Haier in India Case Study

Contents
Haier in India Case Study..................................................................................1
1. Executive summary.....................................................................................1
2. Introduction..................................................................................................1
3. Synthesis.....................................................................................................2
3.1. Indian markets cultural environment.......................................................2
3.2. Haiers critical challenges........................................................................3
4. ersonal assessment o! the situation.........................................................3
". rotagonist..................................................................................................3
#. $iagnosis.....................................................................................................3
%. &ecommendation........................................................................................4
'. (eakness o! my analysis............................................................................"
). &e!erence...................................................................................................."
1
1. Executive summary
*his re+ort analy,ed a Chinese electronic household a++liance enter+rise Haiers
-usiness strategy in entering Indian market in the last t.o decades. *rom+enaars
/onss six value dimensions theory is ado+ted in analy,ing the Indian culture
environment. *he critical +ro-lems o! o+ening the door o! the second largest market
in the .orld are identi!ied and Haiers -usiness strategies in overcome this
challenges are analy,ed. Indian culture so uni0ue and that it should -e al.ays taken
into consideration in order to set u+ the e!!ective -usiness strategy.
2. Introduction
/rom 1)'1s2 Chinas -ooming economic environment has +rovided Haier a huge
domestic market .ith high household a++liance demand. (ith the success in the
domestic market and other develo+ed countries markets2 Haier has gained its strong
!inancial strength and glo-al +resence in a short time. 3s China entered (*4 and
Chinese enter+rises are encouraged to go out to the glo-al market2 Haier is one o!
the am-itious enter+rises that aim at the Indian market. Ho.ever2 although India is
an 3sian country2 their culture is much di!!erent !rom China and 5a+an2 .hich has
-ecome one o! the -iggest challenges !or Haier to gain its ex+ected market share
and +ro!it.
3. Synthesis
3.1. Indian markets cultural environment
3ccording to Cohen2 Ste+hen 61))172 India is an ancient state .ith a modern
civili,ation. *rom+enaars /onss six value dimensions theory is ado+ted in analy,ing
the Indian culture in this re+ort.
8niversalism 9 articularism
It !ocuses on the relationshi+ -et.een the culture and rules. India is considered to -e
+articularistic culture -ecause Indian +eo+le em+hases more on uni0ueness and
relationshi+s. It is suggested that in a -usiness situation2 the role o! trust is more
im+ortant in a +articularism oriented culture64vergaard2 21117.
Individualism 9 communitarianism
*his as+ect re!lects .hether +eo+le consider them as a +art o! the team or as an
inde+endent individual in that culture. It is -elieved that Indian +eo+le .ould likely
choose not to say :no; in order to maintain social harmony. 3s communitarianism
oriented culture2 they al.ays res+ect and listen to their !riends and !amilys o+inions.
S+eci!icity and di!!useness
*his as+ect looks at .hether +eo+le -elieve the +rocess as a +art o! a .hole or as
less connected individual +ieces. Indian culture is a di!!use culture2 !or instance2 they
-elieve the -usiness and relationshi+ are strangely connected. *hey are more likely
2
to do -usiness .ith someone they kno. 64vergaard2 21117.
3chieved < ascri-ed status
3chieved status !ocus more on doing .hile ascri-ed statues em+hasis more on
-eing. =ecause o! the caste system2 a +erson !orm u++er class .ho is highly
educated or .ith a -etter >o- title .ill -e treated di!!erently.
Inner culture < outer directed
Indian culture is considered a more outer directed culture than the .estern culture.
Indian are very +olite2 they .ill let other +eo+le take control since they dont .ant to
-e o!!ensive.
Se0uential and synchronous time
India is more o! an agricultural society than an industriali,ed one2 that may -e the
reason that Indian have a com+letely di!!erent conce+t o! time and delay is ex+ected
.hen doing -usiness .ith Indian.
3.2. Haiers critical challenges
:?ade in China; +roducts are have a -ad re+utation o! :lo. grade co+ycat
manu!acturing +roduct; .ith lo. +rice 6Celly2 21137.
Indian culture is largely di!!erent !rom China and other .estern countries2 and
even the rural culture has huge di!!erence !rom the ur-an culture.
*he !oreign com+anies are not .elcomed -y the India government2 since they
have set u+ +rotectionist +rotocols against overseas investment .ith high
tari!!. *here!ore2 im+orted +roducts are charged .ith heavy duty !rom ra.
material +urchase overseas to sales.
Com+etition !rom @A and Samsung .ere !ierce2 -ecause they had already
-een +laying an im+ortant +art in the a++liance market and they had entered
a +rice .ar that .ith minimum +ro!it margin.
4. Personal assessment of the situation
Haier in China and Euro+ean2 8S markets had -een success!ul2 .hich +rovides a
strong !inancial and technical -ackground to the Indian ex+ansion and the strength to
com+ete .ith @A and Samsung at that time. Ho.ever2 Indian culture is uni0ue and
s+ecial2 .hich means Haier has to ado+t and tailor its strategy to meet the local
needs. Its +articularistic oriented culture has made trust and relationshi+ +lay
im+ortant roles in doing -usiness. 3lthough Haier has -een success!ul and gained its
international +resence2 Indian market is still challenged.
