Haier: Taking A Chinese Company Global: Anshul Bhatia Roll No - 253

HAIER: TAKING A CHINESE
COMPANY GLOBAL
Anshul Bhatia
Roll No - 253
Haier Group: Highlights
#1 company by Asian
Wall Street Journal
China’s largest Home

Appliance
Manufacturer
Largest Player in the

compact refrigerator
market worldwide
Brand “Haier” is
recognized worldwide
Haier Group: Challenges
Declining Profit
Margins; from 9.4%
to 2.6%
Defending its
market share in
China
Increasing its global

presence to generate
$1 billion sales to US
Differentiating Strategy of Haier
 Haier gains competitive advantage by the adoption of a “strategy of
diversification”. The company strives to be a leader by using innovative solutions
in terms of technical specification and in design and creativity.
 Haier is different from most other Chinese manufacturers, whose aim is only to
export and earn foreign currency – they produce and sell OEM products, i.e.
without an own brand policy.
 Haier enters new markets overseas, the demands of local consumers are its
starting point. So the company insists on a strategy of localization in overseas
markets
 For example, in Europe, Haier is adopting a ‘three in one’ strategy – localized
construction at a factory near Venice, Italy, a design centre in Paris and a sales
centre in Milan.
 In order to improve its own key competitive ability, Haier started a business flow
restructuring in 1998 and improved significantly the company’s feedback speed
from the market, reducing operating costs and increasing competitiveness in the
market by this restructuring.
Haier In Chinese Market
2002(%) 2003(%) 2004(%)
Refrigerator market Haier 26.7 26.2 28.2
Guangdong Kelon 13.4 12.4 10.8
Henan Xinfel 8.5 8.5 8.9

Washing Machine Haier 25.8 25.7 30.4
Market
Wuxi Little Swan 20.7 18.8 16.5
Hefei Rongshida 10.6 10.0 10.6

Group
AC Market Haier 16.3 16.6 17.5

Midea 10.9 10.9 11.4
Gree 7.4 9.1 10.0
National Competitors
 In 1989,100 refrigerator producers were there which had been reduced
to 20, with the top 3 accounting for 60% of the market
 Protecting factors for Haier are diversified holdings, its differentiated

products and its export strategy
 Guangdon Kelon-one of national competitors were the only

manufacturer of full line of home appliances. Kelon thus followed
multi-brand strategy in China.
 Kelon’s new management had a new strategy to target China’s rural

population and sold a million units of low-priced brand in first year of
its operation
 Haier did not target specifically rural segments with different pricing
strategy because they already had a strong presence in rural market
Foreign Entrants
 After Chinese entry in WTO in December, 2001, Haier faced
competition not only from local brands but also from foreign
competitors like Siemens, Electrolux, Samsung, LG, Matsushita, Sony,
GE and Whirlpool
 Many MNCs target emergence of a replacement market in large cities
 Companies need to have a well informed sales and marketing network

to capture untapped Chinese market
 MNCs underestimated Chinese competitors and expected competition

to come from other newly arrived foreign firms, instead, they faced
biggest competition from Haier and Kelon, because of equally good
technology and lower price
 Haier has advantage of local knowledge- aware of Chinese culture and

values
Retail Channels for Haier
 Distributors were major domestic chains as well as international
retailers like Wal-Mart and Carrefour
 Introduction of Western retail models to China’s major cities coincided

with the arrival of foreign multinational appliances brands like
Siemens and GE
 WTO-mandated opening of rest of China to foreign retailers by the

end of 2004 threatened to erase domestic firm advantages beyond the
first tier cities
 Haier has advantage of successfully tested sales approach to work on a

non-uniform population
Haier Market Advantages
Haier Products commanded 20% Premium over other

brands, still being a leader in sales
Haier has superiority in majorly 3 areas

Market responsiveness
Distribution
After sales service
After
After sales
sales
service
service
Market
Advantages
Market
Market Distribution
Distribution
Responsiveness
Responsiveness
Market Responsiveness
Focus on meeting customer’s needs
42 divisions act as individual companies
Creating innovative machines like Single wash, Potato
washers
Meeting demand at home with Innovative models
After sale Service

Pioneer of after sale service concept in China
Free of charge replacement
Low costs on repairs
Strong contractor network
National hotline customer service
 Distribution
 Haier Logistics pioneered JIT concept in China
Reduction of inventory cycle from 30 days to 7
More focus on supplier reduction from 2300 to 1000
Teamed up 300 transport companies to deliver goods
Haier reorganized its logistics to serve entire group
unlike others
Haier in International Markets
 Haier adopted a “Three pronged strategy”:
1. 1/3rd from goods produced and sold in China
2. 1/3rd produced in China and sold overseas
3. 1/3rd produced and sold overseas
 Creation of Haier’s Overseas Promotion Division in 1999 led to rapid growth in

international sales.
 Haier started to venture into overseas market as a contract manufacturer for

overseas brands
 It entered into a JV with Mitsubishi to set up China’s largest AC plant

It was one of the first Chinese co’s to engage in FDI by setting
up a refrigerator and AC plant through a JV with a local firm.
Haier entered Europe in 1997 by producing AC’s in Belgrade.
Germany became Haier’s first export market when Haier’s

