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Paper / Subject Code: 57701 / Strategic Management

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MMS III University Examination 23-02-2023

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(3 Hours) Marks : 60

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Note: (1) Q1. is compulsory and carries 20 marks

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(2) Answer any four from Q2. TO Q7. for 10 marks each.

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Q1. Read this case study and answer all the questions a), b) and c) listed below

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Case study : The Haier Road to Growth

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Customers always come first for this Chinese appliance maker — even as it continually

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reinvents itself and expands around the world

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Start with 30 million responses on your QZone, Tencent, and other social media platforms — all to a

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simple question: “What do you want in air conditioning?” Then pay attention to the more than

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670,000 people who take part in the online conversation that follows. You’re bound to come up with

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something cool — or, more precisely, “cool, not cold.” This concept, drawn from online responses,
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became the tagline for the Tianzun (“Heaven”), Haier’s advanced household heater/air conditioner/air
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purifier, released in 2014. Many Asian consumers don’t like the chilling effect of conventional
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temperature control. They’d much prefer to be “cool, not cold.” But there’s more to the concept than
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temperature. Air from most such devices in China is dry and dusty. The machines themselves are too
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noisy, or too likely to spread disease (bacteria live in air conditioning systems). Moreover, the
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machines look — well, like air conditioners.

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The Tianzun doesn’t have any of those drawbacks. It is an obelisk-like device with a small wind
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tunnel that draws air through it from the room where it is positioned. It has an Internet connection, so
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consumers can use their smartphones to warm or cool the room while on their way home. Some
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consumers probably knew they wanted that feature, but they didn’t know that they wanted to see the
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circle’s light shift from red to blue as their air quality improved. Once they saw that happening, they
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were hooked. The product is targeted directly at a consumer segment that no other company, in the
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West or the East, has recognized, and that could end up being much bigger than a niche.
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By building cooling machines based on this in-depth and multi -layered approach to consumer insight,

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Haier is following its own core principle: “customer service leadership,” or the necessity to shape the

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future by giving customers what they want most (but may not have yet realized they can ask for).

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Even the decision to use the phrase “cool, not cold” in its Chinese advertising campaign reflects this

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principle. These are the words that customers use themselves, as opposed to a slogan dreamed up by a

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marketing professional.

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Just as unconventional was the cross-functional nature of the appliance’s launch. While the marketing

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staff digested the insights gained from Haier’s online customer interactions, manufacturing was

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already considering what they would mean for production, procurement was speaking directly to
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suppliers about sourcing feasibilities, and after-sales service was developing plans for follow-through.

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Because they worked closely together from the start, managers from all these functions were moving

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forward in concert, addressing possible disconnects as they arose. This allowed products to go to
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market as soon as they were designed and developed, instead of waiting for each department to throw
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its work “over the wall” to the next one. Meanwhile, representatives of each company function
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conducted conversations directly with customers, thereby adding a responsive new dimension to the
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company’s consumer insight capabilities.

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Haier’s rapid introduction of the Tianzun air conditioner is typical of the company’s track record since
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the late 1990s. The company is known for several distinctive capabilities: a precise understanding of
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consumer needs, especially in China and other emerging markets; the ability to rapidly innovate new
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types of appliances that meet those consumer needs; the management of complicated distribution
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networks, a skill honed in the complex Chinese market; and a high level of execution ability,
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including the automation of factories to deliver products to consumer specification. These attributes
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have served it especially well in China, allowing Haier to outcompete more experienced appliance
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companies such as Whirlpool and Maytag in that country. In fact, Haier’s prowess — and particularly
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its emphasis on “what we can do and who we are” rather than on “what we sell and how we make
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money” — shows the kind of capabilities needed by companies that were founded in emerging

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economies if they are to succeed in the global sphere

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Water purification is another example of the increasing scope of Haier’s collaboration. The company

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entered the business through a joint venture with the Strauss Group, an Israeli technology firm, which

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provided the technology while Haier focused on marketing, distribution, and service. But then Haier

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broadened its platform to include many other R&D partners; for instance, it shares more than 20 water

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purification patents with Dow Chemical.

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The result is a new level of proficiency that goes beyond anything Haier has done before. For

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example, the company now uses Internet access to customize every product it sells in China, whether
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bought in a store or online. Customers choose the color combinations, features (such as the number
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and layout of shelves in the refrigerator), and ancillary design elements (like the pattern of sparkles on
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a high-end appliance). Factories routinely make them to order. The process is not unlike choosing the
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accessories on a new car, except that there tend to be more choices.
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The Internet connection also makes customers more likely to buy a water purifier — which is sold
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only by consultation. Haier reps are trained to look up the complex data on China’s water problems,
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which vary by neighborhood, and to install the filters that guard against that neighborhood’s mix of
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chemicals and pollutants. On its website, which has an active consumer-to-consumer dialogue, the
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company posts water quality information for 220,000 communities in China. “We want people to be
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able to find all their water-related answers at Haier,” says Qu Guinan, the general manager of the
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Haier water treatment company. Building on its success to date, the company is now exploring
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partnerships with local communities to manage their water purification efforts community-wide.
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The Internet has enabled the company to expand its service diligence; it provides intensive installation
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as part of any appliance sale (a rarity in China), and, using monitoring signals from the appliances, it
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conducts follow-up calls with customers when the equipment is not working. The company also keeps
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in touch personally just in case the monitoring has missed some cause of dissatisfaction. The

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connection to customers has helped Haier migrate many people from their medium-value line of

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household appliances (the original Haier) to the more upscale Casarte brand. The phrase “the

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information is more valuable than the product” has already become a slogan throughout Haier.

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1 Explain SWOT as a tool for Strategic Management (6)

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2 Apply SWOT to analyse the Haier business case above (7)

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3 As CEO of Haier India what would be your strategic plan for its growth? (7)

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Q2. Explain Mckinsey’s 7S Model with any suitable example.

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Q3. Explain GE Matrix as a tool for strategic analysis. What are its limitations in application to real CC
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life situations? Give suitable examples.
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Q4. Describe the use of Porter’s Five Force Model in Strategic Management and analysis of the white

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goods industry.

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Q5. What are the critical components of a good strategic plan? Explain with a suitable example.
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a) VUCA
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b) BCG Matrix
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c) Balanced Score Card

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d) Porter’s Generic Strategies

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