Executive Summary

Haier is one of the worlds largest manufacturers of home appliances and consumer
electronics. The company designs, manufactures and sells products including air conditioners,
mobile phones, computers, refrigerators, washing machines and televisions. Apart from these
their products also included DVD players, kitchenware, microwave ovens, vacuum cleaners and
water heaters. It rose from a small Chinese manufacturer to a global player. This was achieved by
focusing and working on brand building, product diversification and globalization. The company
is not only known for its quality and innovation but also for being the first early mover out of the
Chinese market. The company had a goal transforming itself from a low cost Chinese OEM into
a world class household brand name.

Introduction
From being a small refrigerator manufacturing company in the early 80s, Haier grown to
one of the largest manufacturers of domestic appliances in the world. To achieve the global
presence Haier implemented three strategies1. Regarding the consumer needs and preferences
2. Tie-ups and collaboration with the foreign companies
3. The work culture include in the those acquired companies

Phases of Development

Attacking the difficut

markets first

Acquisitions of
companies

Product
Diversificat
ion (19911998)

Brand Building
(1984-1991)

Quality

1. Brand Building (1984-1991):

Major driving Force- to smash the faulty refrigerators
Mainly concerned on the product quality and after sales service.
2. Diversified Development (1991-1998):
Merged with 49 enterprises.
Expanded beyond refrigerators like washing machines, air conditioners and
televisions.
3. Globalization/Internationalization (1998-2005):
Main reason to move was because of lower margins in the local market.
Chinas entry into the World Trade Organization.
Improve profitability, increase innovation and move away from the image of
producer of cheap goods.
Globalization Strategy

Entering the difficult

market first and then the
easy ones

Glob
al
Bran
d
Localize-Built
factories outside
China

Local staf

The three main global expansion strategies of the company were,

1. Focus on the difficult market first Other Chinese companies explored the easier market first and then the difficult
markets. But Haier, started penetration first in the difficult markets (like US and

Europe) and then in the easy markets.

They thought if they succeed in developed market then it could be easy for them

to succeed in the easier market.

2. Niche Market Started with mini dual-compartment refrigerators (for offices, hostels, etc.) and

electric wine cellars

Enjoyed higher margins due to low cost of manufacturing

3. Local Staff Hired local staff as they have more information on the local consumers and their

preferences.
This local staff helped to develop new designs as per the local consumer
preferences.

The company was consumer and quality focused, so as to achieve this they followed two
approaches,
1. SpeedIt helps the customers to satisfy their needs as fast as possible.
2. DifferentiationAs per the customer needs the products are new and innovative.

BCG Matrix:
Stars :

Hig
M
H
a
i
r
g
Air Conditioner
k
h
e
t Cows :
Cash
G
r
o
w
t
h

Refrigerators

Question mark :

Lo

Cell Phones

Dogs
Computer and Pharmaceuticals

L
o
w

Relative market share

Stars: They were having high growth rate and high market share in global market in terms of Air
Conditioner
Cash Cows: Low growth rate as there was more competition in terms of Refrigerators but
having high market share.
Question mark: They have diversified there product in to cell phones so they were new to this
market having high growth rate but low market share because UK, Germany, Ireland and Italy
being the most aggressive markets
Dogs: Haier was having good market share and also there products were having high market
growth rate.

Organic Growth and Inorganic Growth:

Organic Growth:

They were trying to develop their business by entering into global market which was
major risk for them because they have to even sustain their china market in which they

were having huge market share

In china there was low volume production after entering into developed market they have

to increase their production capacity to give tough competition.

As Haier produces very high quality products and in good range so they developed a

strong customer base in global market which resulted in gaining of high market share.
After entering into global market they diversified their business by producing Air
conditioners, Refrigerators, Cell phones etc. which was having high growth rate.

Inorganic Growth:
The company has merged with 49 moribund state enterprises.
Porters five forces:

Barriers to entry:

There is high probability of entry in this industry as these are in home appliances and

electronics which has high marginal profits which may lead to more competition.
The manufacturing cost is low so barrier for entry is high.
And today getting loans is also become easy they can provide it much faster way.

Supplier bargaining power: For manufacturing TV core components are been manufactured by
other companies such Samsung, Sony etc. and many of these party can be duplicated or even
patented so supplier power is high in this industry.
Customer bargaining power:
AS there are many companies manufacturing electronic devices like TV buyer will be looking
for good quality in cheaper prices and even today production capacity of devices has also
increased which again lead to increasing bargaining power of buyers.
Substitutes:
There are many substitutes being innovated now a days now TVs are replaced by highly
advanced computers and mobile phones. Now in internet world the young population is looking
for devices that are fast enough and even portable to carry so there is big threat for TV industry.
Existing competitors:
In this industry the competitors will play price games to gain market share. There are many
competitors in electronics device industry and home appliance as well so to gain share in this
market price plays an important role.

SWOT analysis:
Strength:

Leader in white goods production with good market share in retail segment.
Customer loyalty and trust
Well recognized quality products
Global presence through merger and acquisition
Innovation in technology in home appliance water heater electric technology and many

other.
Big distributors stock Haiers products.
Great marketing and research & development departments.

Weakness:

Weak distribution network except China.

Sales decline in international segment

Opportunities:

Develop more distribution channels

Cost focus strategy
Develop differentiated products

Threats:

Larger competition
New product advances
Power of the consumer.
Foreign companies starting manufacturing in China is major threat.

Timeline of Events
1.
2.
3.
4.

1984 Zhang Ruimin took control of Qingdao Refrigerator Factory.

1990 Exports to Germany and Europe then to France and Italy.
1994 Joint Venture with US retailer Welbilt.
1995 onwards Exports to 30 countries like Japan, Europe, Africa, Middle East, and

North America.
5. 1996 First overseas manufacturing facility in Indonesia, a joint venture Sapporo
6. 1997 Joint venture with Yugoslavian company in Belgrade.
7. 1997- Joint venture with LKG electric company, Philippines
8. 1997 Sales rose to $1.38 Billion.
9. 1998 Started producing PCs in China.
10. 1999 Started to go global (US) with niche market.
11. 1999 Entered in Middle East.
12. 2000 Acquired Italian refrigerator plant from Moneghetti Equipment.
13. 2000 - $30 Million production base in Camden, South Carolina, US.
14. 2000 Member of World Design Organization.
15. 2000 Joint Venture with HBL, Bangladesh.
16. 2001 Color T.V for Middle East consumers.
17. 2002 Business Alliance with Sanyo Electric Company.
18. 2005 Worlds fifth largest white goods manufacturer.
19. 2006 Direct Marketing to order via phone, internet and company based specialty stores
20. 2006 Product portfolio extended to washing machines, kitchenware, vacuum cleaners,
microwave Owen and water heaters.
21. 2006 PCs become Haiers second largest business after household appliances