Haier Chinese Company Going Global

8/2/2019 Haier Chinese Company Going Global

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HAIER : TAKING A CHINESECOMPANY GLOBAL

Amit kejriwalDipika mukim

M Satya KalyanSrivatsava SridharaSirinus Topno

Group 6


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Agenda

Case background

Haier Till Now

Organization Concepts

Haier Worldwide

Recommendations


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CASE BACKGROUND


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Company Background

Founder and CEO : Zhang Ruimin

Started in 1984 in Chinese Port city ofQuingdao by taking over a failing refrigerator

factory

Ranked Chinas number one by The AsianWall Street Journal 2004

Celebrated its 20th anniversary in 2004 withannual sales topping RMB 100 billion

worlds 4th largest White goods manufacturer

and 3rd in revenues


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Challenges Ahead (2004)

To become Chinas first multinational brand

and succeed internationally

Continue its dominance on home turf anddefend against the onslaught of foreign giants

like GE, Electrolux and Whirlpool


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HAIER- TILL NOW


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First 20 years

Born in the year 1984 when Zhang took over afailing refrigerator factory

Factory was a collective enterprise whose ultimateauthority was municipal government.

Workers were collective owners of assets andshared profits

Zhangs business philosophy

Quality focus Technology licensing agreement with Liebherr, Imported

freezer and air conditioner production lines from Derby,Denmark and Sanyo, Japan, JVs with Mitsubishi, Japanand Merloni, Italy to improve quality levels


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Change Management By Zhang

Major driving forceDissatisfaction with the present situation and coercive tactics

Ex:

Thrashing of faulty refrigerators

Workers at the end of everyday explainig about their failings toassembled colleagues which ensures no repetition of the samemistake

Restraining force The Comfort Zone -> Reinforcing on quality and even charging

premium for the same in the market.

what is in it for me -> Collective ownership and hence sharing of

profits


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Outcomes

Made a profit of RMB 1 million in its second year

It stuck to brand building and focus on quality

Won the gold medal for quality in nationalrefrigerator competition

In 1989, supply outstripped demand Competitors cut price result a price war but Haier

increased its price.

Haier commanded a brand premium of 15% in the

market


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Growth and Diversification Stage

Now we could let our reputation precede ournewproducts Zhang

Zhang decided it was the time to diversify

Took over two sick companies Qingdao Airconditioner factory and Qingdao General freezer

factory

In 1992, acquired 500 acres of Qingdao land for anew industrial park large capital

Went public IPO in the year 1993


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Growth and Diversification Stage

From 1992 to 1998, Expand by merging with and acquiring otherfirms

We buy those firms that have markets and good products butbad management. Then We introduce our own management and

quality control to turn them around Zhang

Using the above ideology they acquired firms like Yellowmountain Electronics and 15 other companies

Focused on building great distribution channels all over Chinaand improving product development speed and quality.

OEC Management: Became the pivot of Haier


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Operational Restructuring

In 1998 annual revenue RMB 16.8 billion anddomestic market share 30%

Slowdown in the local market focus oninternational market more

First focus was reorganization to become morecompetitive

In 1998: Restructured the existing facilities into7 product divisions

Four new group wide Development division Formed centers such as TQM, TPM, TEM


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Haiers market advantages in China

Reputation of the Brand

Commitment to quality

Single Brand Approach

High market responsiveness: focus on customersneeds

Continuous innovation taking into considerationthe customer needs

Free repair costs within warranty periods andreplacements during the repair

Unified logistics department for all product lineswhich reduced transportation costs and enabled

speedy delivery


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Internationalization Stage

To become a national brand is not enough. If a

business is successful only in the domesticmarket, the superiority won't last long.

www.haier.com

Strictly adhering to this Haier decided to go

global from 1999


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Globalization Strategy

Make Haier make a mark in world Market

Build Brand Reputation by Entering the difficult markets firstand then the easy ones

Germany -> European + American Markets

Haier Tried to localize

Haier has built factories in places such as the US, Italy, andPakistan

Trying to integrate Haiers culture with local cultures and putlocal capital and intelligence together to manufactureproducts of a localized brand

