Nicole Cambridge

Haier in India
Globalising Operations

Introduction:
The case study is about a Chinese company Haier building its presence in a mass market beyond
China. Haier is one of the largest appliance sellers in the world; who has made its name by
exporting refrigerators to the global market. Due to stable growth in the domestic market, the
company then launched into developed markets because they believe it was more mature and
competition was fiercer. In 2004, Haier entered into the Indian market. Management thought that
it was the best time to do so, since there was liberalisation and ease of foreign companies doing
business there. This analysis will focus on Haier specifically in India and contents relating to
Supply Chain Management.
Main issue:
Whether or not growth can be sustainable in the long run for Haier in India, using their present
strategy (localisation)?
Haier entered in India at a time when the economy seemed favourable for foreign companies to
do business. The country entered a phase of liberalisation, consumers household incomes were
increasing and the middle class group was expanding steadily.
Since Haier inception into India (2004-2009), the company had been experiencing sluggish
growth. Year after year performances was disappointing; turnover alone expanded by 7.7% over
the 5 years period, with nearly no growth in certain periods.
Haier, who has been using the localisation strategy, thought that it was the best strategy to enter
into the Indian market. Although this strategy is not a bad one, when implementing such, all
sectors of the supply chain should to be taken into consideration. Which in some cases, Haier
didnt; for example there was no special emphasis on the retail outlets, other than getting the
goods sold.
Haier then saw the need to make some changes to its current strategies, in order to perform much
better. With a new president in place, Haier made some adjustments in operations, HR, marketing
and sales. Since this overhaul, the company started to experience positive growth. But the
million dollar question is, can this growth be sustainable in the long run?
Other issues:
Supplier surplus: even though the consumer durables market was hyped up in the Indian market,
demand was yet to be on same par. Production capacity was about 5 million in the refrigerator
industry, while demand was only 3.3 million. For Haier, this is where the importance of supply
chain management comes in. While focus should be on the entire supply chain, to curb this
problem, the company will have to restructure their strategies in Marketing and Sales, Operations
and HR.
Heavy tax burden: despite liberalisation, taxes were high on the importation of raw materials
and sales tax. In addition, finish goods that were imported were duty free. This inverted duty
structure alone will discourage companies from manufacturing and assembling locally in India.
On the other hand, with the high level of tax impose on imports and sales, this tend to encourage
companies in operating in the grey market.

Nicole Cambridge
Haier in India
Globalising Operations

Haier, normally outsource their high end goods and purchase the low end ones locally. With this
heavy tax burden in place and the thriving grey market, this can affect Haiers growth.
Price wars/competition: most of Haiers competitors in the Indian market compete on a low
pricing strategy, whereas Haier competes on premium level. The Japanese companies in this
market also compete on a high pricing strategy as well. With all this competition in place, Haier
will have to prove to its potential and existing customers as to why they should buy their
product; otherwise if not, consumers will turn to a competitive brand. The Indian market is not
price sensitive, therefore Haier does not necessarily have to compete on price; they should more
focus on quality.
Infrastructure development in rural areas: the rural areas in India are less developed in terms of
infrastructure (roads, bridges and access to electricity). Access to consumers is very difficult. The
rural segment is a prospective market for Haier, but they cannot tap into it unless the government
move speedily with their electrification programme.
Poor reputation for after sales care: Another problem Haier in India was facing was with its
supply chain. Haier didnt build a strong rapport with its local dealers/retailers; once the finished
goods are passed down to them, Haier seemed not to bother thereafter. As a result, there was poor
after sales care and this affected the company badly.
SWOT Analysis:
STRENGTHS
Global presence
Technological strengths in consumer
electronics
Sourcing hub to other markets
Developed network of direct dealers
Brand recognition
Localisation strategy
Variety of products
Good product quality
Strong corporate culture
Innovative
OPPORTUNITIES
Expand production capacity in India
Export to other emerging markets

WEAKNESSES
Supplier surplus
Heavily dependent on parent company
Poor after sales care
Stagnant turnover

