haier final
TRANSCRIPT
Haier: Taking a Chinese Company Global
KRI SHNA PALEPUTARUN KHANNAINGRID VARGAS
Case Discussion
Anto, Viswa International Business policy 27/01/10
DISCUSSION AGENDA
◦Company background and profile◦Development stages◦Factors for Haiers success in China◦Haiers strategy◦Breaking the Niche barrier◦Haiers one third startegy
Anto, Viswa International Business policy 27/01/10
COMPANY BACKGROUND
◦Haier Group was founded in 1984 in Qingdao by Zhang.
◦Deficit of 215350.59 U.S. dollars◦Highly indisciplined work force◦Absolete factory.
Anto, Viswa International Business policy 27/01/10
COMPANY PROFILE
World’s 4th largest white goods manufacturer and China’s largest home appliance brand.
15,100 different specifications (under 96 categories)Sold in 100 countries50000 people employed240 subsidiary companies and 30 design centers,
plants and trade companiesGlobal revenue in 2006 was RMB107.5 billionChairman and CEO - Zhang Ruimin President - Yang Mianmian
Anto, Viswa International Business policy 27/01/10
Source: Datamonitor Publication Date: 22 May 2009
MAJOR COMPETITORSNational:
◦ Guangdong Elecpro Electric Appliance Holding Co., Ltd.◦ Elec-Tech International Co., Ltd.◦ Hisense Kelon Electrical Holdings Co. Ltd.◦ Ningbo Fuda Company Limited
International:◦ Whirlpool Corp(United States)◦ Electrolux AB (Sweden)◦ Bosch-Siemens Hausgerate (Germany)◦ General Electric (United States)
Anto, Viswa International Business policy 27/01/10
Source: Datamonitor Publication Date: 22 May 2009
PRODUCT RANGE
Refrigerators/freezersAir-conditionersMicrowave ovensWashing machinesDishwashersTelevisionsMobile phonesComputersDVD playersWater heaters
Anto, Viswa International Business policy 27/01/10
Development Stages
◦Brand Building◦Diversification◦GlobalizationAnd NOW…..◦Global brand building
Anto, Viswa International Business policy 27/01/10
SALES NETWORK
China: Alliance with Suning and Gome chain stores
America: SEARS, Lowe's, HOME DEPOT, Best Buy, PC-Richard, Wal-Mart, Sam's, Costco, BrandsMart and Target
Japan: YAMADA, KOJIMA and JUSCOEurope: KESA, Media Market and Carrefour
Anto, Viswa International Business policy 27/01/10
HAIER’S SUCCESS IN CHINA: Success Factor 1 – Quality and value focus
instead of price focus
Come back, join the price war
Sorry, goin for value
war
Haier
Anto, Viswa International Business policy 27/01/10
HAIER’S SUCCESS IN CHINA: Success Factor 2 – Nurture workers and
then demand work from them.
I put hope into the employees hearts – Zhang Ruimin(CEO)
Anto, Viswa International Business policy 27/01/10
HAIER’S SUCCESS IN CHINA: Success Factor 3 – Commitment beyond
contract.
Good Service
They only charged
me 200–300 renminbi ($24–
$36) for the repairs.
I am very satisfied
Anto, Viswa International Business policy 27/01/10
HAIER’S SUCCESS IN CHINA: Success Factor 4 – Customer satisfaction
through Innovation
◦7,000 patents◦In 2004 alone, Haier
applied for 695 patents, 2.7 patents per day.
◦Additionally, creates product differentiation
Bed coffee for my child
Anto, Viswa International Business policy 27/01/10
HAIER’S SUCCESS IN CHINA: Success Factor 5 – Distribution
Implementation of JITImplementation of information systemsIntegrated delivery of different products
Anto, Viswa International Business policy 27/01/10
Haier’s strategy to enter developed markets first
◦It is considered as a escape route for erosion in profits from the local markets.
Dawar and Frost’s survival strategy theory and Haier’s internationalisation strategy
Anto, Viswa International Business policy 27/01/10
Yuping DuJan(2003), Journal of Chinese Economics and Business Studies
COMPETITOR ANALYSIS
Anto, Viswa International Business policy 27/01/10
Source: Ministry of Information and Technology, Government of India
Indian entry:Whirlpool in 1995Electrolux entered
around 2000
Indian middle class alone is more than the population of the United States (US).
Anto, Viswa International Business policy 27/01/10
COMPANY BACKGROUND
◦ The primary driver of revenue has been domestic sales.
1998 1999 2000 2001 2002 2003 20040
2,000
4,000
6,000
8,000
10,000
12,000
14,000
Overseas made and sold
Exports from China
Domesticsales
15%
5.17%
4.83%
Figures in millions
Anto, Viswa International Business policy 27/01/10
QUALITY AND EFFICIENCY
◦ In Germany, the Netherlands, Belgium, and Luxembourg, consumers could receive a rebate of €100 for purchasing a Haier energy-efficient refrigerator (A+ rated in energy conservation).
