Corporate strategy for HAIER business case. This presentation is based exclusively on informations and data provided in Harvard Business School's case study "Haier: Taking a chinese company global in 2011" and Wikipedia.
The presentation provides information about Haier, evaluates the situation, problems and opportunities of the company; then it describes the possible options avaiable to Haier and selects the best, according to the group's ideas.
4. Company Profile
NO.1 white-goods
manufacturer in China,
leading refrigerator
manufacturer worldwide
.
Leading Manufacturer
240 subsidiaries,
61 trading companies,
24 manufacturing plants,
10 R&D centers,
21 industrial parks in 2010
Wide International
Coverage
Port city in Shandong Province
Founded in Qingdao
From RMB 1 billion in 1984,
51 million profits in 1992
136 Billion RMB
Revenue in 2010
25 years of leadership
Founder and CEO
Zhang Ruimin
5. 1984 1990 1991 Early 1990s
Acquired two local
companies to enter
air-conditioner &
freezer market
• Technology licensing
agreement with German
refrigerator maker
• Imported production line
Kept track of tens of
thousands of
customers
First exported to UK and Germany
and then to France and Italy
Establishment Service Center Product Differentiation Venture into Overseas Markets
High-quality
products
Foresight of
service
Attention to
consumer needs
& market trend
Multinational brand
History of Haier(1984-1993)
Haier Core Value
6. • Focus on difficult markets first Meet the principle of high quality
Enter the “difficult” developed markets first
go after the relatively “easy” emerging markets
Developing Abroad
learning from the history
8. Better market intelligence
Place its own people in key
positions overseas
Building own design center
Learning from the locals
Staff with the locals
Hire local employees
Mergers & acquisitions
e.g.
India: alliance with Fedder lloyd
Corporation
Italy: $8 million to acquire a
refrigerator plant in Padova, from
Meneghetti SpA
Short term Long term
1 2
Localization
History of Haier(1994-2010)
Strategies in foreign market
9. Product Mix
Operation
&Brand
Model
More products launched
Normal products
Longer product line
Product differentiation
1 2
Limited products to start
Niche market to focus in US
Product differentiation
Short term Long term
OEM
(original equipment
manufacturer)
Brand image building
History of Haier(1994-2010)
Strategies in foreign market
10. Weaknesses
Experience in adapting to new markets
Local Management localization
Product differentiation Customer orientation
High receptivity and reaction speed
Strengths
Perception of Chinese brand (negative stereotype)
Lower production capabilities abroad
Higher production costs abroad
Strengths and Weaknesses in Foreign market
over Chinese companies
11. Strengths and Weaknesses in Chinese market
High price-quality ratio
Knowledge of the local market
Good after-sales &more customer-focused
Strong network-integrated & responsive system
across China, especially in logistics
Organizational advantage :
• Fast response speed
• Motivation for innovation& efficiency
• Internal talent development.
Strengths
LEADER
CUSTOMER MANAGERSPRODUCT MANAGERS
9-30 members
ZZJYT(self-managed teams)
12. Strengths and Weaknesses in Chinese market
Weaknesses
Financial structure
Heavy dependence on the CEO Zhang Ruimin
November 1993 2005
43.7% 60%of Qingdao Haier
Refrigerator
Shanghai Stock Exchange
A shares RMB 396 million
Haier Electronics
Group Co.
Hong Kong Stock Exchange Total 60% of book value
of Haier’s assets are
listed.
