Haier's Global Rise from Bankruptcy to Appliance Giant

HAIER GROUP (Global Strategic Analysis)
HOW A FORMER BANKRUPT CHINESE FIRM EXPANDED TO

BECOME A GLOBAL APPLIANCE MAGNATE AND ITS
STRATEGY TO STAY AT THE EPITOME OF THIS INDUSTRY.
AN INTERGRATED CASE STUDY OF HAIER GROUP LIMITED
BY
MOSES SEBALU.
B0730KDNF1110 S1113005
PRESENTED AS PART OF THE REQUIREMENT FOR THE

AWARD OF MBA AT UNIVERSITY OF GLOUCESTERSHIRE
(UOG)
FEBUARY 2012
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EXECUTIVE SUMMARY
This report aims at finding a valid strategic framework of Haier, group a Chinese home
appliance and digital electronic firm to retain its grand position as the Global appliance
manufacturer and leader. This report points out problems in Marketing and advertising,
Management of Haier talent, Strategic decision of being a late mover and going hard places
first with high psychic distance, strong competition in china and abroad; and low brand
knowledge in some countries about Haier products. From the SWOT Analysis of Haier and
using Different analytical tools, this report has derived SWOT Analysis interactions that can
be used to formulate strategies that can create better business, development, marketing and
globalised local and growth plans to maintain its Global position and performance.
Recommendations have been suggested and these include improving marketing and
advertisement through cost innovation strategies and use of social networks, Direct sales to
retain the number one position and a response to changing consumer needs, increase in green
products, investing in sub-Saharan Africa by targeting the low income earners and use of
Glocal strategy. The report further points out the importance of critical success factors and
key performance indicators to show a shift from Haiers present position to the new one in a
given time scale.
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ACKNOWLEDGEMENTS
I would particularly like to thank my supervisor Funsho Obilade for
his valuable suggestions, intellectual guidance and support throughout
the time of this study.
Am grateful to the staff of University of Gloucestshire (UOG),
London School of Commerce (LSC), School of business and law
(SBL) and my lecturers for their sincere support and assistance. My
sincere and profound gratitude goes to my wife Aisha A, Brother
Edris, my Dad and Uncle Daudi for their unending kindness and
moral support during the period of my course.
Finally, my appreciation goes to my friends Joyce Kamba and Ritha
M for their sincere help.
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Contents
CHAPTER ONE........................................................................................................ 6
1.0 Introduction............................................................................................... 6
1.1Research aims and objectives..................................................................................8
CHAPTER TWO........................................................................................................ 9
2.1 CASE BRIEF OF HAIER.................................................................................... 9
2.2 Assumptions............................................................................................... 11
2.3 Terms of reference........................................................................................ 12
CHAPTER THREE................................................................................................... 13
3.1 STATEMENT OF THE PROBLEM...................................................................13
3.1.1 International Marketing Management...........................................................13
3.1.2 Managing Human Capital.........................................................................13
3.1.4 International Business............................................................................. 13
3.1.4 Strategic Management............................................................................. 14
3.2 PLAN OF ANALYSIS................................................................................... 14
3.2a The BCG Matrix.......................................................................................... 14
3.2b SWOT Analysis........................................................................................... 14
3.2c Porters Generic........................................................................................... 15
3.2d Value Chain................................................................................................ 15
3.2e Porters Five Forces...................................................................................... 15
3.2f PESTLE Analysis......................................................................................... 15
3.2g Blue Ocean................................................................................................. 16
3.2h Ansoff Matrix.............................................................................................. 16
3.2i Scenario Planning......................................................................................... 16
3.2j Schools of Thought....................................................................................... 17
3.3 Ethical Issues.............................................................................................. 17
CHAPTER FOUR..................................................................................................... 18
4.1 ANALYSIS AND FINDINGS..........................................................................18
4.1.1 INTERNAL STRENGTHS.......................................................................18
4.1.2 INTERNAL WEAKNESESS.....................................................................20
4.1.3 EXTERNAL THREATS...........................................................................22
4.1.4 EXTERNAL OPPORTUNITIES:...............................................................23
4.1.5 RESOURCE AVAILABILITY AND CONSTRAINTS.....................................26
4.1.6 Findings and Results............................................................................... 27
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CHAPTER FIVE...................................................................................................... 29
5.1 PROPOSED SOLUTION TO THE PROBLEM....................................................29
5.1.1 HIGH LEVEL OBJECTIVES....................................................................29
5.1.2 MEDIUM TERM OBJECTIVES................................................................33
5.1.3 LONG TERM OBJECTIVES....................................................................35
5.1.4 IMPLICATIONS TO STAKE HOLDERS.....................................................37
5.1.4 CONCLUSION..................................................................................... 38
5.1.5 REFERENCES...................................................................................... 38
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CHAPTER ONE
1.0 Introduction.
Considering the recent intensified competitiveness that characterises the market environment,
in order to have competitive advantage every company is striving tooth and nail to barricade
itself from the impending dangers that emanate from internal and external environments and
Haier is one of them. Haier started in 1984 as a rural firm specialising in refrigerator
production but because of good management, focus, and its quality products it was able to
surpass its rivals to go global by the 1990s to export it brand.
Haier is one of the largest White goods manufacturers and by 2010 i, Haier was the number
one brand of major home appliances in the world with 6.1% retail volume share. Haier stands
at the apex of the Chinese top 100 IT companies which mean its a major player and its
business scope involves product development, financial services, technological research and
manufacturing. It produces microwaves, refrigerators, air conditioners, vacuum cleaners and
recently entered the cell phone business and LCD/HD television business (Twice news,
12/03/2007).
The development stages of Haier started in 1984-1990 with its brand building strategy
through total quality management. The quality element became the pinnacle of Haiers
survival during a period of price wars and a core value at large among all employees. In
1991-1997 is the diversification strategy employing OEC management. Haier managed to
widen its business scope by offering a range of products and this gave birth to continuous
innovation that would later propel them to the top as regards to superior quality. 1998-2004
saw the take off of the internationalisation strategy by using market chain process
reengineering which helped Haier employees to link directly to the needs of users and build
its brand into the minds of its new found customers hence increasing their market base.
In 2005 Haiers global brand strategy with a win win mode of individual- goal combination
was launched. In this phase Haier benefitted because it could use external resources to create
local brands, connect all its branches through the use of the internet and becoming a service
centred enterprise than before. The fact that Haier was ranked 27 th in 2010 among the top 50
worlds innovative firms, and the first Chinese company to receive this stardom (Chan, 2011);
and crowned 10th most innovative company in 2010 by American Newsweek magazine ii ,
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Haier did not only crave attention and explanation but deep thought and analysis regarding as
to how Haier has persistently refused to succumb to pressures within and outside the industry
which have brought other firms to their demise recently.
Therefore, this report is going to identify, explain, examine and try to address the problems
that may be facing Haier since its inception to the present and offer alternative
recommendations that might be of paramount importance to the continuous survival of this
great company.
Haier given its great brand back in china and abroad, the unchallenged quality, variety of
products, the speed and differentiation strategy employed, a pool of loyal customers
worldwide imply that Haier is not prone to problems. In its 27 years of existence, Zhang
Ruimins principle of late starter with a high starting point is to be examined if it has been
achieved and if so what strategies has he employed to maintain this position as the worlds
number one major appliances brand in 165 countries with 70,000employees and a strong
network of 133,000 retailers. The report will further examine if the awards given to Haier
over the years signify its immortality. Haiers mission is to improve the quality of life,
focusing on customers needsiii and the vision is to provide solutions that make customers
lives comfortable. The report is to investigate or examine if the cooperate objectives and
missions have been met without any impediments to suggest that Haier gets every aspect of
its activities right and if their strategies are flawless.
Furthermore, the report is to carry out a clear diagnosis of Haiers activities to analyse
whether Haier is immune to disaster, however if the findings are not impressive as thought
before then immediate action to the most important activities needs to be taken to avoid Haier
going the wrong path like many white goods manufacturers especially in this precarious
world economic state had done. It will examine how Haiers brand has spearheaded it
expansion and its grip on better quality products has affected its overall strategy globally.
Haier adopted a strategy of entering already saturated markets with the zeal and drive to still
capture its share and this report will try to identify the problems that lay underneath this
popular strategy.
Significantly, this report will try to investigate the ethos behind Haiers use of local
managers in host countries and identify why and what implications it could have on their
brand, objectives and goals wholly as a company and after which recommendations will be
given. If continuous monitoring is useful, it can be recommended as well as looking out for
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critical success factors that can help the company to achieve its new set goals. Key
performance indicators will be necessary to check if the recommended measures have been
achieved or not then drastic or gradual necessary steps taken to reinforce the efforts to effect
the change needed.
1.1Research aims and objectives.

