Introduction
Haier, a Chinese home appliance manufacturer launched a new global development strategy to
bloster its global awareness. i.e. from being a low-cost Chinese original equipment manufacturer
into a world-class household brand name.
Hoped to sell bigger and technology-rich white goods in the overseas market.
Tried to boost brand awareness internationally.
However, profit and margin had been declining since 2001 and increasing operating cost since 2000.
Overseas sales recorded US$ 4 billion in 2005 but overseas profits fell short of making up the target
of one-third of the company’s profits.
Problem Statement
How much risk Haier should bear in pursuing its internalization and product diversification?
How did Haier grow from being a local company to becoming an international company?
Could Haier advance to become a truly global brand?
Would product diversification and design strategy help to improve Haier’s bottom line and develop
its brand name?
Haier’s Development Plan
“The only way we can compete is to take different path”
“To be a STRONG global enterprise, we first need to be LARGE. Therefore, we want to boost our
production volume to reach global level.”
- CEO, Haier
History:
1984-1991: Restructuring and Brand Building
- Zhang Ruimin took control of a loss making refrigerator firm with losses of over $171000/- and
dissatisfied workers
- Zhang’s first task was to reestablish trust between management and workers, tackle the poorly
disciplined workers by shaping the work ethics and setting up a certain discipline for workers to
follow.
- Imposed strict management control on product quality and after-sales service.
- Product that failed to meet the quality requirements were destroyed. (76 faulty refrigerators – first
one himself with a sledgehammer which is now preserved for its symbolism in Haier’s museum).
- Made errant workers stand on red footprints painted on the factory floor and publicly confess their
failings.
- Became a top rated brand in China with sales reaching $125M
1991-1998: Diversified Development
- Took advantage of the growing market and expanded into a range of white goods such as washing
machine, air conditioners and televisions.
1998-2005: Internationalization
- Experienced tough challenges in the overseas market but was proved to be better than other brand
product.
- Generated Sales of $1.38Bn of which one-third was generated abroad.
- Product portfolio expanded to 26 categories with over 7,000 kinds of products.
2006 onwards: Global Brand Building
“We can’t be considered successful unless overseas consumers no longer regard Haier as a Chinese
brand name but a global one.”
Internalization
Haier’s global expansion strategy differed from other Chinese companies in two major ways.
- Establish a brand reputation overseas.
- Unlike other Chinese companies, Haier penetrated the larger and more difficult markets where
most of the global competitors were located and easier markets later.
1. Going the hard way first
Unlike other Chinese companies, Haier penetrated the larger and more difficult markets where most
of the global competitors were located and easier markets later.
2. Quality, Specialization and Innovation
Wrestled with overturning the general impression that “Made in Chine” equaled low quality and low
prices. Speed and Differentiation were two approaches adopted by Haier.
- Speed in being able to satisfy customer’s need as quickly as possible.
- Differentiation in being able to offer new and innovative products to meet different needs.
.
Entered overseas market by introducing one product segment at a time rather than pushing many
products.
3. Design the Unimaginable
Dreamed of becoming a truly innovative global company in the industry.
Products to be differentiated from the competition.
Focused on technological innovations, tried to move up the value chain by applying innovation to
product design and production.
Established a dozen information and design centers in developed countries and was able to turn out
an average of 1.3 new product designs daily for six years consecutively.
Not only did they expand product categories but created market needs by introducing innovative
designs and products
