COLGATE PALMOLIVE PRECISION CASE STUDY

Haier in India : Building presence in a Mass Market Beyond China

APMP-04, South Ex, New DELHI

Group details

Mayank Kumar Dwivedi Nehru Place, Delhi

Arun Kumar Nehru Place, Delhi

Kamal Kishor Pandey Nehru Place, Delhi

Vivek Dutt Saxena Nehru Place, Delhi

Alpana Choudhary Nehru Place, Delhi

Anupam Anand Nehru Place, Delhi

Case Questions

Why did Haier enter India? What did it plan to achieve in this new market?

Evaluate Haiers entry strategy in India. What was and was not working? Why?

Discuss Haiers localization model in India and other markets. Were they different? If so, why?

Analyse the landscape of Indias consumer electronics market. What were the Korean companies strategies and how did these impact the market?

Evaluate Braganzas decisions and actions. What were his analyses?

Going forward, How can Haier sustain its growth in India?

Haier - Introduction Summary

In short 25 years, Haier Inc had emerged from being a small refrigerator factory to the worlds biggest appliance seller by retail volumes

Unlike most of Chinese companies (low price strategy), Haier build its success on the basis of good quality product, innovation & services.

Haier became one of the top 10 brands in China 1991

In most of the overseas markets, Haier adopted a Three-in-One localization Strategy

Haier entered the global markets and started an internationalization strategy in the 1990s. Starting from European countries including Italy, the United Kingdom, and France, it stretched over even to the Asian market and opened its first manufacturing facility in Indonesia.

There are many reasons why Haier made the step to actually go into the Indian market.

First of all, a series of policy changes in the 1990s definitely opened the doors and set the environment that made it possible for Haier, a foreign company, to enter the Indian market. In addition to that, the Indian market itself was in a favorable state for Haier.

Around 2003-2004, India had rising disposable income, an expanding middle class, and a relatively low entry barrier in the white goods market. These conditions were very attractive for Haier to launch its new facility in India.

Haier Launched in India in 2004. T.K. Banerjee, an industry veteran appointed as president of Indian operations.

He wanted Haier to become a top-thee home appliance brand in India

But year after year, Haier India performance was disappointing. Turnover expended by a 7.7% over 5 years.

In 2009, Eric Braganza as the new president. He spotted problem area and revamped entire system, which resulted growth in market share and overall revenue.

Haiers Corporate Strategies

1984

Brand building

1991

Diversification

1998

Internationalization

2005

Global Brand

Why did Haier enter India? What did it plan to achieve in this new market?

White Good Market Opportunity

HA sector was growing between 11% to 14% and projected growth was 20% (2005 ~ 2010)

Change in Indian government policy

8.3% GDP and expected 2003~04 and expected to log high growth rates in subsequent years.

Favorable Market with Rising disposable income group

The urban market was mainly a replacement & up gradation market

Rural India had an immense capacity for growth Electrification Awaited

India White Good Market 2000 to 2004

Haier Target Acquire 20% market share by 2009

Evaluate Haiers entry strategy in India. What was and was not working? Why?

20% Market Share by 2009

Become one among top 3 brand

Adapt Localization Strategy

Establish Global Brand image

Delivery good quality product

Global Branding Strategy - Inspired Living

Evaluation of Haier Strategy -

Target Segment : High Income bracket

Product India Centric product lineup (Refrigerator, AC, Washing Machine, Heaters, & Color TV). Bottom mount refrigerator become one of the most popular product.

Place Establish Haier Experience zone, Retail expansion

Price 5% premium on products.

Promotion Inspired Living

Summary Overall Haier strategy to be out of crowd, not to be in price war, Innovation, Adapt Localization.

What was and not working?

What Was Not Working

Deficit in targeted Vs actual value & volumes share

India operations only 2% to global revenue as on 2008.

Poor after sales support

Drawback of late entrant in market (While LG, Samsung & Videocon high penetration in market)

High competition from Korean vendors in price.