5.Protagonist
Bhang &uimin is the CE4 o! Haier International .hile =ener>ee is the Haiers Indian
director at the -eginning. *he government encouraged enter+rises to -ecome
:Alo-al; a!ter >oining the (orld *rade 4rgani,ation. Bhang -elieved it is good
3
o++ortunity to enter the second most +o+ulated country. =aner>ee had targeted 21C
o! Indias .hite goods market in the next !ive years since Haier ste+ into Indian
market and +lanned to -uild a manu!acturing !acility in India !or re!rigerators and
color *D res+ectively. In 211)2 Eric =ragan,a has re+laced =ener>ee as the +resident
o! Haier india.
6.iagnosis
Heavy tax -urden
Heavy tax -urden and lack o! 0uality ins+ections had led to lo. +ro!it margin and
grey +roducts. ?ulti+le levels levies had im+osed on im+orted +roducts !rom
im+orted ra. material to sales 6Celly2 21137. 3lthough lo.9end +roducts .ere
+roduced locally2 Haiers +remium +roducts .ere still made in China. It .as
considered one o! the most critical +ro-lems at the -eginning2 since it heavily
reduced Haiers market share and +ro!it. *here!ore2 =ener>ee decided to ado+t
:three9in9one; locali,ation though ac0uisition in 21142 .hich has turned India into a
sourcing hu- to 3!rican and 3sian market later. *he ne. Haier !actory allo.s
im+orting ca+ital goods2 ra. materials and com+onents to -e duty9!ree2 .hich is a
large ste+ in the Indian market.
*he +articularistic oriented culture and the immature market should -e taken into
account. 8nlike highly develo+ed (estern market2 rules and regulations do not have
ex+ected im+acts on the market -ehaviors2 .hite good +roducts are lack o! 0uality
ins+ections and the grey +roducts could easily get in the market2 leaving Haier and
other !oreign .hite good enter+rises an un!air com+etition +lace.
?arket targeting
Eric =ragan,a has set Haier +roducts at a +remium +rice later and targeted
consumers .ho have higher income. He aimed at creating a :ins+ired living; name
-rand in India and advertised its -rand value and glo-al +resence o! the mother
com+any. It is smart since he considered the achieved < ascri-ed status in India.
Social status are very im+ortant in India as it is mentioned a-ove2 they em+hasis
more on -eing. eo+le !rom the ur-an area .ould like to +ursue niche +roducts such
as .ine cellars and mini -ars .ith a -etter -rand name and good a!ter sale service2
.hich re!lects their +remium social status.
Ho.ever2 3ccording to Celly 6211372 rural India has large ca+acity !or gro.th o! .hite
goods .hile the ur-an market is looking !or Eiche +roducts .ith good 0uaity. #"C o!
the +o+ulation lives in rural area2 although electri!ication and in!rastructure
construction are delayed -y the government2 there are a large num-er o! +otential
consumers2 -ut Haier seems to !ocus too much on +remium +roduct market.
Sales strategy
3t the -eginning2 Haier had its o.n sales net.ork and a +roduct sho.room. In 211)2
Eric =ragan,a -ecame the ne. +resident o! Haier India. his sale strategy is to treat
dealer as the !irst customers .ith com+etitive +ro!it margin and more ex+erience
centers. ?oreover2 he s+ent large amount o! money on advertisement and invited a
4
-olly.ood actor as the -rand am-assador.
3s it is analy,ed -e!ore2 the Indian culture is more communitarianism oriented and
di!!use2 .hich means esta-lish a good relationshi+ and trust in -usiness is very
im+ortant. *hey .ould more likely to ado+t the o+inions o! !riends and !amily or
someone they kno.. 3 good relationshi+ .ith the dealers and a !amous star as the
-rand am-assador .ill let more +eo+le understand Haiers -rand value. 3t the same
time2 :made in China; +roducts -ad re+utation o! lo. 0uality and +rice amount the
consumers .ill -e changed in time.
!."ecommendation
Haier has -een -uilding u+ a good -rand value and gaining larger market share in
India. 3lthough the demand is not as high as it .as ex+ected2 es+ecially in the rural
area2 since the in!rastructure construction and electri!ication is delayed2 the rural
market in India should not -e underestimated. /urthermore2 living standard and
culture have huge di!!erence -et.een rural and ur-an area2 the +roducts should -e
locali,ed to meet di!!erent needs o! the consumers. Haiers com+etitors !rom Forean
enter+rises such as @A and Samsung !ocus on -oth +remium market and the lo.
end market. *here!ore2 it is necessary !or Haier to develo+ more diversi!ied +roducts
that aimed at the lo.9end market.
#.$eakness o% my analysis
*he culture value and -elie! that this re+ort has analy,ed may not -e true value o!
the market consumers2 since the .estern culture has great im+acts on India culture
and di!!erent +laces have their o.n culture.
*his re+ort mainly !ocuses on the +roduction and sales +ro-lems and does not
analy,e the com+anys internal structure and the com+any culture.
&."e%erence
Overgaard, Louise., (2010). An analysis of Indian Culture in an Era of lo!ali"ation. #evie$ in
31t% of August, retrieved fro&' %tt('))(ure.au.d*)(ortal)files)13+,4)23--.+.(df
Celly, /i*%il., (2013), 0aier In India' 1uilding 2resen3e in A 4ass 4ar*et 1eyond C%ina, Asia
Case #esear3% Centre, t%e 5niversity of 0ong 6ong.
Co%en, 7te(%en 2%ili(, 8%e Indian Ar&y' Its Contri!ution to t%e 9evelo(&ent of a /ation
(O:ford' O:ford 5niversity 2ress, 1;;0).
,