Strategic Management
Content
[PM1473005] MANAJEMEN STRATEGI
CASE ASSIGNMENT :
Haier: Taking a Chinese Company Global in
2011
Harvard Business School, 9-712-408
Tarun Khanna; Khrisna G. Palepu; Philip Andrews
AGUS HERMANTO
HUSIN
ADISTRA WIDYANIE
[9112205310]
[9113205316]
[9114201305]
DOSEN
F.A. HANDOKO SASMITA, MBA.
PROGRAM MAGISTER MANAJEMEN TEKNOLOGI
INSTITUT TEKNOLOGI SEPULUH NOPEMBER
SURABAYA
2015
Haier : Taking a Chinese Company Global in 2011
Starting in 1984 with a defunct refrigerator factory in Qingdao, a port city in Chinas
Shandong province, founder and CEO Zhang Ruimin built Haier Group a into Chinas largest
home appliance maker before launching operations overseas in the 1990s.
Haier developed a formal global expansion strategy beginning in 1997, when Zhang
announced his three thirds goal of having Haier revenue come equally from goods produced
and sold in China, goods produced in China and sold overseas, and goods produced and sold
overseas. The company had been the No. 1 white-goods manufacturer in China since 2001
and had just been named the leading refrigerator manufacturer worldwide by Euromonitor. A
75% increase in Haiers 2010 profits was 8 times its 9% increase in revenues.
International Strategies
Focus on difficult markets first Shunning conventional wisdom among Chinese firms, Haier
opted to enter the difficult developed markets first and, only after proving itself in those, go
after the relatively easy emerging markets.
Haier used its U.S. and European experience to convince emerging market retailers to carry
its products; competing effectively in mature markets against brands such as GE, Matsushita,
and Philips gave Haier credibility elsewhere.
Staff with locals When entering a new market, Li said, The first stage relies on local people,
who know the market very well.
Haier began by identifying a local manager with experience, preferably in a leading whitegoods firm, to head the country operation, hire a local team, and develop sales and
distribution channels.
Foreign rivals in China Just as Haier had been busy growing overseas during the 1990s,
foreign consumer-appliance brands had been entering China, both to take advantage of cheap
Chinese labor and to sell into the world’s most populous market.
As early as 1994, Whirlpool formed a JV with a Chinese manufacturer to produce
refrigerators in a plant near Beijing. In 1996, Zhang noted, The Chinese market has become
part of the international appliance marketplace.
The impact of Chinas 2001 WTO entry added pressure on Haier to solidify its brand globally
and maintain a dominant position in the Chinese market.
Before 2001, our competitors were domestic brands, said Haier vice president Gao Yicheng.
Haiers domestic rivals also planned to capitalize on the rural Chinese market, where, in 2001,
less than 20% of households owned a refrigerator. Chinese refrigerator firm Kelon had
already begun doing so, selling nearly a million units of a new lower-priced brand in 2002.
The future lies in the second-line and third-line markets, which is the rural population in
counties and townships, said Kelons CEO. While Haier already had a strong presence in the
rural markets, the company had not specifically targeted this segment with specially priced
products.
Haiers response In an effort to fend off loss of market share to foreign rivals, Haier diversified
its domestic products, adapted to retail shifts, and improved service and distribution. By 2004,
Haier had a service network of 5,500 independent contractors, one for each sales outlet.
Haier product owners could call a nationwide service hotline and warranty periods covering
full repair costs met or exceeded Chinese government regulations.
Achieving and Maintaining the Top Market Position in China
To get there, Haier planned more deliberately, securing market leadership at home in each
sector, and then taking that product line into the global market. In the international market, we
wanted to get a 10% share in white goods to begin with when entering a market.
ZZJYT Based on an ancient Chinese proverb, the acronym ZZJYT for the Romanized zizhu
jingying ti, or was loosely translatable as self-managed teams. These teams typically ranged
between 9 and 30 members and consisted, at a minimum, of a leader, four customer managers,
and four product managers from the core businesses.
