Case Study on
Operation Strategy
of Haier
Division F
Name: Vishal Govindani
Roll no:20
Introduction
Haier Group Corporation is
a Chinese multinational home appliances and consumer
electronics company headquartered in Qingdao, Shandong.
It Started as Qingdao refrigerator company in 1984 .
Itdesigns, develops, manufactures and sells
products including refrigerators, air conditioners, washing
machines, microwave ovens, mobile
phones, computers, and televisions.
History and Timeline
Theorigins of Haier date back long before the actual
founding of the company. In the 1920s, a refrigerator
factory was built in Qingdao to supply the Chinese market.
By the 1980s, the factory had a debt of over CN¥1.4 million
and suffered from dilapidated infrastructure, poor
management, and lack of quality controls, resulting from
the planned economic system and relevant policies.
The
Qingdao government hired a young assistant city-
manager, Zhang Ruimin, responsible for a number of city-
owned appliance companies. Zhang was appointed the
managing director of the factory in 1984.
With China opening up to world markets, foreign corporations began
searching for partnerships in China. One of these, Germany's
refrigerator company Liebherr, entered into a joint-venture contract
with Qingdao Refrigerator Co., offering technology and equipment to
its Chinese counterpart.
Within 3 years they became best company in china and eventually
government of china rewarded the company and handed 18 other
appliance factory to manage.
Between 1984 and 2000 sales grew from CNY ¥3.5 million to ¥40.5
billion.
Eventually Haier began to expand internationally they acquired big companies
like Casarte, Leader, GE Appliances, Fisher & Paykel, Aqua and Candy.
Euromonitor, the UK-based research firm, announced today that Haier ranked
the #1 global major appliances brand with a 9.7 percent global market share.
This is the fifth consecutive year Haier being the top of the ranking. Haier
also maintained its leadership in the global markets for refrigerators, washing
machines, wine coolers and freezers.
1984-1991 Brand Building Stage
1991-1998 Diversification stage
1998-2005 Internationalisation stage
2005-2012 Global branding stage
2012-2018 Networking stage
HAIER MISSION, VISION & VALUES
Vision Statement
We at Haier aim to do is to start with the needs of consumers and transform ourse
from a product manufacturer to a service provider.
Mission Statement
To improve the quality of life, focusing on customer's needs.
Values
• Innovation
• Service
• Rapid response
Business Model of Haier
Haier's CEO, Zhang Ruimin has said: 'We replaced the
bureaucratic model with a model based on self-employment, self-
motivation, and self-organization. Our goal is to let everyone
become their own CEO’.
Rendanheyi
Zero distance to customber
Everyone is a entrepeneur
The ultimate goal of the Rendanheyi model is to enable every
entrepreneur to face their users directly, create value for them, and
cultivate them into lifelong users. In the process of creating value
for the user, the employee is paid by the user, thus aligning the
value of the employee with the value they create for the user.
In traditional bureaucratic organizations, employees only listen to
their superiors and have no right to make decisions. Everything they
do has to be reported to their leaders. The organization is driven by
top-down KPI assessments and rewards and penalties. As
employees cannot face users directly nor respond to their needs in
a timely fashion, they are limited in the initiative they can use. To
encourage initiative and creativity, Haier started the reform around
the Rendanheyi model.
Corporate Strategy of Haier
The most eye catching elements of Haier invention is the change in organisational structure the
hierarchical pyramid was pulled down and replaced with the network of more than 4000 highly
autonomous micro enterprise. a micro enterprise with employees 10 to 15 people and functions
as a separate business is independent unit contract with one another to deliver products and
services each micro enterprise as a authiority in three critical areas of decision making
[Link]
deciding what opportunities to pursue what partnerships formed who to collaborate with and how
to meet customer needs
2. People
deciding on hiring and firing identifying roles and responsibilities and training and development
decisions may be taken to select or replace micro-enterprise leader
[Link]
Deciding on salary levels bonus payments other incentives and distribution of shares
Growth
The Qingdao refrigerator company actually started to grow from 1984 and
started through improvising quality of refrigerator and started to build a
brand.