The main aim of this research is to evaluate Haiers strategic activities in china and abroad.
The objectives of this study are:
To Identify the current business landscape of Haier

To engage in a critical review of the literature related to Haiers activities.
To examine the problems and challenges Haier faces with Strategic choice,
Glocalisation, international marketing and advertising, Entry strategies, managing
human capital.
To investigate, explain the impact of the problems on Haiers business.
To generate recommendations of how Haier can resolve its problems and leverage its
synergies to outwit the competitors to achieve competitive advantage.
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CHAPTER TWO
2.1CASE BRIEF OF HAIER.

Haier has been in existence for 27years and started as a township and village enterprise to
cater for local employment in order to better their livelihoods and Haier later expanded into a
global producer of the white goods in the 1990s due to its good management style ,brand and
unstained reputation. Haier was started by Zhang and it rose to prominence by manufacturing
refrigerators and later diversifying into other products like microwaves and air conditioners to
meet the high demand for such goods and cater for all groups of customers with different
needs to gain a wider market share and leadership in all appliance fronts. This led to a higher
profit margin later.
Haiers Growth had been aided by two factors; Chinese government protectionist policy and
the increase in the GDP in mainland china. The protectionist policy helped Haier to
monopolise the market because the Chinese customers had no foreign alternative to compare
their goods with and the Chinese competitors did not offer any better quality refrigerators
which Haier had made a centre of its strategy. Haier therefore introduced foreign technology
and equipment for refrigerators. Many other Chinese competitors concentrated on filling the
demand because supply was low for the white goods. For Haier, quality management was its
catchword for progress not just meeting the supply. This gave Haier a competitive advantage
in the long run coupled with customers trust and loyalty respectively. Their belief was always
to aim for the top positioniv. By selling quality products in developed settings first was to
confirm their concept of difficult first, easy later v and this paved way for brand recognition
and approval hence being easily accepted in less developed settings later. This strategy would
give Haier an easy access to rural areas within china and emerging markets without extensive
advertisement or promotional marketing activities hence saving more money. In the 1990s
after the state encouraged mergers and acquisitions, this became an advantage to Haier as it
took over 18 failing businesses and diversified to cater for all groups of customers. As other
manufacturers were tiring with price wars and specialisation, Haier had a chance to create a
large pull of customers through its superior quality which had been a result OEM (Overall
Every Control and Clear) Management approach which centred on total quality and hence
also being pivotal in Haiers innovation journey.
After consolidating its self in china and gaining experience in this industry this acted as an
impetus to explore overseas and seek new markets through joint ventures and later
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Greenfields to exert their foothold abroad and this springs from the assertion that becoming a
national brand and being successful domestically was not going to be enough, so Haier had to
go out to protect its survivalvi. The joint ventures would mitigate the risk involved in
investing in new markets, offer opportunities of knowledge sharing and learn new culture and
consumer behaviours which could help in tailoring its products to customers hence being a
customer centric organisation and the Greenfields signified that Haier could now fly on its
own without much help from outsiders making it a learning organisation and being able to
control all sections of its business functions without reference to anyone. Chinas entry into
the World trade organisation also influenced Haier to venture abroad and promote its brand as
it is affirmed in Haiers strategy of three steps Get in, move into mainstream, leadership vii.
Haier also used its localisation mode of three in one step coupled with the implementation of
chain management that was helped by computer information systems it had introduced. This
centred on order information flow to improve logistics, facilitate information flow within the
firm and also importantly to help employees to align their value orientation to users needs.
Haier has succeeded in having 29 manufacturing plants and 16 industrial parks outside china
giving it brand recognition and wider geographical appeal.
However, in its bid to conquer new markets in Europe, America and other continents, Haier
has faced a rising and steep competition from well known competitors at home like
Whirlpool, GE, LG and Samsung. The white goods war Haier had exported abroad had
become a menace back home and this threatened its dominance back home .Changing from
an enterprise -centric sale of products to user-centric sale of services due to the era of internet
is a challenge Haier faces as this demands new tactics. Could Haier prevail amidst the new
challenges? Since the Chinese entry into the world trade organisation in 2001 the rules
changed and all Chinese manufacturers had a task of dealing with the new multi global
challenges which include the environmental, management, collaborative, organisational,
learning and competitive challenges hence forcing Haier to re-model itself in the event of
this change so as to maintain its position, competitive advantage and if possible even outwit
its new rivals both home and abroad.( Bartlett and Ghoshal, 2000 ). Can Haier leverage its
synergies to compete favourably? This report will try to examine the routes to Haiers
survival.
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2.2Assumptions
-The market is highly competitive. This is so because of the existence of many manufacturers
both in china and abroad and the fact that china opened its borders to foreign companies
making china itself a global market now.
-Customers have a high bargaining power. This stems from the fact that there are many white
goods manufacturers with unique products and all striving to lower cost to meet the
customers need of value meeting cost.
-The product life cycle of white goods in America and Europe is saturated. These two
continents have been markets for appliances for a very long period compared to Africa and
Asia because most technologies have their cradle in America and Europe.
-Branding and innovation is Key to survival. Branding helps to create a proposition for a
product or service of how a business is perceived and what customers expect out of it.
Innovation is response to the changing consumer tastes and times thus a company that
neglects change in systems, processes, research and design calls for an easy exit.
-The level of entry in this market is high and exit is low. Since Haiers start in 1984 in china
there have been other entrants into the industry like Henan Xinfei electrical 1994, Glanz
enterprises in 1996 and Hefei Meiling Group in 2002 respectively. However there is no
evidence of exits so far.
-Product diversity is instrumental in keeping markets share high. Almost all manufacturers in
this industry have more than 20 products lines to cater for the variety of customers with
different needs.
-Market growth exists outside and inside china. In rural china there are still virgin areas
which need supply of white goods. In Africa also, Haiers presence has not been felt deeply
so there is a chance to tap markets there.
-Consumers of white goods disposable income is increasing. This is evident from the
demographic data and economic indicators of china between 1980 and 2010. This emanates
from the fact that china opened up to the world for trade, the government grants given to
farmers and the value of the Yuan against the Dollar all act as instigators to spend in china.
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2.3 Terms of reference.

Multinational Company: An enterprise that operates in several countries but managed from
one (home) country or generally a company or group that derives a quarter of its revenue
from operations outside it home countryviii.
Glocal: Means a company should think globally but act locally (Kotler and Armstrong,
2007).
Market Chain Management: its a management system based on computer information

systems and centres on order information flow to improve the logistics and capital flow and
to rebuild the business process.
Innovation: Product, service, or idea that is perceived by consumers as newix.
Cost Innovation: A process whereby firms must learn to reengineer their cost structures in
novel ways so they can offer customers more for less (Williamson and Zeng, 2009).
Brics: This term refers to emerging economies of Brazil. Russia, India, China and South
Africa.
Mercosur: This Refers to the free economic trade area in South America that includes Brazil,
Argentina, Paraguay and Uruguay. It is referred to as Common Southern Market.
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CHAPTER THREE
3.1STATEMENT OF THE PROBLEM.

Haier faces problems different areas as highlighted below.
3.1.1 International Marketing Management.

