Haier: Taking a Chinese Company Global

HAIER: Taking a Chinese Company Global

Q1 – What are the basis of success in Home Market

1. Turning around sick companies - Taking over sick companies which were bankrupt and turning them into profitable businesses
2. Quality – Haier was fanatic about quality. Once Zhang pulled out 76 refrigerator with minor defects/scratches from the assembly line and ordered them to destroy to pieces.
3. Launching IPO – Haier launched IPO and got a splendid response when they were in dire need of money
4. Operational Restructuring – Haier restructured the business into 4 – Capital Flow (Finance), Commerce Flow (Sales), Material Flow (Logistics) & Overseas (Global Business). They were now independent profit centres.
5. Diversification – Haier had diversified it into length and breadth of the home appliances. Only Guandgdon Kelon gave some competition but in 2000-2001 it suffered heavy losses.
6. Foreign Competition – Haier was not threatened by foreign competition as it had firm grasp on changing tastes of the local market, foreign companies were not in tune with Chinese culture & values.
7. Market Responsiveness – Haier was very fast in Market responsiveness. In some villages the customers even washed sweet potatoes and Haier changed designed. They made changes for saving electricity and water.
8. Service & Distribution – Haier had made deep roots in fulfilling the service needs of the customer and re-organized logistics to reach fast to the customers.

Q2 – Why Haier want International Growth. What they are trying to achieve

Zhang in 1997 made a strategy to of three thirds of the revenue strategy. On third produced in china and sold overseas and another third produced and sold overseas. Nearly 17% of the total revenue came from international sales in 2004. Main purpose of the Haier group was to establish a brand reputation overseas. Many Chinese companies exported the products under the OEM client brand; Haier on the other hand was willing to bear the early costs of establishing the firm as an independent player overseas. They were trying to evaluate the strategy of LG, Samsung and Sony who had built their brands across international markets. Since they wanted to focus on difficult markets first their 70% of overseas sales came from Europe, United States and Japan.

Q3 – Why Haier has gone to the American Market

As stated above Haier wanted to enter the difficult developed market first; only after proving themselves here they would enter the easy emerging markets. Many Chinese firms had the strategy to enter the south east Asian markets who had no strong, dominant competitors. The Americas where the markets with largest global competitors and if they were successful in America they could be successful, which they believed.

• In going to these markets they would have to meet the highest quality standards
• Requirements of customers and retailers where very tough; they were keen to understand the UI requirement between US and Chinese customers.
• The prestige of a known brand that had worked in America would serve as a ready-made reputation. When Indian and Middle East customers travel to Paris or Tokyo they would see the advertisements already
• Even having a few successful products in America would help Haier to make full line of products in the developing markets.
• After competing with GE, Matsushita, Phillips they can easily compete with lessor known brands in emerging markets.

Q4 – How is Haier choosing to succeed?