HAIER IN INDIA : BUILDING PRESENCE IN A MASS

MARKET BEYOND CHINA

APMP-04, South Ex, New DELHI
 Group details

Mayank Kumar Dwivedi Nehru Place, Delhi

Arun Kumar Nehru Place, Delhi
Kamal Kishor Pandey Nehru Place, Delhi
Vivek Dutt Saxena Nehru Place, Delhi
Alpana Choudhary Nehru Place, Delhi
Anupam Anand Nehru Place, Delhi
 Case Questions

Why did Haier enter India? What did it plan to achieve in

this new market?
Evaluate Haiers entry strategy in India. What was and was
not working? Why?
Discuss Haiers localization model in India and other markets.
Were they different? If so, why?
Analyse the landscape of Indias consumer electronics
market. What were the Korean companies strategies and
how did these impact the market?
Evaluate Braganzas decisions and actions. What were his
analyses?
Going forward, How can Haier sustain its growth in India?
 Haier - Introduction Summary
In short 25 years, Haier Inc had emerged from being a small refrigerator factory to the worlds biggest appliance
seller by retail volumes
Unlike most of Chinese companies (low price strategy), Haier build its success on the basis of good quality product,
innovation & services.
Haier became one of the top 10 brands in China 1991
In most of the overseas markets, Haier adopted a Three-in-One localization Strategy
Haier entered the global markets and started an internationalization strategy in the 1990s. Starting from European
countries including Italy, the United Kingdom, and France, it stretched over even to the Asian market and opened its
first manufacturing facility in Indonesia.
There are many reasons why Haier made the step to actually go into the Indian market.
First of all, a series of policy changes in the 1990s definitely opened the doors and set the environment that made it
possible for Haier, a foreign company, to enter the Indian market. In addition to that, the Indian market itself was in a
favorable state for Haier.
Around 2003-2004, India had rising disposable income, an expanding middle class, and a relatively low entry
barrier in the white goods market. These conditions were very attractive for Haier to launch its new facility in India.
Haier Launched in India in 2004. T.K. Banerjee, an industry veteran appointed as president of Indian operations.
He wanted Haier to become a top-thee home appliance brand in India
But year after year, Haier India performance was disappointing. Turnover expended by a 7.7% over 5 years.
In 2009, Eric Braganza as the new president. He spotted problem area and revamped entire system, which resulted
growth in market share and overall revenue.
Haiers Corporate Strategies

1984 1991 1998 2005

Brand building Diversification Internationalization Global Brand
Why did Haier enter India? What did it plan to
achieve in this new market?

White Good Market Opportunity

India White Good Market 2000 to 2004
HA sector was growing between 11% to
14% and projected growth was 20% (2005
Growth - HA / CE
~ 2010)
35%
30%
30%
Change in Indian government policy
25%

20%
14% 14%
17%
8.3% GDP and expected 2003~04 and
15% 12% 13%
11% 11% 11% 11% expected to log high growth rates in
10%
subsequent years.
5%

0%
Favorable Market with Rising disposable
2000 2001 2002 2003 2004
income group
Home Appliance Consumer Eletronics

The urban market was mainly a replacement

& up gradation market
Haier Target Acquire 20% market share by
2009 Rural India had an immense capacity for
growth Electrification Awaited
Evaluate Haiers entry strategy in India. What was
and was not working? Why?

Evaluation of Haier Strategy -

20% Market Share by Target Segment : High Income bracket

2009
Product India Centric product lineup
(Refrigerator, AC, Washing Machine, Heaters,
Become one among top 3 brand & Color TV). Bottom mount refrigerator
become one of the most popular product.

Place Establish Haier Experience zone,

Adapt Establish Delivery Retail expansion
Localization Global good
Strategy Brand quality Price 5% premium on products.
image product
Promotion Inspired Living

Summary Overall Haier strategy to be out

Global Branding Strategy - Inspired of crowd, not to be in price war, Innovation,
Living Adapt Localization.
What was and not working?