-Market entry strategies regarding time of entry: Haier has always pursued a policy of
being a late entrant in the industry in its internationalisation phase. All the developed nations
Haier established itself in had already been occupied by other industry giants.
-Marketing and Advertising: The way Haier has communicated to its target market lacks
some effectiveness. The choice of media used to get its message needs to be improved
3.1.2 Managing Human Capital

-Talent management: Means managing employees who are exceptionally skilled and can
consequently uplift the image of the organisation through their work. The problem at Haier is
about other employees who have other attributes and not talented but need to be recognised?
-Appraisal and Evaluation System: Haiers evaluation and appraisal system does not
consider line manager accounts of the employee. All evaluation is based on individual
employee output and does not consider other crucial elements employees possess like attitude
to work and authority, seniority and loyalty
-Motivation: Issues of how to meet the needs of workers are not discussed. This prompts
questions of how does Haier motivate its workers the fact that they the centre-pin of most its
activities that have sprung them to industry stardom?
3.1.4 International Business

-International Marketing: Despite the fact that Haier is many countries, it has not broken
through the retail British market and many other African and South American markets.
Consumers still have no idea of what Haier does or means
-Global Localisation Strategy: The Glocal strategy employed by Haier works in developed
nations at large. In Africa where they have facilities, this does not apply however much Haier
professes to align its orientation to user needs and it is also expensive.
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-Inadequate Competition in High End Market: Haier concentration in the mass markets
creates a loophole in its marketing strategy because of less effort to tap into the high end like
the automobile industry has done
- Global Trends and directions for example changing consumer behaviour for green
products. This problem emanates from the Globalisation trend where customers needs have
converged and what is needed in developed markets may as well be demanded in emerging
economies, customers want value from products and need information about products they
use.
3.1.4 Strategic Management

-Strategic Choice for example Hard Places First and Easy Later: This strategy echoed by
Zhang Ruimin meant that Haier ignores less competitive markets and first gains a strong
foothold in the highly competitive ones to create a brand and prestige which would help it to
have a walkover if it embarks on a plan to invest in less competitive markets.
3.2 PLAN OF ANALYSIS.

The plan of analysis will incorporate strategic models and tactical models.
3.2a The BCG Matrix is to be used when a company has a portfolio of products which
may have both low and high growth tendencies. Its useful in identifying and assessing the
priorities for growth in a product portfolio which can substantially lead to high revenues,
growth of a given business unit within a company. If a product/business unit is assessed
according to its market share and market growth then it can be classified as a cow, star, dog or
question marks and this classification will determine whether it needs more cash injection or
not. From the identification of what a business unit needs, then a firm will either hold, divest,
harvest or build. In using the matrix it is salient to know the relative market share because
markets are sometimes not clearly defined (Assen et al, 2009).
3.2b SWOT Analysis helps in allocation of resources, matching resources and capabilities
to the competitive environment in which the organisation operates. The SWOT Analysis
looks at the companys leverage able strengths, existing weaknesses, feasible and desirable
opportunities and impending threats. Imperatively, the firm has to make an opportunity
analysis because it depends on this to survive. If opportunities are merged with a firms
strength which is the SO strategies, then it is able to get out of trouble easily and also gain a
14
competitive advantage as it can fight back or even attack vigorously. It can be useful in
devising and selection of strategy as well as working as a tool in decision making situations
provided the desired objective has been clearly defined (Assen et al, 2009). It will be used
because it helps with strategy formulation.
3.2c Porters Generic is a model that involves a firm choosing cost, differentiation or
focus as a strategy to out compete others. If a firm chooses cost then it embarks on a plan to
lower cost in all its activities so that it gains competitive advantage and a proposition as a low
cost firm, and the same will apply to the other two strategies. This model will help in
identifying the key strategic direction to be taken by Haier to gain, maintain competitive
advantage in the wake of uncertain economic industry environment. (Harding and Long,
2006)
3.2d Value Chain will be employed. It shows how inter-related activities of an

organisation can contribute to the overall value created to fulfil customer needs. (Harding and
Long, 2006). This model will be used to wholly understand its competitive advantage by
linking the different Haiers activities that help to create value proposition while minimising
costs and it can be useful in case of outsourcing. The primary and support activities should be
analysed for their added value and how this value in relation to cost can lead to profitability.
Value chain can be helpful in mergers, acquisitions and strategic alliances where firms may
have different strengths (Assen et al, 2009).
3.2e Porters Five Forces tool demonstrates how a firm can be affected by the different
acting forces and how it needs to safeguard itself from them. This model might help a firm to
again insights into the area where it operates by analysing attractiveness of new industries
linkage to profitability of services and products. It also helps in evaluating the position of the
firm in the industry against the different competitors and also helps in assessing the
competitive ground form all dimensions based on the five fundamentals (Assen et al, 2009).
It will be useful because it is vital in strategic planning, development and helps a firm by
creating a better position to counter attacks from the forces.
3.2f Pestle Analysis. This gives an overall outlook into the whole environment if a
business is to make strategic decisions of survival because the variety of factors will affect its
performance if not analysed well. It will be useful because its used as a checklist in the
planning process and also management development because managers become less insular
as they consider the effects of external factors on the firm. These factors may range from
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taxes, interest rates, regulations, consumer behaviour, demographics and government

intervention which can be termed into political, economic, social, technological and legal
factors. A firm has to investigate which factors can affect it more and then devise means to
counter these threats not to interfere with its plans and objectives.
3.2g Blue Ocean entails a firm to create demand or a new market within an already
existing market. It concentrates on what customers value than what competitors do. It will be
useful because it focuses on adding direction to the strategic management process of a firm. A
firm has to identify opportunities inform of markets which are uncontested and then create
value offerings to the segment that lies within instead of fending off competitors. It can do
this by aligning its system to pursue differentiation and low cost simultaneously and making
the competition irrelevant. This will need innovation and creation of a new value curve as
managers start to eliminate the factors that are taken for granted within the industry, reducing
them below the industry standard, raising them above the industry standard or by creating
new factors that the industry has never offered. This creates a new proposition away from the
red oceans. (Assen et al, 2009)
3.2h Ansoff Matrix is used to identify directions and opportunities for corporate growth
basing on markets and products. Assen et al state that the Ansoff matrix it offers a logical
way of determining the scope and direction of a firms strategic development in the market
place (2001:p.3). It will be helpful because it helps with portfolio strategy and how a
business can connect its current scope of business to the future desired business which is
essential if Haier is to widen geographically (Harding and Long, 2006). Its important for the
firm to know the gap between the present position and the desired future position because of
the existence of a myriad of factors like risk involved, products and markets.
3.2i Scenario Planning: This model premises on questioning future scenarios and making
preparations to counter any possible plausible future models of the world. Because the world
is very dynamic now, if managers can anticipate, see any possible worlds, they will be able to
make long-term decisions for the firm based on this knowledge hence giving it a position thus
Haier is not immune to any business dynamics. A firm has to identify the knowledge gaps and
areas of uncertainty to start a scenario planning process. A team that is set up to spearhead
this process is supposed to work out possible future events and communicate it to the
organisation and possible future strategies drawn out for any eventualities (Assen et al, 2009).
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3.2j Schools of Thought: There has been a great debate on the strategy formation issue
however a group of scholars like Mintzberg et al (1998) agreed upon ten schools in strategic
management. These models strongly help in the management process. They include the
design, planning, position, entrepreneurial, cognitive, learning, power, cultural,
environmental and configuration schools of strategy formation. It is beyond this brief study to
explain all the benefits of the schools. The basic scope in this study will cover the learning,
entrepreneurial and environmental schools of thought.
3.3 Ethical Issues.
The information used in this report is secondary and collected from textbooks; Haier
websites, Reports and journals. All the above sources of data have been used in context to put
together this report and shall not be misused but used in accordance to ethical considerations
in a bid to enrich my research only.
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CHAPTER FOUR
4.1 ANALYSIS AND FINDINGS.

Haiers SWOT Analysis entails internal strengths and weaknesses and the external analysis
involves the leverage able opportunities and potential threats. After carrying out analyses,
then potential SWOT interactions shall be drawn, drivers for change will emerge from these
interactions, priorities set and leading to formulation of strategies.
4.1.1 INTERNAL STRENGTHS.

