Haier: Taking Chinese company Global

1. Haier : taking a Chinese companyHaier : taking a Chinese company
globalglobal
Khinza KhalidKhinza Khalid
Aniqa Komal KhanAniqa Komal Khan
Saher ZaibSaher Zaib
Rida MudassarRida Mudassar
Group 7

2. AgendaAgenda
Case background
Haier – Till Now
Organization Concepts
Social Responsibilty
Recommendations

3. CASE BACKGROUND

4. Company BackgroundCompany Background
Founder and CEO : Zhang Ruimin
Started in 1984 in Chinese Port city of
Quingdao by taking over a failing
refrigerator factory
Ranked China’s number one by The Asian
Wall Street Journal 2004
Celebrated its 20th
anniversary in 2004 with
annual sales topping RMB 100 billion
world’s 4th largest White goods
manufacturer and 3rd
in revenues

5. Challenges AheadChallenges Ahead
To become China’s first multinational brand
and succeed internationally
Continue its dominance on home turf and
defend against the onslaught of foreign
giants like GE, Electrolux and Whirlpool

6. Chief executive officer:Chief executive officer:

7. HAIER- TILL NOW

8. First 20 yearsFirst 20 years
 Born in the year 1984 when Zhang took over a failing
refrigerator factory
 Factory was a collective enterprise whose ultimate
authority was municipal government.
 Workers were collective owners of assets and shared
profits
 Zhang’s business philosophy
 Quality focus
 Technology licensing agreement with Liebherr,
Imported freezer and air conditioner production
lines from Derby, Denmark and Sanyo, Japan,
JV’s with Mitsubishi, Japan and Merloni, Italy to
improve quality levels

9. Change Management By ZhangChange Management By Zhang
 Major driving force
Dissatisfaction with the present situation.
Ex:
◦ Thrashing of faulty refrigerators
◦ Workers at the end of everyday explaining about their
failings to assembled colleagues which ensures no
repetition of the same mistakes.

10. OutcomesOutcomes
 Made a profit of RMB 1 million in its second year
 It stuck to brand building and focus on quality
Won the gold medal for quality in national refrigerator
competition
 In 1989, supply outstripped demand
 Competitors cut price – result – a price war but Haier
increased its price.
 Haier commanded a brand premium of 15% in the
market

11. Growth and Diversification StageGrowth and Diversification Stage
“Now we could let our reputation precede our new
products” – Zhang
 Zhang decided it was the time to diversify
 Took over two sick companies Qingdao Air
conditioner factory and Qingdao General freezer
factory
 In 1992, acquired 500 acres of Qingdao land for a
new industrial park – large capital
Went public – IPO in the year 1993

12. Growth and Diversification StageGrowth and Diversification Stage
 From 1992 to 1998, Expand by merging with and
acquiring other firms
“We buy those firms that have markets and good
products but bad management. Then We introduce our
own management and quality control to turn them
around” – Zhang
 Using the above ideology they acquired firms like Yellow
mountain Electronics and 15 other companies
 Focused on building great distribution channels all over
China and improving product development speed and
quality.

13. Operational RestructuringOperational Restructuring
 In 1998 annual revenue RMB 16.8 billion
and domestic market share 30%
 Slowdown in the local market – focus on
international market more
 First focus was reorganization to become
more competitive
 In 1998: Restructured the existing facilities
into 7 product divisions
 Four new group wide Development division
 Formed centers such as TQM, TPM, TEM

14. Haier’s market advantages in ChinaHaier’s market advantages in China
 Reputation of the Brand
 Commitment to quality
 Single Brand Approach
 High market responsiveness: focus on
customer’s needs
 Continuous innovation taking into
consideration the customer needs
 Free repair costs within warranty periods and
replacements during the repair
 Unified logistics department for all product lines
which reduced transportation costs and enabled
speedy delivery

15. Internationalization StageInternationalization Stage
“To become a national brand is not enough. If
a business is successful only in the
domestic market, the superiority won't last
long.” www.haier.com
Strictly adhering to this Haier decided to go
global from 1999

16. Globalization StrategyGlobalization Strategy

17. OutcomesOutcomes
By 2004 Haier became the No.1 appliance
company in china
It was the only company with leading share
across the white goods market
It was dominant in the refrigerator and the
freezer market

