1. The CEO of Haier stated that they are number three in the world for white goods and they want to become number one. Haier’s strategic intent for the future is to complete its internationalization strategy and work further towards winning its global competition challenge. For this matter, Haier should implement its differentiation strategy in service and product differentiation focusing on the personalization direction.
The most important fact for Haier to succeed is to have a good understanding of the local customer needs and to be able to provide unique products and services that are different from its competitor’s and that are difficult to imitate.
Haier’s global branding strategy should aim at positioning the company as a local brand in different international markets around the world in conjunction with enhanced product competitiveness and strong corporate operations. Haier’s international business framework encompasses a global network of design, procurement, production, distribution and after sale services. The way Haier implements global branding strategy is mainly forced by global economic integration.
Another important strategic intent for Haier is to build strength of the namesake brand by introducing the Csarte brand to China’s urban centers. Haier’s CEO believes that Csarte, a high-end brand inspired by Chinese demand for European luxury goods and high-quality products, would generate higher profit margins at home, while also increasing Haier’s market share in both developed and emerging markets.
For the next ten years, Haier’s management would depend on the intellectual capital developed through their experience of acquiring numerous companies as well as entering and retaining new markets, managing hundreds of subsidiaries around the world and restructuring their organization. As a best approach when growing the brand globally, they would need to look forward in determining which of the lessons learned from Haier’s international operations should be implemented in China and which abilities learned at home could be applied abroad.
2. Haier developed their strategy through their uniquely customized approach when entering each specific market at a specific time. The main motive underlying Haier’s internationalization was to achieve competitive-oriented foreign market-entry and development, while building permanent market position.
Among their integration strategies is the focus on difficult market first. The Chinese company’s strategy in the international environment was to first of all try to successfully penetrate a “difficult”, developed market first, and only afterwards go on the relatively “easy “ emerging ones. For Haier this was a way to increase their quality standards. Haier then used its experience on the European and U.S. market to convince emerging market retailers to carry its products, now competing effectively in mature markets among very important players in the field. This approach followed Haier’s growth in China.
Another integration strategy is represented by staffing with locals when entering a new market. This happens because the locals know the market very well and allows the company to grow up faster. Their strategy does not mean just purely export; Haier wants to use local people and their local thinking in order to satisfy their local customers. Haier paid very close attention to the consumer needs in overseas markets and made detailed product modifications in order to meet them.
Following customers was another one of Haier’s strategies. They chose their market-entry in response to customers’ internationalization. Their strategy of overseas expansion was that “Where there is a market, there must be a factory”. They first exported their products and franchised their technology and know-how. When the product market of their products exceeded “break-even” point, they started their Greenfield projects.
Meeting or following competition in response to competitors’ actions. In accordance to the CEO, when foreign companies come to China, they do not come for a benevolent purpose. They follow a very simple principle: the law of the jungle. Chinese enterprises must not fail to be fully aware of this fact. If you treat yourself as a sheep rather than a wolf, you will be a prey of a wolf; if you act as a wolf, you can compete for sheep with others.
3. Haier pursued a different global strategy than other Chinese companies, which were satisfied with exporting low-cost products from China for foreign multinational brands as contract manufacturers. Haier, in contrast to other Chinese companies has adopted the strategies of the successful Korean and Japanese firms, such as LG, Sony and Samsung in terms of taking their own brand to a foreign market or establishing production in a foreign market.
The CEO of Haier believed that setting up manufacturing plants overseas could gain them advantages from avoiding import tariffs and reducing the transportation fees. Another of his beliefs is that Haier’s products would appeal more to consumers form the developed countries, if their products were no longer seen as Chinese imports. Moreover, even from the beginning Haier had a different position in the international market from that of their competitors; they occupied their own position.
Expending abroad is a response to competition within the domestic market both from imports and local products. Haier started ‘taking the fight to the enemy gates’ by breaking into the U.S. market using a combination of quality, price and local manufacturing.
These achievements demonstrate that Haier has the technology and manufacturing capabilities to make quality products and thereby compete with world consumer appliance giants, such as GE, or Whirlpool even in the hyper-tough developed markets. Its outstanding achievements have established it as a model for other Chinese manufacturers who used to feel inferior to MNCs both in China and overseas.
4. The foreign manufacturers have underestimated the Chinese manufacturers and have found themselves competing with Kelon and Haier. The price of Haier and Kelon were lower than Whirlpool’s, their technology was almost as good as theirs and the distribution and design were better suited for the Chinese market and preferences.
Whirlpool has lost millions of dollars by investing in the wrong technology and infrastructure in China. The foreign manufacturer was no match for Kelon and Haier, those two companies being able to maintain their competitive advantage over time. Haier is “much closer to China’s consumers”, having a grasp of their changing tastes. The company designs in accordance with the Chinese consumer’s preferences.
The foreign companies design products for China based on foreign approaches; therefore they are not in tune with the Chinese culture and values and will never be able to compete with the local companies in this way.
References
Khanna, T., Palepu, K., & Andrews, P. (2012). Haier: Taking a Chinese Company Global in 2011. Harvard Business School.