Through the ZZJYT model, Haier continually assessed its position in a market and identified
specific competitive advantages in order to quickly adjust its corporate strategies to adapt to
the market. The model was also used to attract talented employees, enticed by opportunities
for teamwork, responsibility, and entrepreneurship.
Market Penetration
In 2007, Haier began implementing a strategy to reach these consumers by building an
integrated and responsive system to sell, distribute, and service Haier products across China
through company-owned retail stores, local sales contractors, and an expanded delivery and
repair network.
Haiers efforts to increase its rural market penetration were greatly enhanced in 2008 by the
Chinese governments rural subsidy program, part of a $586 billion economic stimulus
package.
When the program ended in spring 2011, sales of home appliances in Chinas rural areas had
surged 168%.66 On average, 4 million units of subsidy-eligible items were sold each month
in 2009.67 This increased to between 5 and 6 million units per month in 2010, and the first
three months of 2011 alone produced 30 million units in sales.Refrigerators and televisions
were the most popular appliances.69 Three groups have benefited from this subsidy: the
farmers got benefit in access and affordability of product, the companies got the market, and
the government won the hearts of the people, reflected Zhou Yunjie, Haiers executive vice
president.
Haier also sought to expand its share of foreign markets by acquiring rival white-goods OEMs
and by expanding overseas production capacity. In 2005, with backing from two large U.S.
private equity funds, Haier made a bid to acquire U.S. appliance maker Maytag for $1.28
billion. The bid failed, however, and Maytag was bought by Whirlpool for $1.7 billion. Still,
Haier continued to strengthen its U.S. manufacturing infrastructure with a $150 million
investment in 2006 to expand the production capability of the Haier America industrial park
in South Carolina.
The Next 10 Years
Regarded as a national hero, Zhang was proud of the work he had done to transform Haier
into one of Chinas first global brands.
In 2011, Zhang made a significant departure from Haiers long-time strategy of building the
strength of the namesake brand by introducing the Casarte brand to Chinas urban centers.
Zhang believed Casarte, a high-end brand inspired by Chinese demand for European luxury
goods and high-quality products, would generate higher profit margins at home while also
eventually increasing Haiers market share in both emerging and developed markets.
CASE ASSIGNMENT :
Haier: Taking a Chinese Company Global in
2011
Harvard Business School, 9-712-408
Tarun Khanna; Khrisna G. Palepu; Philip Andrews
AGUS HERMANTO
HUSIN
ADISTRA WIDYANIE
[9112205310]
[9113205316]
[9114201305]
DOSEN
F.A. HANDOKO SASMITA, MBA.
PROGRAM MAGISTER MANAJEMEN TEKNOLOGI
INSTITUT TEKNOLOGI SEPULUH NOPEMBER
SURABAYA
2015
Haier : Taking a Chinese Company Global in 2011
Starting in 1984 with a defunct refrigerator factory in Qingdao, a port city in Chinas
Shandong province, founder and CEO Zhang Ruimin built Haier Group a into Chinas largest
home appliance maker before launching operations overseas in the 1990s.
Haier developed a formal global expansion strategy beginning in 1997, when Zhang
announced his three thirds goal of having Haier revenue come equally from goods produced
and sold in China, goods produced in China and sold overseas, and goods produced and sold
overseas. The company had been the No. 1 white-goods manufacturer in China since 2001
and had just been named the leading refrigerator manufacturer worldwide by Euromonitor. A
75% increase in Haiers 2010 profits was 8 times its 9% increase in revenues.
International Strategies
Focus on difficult markets first Shunning conventional wisdom among Chinese firms, Haier
opted to enter the difficult developed markets first and, only after proving itself in those, go
after the relatively easy emerging markets.
Haier used its U.S. and European experience to convince emerging market retailers to carry
its products; competing effectively in mature markets against brands such as GE, Matsushita,
and Philips gave Haier credibility elsewhere.
Staff with locals When entering a new market, Li said, The first stage relies on local people,
who know the market very well.
Haier began by identifying a local manager with experience, preferably in a leading whitegoods firm, to head the country operation, hire a local team, and develop sales and
distribution channels.