THREATS
Producing less than competitors
Taxation
Grey market
Price wars
dwindling customer confidence

Nicole Cambridge
Haier in India
Globalising Operations

Summary of SWOT:
Due to the fact that Haier made its mark in the high end markets in the US and Europe,
they had a global presence. The company was the first Chinese brand to be known for its
good quality in the global market. When Haier conducted a brand perception survey in
India, the results showed that 97% of its customers didnt realise that Haier was a
Chinese brand. It is perceived mostly all over the world that once something says made
in China it is of poor quality, cheap and inferior. Haier in India was also a sourcing hub
to other markets. Goods that used to take weeks to reach other markets are now taking
less the time to arrive when it passes through the hub in India. With the companys
localisation strategy in place, they took a step by step approach upon entering India. With
this approach, they were able to spot problems and work on them immediately. Apart
from the much strength, Haier in India had some weaknesses. They were heavily
dependent on their parent company in China. They had a poor relationship with dealers,
thus resulting in poor after sales care. For the first few years in operation, they had
stagnant turnover. Despite the weaknesses, Haier has a competent management team to
grab the opportunities facing the company. They have the opportunity to expand
production capacity in India and also to export to other emerging markets. Some of the
threats facing Haier are high taxation, grey market, Price wars and dwindling customer
confidence.
In order for Haier to experience growth, they will have to turn their weaknesses into
strengths, capitalise on the opportunities and come up with strategies to reduce threat.
Strategies:
STRATEGIES
Strategy 1
Form a relationship with the
Indian government to bend
some taxes for importing
unfinished goods

PROS
Increase profits
Create more
employment
Lower cost of
production
Supply a variety of
products
Reduce grey market
and price wars
Better quality products

CONS
May have to return a
favour to the
government
Not localised in its
entirety

Strategy 2
Expand production capacity
and brand advertising

Enhance product
quality
Enhance product
development
Narrow the gap
between competitors

Costly
Experience losses
before signs of profits

Nicole Cambridge
Haier in India
Globalising Operations

Strategy 3
Be less dependent on parent
company
Strategy 4
Implement a technological
system to deal with customers
queries about products or
services and also one that
deals with internal affairs, as
well as the entire supply chain

Increase localisation
Create local
employment
customer retention
increase sales
attract potential
customers
manage procurement
manage HR
improve efficiency and
effectiveness in
business operations
develop closer
relationship within the
entire supply chain
flow of information
smoothly

costly
train staffs to be
acquainted with the
system

Recommendation:
All four strategies above are important to Haier in India if it wants to sustain growth in the long
run. However, I will recommend the following three strategies:
Strategy 4- there seems to be a communication problem within Haiers supply chain and also
with the end consumers. By providing a new technological system in place for after sales
services, this will retain customers and attract potential ones; thus increasing sales. In addition,
by having another technological system in place, so that the entire supply chain can keep abreast
as to what going on in other parts of chain will encourage smooth information flow, capital flow
and aid in decision making. With this system, management from each sector in the supply chain
can focus on how they can create value to their direct and indirect customers. And lastly, the
individual companies in the supply chain should also have a technological system in place; this
will aid management in spotting problems and making decisions; thus reducing cost.
Strategy 2- Haier has the opportunity to grow within the Indian market and will definitely need
to expand production and brand advertising. Being a late comer into the market, the competitors
had gain their presence and experience growth. Haier is producing way below its competitors
and to be on par, they will need to increase production. Haier targets high end consumers in the
urban segment and also has the potential to attract the rural segment.
Strategy 1- If producing parts locally is expensive; the management of Haier should engage in
some dialog with the government on the matter of liberalising taxes on imported unfinished
goods. If this is achievable, this will lower the cost of production for Haier in India. With such
benefits, management can focus on building brand image, providing better quality goods and can
re-invest some money back into the business for development.

Nicole Cambridge
Haier in India
Globalising Operations

References
Celly, N. (2012). HAIER IN INDIA: BUILDING PRESENCE IN A MASS MARKET BEYOND
CHINA. University of Hong Kong.