Brand Strength. Haier prides itself with a reputable brand that has been unmatched in china
and globally has caused tremors in the industry. Haier was voted number 10 by the American
Business week as an innovative company in 2010 and in June 2008 it ranked 13 th and 1st
among all the Chinese companies on worlds list of the 600 reputable companies (Chan,
2011). This implies that Haiers brand commands respect because of its quality, good design
and customer service which has led Haier to continue expanding into a recognised
multinational as profits increase tenfold.
However, this has been so due to the good PESTEL Analysis Haier undertook before
venturing overseas. The political and social climate favoured it in Europe and America. Both
markets were politically stable with sustainable GDPs which meant that the consumers in this
mass market were able to buy unique products. The world trade organisation had also
challenged china to open up which pushed Haier to explore further too. When Haier took a
study about Wal-Marts customers, it clearly identified their needs and offered products they
needed. The joint ventures created, gave them a legal platform to explore more hence being
the position they are in now.
Innovation is another strength Haier possesses. Haier has inculcated in the organisation a
management system that allows no faults and demands improvement every day. Its Overall
Every Control and Clear management style is a winner and pivotal in their success. Haiers
logo of made from design, made from innovation explains why they lead with 7,000
innovators worldwide which resulted in 9,258 patents coupled with 2,532 certified inventions
and 589 intellectual property rights. This has led to Haier gaining a bigger market share and a
competitive advantage as it dedicates 4% of its revenue to research and development
annuallyx.
However, this innovation is not just a strategy but a response to survive and the porters five
forces explain this. The fact there are many substitutes in the appliance industry, Haier has to
18
enhance customer value by adding quality and utility through innovation as it may reduce
attractiveness of substitutes (Peng, 2009). Also in the appliance industry, firms dont depend
on each other which breed rivalry and in case the economic growth is low, then fierce price
wars emerge thus Haier to compete favourably, resorted to innovation through market chain
reengineering and now digitised refrigerators which keep the price high thus a sustained
profitability level.
Peng states that if firms can sell to numerous buyers, identify clear value added, provide
differentiated products....buyers will have low buying power (2009:p.42). The customers of
home white appliances have a high bargaining power but Haier has crafted a strategy of
manifesting added value and differentiation in its products for example in June 2011 haier
was to showcase its first three A+++ energy class appliances and it Glass design range. These
appliances would reduce energy consumption by 75% and an integrated LCD panel would be
visible in its 3 Glass design range. All this is evidence of added value and differentiation as a
generic strategy and this uniqueness will draw more customers to haier productsxi.
Global Expansion. Haier has managed to reach several mass markets in almost all
continents. Its presence is felt in over 30 countries in Europe, 165 countries globally, 7
production facilities in Africa and Middle East and 10,451 sales networks in Asia pacific.
This has led them to create a customer centric approach in every region to meet consumer
needs thus having to Glocalise products. Haier appreciates that all people are different and it
has provided something for everyone in their product portfolio which is evident as American
refrigerators are totally different from those in the Hong Kong market hence in
December2009 Euro monitor study concluded that Haier brand had 5.1% market share in the
home white appliances marketxii.
Global expansion has been possible because of the PESTEL Analysis. Because of the legal
factor from the world trade organisation that china should open its borders to the outside
world trade, Haier had a chance to export its products to new areas hence having both market
development and diversification simultaneously which would in future lead to haiers
increased growth rate. In this the Ansoff matrix was applied to gain market share.
Product Diversity. Many Chinese firms that diversified ceased to exist. This acted as a jinx
and firms feared to take that path. Only Haier diversified with production of microwaves,
televisions, cell phones, air conditioners and vacuum cleaners. Zhang retorted once that ...
From the consumers perspective its not diversification but specialisation (Yibing, 2003). In
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this Zhang meant that they target the same customer group that will continue buying different
Haier products depending on the precedent product quality hence having more loyal
customers who sustain the business.
This diversification strategy of introducing new products to new markets for example the
compact refrigerator in America helped haier capture the office workers and students market
leading to Brand recognition easily. In china it was product development because
microwaves, vacuum cleaners were being sold by haier. This shows how the Ansoff matrix
was used.
Speed and Differentiation. The speed advantage makes Haiers customers to trust it
completely and given the changing customer needs which need versatility of firms to respond
in the quickest time, Haier has created a proposition for itself. Haier can manufacture a wine
cabinet in 5months compared to the 18months from its competitors and this resulted in Haier
gaining 50% market share when it sold 55,000 of the 100,000 sold in 2004. With
differentiation, they managed to tap into a market of students by creating the compact
refrigerator that could be used simultaneously as a computer desk. This is a true example of
blue ocean strategy as Haier created demand in an already existing market.
4.1.2INTERNAL WEAKNESESS.
Ineffective Marketing and Advertising: Though Haier holds the top position in the white
goods industry, there has been a continuous failure in its marketing strategy and advertising
campaign. Using the marketing mix approach of price, product, place and promotion, a
systematic failure exists within Haier because Haier has not sufficiently promoted and
communicated its product globally. Many prospective buyers are not aware of Haiers
+products given the fact that it sponsored WWF earth hour operation in Europe, America and
China. Haier supports the Arts, sports and culture but all of these endeavours are in Europe
and America if not chinaxiii.This raises a of question what about Africa, the middle east which
are not yet saturated and the middles classes are increasing as Wall and Reese (2001) assert
that successful promotion helps a firm to spread costs over a larger output.
Wage, Motivation and Appraisal Systems: Haiers human resource management system
fails to address issues of ethics and creation of human relationships as the Chinese culture
purports. The workers at Shunde Haier factory wages are determined by the evaluation
method which considers output of jobs of workers (haier salary). Evaluation is carried out on
an individual basis through the resource passbook and the three financial statements each
20
employee has to show their performance from to be judged(Yibing, 2003) .No team work is
allowed and managers and engineers are paid according to the performance of the new
products and promotion is not based on seniority, attitude, age, sex, loyalty to Haier, but by
