Posted at 07.10.2018
This paper details the internationalization of Haier into America. It analyses the admittance strategy followed by the company, the key issues the company had to deal with in its foray in to the American market. It discusses the foundation and motivation behind the access in to the USA, how the company evaluated the united states and handled the various growth issues it came across using Porter's five causes competition model. It also discusses the business account and analyses it based on the SWOT analysis, the key factors that added to its success in America and finally, the lessons learnt by the said internationalization venture of Haier into America.
The Haier group is the leader in the making of white goods in China with its head office in Qingdao, China. Inside the 1980s, demand for refrigerators really exceeded resource, there was a boom in the industry. Things modified in the early 1990s, because of the deflation in the Chinese economy, development rate of Haier refrigerators dropped from 50% in 1998 to about 30% in 1999. When China joined up with the WTO, there was an influx of international home machine manufacturers in to the country. This made competition in the home market very stiff scheduled to a business shakeout. He Chinese language home kitchen appliance market was growing and there is huge prospect of profit due to cheap labor cost. A whole lot of foreign organizations were entering the marketplace and competition became fierce. Manufacturers started contending on price basis. Haier refused to become listed on the band wagon, instead, it decided to diversify its products beyond refrigerators with the addition of washer and air conditioning equipment to its brand and also source for new market.
Haier's internationalization in to the USA was influenced by competition. The business moved in to the international market when the home market became saturated and less profitable. The main factor that influenced Haier's decision into joining the American market was partly since it has a big demand for white goods and majorly since it wants to build a strong global brand. USA was the most significant and most competitive market for consumer appliances. Haier figured that for this to build a strong global brand, it has to contend with the world's most powerful brands. Haier Group launched its growth drive from the most difficult to easy and simple countries. Zhang assumed that once Haier proven a strong brand reputation in the developed countries like USA, it will be easier to start expansion in to the developing countries. There is this initial fear of how well Haier would fare in the American market because of the general conception of Chinese products being cheap and substandard. The firm handled these by using its resources and capabilities to achieve a lesser cost structure and a differentiated product, which helped it position itself in the American market. The brand however, thrived and created a niche for itself on the market due to its competitive advantages.
Established in 1920, Haier is the world's 2nd major white goods producer and Chinese most effective brand with a occurrence in every five continents. Haier had not always been successful story, its record goes back to 1984, when it was a little refrigerator factory on the verge of bankruptcy and may not afford to pay the salary of its meager 600 staff. Over time, Haier is continuing to grow to become a multimillion dollar organization with over 50 000 employees worldwide, with deal stores of over 58 800 which accounted for a worldwide turnover of 122 billion RMB (17. 5 billion USD) in 2008. It has also proven 240 subsidiary companies, 64 trading companies, 29 production plant life, 8 design centers and 16 professional parks worldwide. In 2008, Haier invested 60 million USD (4% of the total turnover of the group) in Research & Development. Haier has turned into a global brand and has since diversified from the white home device industry (Washers, Heaters, microwave & dish washer) to the dark-colored home appliance industry (Television set, VCRs, Fax machines, devices) and the tan kitchen appliances industry (Computers).
Zhang Ruimin, CEO Haier Group performed a major role in the business's success. Zhang was appointed the new Managing Director of the Qingdao Refrigerator Company in 1984 - a state owned refrigerator making company, officially renamed as Haier Group in 1992. When Zhang took over the company, neither product quality nor client satisfaction was the business's strong point. He started importing technology from Germany's Liebherr and commenced production of technically complex products. He soon realized that the singular act of launching the Liebherr's technology is insufficient to impact favorably on the company. There was decadence in the entire company culture: nepotism, indifference to quality and ineffectiveness characterized the workers' attitude. Zhang realized there exists need to set up place a fresh management system and focus on customer needs, product quality, invention and speed to boost operating efficiency. Client satisfaction, quality control and self-control became priority in the business such that defective products are not allowed to be sold to customers. Haier's culture became "quality before profit".
Zhang also launched a development strategy which is at four levels. 1984 to 1991 saw the Brand building strategy of the business. During this time period, the quality awareness of the employees was awakened and he made them recognize that the fact of the business sustainability and continuity is quality, when he bought the smashing of 76 defective refrigerators in 1985. It was during this brand building time that the firm gained its power and became a leading appliance maker by setting high criteria. It leveraged on the opportunity of importing technology from German's Liebherr because of its technological advancement. The second stage of his development strategy was the diversification time which occurred between 1992 and 1998. Haier decided to leverage on its brand strength and introduced services in to the market. It relocated from a one product brand to many products. By the end of 1998, Haier experienced become a nationwide brand innovator and had collected enough experience in corporate management because of its foray in to the international market. It identified development opportunities and the globalization level of its development strategy premiered in 1999-2005 to place the brand's durability to test. Haier's approach was to build the brand name in developed market segments where the competition is very stiff, before growing to developing market segments. This age strengthened the organization with global availableness. The global brand strategy premiered in 2006 to manage the Haier brand globally, adapt to global market style and handle the risk of globalization.
