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Answer - 1

Haier, one of the most successful electronic manufacturers, was originated from China. .
Unlike the strategies and management system as used widely by most China industries and with the
help of international business opportunity and strong corporate strategy, it becomes a well known
company among electronic industry.

India, one of the most economically developed countries, has raised its economy with rising
global business and increasing population as in China which attracts international firms to invest as
a part of international expansion. Being an emerging market with high disposable income, the
middle class India people who demand for the quality products seemed to appear. As mentioned in
the case, large electronic companies of the world such as LG, Samsaung etc has anchored India
market to some extent. Moreover, India families are mostly nuclear type of family and as there is
not much thing to spend, white goods market seems to be a priority. According to the Abraham
Maslow’s theory1, current population search for love needs and esteem needs and this becomes a
high opportunity for large industries like Haier.

Haier has got a firm market position with the premium pricing strategy. After attaining a
position in America and Europe, it tended to compete with global firms like Samsaung and LG.
Though Haier missed first mover advantage, they wanted to get entry of potential emerging market
for more effective utilization of resources all over the world. Thus, Haier planned strategic
management to enter the India white goods market.

As part of international springboard strategy[ CITATION Yad07 \l 1033 ] , Haier acquired a

failed production factory run by Korea-India joint venture. With this, Haier gained a great
advantage from outbound logistics creating a reliable path for delivery to Middle East customers. It
also outsourced high-end goods due to inverted duty structure set up by the India government. Thus,
Haier got cumulative benefits from inward investment before direct investment. Moreover, Haier
has practiced localization strategy as its leapfrogging strategy 2[ CITATION Yad07 \l 1033 ], modifying
the products that the markets demand, during America and European operations.

In addition, China government encouraged international expansion as part of country

business strategy. At the same time, due to economic crisis in India, government had to allow
wholly owned foreign industries and reduce tariffs and trade barriers regarding international
investment. Thus, the favorable situations of international expansion have welcomed Haier to enter
into India market.

1
Abraham Maslow’s theory: Physiological needs, safety needs, love needs, esteem needs, self-actualization (Source:
The Open University of Hong Kong (2013) “The global, cultural, political and economic environment” in MKT B891
International Marketing Strategy, Hong Kong: OUHK (1-28))
2
Leapfrogging: The hypothesis proposes that companies holding monopolies based on incumbent technologies have less
incentive to innovate than potential rivals, and therefore they eventually lose their technological leadership role when
new radical technological innovations are adopted by new firms which are ready to take the risks. When the radical
innovations eventually become the new technological paradigm, the newcomer companies leapfrog ahead of former
leading firms. (Source: Wiki)

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Answer - 2

Haier held a market position in the global market of electrical goods especially luxuries and
sophisticated appliances. It entered the India market with the premium pricing strategy as in
America and Europe. It targets the middle class customers for high quality high price goods. The
firm kept strong corporate culture and valued the brand quality of the product. However, the
strategy seemed to be not useful. Though India market seemed to be an emerging market with high
economy, the people still demanded for the low price goods. Its products are well-recognized as
branded ones globally, and thus focused mainly on product based strategy which was opposite to
market based strategy in India.

Here, Haier did not get first mover advantage in India since it made its first move of
international business in America and Europe. In contrast, in India, LG first targeted the mass
market with low price products without much technical innovation. On the other hand, Samsaung
introduced high quality products that targets the middle class population. In addition, small local
electronic firms in India which did the production with lower profit margin also had to take into
consideration. Furthermore, Haier didn't want to do price war, and it did not plan to enter mass
market. As a result, its premium pricing strategy was not successful in India.

Haier’s most successful strategy during international expansion was three-in-one strategy.
The key requirement of this strategy was to build a network of supply chain system with inbound
and outbound logistics. But, at the mean time according to the case, India’s transportation system
was so bad that even cars were barely accessible to the villages. Distribution channel was not
modernized and Haier was not able to cope with the geographical requirement. Moreover, the
electricity supply was not sufficient and stable voltage was not achieved.

