Haier's Case
Executive Summary
The strategic problem of Haier is inconsistency between its target - to become a leading U.S. appliance brand with not typical “made in China” reputation, and its actions that have developed perception of Haier as a brand of comparable or acceptable quality at low price: the U.S. market entry through a niche in a price-driven category by offering products with specific features, pricing its differentiated product in high-end segment lower than competitors do, communicating its products mostly to retailers, not consumers, which has led to low brand awareness among end-users in large standard refrigerator segment. Haier may resolve this problem by (1) improving and strengthening its current competitive position in a niche market (for current situation see Exhibit 3), (2) challenging share leaders in large standard refrigerator market, or (3) entering a niche of deluxe refrigerators.
We recommend that Haier pursues offensive strategy - improves & strengthens its competitive position in a niche market of compact refrigerators - that will result in gross profit of $19 million and marketing ROI of 40% by reaching market share of 35% by 2010, and in gross profit of $35 million and marketing ROI of 53% at market share level of 40% by 2015 (see Exhibit 4).
Analytical Summary of the Haier’s Strategic Situation
Category
As of 2007 Haier, China’s strongest domestic brand in home appliance business, enjoys 1.31 relative market share in a niche segment of compact refrigerators within the U.S. refrigerator market (see Exhibit 1). It also holds second position in the free-standing freezer segment with the market share of 12%, which is again a niche market. Haier has won its position due to two major advantages: low cost production (which in return offers higher margins than local manufacturers can have - see Exhibit 2), product differentiation & innovation. Its offer to the U.S. compact refrigerator market is superior; it is really good value for
The strategic problem of Haier is inconsistency between its target - to become a leading U.S. appliance brand with not typical “made in China” reputation, and its actions that have developed perception of Haier as a brand of comparable or acceptable quality at low price: the U.S. market entry through a niche in a price-driven category by offering products with specific features, pricing its differentiated product in high-end segment lower than competitors do, communicating its products mostly to retailers, not consumers, which has led to low brand awareness among end-users in large standard refrigerator segment. Haier may resolve this problem by (1) improving and strengthening its current competitive position in a niche market (for current situation see Exhibit 3), (2) challenging share leaders in large standard refrigerator market, or (3) entering a niche of deluxe refrigerators.
We recommend that Haier pursues offensive strategy - improves & strengthens its competitive position in a niche market of compact refrigerators - that will result in gross profit of $19 million and marketing ROI of 40% by reaching market share of 35% by 2010, and in gross profit of $35 million and marketing ROI of 53% at market share level of 40% by 2015 (see Exhibit 4).
Analytical Summary of the Haier’s Strategic Situation
Category
As of 2007 Haier, China’s strongest domestic brand in home appliance business, enjoys 1.31 relative market share in a niche segment of compact refrigerators within the U.S. refrigerator market (see Exhibit 1). It also holds second position in the free-standing freezer segment with the market share of 12%, which is again a niche market. Haier has won its position due to two major advantages: low cost production (which in return offers higher margins than local manufacturers can have - see Exhibit 2), product differentiation & innovation. Its offer to the U.S. compact refrigerator market is superior; it is really good value for