Haier India & Global Business Initiatives

1. Strategic Marketing
in India
By A.Arputha Selvaraj – APMPIIMCalcutta
USI

2. Agenda
 Case Overview
 Haier Strategy in Chinese Market
 Haier’s International Expansion Approaches
 6 Frameworks / Tools (Porter, Yip, Dunning, BCG,
PLC, Integration/Responsiveness Grids)
 Discussion

3. Case Overview
• Haier Group is a multinational company specializing in the production of
home appliances and consumer electronics.
• Originated in 1984, When founder and CEO Zhang Ruimin took over
failing refrigerator factory in Quindao, China.

4. Case Overview
• Zhang Ruimin took over in 1984, when it was approximately 300 refrigerator factories in china.
• Most of them produced poor quality products.
• Zhang saw this, and therefore went to the other direction : Focusing on high quality products and
service.
• Went into a JV with among others German manufacturer Liebherr which had technical expertize in
refrigerators.
• Had a high focus on becoming a «first class brand» through large scale operations.
• In 1992, After becoming Chinas leading refrigerator manufacturer, Haier Group started to look into
other similar businesses. Acquired companies with poor management and implemented new
manag. With same focus on quality and service.
• Went public in 1993, at the Shanghai stock Exchange.
• 1997, Started to target the rural areas of china.
• At the same time, they started to diversify their product line.
• 2004, became the number one appliance company in China.
• At the same time, experiencing stronger and stronger competition from domestic and multinational
companies who tried to break into the market.

5. Case Overview
• By 2004, the Haier Group was the largest home appliance maker, holding
approx.. 30% of the white goods market (third globally)
• They were the second-largest refrigerator manufacturer in the world, and
had a growing presence in the black goods market.
• At this stage, with domestic market success, they were considering going
abroad and become a multinational brand.
• But could they do this without loosing their position in china?

6. Strategy – Chinese Market
• Between 1989 and 1996, reduction from 100 to 20 refrigerators
producers -> more competitive market.
• China entered the WTO in 2001 -> new competitors, multinationals.
Difficult start for them, for several reasons.
• That said, the multinationals reached 31% of refrigerators market share
in 2002, local companies being losing market share rapidly.

7. Strategy – Chinese Market
Haier’s competitive advantages in the Chinese market
• Haier is known in China for its high quality products ; It has therefore a
very good brand reputation.
• Closer to chinese customers (design, needs) in comparison with
multinationals.
• High investment in R&D (5-7% of revenues) and thus new products every
year, very innovative.
• High market responsiveness, focusing on meeting customers needs ; 42
distribution centers in China operating as sales companies.

8. Strategy – Chinese Market
• High level of services, with better after-sales service than competitors ; According
to the customers, one of the biggest advantages of Haier.
• Very good distribution channels/network, with «Haier Logistics» ; Advantage over
multinationals, since establishing a logistics network in China is complicated.
• Staff cheaper than multinational competitors.
• That said -> these strengths in distribution and service networks, and the superior
knowledge of the domestic market may not last forever! They are provisory
advantages, since multinationals have already had some successes, contracting
people who understand the Chinese market, buying sales channels and services as
Haier’s competitive advantages in the Chinese market

9. Company Goals
HaierThree Third Goals:
 1/3 Revenue from goods produced and sold in China
 1/3 Revenue from goods produced in China and sold overseas
 1/3 Revenue from goods produced and sold overseas

10. Export
Contractua
l
Investment
EntryStrategyfor
International
Markets
Strategy – Global Market

11. Strategy – Global Market
• Entry Mode: Joint Venture with multinational brands (1990s)
• In 1995 Haier become first company which engaged in FDI
• In 1997 lunched first European manufacturer based in
Belgrade through JV.
• Until 1999 Haier continued OEM production for multinational
companies
• After 1999 start selling under Haier Brand

12. Strategy – Global Market
Three Main Global Expansion Strategies:
1 - Non-traditional expansion ➔ Focus on difficult market first
•“We chose the developed countries first because the requirements
of both customers and retailers are very tough and not easy to meet”
•High Prestige
•Being well-known in developed markets can enhance market
penetration ability in emerging markets
•Competition in developed markets can guarantee the success in
emerging markets

13. Three Main Global Expansion Strategies:
2 – Begin with niche products
•“When we entered the U.S market, we found that nobody was
making competitive refrigerators for students or for offices.”
• Starting with mini-fridge , compact refrigerators
•“After we were successful in the niche products, then we started to
introduce regular products to the U.S market.”
Strategy – Global Market

14. Strategy – Global Market

15. Strategy – Global Market

16. The America:
•1994 JV with Welbilt
•1999 Haier America
•Employing American staff
•Establishing industrial park in South Carolina (To build brand reputation ,
being quality oriented)
•Focus on niche which enabled Haier to avoid competition with GE, Whirlpool
and ..HaierEurope:
•1990 JV with some brands in UK, Germany and France
•2000 HQ in Varese – Italy
•Employing former sales executives of Italy’s Merloni as a local experienced
staff
•Europe and America were similar in terms of size and degree of
developments
Strategy – Global Market

17. HaierIndia:
•1999 JV with Indian appliance firm (Fedder Lloye Corp.)
•Establishing refrigerator and R&D Center
•2004 alliance with Whirlpool and Voltas to produce refrigerator and Air
Conditioner
•Main Challenge in India ➔ Hard to find top chain store
• “In United States you can easily find the top ten chain stores but in
India you cannot find them”
Strategy – Global Market

18. Haier Expansion Strategy Phases at a
glance

19. Porter What’s Strategy
Framework
HaierActivities System:
Understanding of Markets
Outstanding Product quality
Sourcing & Distribution network in
place
Development of Global brand
JIT delivery (reducing inventory cycle)
HaierCompetitive Advantages:
High product quality
Differentiation in products
and services (Thanks to high
investment in R&D)
Single brand management
Quickly response to shifts in market

20. Yip Globalization drivers
Competitive Drivers
Difficult first, Easy later (more
competitors)
Exports
Government Drivers
Entering to WTO
Exchange Currency
Market Drivers


21. Eclectic Paradigm
• Dunning
•Internalization (Value chain optimization)
•Location (Entry to developed markets)
•Ownership (Change from JVs to owned FDI)

22. Haier
Transnation
al

23. Sales
Time
Development Introduction Growth Maturity Decline
Product Life Cycle

24. BCG Matrix

25. In global market: Continue Brand Building Initiatives
• An individualized brand
• The product quality, adaptability and flexibility
• Customer focused firm
In Domestic Market: Continuous Innovation
• A home company
• Increase quality
Recommendations:

26. Discussion
• Would Haier diversify their products by having different brand names, or
should the continue with one big brand?
• Would you use JVs as entry mode to global markets?
• Did they make the right strategy by entering to developed market rather
than easy markets?

27. Thanks foryour
Attention
Thank You