14. Evaluation of current situation-International Market
Opportunities Threats
Higher consumption power in emerging
markets: South America, India, Indonesia,
Malaysia, Thailand
Technological progress especially in developed
market
Government support for companies to go
international
Flat growth in mature markets
(e.g.: US and Europe)
Fierce competition in mature
markets (e.g. US and Europe)
Currency volatility
16. Evaluation of current situation-Chinese Market
Opportunities
Big gap between rural areas and urban
Trend of urbanization
0.0
20.0
40.0
60.0
80.0
100.0
120.0
1980 1990 2000 2010
Refrigerators
urban rural
17. Manufacturer Market Share of Major Consumer Appliances in China (percentage of retail volume)
Company Base Country 2002 2004 2006 2008 2010
Haier Group China 14.1 16.4 16.8 18.9 22.3
GD Midea Holding Co. China 3.0 3.7 8.1 13.1 13.6
Glanz Enterprises China 6.9 6.1 7.1 5.6 5.6
Panasonic Corp. Japan n/a n/a n/a 2.8 4.2
Hisense Kelon Elec. China n/a n/a 3.5 3.5 3.9
Henan Xinfei Elec. China 2.3 2.4 2.8 3.3 3.3
Bosch-Siemens-Hausgerate Germany 2.2 2.5 2.7 2.7 2.9
Hefei Meiling Group China 2.1 1.8 2.1 2.1 2.4
LG Corp. Korea 3.7 2.8 2.2 1.9 1.9
Whirlpool Corp. United States 0.5 0.5 0.5 0.4 0.4
Others 65.2 63.8 54.2 45.7 39.5
Source: Consumer Appliances, Retail Statistics, Euromonitor International, www.euromonitor.com, accessed August, 2011.
Competition with domestic and international competitors
Evaluation of current situation-Chinese Market
Threats
18. SWOT analysis of International Market
SWOT
S W
O T
•Staff with locals
•Localization
•Customer orientation
•High receptivity and reaction speed
Strengths
•Higher consumption power
in Emerging markets
•Technological progress in
mature markets
•Government support for
companies to go abroad
Opportunities
•Perception of Chinese brand
(stereotype)
•Lower production capabilities
abroad
•Higher Production costs abroad
Weaknesses
•Flat growth in mature market
•Fierce competition in mature market
•Currency volatility
Threats
TO SUM UP…(1)
19. SWOT analysis of Chinese Market
SWOT
S W
O T
• High quality products & good
after-sales service
• Flexible organizational
structure (ZZJYT)
• Distribution Networks
• Customer Orientation
Strengths
•Emerging Middle Class
•Development of Rural Area
Opportunities
•Financing Problem
Weaknesses
•Domestic & International
Competitors
Threats
TO SUM UP…(2)
20. Outcome of developing abroad & deepening at
home
标题数字等都可以通过点击和重新输入进行更改,
顶部“开始”面板中可以对字体、字号、颜色、行
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28
1
8
No. 1 white-goods manufacturer in China
A 75% increase in Haier’s 2010 profits was 8 times its 9%
increase in revenues
Rank on BusinessWeek’s 2010 list of the most innovative
firms
21. Based on our analysis, we want to exploit the stengths to the full
catch the opportunities of the industry.
Summary
Key question to answer:
Which market to go?
23. Strategic options
Identify the
problem
• where shall we expand our
revenue
Find the
opportunities • Analyzed in the SWOT analysis
Brainstorm with
the possible
options
• List the options
• Whether to take the opportunities?
• Where exactly?
Valuate the
options
• Two criteria :1) gain
& loss 2)feasibility
Increase revenue
Revenue=price*volume
Price value
24. Penetration in Urban China?
rising middle-income groups
Pros
Motivation to innovate
Catch the latest trend
Higher brand image
Technologic capacity
Local network to gain support
Organizational advantage : Fast response
speed/Motivation for innovation& efficiency/Internal
talent development.
Opportunities
Options
Valuation-gains
Feasibilities
Penetration in urban China-first-tier cities Nothing
Cons
High market saturation
Competition is high
More investment in R&D
Pros
Low risk
No expenditure
Cons
Competitors
may take your
market share
25. Penetration in rural China?
Trend of urbanization & increasing consumption power of rural area
Pros
Large room
Strengthened Leadership
in China
Brand awareness
High quality-price ratio
Distribution networks
Service center
Opportunities
Options
Valuation-gains
Penetration in rural China-third/fourth-tier cities?
