Haier - Taking a Chinese company global

Haier: Taking a Chinese Company Global Strategy Management [Type the author name]

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Discuss the process of Haier's diversification strategy from single dominant business to a diversified portfolio. What do you think were the reasons behind this diversification strategy? Haier decided to delay diversification until they became a fir st class brand in the Refrigerator segment in their domestic market !hina"# so that when they diversify# their reputation that they have earned would enable them to reach out to the customers and connect with them better. $lso# by this time# they would have achieved a fairly large enough scale so that they would be able to e%ploit their learnings and apply them for other products. $s mentioned in the case# during this time# the general perception amongst the !hinese consumers was that !hinese companies were not capable of providing &uality products. hus (r.)hang decided to focus on the &uality aspect in the initial stages itself. *y focusing only on Refrigerators# they &uickly made manufacturing of quality# a core competence which became a source of sustained competitive advantage that they could e%ploit after diversification. $ccording to the case# Haier+s diversification s trategy was mainly by ac&uiring firms that have markets and good products# but bad management. his strategy ensured that they were ac&uiring firms who had fairly competent technical employees who were not being utili,ed properly by their management. hus# Haier# by utili,ing the experience of these employees and by coupling it with their managerial e%cellence and &uality control# could &uickly turnaround loss making firms into profitable firms at the same# improving their product offerings and brand reputation. We see from the case that Haier first ac&uired an $ir !ondition factory and a -r ee,er factory and then later ac&uired Red tar washing machine !ompany# a television company and then a telecommunications e&uipment manufacturer. his also meant that they moved gradually from one product offering to another in terms of technology that is common between two successive product".

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How does Haier create value in its Diversified 0ortfolio? Haier+s management emphasi,es three areas in which they had to be consistently better than their competition to create value in their Diversified 0ortfolio. hese three areas were a. innovation based on consumer re&uirements or market responsiveness  e%ample of how their engineers made slight tweaks to a washing machine that was being used to wash sweet potatoes. 2ther e%amples of the same include a refrigerator with 3imchi pickler etc. hey were e%tremely smart to emphasi,e on modular manufacturing where all these customi,ations could be added at minimal cost without having to change the way the basic unit was being manufactured. b. superior service hey utili,ed information technology very early on to automate the way their service centers worked. $lso# it was mentioned that# Haier offered temporary units that their customers during the time the product was being repaired. his ensured that their customers developed a brand loyalty which was further

accentuated by the story of the !hu 4iaoming# a ta%i driver. hey were also ranked as the number one firm in $fter sales service. c. local distribution Haier logistics was a pioneer in the field of logistics in !hina. hey developed an e%tensive distribution system that could serve the entire product group. 5stablishing a network of this scale was a comple% issue# and this was a source of advantage of Haier. $lso# by developing this network# they were able to serve the tier / and tier 6 c enters also.

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Why does Haier adopt globali,ation strategy? How does it do so? Haier started a formal global e%pansion strategy in 1778 with the announcement of three goals 196rd of the goods produced in !hina and sold overseas and 196 rd produced and sold overseas with the remaining 196 rd produced and sold in !hina" by (r. )hang. he main reason why Haier decided to adopt globali,ation strategy was to test and prove itself by competing with the leading manufacturers in the developed countries. :nlike other !hinese firms# Haier decided to produce and sell under the Haier brand itself so as to establish a brand reputation even though they also initially started off as an 25( and continued to do so until 1777.  his period let them understand the e%pectations in terms of &uality# product re&uirements# specifications etc" of their consumers. $fter the double blind test that showed that H aier+s *lue ;ine brand of $! was better than <= partner ;iebherrs# Haier became confident enough to launch products under their own brand. hey decided that there will be losses initially# but then# it was imperative for them to stick to this strategy if they had to develop their brand reputation# especially considering the fact that a lot of people would be biased against Haier because of their !hinese 2rigin. Haier also initially targeted only the niche s egments 5specially in markets like :$" where the initial product offerings were limited and not main stream like a refrigerator that doubles as a table# tar geted at college students# mini refrigerators# mini washing machines that can be used without detergents or those that can be used to wash a single set of clothes etc. ince this segment was not being serviced by the mainstream companies incumbents"# Haier was easily able to ac&uire a substantial portion of this segment. $lso# they hired e%ecutives from the local population as much as possible bec ause they trusted that the knowledge of the locals is essential especially in an industry like consumer electronics.

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Do you think that Haier's strategy of investing in creating burdensome manufacturing assets for multiple technologies and that of investing its branding and marketing have inherent tradeoffs. How do you think Haier can materiali,e )hang's vision? @o. he way Haier went about their diversification and global e%pansion# they have tried to reduce the tradeoffs as much as possible. An (r. )hang+s words# the two pronged strategy of keeping Haier agile and more customer focused than fir ms like B5# Whirlpool etc. was showing benefits. heir sales volume oversees made and sold# and e%ports from !hina" increased sharply between /CC/ and /CC> from a combined figure of E>> million to /CCC million". his is phenomenal for any firm in a similar industry. -or a firm like Haier with its or igins in !hina# it is imperative that they spend a lot on developing their brand awareness amongst the foreign consumers by aggressive marketing and branding strategies. his is because of the inherent biases amongst the people especially in the western countries" against products that are manufactured by !hinese firms on parameters like Fuality# reliability etc. o materiali,e (r. )hang+s vision# it is imperative that Haier maintains its product differentiation and response speed at all costs . Haier can build on the success model of their *lue ;ine brand of refrigerators# where they went for a <= with a local reputed player and then over a period of time# after analy,ing the market completely and after having learnt from their <= e%perience# decide whether they want to continue with the <= or branch out and start competing with the mainstream players. his will give them a chance to study and learn about the market and its conditions from close vantage point before deciding whether they should commit themselves to it. $lso# in markets like :$# 5urope# where they have already established manufacturing facilities# it is imperative for them to position themselves as a premium player through aggressive marketing.