North South University

SUBMISSION

of

Term Paper

Prepared For

Professor Dr. Md. Nazmul Hossain

BUS 535.1

(Business Research Methods)

Submitted By

Supriya Saha

(ID: 2016335660)

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A background of Haier Group
Zhang, the father of the Rendanheyi business model, one of the global top 50 thinkers, has built
the world's number one white goods brand – Haier. With his constant innovation in management
models, he sparks attention and recognition in the field of management both at home and
abroad.

Haier Group is a global white electric appliance company with its Headquarter in Quingdao
China. Studies indicate that the company, formerly known as Quindao Refrigerator Plant, has
today established itself as a renowned brand in the whole world ranking among the top four most
significant manufacturers of white goods.

In China, Haier Group is the largest white goods maker, and its various products include
computers, cell phones, vacuums, televisions, microwaves, dishwashers, air conditioners,
freezers, and refrigerators.

The company’s annual sale from over 13,000 different products it produces is approximately
$8.6 billion. The company has an employee base of about 30,000 people and carries out its
operations in nearly 160 countries.

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 ✓ Problems and struggles within Haier,

these are pointed out below-

❖ Company’s struggle of collapse and faulty products

In start of the business that was about more than 30 years ago, Haier was known as “Qingdao
Refrigeration Company (QRC)”. They were a collective company who were in brink of collapse.
They have hired 3 managers who were not able to fix the collapse problem in 1980s. The
company faced different types of struggles. After the takeover of Zhang Ruimin, Zhang
discovered that QRC is selling electronic products that are faulty which costs more than 2 times
higher than the QRC worker’s pay.

❖ weak management system

There was no top level of superiors. Most superiors’ directives were not up to standard or not
clever enough to run a business.

❖ Expansion of business lead to the inferior in bureaucrat

As the enterprise was getting larger and larger, Zhang found out that bureaucracy had worsened.
Every workers and every department were not giving enough to have connection with the
market.

❖ Eliminating employees due to administrative model “RenDanHeyi”5

Zhang has improvised his model to those employees that they need to be the entrepreneurs of the
company. The employees were failed to be the entrepreneurs even though they were highly
excellent workers and managers.

❖ Casting in the region of North America and Europe

Haier are the first Chinese electronic company who expand their business globally all over the
world. But there was a gap as consumers in North America and Europe have the stereotype issue
against the Chinese products that they think that Chinese products are of poor quality.

❖ Local and Global Market Competition

Haier has faced increasing domestic competition due to the foreign entities such as Whirlpool
and GE. They were also struggling to complete in the global markets due to low brand
recognition. The main issue for Haier is to establish brand equity in international markets such as
US and Europe.

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 ✓ The ways how Haier managed the challenges :

❖ Showcasing activity in front of the local consumers

In Zhang’s perspective, destroying fridges was the entry point to change people mind set. Zhang
was focused more on stock value and people to understand that total quality management is
about managing human resource. He mentioned that high quality products should be made by
high level of caliber workers.

❖ Zhang was a leader and a friend to all the workers

Zhang’s target was to achieve the common goals of the company. He does not only work as a
worker, but also he was a supervisor to every workers working on QRC which was renamed as
“Qindaohaier Group Company” in 1992. This process had highly motivated his employees.

❖ Experienced and talented workers

Based on factor 2, Zhang realized that there are workers who are highly talented and have the
capabilities of doing the work properly. In order to do so, Zhang created a mechanism that allow
workers to fully unleash their talent and capabilities.

❖ Organizational Model “RenDanHeYi” by Zhang Ruimin

An organizational model was introduced by Zhang Ruimin that is known as “RenDanHeYi”

which implies “Ren” as to each employee, “Dan” as to the needs of each user, and “HeYi” as to
the connection between each employee and the needs of each user. [ CITATION Pim18 \l 1033 ].
Zhang made this model to make each unit became a small company responsible for its own
decisions and financial survivor.

❖ Investment of fund from employees who are acting as entrepreneurs

In order to survive, Zhang made every employees to invest fund for the company’s survivals and
to keep the company afloat. For every dollar employees invested to expect a return. Employees
of Haier were more focused on the market as well as the deadline.

❖ Merge with “Sanyo” (Japan) and “Fisher & Paykel” in (New Zealand)
China Haier Group and Japan’s Sanyo Electric Co. Ltd reached a final merger and acquisition
agreement where Sanyo will sales its refrigerator and washing machines business in Japan and its
home appliances business in four countries in Southeast Asia to Haier. On the other hand,
China’s Haier Group was poised to take complete control of “Fisher & Paykel Appliances
Holding Ltd. FPA. NZ” in New Zealand after Haier acquired more than 90% of NZ’s top white-
goods maker.