Foreign rivals in China Just as Haier had been busy growing overseas during the 1990s,
foreign consumer-appliance brands had been entering China, both to take advantage of cheap
Chinese labor and to sell into the world’s most populous market.
As early as 1994, Whirlpool formed a JV with a Chinese manufacturer to produce
refrigerators in a plant near Beijing. In 1996, Zhang noted, The Chinese market has become
part of the international appliance marketplace.
The impact of Chinas 2001 WTO entry added pressure on Haier to solidify its brand globally
and maintain a dominant position in the Chinese market.
Before 2001, our competitors were domestic brands, said Haier vice president Gao Yicheng.
Haiers domestic rivals also planned to capitalize on the rural Chinese market, where, in 2001,
less than 20% of households owned a refrigerator. Chinese refrigerator firm Kelon had
already begun doing so, selling nearly a million units of a new lower-priced brand in 2002.
The future lies in the second-line and third-line markets, which is the rural population in
counties and townships, said Kelons CEO. While Haier already had a strong presence in the
rural markets, the company had not specifically targeted this segment with specially priced
products.
Haiers response In an effort to fend off loss of market share to foreign rivals, Haier diversified
its domestic products, adapted to retail shifts, and improved service and distribution. By 2004,
Haier had a service network of 5,500 independent contractors, one for each sales outlet.
Haier product owners could call a nationwide service hotline and warranty periods covering
full repair costs met or exceeded Chinese government regulations.
Achieving and Maintaining the Top Market Position in China
To get there, Haier planned more deliberately, securing market leadership at home in each
sector, and then taking that product line into the global market. In the international market, we
wanted to get a 10% share in white goods to begin with when entering a market.
ZZJYT Based on an ancient Chinese proverb, the acronym ZZJYT for the Romanized zizhu
jingying ti, or was loosely translatable as self-managed teams. These teams typically ranged
between 9 and 30 members and consisted, at a minimum, of a leader, four customer managers,
and four product managers from the core businesses.
Through the ZZJYT model, Haier continually assessed its position in a market and identified
specific competitive advantages in order to quickly adjust its corporate strategies to adapt to
the market. The model was also used to attract talented employees, enticed by opportunities
for teamwork, responsibility, and entrepreneurship.
Market Penetration
In 2007, Haier began implementing a strategy to reach these consumers by building an
integrated and responsive system to sell, distribute, and service Haier products across China
through company-owned retail stores, local sales contractors, and an expanded delivery and
repair network.
Haiers efforts to increase its rural market penetration were greatly enhanced in 2008 by the
Chinese governments rural subsidy program, part of a $586 billion economic stimulus
package.
When the program ended in spring 2011, sales of home appliances in Chinas rural areas had
surged 168%.66 On average, 4 million units of subsidy-eligible items were sold each month
in 2009.67 This increased to between 5 and 6 million units per month in 2010, and the first
three months of 2011 alone produced 30 million units in sales.Refrigerators and televisions
were the most popular appliances.69 Three groups have benefited from this subsidy: the
farmers got benefit in access and affordability of product, the companies got the market, and
the government won the hearts of the people, reflected Zhou Yunjie, Haiers executive vice
president.
Haier also sought to expand its share of foreign markets by acquiring rival white-goods OEMs
and by expanding overseas production capacity. In 2005, with backing from two large U.S.
private equity funds, Haier made a bid to acquire U.S. appliance maker Maytag for $1.28
billion. The bid failed, however, and Maytag was bought by Whirlpool for $1.7 billion. Still,
Haier continued to strengthen its U.S. manufacturing infrastructure with a $150 million
investment in 2006 to expand the production capability of the Haier America industrial park
in South Carolina.
The Next 10 Years
Regarded as a national hero, Zhang was proud of the work he had done to transform Haier
into one of Chinas first global brands.
In 2011, Zhang made a significant departure from Haiers long-time strategy of building the
strength of the namesake brand by introducing the Casarte brand to Chinas urban centers.
Zhang believed Casarte, a high-end brand inspired by Chinese demand for European luxury
goods and high-quality products, would generate higher profit margins at home while also
eventually increasing Haiers market share in both emerging and developed markets.
