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International Business - Haier Taking A Chinese Company Global
International Business - Haier Taking A Chinese Company Global
Agenda
Haier Company Background
Dawar & Frosts survival strategy : Positioning of Haier ( Export and FDI)
Operational Restructuring
Early 1990s exported appliance as OEM 7 product divisions 1998 - 4 development divisions Capital Flow (Finance) Commerce Flow (Sales) Material Flow (Logistics) Overseas (Global Operations) 1998 China market share more than 30%, RMB 16.8bn
National Competitors
1996 20 major domestic competitors (refrigerators) Only 3 had annual sales of more than 1 million units Guangdon Kelon Biggest Competitor Offered full line of appliances Multibrand strategy for China Targetted Chinas Rural market
Foreign Entrants
WTO pressure Chinese economy opened in 2001 Siemens, Electrolux, Samsung, LG, Sony and Whirlpool Foreign Multinationals rapidly growing 2001 - 26% China Refrigerator sales 2002 - 31% % China Refrigerator sales 2001 - 31% China Washing Machine sales 2002 - 38% % China Washing Machine sales
International Expansion
Began expansion strategy in 1997 1994 JV with Mitsubishi setup Chinas largest AC plant 1998 overseas sales - $62 million (3% of Group sales)
International Divisions
Haier America Haier Europe Haier India Focus on difficult task first Begin with niche products Staff with locals
Advantage In China
Retail Channels Before 2000 State owned departmental stores 2004 Domestic chain GOME accounted for 30% sales 100 outlets in Chinas 22 largest cities Reputed Brand known for its creativity Market responsiveness Modified Dish Washer Tiny Washing Machine Service Computerized Information System Distribution 1999 : Haier Logistics Independently operated company Reduced Inventory levels Reduced delivery times
Success drivers
Quality commitment Build quality, Reliability Blind test Better than German brand Liebherr Branding Branded, not just OEM products Unlike most competitors Higher priced but better products
Customer-centric
Best after-sales service Chu Xiaomings case House calls, Warranty coverage, Temporary replacement
Innovative
Potato washer, Happy summers, Detergent-less wonder etc.
Responsive
Assess needs Identify demand Satisfy it
Supply chain
JIT system Customer focus, Lesser costs Group-wide logistics Cross-product distribution When transferring a fridge, can transfer a microwave too
Technology transfer
Market position
Greater reach
Cover entire China Tough for competitors (esp. foreign multinationals) to imitate
Demand conditions
Factor conditions
Cheap labor Infrastructure investment Government influence Opening economy
Dodger
High
Focuses on a locally oriented link in the value chain, enters a joint venture or sells out to a multinational
Contender
Focuses on upgrading capabilities and resources to match multinationals globally , often keeping to niche segment
Defender
Low Focuses on leveraging local assets where multinationals are weak
Extender
Focuses on expanding to similar markets like the home base, using competencies developed at home
Competitive Assets
*http://hbswk.hbs.edu/archive/501.html#figure
High
Pressure to globalize
Dodger
After 1992- Competing with international competitive assets
Contender
1992- Direct exporting to developed markets to build international brands
Defender Low
(1987-1991) TQC& national brand (1984-86) Technology-learning
Extender
After 1992- Competing with international competitive assets
Low
Competitive Assets
High
High
Pressure to globalize
Dodger
1998-2001 International brand and international alliances
Contender
1999-2001 FDI in Developed markets
Defender
(1987-1991) TQC& national brand (1984-86) Technology-learning
Extender
1991-1998 Diversification 1991-1999 - FDI in LDCs
Low
Low
Competitive Assets
High
Established brand name in developed markets would create a good reputation for the brand which will help it in emerging markets.
Success in US would draw attention of retailers like WalMart, Best Buy
Developed markets have well established infrastructure and distribution networks which make Haier could leverage to get a hold in the market
Haier Established relationship based distribution networks which invariably helped it over the long run
Customers in developed economy are more quality conscious than price. This would suit Haier as this would push it to meet higher quality standards and at the same time they can sell their product at a premium.
Difficult for a new player to create a market position for itself among top players.
Difficult to meet quality and safety standards of developed economy on all product lines. Cost of production will go up as well.
Cost of building new establishment, labour, employment, marketing the product etc. goes up in developed market.
Culture difference is bigger between china and US than with other Southeast Asian nations.
Not easy to woo the big retailers and wholesalers in developed markets to carry the products of an unknown brand.
Globalization Philosophy
First difficult then easy Without domestic market, business is rootless, without international market, business is weak Three 1/3rds
1/3 made and sold at home 1/3 made at home and sold abroad 1/3 made and sold abroad
Three Internationalizations
Internationalization of management system build up employee loyalty Internationalization of service build up customer loyalty Internationalization of brand build up international competence
Globalization Philosophy
Globalization of design
Set up 18 design centers worldwide to consolidate resources from developed countries
Globalization of manufacture
Set up 10 industrial parks and 22 plants overseas enabling prompt action to satisfy local user needs for quality
Globalization of marketing
5,000 overseas retail outlets and over 10,000 service centers all over the world. Best practices exchanged
40.00%
30.00% 20.00% 10.00% 0.00%
DomesticSales Growth
16.79% 14.68% 9.91% 1998 1999 2000 2001 2002 2003
Increasing export
200
0
products
400 200
0 2002 2003 2004
8.3
Overseas made & sold Export from China 2003 2004 Total in 2004
Growth over previous year in overseas made & sold 25% 100% $1000 m
80
75
1998199920002001200220032004
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