18. ORGANIZATIONAL
CONCEPTS

19. Strategies followedStrategies followed
(Ref: www.haier.com)(Ref: www.haier.com)
Three phases of Haier’s Innovation Strategy
◦ Brand Building (1984-1991) -> Quality is prominent for Haier
◦ Product diversification (1992-1998) -> Acquisitions of companies
with bad management and infusing life into them
◦ Globalization (1998-2005) -> Attacking the difficult markets first
followed by relatively weaker ones
Principles followed for expansion
◦ Best efforts are made to fully develop the current industry before
entering new segment of relative products
◦ Best efforts are made to gain the leading position in the new
segment of the industry after a certain period

20. Competing strategies AbroadCompeting strategies Abroad
Product Differentiation:
 close attention to consumer needs
 R&D professionals talked directly to
consumers
Response Speed:
18 design centers facilitated rapid product
development
 Ideas from the field to be quickly tested
 Flat structure enabled quick communication

21. OEC ManagementOEC Management
 OEC : Overall Every Control And Clear
 Philosophy: Solve problems immediately, search
causes of problems and solve one by one
 1995: Haier’s OEC Management was awarded National
Management Innovation Advance Prize Of China
Enterprise Confederation.
 At the end of every day a worker checks on 3E card
(Everyone Everything and Everyday) which contains 7
items -- job quantity, defects, usage of parts, condition
of parts, safety, work attitudes and work discipline

22. OEC ManagementOEC Management
Based on the OEC scores workers are
given wages, promotions and appraisals.
Linked each staff member to another, so
that the specific responsibility of each
employee is involved in the achievement of
the firm’s objectives.
Outcome : No more disputes over trifles
among staff members and, consequently,
the quality of products was greatly
improved.

23. Organizational CultureOrganizational Culture
 Haier corporate culture is guided and developed by
◦ innovative strategy
◦ efficient organization
◦ creative technology and
◦ market orientation
enabled Haier to grow swiftly with business expansion
from China to outside world
 Haier corporate culture features recognition and
participation of all employees
 Haier has had all its employees involved in realizing
Haier’s ideal to be a global recognizable brand

24. Brand Marketing PhilosophyBrand Marketing Philosophy
Smashing of defective refrigerators
has turned out to be the urge for
brand
To become a national brand is not
enough
Build name brand in developed
markets and then expand the
business into developing markets with
little resistance
Create localized Haier brand in each
market in world
Compete on value rather than price

25. Social ResponsibilitySocial Responsibility
 Haier not only provides the good life solutions for
the consumer, but is keen on public charities with
the belief “To be true forever”.
 Haier Group launched activities of Green Sail in
environment to lead the sustainable development of the
global industries
 In America, Haier was awarded with “Community
Contribution Award”.
 Haier Group launched activities of Green Sail in
education to satisfy Teenager’s thirst for knowledge.
 Haier Group also launched activities of Green Sail in
Sports.

26. RECOMMENDATIONS

27.  In Global Markets: Continue Brand Building Initiatives
◦ Publicize as a individualized brand
◦ Publicize the quality, adaptability, speed and
customer focus
 In Domestic Market: Continuous Innovation
◦ Publicize the fact that it is a home company
◦ Publicize the awards received for quality

28. Retention StrategyRetention Strategy
Work-life balance should be given
priority
Give more autonomy and leadership
at lower levels (moving away from
traditional paternalistic leadership)
Job security is a concern - Show
support publicly to top performers
Support must be given to normal
performers to improve

29. Recruitment StrategyRecruitment Strategy
Recruit people who are open to
learning and who are easily adaptable
to continuous innovation
Search for people who are
accommodative to customer requests
Recruit people who respect quality
and process
Leverage the existing brand value to
attract the required personnel from
competitors

30. ReferencesReferences
 Haier’s survival strategy to compete with
world giants
http://www.ryerson.ca/~iri/papers/ypdu.pdf
 Market Economy model of Chinese
Management http://www.rieb.kobe-
u.ac.jp/academic/ra/dp/English/dp131.PDF
 www.haier.com

31. THANK YOU