HAIER

HAIER-TAKING A CHINESE COMPANY GLOBAL IN 2011 Haier started in 1984 with a defunct refrigerator factory in Qingdao , a port city in China’s Shandong province , founded by Zhang Ruimin. From 1980 to 2010 , China’s GDP grew at a rate of 10% eliminating millions of people from extreme poverty and forming an urban middle class. The challenge that Zhang had was to decide to apply Haier’s international operations in China & apply China’s operations internationally. Municipal Government of China wanted to appoint Zhang as director of nearly Bankruptcy Company which Zhang took as a challenge and launched Qingdao Haier. Haier started TVE (Township and Village Enterprise) TVE differed from state-owned enterprises in not collecting any claim other than taxes. Zhang observed that a high-quality refrigerator

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rare in China. So he signed an agreement with German Refrigerator maker Liebherr, later imported freezer and air-conditioner production lines from Derby of Denmark and Sanyo of Japan. Hurdles that Zhang faced at the beginning was to make workers understand the Haier’s commitment to quality which he made them understand by asking staff to smash refrigerators to bits. In the year 1989, Haier faced oversupply but less demand. Even though his competitors had cut the prices , Haier didn’t do that instead raised them to get a premium of 15%.Haier always was good at after-sales service by maintaining a track of thousands of customers by computerized service centre in Qingdao. At the initial stage Haier focussed on building brand reputation instead of market expansion. Inflation in China in 1994 is caused by rapid growth of Chinese economy after Haier’s establishment. China government wanted to rationalize state-owned enterprises (SOEs) by pushing mergers and spinoffs at both national and provisional levels. Haier first started to venture into international market by first exporting to U.K and Germany and then to France and Italy. Haier’s brand refrigerators sold well in Germany and were marketed by Liebherr at the beginning in 1991.Haier decided to market its own brand overseas when they won blind quality test conducted by German magazine. Zhang stated that his purpose in exporting is to establish brand reputation internationally not to earn foreign currency.

Haier entered America by Michael Lemal , a partner in New -York based import company by then only three Haier compact refrigerator models met U.S energy and safety standards. Zhang wanted to make refrigerators for students or for offices which other U.S manufacturers didn’t make and later added features like mini-fridges that doubled as computer desks. At first it took lot of time for them to get an appointment with Wal-mart but later years they ordered double units of refrigerators from Haier. In U.S they don’t wanted to manufacture quality products that can be sold at premium instead of manufacturing cheap products. Haier entered European market with specifically designed products for European Market. Market was similar in size to the U.S market but differences were made in distribution channels and consumer preferences all countries created problem for manufacturers to form economies of scale. In India, they discovered challenges like environment, economy, and the channels and they thought that it is difficult to find top 10 chain stores in India. Haier implemented strategies like first focussing on markets which are difficult to capture , staffing with local people to understand needs of customers to know the market well. Two approaches that they followed were speed and differentiation to win customers. Haier had foreign rivals like Siemens, Electrolux, Samsung, LG, GE, and Whirlpool. Most of them realized that penetrating in Chinese market is not easy as saturation levels, urban areas are well organized. Foreign brands were especially strong in the automatic washing-machine sector and advantage that Haier had was they designed products based on Chinese consumers but foreign consumers designed products based on foreign approaches. To compete with foreign rivals Haier diversified its domestic products and improved its service and distribution. Haier created tiny washer that cleaned a single change of clothes which was introduced successfully in Europe. Haier had an advantage with domestic retailers which had threat when WTO made compulsory that China opening its market to foreign retailers. Haier implemented Just-In-Time because of which initial order to product delivery was reduced from 36 days to 10 days. Haier worked during 2007 and 2010 to capitalize on existing competitive advantages to penetrate unexploited sources of demand. To minimize gaps Haier started redeployment of human capital, creating small teams to work on making Haier efficient. To maintain top position Haier started self-managed teams to attract talented employees, opportunities for teamwork, responsibility and entrepreneurship. Haier inverted typical corporate pyramid in which ideas were generated by customer at the base and travelled up

through the company. They employed incentive system to encourage hard work, quality service with to meet key performance indicators and also fostered on internal talent development in which to join specific team it is necessary to win majority from team members. Through Chinese government’s rural subsidiary program , Haier was able to penetrate through rural market areas which aimed at farmers who had discretionary income and were price sensitive. Because of this program urban market became 40% of total market & rural market became 60%.They differentiated products based on lessons learned from foreign. In Europe, Haier developed video messaging device into refrigerator door that made people leave video messages to the family instead of paper notes. Zhang departed from Haier’s strategy of building strength of namesake brand by introducing Casarte brand to China’s urban centres. For the next 10 years Zhang and the team depend on the acquiring companies , entering and retaining new companies and managing subsidiaries.