Haier in India Building Presence in a Mass Market Beyond China

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 Haier’s entry strategy in India. What was and was not working? Why?  Discuss Haier’s localization model in India and other markets. Were they different? If so, why?   Analyse the landscape of India’s consumer electronics market. What were the Korean companies’ strategies and how did these impact the market?  Evaluate Braganza’s decisions and actions. What were his analyses?  Going forward, How can Haier sustain its growth in India? 

Haier - Introduction Summary 

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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.

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Haier became one of the top 10 brands in China – 1991

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

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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

Haier’s Corporate Strategies

1984

1991

1998

2005

Brand building

Diversification

Internationalization

Global Brand

Why did Haier enter India? What did it plan to achieve in this new market? White Good Market Opportunity

India White Good Market 2000 to 2004

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

Growth - HA / CE 35% 30%

30%

Change in Indian government policy

25% 20% 15%

17%

11%

11%

11%

11%

12%

13%

14%

14%

10%

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

5% 0% 2000

2001 Home Appliance

2002

2003

2004

Favorable Market  –  disposable income group

with

Rising

Consumer Eletronics

The urban market was mainly replacement & up gradation market Haier Target – Acquire 20% market share by 2009

a

Rural India had an immense capacity for growth  Electrification Awaited

Evaluate Haier’s entry strategy in India. What

was and was not working? Why? Evaluation of Haier Strategy Target Segment : High Income bracket

20% Market Share by 2009

Product  – India Centric product lineup

Become one among top 3 brand

Adapt Localizatio n Strategy

Establish Global Brand image

Delivery good quality product

(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

Global Branding Strategy - Inspired Living

Summary  –  Overall Haier strategy to be out of crowd, not to be in price war,

What was and not working? What Was Working

What Was Not Working

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

Deficit in targeted Vs actual value & volumes share

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

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)

Growth in in CE segment (Opportunity) Local manufacturing help in reducing timelines for other markets.

High competition from Korean vendors in price. Premium price policy kept away from mass market segment.

scuss

a er s oca za on mo e n n a

and other markets. Were they different? If so, why? India 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 & AC’s

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.

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

 Analyse the landscape of India’s consumer electronics

market. the market?

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1980 – India’s 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) –  

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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

a were

e orean compan es

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 Braganza’s decisions and actions.

What were his analyses? 

Redesigned sales structure with 30% new employee

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Planned to add 100 direct dealers & 1000 indirect dealers to Haier ’s distribution network

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Focused on dealer retention & treated dealers as Haier’s first customer 

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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 Haier ’s

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

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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

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2010, Haier launched a marketing campaign program “You Inspire Us”

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John Abraham as Haier brand ambassador.

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

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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 

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