performance paid on a piece rate which holds hostage many Chinese females who work at
Shunde Electric Haier plant (Yidan,2009).
This has been possible because of the value chain process haier uses to cut costs and optimise
performance through synergies which benefits haier as a firm. However, on the employees
side, ethically this type of management takes advantage of workers because of high
unemployment; and judging the employees by work only is unfair because no evaluation is
made by managers to determine other variables for example attitude and loyalty to work. This
can create de -motivation and no connection to the firm as the employees intrinsic needs are
not met which at a later date might explode into unimaginable employee behaviours that
could lead to Haiers collapse or being dysfunctional as the employees feel disrespected.
Bowie (1999) argues that the Kantian second formulation says human beings need to be
respected as they have dignity and an object that has dignity is beyond price which is totally
different from what haier does. The teams that Haier created later which recognised only the
talented would cause resentment and discontent among employees who may feel that they are
not valued.
Lack of Core technology that helps in production of the core components needed in their
products. Haier depends on Mitsubishi for the compressors that are put in its air conditioners
and Phillips has been providing the core components that are used in haiers televisions. This
is a weakness which might hamper differentiation as the porters generic model calls for
extreme uniqueness to gain competitive advantage (Yidan, 2009).
Neglect of First Mover Advantage: When Haier decided to go global, Haier chose hard
places first and easy later with the perception that if they conquered the first world, the
emerging economies would just fall prey to Haiers products with ease. However, Haier
forgot to take advantage of first mover benefits in places like India and Africa. Haier could
have amassed a lot of profits because the consumers in these markets were not able to
purchase Whirlpool or Electrolux products which means that they could have resorted to
Haiers. There is a problem with the strategic choice of Haier.
Inadequate Competitiveness in High End Market. The fact that Haier leads in china
mainland, outside of china it lags behind a bit in the high end market which is dominated by
21
large ones like General Electrolux and Whirlpool. Haier lags behind in technology and capital
as it specialises more in traditional electric products. Also Haier has a problem of
unsynchronised external information which is tantamount to high costs because the exchange
of information between suppliers and distributors is marred with difficulty compared to
information platforms that exist in china (Chan, 2011).
4.1.3EXTERNAL THREATS.
Economic downturn that started with recession in 2007 poses a great threat to all industries
and Haier is not unique, though in china the government offered grants to farmers to purchase
appliances which boosted Haiers profits. Currently the economic situation in Europe and
America who make up quite a substantial market for Haier is very gloomy. If a PESTLE
Analysis is carried out now for Europe, the consumer purchasing power has dwindled
tremendously and recently because of the European Economic Crisis there was speculation
that china could offer financial helpxiv (Reuters, 14/November/2011). This help would keep
the Haiers European market active and stable in the long run.
Growing Competition in China and Strong Rivals: When Haier decided to capture markets
outside china; Haier became complacent and forgot its domestic market at a time when china
had entered the world trade organisation. This meant that large corporations like Samsung,
Whirlpool and LG could snatch Haiers Chinese market. In china, Gree and Midea other
Chinese competitors pushed Haier to a third position of chinas most favoured refrigerator
whereas Electrolux a highly hitech competitor also launched its talking washing machine
and robot vacuum cleaners. LG, Phillips and Panasonic increased the intensity of the
competition with their home appliances and this put Haier in a very grave position because
according to Porters five forces, this market seems unattractive as substitutes will increase
due to high number of competitors and buyers will also gain high bargaining power as they
have many choices to choose from besides haier products. This can lead to a limit on the
prices and profits hence profits falling at a later stage (Kotler and Keller, 2009).
Increasing Price Wars. Porters five forces explains the existence of price wars as due to
high entry of new rivals into the industry and the white home appliance market is prone to
high entry which has culminated into price wars for example Haiers Chinese competitor
Gome and Suning appliance during the 2010 holiday launched a sales promotions to attract
customers by offering rebate coupons, premiums and special offers of 50yen on television
22
sets (Chan, 2011). This could threaten haiers position domestically as they encroach on its
market and affect its marginal profit.
Chinas Image: China has been branded as the worlds factory because many products are
manufactured in china. Even though corporations like Nike, Logitech and Nokia have
production facilities in china, they have an established brand spanning many years which
built consumer confidence. For Haier being from china and still building a brand, having
made in china on their products in some consumers perception depicts poor quality whereas
if it had made in Germany, the perception would change immediately.
Changing customer needs: In the present economic situation, many consumer needs and
preferences have changed drastically to coincide with their income. Their needs are very
particular and they want to spend less. This threatens Haiers strategies because it has to add
value at low cost and provide its customers continuously with differentiated products. This
calls a for an extreme value chain analysis, research and development to retain its market
share whilst gaining a competitive advantage but in undertaking this process finding the right
resources, right marketing and sales team, support systems and outbound logistics might
prove hard than thought before.
4.1.4EXTERNAL OPPORTUNITIES:
Global economic Integration: Since china entered the world trade organisation in 2001 this
presented an opportunity to export their products in new markets like all multinationals do.
There was market development and diversification as the Ansoff matrix explains. Though this
posed a threat, it was an opportunity to showcase its brand, recruit from international talent,
and acquire needed raw materials from global suppliers. This would give it a competitive
advantage in the long run than only depending on its mother land and no one to compare with
its products to judge quality.
Potential For More Domestic Market: Haier being one of the pioneers in the industry in
china and the strategy it employed of hard first which meant concentrating first in shanghai
and Beijing, there is still plenty of room of room in rural china to exploit the market and this
is possible because the increase in rural spending power in 2010 had increased to 5,919 RMB
from 2,139.7 RMB in 2000. The population below poverty line is 2.1% compared to 3.5% in
2000 in rural areas. So there is an opportunity for haier because rural Chinese want to taste a
good life too. This will be market penetration as they offer existing products to an existing
23
market and if Haier uses the value chain well, added value will help them win customers
from other competitors.
Development of more green products: The international community is pressing hard

