Haier: Taking a Chinese Company Global

TAKING A CHINESE COMPANY GLOBALGroup 2Why was Haier so successful in China?

Zhang Rui MinVisionary leadershipGoal to take Haier globalChallenge conventional wisdomBelieves that competition leads to improvement and creating a localized brand name is paramount

Commitment to QualityStrong emphasis on commitment towards quality than their competitors. E.g. Zhang once ordered workers to smash 76 refrigerators which did not meet the required specifications. Esp so when pple have low perception of Chinese brand

Why was Haier so successful in China?

Continuous Innovationdifferentiation is the key to succeed in the white goods market; differentiate via innovation continuously increased their product range through innovation; about 96 product categories with 15,100 specifications. Garnered awards for its innovative products; ensured healthy cash inflows to the company in the long run

Building the BrandFollowed a single brand approach, as a strong brand name would help them in their approach to go global. strategy involved developing brand around a single product first, then leveraging on that success to diversify into other products

Why was Haier so successful in China?

Market AdvantagesHaier Products commanded 20% premium over other brands, but is still a market leader in sales, coz of superiority in 3 areas:

Market responsiveness: meet customer needsAftersales service: computerized system, service network of 5,500 independent contractors, one for each sales outletDistribution: high on operational efficiency; a single company called Haier Logistics serves the entire group for all kinds of products, unlike its Chinese competitors; a unified logistics department for all product lines which reduced transportation costs (economies of scale) and enabled speedy delivery.

2. Was Haiers decision to globalize into developed markets early on a good strategy? YesNoCompetition in ChinaFacing intense competition (Whirlpool and GE) and price wars in the domestic marketStiff competition overseasThe competition in the developed market was tough as most of the market players had established themselves there

Prove itself, achieve highest quality standards and a ready-made reputationfocus on the difficult developed markets first and after establishing a considerable presence over there, then go after the relatively easy emerging markets; create a localized brand name. e.g. Haier is a localized US brand instead of imported Chinese brand

Lack of a strong brandHaier could not get a large market share in the US as it was an unknown brand there and Chinese products are perceived to be having poor quality products. In the developed markets, the consumers are not willing to sacrifice quality at any price. Haier, being a Chinese company had to face these issues.

Product Differentiation Strategyfocused on niche products, offered variety of versions for different market segments, to be in line with their belief in being responsive to customer needs Ample opportunity available to be exploited to its full potential in the emerging markets

Non-traditional expansion strategy ability to quickly gain access to foreign markets significantly different than their own; entered the developed markets of Europe and the United States as a niche player before venturing into neighboring Asian markets; successful launch into the U.S., where the company was able to concentrate on local responsiveness through an innovative new product development and introduction (NPDI) process53.Can Haier build on its success in niche products to become a dominant global brand in high-end white goods? Haier global expansion strategy in 1997 International StrategiesRevenue: three thirds goal YesInitial entry challenge into US marketProduct Differentiation Strategy

entered developed markets with a few models to test the waters and avoid major competitors.

E.g. in US they manufactured compact refrigerators for students and offices. With minimal competition, these niche products brought in high margins, and also got the attention of major retail chains like Wal-mart. Once they were successful in this segment, they decided to launch regular products like the standard refrigerators and washing machines.

Increase in brand visibility

Lack of a strong brand

Initial difficulty to get Haier products into large retail chains like Home Depot, Wal-Mart etc.

People were not ready to buy Haier refrigerators, as they could not recognize it as a prominent brand for other appliances

4. Is Haiers three thirds strategy a viable or wise approach?Haier global expansion strategy in 1997 no one market accounts for more than one third of our business Lorenzo Zambrano, CEO of CEMEXone-third domestic sales, one-third exports, and one-third produced and sold abroad Yang2/3 made in China Cost advantage

2/3 sales overseas Bigger market potential outside China