Haier Case Study

Strategic Management
HAIER: Taking a
Chinese Company
Global
CASE STUDY
HAIER: Taking a Chinese Company Global
Questions
1. Why was Haier so successful in China?
Haier started from a failing refrigerator factory from Qingdao in 1984 and
grown into a Multinational company by the end of 1990’s. In 1984there
were more than 300 refrigerator companies all over China. But most of them
offered low quality products. Zhang the new director of Haier made the
focus on building quality refrigerator. He made his focus clear to his
employees as one time he made them smash 76 refrigerators for minor flaws.
In 1989 the Chinese market was flooded with oversupply of
refrigerators. Many companies reduced their prices to survive while Haier on
the other hand increased their prices by 15% as they believe that the
consumers are willing to pay that premium for their product.
Haier has expanded its product line from refrigerators to Air
conditioners, washing machines, IT products, Kitchen & Bath, Technology
equipment and direct affiliates.
Haier put a lot of focus on the R&D division. It constantly made
innovations to the product. It also brought additional utilities to its products
like using washing machines for cleaning vegetables. The after sale service
provided by Haier was also very good quality with low cost. If the
equipment needs to be transferred then Haier give a temporary replacement.
Haier logistics which was its logistics wing give a competitive
advantage as the competitors are using third party distributors at high cost.
2. Was Haier’s decision to globalize into developed markets early on a

good strategy?
Developing into foreign markets was part of Zhang’s “three thirds” goal. For
promoting globalization it established an Overseas Promotion Division in
1999. As a result it experienced rapid growth in international sales and it
grown to contribute about 17% of total revenue of Haier in 2004.
Haier entered into global markets by the early 1990’sitself. It started
with exporting to UK and Germany, then to France and Italy. It also
established several JVs in various countries.
Haier’s strategy into entering into developed markets first was also a
success as it helped in increasing their brand value when entering into
developing markets.
Entering into foreign market as mr.Zhang says helped them in
knowing what their competitors are doing and helped them in giving a
Competitive edge over others. Haier recognized this competitive edge as
quality and innovation and successfully implemented it. Also foreign
companies have been penetrating into the Chinese markets. As a result
Chinese urban market has reached its saturation point so expansion was
inevitable.
3. Can Haier build on its success in niche products to become a dominant

global brand in high-end white goods?
When Haier entered US market there were already major established

companies like Whirlpool, Electrolux, etc. Haier doesn’t have the resources
to compete against these big players. So they entered into niche market
meeting needs of students and offices. Its products were a hit in that segment
as there were no competitors at that segment.
It constantly brought in new features and innovations in its product. In
three years it 30% of market share in compact refrigerators. It then entered
into agreements with retail giants like Walmart to supply its products.
Slowly they diversified its products to high end white goods. With niche
marketing Haier had already created trust in customers and builds a
distribution network. So it was easy to enter into high-end segment.
Haier’s staffing strategy was also different. For every foreign
establishment it employed people from that nation itself. It helped in
creating an image in the mind of customers that its products are produced by
local people from their own country. The people they chose were
experienced in the sector. This experience helped in establishing a successful
distribution network.
4. Is Haier’s “three thirds” strategy a viable or wise approach?
‘Three third’ strategy was part of Haier’s Global expansion plan in 1997. In
this approach Zhang want the revenue to equally distributed from three
categories. One third from production and sale in china, one third from
production in china and sale overseas and one third from production and sale
overseas. By 2004 17% of its revenue was from overseas.
Global expansion helped Haier in getting a competitive advantage
over the others. Also Chinese market was saturated at certain segments. So
in such segments, overseas sale brought in new markets. So ‘Three third’
approach was wise in that sense.
For entering into foreign segments Haier has to sacrifice the profit it
obtained from Chinese market as capital to other markets. Due to existence
of established players like whirlpool, LG, Electrolux, etc. it had incur some
expense to penetrate foreign markets. Exhibit 1b shows that its revenue from
foreign operations is increasing but the rate of increase is very slow. This
raises the question that if this approach is wise.

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Strategic Management

2. Was Haier’s decision to globalize into developed markets early on a

3. Can Haier build on its success in niche products to become a dominant

When Haier entered US market there were already major established

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