Haier In India:

Building A Mass
Market Beyond China

CASE BACKGROUND
Chinese multinational consumer electronics and home
appliances company
Founded in 1984 by its current chairman and CEO Zhang
Ruimin and headquartered in Qingdao, China

Focus on high quality products and services

Became world leader in appliance sale by retail volume in a
short span of 25 years
Global operations began in 1990 starting with exports to US
and Germany, entry into the Indian market in January, 2004

HAIER IN CHINA

1920
s
1980s
1991

Founded in the 1920s as

Qingdao Refrigerator Co. by
take over of an ailing
refrigerator company under the
authority of municipal
government to serve the
Chinese market

Debt of $630,901,
Dilapidated infrastructure
Poor management
Lack of quality controls

Achieved $156 million in

sales under the leadership
of Zhang

HAIER IN CHINADiversification and Growth

Dropped mono-product strategy
and diversified into other
electronics by taking over
Qingdao Air conditioner factory
and Qingdao general freezer
factory

1992-1998: Expansion by
merging with and acquiring
ailing Qingdao Air conditioner
factory and Qingdao general
freezer factory

Focus on quality, improvement of

distribution channels, after-sales
customer experience & brand
building

30% market share by the end of

HAIER GOING GLOBAL

Started Globalization .Launched Internationalization Strategy.
Diversification as their strategy and entrance to US and German
Markets
1990-93 European retailers worried about quality.

19931998

19982004

Turning Point with coming first in blind test and led to gradual rise.
Entered to Middle East Market .Followed single distributor strategy in
US.
Opened facilities in Indonesia , Philippines and Malaysia.

Internationalisation strategy adopted.

Sales increased 15 fold in European Market from 1998-2001
Three in One Localisation strategy adopted

Entered Indian Market

Followed Global Brand Strategy from 2005.
2004-2008 Bought a factory in India in 2008.

ENTERING INDIA

Challenges Go Global
Indian
Favourable
for Entering Go Local
Market
Factors
India before Haier was using Rapid economic Global prowess
mergers and
growth & Rising Presence of local
1991
Less than 40%
foreign
ownership
Tight
protectionist
protocols
Policy changes
opened up
market

acquisitions.
In 2004, Global
presence
already there
Go Global
followed in
China.

disposable
income
Low entry
Barrier
Expected
Growth 20 to
25% in white
goods market

Companies for
acquisition for
growth
Low penetration

INDIA: THE WHITE GOODS MARKET

Growth from 2003-2004 11% - 14%
Expected growth from 2005-2010- At least 20%
Plans were in place for new product lines, new plants,
capacity extensions and even green field investments.
The market was hyped but the demand had not yet
caught up.
For Example, the installed capacity for refrigerators
was 5 million units, but the demand was only 3.3
million units.
The factors that led to demand:

High Scope of growth

The rural market provided a great opportunity because it
was awaiting electrification
The urban market had low penetration:
1.Home Electronics- 21.3%
2.Refrigerators 16.1%

Increasing middle class cohort

There were more double income and nuclear families that

would generate higher disposable income

MARKET COMPETITION
Major Competitors
1. LG
2. Samsung
3. Videocon
4. Godrej
5. Whirlpool
A competitor analysis provides a firm with the
knowledge to leverage its strengths and address its
weaknesses and, conversely, take advantage of
weaknesses of competitors and counter their strengths.

MARKET COMPETITION
CONTD..
Strategy Chinese Market
Known for its high quality product, so very good
brand reputation
Closer to Chinese customers in comparison to other
multinationals.
High investment in R&D, thus new products every
year, very innovative.
High market responsiveness, focusing on meeting
customers needs.
Strategy in American Market
To manufacture quality products and sell at premium
Focus on getting Haier products into large retail
stores such as Wal-Mart and Home Depot etc.
Focus on niche markets to avoid competition from
biggies like GE.

MARKET COMPETITION
CONTD..

Competition in India

Revenues has grown to Rs

1500 cr. In the long-term, Haier
eyeing a 10% share of the
market from the current 4%
and is also looking to be among
the top brands in the next five
years.

The promotional activities done by Haier are

very less.
The in shop displays of Haier products are very
less in number as compared to its competitors.
As survey stated the Haier customer never
switches over to any other companys product.
Haier, being a Chinese company is disliked by

MARKET COMPETITION
CONTD..
SUGGESTION AND RECOMMENDATIONS
Increased promotional activities
Increased
displays.

production

capacity

for

more

in-shop

High margin should be offered to the dealers.(push

strategy)
Company should arrange more demonstration.
Sales promotional schemes in regular.
Products should be made available in at least all major
stores.
New innovative products should be launched in the
market with effective .

