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Copy of Haier

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Maya Hanouni

on 6 October 2014

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Transcript of Copy of Haier

Business Operations in Emerging Economies

CEO Zhang Ruimin
Alkis Meletiou- Maya El Hanouni- Javier Acostanavarro Carmen Garcia- Ibrahim Sabbah
Reaching the Top
A Chinese Way of Haier

Company Overview & Timeline
Haier in China
Domestic Growth
International Growth
Haier Strategies
Foreign Rivals in China
Niche Products
Blending International & Domestic Growth
The next 10 years
Haier Today
1984- 1991
Haier is a chinese multinational home appliance and electronics company


"First we observe and digest, then we imitate. In the end, we understand it well enough to design it independently.”

“They finally understood I wasn’t going to sell just anything like my competitors would. It had to be the best.”

Domestic Growth
Expansion in China 1990-2004
Chinese Market
International Growth
Which would be the best way of going international?
1994 -> Joint Venture with Welbilt.
Distribution -> Large chain retailers
1999 -> Operating under Haeir America.
2001 -> $40m investment: Industrial Park and Factory in S.C + Exports.

US Market
90s -> Joint Venture with manufacturers
2000 -> Headquartes in Italy, Haier Europe.
Haier hired a former sales executive of Italy’s Merloni.
2001 -> $8m Acquisition of a refrigerator plan in Italy.
2004 -> 4 distribution centers: Italy, the Netherlands, Spain and the U.K.

European Market
René Aubertin, CEO of Haier Europe
1999 -> JV with an Indian appliance firm
2004 -> Exports from China. Haier India.
2004 -> Announcement $200m factory + R&D center.
Challenge: Distribution channels.
Haier hires a fomer Whirlpool India executive.

Indian Market
Haier Branch Offices, Warehouses, and Experience centers
What were some common points of Haier's entry strategies in these regions?
Common Points
Joint Venture as a first step.
Great investment on R&D.
Hiring local and experienced former executives in each region.
Adaptation to the local needs and tastes.
Different division for each country or region.

Was going international a good idea?
Haier Strategies
Three-Thirds Strategy
Haier Revenue comes equally from:
goods produced and sold in China
goods produced in China, and sold overseas
goods produced and sold overseas
took company from China to the global market
increased Haier’s revenue growth
strategy not fully in pratice (10% of TR is produced by products sold and produced abroad)
-beginning in 1997-
1- Focus on difficult markets first
2- Focus on emerging markets afterwards
Well recognized brand
Logistics pioneer serving the entire group
diversification of products
Lack of previous experience
Highly dependant on home sales
Low quality Image 'Made in China'
Find & explode niche markets
Development of 'green' products
Government support "Go out strategy"
Mature Markets
Powerful competitors
Culture issues
SWOT Analysis
CEO Zhang Ruimin took over a failing Refrigerator Factory in Quindao, China
Transformation of the company
Started in the US Market
CEO Zhang Ruimen was awarded the Five Star Personal Lifetime Award
Haier won honors of Business Management Golden Horse Prize and National Quality Management Prize, which contributed to a solid foundation for its future development.
Reached $200 million dollars in Revenues
2nd largest Global Refrigerator manufacturer
PWC publicized the “World Most Respectable Enterprises and Entrepreneurs” as well as the ranking list of worldwide enterprises.
Ranked #1 between Chinese enterprises
Ranked 3rd in the Forbes' Top 600 'World's most reputable enterprises'
World's Largest Market share
#1 Global Major Appliance brand for white goods
Deep market penetration especially in the rural areas of China.
Local knowledge, adaptability to change in tastes & huge diversification.
1st rank in service and after sales service. Full coverage of the repair costs.
Creation of entry barriers to their multinationals competitors.(price, local policies)
Market leadership and best brand reputation.
“Their technology was nearly as good as Whirlpool’s, their prices were lower, and their styling and distribution were better suited to China,” wrote the Economist.