Premium price policy kept away from mass market segment.

Low market penetration

What Was Working

Global Brand Image (Haier was able create themselves & other Chinese brands

Innovative Product lineup

New Inovative products were well accepted by users (Bottom mount refrigerator become one of the most popular product)

Growth in in CE segment (Opportunity)

Local manufacturing help in reducing timelines for other markets.

Discuss Haiers localization model in India and other markets. Were they different? If so, why?

First 5 years, Haier Outsourced production & Sourcing low end goods from local manufacturers (Color TV)

2007 Haier Acquired 40acre manufacturing capacity in Pune district. It was assembling washing machines & ACs

Factory also hub for supplying to Africa, Middle east & southern & western Asia.

India

Global

Haier 1st started Three in One plan in South Carolina.

Opened a design house in Los Angeles to realize true localization.

Rolled 1st made in America product in 2010.

Later on Haier replicated same model in Europe. Opened sales headquarter in Italy and opened two design centre's in France & Amsterdam.

Objective of Three in One model was to achieve the localization in terms of R & D, manufacturing & market activities are carried our as per local way

In US & Europe, full version of Three in One strategy opened whereas in India it was only one manufacturing factory, which was further used for exporting goods to other countries.

Analyse the landscape of Indias consumer electronics market. the market?

1980 Indias govt. was wary of foreign presences and held tight protocols

1991 Change in policy opened market for foreign investments

2000 to 2004 HA sector grew between 11% to 14% annually & growth expected to expand at at least 20% between 2005 to 2010.

2005 Color TV penetration was biggest in category (21.3%)

Rural India had an immense capacity for growth because many were still awaiting electrification.

Urban market was mainly replacement with better products.

Looking at the growth rate projections, vendors enhanced manufacturing capacity (new plants, production lines.

While market was looking very lucrative at coming months, there was some issues (Drawbacks)

Heavy taxes, Rural India awaiting for electrification

Since 2005, the market has been plagued by price war & that resulted low margin.

Key Players, LG & Samsung were keeping prices very low to ensure market share but barely making a profits.

What were the Korean companies strategies and how did these impact the market?

LG

Entered into low price strategy with basic function products

After success in low price market, entered into mid end market by offering feature rich product with brand image - Aspirational brand

Samsung

Entered into with premium product

Later crossed into mass market and released more price sensitive products aiming premium & large volume categories.

R& D

Both the companies heavily invented into R&D for developing new products as per market need and cost optimization

Impact

Strategy in both the segments helped brands to gain penetration, market share & revenue.

Evaluate Braganzas decisions and actions. What were his analyses?

Redesigned sales structure with 30% new employee

Planned to add 100 direct dealers & 1000 indirect dealers to Haiers distribution network

Focused on dealer retention & treated dealers as Haiers first customer

Offered good quality products and increased gross margin of 10% to 15%, above 10% to 12% industry average.

Planned to open more experience centers and add up to 700 retail outlets to Haiers existing 4500 across the nations.

Aimed to increase revenue from experience centre from 5% to 12%.

Marketing/promotional budget USD $ 2.7 mn.

Improved existing service setup & process to ensure customer issues are resolved with 6 hours in Metros.

Planned to open service stations InstaCare in 8 cities

Change in Pricing Strategy Closure to mass market but 3% higher than Samsung & LG

Launched 25 new products and laid down plan for laptop and camera in near future

2010 Haier invested USD22.2mn to upgrade its factory capacity

2010, Haier launched a marketing campaign program You Inspire Us

John Abraham as Haier brand ambassador.

Going forward, How can Haier sustain its growth in India?

Haier has been able to create infrastructure including manufacturing capacity.

In order to sustain its growth in India, Haier should focus on following

Innovation Continuous innovation & New Products

Target Market Rural market is big opportunity, hence new products needs to be developed accordingly

Distribution needs to enhance it

After sales support Customer is King

Loyalty program for dealers

Thank you

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Growth -HA / CE

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