Haier Going Global

Presented by Group3:
Gaurav Vats 18PT2-23; Neeraj Mittal 18PT2-31; Raman Taneja
18PT2-42; Sudesh Kumari 18PT2-50; Swapnil Misra 18PT2-53

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 A. China: reforms from 1980 to 2010
B. China’s home appliances market (white
goods market): from 1980 to 2010
C. Haier: the snapshot
D. Haier’s growth story
i. Stage 1: Haier’s domestic growth
Agenda 1984-1993
ii. Stage 2: Haier’s global expansion
1994-2003
iii. Stage 3: Balance between global and
domestic growth 2004-2011
E. Way forward: the big question
A. Strategy for China
B. Strategy for overseas business

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China: reforms from 1980 to 2010
Agricultural reforms in 1978

1980: Creation of SEZ for manufacturing, trade; rise of small collective business and
privatization of state-owned enterprises
Tax and currency restructuring; policies to facilitate foreign enterprises, free trade and
growth of equity markets during 1990

China entered WTO in 2001 and allowed foreign retailers from 2004 (WTO mandated)

Real GDP growth of ~average 10% annually: by 2011, China was world’s second largest
economy measured by GDP at PPP

Reforms in FDI policy resulting in inward FDI increase from $4bn in 1990 to $60bn in 2004

2008: Rural Subsidy program 3

China’s home appliances market (white goods
market): from 1980 to 2010
u n its p e r 1 00 h o u se h o ld s

Significant reduction in below poverty

line population in both rural and urban
160 Penetration of Household Appliance
140 china: less than 1 % in urban and 2% in
120
100
80.1
98.7 rural household by 2010.
80
58.2
60

% of retail Volume
42.3
40
20 12.3
0.2 1.2
0
Major Consumer Appliances
25 22.3
Refrigrator AC Washing machine Color Television 18.9
20 16.8
16.4
1514.1
Significant increase in disposable income
10
of urban household by 40x and of rural 5
household by 31x in 30 years (1980- 0
2002 2004 2006 2008 2010
2010) Haier GD Midea Glanz Panasonic
Hisense Kelon Henan Xinfei Hausgerate Hefei meiling 4
https://www.youtube.com/watch?v=ATNsMDiBqsM LG Corp Wirlpool
Haier: the snapshot
Foundation
• founded in Quigdao in 1984
• Began as a Township and village
enterprise (TVE) No 1 white 75% increase 28th rank
in profits,
• 300 refrigerator manufacturing company goods
manufactur
being 8 times
in most
innovativ
of increase in
already in existence: rare high-quality er in China revenue e firms
output During 2010
• Adopted various strategies for growth

Revenue Profits Market share International coverage

• 240 Subsidiaries
136bn RMB 6.2bn RMB in 2010: 22.3%
in 2010 from 2010 from market share
• 61 Trading Companies (19 overseas)
3.5mn in 1mn in 1985 in china and • 24 manufacturing plants (all overseas)
1985 6.9% globally • 10 R&D centers (8 overseas)
• 21 industrial parks (4 overseas)
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Haier’s growth story

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Stages of Haier’s growth
• Focused on domestic growth
• Early 1990s: Started exporting to UK, Germany, France and Italy
1984-1993

• Entered US in 1994, later expended to Europe and India

• Global companies entered Chinese white goods market
1994-2003

• No 1 appliances company in China by 2004

• Listed group entity in HK in 2005
2004-2011 • Created “self managed” teams (ZZJYT)

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Stage 1: Haier’s domestic growth 1984-1993

1984 1984 1989 1990/91 1992/93

• Signed • Focussed on • Set up • Built a first-class
technology • Imported quality of computerized brand
licensing freezer and air products and in service center in • Haier began to
agreement with conditioner brand building Qingdao expand
Liebherr, importer lines • Improved • Acquired
German from Denmark • Raised prices in quality of Qingdao’s AC
refrigerator and Japan 1989, when service and general
maker other significantly freezer factory;
• Agricultural • JV with Japan’s refrigerator • Became China’s • Introduced new
reforms proved Mitsubishi and companies leading type of AC
to be added Italy’s Merloni reduced prices refrigerator • Haier group
advantage for manufacturing entities listed in
the Company company by Shanghai and HK
1991 stock exchanges
in 1993/ 2005.
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 • Differentiated products: high quality and
high price
• Created customer perception of high value
Strategies brand
adopted for • Superior technology
domestic • Good After sales and more customer focus
• Strong integrated network across China,
market especially in logistics
penetration • Fast response speed
• Motivation for innovation and efficiency
• Internal talent Development

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 Stage 2: Haier’s global expansion 1994-2003
Haier’s Three-Third global
expansion strategy

1/3
1/3Revenue
Revenuefrom
fromgoods
goodsproduced
producedand
in
Chinasold
sold
andoverseas
in
sold
China
overseas

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Continuum approach of global expansion
2001 – Invested $40 million in
1994 – Entered US market by industry park and refrigerator
1990 – Exporting factory in South California
to UK, Germany, JV with Welbilt Appliances
1999 – JV on 5 continents, in 2004 – Invested $200 million in
France Italy India to establish refrigerator
1991- Sell in countries including
Indonesia, New Zealand, factory and R&D Centre over 4
Germany under years starting from 2004
Liebherr Nigeria, Philippines and
Yugoslavia

2001 – Acquisition of plant in

Padova, Italy (Invested $8 11
million )
 • Non Conventional Approach :
• Focus on difficult markets first : Haier
Strategies Approaches to cater developed markets such as
US, Germany first rather them catering emerging
adopted for markets such as India first
• High Prestige
global • Getting Success in developed market increases
penetration ability in emerging market
market • Started with un tapped market of niche product
penetration - compact refrigerates for student / offices
( what US manufacturers did not make )
• After being successful in niche product, start
supplying regular products also.

