Introduction
Enhancing business performance as well as sustaining effective operations requires strategic management that in turn requires intensive analysis of a business situation. The analysis should seek to evaluate the problems that the businesses face as well as capabilities in order to devise suitable measures to address the situation. In that respect this analysis seeks to demonstrate the strategic management analysis of a business as well as the process of establishing strategies by applying the concept to Haier business in its bid to expand its operations to the international market. To achieve this, the analysis identifies the key problems facing the business and explains their significance to the business’s strategic management. Further, the analysis develops suitable through application of the SWOT Matrix analysis.
Analysis
- Key problems identifiable in the case
Any business’ operation is prone to challenges and problems which are a creation of both its structure as well as external factors beyond its control. In this respect, Haier has since inception been faced with numerous problems which have had to be addressed by establishing suitable strategies to deal with the situations. Some of the problems notable from the case include the following. (Fred, 2011)
- Unfavorable government regulation which have negative impacted on business’ operations and plans. A perfect case was the regulation that tightened credit in 1992 hampering Haier’s prospect of using credit financing to build its headquarters and a new production line. (Khanna, Palepu & Andrews, 2012, 5)
- Increasing market rivalry is a key challenge notable in the case with multinationals entry into the Chinese market seeking to compete for the market with Haier’s brands. The increasing rivalry has had a negative impact of businesses’ operations.
- Cultural differences in the international market presents a big challenge for businesses seeking to enter new markets since different markets are marked by difference in ways of doing things hence difficulty for businesses to adopt and understand customers and the general market. The situation faces Haier in its operation’s expansion. (Khanna et al, 2012,9)
- The un-penetrated Chinese rural market consumers’ low income presents a challenge to any business effort to enter it for its lacks adequate income to sustain operations. (Khanna et al, 2012, 10).
- Lack of skills by the partners’ work force presents a challenge to Haier in its effort to acquire new businesses as well as venture with new partners for operations in different markets.
- Loss of market to competitors like had been experienced in 2002 is a problem to Haier as new businesses enters its brands market. This has a possible effect of reducing its revenue hence negatively affecting its performance. (Khanna et al, 2012, 2002. 10)
- Free trade policies like the WTO whose which mandated the Chinese government to open up market to foreign businesses. (Khanna et al, 2012, 9)
- Differences in needs by international customers making the market standards sometimes high to meet with an example of US and Europe which are referred to as difficult markets. (Khanna et al, 2012, 7)
In respects to the above identified problems, they represent the most important problems in strategic management due to their ability to significantly affect the business and its performance. In addition, they are more difficult to address as they are dependent on external factors that are beyond Haier’s control hence requiring effective strategic planning in order to devise ways of coping with them to enhance business sustainability. (Fred, 2011)
Other less significant problems include those within the business control like the inadequate finances which faced the business in its effort to expand its operations. Such problems can be easily addressed by strategies to improve businesses’ own position like raising finances through credit as the business had sought or through the equity market as it eventually did in 1992. (Khanna et al, 2012)
- SWOT and Strategies Matrix
A SWOT analysis seeks to identify the status situation that a business is in considering the effects of both internal and external factors. Among the internal factors that affect a business operations include its performance, and resources which determines its strengths as well as weaknesses. On the other hand, the external factors that affects business operations include the customers, competition, market forces like economic, social, technological, environmental and legal factors that plays a crucial role in determining and shaping opportunities available for the business as well as the prevalent threats. (Fred, 2011, 175)
Further, the analysis is applied in setting and establishing effective strategies to address the situation in consideration of the SWOT findings. In this respect, strategies are suited to the situation developing a four set of strategies including SO, WO, ST, WT. SO strategies seeks to utilize the business strengths in utilizing available opportunities while the WO strategies seeks to address the business weaknesses in order to be able to utilize the opportunities. In addition ST strategies utilize the business strengths in addressing the risks while the WT strategies are mostly defensive in trying to address weaknesses as well as mitigate against the threats risks. (Fred, 2011, 175) In respect to Haier’s case, below is the SWOT analysis as well as the suitable strategy matrix.