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 ❖ Assessment of Firm Policy
In the local markets, Haier started out with building the brand image. Zhang knew that high
quality products could command a premium price and it would satisfy consumer needs. Haier
kept on innovating and researching consumer tastes and preferences and came out with
diversified product range. In the foreign markets, Haier uses the transnational strategy which is
coordinated approach to globalization in which the firms seeks to combine the benefits of global-
scale efficiencies with the benefits of local responsiveness.

❖ Fundamental Capabilities

Haier had developed numerous core competencies over the year. Zhang quoted “Novelty is the
real core competence for Haier”. Haier set foot in over 20 types of product categories which
allowed them to transfer core competencies from one product portfolio to another portfolio.
Zhang stayed ahead of its competitors as he studied consumers’ behavior and preference. This
allowed Haier to have a better understanding of changing trend and the company successfully
employed a product differentiated strategy which allowed for new innovative product. Moreover,
their quick response allowed for rapid product development.

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✓ Things could have been done if I were the decision-maker:

There are alternative strategies that I could help if I were a decision maker. Being a decision
maker, I analyzed the internal and external environment that could help Haier to compete as a
truly global brand.

1.Target Niche markets with innovative products: Haier has acquired GE Appliances in US
Market and had come up with refrigerator with Internet of Things (IOT). Haier should come with
this same strategy but customize that other range of products with that IOT strategy to meet
customers’ needs. Focusing more on the customers’ needs would help Haier to be more flexible
and offer products faster than the competitors.

2. Offering unique first-rate customer services: Haier has been outstanding with their
customer service. Unlike its competitors, Haier has gained competitive advantage in the Chinese
Market. Haier has been using the core competency as their prior strategy in Chinese Market, they
can imply this globally, this may help in gaining customers and creating brand loyalty.

3. Continue to build its brand by having an effective and aggressive marketing campaign:
Haier should come up with the marketing campaign focusing on mostly social and environmental
way. This would help in company’s cause, speed, and differentiation.

4.Tap into the new market: Haier could start forward with different electric product. A good
example could be the vacuum cleaner as they have the strongest technological advancement
and most importantly, they have IOT technology.

5.Team orientation: The performance of small groups within an organization is a crucial

ingredient to the overall output of the entire organization. Hence, the success of any organization
heavily relies on the individual production of small teams. Haier could operate their whole
operation into small teams that constitute departments or divisions within an organization.

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✓ Learnings from this case that can be applied in real corporate world here
in Bangladesh:
Based on stories on internet and details on Haier’s website, I understand that there are several
stages we can apply in real corporate world here in Bangladesh.

1.Brand building strategy stage: Based on the case, we learned that a company should be
handled with care and love. A company should have strong relationship with employee and
employee should be more focused on work. Based on customers’ feedback, every manager
should inspect every products before launching the product into the market.

2.Expansion strategy stage: A company should gain respectable and trustworthy reputation
not only in local market, but also in international market. So based on this, a company should
diversify their range of product. Before diversifying the range of product, we should introduce a
style of management and a corporate culture that would set up a strong capability for my
company.

3.Implementation of new strategy stage : A company should seize any opportunities to

implement a new strategy. Based on the competition, a company can enter into the most
competitive markets instead of less competitive region. This would help a company to have more
learnings and knowledge on the basis of competition even though there is no cost advantage.
Another could be the best way to move is through acquisition.
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4.Global branding strategy stage: The best possible way to expand any business is through
“RenDanHeyi” business model. A company should focus on exploration that creates user to
remain loyal to a brand of my company. A company should integrate its unique management
culture into the local operation and cultures.

5.Networking strategy stage: In the era of internet, a company should be “platform-based

enterprise” with “entrepreneurial employees” and “personalized user experiences for
customers”. Platform-based enterprise should work as a network platform that is accessing to
world-class resources. Another approach can be “Micro-Enterprises” that means giving your
works to thousands small, independent companies. It would bring success to my company.

6.Ecosystem strategy stage: A company should intend to stimulate open and dynamic creation
within an ecosystem that focuses on creating products and services that change one-time
customer into lifelong user. A company should strive to provide a scenario ecosystem that is to
focus on user’s complex needs and provides user with one-stop services by attracting various
stakeholders and integrating a wide range of resources to fulfill that user’s needs.
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