Executive Summary
The succession of a business is solely depending on its selection of strategy. It can help a company to achieve its pinnacle or to drive the business to bankruptcy. This essay has analyzed the internationalization strategy of Haier, from the beginning of the company to the present status.
Haier is a multi-national company in consumer electrical products which is based in Japan. Haier’s strategy consists of 5 main strategies which drew the company to the position of which it experiences currently. Moreover, literature section analyzed the management features in Haier’s management strategy compared to other competitors in the market. TQM, business process reengineering and Haier’s sophisticated digital connectivity between Haier companies as well as other companies. As a conclusion, essay concludes how successful and healthy of Haier strategy so far and the trust Haier product have gain over these periods.
Contents
2. Main features of Haier's internationalization strategy since early 1990s 5
2.1. Brand building strategy stage 5
2.2. The diversification strategy stage 5
2.3. The internationalization strategy stage 6
2.4. Global brand strategy stage 6
2.5. Networking strategy stage 7
3. How does it differ from the pattern of international developmentof typical Western enterprises 7
4. How successful has Haier's internationalization strategy been 8
5. Haier’s Strategic capabilities 8
5.1. Total Quality Management and quality assurance 9
5.2. Business process re-engineering 9
6. Principal features of Haier's management system 10
6.1 OEC (Overall, everything and clear strategy) 10
6 Differences from other Chinese companies and western companiesand lessons from Haier 11
Introduction
The tale of transformation of Qingdao General Refrigerator Factory in to the Haier Group is a world famous one. Its CEO Zhang Ruimin named as a hero of nation for his visionary strategy to bring Haier Group as they lead the overall market now. Currently Haier Group a world dominated electronic appliances brand based in China which attracts many foreign direct investments (Grant, Robert M, 2018).
The Haier Group currently holds a world-wide market share of 10% in electrical appliances (markets.businessinsider.com). Within home appliances market, Haier is a frontrunner competing shoulder to shoulder with other major world class brands. Their success story is based on innovation, product design which attracts more customer retention and more importantly, it had built a strong presence in the global market without major acquisitions or mergers (Grant, Robert M, 2018).
Currently, Haier established 10 R&D bases, 7 industrial parks, 24 manufacturing plants and 24 trading subsidiary companies world-wide in relation to its internationalization strategy. Moreover, as a continuous learning strategy, Haier started acquiring internet based product development strategies by building an internet based product eco system to tap further its overseas markets, where Haier products can individualize (Haier.net,2020).
Main features of Haier's internationalization strategy since early 1990s
Haier had one strategic goal to achieve. Which is to become a world class competitive brand in consumer products. To achieve this target, Haier must achieve a highest level of quality and to meet customer expectations as quickly as possible. One classical example will be Haier super energy saving refrigerator. Haier achieved its target of 50% energy saving refrigerator in the market as well as to gain a lots of customer attraction to the brand (Yi Yan, 2007). However, Haier did not become success in an overnight. They initiated a 5 stage internationalization strategy namely, Brand building, diversification, internationalization, global brand, and networking strategies (Grant, Robert M, 2018) (Appendix 1).
Brand building strategy stage
This was 1984 to 1991 when Haier started developing a quality assurance system to ensure customer satisfaction. As they wanted to become the famous brand in domestic market where they did not have a quality assurance system, they stopped its daily production to 100,000 units rather manufacturing all day. However, Haier was able to sell as many as refrigerators compared to its competitors who did not consider the quality of output. As their competitors did not consider the quality of output, they become shooting star companies which had a short lifetime. By the time Haier was able successfully establish its quality assurance system, it had spent almost seven years. As a result, Haier becomes the first Chinese company to win the gold medal for quality and become the leading refrigerator manufacturing company in China (Yi Yan, 2007).
The diversification strategy stage
The next seven to eight years from 1991, Haier started diversifying its product portfolio. During this time period, Haier built the largest household appliances industrial park with the goal of becoming the best Chinese household appliances company. In this period, Haier began to enter the markets of freezers, washing machines, air conditioners, and other appliances. In the meantime, Haier entered into the market of TV and computer. Haier initiated a business strategy of “Shock the fish to eat” as its business expansion strategy. As a result, they successfully acquired 18 companies and formed product categories of 96. Finally, at this stage, Haier turned its white appliances to more than 15,000 product subcategories and the Company was able to strengthen its group to the top 500 enterprises in the world Gupta, A. K. (2015).
The internationalization strategy stage
From 1998, Haier started looking for global opportunities for its products. Since Haier already achieved and dominated their homeland market, they had enough resources to go outside the country and expand its business arena. As a result, Haier started exporting its products initially for a chain of retail sellers and developed an after-sales service system. Haier then gradually incepted its industrial park in America as a groundbreaking milestone of its history. Haier then started exploring foreign markets and opportunities. Correspondingly, they made few changes to its overseas management strategies to cope up with changing market environments. They initiated strategies such as “Market change” “integrated employees and orders” and “process reengineering” to develop innovative products which meet customer needs Gupta, A. K. (2015).