manufacturers to produce products that consume less energy and emit low carbon because of
the Global Warming Crisis and china was reported to be one of the highest carbon emission
zones. The fact that haier owns more than 26% of appliance Chinese market, and the market
is growing by 20% annually in need of appliance, this creates a chance to produce green
friendly products as the market does exist and other Governments and International are
lobbying for this trend. An example is when the United States introduced $40million project
that would offer market incentives for Chinese refrigerator manufacturers to produce green
refrigerators. This would help to lower carbon emissions in the long run (Chan, 2011).
In this case the schools of thought are paramount is strategy formulation because this process
calls for a learning organisation to easily adapt to the new industry rules but all this is
possible if the firm has the right entrepreneurial management to communicate and carve out
plans in their strategies to counter industry dynamism and the plans must be emergent in
nature to incorporate any uncertainties that can evolve in due process hence having a flexible
strategy fit for purpose at the cooperate level.
Sub-Saharan African and South American markets: Haier has had a tremendous global
presence but in Africa it concentrated in Tunisia, Nigeria, Egypt, Algeria and South Africa. In
central Africa and east Africa haier has no foot hold and there is a potential market. The fact
that in 2004, the sales revenue was $27million just for 20 African countries, what would
happen if Haier expanded its operations in the remaining parts? xv. Haier has decried itself of
so many profits in this unsaturated market. This is evidence of market development in
Ansoffs model and they have to use the marketing mix appropriately by manufacturing the
right products, pricing strategies, delivering them in the right places and promoting them
effectively to the customers.
Joint Ventures and Core Technology. A viable opportunity awaits Haier in this present
economic climate. Many companies that cannot stand the economic storm offer opportunities
for mergers or joint ventures for example the recently on 19/October 2011 Argos, home retail
group plc announced a joint venture with Haier which is to start in 2012 in shanghai xvi. If
other joint ventures emerge, Haier can utilise this opportunity to learn new technology and
24
marketing techniques. In this it can differentiate more by creating better unique life inspiring
appliances as in porters generic strategies.
Strategic business unit for cell phones: Haier diversification policy led to Haier engaging in
production of cell phones as Zhang Ruimin said that they would develop phones with laser
pens for presentations and voice recording functions way back in 2004 but up to now this
strategic business unit is a question mark in The BCG matrix of Haier. There is a high growth
potential but the market share is low. An opportunity still exists for Haier to turn this round
and get a breakthrough like Nokia and Apple or Samsung which has a large markets share
globally.
Haier as a conglomerate needs to ascertain which strategy to use for example the industry
based view of external opportunities and threats, or the resource based view of internal
strengths and weaknesses that focuses on a firms internal capabilities. A hybrid of the two
would work better.
Scenario Planning.
American and European debt Crisis: Recently the American and European debt crisis has
dominated the news. All governments are trying to reduce the deficit at all costs. In Europe,
Greece retailers have had the worst Christmas sale in history and Italys economy was on the
verge of collapse. The banks in United Kingdom have been downgraded by the financial
body Moodys investor servicexvii. However every state is carrying out economic reforms to
adjust to the changes. But if the changes do not work out this will mean that banks cannot
borrow small businesses because the borrowing costs will be very high, for royal bank of
Scotland 82% of shares is owned by the public. A stable economic revival is not a guarantee
in the near future.
The negative effect is that if small businesses are starved of cash and they are operated by the
public who earn a profit and then they use this profit for spending in their daily lives like
buying Haiers products, this wont be possible anymore. Even more unemployment will
increase which leads to low consumer purchasing power hence a decrease in Haiers
European customer base, leading to low sales hence low profitability and if very unfortunate,
closure of European headquarters like Wal-Mart failed in Germany.
25
The positive effect is that Haier at this moment can draw plans of investing in other areas like
the Sub-Saharan Africa where the financial system is not based on credit. It can increase
research and development into what products fit this specific market at reasonable prices
because there are less competitors and the increase in number of middle class is vast. Haier
should not look at the income of this mass market but at its substantiality because many
customers are willing to buy as they want to live a good life.
Increase in Price of Steel: The basic raw material for Haiers products is steel however the
prices of steel would increase to $960 per tonne by December 2011 a 66% jump increase in
steel pricesxviii.If the price continues to increase, then this will affect Haier negatively by
increasing prices of its products which might further reduce their customer segment as they
cannot afford to buy leading to low profits for Haier which will eventually affect their growth
strategy. Haier can then craft plans for more research and development to use non steel
materials in its products but it can be costly and time consuming still.
Positively, the price increase will instigate Haier to invest more in research and development
by finding less costly and reusable raw materials to cater for the period in case it happens. In
this they can also find an advantage of creating more products out the new raw materials they
had never thought of or even now be in a position to change strategy as the new raw material
may lower cost of production in the long run and force them to invest in new markets they
had never thought of before.
4.1.5RESOURCE AVAILABILITY AND CONSTRAINTS.
Research and Development: Haier commits 4% of its total revenue to research and
development every year. This is to respond to the customer needs Haier has encountered and
is keen to satisfy in order to retain its market position and fulfil its core values of quality,
innovation, customer service, design and performance. These entire core values resonate
through Haiers activities therefore Haier is financially able to effect change.
Human Resources. Haier has an advantage of a multitude of talented designers in its centres
in china and abroad. They recruit talented individuals globally and in most countries they
recruit people who have worked for bigger rival firms with enough experience and business
acumen to remove all the bottlenecks that exist. Every employee works with the core values
in mind hence no deviation from business strategy.
26
Marketing Research: Haier faces a constraint of not having enough external market
research. This acts as a bottleneck to continuous expansion and growth especially in the
emerging economies where there are no institutional structures that gather genuine market
data and interpretation. In other areas there are no competitors in the same industry to
compare with and this makes it difficult to benchmark or even carry out customer needs
survey.
Strategic choice: This also constrains any further undertaking because the strategy Haier
holds has been proven working all throughout its history. The strategy of hard first and easy
later may have its flaws but its track record has had no outright blemishes so far given the
recession and the cash flow suggests that its the right craft; and given the administrative
heritage of this organisation, changing ingrained values can be so difficult.
4.1.6 Findings and Results.
From the above analysis it is important to point out the areas that need attention and the
findings are:
(1) Haier has not done enough in marketing of its brand to some parts of the world
despite having high markets shares in some. Haiers competitors can use this loophole
to counter Haiers expansion programme. Haier has a global high global presence and
it is the industry leader at the moment. However, this leadership emanates from a
concentration of its products in the developed world and the segment that has haier
goods exposure is mainly in china. There is need to enlighten the world more about
the existence and value of Haier products.
(2) Though Haier has the technology to design good cell phones this business unit still
lacks a sustainable market base and market presence. It is very rare to find haier cell
phones here in the United Kingdom. An online survey about the most popular phones,
haier has no placexix ; and another online survey about the 50 best used smart phones,
still haier cell phones are not visible. This means that this business unit needs total
improvement or closurexx.
(3) Strategically, given Haiers entrepreneurial capability, Haier set out to be a late mover
in saturated markets and more competitive places first than the less competitive.
Currently this needs to change. Given the good management of Haier that has even
drawn scholars and academics to analyse, sound financial standing and business
model, it defeats understanding why haier does not take advantage of unsaturated and
27
less competitive markets first because the resources needed in such markets are less
and markets are predictable.
(4) There is more market in rural china, sub-Saharan Africa and South America for Haier
products. Haier should use its resources to compete effectively before others do so
.China is so big but Haier neglected some parts rushing to gain its share in new hard
territories. Un-tapped markets or partially tapped markets still exist in Africa and
South America where there is a large substantial population that needs haiers
products but there is no adequate provider.
(5) The global customers trends are increasing especially as regards to relationships,
green products and haier needs to pay heed to understand its customers needs. This is
form the fact that service quality has become and part and parcel of any business to
remain operating and retain the most valuable and protect the vulnerable customers
from switching to other brands.
(6) Many small and large competitors are threatening Haiers position both domestically
and outside of china competing on the same tactics like Haier and Haier needs to
protect its customer base or else will lose its grip. Because of the low entry barriers to
this industry and the fact that apparently technology is the rise, electronic companies
are diversifying to gain economies of scale, haier faces new entrants and old players
as innovation is increasing. Haier needs to be in the look out always
(7) Haier needs to skilfully utilise the talented teams instead of causing disharmony
internally among other non- talented employees. The ZZJYT model used to attract
more talented employees is not unifying enough because its purpose is to cater for
customers needs whereas it fails to address employees needs which are intrinsic in
nature or hygiene factors. These employees needs if not met may lead to de-
motivation and dissatisfaction as some employees feel being left out because their
performance is underrated hence leading to low individual output. In other instances
the coordination among groups can be reduced because each ZZJYT group wants to
retain valuable information to beat the rival team which can be detrimental to the
organisational goal.
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CHAPTER FIVE
5.1PROPOSED SOLUTION TO THE PROBLEM