“Blue Line” refrigerators beat local firm Liebherr in a ranking
In 1997, Haier formed a JV with LKG to manufacture Haier

branded products in Philippines for sale in regional market
Haier started focusing on selling its branded products
overseas
Haier’s philosophy – “ To export in order to establish a

brand reputation and not to earn foreign currency”
Haier tried emulating strategies of Sony, Samsung, LG

while expanding into international markets
LG was the most likely model for Haier

International Strategies
Focus in the
difficult
market first
Begin with
Staff with
the niche
locals
products
Focused on difficult markets first
Home markets of larger global competitors

Highest quality standards
Build a prestige and arrive with a ready made
reputation in South Asian Market
Zang said “ If we can compete in mature market with
brands as GE, Matsushita, Philips, we can surely take
the market of developing countries without much
effort”
Begin with niche Products
Started with few models
Established itself as a distant competitor
Compact refrigerators for students and offices
30% market share within 3 years.
Attention from Wal-Mart and Best Buy
Introduction of regular product after high awareness
and purchase intention achieved
Staff With Locals
Local people know the market very well
Identify a local person with experience preferably in a
leading white goods firm, to head the country
operations.
The person will hire a local team and set up sales and
distribution network
Eventually they will place their own people in key
positions to get better market intelligence
International Divisions
Haier China
Overseas
America Middle South

Europe East Asia
(N&S) East East Asia
Contd.
Haier Products , 80% in white goods sold :
62 distributors, 30,000 retailers, 59,000 sales agents,
12,000 service personnel
Operated 18 design institutes, 13 overseas factories, 11
industrial complexes.
Haier America
Entered US market in 1994 with compact refrigerators
captured 10% market share
Michael Jemal, import company Welbeilt appliances
Joint venture ‘ Haier America’ with Jemal in 1999
Rented space in Manhattan , 13 people all American
except for the accountant
Established $40 million Industrial park and a factory
in south Carolina
Strategy in America
To manufacture quality products and sell at premium
Focus on getting Haier products into large retail
chains- Home Depot, Wal-Mart etc
Focus on niche markets helped to avoid competition
from GE, Maytag, Frigidaire
Haier in Europe
 In 2000 Haier Europe headquartered in Varese, Italy, began
coordinating sales an marketing in 13 European countries growing
upto 17 in 2004.
 Product line included refrigerators, freezers, washing machines,
dishwashers, microwave ovens and small appliances all designed
for the European market.
 In 2001 Haier invested $8 million to acquire a refrigerator plant in
Padova,Italy,manufacturing built in refrigerators and freezers.
 In 2002 Haier A/C Trading began distributing air conditioners in
the local market.
 By 2004 Haier had an estimated 10% share of European air
conditioner sales.
Haier in India
 Joint production and marketing of refrigerators with Indian
appliance firm Fedder Lloyd Corp.
 In Jan 2004 it launched a broad range of products with the goal of

becoming one of the top three white goods firms in India within 5
to 7 years.
 In 2004 it announced a $200 million investment over 4 years to

establish a refrigerator factory and R&D center that would serve as
a production site for South Asian and African markets
 In 2004 Haier formed an alliance with Whirlpool and Voltas to

manufacture refrigerators and air conditioners for the Indian
markets.
Thank You!

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HAIER: TAKING A CHINESE

China’s largest Home

Largest Player in the

Increasing its global

Refrigerator market Haier 26.7 26.2 28.2

Guangdong Kelon 13.4 12.4 10.8

Henan Xinfel 8.5 8.5 8.9

Wuxi Little Swan 20.7 18.8 16.5

Hefei Rongshida 10.6 10.0 10.6

AC Market Haier 16.3 16.6 17.5

 Protecting factors for Haier are diversified holdings, its differentiated

 Guangdon Kelon-one of national competitors were the only

 Kelon’s new management had a new strategy to target China’s rural

 Many MNCs target emergence of a replacement market in large cities

 Companies need to have a well informed sales and marketing network

 MNCs underestimated Chinese competitors and expected competition

 Haier has advantage of local knowledge- aware of Chinese culture and

 Introduction of Western retail models to China’s major cities coincided

 WTO-mandated opening of rest of China to foreign retailers by the

 Haier has advantage of successfully tested sales approach to work on a

Haier Products commanded 20% Premium over other

Haier has superiority in majorly 3 areas

After sale Service

 Creation of Haier’s Overseas Promotion Division in 1999 led to rapid growth in

 Haier started to venture into overseas market as a contract manufacturer for

 It entered into a JV with Mitsubishi to set up China’s largest AC plant

Haier entered Europe in 1997 by producing AC’s in Belgrade.

Germany became Haier’s first export market when Haier’s

In 1997, Haier formed a JV with LKG to manufacture Haier

Haier’s philosophy – “ To export in order to establish a

Haier tried emulating strategies of Sony, Samsung, LG

LG was the most likely model for Haier

Home markets of larger global competitors

America Middle South

 In Jan 2004 it launched a broad range of products with the goal of

 In 2004 it announced a $200 million investment over 4 years to

 In 2004 Haier formed an alliance with Whirlpool and Voltas to

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