One remarkable feature of Haier’s internationalization strategy is that their entry into the European market. Before entering Haier products into the European market, they initiated research and development centers in Italy, Holland, and Germany. The objective of these R&D centers is to develop designs that satisfy European customers. As Haier’s strategy is to provide local products to international markets, they first identified what are the requirements of the market before entering such a market (Ian Michael, 2016).
Global brand strategy stage
In the expedition of global opportunities, Haier refers to the reach of the global market and multinational production lines and processes. With the successful initiation of internationalization, Haier wanted to protect its intellectual property rights and its brand protection. As a result, Haier registered its brand name in 102 countries. Meanwhile, it received 8 quality certifications in many countries. Moreover, it received ISO9001 certification for its refrigerator, freezer, and air condition range. As a succession plan, Haier has entered into 12 large European chains and 8 large American chains (Ian Michael, 2016).
Networking strategy stage
As the final stage of the evaluation, Haier initiated a strategy called Networking strategy. The main reason to develop this strategy is that Haier identified that consumer needs have changed with the evolution of the internet. Haier then identified the niche in this market and developed an internet-based platform to capture changing consumer patterns (The Nation, 2014).
In this stage, Haier stepped out from being a mere manufacturing company and Haier became an Internet-based company to cater to untapped marketplaces. As a result, Haier turned itself into a node of an interconnected network by enabling every party in the network to get its benefits out. Haier conducted a tremendous number of researches over strategies and outcomes over this network strategy on users, organization, employees, and management creating a dynamic cycle system with the help of internet transformation. During this process, employees became business partners who work shoulder to shoulder with their customers to achieve their dreams. (Haier.net, 2020)
How does it differ from the pattern of international development of typical Western enterprises?
As Haier CEO said in an interview, Haier's internationalization strategy has three stages as to go out, to go into, and to go up. Going in and outstands for investing overseas and competing with other companies in the international market, to get into the stands for of joining the networking the overseas market, going up is international markets as a localized brand (Dang, 2006).
According to the internationalization process described above, there is the following sequence: Overseas investment. Companies facing international market choices need to follow the principle of spiritual distance implies choosing a similar cultural background first. Haier chooses neighboring countries first under these circumstances’ Overseas investment. Established local joint venture in Haier in Indonesia in 1995 as first step for refrigerator and air conditioner manufacturers Haier's global expansion. Haier will continue to manufacture in Malaysia, a joint venture in the Philippines. The first step in all these countries Internationalization is in the Asia Chinese environment (Ian Michael, 2016).
After gaining knowledge and experience on how to do business abroad, as a way of internationalization, Haier chose to enter the US market in 1999. Established the largest FDI manufacturing center in South Carolina US Chinese company (Liu & Li, 2002). In the process of entering Haier, It is most important to enter the overseas market, the United States. The third is to improve the level of Research and Development. On the other hand, three 1/3 business developments Strategic goal: one-third of domestic sales of national production foreign sales of domestic production and one-third of overseas sales Production (Haier.net, 2009) demonstrates Haier's confidence to go abroad and develop especially for building a brand reputation in international markets.
How successful has Haier's internationalization strategy been
The data table below shows the present data of the Haier group such as financial and non-financial information in order to showcase where Haier stands right now.
(Source – Haier.net, 2020)
Haier’s Strategic capabilities
Haier has achieved seven capabilities and they are excelled in these areas. They are namely, customer service, product quality, operating effectiveness, innovation, and speed responsiveness (Lin, 2005). For constant growth in the business, firms require raising their business goals and quality with innovation. With the implementation of OEC, Haier continually raises its goals and quality over the years. The firm will focus on improving skills which require for tomorrow's expectations. Every employee at Haier attends one monthly corporate culture training program to cope up with the OEC skill matrix. OEC strategy setting consists of few steps. Namely, focus and understand customer value, product quality, innovation, and speed to the market. Then the top management shall be committing to ensuring the corporate culture is designed to meet the target set previously. Finally, the management and the other staff shall be familiar with the OEC strategy by continuous learning process (Lin, 2005).
Moreover, as mentioned in the 1st stage of evolution of Haier which is brand building, the company initially focused on its quality management system. As a result, after seven years, they initiated its Total Quality management system in place. In the 1980s many refrigerators got rejected from the market due to poor quality issues with them. However, Haier had a better chance over others as they were prepared for this issue and they try to maintain its quality of products. Haier further won ISO9001, TUV, and VDE attestation for its refrigerators for their excellent quality (Xu et al, 2007).
Total Quality Management and quality assurance
Business process re-engineering
Haier’s business process re-engineering strategy consists of several features which are not being seen among other competitors. Haier is focused on order flow. Haier’s core competency is in its process engineering. Haier has a radical capability to change its business process based on changing customer requirements in a fast manner. Haier has heavily invested in its IT infrastructure in order to cater to this re-engineering process. Moreover, its foundation is Haier’s culture and OEC management outline. Haier’s culture and OEC management pattern tunefully infiltrate the entire marketplace (Liu, 2003).
