Strategic Development Phases of Haier
Brand Building Phase (1984-1991)
In the early days of China's reform and opening, the market was still relatively controlled; a limited supply of goods was insufficient to meet the enormous demand. Economic conditions in the early 1980s were such that to buy a refrigerator required first obtaining a 'refrigerator coupon.' Haier observed that the demand was unrelated to product competitiveness, but was rather a byproduct of a closed system which kept companies from tapping an enormous potential market for high quality consumer goods. As a result, Haier established the "Brand Building Strategy" and the "Zero Defect" quality standard. In no time, Haier reaped the rewards of these initiatives. In 1988, in only its fourth year of existence, Haier earned the first ever National Gold Medal awarded in China's refrigerator industry. By the late l980s, the time was changing and the market was flooded with refrigerators, forcing many suppliers to cut prices. Despite the glut, Haier's products remained consistently popular and the company was even able to increase prices by 12%. Features: By only focusing on refrigerators, Haier was able to accumulate valuable business and management experience. This experience allowed the company to build a management model which could be used with future business units. Achievements: Haier was able to transform itself from a small factory operating at an annual loss of nearly RMB 1,470,000 into the number one refrigerator brand in China.
Diversification Development Phase (1991-1998)
In the 1980s, demand vastly exceeded supply with Chinese firms generally setting sales targets based on production capacity. By the early 1990s, however, the situation had reversed, dealing a significant blow to the strategies of the past decade. Many home appliance http://www.ukthesis.org/thesis_sample/guanlileizuoye manufacturers chose to compete on the basis of price, which provided occasional short-term market gains but reduced their capacity for further innovation and corporate development. For example, by 1998 the average color television manufacturer in China operated in the red, and in 2001 nine publicly listed home appliance companies combined for over RMB 3.545 billon in losses. Haier observed that marketing was less about beating annual sales quotas and more about winning the hearts of the customers. The reduced demand in the 1990s did not mean the market had reached the limits of its potential, but rather that products were not meeting the expectations of increasingly savvy consumers. The company established its "Diversification Strategy" to expand the Haier brand beyond refrigerators, adding washing machines, air conditioners, and other items to its product line. At the same time, Haier did extensive consumer research, listening to its customers and even regarding complaints as a valuable tool for refining corporate strategy. When the industry followed Haier's example by also focusing on product quality, Haier once again forged ahead of the competition, extending its emphasis on quality to customer service, a move which further bolstered customer loyalty to the Haier brand. Features: Haier moved from a single-product company to a manufacturer with multiple product lines and expanded its brand to include both brown goods as well as white goods. Internally, the company restructured operations to maximize latent corporate potential, using intangible assets to get the most out of existing tangible assets. By doing so, Haier was able to quickly grow the scope of its business while enhancing the company's overall strength and position. Achievements: From being a top producer of refrigerators, Haier became the number one home appliance brand in China.
Globalization Phase (1998-2005)
In the 21st century, globalization provided opportunities for Chinese companies to earn foreign exchange by leveraging lower production costs and functioning as an original equipment manufacturer (OEM), for multinational corporations (MNCs). But as China developed economically, rising labor costs meant that China's time as the world's 'factory floor' would soon be coming to an end, and many MNCs shifted their production facilities to countries, such as Vietnam, which offered a cheaper source of labor. Those Chinese manufacturers who continued to rely on cut-rate production to attract business soon found themselves abandoned by their international partners. Haier's view was that in the age of globalization, only those MNCs with their own proprietary intellectual property and strong brand identities would be competitive in the world business arena. Faced with this reality, Haier knew the time was right to go global. Features: The Haier Group implemented a three-step globalization strategy: 1) enter international mainstream markets; 2) utilize main sales channels to deepen market penetration; 3) establish Haier as an internationally recognized global brand.Achievements in this phase: A tripartite (design/production/marketing) operational framework was established in six key regional markets: North America, Europe, Middle East/Africa, Asia-Pacific, ASEAN, and South Asia. Utilizing this strategy, Haier now sells products in over 160 countries around the world.
Global Brand Building Strategy Phase (2005-)
With the development of information technology and ever faster global economic integration, the world is flattening. Every minute of every day, there are 1.4 million internet search requests; we live in a global information age. For some companies, over 30% of their innovation comes from outside sources. Companies cannot satisfy consumer requirements on their own; finding a way to integrate the individual talents is the key to future success. Haier believes that no individual, company, or country can survive without the support of a wider community. The new rule for international businesses today is this: Co-operate or Perish. To his end, Haier last year launched a 1000-day information management revolution. This revolution has involved restructuring organizational frameworks, processes, and people. Haier's design centers, manufacturing bases, and trading companies in over 30 countries will come together to share global resources through a single information platform. Features: Opening the gate, build a garden without fences. In the spirit of "openness, equality, sharing and global operation", Haier is on the way to integrate global resources to satisfy consumers' needs all over the world. The difference between the Globalization Phase and Global Brand Building Phase is as follows: in the Globalization Phase, Haier is still based in China, radiating to the world; while in the Global Brand Building Phase, Haier aims to build a local Haier brand in each geographic area all around the world.
Achievements: By integrating its centers around the world, Haier created a 1+1+N team without borders. Through tapping the global marketplace of ideas, innovations, and human resources, the company has improved its ability to confront challenges and develop timely, effective solutions. Haier programs, like the PC Ordering Department in Macedonia, demonstrate the company's ability to internationalize its business culture and adapt to conditions in a global marketplace.
Mr. Yang, the chairman of Haier’s board of directors, has read the business strategy report drafted by Zhang Lu. The global financial crisis has influenced China’s economy deeply since 2008 and the development of Haier group is now facing to great challenges. There are different opinions about Haier’s future business strategy. Haier has been the No.1 brand in the global white home appliance market, so manager Li who takes charge in sales department suggests that Haier should adopt unrelated diversification which belongs to substantive growth strategy. Manager Wang, the leader of foreign trade department, believes that there are still great potential in global home appliance market, so Haier need to implement market penetration which belongs to limited growth strategy. In another word, Haier should try to increase the market share in the domestic and international market. Manager Zhang, the leader of finance department, insists that Haier should carry out retrenchment strategy. He considers that financial crisis will influence China’s economy for a long time, so Haier must divest unrelated industries such as real estate and personal computer to maintain competitive advantage in home appliance industries.
If you are Mr. Yang, how do you choose Haier’s future business strategy? You need to finish the following task:
From the above discussion, you should evaluate the possible alternative strategies ----substantive growth, limited growth or retrenchment through analysis. (3.1)
vertical integration（forward integration & backward integration）纵向一体化
related diversification 相关多元化
unrelated diversification 非相关多元化
market penetration 市场渗透
market development 市场开发
product development 产品开发
Select an appropriate future strategy for Haier group. (3.2)
3. Galanz Group is a world-class enterprise in Shunde and Zhongshan, Guangdong. It has 13 subsidiaries in headquarter, 52 sales offices across the country and branches in H.K, Seoul and North America. In recent years, 40,000 employees of Galanz have been dedicated to global development of its microwave oven, air conditioner, household appliances and relevant industries.
Compare the roles and responsibilities for strategy implementation in Haier group and Galanz group. (4.1)
4. Identify and evaluate resource requirements to implement the selected strategy for Haier group. (4.2)
5. Propose targets and timescales for achievement in Haier group to monitor the selected strategy. (4.3)
1. This is an individual assignment. The report should be typewritten in English, minimum 4 Pgs (1.5 spaces, 12 point Arial or Time New Roman)
2. The students must do research independently and give out reference and bibliography.
3. The decision must be supported by legal authority.