Moreover, the India customers didn’t demand for high class product, instead they wanted to
get a better after-sales service. Haier strongly believed that their product value should overwhelm
the needs of the customers. They did not run a thorough research and development on the customer
behavior though they had one during the entry of the India market while the global rivals, LG and
Samsaung, spent a lot on the research and development for the better knowledge of customers.

More than that, Haier failed to get a position in India white goods market. It might be partly
due to the lack of knowledge of the local consumers, and partly due to the improper localization
strategy. It seemed to apply localization strategy, yet there was no diversity of products (single
product "refrigerator" was introduced to the market) as practiced in China and America. It was lost
since the time of segmentation and targeting of the market. Thus, Haier should evaluate their
strategy from the beginning to get a desired profit in India market.

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Answer – 3

Haier used localization strategy as an international expansion strategy. It provides the

specific goods with high quality and premium price to the specific customers. Specifically, Haier
used three-in-one localization strategy which comprises local products, local design and local
distribution network. Because of some tight restrictions by the India market, Haier didn’t want to
start running all businesses with wholly owned factories. Instead, they tried to import high-end
goods directly from their home country and manufacture high-end goods. Thus, they acquired a
failed factory of a joint venture. It also tried to get a network of distributors and opened “Experience
Centers” to show their own products exclusively.

During American and European operations, though it used three-in-one localization strategy
the detail strategic plans were quite different. Firstly, it gained access to the market closely through
scattered channels, then appoint a sole distributor. When target sales were reached to a significant
level, they set up local operation including local production base, local design base and even local
headquarters. It tried its products to be recognized as local brands, and achieved its target
throughout its operation.

Instead, there are some discrepancies between three-in-one localization strategies. For
instance, the products offered to India were more generic than China and U.S. During the times in
U.S, the U.S population demanded the products like wine cellars and compact refrigerators, and
Haier innovate them letting its brand recognize by the locals as the local brand. So also in China, it
designed a washing machine to wash potatoes which were very useful and satisfied by the most of
Chinese customers.

In India, there was delay in electrification process, and Haier knew the problems very well.
So, it tried to introduce energy saving refrigerators with high resistance to instable voltage. It
seemed to go smooth. But, in fact, being energy saving did not mean a specific innovated product
for the needs of the locals. In contrast, global competitors produced variety of products including
televisions, radios, air-conditioners and microwaves making brand recognition by the customers.

During global expansion, Haier got a market position as a premium brand among the
Western customers. It was because the market demands highly sophisticated products and brand
appliances. Even the head-office is in China, they did most of their international steps with the local
integration and their strong corporate culture so that their products are quality assurred ones.
However, India customers have a different taste on the electronic applainces. And the promotion
services are also not good enough to attract the market. Moreover, the research and development
centre are poorly developed in order to do detail research of changing market.

Though the generic localization strategy seems to be the same, there are differences in
details, and Haier is facing difficulties from discrepancies in the growing market.

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Answer - 4

All international firms tried to expand the emerging developing markets such as India and
China. As the global economy increases and appearance of middle class population, the growing
population of China and India were recognized as potential markets. India, with ascending growth
rate of population, becomes a main target for international companies. Increase in disposable
income let the India people to spend more on electronic appliances.

Global giants like LG and Samsaung had entered India market long before Haier stepped
into the competition. LG mainly targets on the mass market, and Samsaung prioritize on premium
products. Moreover, they have founded a reliable R& D unit with adequate staffs to show their
awareness of the India market. Moreover, there are also many local manufacturing firms who
worked with the low profit margins. It is undeniable that the India market is brilliantly emerging,
the supply and demand are not balanced. There are many players waiting for the explosion of the
market, yet the growth rate of the white goods market was much lower than that of the players.

In addition, India government did not prioritize the electronic markets particularly in
electrification process and transportation system to the villages. There were shortage of electricity
and irregular voltage especially in the villages, thus it was too difficult to build a production factory.
Besides, during the earlier times, India had an inverted duty structure that hindered development of
foreign direct investment. Moreover, local small businesses didn’t conduct proper market based
production since they didn’t have proper research and development centre. As a result, they could
only produce a non-innovative, low quality and low price products, and global brands are no match
for them.