What Was Working What Was Not Working

Global Brand Image (Haier was able create Deficit in targeted Vs actual value & volumes
themselves & other Chinese brands share

Innovative Product lineup India operations only 2% to global revenue as

New Inovative products were well accepted
by users (Bottom mount refrigerator become
one of the most popular product)
Growth in in CE segment (Opportunity)
Local manufacturing help in reducing timelines
for other markets.
on 2008.
Poor after sales support
Drawback of late entrant in market (While LG,
Samsung & Videocon high penetration in
market)
High competition from Korean vendors in price.

Premium price policy kept away from mass

market segment.

Low market penetration

 Discuss Haiers localization model in India and
other markets. Were they different? If so, why?
India Global
First 5 years, Haier Outsourced production Haier 1st started Three in One plan in
& Sourcing low end goods from local South Carolina.
manufacturers (Color TV) Opened a design house in Los Angeles to
realize true localization.
2007 Haier Acquired 40acre Rolled 1st made in America product in
manufacturing capacity in Pune district. It 2010.
was assembling washing machines & ACs Later on Haier replicated same model in
Europe. Opened sales headquarter in
Factory also hub for supplying to Africa, Italy and opened two design centre's in
Middle east & southern & western Asia. France & Amsterdam.

Objective of Three in One model was to achieve the localization in terms of R & D,
manufacturing & market activities are carried our as per local way

In US & Europe, full version of Three in One strategy opened whereas in India it was only
one manufacturing factory, which was further used for exporting goods to other countries.
Analyse the landscape of Indias consumer electronics market. the
market?

1980 Indias govt. was wary of foreign presences and held tight protocols
1991 Change in policy opened market for foreign investments
2000 to 2004 HA sector grew between 11% to 14% annually & growth
expected to expand at at least 20% between 2005 to 2010.
2005 Color TV penetration was biggest in category (21.3%)
Rural India had an immense capacity for growth because many were still
awaiting electrification.
Urban market was mainly replacement with better products.
Looking at the growth rate projections, vendors enhanced manufacturing capacity
(new plants, production lines.
While market was looking very lucrative at coming months, there was some issues
(Drawbacks)
Heavy taxes, Rural India awaiting for electrification
Since 2005, the market has been plagued by price war & that resulted low margin.
Key Players, LG & Samsung were keeping prices very low to ensure market share but
barely making a profits.
 What were the Korean companies strategies
and how did these impact the market?

LG
Entered into low price strategy with basic function products
After success in low price market, entered into mid end market by offering feature rich
product with brand image - Aspirational brand
Samsung
Entered into with premium product
Later crossed into mass market and released more price sensitive products aiming
premium & large volume categories.
R& D
Both the companies heavily invented into R&D for developing new products as per
market need and cost optimization

Impact
Strategy in both the segments helped brands to gain penetration, market share &
revenue.
Evaluate Braganzas decisions and actions. What
were his analyses?

Redesigned sales structure with 30% new employee

Planned to add 100 direct dealers & 1000 indirect dealers to Haiers distribution network
Focused on dealer retention & treated dealers as Haiers first customer
Offered good quality products and increased gross margin of 10% to 15%, above 10% to 12%
industry average.
Planned to open more experience centers and add up to 700 retail outlets to Haiers existing
4500 across the nations.
Aimed to increase revenue from experience centre from 5% to 12%.
Marketing/promotional budget USD $ 2.7 mn.
Improved existing service setup & process to ensure customer issues are resolved with 6 hours in
Metros.
Planned to open service stations InstaCare in 8 cities
Change in Pricing Strategy Closure to mass market but 3% higher than Samsung & LG
Launched 25 new products and laid down plan for laptop and camera in near future
2010 Haier invested USD22.2mn to upgrade its factory capacity
2010, Haier launched a marketing campaign program You Inspire Us
John Abraham as Haier brand ambassador.
Going forward, How can Haier sustain its growth
in India?

Haier has been able to create infrastructure

including manufacturing capacity.
In order to sustain its growth in India, Haier should
focus on following
Innovation Continuous innovation & New Products
Target Market Rural market is big opportunity, hence
new products needs to be developed accordingly
Distribution needs to enhance it
After sales support Customer is King
Loyalty program for dealers
THANK YOU