Haier Analysis

Haier

How can Haier compete against larger multinationals experienced in advanced country markets?

Haier has had the advantages of operating in a very large and fast growing home base which contributed to its rapid growth. Since its foundation, focusing on higher production quality and meeting customer needs to the fullest extend, along with formulating an international expansion strategy; Haier became a dominant player in the global appliances market.

Haier’s first international expansion took place in developed markets such as USA which allowed its products to meet higher safety and consumer standards.

During its international expansion in above mentioned markets, Haier successfully focused on niche products by offering a variety of versions for different market segments. Although successful for an entry strategy, in today’s intense global competition where large scale is a must, Haier will have to gradually offer a complete line of products (diversified product portfolio) and move beyond niche markets.

Haier’s strategy of letting local managers take care of a particular country is the correct strategy to attain “global localization”. However, this strategy should not undermine the fact that Haier’s success also depends upon local employees and managers that understand international markets and are very familiar with international business practices, thus have the ability to steer Haier into future.

In an era where design matters as much as a good quality and attractive pricing, Haier’s design centers in several locations facilitates localization of its products. But, this may cause overlapping in design and component use and reducing production efficiency. R&D and production facilities must be located in accordance with particular locations competitive advantages.

Haier’s global strategy is to use only one brand name rather than several names for each segment. I agree with this strategy but considering today’s markets where it is very easy for consumer products to become mere commodities, in order to become a global name, Haier will have to differentiate not only its products but its image as well. This is especially important for Chinese manufacturers that tend to be associated with lower quality products.

Haier will also have to improve continuously its logistics and information systems for manufacturing and distribution in order to meet stringent delivery terms of large retailers such as Wal-Mart.

Finally, Haier will consistently have to formulate its strategies free from government intervention by applying transparent and ethical corporate governance. In the meantime it will have to incorporate a solid company culture that encompasses multi cultural environment.

What China home base experience brings to Haier?

Haier expansion simultaneously took place with rapid growth in China which became one of the most important markets in the world. Having a large market share in this very important market with high future growth prospects gives Haier a very important leverages vis a vis multinational corporation and local players. Haier has been competing in a very large continent with very diverse tastes and requirements. It established a very effective logistics and after sales service which penetrated into company’s culture.

From time to time it operated in an overcapacity environment but did not sacrifice its quality and was able to grow and emerge as the strongest player in China.

Being accustomed to operate under intense competition should be successfully applied Haier’s global operations.

Haier Management Approach and Chinese Market Experience

• Large and growing home market with several local and multinational strong players that pushes Haier to develop innovative products and strategies

• Offering customers a good value, rather than solely competing on prices

• Customer oriented approach, ability to deal with customers in several regions that have different product requirements and tastes

• Establishing logistics activities in a very large country that posses many regulation and infrastructure difficulties

• Large base of Chinese component manufacturers that helps Haier to source at very competitive terms

• Government interference in Haier management which may conflict with its global expansion

• Having a large market share in China carries a risk of disregarding many future threats and compliancy. This is especially dangerous since multinational corporations are getting more familiar with local market conditions.

International Strategy

Haier prefers to challenge themselves on the “difficult” developed