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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.pdf8/2/2019 Haier Chinese Company Going Global
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THANK YOU