None of the employees at its New York office is Chinese


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Outcomes

By 2004 Haier became the No.1 appliancecompany in china

It was the only company with leading share

across the white goods market It was dominant in the refrigerator and the

freezer market

D d F t S i l St t Th


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Dawar and Frosts Survival Strategy Theory(Ref: Haiers survival strategy to compete with world giantshttp://www.ryerson.ca/~iri/papers/ypdu.pdf)

D d F S i l


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Dawar and Frosts Survival

Strategy Theory

Stage 1 : Defender

globalisation pressure was relatively weak

imported advanced technology in refrigeration fromGermany and spent seven years building up a strong brand

name in refrigerator production through a well-plannedquality control system

Haiers export, however, was limitedand indirect throughagents.

Stage 2: Contender first difficult, then easy Principle

exported to Europe, Japan and US markets, to obtainprestige and to establish their brand

having built a highlydesirable industrial image for theirualit roducts enabled the com an to com ete loball .


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Dawar and Frosts SurvivalStrategy Theory

Stage 3: Defender and Dodger

After 1992 Haier entered into other markets within

developing or less developed countries without

obstacles as a strong defenderin internationalmarkets

Enjoying the advantages of Extenderstrategyapplication, Haier applied a dodgerstrategy atthe domestic market.

This is done to avoid price wars by using theirintegrated international competitive assets to

reform the Chinese household electrical applianceindustr


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Present Day Scenario (2004)

Very strong in white goods market and growingpresence in the black goods market

Recently a marked drop in the profit margins It had to face players who specialized in one or

two product lines Its nearest competitor Kelon was acquired in

2001 by Greencool enterpriseMore foreign players entered the market as china

entered the WTO in 2001 The Chinese market had become same as the

world appliance market


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ORGANIZATIONALCONCEPTS


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Strategies followed(Ref: www.haier.com)

Three phases of Haiers Innovation Strategy Brand Building (1984-1991) -> Quality is prominent for Haier

Product diversification (1992-1998) -> Acquisitions of companieswith bad management and infusing life into them

Globalization (1998-2005) -> Attacking the difficult markets firstfollowed by relatively weaker ones

Principles followed for expansion Best efforts are made to fully develop the current industry before

entering new segment of relative products

Best efforts are made to gain the leading position in the newsegment of the industry after a certain period


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Competing strategies Abroad

Product Differentiation:

close attention to consumer needs

R&D professionals talked directly to

consumers

Response Speed:

18 design centers facilitated rapid productdevelopment

Ideas from the field to be quickly tested

Flat structure enabled quick communication


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Model Of Adaptive Orientation

RenewingTransformation

Reactive

Satisficing Sluggish

Hyperturbulent

Environment

al

Stability

StableAdaptive Orientation

High Low


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OEC Management(Market Economy model of Chinese Management Ref:http://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/dp131.PDF)

OEC : Overall Every Control And Clear

Philosophy: Solve problems immediately,search causes of problems and solve one by

one 1995: Haiers OEC Management was awarded

National Management Innovation Advance

Prize Of China Enterprise Confederation. At the end of every day a worker checks on 3E

card (Everyone Everything and Everyday)which contains 7 items --job quantity, defects,

usage of parts, condition of parts, safety, work attitudes


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OEC Management

Based on the OEC scores workers are givenwages, promotions and appraisals.

Linked each staff member to another, so that

the specific responsibility of each employee isinvolved in the achievement of the firms

objectives.

Outcome : No more disputes over triflesamong staff members and, consequently, thequality of products was greatly improved.


