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Mayank Kumar Dwivedi Nehru Place, Delhi Arun Kumar Nehru Place, Delhi Kamal Kishor Pandey Nehru Place, Delhi Vivek Dutt Saxena Nehru Place, Delhi Alpana Choudhary Nehru Place, Delhi Anupam Anand Nehru Place, Delhi
Case Questions
Why did Haier enter India? What did it plan to achieve in this new market? Evaluate Haiers entry strategy in India. What was and was not working? Why? Discuss Haiers localization model in India and other markets. Were they different? If so, why? Analyse the landscape of Indias consumer electronics market. What were the Korean companies strategies and how did these impact the market? Evaluate Braganzas decisions and actions. What were his analyses? Going forward, How can Haier sustain its growth in India?
In short 25 years, Haier Inc had emerged from being a small refrigerator factory to the worlds biggest appliance seller by retail volumes Unlike most of Chinese companies (low price strategy), Haier build its success on the basis of good quality product, innovation & services. Haier became one of the top 10 brands in China 1991 In most of the overseas markets, Haier adopted a Three-in-One localization Strategy Haier entered the global markets and started an internationalization strategy in the 1990s. Starting from European countries including Italy, the United Kingdom, and France, it stretched over even to the Asian market and opened its first manufacturing facility in Indonesia. There are many reasons why Haier made the step to actually go into the Indian market. First of all, a series of policy changes in the 1990s definitely opened the doors and set the environment that made it possible for Haier, a foreign company, to enter the Indian market. In addition to that, the Indian market itself was in a favorable state for Haier. Around 2003-2004, India had rising disposable income, an expanding middle class, and a relatively low entry barrier in the white goods market. These conditions were very attractive for Haier to launch its new facility in India. Haier Launched in India in 2004. T.K. Banerjee, an industry veteran appointed as president of Indian operations. He wanted Haier to become a top-thee home appliance brand in India
But year after year, Haier India performance was disappointing. Turnover expended by a 7.7% over 5
1991 Diversification
1998 Internationalization
Why did Haier enter India? What did it plan to achieve in this new market?
White Good Market Opportunity
HA sector was growing between 11% to 14% and projected growth was 20% (2005 ~ 2010)
Change in Indian government policy
17%
14%
14%
8.3% GDP and expected 2003~04 and expected to log high growth rates in subsequent years.
Favorable Market disposable income group with Rising
Home Appliance
Consumer Eletronics
Evaluate Haiers entry strategy in India. What was and was not working? Why?
Evaluation of Haier Strategy -
Target Segment : High Income bracket Product India Centric product lineup (Refrigerator, AC, Washing Machine, Heaters, & Color TV). Bottom mount refrigerator become one of the most popular product. Place Establish Haier Experience zone, Retail expansion Price 5% premium on products. Promotion Inspired Living
Summary Overall Haier strategy to be out of crowd, not to be in price war, Innovation, Adapt Localization.
Discuss Haiers localization model in India and other markets. Were they different? If so, why?
India
First 5 years, Haier Outsourced production & Sourcing low end goods from local manufacturers (Color TV)
Global
Haier 1st started Three in One plan in South Carolina. Opened a design house in Los Angeles to realize true localization. Rolled 1st made in America product in 2010. Later on Haier replicated same model in Europe. Opened sales headquarter in Italy and opened two design centre's in France & Amsterdam.
2007 Haier Acquired 40acre manufacturing capacity in Pune district. It was assembling washing machines & ACs
Factory also hub for supplying to Africa, Middle east & southern & western Asia. Objective of Three in One model was to achieve the localization in terms of R & D, manufacturing & market activities are carried our as per local way
In US & Europe, full version of Three in One strategy opened whereas in India it was only one manufacturing factory, which was further used for exporting goods to other countries.
Heavy taxes, Rural India awaiting for electrification Since 2005, the market has been plagued by price war & that resulted low margin. Key Players, LG & Samsung were keeping prices very low to ensure market share but barely making a profits.
What were the Korean companies strategies and how did these impact the market?
LG
Entered into low price strategy with basic function products After success in low price market, entered into mid end market by offering feature rich product with brand image - Aspirational brand
Samsung
Entered into with premium product Later crossed into mass market and released more price sensitive products aiming premium & large volume categories. R& D Both the companies heavily invented into R&D for developing new products as per market need and cost optimization
Impact Strategy in both the segments helped brands to gain penetration, market share & revenue.
Redesigned sales structure with 30% new employee Planned to add 100 direct dealers & 1000 indirect dealers to Haiers distribution network Focused on dealer retention & treated dealers as Haiers first customer Offered good quality products and increased gross margin of 10% to 15%, above 10% to 12% industry average. Planned to open more experience centers and add up to 700 retail outlets to Haiers existing 4500 across the nations. Aimed to increase revenue from experience centre from 5% to 12%. Marketing/promotional budget USD $ 2.7 mn. Improved existing service setup & process to ensure customer issues are resolved with 6 hours in Metros. Planned to open service stations InstaCare in 8 cities Change in Pricing Strategy Closure to mass market but 3% higher than Samsung & LG Launched 25 new products and laid down plan for laptop and camera in near future 2010 Haier invested USD22.2mn to upgrade its factory capacity 2010, Haier launched a marketing campaign program You Inspire Us John Abraham as Haier brand ambassador.
Haier has been able to create infrastructure including manufacturing capacity. In order to sustain its growth in India, Haier should focus on following
Innovation
Products Target Market Rural market is big opportunity, hence new products needs to be developed accordingly Distribution needs to enhance it After sales support Customer is King Loyalty program for dealers
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