Now the brand had gained a respectable and trustworthy reputation
in China, Zhang could aim for bigger goals. Making his company a
global success. Zhang knew that before he could do that, he needed
to diversify.
Prior to this, Haier only manufactured refrigerators, and from then on,
Haier focused on manufacturing a diverse range of products.
Haier acquired a total of 18 companies, rapidly expanded its scale and
reach into many other fields: refrigerators, washing machines, TVs, air-
conditioners and freezers
Survival
Now talking about the survival ,in 1999 haier start to globalize itself by
making entry into international market
During this period, the competition was fierce. Foreign multinationals now
targeted the Chinese market and forced Haier to develop a global strategy.
Instead of focusing on less competitive regions like South-East Asia or Africa,
Haier chose to enter, and learned to thrive in, the most competitive markets of
the U.S. and Europe.
With the help of rendanheyi systemHaier integrated its unique management
culture into local operations and cultures. They can now deliver 'on-demand
manufacturing and delivery, based on zero-inventory and zero distance to
users’.
During this stage, Haier focused on exploring a business model that creates
users that remain loyal to their brand during the Internet era.
Haier intends to start adopting a new concept in the coming year. They call it a
concept of Ecosystem Micro-Community (EMC). Building on the open network
organisation that was created during the previous stage - a network of MEs - this
strategy intends to stimulate open and dynamic co-creation within an ecosystem
that focuses on creating products and services that change one-time buyers
(customers) into lifelong users.
So instead of selling you a product (such as a washing machine) one time, they
strive to provide a scenario ecosystem, to simply put it, they focus on user's
complex needs and provide users with one-stop services by attracting various
stakeholders and integrating a wide range of resources to fulfill that user's needs.
To simplify that; Your fridge knows what food you bought, and because it is
connected to a platform where another stakeholder can show you recipes you
could cook with the ingredients you have in your fridge. Missing something? No
worries! The recipe shows you exactly what is missing and so you can directly
order those ingredients and get them delivered to your doorstep, using the Haier
platform.
Marketing Strategy
Range
Haier is a multinational organisation that deals in selling, manufacturing, developing and designing several types of electronic goods.
The brand started its operations as a manufacturing unit of refrigerators and with time has expanded its product range in ninety-six
categories and includes nearly 15,100 models.
It is a world-class company that offers products in fields of large-scale and digital integrated circuits, logistics, bio-pharmaceuticals,
network appliances and home integration. Following are some of the products in its kitty-
Consumer Products include
Microwave Ovens
Water Heaters
Air Conditioner
Television
Washing Machine
Refrigerator
Computers
Mobile Phones
Commercial products include
Commercial Freezers
Commercial Air Conditioner
Promotions
Haier has adopted a global strategy of branding and marketing that has helped it
immensely in creating a positive brand influence in the consumer market. It has been an
enthusiastic partner in social works. It is a part of Project Hope and has taken the
initiative to provide education to underprivileged and deprived children. Nearly one
hundred and eighty-six schools have benefitted from this project.
Brand Haier has been quite vocal in expressing its concern over the ecological status of our
world. It has promoted the concept of green ideas and has been a part of a community
that actively supports planting trees. Haier has taken part in charity programs and
sports events also. It promotes its products via several advertising campaigns.
Commercials are shown through electronic media on radio and different channels of
television, through print media on billboards, household magazines and newspapers. It has
started advertising through social media and taken help of several platforms
like Twitter, Facebook and YouTube. It also has a personalised website to provide
necessary information to its interested customers.
Place in the Marketing Mix Of Haier :
Haier has a strong international presence and it includes countries like
Malaysia, Philippines, Indonesia, Japan, India, Australia, Pakistan, United
Kingdom, France, Norway, Chile, New Zealand and the United States. Its first
overseas production facility was established in Indonesia in the year 1996 and
in the year 1997 at Malaysia and Philippines. Later production plants were
also located in Italy, the United States, Asian countries and in some African
countries like Egypt, Algeria, Tunisia and South Africa.