In 2011, haier has been voted by Euro monitor as the white goods industry market leader with
7.8% market sharexxi. From the SWOT interactions of SW, ST, SO, WO, WT, TO, Strategies
will be formulated to address problems, challenges haier faces and these will become
objectives to be achieved according to urgency and importance to haiers activities globally.
High level objectives.
-Increase Haier Global brand Awareness, Knowledge and visibility.
-Increase market share in rural china, Africa and South America.
-Protect its global customer base and remain the market leader in 2012
Medium level Objectives.
-Become a first mover in untapped markets and go to easy places first.
-Respond to Global customer trends vigorously.
Low level Objectives.
-Improve the Cell phone strategic business unit
-Improve team work, talent management and motivation among employees.
5.1.1HIGH LEVEL OBJECTIVES

Increase Haier Global Brand Awareness, Knowledge and Visibility.
Marketing Plan. Strength/Weakness Strategy
Haier holds the worlds largest market share of 7.8% in the white goods industry which is a
tremendous strength and haier has to utilise it to counter its weaknesses. Being am market
leader would mean that haier is known everywhere, However many customers have no clue
what haier is about, its products and brand. The quote by Zhang Ruimin that Whenever
Haier is mentioned, the entire world will know about it has failed in purpose. Haier has to
communicate its brand identity through massive marketing and advertisements to the
prospective customers in order to learn about the haiers brand portfolio, product quality and
value and this will create brand equity in the minds of the consumers. Once this is
29
established, Haier products will be positioned in the customers minds for their value worth
in relation to substitutes making the switching cost high.
In trying to market haiers products, the effective but less costly channels of communicating
the brand must be adopted and this will depend on the market segment chosen. Marketers
must make sure that customers get the right experiences with the product and their marketing
programs to create the desired brand knowledge (Kotler and Keller, 2009). Haier can
advertise by choosing the cost innovation strategy which entails doing more but spending
less, do the same for less or do less by spending less (Williamson and Zeng,2009 ).
With regards to cost innovation, Haier can use this strategy by marketing and advertising
cheaply for example by putting its name on luggage trolleys on airports in Asia or countries
where it operates or wishes to expand to like Taiwans Acer did and they experienced
tremendous visibility relatively inexpensively (Williamson and Zeng, 2009). Haier can also
think of other cost-effective marketing techniques like carrying out promotional festivals in
cities where it is launching. This worked for IKEA in America and Intel held the unwired
day in different cities by carrying out product demonstrations, and prize giveaways. They
used $300million total media campaign for Centrino and the return was $200billion in just
9months (Kotler and Keller, 2009). This is evidence that customers once informed of the
products quality and value, with the right communication channels will respond by
purchasing the product consequently creating a large customer base. Both these marketing
strategies of cost innovation and promotional festivals offer brand knowledge and
information to consumers and by also using social communities, Haier can save money.
Increase Market Share Rural china in Africa and South America. Strategy/Opportunity
Strategy
There are over 640,000 villages, 35,000 towns and 2812 counties in rural china (Chan, 2011).
Haier has the largest market share in china and should not ignore the needs of this large
domestic market that catapulted it to fame. Haier needs to carry out extensive and
comprehensive market research of the rural market before the competitors do. for example
Haier has to take note of the reality that electricity in rural china is expensive hence in
developing new products, low energy consuming appliances must supplied to these areas
which relates with haiers value and DNA of thinking what consumers think. Haier has the
capability of creating less energy consuming appliances for the rural customers due to the
innovative designs and numerous awards Haier has received in the same field for example the
30
June 2009 Business Week of USA reported Haier as the pioneer of new generation energy
saving industryxxii.
Sub Saharan Africa is another opportunity for Haier to exploit. Haier has to change its
corporate strategic norm of defining markets by income but by consumption. Haiers
expansion to this region can be an economic boon. All countries that lie below the Sahara
desert are sub-Sahara Africa with a population of over 600million people and still growing.
Return on investment in telecommunications is between 30%-40% and cell phone usage has
brought about a revolution (Mail and Guardian, 23 October 2009) as its stands at a third of
the population. Digital television and pay service is on the rise (New York Times, 6 August
2007).
There is more political stability in the region than before especially in East and Central
Africa. Economically African growth domestic product is forecast by Mckinsey to raise by
4.5% a year until 2015 thus increasing Africans consumer power by 35%. Additionally, there
is an increasing number of middle class earners who are willing to spend on quality and value
as Jo Bowman indicates from Synovate a market research company that people have it
wrong if they think it is all mud huts in Africa, the new middle class takes their children to
private schools, have medical insurance and have the means to achieve their aspirations and
adds by saying that they are beginning to look like the middle class we see in Europe and
USxxiii.The governments are thirsty for Investors to boost their economies and offer
employment. Tax havens do exist and land to build facilities and factories is offered by the
government to large multinationals like haier.
Cheap labour is another incentive that will benefit haier from if haier extends its investments
in other African countries. MTV an entertainment TV channel, has several tailored
programmes in different African countries, Coca cola, Virgin airlines, Vodafone have a foot
hold in Africa and recently easy jets Stelios expressed interest to extend the low cost airline
to east Africaxxiv. According to the Synovate EMS survey in 2010, 64% said they were the
first to buy technologically innovative products,79% preferred to buy well known brands and
91% did not mind paying more for quality. Haier can also benefit from the proposed $1.4
billion railway which is to link Tanzania, Burundi and Rwanda construction commencing
2014 and another one form Tanzania to Uganda xxv.People in Africa want to work and are
skilled and because of the laxity in labour laws, cheap labour cuts down multinational costs.
31
Haier can do this by creating joint ventures or Alliances with Big retailers like Shoprite,
MTN, Game, and Nakummatt in East Africa, Mahima and Casino in Cameroon to introduce
and sell some of its appliances. Undifferentiated marketing is useful here in the first few
years then later creating niche markets because to attract a large customer base, firms must
target every segment to create brand awareness, loyalty and equity. Also this will work if
segmenting the market is not on income basis because income does not predict the best
customers for a product, low income groups market are easy for marketers because there are
less competitive pressures and high consumer loyalty (Kotler and Keller, 2009). This market
is among the worlds 5.1 billion low income consumers, Haier will have a sustainable market
base for a long time hence high profits margins and high market share because this segment
which is 78% of the global population and not cared for by multinationals will shrink by 24%
by 2020xxvi.
Brazil one of the BRICS is a good market. Unilever, Proctor and Gamble have bases in Brazil
and General Electrolux withdrew from Brazil in 1980 leaving the competition to local
appliances manufacturers (Bartlett and Ghoshal, 1998). Brazil has around 180million people
and its growing very fast with and the labour is cheap. Coupled to this is a pool of engineers
from Rio Grande de sol who can offer their talent to haier. This will lead to low cost, secure
market; cheap sustainable labour and free distribution of Haier products to all MERCOSUR
countries tax free hence extending Haiers dominance in the industry and high returns.
However, some risks do exist like Country, Currency, Cross Culture and Competitive risks.
Haier can mitigate these risks through licensing and joint ventures or exporting and later if a
strong market base is established then a Greenfield approach should be embarked upon.
Protect Haiers Global Market Base and Remain the Market Leader in 2012.
Strength/Threat Strategy.
As a market leader Haier and in a period of looming economic crisis globally, protecting
Haiers market share not only becomes necessary but essential. Hiears speed and
differentiation is key in countering this threat and turn it into an opportunity. Haier can
increase the usage of its products by customisation. In this it will be able to differentiate its
products and service exclusively not falling into what hazard business professor Michael
porter refers to as competitive convergence meaning that all competitors in the industry
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compete on similar dimensions like cycle time, quality, after sales service and supplier
partnerships which dimensions are easily imitated hence firm losing its competitive edge like
many Japanese companies in the 1980s and 1990s did and lost out because they were selling
high quality goods at low prices.
Haier should not compete on operational effectiveness to protect its market because this can
dangerous and may lead to mayhem. Improving quality and cost alone simultaneously can
lead to a firms to demise (Yi and Ye, 2003). It is better to compete on strategy which is about
breaking away from the mainstream of doing things for example offering a different kind of
service and product from rivals. Dell has succeeded in this by focusing on customers, direct
sales and low inventory. Haier can succeed by service and product differentiation with
extreme design and speed for example what Haier did for their customer Song Mingwei who
booked a small BCd-130E refrigerator with a left open door as all in the market had right
doors to be delivered in 7 days. Haier produced it and delivered it on time (Yidan, 2009).
With this strategy, haier will keep its market position intact.
Another strategy is by increasing the usage potential of Haier products and this can be
achieved through intensive innovation and product development whereby a product like a
refrigerator has different compartments for different items to deter customers from buying
from Haiers rivals.
Furthermore, to retain market share, Haier should continue do more in its core competence
for example, Haier has an edge in design and localisation. Executing this core competence by
putting more emphasis on extreme design, simplicity and localised products, Haier will
manoeuvre and compete favourably against value based manufacturers globally because this
is paramount to its survival and that managing national differences is a primary goal for firms
and those that had neglected it should consider adopting local conditions.(Ghemawat,2010) .
5.1.2MEDIUM TERM OBJECTIVES

Become a First Mover in New Markets and Go easy places first.
Strength/Opportunity Strategy.
The corporate expansion strategy of Haier needs revision as regards to time of entry in new
markets. In all Haiers expansion programme, Haier has been a late mover and going hard
places first. As a first mover in developing regions like Sub-Saharan Africa which has a
33
population that falls within the 78% global income population but sustainable and substantial,
Haier can nature this customer base by using cost innovation techniques given its brand
strength, innovation and financial resources because as Ghemawat points out that large
developing economies still represent the best market opportunities (2010: p.57).
Haier being a first mover can use cost innovation in a way that it can sell cutting edge
technology at mass market prices. This can be achieved by using cheap alternative raw
materials because this would reduce manufacturing costs. This would lower the consumer
prices giving haier a mass customer base and high market share. Secondly haier can offer a
large choice of customised products that will cover almost every price point segment of the
market. This will be possible because of the cheap labour costs, the flexibility due to
automation and human processes to deliver quality for example Chinas Good baby offers
1600 types of children strollers (Williamson and Zeng, 2009).
In addition, as a first mover Haier can turn niche into mass markets in sub-Saharan Africa
like it did in America with wine cellars and gained 60% market share in less than a decade.
Shinco also turned a niche into mass market by its portable DVD player and Williamson
points out that companies do not lose money when they move from high to high volume
products (Williamson and Zeng, 2009). From this analysis haier can enjoy its first mover
advantage and create a barricade for its self before rivals come to encroach on its market.
Haier can have facilities in this region to mark its existence and penetrate deep into the
interior to create more markets not only carrying out operations in urban centres.
Respond to Global Customer Trends Vigorously.
Strategy/Opportunity Strategy.
Consumer behaviour cannot be predicted but understanding buyer behaviour is central to

