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Drivers for Haier's Home Country Success - Quality & Consumer Focus, Distribution

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Drivers for Haier's Home Country Success - Quality & Consumer Focus, Distribution

Networks and Flexibility:

Emerging in 1984 as a small refrigerator factory, Haier grew and expanded its product lines in

both domestic and global markets over the next twenty years. Haier achieved RMB 100 Billion

annual sales in 2004, ranking Haier China's No.1 home appliance supplier and placing it third in

the global white goods market. In 2004 Haier was the second largest refrigerator manufacturer

in the world.

Our analysis focuses on three essential factors that contributed to the success of this firm: (i) its

production of high quality products that were adapted to serve local-demand, (ii) its reliable and

extraordinary service and (iii) utilizing their expertise and control of distribution network.

In Haier's early days in 1984, Zhang Ruimin, Haier founder and CEO, envisioned Haier's future

of providing high-quality products and reliable service in exchange for price premium (resulting

in higher profits) at a time when domestic competitors were producing poor-quality refrigerators.

As Haier grew into the company he envisioned, the firm invested 5% to 7% of revenue back into

R&D in order to provide customers with new and innovative products to meet their diverse

preferences. This focus on adapting to consumer preferences helped solidify Haier's position in

the highly competitive market - even after the entrants of major foreign brands. At the same

time, Haier established a nationwide service center network of 5,500 independent contractors to

help customers maintain and fix their Haier products problems efficiently and without cost to the

consumer. This consumer focus strategy helped build loyalty and brand recognition for the

Haier name. Thus, Haier has built an excellent reputation that allowed them to charge as much

as 20% more than market price and greatly increased their profitability compared to competitors.

In 1999, Haier created the independently operated Haier Logistics, which essentially reorganized

all firm logistics into a single company serving the entire group of products. As a result, Haier

was able to take advantage of economies of scale in distribution to realize logistics cost savings.

Furthermore, Haier was quick to react when retail channels shifted from large shops to major

domestic chains and international retailers. Haier quickly realized the importance of these

private retailers' focus of profit and as a result of the Haier's flexibility it was able to apply its




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