Haier presentation Taking Chinese company Global

Haier : taking a Chinese Haier : taking a Chinese company globalcompany global

Khinza KhalidKhinza KhalidAniqa Komal KhanAniqa Komal Khan

Saher ZaibSaher ZaibRida MudassarRida Mudassar

Group 7

AgendaAgendaCase backgroundHaier – Till NowOrganization ConceptsSocial ResponsibiltyRecommendations

CASE BACKGROUND

Company BackgroundCompany BackgroundFounder and CEO : Zhang RuiminStarted in 1984 in Chinese Port city of

Quingdao by taking over a failing refrigerator factory

Ranked China’s number one by The Asian Wall Street Journal 2004

Celebrated its 20th anniversary in 2004 with annual sales topping RMB 100 billion

world’s 4th largest White goods manufacturer and 3rd in revenues

Challenges Ahead Challenges Ahead

To become China’s first multinational brand and succeed internationally

Continue its dominance on home turf and defend against the onslaught of foreign giants like GE, Electrolux and Whirlpool

Chief executive officer:Chief executive officer:

HAIER- TILL NOW

First 20 yearsFirst 20 years Born in the year 1984 when Zhang took over a failing

refrigerator factory Factory was a collective enterprise whose ultimate

authority was municipal government. Workers were collective owners of assets and shared

profits Zhang’s business philosophy

Quality focus Technology licensing agreement with Liebherr,

Imported freezer and air conditioner production lines from Derby, Denmark and Sanyo, Japan, JV’s with Mitsubishi, Japan and Merloni, Italy to improve quality levels

Change Management By Change Management By ZhangZhang

Major driving force

Dissatisfaction with the present situation.

Ex: ◦ Thrashing of faulty refrigerators◦ Workers at the end of everyday explaining about their

failings to assembled colleagues which ensures no repetition of the same mistakes.

Outcomes Outcomes Made a profit of RMB 1 million in its second year It stuck to brand building and focus on quality

Won the gold medal for quality in national refrigerator competition

In 1989, supply outstripped demand Competitors cut price – result – a price war but Haier

increased its price. Haier commanded a brand premium of 15% in the

market

Growth and Diversification Growth and Diversification StageStage

“Now we could let our reputation precede our new products” – Zhang

Zhang decided it was the time to diversify

Took over two sick companies Qingdao Air conditioner factory and Qingdao General freezer factory

In 1992, acquired 500 acres of Qingdao land for a new industrial park – large capital Went public – IPO in the year 1993

Growth and Diversification Growth and Diversification StageStage

From 1992 to 1998, Expand by merging with and acquiring other firms

“We buy those firms that have markets and good products but bad management. Then We introduce our own management and quality control to turn them around” – Zhang

Using the above ideology they acquired firms like Yellow mountain Electronics and 15 other companies

Focused on building great distribution channels all over China and improving product development speed and quality.

Operational Restructuring Operational Restructuring In 1998 annual revenue RMB 16.8 billion

and domestic market share 30% Slowdown in the local market – focus on

international market more First focus was reorganization to become

more competitive In 1998: Restructured the existing facilities

into 7 product divisions Four new group wide Development division Formed centers such as TQM, TPM, TEM

Haier’s market advantages in Haier’s market advantages in China China

Reputation of the Brand Commitment to quality Single Brand Approach High market responsiveness: focus on

customer’s needs Continuous innovation taking into

consideration the customer needs Free repair costs within warranty periods and

replacements during the repair Unified logistics department for all product lines

which reduced transportation costs and enabled speedy delivery

Internationalization StageInternationalization Stage“To become a national brand is not enough. If

a business is successful only in the domestic market, the superiority won't last long.” www.haier.com

Strictly adhering to this Haier decided to go global from 1999

Globalization StrategyGlobalization Strategy

OutcomesOutcomesBy 2004 Haier became the No.1 appliance

company in chinaIt was the only company with leading share

across the white goods marketIt was dominant in the refrigerator and the

freezer market

ORGANIZATIONAL CONCEPTS

Strategies followedStrategies followed(Ref: www.haier.com)(Ref: www.haier.com)

Three phases of Haier’s Innovation Strategy◦ Brand Building (1984-1991) -> Quality is prominent for Haier

◦ Product diversification (1992-1998) -> Acquisitions of companies with bad management and infusing life into them

◦ Globalization (1998-2005) -> Attacking the difficult markets first followed by relatively weaker ones

Principles followed for expansion ◦ Best efforts are made to fully develop the current industry before

entering new segment of relative products

◦ Best efforts are made to gain the leading position in the new segment of the industry after a certain period

Competing strategies Competing strategies AbroadAbroad

Product Differentiation: close attention to consumer needs R&D professionals talked directly to

consumers

Response Speed:18 design centers facilitated rapid product

development Ideas from the field to be quickly tested Flat structure enabled quick communication

OEC ManagementOEC Management

OEC : Overall Every Control And ClearPhilosophy: Solve problems immediately, search

causes of problems and solve one by one1995: Haier’s OEC Management was awarded National

Management Innovation Advance Prize Of China Enterprise Confederation.

At the end of every day a worker checks on 3E card (Everyone Everything and Everyday) which contains 7 items -- job quantity, defects, usage of parts, condition of parts, safety, work attitudes and work discipline

OEC ManagementOEC Management

Based on the OEC scores workers are given wages, promotions and appraisals.

Linked each staff member to another, so that the specific responsibility of each employee is involved in the achievement of the firm’s objectives.

Outcome : No more disputes over trifles among staff members and, consequently, the quality of products was greatly improved.

Organizational CultureOrganizational CultureHaier corporate culture is guided and developed by

◦ innovative strategy◦ efficient organization◦ creative technology and ◦ market orientation

enabled Haier to grow swiftly with business expansion from China to outside world

Haier corporate culture features recognition and participation of all employees

Haier has had all its employees involved in realizing Haier’s ideal to be a global recognizable brand

Brand Marketing Brand Marketing Philosophy Philosophy Smashing of defective refrigerators

has turned out to be the urge for brandTo become a national brand is not

enoughBuild name brand in developed

markets and then expand the business into developing markets with little resistance

Create localized Haier brand in each market in world

Compete on value rather than price

Social ResponsibilitySocial Responsibility Haier not only provides the good life solutions for the

consumer, but is keen on public charities with the belief “To be true forever”.

Haier Group launched  activities of Green Sail in environment to lead the sustainable development of the global industries

 In America, Haier was awarded with “Community Contribution Award”.

Haier Group launched  activities of Green Sail in education to satisfy Teenager’s thirst for knowledge.

Haier Group also launched  activities of Green Sail in Sports.

RECOMMENDATIONS

In Global Markets: Continue Brand Building Initiatives◦ Publicize as a individualized brand◦ Publicize the quality, adaptability, speed and

customer focus

In Domestic Market: Continuous Innovation◦ Publicize the fact that it is a home company◦ Publicize the awards received for quality

Retention StrategyRetention StrategyWork-life balance should be given

priorityGive more autonomy and leadership

at lower levels (moving away from traditional paternalistic leadership)

Job security is a concern - Show support publicly to top performers

Support must be given to normal performers to improve

Recruitment StrategyRecruitment StrategyRecruit people who are open to

learning and who are easily adaptable to continuous innovation

Search for people who are accommodative to customer requests

Recruit people who respect quality and process

Leverage the existing brand value to attract the required personnel from competitors

ReferencesReferencesHaier’s survival strategy to compete

with world giants http://www.ryerson.ca/~iri/papers/ypdu.pdf

Market Economy model of Chinese Management http://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/dp131.PDF

www.haier.com

THANK YOU