HAIER-TAKING A CHINESE

COMPANY GLOBAL IN 2011

Haier started in 1984 with a defunct refrigerator factory in Qingdao , a port city in Chinas
Shandong province , founded by Zhang Ruimin. From 1980 to 2010 , Chinas GDP grew at a
rate of 10% eliminating millions of people from extreme poverty and forming an urban
middle class. The challenge that Zhang had was to decide to apply Haiers international
operations in China & apply Chinas operations internationally.
Municipal Government of China wanted to appoint Zhang as director of nearly Bankruptcy
Company which Zhang took as a challenge and launched Qingdao Haier. Haier started TVE
(Township and Village Enterprise) TVE differed from state-owned enterprises in not
collecting any claim other than taxes. Zhang observed that a high-quality refrigerator was
rare in China. So he signed an agreement with German Refrigerator maker Liebherr, later
imported freezer and air-conditioner production lines from Derby of Denmark and Sanyo of
Japan. Hurdles that Zhang faced at the beginning was to make workers understand the
Haiers commitment to quality which he made them understand by asking staff to smash
refrigerators to bits.
In the year 1989, Haier faced oversupply but less demand. Even though his competitors had
cut the prices , Haier didnt do that instead raised them to get a premium of 15%.Haier
always was good at after-sales service by maintaining a track of thousands of customers by
computerized service centre in Qingdao. At the initial stage Haier focussed on building brand
reputation instead of market expansion.
Inflation in China in 1994 is caused by rapid growth of Chinese economy after Haiers
establishment. China government wanted to rationalize state-owned enterprises (SOEs) by
pushing mergers and spinoffs at both national and provisional levels. Haier first started to
venture into international market by first exporting to U.K and Germany and then to France
and Italy. Haiers brand refrigerators sold well in Germany and were marketed by Liebherr at
the beginning in 1991.Haier decided to market its own brand overseas when they won blind
quality test conducted by German magazine. Zhang stated that his purpose in exporting is to
establish brand reputation internationally not to earn foreign currency.
Haier entered America by Michael Lemal , a partner in New -York based import company
by then only three Haier compact refrigerator models met U.S energy and safety standards.
Zhang wanted to make refrigerators for students or for offices which other U.S manufacturers
didnt make and later added features like mini-fridges that doubled as computer desks. At
first it took lot of time for them to get an appointment with Wal-mart but later years they
ordered double units of refrigerators from Haier. In U.S they dont wanted to manufacture
quality products that can be sold at premium instead of manufacturing cheap products. Haier
entered European market with specifically designed products for European Market. Market
was similar in size to the U.S market but differences were made in distribution channels and
consumer preferences all countries created problem for manufacturers to form economies of
scale. In India, they discovered challenges like environment, economy, and the channels and
they thought that it is difficult to find top 10 chain stores in India.
Haier implemented strategies like first focussing on markets which are difficult to capture ,
staffing with local people to understand needs of customers to know the market well. Two
approaches that they followed were speed and differentiation to win customers. Haier had
foreign rivals like Siemens, Electrolux, Samsung, LG, GE, and Whirlpool. Most of them
realized that penetrating in Chinese market is not easy as saturation levels, urban areas are
well organized. Foreign brands were especially strong in the automatic washing-machine
sector and advantage that Haier had was they designed products based on Chinese consumers
but foreign consumers designed products based on foreign approaches.
To compete with foreign rivals Haier diversified its domestic products and improved its
service and distribution. Haier created tiny washer that cleaned a single change of clothes
which was introduced successfully in Europe. Haier had an advantage with domestic retailers
which had threat when WTO made compulsory that China opening its market to foreign
retailers. Haier implemented Just-In-Time because of which initial order to product delivery
was reduced from 36 days to 10 days. Haier worked during 2007 and 2010 to capitalize on
existing competitive advantages to penetrate unexploited sources of demand. To minimize
gaps Haier started redeployment of human capital, creating small teams to work on making
Haier efficient.
To maintain top position Haier started self-managed teams to attract talented employees,
opportunities for teamwork, responsibility and entrepreneurship. Haier inverted typical
corporate pyramid in which ideas were generated by customer at the base and travelled up
through the company. They employed incentive system to encourage hard work, quality
service with to meet key performance indicators and also fostered on internal talent
development in which to join specific team it is necessary to win majority from team
members.
Through Chinese governments rural subsidiary program , Haier was able to penetrate
through rural market areas which aimed at farmers who had discretionary income and were
price sensitive. Because of this program urban market became 40% of total market & rural
market became 60%.They differentiated products based on lessons learned from foreign. In
Europe, Haier developed video messaging device into refrigerator door that made people
leave video messages to the family instead of paper notes.
Zhang departed from Haiers strategy of building strength of namesake brand by introducing
Casarte brand to Chinas urban centres. For the next 10 years Zhang and the team depend on
the acquiring companies , entering and retaining new companies and managing subsidiaries.