HAIER – Taking a Chinese Company Global

Q1. Why was Haier so successful in China?

Haier Group was the leader in appliance manufacturer business in China. It was the second
largest manufacturer of refrigerators in the world. This was evidence of its outstanding
growth. Haier strictly abided by its objectives in a very focussed manner. Success of Heir
attributes to many reason including following:

Quality: In order to stay for long for their industry Haier was committed to higher quality
products than their competitors.

Continuous Invention: Haier also believe that differentiation is the key to distinguish their
products. They had about 96 categories with 15100 specifications. With this the company
also ensured healthy currency in the long tally.

Brand Reputation: Haier also believed a strong brand awareness is essential to globalize
their company. Their scheme involved developing trade name around a individual categories
of products.

Customer Service: Another cardinal distinguishing factor was superior after gross revenues
service to its customers. They have service network with 5500 independent contractors, to
provide free temporary repairs and full repair cost within warranty periods.

Operational Efficiency: Haier Logistics served the entire group for all categories. This
reduced transit costs and enabled speedy delivery.

Q2. Was Haier’s decision to globalize into developed markets early on a good strategy?

Yes, i feel the choice to expand their brand into developed market was an honest strategy.
Haier globalizes the corporate with three phases-

• Localize design, production, and sales

• Focus on social awareness of Haier’s name
• Pull in local resource of capital and human expertise

Haier’s strategy to expand its market globally made its path simple. The hurdle during this
option was to perforate the pyramid. However, Haier identified weak configurations within
the top of the pyramid, global part, and perforate it successfully. After perforating it, it started
moving downwards to complete the circular path.

They decided to enter the worldwide market by “first the hard, then the easy” approach. The
brand name created in developed markets gave Haier credibility in other developing markets.
However, this strategy can't be applied by all companies uniformly. Haier succeeded because
it identified a particular need in developed markets and moved in fast to satisfy it.
Q3. Can Haier successfully defend against Chinese and multinational challengers in
China while building a brand overseas?

Haier’s competitive advantages in the Chinese market

 Haier is known in china as a high-quality product – Good brand image

 Haier always close to Chinese customer (design, needs) in comparison with
multinationals – Customer oriented
 Haier invest high in R&D (5 to 7% of revenues) so they launch new product every
year like smart house appliance (cooperation with Huawei/Xiaomi)– Very Innovative
 Haier responsiveness to the market is very high, they focus on meeting customers &
their needs, they had 42 distribution centers in china operation as sales companies -
Good customer relationship
 Haier provide high level of service with better after sales service than competitors –
Happy customer base for good sales
 Haier had very good distribution network, with “Haier logistics” as compare to
multinationals, establishing a logistic network in china is complicated – Very Good in
logistics
 Haier have better & cheaper staff as compare to multinationals.
 Haier have a superior domestic market knowledge as compare to multinationals –
Good in domestic market analysis
 Haier’s employee’s working environment is motivational, innovative, efficient &
internal talent development.
 When multinational are focusing on high production then they focus on “niche”
product.

Q4. Could Haier have chosen to be a pure exporter of white goods from China? Why?

 It could not have chosen to be pure exporter of white goods from China.
 Haier’s business strategy revolved around the closely knit fabric of ensuring product
differentiation in nice markets with high emphasis on quality, innovation and
customer responsiveness as well as highly regarded after sales service, and if it
wanted to succeed as an exporter, the whole so called well woven fabric had to be
exported in any country it wished to enter.
 To obtain speed and differentiation, and challenge existing market players in countries
like USA, they had to ensure to pay attention to the consumer requirements and adopt
quickly and respond to the needs of the customers as soon as possible. This could not
happen if it chose to be a pure exporter
 Further customers would not know the value that Haier brought along with them if
they went in countries only as an exporter and would have not met with acceptance
from customers who would reject them as an “inferior quality good supplier from
China”
Q5. Is Haier’s “three thirds” strategy a viable or wise approach?

 By opening up its share of Chinese market up for grabs by competition, Haier may be
preventing itself from making use of profits earned at home (a formidable part of its
total profits pie) and investing abroad, even though the potential was great
 If it finds a way out and makes sure to distance the competition at home (Local and
foreign) and sustainably maintain its top position in the appliance maker’s list, then
this strategy is very viable and a wise approach
 With its strategy of product differentiation and entering niche markets, it could
capture three thirds of all possible markets targeted only if constant focus on
innovation, operational efficiency and customer service is maintained along with
ensuring on obtaining a competitive local advantage in the target markets outside
China
 They should leave out mature markets and find emerging markets to spread their
reach and score winning runs on the decided strategy