HAIER IN AMERICA
Haier's first project into the USA was at 1994, when it was offering its products to American transfer companies that are only interested in the reduced price and least worried about the brand except Michael Jemal. During his visit, Jemal was challenged to buy 150 000 products of small refrigerators with a package of being granted exclusivity and a long-term romance if he made a success of the sales. It appears Haier was ambitious to think it could gain 10% of the market of this particular product without any sort of brand awareness in the US. Jemal took up the challenge and by the finish of the year, the sales exceeded 165 000 items which was over 10% of the marketplace. By 1999, Haier's refrigerator export has exceeded the bare minimum production volume to break even and it had end up being the market head in the sales of small refrigerators and wine coolers. This achievements prompted it to float the Haier America Trading Company in March, 1999 and open up an industrial park in SC on Apr 30, 1999 to boycott tariff barriers, save freight cost, access advanced technology and create itself on the market by production refrigerators for the American consumers.
One major factor that facilitated the company's final decision to go to South Carolina is the relatively labor union environment in the state. Employees hold the right to become a member of labor union or not, and the decision has no influence on their employability. There's also state investment incentives such as: Property duty incentive, job-creation taxes credits (which range from $1, 500 to $4, 500 per job created), five-year moratorium on basic county fees and also various sales taxes-exemptions on equipment, equipments, gasoline and electricity. Net operating deficits are permitted to be carried onward for a fifteen calendar year period due to the low corporate tax rate (5%). The price tag on land was almost twenty times cheaper in SC than China. All these environmental evaluation, including the possibility to recruit local talents and ability to use for American Trade and Industrial business made SC a great choice for Haier.
When Haier got into the united states market, it was being dominated by American companies such as GE, Whirlpool and Maytag, the sole international player being Sweden's Electrolux. There is a market entrance barrier created by customers' devotion to these major market players. The business recognized that, to be competitive successfully with these founded home product manufacturers, it needs to be very progressive rather than duplicate existing products. Instead, it focused on the neglected segment of the marketplace that the marketplace players were not interested in, anticipated to income or low volumes. Haier introduced compact dorm refrigerators, to meet up with the needs of graduates that can't find the money for to buy standard refrigerators. Expecting that by enough time they graduate and begin their families, the nice storage of the Haier experience it's still with them and encourage them to buy more of Haier products. It was able to get about 30% of the American compact refrigerator market by mid 2002. It broke into the American market using quality, price and local processing. This combination allowed it gained footing in the competitive retail sector. With its 'Quality before Revenue' policy, it was able to gain a sizeable talk about of the market in an exceedingly short period of energy.
In contending in the American market, Haier stresses quality rather than price. Though, it wasn't possible for the company because of the general conception of the American consumers. They think that Chinese language goods are cheap and substandard. Haier decided to make a localized brand by producing the refrigerators in the USA with a 'Made in USA' tag alongside the Haier brand. It uses local resources to create, manufacture and deliver. The localization strategy implemented by Haier helped improve its presence in the market. Virtually all the personnel in Haier America are Us citizens. This make Us citizens believe that Haier is a localized US brand. The Haier picture began to take form in 2002, an extensive sales network was set up, by partnering with top 10 10 retailers in the USA, e. g Wal-mart, SEARS, Lowes, Home Depot, Best buy, PC-Richard, Sams, Costco, Brands mart and Aim for. In addition to this, over 7 000 impartial stores also bring Haier products. The syndication network is very strong because it operates at both the retail chain and mass wall plug levels.
Based on the proper branding process of CEO Zhang Ruimin, Haier thinks that 'the substance of Globalization is Localization'. The functional framework was based on complete localization of design, production and marketing. Haier recruits local ability and work with local professionals to see to your day to day business businesses. There was an initial cultural clash at inception, the People in america weren't used to the Chinese's autocratic management style. The strain subsided as both sides got familiar with one another.
Haier America has achieved quite a lot since its establishment in 1999, they have widened and grew its market show in america, Canada and into SOUTH USA through strategic channel associates. When it inserted the American market a decade before, it sold three products. Today it provides over 3, 000 ranging from room air conditioner, compact refrigerator, wines cellars, washing machines, portable electronics, High definition tv etc.
KEY SUCCESS FACTORS
Haier America's position in the market can be assessed, using the PESTLE examination to specify the success of the brand with regards to the American market.
Over the years China has turned into a major US trading spouse, The US-China economical ties have been strengthened considerably. China's WTO accession improved the firm's entry into one of world's best economy.