Cons
Capital for channel , logistic,
service center building
Risk of falling into price war
Economic risk
Nothing
Pros
Low risk
No expenditure
Cons
Flat growth of
the revenue
Feasibilities
26. Which emerging market
Higher consumption power in emerging markets
Pros
Growing market
Close to US plants
Possibility to further
expansion in SA
NOT enter this market:
Logistic problems (the distance from China)
Exportations from US would cost too much
Brazil Southeast Asia: Malaysia, Thailand, Vietnam
Cons
Far from China
US production too expensive
for an emerging market
Very different culture
Possibility of
social/economical changes
Pros
proximity to China
low labor force cost
possibility to further expansions
in SE Asia
ASEAN
Chinese government influence
Cons
To bring a good volume of our
product in Vietnam
Opportunities
Options
Valuation-gains
Feasibilities
social political risk
27. Which mature market
Technological progress especially in developed market
Pros
possibility to establish internationally our brand
possibility to follow the highest world trends
proximity to best high tech companies (Silicon Valley)
-knowledge of the custom
Existing plants
Knowledge of the US market
Local partnership
Learning more from US market
Cons
Higher labour cost
Higher degree of
competition
Opportunities
Options
Valuation-gains
Feasibilities
28. Which mature market
Identify the
problem Find the opportunities options
Valuate the options
Gains & Loss Feasiblity
Where to go
rising middle-income
groups
Penetration in urban
China Gain Yes
Nothing Loss Yes
Trend of urbanization &
increasing consumption
power of rural area
Penetration in rural China
Gain Yes
Nothing Loss Yes
“Higher consumption
power in emerging
markets
Brazil loss No
Vietnam Gain Yes
Technological progress
especially in developed
market
Penetration in US market Gain Yes
Nothing No Yes
30. How to catch the opportunities
Industry
development
Early stage Growing stage Mature stage
Consumer
needs
Volume>Value Volume=Value Volume<Value
More options to make-how?
Two goals:
Volume & value
Priority differs during
different stages
31. Rural China
• One-stand shopping experience & E-commerce
Online shops channels
online/offline
orders
logistics-fast
delivery
installment
after-sales
service
Self-owned
brand store
Retailing
stores( Gome ,
Suning)
Experience
store
Online
channels
Value Volume
Volume-based
Experience Convenience Fast delivery Good serviceValue-based
32. Urban China
Value Volume
Smart home project
Smart housing appliance(investment in R&D)
APPs to connect all your housing appliance(cooperation with Huawei/ Xiaomi)
Smart
Elegant
Brand buildingfrom product to life style
Differentiated product to fit in the new city life
Compact housing appliance to cater to small space in big cities
More designs &customization
Housing appliances
Customized products to satisfy personal needs
33. Old Mature Markets
Value Volume
Own plants, Know the market, own the network.
Position in the mid-low segment
Aim Higher
Where are we now?
How to do?
Brand building: improve Made in China image marketing campaign
Invest on quality: Acquire High Tech Companies
Continuous adequate product development
34. New Emerging Markets
Value Volume
• Simplify Products
• Export from plants in China
• Offer a competitive price that emerging households can
afford
• Acquire local distributing expertise
• Establish brand reputation as reliable products
• After establishment on market Increase investment and
commitment
Problem
Strategy
No Brand Reputation in Southeast Asia
Enter New Markets: Malaysia, Thailand, Vietnam
35. How to Increase the Revenue
Identify the problem Find the opportunities Options
Strategy selection
Volume Value
Where to go
Rising middle-income groups
Penetration
in urban
China
Yes
Trend of urbanization & increasing
consumption power of rural area
Penetration
in rural China
Yes Yes
Higher consumption power in
emerging markets
Vietnam Yes
Technological progress especially in
developed market
Penetration
in US market
Yes