Haier SWOT Analysis and Strategy Matrix
- Strengths (S)
- A well recognized brand with market leadership.
- The business has key partnerships in the international market as joint venture partners or suppliers.
- The business has an effective leadership and management.
- Skilled workers who provide strength in innovation and efficiency in production.
- Adequate resources in terms of production lines as well as finances. (Khanna et al, 2012, 3)
- Weaknesses (W)
- Business’s limitation in international markets’ knowledge.
- Too much specialization hampering development of key complements and full utilization of its innovation capabilities and skills. (Khanna et al, 2012, 3)
- Opportunities (O)
- An impressive growth of the Chinese economy from 1980’s to 2010 at an average rate of 10% and even expected to grow exceeding the US economy’s size is a boost to the business growth with economic growth resulting to increase in spending in the market. (Khanna et al, 2012, 1)
- The increasingly changing customer needs presents opportunities to develop new and more advanced products as well as expand operations to other product lines.
- Technological advance continues availing opportunities to develop high quality products as well as provide efficient services. (Khanna et al, 2012, 2)
- Emerging markets presents new markets that the business can venture into. (Khanna et al, 2012, 1)
SO Strategies
- The business can employ more of its abundant resources to expand its operations in the emerging markets.
- The skilled workers can utilize the technological advance to develop new products and innovate to improve efficiency of the existing brands.
- Expand into new markets with the well known brand name being a key marketing tool to enhance the business’ competitiveness. (Khanna et al, 2012, 3)
WO Strategies
- The business can rely on its international partners to address its limitation on international market experience and knowledge in order to enhance its expansion into the new emerging markets.
- The specialization weakness can be addressed by having joint ventures with other producers of complement and other products and utilize its skilled manpower to enhance delivery of new products that meet changing market needs. (Khanna et al, 2012, 3)
- Threats (T)
- Competition increase with the reform program that began in 1990’s with policies promoting free trade and foreign enterprise. This brought about entry of multinationals presenting a challenge to Haier. (Khanna et al, 2012, 1)
- Government’s regulations and their change could interfere with a business’ plan and operations with an example of credit tightening regulations. (Khanna et al, 2012, 4)
- Threat of a high inflation as a result of China economy’s continued growth. Inflation reduces consumer’s purchasing power hence negatively impacting on business performance. (Khanna et al, 2012, 4)
ST Strategies
- The business cab rely of its well established and known brand to cope with the increasing market competition with increased entry of multinationals in its brands’ markets.
- The business should utilize its innovation to develop more efficient and cheap brands that can cope with inflation pressure on customers by offering them affordable brands. (Kotler & Armstrong, 2004)
WT Strategies
- With limitation of international market knowledge as well as increased competition, the business should use ventures to invest in those markets where the local partners would have the benefit of market knowledge and established operations to compete.
- The business should also consider expanding its production to other product lines to address its specialization weakness as well as cope with the increasing competition by offering variety to its customers. (Khanna et al, 2012, 1)
Conclusion
The analysis has demonstrated that there are several problems that Haier faces in its local operations as well as in the intended expansion into the global market. However, a close analysis with application of a SWOT analysis shows some strengths as well as opportunities that the business can take advantage of and enhance its operations and performance through establishment of effective strategies addressing the problems, its weaknesses as well as threats.
References
Fred, R. D. (2011). (13th Ed.). Strategic Management: Concepts and Cases. New Jersey
Prentice Hall. ISBN-13: 978-0-13-612098-8
Khanna, T. & Palepu, A. (2012). Haier: Taking a Chinese Company Global. Harvard
Business School, 18 May 2012. 9-712-408.
Kotler, P. & Armstrong, G. (2004). Principles of Marketing. London: Prentice Hall.