As Korean and Japan brands occupied emerging India market for a certain degree, they had
a first mover advantage. In addition, the mass market demanded on the low cost products.
Therefore, there was a price war among the firms and the product has lost its relevant market price
position. It became hard to establish a good quality product rather than lower and lower pricing, and
small businesses will have to be exempted.

When Haier entered the market, the premium quality of the Haier’s product was not useful
since the public demanded for the low price products. And, there was no specific modification
depending on the social, cultural and behavioral segments in the wild market instead it entered with
the brand quality with premium pricing, but the sales were not favorable. There were so many
governmental constraints and the market knowledge and commitment on the product was still
lacking.

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Answer – 5

Braganza, a new president of the corporation appointed in 2009, took over the slow growing
Haier in India operation. He firstly evaluates the problem areas of the operation, and timely
implements the faults of their strategy. He found out that there was low brand awareness by the
India people.

Haier's primary target was middle class population which seemed to be emerged during
successive economic development, there was less brand recognition than expected. Their premium
pricing was successful in the Western countries, but the India people were not familiar with the
sophisticated appliances, and they didn't want to spend much for newcomers with high price. Thus,
Haier failed the first time entry with inappropriate targeting. Thus, they started to produce a
diversity of products with reasonable prices. They tried to cope up with the consumers' needs letting
them taste a wide variety of products including daily used products such as juicers and blenders
which targets the mass market of India.

Moreover, Braganza knew that they failed to get a market position in the India white goods
market. The brand was less known among India people, and there was also influence of first
movers. The distribution network was also weak, unlike in America operation. Thus, they built a
good distribution network as done in the previous successful three-in-one strategy in U.S. They first
entered the U.S market through a scattered channel, and the strategy was in a success. Thus,
Braganza strengthened dealer network by providing higher commission with good quality products.
The usual commission fees were 10-12% of the sales, but Haier provided 10-15% commission fees
to their distributors creating more distribution channels. Moreover, in selected locations especially
in areas with difficult access, they tried to give locals a single dealership providing brand loyalty.

Haier also owned a large "Experience Centre" which was difficult to possess. Earlier, there
were only Haier products showcasing at that centre which could slow down the product recognition
by the different types of customers. Braganza corrected that error by providing different products
which could increase the visibility of the products. It needs about 1200 sq.ft for an ordinary
experience centre, and Haier had many of these around the country. With the changing the
distribution pattern and marketing strategy, the turnover rate of the Haier's products was supposed
to be increased twice its current value in a fiscal year[ CITATION Aru10 \l 1033 ].

The pricing strategy was inappropriate with the market demand. Braganza with high market
knowledge knew that it was necessary to change the pricing strategy which was incompatible with
the India market as part of internationalization model[ CITATION Jan04 \l 1033 ]. In India, the market
is price sensitive[ CITATION Aru10 \l 1033 ]: there will be no enough consumers with high price, and
same negative result on the product if the price is too low. Braganza planned to stay in the fair price
position. Moreover, due to inverted duty structure, production of high end luxurious good were too
costly, and thus Braganza planned to import high end goods while producing low end high volume
products locally.

Braganza also planned to promote after-sales services as it was not properly set up since the
company thought their product was of the premium quality, and need not to be followed-up. The
global competitors had an effective after-sales services, and Braganza tried to set up the service

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centers across the state capitals. They tried to improve more service-franchisee network delivering
six-hour service in all metro cities[ CITATION Aru10 \l 1033 ].

Because of the new president, Braganza, Haier's business becomes alive and active again
downstreaming with the tide of the customers' needs, and approaching to get a market position in
the potential market.

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Answer - 6

Haier, with unsteady position and struggling in the India market, was starting to reach the
right track under the management of the new president, Braganza. It is undeniable that the market
sales are increasing, but the growth of the company's economy is still questionable.