Why was Haier successful in China?
Product Development
1984, technology licensing agreement with German refrigerator Liebherr, then JV with Mitsubishi and the Italian Merloni.
Creation of Extra features.
96 product categories, 15,100 specializations in their designs.
Low cost of production with modules of components and subsystems on basic platforms.
Product modifications to meet the needs of their customers abroad.
More customer focused than their competitors
Innovative & devoted to their after-sale service
Speed and differentiation created an effective sales and marketing organization.
High-quality products & creation of worldwide brand recognition
Risks of the Fundraising Strategy

Promised loan 1,6 billion RMB not happened.
World Bank and Asian development bank suspended foreign loans to Chinese government.
Nov 1993 China's stock market in Shanghai raised 369M RMB.
Big danger of Bankruptcy
Through which way would you proceed in a capital injection?
Intensive industries have a Debt/Equity ratio around 2
Haier at that point had 0.3

Huge pressure by the shareholders and highly dependent on their capital until 1998, when the company started paying dividends.
Shareholder Pressure
Foreign Rivals in China
Competitor Overview
1994 -> Whirlpool formed JV with a Chinese refrigerator manufacture.
1997 –>Don’t value cutting- edge technology / accumulated losses of over $100 million
2001 –> Whirlpool launched 30 new products, two global R&D centers, and a large factory
2001 –>China entered WTO
2002 –> Asian Wall Street Journal ranked Haier China’s leading company.

The sale of refrigerators and freezers valued at RMB 38 billion, accounting for 37% of the total value of the white-goods market.

Haier’s Response
Diversification of domestic products
Service network of 5,500 independent contractors/nationwide service hotline and warranties
“Just in time” raw materials (receiving material every 2 hours) 100.000 items a day.
Own logistic infrastructure for delivery service.

Can Haier build on its success in niche products to become a dominant global brand in high - end white goods?
Niche Products
After getting success entrance to the market with niche products, Haier introduce regular products.

Five Business-level Strategies
Niche Product
Avoid competitors who target broader group of customers.
Different needs and wants. Customer satisfaction.
Getting known as Haier name in market.

Haier differs from others
Rapidly get a well known brand name
Internal talent development (ZZJYT or self-managed teams)
The choice of developed countries instead of close neighbors
Blending International and Domestic Growth

Cement dominance in China
Address local customer desires and extend the practices and products they've adapted from one market to the other.
Secure market leadership at home in each sector, and then taking that product line into the global market.
ZZJYT 'self-managed teams'
How Haier differentiated itself?

"I have built a platform that provides equal opportunities for my employees to compete and fight for the top if they are capable. This way the person only gets the position if they are passionate about their capability. I find this person is more capable of delivering good results."
CEO Zhang Ruimin
Operated in market sensing, product design, or production and manufacturing domains
The majority of the 2,000 ZZJYTs that operated in the Chinese market were extended to Europe and the U.S.

Market Penetration
Building an integrated and responsive system to sell, distribute, and service Haier products.
Chinese government’s rural subsidy program.
Differentiating its product lines based on lessons learned from developing its foreign markets.
Haier Recession Period
January 2009: exports of Chinese air-conditioners to the US fell by 9.65%, but with an increase of 20% for US exports
Haier's strategy for the next few years?
In May 2007, Haier acquired Sanyo's Refrigerator factory in Thailand
In July 2011, Haier signed a memorandum of understanding to acquire Sanyo Electronics for further global expansion!

The Next 10 Years
Bright future due to the following:
- intellectual capital
- years of experience
- mergers and acquisitions
-new markets
-company restructuring
-subsidiary management
Haier Today
In November 2012: Acquired >90% of Fisher & Paykel Appliances.

In August 2013: Haier America became a wholly owned subsidiary of Haier Group.

Global Revenue: $29.5 Billion. Profit: $1.76 Billion.
Global Brand Market share increased from 8.6% to 9.7% in 2013.
Global Market Share: Announced the #1 Global Major appliances brand for the 5th consecutive year.
Haier Today
Product Distribution
Logistics pioneered in 1999 to purchase raw materials delivery effectively every two hours.
By 2004 it only took 10 days from the order to delivery date whereas in 1999 it took 36 days.
13 Factories abroad,62 distributors and 30,000 retail outlets outside China, 59,000 sales Agents and 12,000 service personnel.
Logistics distribution created a competitive advantage in logistics costs and networks.
By 2011 they served 6000 country stores, 24,000 town stores, 150,000 vendor contractors, 19,000 servuice centers,and 91 distribution centers

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