marketing management because marketing management ends with consumption so marketing
management should strive to understand what customers like first (Kotler et al,2001).
Consumers vary in geographical location, sexual orientation, age, gender, cultures and
education which means all need different services and products. Recently there has been a
rise in need of green products worldwide as campaigners of Global warming accuse
corporations of production of high carbon emitting products.
Haier has the ability to respond effectively to this by increasing the production of green
appliances to meet the changing consumer need for them and act as a socially responsible
34
multinational which can lead to more prosperity and trust among consumers. This can be
done by resorting some of the revenue to research and development of environmentally
friendly and less energy consuming green appliances for it global market and this resonates
well with Haier mission of improving the quality of life and focusing on customer needs
which is also a core value. In June 2009, haier received the Green enterprise award and in
2010 Haier received the Energy-saving china contribution prize.
A myriad of customers now want direct interaction with the producer. As a customer centred
strategy and a core value of Haier, Haier can use direct sales as a strategy to sell its
appliances and in doing this Haier will learn more about their customer needs, sell at low
prices as there are no middlemen and develop longstanding relationships as Dell computer
has succeeded with this strategy.
5.1.3 LONG TERM OBJECTIVES.
Improve Cell Phone Strategic Business Unit, Weaknesses/Opportunity Strategy.
With the Weakness Opportunity strategy, Haier should try to reduce the internal weaknesses
by leveraging the external opportunity. The cell phone business unit is not very strong
compared to rivals like Samsung, Nokia and the new HTC given Haiers innovation
capability and OEM management. This business unit could turn from dog into a star
especially in Africa if haier creates cell phones that adhere to the heat and dust conditions at a
favourable price. Haier can do this by forming strategic partnerships and alliances with other
technologically endowed multinationals that can help it boost this strategic business unit and
also help to market it the developed world where Haier mobile phones like the CDMA
D1000. C1700 and F1000 have little or no shelf presence. The partnerships will increase
Haiers cell phone business strength and competitiveness. Repositioning its self will help this
business unit.
Improve teamwork, Talent management and motivation among Haier employees.
Threat/Opportunity Strategy.
The fact that Haier has turned to be service firm, employees well being becomes imperative
and a high priority necessity for haier to consider. Haier has to differentiate its services from
that of competitors and if the employees are happy, then customers will be happy leading to
high customer retention because the employees will take care of the customers needs, which
35
are a core value of Haier and given the high rivalry in this industry, competing on strategy
leads to success.
However, the talent teams Haier uses have a good objective but the way they are used is
divisive among other haier employees because only the talented are chosen for certain team
tasks leaving out the non talented but who may have other attributes like company loyalty,
attitude to work which elements in an employee are vital. This can create dissatisfaction as an
employees intrinsic needs are not met which are need for belonging as the Maslow hierarchy
of needs states. Haeir can turn around this threat into an opportunity by continuous training
and development of other employees in tasks they enjoy to become better that leaving them
on the lower level of the talent ladder and by recognising their work in other forms like
outstanding loyal employee awards programs or on spot recognition and offer of shares in the
organisation. This will motivate the employees even further.
Another problem with ZZJYT teams (zizhu jingying ti/ self-managed teams) is that they
impede the sharing of knowledge with other opposing talent teams. This reduces cohesion
and cross functional coordination which benefits Haier mission and objectives. It can cause
internal rivalry as groups of employees are clamour for prestige and bonuses. Presently, speed
in decision making is crucial due to high competition, being reactive and proactive is salient
and innovation is key to survival. Such internal rifts should not hamper organisational goals
and Haier needs to draw boundaries to these groups as to how much information or
knowledge should be withheld and even create more flat management structures to speed
information flow.
This consequently if communicated to all Haier regional centres would help employees
become more attached to Haier as were the employees of Matsushita, increase human
productivity, employees loyalty, cohesion and ultimately improving service quality and
delivery creating a more substantial customer base for Haier as Ritz-Carlton a hotel chain in
America well known for its outstanding customer service because it takes care of its
employees needs vigorously to retain its competitive edge.
36
5.1.4 IMPLICATIONS TO STAKE HOLDERS.
Shareholders:
By expanding in different regions, the shareholders dividends in the short-term will be low
because of the massive investments in rural china and abroad, expanding the business scope
and improving the marketing outside of china to gain a wider customer base and market
share. In the long run when the markets stabilise, share holders will enjoy a high return on
investment, dividends and capital growth.
Environment:
Due to the fact that Haier has to produce environmentally friendly appliances as response to
changing consumer needs and as a socially responsible conglomerate, the environment will
benefit by the less consumption of energy and less emission of unfriendly carbon gases that
destroy the ozone layer and lead to Global Warming and pollution. In the short term this may
affect cost structure but will draw customers to Haier. This is an ethical issue which may
increase sales in the long run.
Customers:
In this case, Haier customers will enjoy high value home appliances because of the of Haiers
core values of satisfying customer needs and the race to improve the products to meet the
green energy standards hence lowering the cost of energy bills monthly consequently creating
a pool of more loyal customers for haier and hence improving profitability.
Governments:
Employment opportunities will increase and this benefits the countries where Haier expands
because of a large taxable base of its citizens and form Haier. The agreements Haier signs
with different countries will help improve other infrastructure in these countries.
Employees:
Employees are the cornerstone of any business. They need to be offered after fair payment
and good working conditions. Haier will benefit its employees if it trains and develops them
to be able to serve its multi-cultural customer base, for example by sending employees to
learn how customers in new regions behave and what they need will aid in making the right
37
research and amendments to strategies to fit different markets and employees having a wider
scope of knowledge of their customer needs so that they align their efforts to meeting them.
Suppliers:
They feed Haier with the raw materials to manufacture all forms of home appliances. Given
the assumption that there are many home appliance manufacturers, this gives suppliers a high
bargaining power to choose whom to supply to at a high price thus gaining profits too.
However this puts a cost strain on Haier as it has to meet the demand of its customers as it
expands. In the long-run, haier to cut cost will devise alternative cheap raw materials from
other sources hence affecting the supplier power.
5.1.4 CONCLUSION
By and Large, this report has examined the implication of haiers growth from mainland
china to its global status in the white goods industry. Using the analytical tools and a SWOT
Analysis, challenges and problems in Haiers strategy have been identified; and through a
comprehensive research and findings, solutions to tackle these problems have been
recommended. Challenges include the need for first mover strategy, responding to consumer
needs globally, brand awareness and maintaining the market leader position.
Recommendations drawn include; use of cost innovation strategies, direct sales, more Glocal
strategy, expansion into un-saturated markets and a need for strategic shift from hard places
first to easy places first so that Haier retains its relevance in the electronics and home
appliance world as well as playing a major role in peoples lives.
This report is an integrated case study and has evaluated different areas that need urgent
attention. However it is not conclusive and further research and in-depth analysis needs to be
carried out to aid business, growth, expansion, marketing and strategic business unit plans.
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Haier's Global Rise from Bankruptcy to Appliance Giant

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HAIER GROUP (Global Strategic Analysis)

HOW A FORMER BANKRUPT CHINESE FIRM EXPANDED TO

AN INTERGRATED CASE STUDY OF HAIER GROUP LIMITED

PRESENTED AS PART OF THE REQUIREMENT FOR THE

1.1Research aims and objectives.

The objectives of this study are:

To Identify the current business landscape of Haier

2.1CASE BRIEF OF HAIER.

2.3 Terms of reference.

Market Chain Management: its a management system based on computer information

Innovation: Product, service, or idea that is perceived by consumers as newix.

3.1STATEMENT OF THE PROBLEM.

3.1.1 International Marketing Management.

3.1.2 Managing Human Capital

3.1.4 International Business

3.1.4 Strategic Management

3.2 PLAN OF ANALYSIS.

3.2d Value Chain will be employed. It shows how inter-related activities of an

taxes, interest rates, regulations, consumer behaviour, demographics and government

3.3 Ethical Issues.

4.1 ANALYSIS AND FINDINGS.

4.1.1 INTERNAL STRENGTHS.

Development of more green products: The international community is pressing hard

4.1.5RESOURCE AVAILABILITY AND CONSTRAINTS.

4.1.6 Findings and Results.

5.1PROPOSED SOLUTION TO THE PROBLEM

High level objectives.

-Increase Haier Global brand Awareness, Knowledge and visibility.

-Increase market share in rural china, Africa and South America.

Medium level Objectives.

-Become a first mover in untapped markets and go to easy places first.

-Respond to Global customer trends vigorously.

Low level Objectives.

-Improve the Cell phone strategic business unit

-Improve team work, talent management and motivation among employees.

5.1.1HIGH LEVEL OBJECTIVES

Marketing Plan. Strength/Weakness Strategy

5.1.2MEDIUM TERM OBJECTIVES

Respond to Global Customer Trends Vigorously.

Consumer behaviour cannot be predicted but understanding buyer behaviour is central to

5.1.3 LONG TERM OBJECTIVES.

Improve Cell Phone Strategic Business Unit, Weaknesses/Opportunity Strategy.

Improve teamwork, Talent management and motivation among Haier employees.

5.1.4 IMPLICATIONS TO STAKE HOLDERS.

Bartlett, C A. and Ghoshal, S. (2000) Translational management-text, Cases and Readings in

Bartlett, C A. and Ghoshal, S. (1998) Managing across Borders, The transnational

Bowie, E N. (1998) Business Ethics, A Kantian perspective. Blackwell Publishers.

Haier Group Company Limited (n.d) Haier Vision.[Online].Available from:

Harding, S and Long, T. (2006) MBA models, Gower Publishing Company.

Kotler,P and Keller, K L.(2009)Marketing Management,13th ed. Pearson Prentice hall,

Kotler, P. Armstrong, G. Saunders, J. Wong, V. (2001) Marketing Management, 3rd ed.

Peng, M. (2009) Global strategic Management, 2nd ed. Cengage Learning.

Shipman, T. (08 October 2011) Confidence in UK Banking system Rocked as agency

Mintzberg, H. Bruce, A. Lampel, J. (1998) Strategy safari, the free press.

Tarr, G. (12 March 2007) Haier Expands LCD TV offering

v www.haier.net/net/about haeir/haier strategy/

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