◦ Since 2007, US consumers have received rebates of $40 to $100 when they purchase Haier Double Drive washing machines.
◦ Haier products earned UL certification (Underwriters Laboratories Inc.).
◦ Haier's "Tank" refrigerator won Japan's G-Mark Design Prize.
Anto, Viswa International Business policy 27/01/10
So the strategy was a partial success in terms of these objectives!
Haier’s strategy to enter developed markets first
Obj 1: Challenge the quality standardsObj 2: Creating a brand prestigeObj 3: Ease in penetration into developing
markets after success in developed markets.
Anto, Viswa International Business policy 27/01/10
HBS professor John Quelch and Earl Taylor of Research International in Cambridge, Mass
BREAKING THE NICHE BARRIER
Perceived quality— Haier products are known for their superior quality.
Global status—The idea that transnational brands confer an elite status on the buyer. Haier does the same.
Country-of-origin quality— Country of origin tag may have an impact on Haier’s entry into high-end white goods because Chinese products are associated with lower quality.
Citizenship—The social relation that China has with the other country will have an impact on the customers final decision.
Anto, Viswa International Business policy 27/01/10
Operating Expenses are very high 11570(2003), 14892(2004)*Financial Management by Brigham & Houston
Financial Analysis
Financial RatiosIndustry Standard* 2000 2001 2002 2003 2004
Current Ratio 2.56 2.7 2.1 2.1 2.9 5.1
Inventory Turnover 9.6 9.1 20.1 16.5 16.5 18.3
Asset turnover 1.31 1.3 2.1 1.6 1.6 2.1Receivables Turnover 70.02 7.3 15.4 15.6 18.9 19.5
Profit margin 7.73 8.9 5.4 3.4 3.2 2.4
Return on Assets 7.92 11 11.4 5.6 5 5.1
Return on equity 15.11 15.7 16 7.8 6.9 6.7
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¹The globalisation of Chinese brands, Marketing Intelligence & Planning
BREAKING THE NICHE BARRIER
Pros• 10% of revenues on global
branding and marketing• Excellent Managerial practices
like OEC, Market-chain, Individual-goal combination.
• High local responsiveness due to local units.
• Global networks for design, production, distribution and after-sales service.
Cons• Revenue of Haier in 2002 amounted to only about ten per cent of Sony's total electronics sales.
• Too much diversification has lead to brand dilution. (no multibranding¹).
• China tag.
Anto, Viswa International Business policy 27/01/10
¹Kotler Marketing Group
BREAKING THE NICHE BARRIER
◦Can Haier freeze Whirlpool? Haier will have to appeal to image-conscious
consumers. Haier cannot play cost card alone. Truly powerful brands will emerge only from market
competition¹. Chart strategies to overcome competition.
Lower the operating expenses to get higher profit margin which can be reinvested, because the competition against cash rich conglomerates.
The penetration of appliances into rural segment is very low. This segment of the market if properly addressed can generate revenues for overseas ambition.
Anto, Viswa International Business policy 27/01/10
Assumption: Haier will reach the goal by 2015.
HAIERS ONE THIRD STRATEGY
◦FEASIBILITY ANALYSIS:
Xi (y) (x=xi- µ) (x2) (xy)2000 4,913 -3 9 -147392001 7,284 -2 4 -145682002 8,712 -1 1 -87122003 9,680 0 0 02004 12,100 1 1 121002006 15,748 3 9 472442008 17,873 5 25 89365n=5 76310 3 49 110690
YearRevenue (in millions)
Time deviations from the year
Square of deviation
Product of time
Anto, Viswa International Business policy 27/01/10
Assumption: Haier will reach the goal by 2015.
HAIERS ONE THIRD STRATEGY
◦FEASIBILITY ANALYSIS (Contd.,):
Projected Revenues following the regression y=10901.43+2258.98x
Year Revenue2009 24455.312010 26714.292011 28973.272012 31232.252013 33491.232014 35750.212015 38009.19
Anto, Viswa International Business policy 27/01/10
Assumption: Haier will reach the goal by 2015.
HAIERS ONE THIRD STRATEGY
◦FEASIBILITY ANALYSIS (Contd.,): Indicating 38009.19/3 = $12.669 billion USD Hence going by this trend Haier should generate
$12.669 billion USD as revenues from each of the three modes.
Whirlpools revenue – 18 billion GE Consumer Appliances – 21.41 billion (includes
industrial equipment also) Haier does not have good hold on the high-end
products which have higher revenues.
Anto, Viswa International Business policy 27/01/10
HAIERS ONE THIRD STRATEGY
◦FEASIBILITY ANALYSIS (Contd.,): Haier had 3.8% volume share on Large kitchen
appliances. Whirlpool being at 7.9%. 52% by small players who hold less than 2% of
share each. Haier would not only have to topple top players
but also the small players. By all these analysis, it can be said that three
thirds strategy is not a viable one (and definitely not wise too!!).
Anto, Viswa International Business policy 27/01/10
Thank you for your kind attention.
Questions please?