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 • Go GLOCAL Approach :
• Think globally... Act Locally…. Go for GLOCAL
• Customization of products as per local requirements
• Cheap in innovation and leads to higher satisfaction of
Strategies customer.

adopted for • High touch – Hi Tech & Customer Centric Approach

• Engaging local staff and pushing them to make Haier
global in each country “be the Haier they created”
• Direct connect with customers (R&D staff talk directly
market to customers and sales person) to understand their
requirement and modify product accordingly.
penetration • Use of Local people and local thinking to satisfy the
needs of customers
• “Speed/ Responsiveness” and “Differentiation” to
establish difference between them and competitors
and win trust of customer

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Even though with above approaches and investments by Haier, revenues
from exports and from goods made and sold overseas accounted only 27.5 %
of total Haier Group revenue for 2010, far below the Three Third Goal
Revenue in 2010

14% 14%

Revenue from Goods produced and sold in China

Revenue from goods produced in China and sold
overseas
Revenue from goods produced and sold overseas

73%

Source: Exhibit 3b
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Stage 3: Balance between global and domestic growth 2004-11

• No 1 appliance company in China

2004
• Capitalized on existing competitive
2007-10 advantages

• Had 6,000 Country stores, 24,000 Town

2011 Stores, 150K Vendor contractors in Villages
– achieved rural penetration

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Achieving and Maintaining Top Market Position

• Securing Market
Leadership at home in
each sector and then
taking the product line
global
• Reorganization of HR
ZZJYT
• ZZYJT –transformation
from selling products to
selling services

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 • Gap identified between Rural and
urban markets
Strategies • Need to penetrate rural market
adopted for • Strategies adopted:
local/ rural • Staff gave home designed seminars
• Stores – Rural community gathering
market spaces
penetration • Rural Subsidy program
• Differentiation according to the
Market
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 Way
forward • Strategy for China
• Strategy for overseas business
: the big
question
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 SWOT analysis for Haier
High quality products Established brand image
Good after sales services Flexible organizations structure
Related and unrelated Distribution network
diversification Consumer orientation

Emerging middle class Product Segmentation for

Untapped rural market SWOT BoP
Financing problems

Intl competition Domestic competition

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Summary of Haier’s strategy and approaches
• 1984-1991: Brand building strategy:
• Smashing of defective refrigerators
• Customer perception: high brand image
• 1992-1998: Product Diversification:
• acquiring bad management companies and infusing life in them: adopted the products
of such companies
• innovative products
• Transformation from “selling products” to “selling services”
• 1990-2010: Globalization
• Difficult markets first. Specific strategies:
• Product differentiation: niche segments
• Globalization of design: 8 overseas R&D centers overseas: 80% of all
• Globalization of manufacture: 24 plants overseas: 100% of all
• Globalization of marketing: 37k sales network: : 27% of all

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Summary of Haier’s strategy and approaches
• Related diversification:
• Into Services
• Unrelated diversification: Acquisitions and JV’s
• 1991: acquired two ailing firms in Air conditioning and freezer market and
launched new AC
• During 1990s: Acquired 15 companies in washing machine, telecommunication
equipments and TV
• Product diversification: Smaller dishwasher launched in Japan
• High capacity laundry Machines in Pakistan

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 Strategy recommendation for China

• Focus on China’s Rural segment: Product development strategy (Ansoff model)

• 55% of population lives in Rural area (in 2010)
• Rural penetration rates for household appliances is low and offers opportunity for
growth:
• 58.2 in refrigerator, 22.1 in AC, 66.8 in washing machine, 107 in color TV (per 100 household)
• Target rural market with specific products and prices keeping in mind rural china
population (Adaptation market strategy)

• Online mode: Start selling white goods through online mode in China: less than 10%
through online and telephone sales.
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Haier need to
adopt its products
and services to
suit the need of
China’s Rural
segment

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 Strategy for overseas business

US and other Unrelated

Related Diversification Unrelated diversification:
Market penetration markets-
strategy: Plan to expand diversification:
strategy: Aggressive Adaptation/ - Acquire OEM’s in
in South Africa market
promotion with the localized approach Backward: Logistics foreign market (one
or market similar to US
objective of building the *: Replicate lessons company such effort failed in
like Canada and Latin
brand in overseas learnt in China for Forward: Target E- 2005);
America. Same/
market after sales service in commerce industry Venture into different
different products
current markets home appliances

* Polycentric orientation currently but aiming for Geocentric orientation

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Thanks

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