PROBLEMS FACED
High Tax
Burden
The Taxes were
high and were
levied at
multiple
levels
Inverted Duty
Structure:
This
resulted in a
situation where
the imported
individual parts
were taxed but
the product as
a whole was
not

Escalating
Price War
The price war
kept margins to
a minimum.
Example: 1.
Price of
washing
machine was
down 25 %
from 2 years
before.

Infrastructu
re
The Indian
government
tended to delay
spending on the
rural
electrification
program and
other infra
projects
This held up
potential
housing
demand

THREE-IN-ONE LOCALIZATION:
GAINING FOOTHOLD
Used localization strategy where R&D, manufacturing and
Marketing activities carried as per local way
In India, initially outsourced production by sourcing low-end
goods from local manufacturers and importing high-end
goods
Eventually acquired refrigeration production facility as
volume grew large enough to justify local production
Factory also served as sourcing hubs to foreign markets
thus cutting delivery time
For sales, developed network of direct dealers and
distributors and opened Haier Experience Centers across
India
The localization model was replicated across USA and
Europe

BRANDING ITS WAY INTO

INDIA
Made in China tag considered a liability worldwide
Launched a global branding strategy in 2004 to raise profile on
world stage
Haier focused on creating a brand name in India by leveraging on
global brand value
Projected itself as global brand delivering latest technology and
marketing products as premium
Survey 5 months after launch showed 97% customers did not
believe Haier was a Chinese brand
In 2011, became 4th most trusted electronics brand in India after
Sony, LG, Samsung ahead of local counterparts like Videocon and
Godrej

MARKET POSITION AND

PRODUCT OFFERING
Premium price strategy

Ready to fight value war but not price war.

Unique products like bottom mount refrigerators, double driving

washing machines- for the energy strapped Indian consumers.

In China, innovative products included detergent free washing

machines and wine cellars and mini bars.

Water heaters with patented Safecare technology was sold.

In 2008- launched commercial use refrigerators, ACs and water

heaters.

Dedication towards customer needs- washing machines to wash

clothes and sweet potatoes!

CHALLENGES
2009- six years in, Haier reported
a mere 3.5% market share
compared to the targeted 15%

Indian operations contributed to

only 2% of its global revenues
.

MAKEOVER
In Sept 2009 Eric Braganza replaced Banerjee as
President of its India operations.
Sales and Marketing identified as weak link

Competitive margins offered to dealers- above the

industry average
.

Number of Experience Centers and Retail outlets

increased
.

US $2.7 Million spent on in store promotions

After sales support improved

Haiers pricing strategy repositioned

SWOT ANALYSIS

Innovation
Brand Name
Product diversification
Financially Strong

Price compared to
competitors

Lower brand-awareness in
India
Only ONE manufacturing unit
in India

Strength

Weakness

Threat

Opportunit
y
Improving after-sales by
setting up units like Insta
Care
Mass-production to Masscustomisation

STRATEGY PROPOSED USING

ANSOFFS MATRIX

PRICING
Changing market landscape
Unpredictable macro-economic variables
Past trends of inaccurate forecasts

OPERATIONS
Increase production base and capacity.
Make in India product for other categories of
products as well such as TV and other new products.
Acquire existing facilities to increase its production
capacity.
Move from Mass Production to Mass Customization.

INNOVATION AND MARKETING

Investments in establishing R&D
centers.

Innovative products to avoid price

wars.

Keep building the brand image and

awareness in India through TV Ads.

PRODUCT PORTFOLIO
Investment into other consumer electronics
such as mobile, small devices, water Heaters,
etc.
Come up with simpler variants with basic
function to target the lower end market.

Premium or technologically advanced

products for the higher end market.

More innovation and focus in the TV product

market.

DISTRIBUTION NETWORK
Combat grey market sales through Anticounterfeiting solutions & online fraud detection
methods

Continue the incentive provided to the dealers.

Increase in Experience Centres

After-Sales support centres by Haier InstaCare to

increase and maintain customer delight.

NEWS PAPER REPORTS ABOUT

HAIER INDIA POST 2010

Link: http://www.business-standard.com/article/companies/haier-toset-up-new-plant-in-north-india-post-may-2015114021800631_1.html

Link: http://www.business-standard.com/article/companies/haier-tobreak-even-this-fiscal-with-33-increase-in-turnover113062000607_1.html

Link: http://www.business-standard.com/article/companies/haiereyes-43-growth-in-2013-113031000169_1.html

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