Haier has a strong distribution network that comprises of an efficient and
capable workforce of nearly 70,000 employees, 5 centres of R & D, 8
designing centres, 24 industrial-parks, 1, 43,330 sales stores, 30 factories for
overseas production and 66 trading companies. Its extensive sales network is
dependent on that particular region, In China, it has a strategic alliance with
chain stores, in Europe it works alongside with KESA, in Japan with top
retailers and in America with cooperation from retailers like Best Buy, Home
Depot and Wal-Mart. Haier products are easily available in supermarkets,
malls and hypermarkets.
Price
Low-price or economic-pricing helped the company in attracting a huge and
successful customer base and increased its share in the consumer market. The
actual production cost of Haier products is less than other brands because of
cheap labour and hence they can easily afford economic pricing system and
still generate good revenues.
Haier adopted a strategy of competitor-orientated and penetrating pricing
and hence set its product prices at marginally lower rate than its rival
companies.
Innovation
Haier constructs a 10+N open innovation ecosystem and
platform in an effort to create a better life experience for
users. 10 represents 10 R&D centers around the world, N
stands for users' needs and N innovation centers and
partners that follow to meet users' demands. 10+N is not
only a platform where zero-distance interaction takes
place between users and resources, but also a globally
coordinated ecosystem where constantly iterated products
and smart life solutions are provided.
As a core innovation team of Haier appliances group, we have active programs of outreach to
the broader innovation community so that the brightest minds across all fields can see the
areas that Haier is pursuing, and recommend solutions, contacts, or resources to fulfill these
needs.
Haier Smart Home
The industry's first full smart home set: Covering four core spaces and
seven room solutions, Haier's groundbreaking Smart Home Solution is made
possible by the many smart home products of its seven brands, which can be
used in conjunction by global users to satisfy their food, clothing, living, and
entertainment needs.
A smart and seamless lifestyle: More than just hardware, Haier delivers an
Internet-enabled lifestyle. In terms of clothes washing, Haier not only provides
washing machines but can fully manage washing, protection, storage, clothes
pairing, and purchase thanks to a smart clothing management platform that
oversees the entire life cycle of clothing. Meanwhile, Haier's food ecosystem
merges more than 200 resources across 7 categories including food,
entertainment, farms, and nutritionists, allowing it to fully manage purchase,
storage, cooking, cleaning, and health for families everywhere.
Leader vs follower
Swot Analysis
Haier’s strategy has been that of a start up firm. It never tried to cash in on its MNC appeal.
As a result the spending on Brand Building and Marketing have been minimal.
The Company has been trying to build up its Distribution Network So as to reach tier 1,2 and
3 cities.
As a new entrant to the Indian market, It has practiced Penetration Pricing. Hence, its focus
has been on price wars with competition. As a result a Push strategy has been prevalent in
Supply Chain Process. Haier has been following Economy Pricing Strategy with minimum
marketing expense.
The company has been emphasizing on Logistics and Supply Chain to tackle Bull Whip Effect.
SAP enabled Data Warehousing for Efficient Business Analytics and Interpretation.
Diversification of the distribution Network to support the entire Product Portfolio.
Focus on Hi–End Products as they are Profit yielding. Setting up of HEC’s to specifically cater
to HI-END product
Strengths
• High end products are well accepted.
• Good market share in western India
• Strong presence in home appliances segment
• Big distributors are stocking many of Haier’s
product
Weakness
• Very weak distribution network in central India
• Weak service agent network
• Weak logistics as a result accumulation of trade stocks a
nd aging stocks
• Sales seasonality in specific segment hindering growth.
Opportunities
North-east a potential market is still largely untapped
Mobiles and cellular phone market offers new growth opportunities.
SPIN(Situation, Problem, Implication, Need) selling strategy for HEC’s
Consumer electronics segment is booming and set to grow at 14% CAGR,
Haier’s product offerings catering to this segment are limited
Small appliance market set to grow.
Tie up with big retailers will help in growth
High disposable income and higher number of Nuclear Families in the society.
Threats
Medical Freezers are not selling.
Product portfolio is weak.
Overallweak distribution network compared to
competitors.
Only selected products are selling from the entire
Product Portfolio.
Order winning criteria
With the smart home services and innovation done by
haier, the company target more users in market compare
to other companies.
Talking
about color,range variety and
technology,
Haieroffers everything such that customer
can get what they want and customize their
needs with smart home system as well
Thank you