For a start, the price of the company's products changes from premium price to the mass
market. The firm originally targeted for the middle class population with the brand quality, but due
to the slower growth rate of the luxurious product market, the company has to modify their strategy.
The company was still introducing the quality products, but it has to compete a price war with the
current giants with the market demanding products. But, in the future, there will be chance of
developing economy since its GDP is increasing steeply in the past decade (1500 million USD rise
from 2003 to 2013)3. With this, the company can build a perfect premium pricing strategy as
successful in the West and China.

Moreover, due to inverted duty structure, the production of high quality products will be
costly than importing them. Besides, Braganza wanted to raise their sales by product development
with diversity of products. Thus, high end goods are imported directly from China and low end
goods are manufactured directly in the host country.

Promotion and after-sales services, which are essential and vital for the survival and
longevity of an international firm, become strong and adequate after Braganza's revolution.
Opening more sales centers and service centers which can increase the visibility of the brand in turn
increases the significant difference of the quality of the products between their products and
existing products.

After some time of reaching India market, because of balance of payment crisis with debts
rom international loan agencies, India has to reduce tariffs and constraints, and start to liberalize,
Haier established a new factory in one of the governmental technology parks. This reduces the
Haier’s production in both inbound and outbound logistics, and also receives tax exemptions and
tax refunds. Here, it can reactivate its hindered three-in-one plan by manufacturing in a large scale
with minimal investment. Moreover, Haier should set up more research and development centre
on behalf of continuous researching and re-evaluation of the changing markets. Market research is a
critical component for future development of the international expansion, and Haier should conduct
a proper research with adequate quantity and quality of the researchers.

India market with a great diversity of people with different culture, behavior and social
statuses, it is hard to customize the needs of each and every customer. Haier used localization
strategy during American and German operations, but there were discrepancies in operating
localization strategy in India. Giving a generic modification of product (energy saving and tolerance
to voltage), Haier seemed to believe global market which favors premium quality and its strategy

3
India: Gross domestic product (GDP) in current prices from 2003 to 2013 (in billion U.S. dollars) (Source :
http://www.statista.com/statistics/263771/gross-domestic-product-gdp-in-india/)

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was to some extent similar to globalization strategy in which the firm introduces a certain level of
product to the market whatever market demands for. Thus, Haier showed strategical
inappropriateness in India operation, thus hinders its development in India market. This may be
partly due to overlooking of the India market and partly due to the experiences obtained during
economically developed countries. Braganza planned to innovate the strategy with a formal
localization by market direct approach and successive market research.

India market has a bright future. The firms are trying to take larger share holder during the
emerging period. It is still its growth stage in the product life cycle.4

Product Life Cycle

Source:
http://www.nku.edu/~issues/internet_marketing
/newwebpage1.html

Haier, with stronger competition skill, larger economy scale and current modified marketing
strategies, will have an ascending trend of growth to attain more and more market share, going
global.

4
Growth - Once the market has accepted the product,sales begin to rise.This is most crucial stage and help the brand
to establish in the market. (Source: Wiki)

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References
 Statista: The Statistic Portal (http://www.statista.com/statistics/263771/gross-domestic-product-gdp-
in-india/)

 The Open University of Hong Kong (2013) “The global, cultural, political and economic environment” in
MKT B891 International Marketing Strategy, Hong Kong: OUHK (1-28)

 Arunima Mishra  |  New Delhi  September 27, 2010 “Against all odds” (http://www.business-
standard.com/article/management/against-all-odds-110092700065_1.html)

 Yadong Luo and Rosalie L Tung (2007) “International Expansion of emerging market
enterprises: A Springboard Perspective”, Journal of International Business Studies, 38, 481-498

 Jan Johanson and Jan-Erik Vahlne: Internalization Process of The Firm – A Model of
Knowledge Development and Increasing Foreign Market Commitments

 Leapfrogging (http://en.wikipedia.org/wiki/Leapfrogging)

 Product Life Cycle (http://www.nku.edu/~issues/internet_marketing/newwebpage1.html)

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