Haier Strategy
Haier: A Global Brand
Executive Summary
Haier, under the leadership of CEO Zhang Ruimin, grew from a single model refrigerator firm to the #5 white goods producer in a matter of two decades. Throughout the expansion process Haier entered over 100 countries through multiple entry modes and into other industries. The 2005 financial results gave Haier reason to pause and reassess its mission and strategic intent. The primary issue was whether to continue its expansion strategy or slow down operations and engage in a stabilization strategy. After careful analysis and debate the team recommends the latter based on underutilized facilities, operational inefficiencies, and the risk involved with increasing debt. The stabilization strategy would include continued pursuit of exports and non-equity alliances; however further significant financial investments would not be pursued. A shift from a multidomestic strategy to a transnational strategy is recommended in order to centralize operations to ensure efficiency and learning, and increases accountability based on product instead of by geographical area.
Background & History
Haier has a rich and exemplary history, one that is studied by many business experts and business schools worldwide. Haier managed to break out of the “China mold” and become a leader in the appliance industry. Haier progressed through three stages of growth and was embarking on its fourth stage of “Global Brand Building” as of 2006. The stages provide insight to Haier’s history and culture.
During the “brand strategy” stage (1984-1991), Zhang Ruimin transformed the bankrupt Qingdao Refrigerator Factory from a single model refrigerator manufacturer into the number one refrigerator brand in China with sales of US$125M in 1991. The culture of the collective-owned enterprise allowed for a highly unmotivated work force. Zhang changed the culture through historical events such as destroying 76 defective refrigerators with a sledgehammer and
Executive Summary
Haier, under the leadership of CEO Zhang Ruimin, grew from a single model refrigerator firm to the #5 white goods producer in a matter of two decades. Throughout the expansion process Haier entered over 100 countries through multiple entry modes and into other industries. The 2005 financial results gave Haier reason to pause and reassess its mission and strategic intent. The primary issue was whether to continue its expansion strategy or slow down operations and engage in a stabilization strategy. After careful analysis and debate the team recommends the latter based on underutilized facilities, operational inefficiencies, and the risk involved with increasing debt. The stabilization strategy would include continued pursuit of exports and non-equity alliances; however further significant financial investments would not be pursued. A shift from a multidomestic strategy to a transnational strategy is recommended in order to centralize operations to ensure efficiency and learning, and increases accountability based on product instead of by geographical area.
Background & History
Haier has a rich and exemplary history, one that is studied by many business experts and business schools worldwide. Haier managed to break out of the “China mold” and become a leader in the appliance industry. Haier progressed through three stages of growth and was embarking on its fourth stage of “Global Brand Building” as of 2006. The stages provide insight to Haier’s history and culture.
During the “brand strategy” stage (1984-1991), Zhang Ruimin transformed the bankrupt Qingdao Refrigerator Factory from a single model refrigerator manufacturer into the number one refrigerator brand in China with sales of US$125M in 1991. The culture of the collective-owned enterprise allowed for a highly unmotivated work force. Zhang changed the culture through historical events such as destroying 76 defective refrigerators with a sledgehammer and
References: * Fundamentals of Management, Robbins/DeCenzo, 6th edition, 2008, pages 80 – 88 * “The Internationalization Process of the Firm” paper by Johanson and Vahlne * http://dept.lamar.edu/industrial/underdown/org_mana/org_structure_george.htm * Cavusgil, S. Tamer. International business: strategy, management, and the new realities/S. Tamer Cavusgil, Gary Knight, John R. Riesenberger * International Business – Competing in the Global Marketplace, 5th Ed, McGraw-Hill, 2005 * “The Competitive Advantage of Nations” paper by Michael Porter, 1990, Harvard Business Review 1990 * http://www.haier.com/index.htm * http://www.businessweek.com/1999/99_24/b3633071.htm - on Zhang