The Chinese federal government is considering making Haier a model of national industry for other Chinese language businesses to emulate, a domestic firm convert global with a global competiveness. The government provides company both financial and moral support. Haier has a considerable financial reference (deep pockets) because of its affiliation with the Chinese language government. That is a key factor that made the huge investment the company made in USA a success. The $40 million industrial park built-in Camden is the first production plant ever before built and most significant investment ever made in the USA by any Chinese language company.
The Economic trend in america is favorable for Haier to handle its business activities and created an opportunity for a beautiful interplay of ownership, location and internalization gain. Localization of Product design contributed to the strong foothold gained by Haier in the American market. Haier used local resources to design, manufacture and deliver in the us.
When Haier entered the American market, it did not consider the industry big players as rivals. It understood the fact that it was very small compared to them, so rather than fighting with them, it attempted to find a position for itself on the market. Haier America grows products that were different and sell products the top players don't focus on. It realizes the ability of making products that are obviously different from competition who were targeting a broader band of consumers. The company didn't only compete to increase a category, it created a market for itself.
The success account of Haier America wouldn't normally be complete without the pragmatic and radiant management of Michael Jemal, who possessed always keyed in to the overall vision of creating a strong brand name for Haier along with his long-term views and commitments.
The Haier global culture of building a business model that maintains functional brilliance. The OEC management model implemented globally by Haier also added immensely to its success in America. It inculcated the Haier's work culture and its global dedication to quality, customer value, working efficiency and technology.
With the viewpoint of 'Customer as the basis and groundwork of Expansion', Haier provides top-notch customer support to its customers. The company understood the idea of 'Customers being the key motive of an organization running a business. ' To guarantee the quality of product sent to customers, it assigns incentive-based responsibility to personnel. Its level of sensitivity and responsiveness to customers' preferences contributed to the company's success in the American market.
Haier America co-operates with top retail brands in america to carry their products and built an extremely strong distribution network. In 2006, Haier became a strategic spouse and the first world home kitchen appliance sponsor of the Country wide Basket ball Association. The NBA is one of the most popular sports league in america which alliance has strengthened the Haier Brand in America
Haier's creativity and design has continuously allowed it outperform its competitors. Its value-creating process are deep rooted, it followed a focused procedure by focusing on a slim, exclusive competitive portion and created a market specific niche market for itself. It's been able to stay ahead of present or potential competition through the competitive benefits it created for itself. It has ensured its survival and prominent inserting of the Haier brand in America.
Haier America has since diversified and increased its product stock portfolio from the three products it moved into the marketplace with. With its diversification strategy it includes managed to win more market share in the industry. It also allows it spread out its risk among different products.
Haier managed to charm to the brand mindful American consumer, to whom brand means a whole lot increasing its brand building strategy. It had been very devoted and pragmatic as it pertains to brand building.
Speed was another key business strategy that Haier used in being successful the American market. It is very fast at gratifying customer's needs as quickly as possible. Among the company exhibiting speed was when Jemal, the Haier American President had a concept of his aspiration refrigerator that he feels will suit the American consumers flawlessly and get their heart and soul. He drew a sketch of the refrigerator and handed it over to Zhang during one of is own trips to the headquarters in China. To his utter astonishment and pleasure, a prototype of the refrigerator was built and reached the American market in seventeen calendar months without compromising benchmarks and quality.
Haier has strongly impacted everyone with its advertising campaign "Try your best and strive to be the number one". Haier's corporate culture of quality control is the heart of the business's brand identification and success. It was self-confident of its growth potential and also exhibited self-assurance in the Us citizens by allowing them run the Camden manufacturer.
Haier is extremely fast in its growth initiatives, it relies strongly on its swiftness to meet consumers' needs. Its entrance into America has enabled it understand the peculiarities, traditions and practices of local consumers also to also convert impressive ideas into local consumer tastes. Its ground breaking thinking, commercial culture, adaptation to evolving market and its efficient response to improve, sets it apart from other Chinese companies. Haier's management philosophy and commercial culture is acknowledged worldwide and worth emulation.
A major lesson to be learned from the success of Haier's entry into US is the way it internalized the traditional western business model in response to economical condition and consumer desire. It was mindful in america market at first but capitalized on the actual fact that it was being basically neglected and develop its progress potential. Haier's constant success in the us has challenged the superiority of multinationals in developed nations. It has taught them the essence of understanding the changing market if they intend to stay before competition. It is also imperative for western multinationals to focus on the culture and business strategies of competition from appearing market up to they paid to theirs. An intimate understanding of one's strength and this of competition enhances the progression of the business.
Haier implemented its survival strategy in the US by being versatile, interacting with customers' requirements well-timed, continuous invention and braving competition to determine a strong brand and market position. Haier is certainly an active, energetic and impressive company that never relax on its oars.