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Organizational Culture

Haier corporate culture is guided and developed by

innovative strategy

efficient organization

creative technology and

market orientation

enabled Haier to grow swiftly with business expansionfrom China to outside world

Haier corporate culture features recognition andparticipation of all employees

Haier has had all its employees involved in realizing

Haiers ideal to be a global recognizable brand


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Brand Marketing Philosophy

Smashing of defective refrigerators has turnedout to be the urge for brand

To become a national brand is not enough

Build name brand in developed markets andthen expand the business into developingmarkets with little resistance

Create localized Haier brand in each market in

world Compete on value rather than price


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Globalization Philosophy

First difficult then easy Without domestic market, business is rootless, without

international market, business is weak

Three 1/3rds

1/3 made and sold at home 1/3 made at home and sold abroad

1/3 made and sold abroad

Three Internationalizations

Internationalization of management system build upemployee loyalty

Internationalization of service build up customerloyalty

Internationalization of brand build up internationalcompetence


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Globalization Philosophy

Globalization of design

Set up 18 design centers worldwide to consolidateresources from developed countrie

Globalization of manufacture

Set up 10 industrial parks and 22 plants overseasenabling prompt action to satisfy local user needsfor quality

Globalization of marketing

5,000 overseas retail outlets and over 10,000

service centers all over the world. Best practicesexchan ed


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HAIER WORLD WIDE


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Europe

Started in 2000 headquartered in Varese, Italy Began coordinating sales and marketing in 13 European

countries, growing to 17 markets by 2004

HQ coordinated logistics through 4 distribution centers in

Italy, Spain, UK, and Netherlands

Uses local finance, talents and culture

Differences in distribution channels and consumerpreferences across countries

Top loading Vs Front loading

Independent retailers Vs Chain stores

Difficult for manufacturers to establish scale economies

Europe accounted for 30% in overseas sales of Haier


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America

Started in 1994 sold products under Welbilt Appliances

Haier America formed in 1999

All American team, except for accountant sent fromQingdao

Few models to test the waters and avoid majorcompetitors like GE, Whirlpool, Maytag, and Frigidaire

Started with compact refrigerators nobody made

In 3 years over 30% market share in them

Combated imitators by adding new features as such asmini-fridges that doubled as computer desks

Got attention of major retail chains like Wal-Mart & BestBuy

Can now get the chains to consider Haiers major

appliances


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America

Strategy not to manufacture cheap products but tomanufacture quality products that can sell at apremium

To supplement with exports from China ascapacity not enough

U.S. consumers saw Haier as American brand,because Haier is produced and sold byAmericans

Accounted for about 30% of overseas revenue

In 2005 had a 26% share for compactrefrigerators, over 50% of the wine cellar market,and 17% of air conditioner sales in the UnitedStates


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India

Earmarked India as a potential high-growthmarket

Invested heavily in building up production,

distribution, and sales capacities in thecountry.

No chain stores in India thus greater reliance

on locals Employed a former Whirlpool India executive

to head Haier India to guide its operations

Local human resources to help establish thewhole business


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RECOMMENDATIONS


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In Global Markets: Continue Brand BuildingInitiatives

Publicize as a individualized brand

Publicize the quality, adaptability, speed andcustomer focus

In Domestic Market: Continuous Innovation

Publicize the fact that it is a home company

Publicize the awards received for quality


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Retention Strategy

Work-life balance should be given priority

Give more autonomy and leadership at lowerlevels (moving away from traditional

paternalistic leadership) Job security is a concern - Show support

publicly to top performers

Support must be given to normal performers toimprove


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Recruitment Strategy

Recruit people who are open to learning andwho are easily adaptable to continuousinnovation

Search for people who are accommodative tocustomer requests

Recruit people who respect quality and

process Leverage the existing brand value to attract

the required personnel from competitors


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References

Haiers survival strategy to compete withworld giantshttp://www.ryerson.ca/~iri/papers/ypdu.pdf

Market Economy model of ChineseManagement http://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/dp131.PDF

www.haier.com
http://www.ryerson.ca/~iri/papers/ypdu.pdfhttp://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/dp131.PDFhttp://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/dp131.PDFhttp://www.haier.com/http://www.haier.com/http://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/dp131.PDFhttp://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/dp131.PDFhttp://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/dp131.PDFhttp://www.ryerson.ca/~iri/papers/ypdu.pdf


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Haier Chinese Company Going Global

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