ranging from dishwashers to coffee machines, at a price premium of up to 70

percent over their competitors' products. It spends 12 percent of its revenue on product development - far

more than the industry norm. 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 their owners' kitchens.

The company also believes it can make its German plants more competitive by changes in working

practices. According to Markus Miele, co-owner of the company, 'We have a plant near Gutersloh that

makes 50 percent of all the plastic parts we need. But we make this plant compete with outside

contractors to see who gets the work for specific jobs. We make sure that the Miele plant charges

prices no greater than the other bidders. This is one way we encourage our factories to make

improvements@ and

innovations in their production processes.'

Even though Miele's manufacturing costs are higher than those of its competitors, the company says these

are justified by its ability to produce appliances that - despite their high prices - people want to buy.

Roughly 50 percent of Miele's manufacturing costs come from components it makes itself compared with

about 30 percent for equivalent companies. But, the company says, most Miele appliances will work for 20

years, which is longer than comparable products. This, it says, is linked to the reliability of individual

parts.

The policy pays off, says Mr Miele. 'My father [who was in overall charge of Miele until 2002] once had a

letter from an old lady in Eastern Germany. She said she didn't have much money but she was willing to pay

50 percent more for a Miele washing machine because she knew it would last for the rest of her life.' Nick

Platt, a home appliance specialist at the GfK market research company, says such feelings are not

uncommon. 'The company has built up a tremendous loyalty among consumers who know that the brand

stands for quality,' he says.

Miele faces a tough few years as it strives not just to keep ahead of competitors at the top end of the white

goods market but also to interest new generations of increasingly cost-conscious consumers in buying

machines that - in terms of kitchens - are the equivalent of luxury Swiss watches.