Quality Culture
Principal features of Haier's management system
OEC (Overall, everything and clear strategy)
In order to achieve this success, Haier had implemented various number strategies and made business decisions throughout its stages of internationalization. They have developed a corporate culture, business strategy, and OEC management control system on which the company’s work rules and discipline depend upon. Among these capabilities, OEC is a concept which widely talked about. According to the management, O means overall, E means everyone, everything, and every day and C means to control and clear. Correspondingly, the OEC application would mean that overall control of everything that employees finish on the job every day with a 1% increase from the previous day. Accordingly, OEC has taken Haier as a global brand by resulting in Haier satisfying customers, efficient and effective processes, a motivated and prepared workforce, sustainable revenue, and healthy profits over the past years (Lin, 2005).
E-Cards
3E cards are filled by employees every day. These cards consist of seven OEC items and the purpose of the 3E card is to monitor how far the production is achieved in terms of OEC targets. Those items which OEC measures are, production plan, quality, technological level, equipment, material, labor discipline, production safety, penalties, endorsement, and inspection. Once the employees fill these, the production supervisor reviews and updates the production manager on the daily status. Based on this status, the firm will decide the next day's plan (Lin, 2005).
Haier Platform
Haier had a thriving need of exposing its design concepts with an open network so that further innovative modifications can be done in a speedy manner. As a result, in 2009, Haier established an open innovation center and currently expanded worldwide. With the implementation of Haier's open innovation concept, Haier initiated an advanced interconnected ecosystem where all the Haier R&D companies connected and working as the backbone of the network whereas all other subsidiaries can work in a connected environment. As a result, this platform enabled Haier to share its innovative thought processes among other Haier companies so that whoever connected to the Haier group can share and gather knowledge about its up-and-coming innovative concepts. In 2013, Haier again initiated another open innovation platform where customers can come up with innovative concepts to personalize their products. Haier named this as HOPE Platform (Haier Open Partnership Ecosystem). Initially, they invited global R&D firms and innovators to the platform, and later this platform was open to University students and professors (Haier.net, 2020).
However, there is a counterargument coming from Professor Anil K. Gupta for the HOPE platform. The argument is that the concept of Innovation Platform is only valid for internet companies such as Google, Uber, and Airbnb. As Haier is a manufacturing company, it is hard to extrapolate to what extent the HOPE platform will become a success story. Anil K. Gupta further argued that the main reason for his argument is that the Company is currently focused on mass production to various needs of the worldwide customer base. Accordingly, Haier cannot divide its worldwide supply chain and design nodes to satisfy individual customer needs. Further, Haier’s backbone is its quality and physical products; it is not an easy task as a videogame company to make modifications to its services for individual needs (Gupta, 2015).
Differences from other Chinese companies and western companies and lessons from Haier
Open innovation culture
As per the critical evaluation of Haier's innovation and management concepts, one demarketing feature of Haier's management system when compared to other Chinese companies, as well as other western companies who are in the consumer product business, is that Haier’s open innovation culture. Open innovation firms are rarely seen in the industry as they cost heavily to the company. However, if an open innovation culture executes successfully, companies can benefit from them by gaining a huge competitive advantage (Lewin et al, 2017).
Organizational Structure Innovation
The objective of Haier's organizational innovation is to Generate order and extreme structure enhance its strength. Haier's structural innovation also three stages. The first organizational structure (1984-1991) was a functional structure. This stage drives the business with minimum communication requirements. Hence, the company’s interaction between customers is also low. Many of the functions are internal communications in between isolated businesses. Therefore, Haier was very slow to respond to the market. The second organizational structure (1992-1998) had a matrix structure. The degree also hindered the progress of the project in some cases features did not participate in harmony with the same project Was. The third organizational structure (since 1998) was a process-based network structure. At this stage, all Haier operates will be the SBU headline straight to the marketplace. The present organizational structure is an even and flexible computer network structure. Hence it is also noted that Haier has well balanced organizational structure compared to other corporations (Liu, 2003).
Conclusion
In a conclusion, it could say that Haier started from scratch and now shining all over the world by leaving a benchmark of white appliances. The core value of Haier is its highest quality. Hence, it has become a world-famous consumer appliances brand. Haier’s internationalization strategy had few strategic milestones which lead Haier to the pinnacle of its market. All these strategies are carefully initiated after several types of research are carried out in many countries. One remarkable milestone was its entrance into the European market. Before entering the market, they initiated few R&D centers there in Europe to understand consumer patterns.
Haier is one of the few Chinese companies engaged in international adventures. For the Haier Group, one of the challenges in the early stages of development is to ensure product quality and product innovation. As Haier's business grows and matures, Haier seeks to find innovative strategies in management or processes. It can simplify that innovation involves the development and growth of the Haier Group. Haier, on the other hand, follows the theory of internationalization in the process of internationalization, first cultivating and utilizing markets in neighboring countries, such as Asian markets, to gain market knowledge and reduce the spiritual distance. In addition, Haier moved into much more developed countries such as the United States. In the internationalization process, Haier has taken various steps to find a position in the global market and overcome the difficulties of avoiding losses and making profits, using exports and FDI as examples.
In the final analysis, Haier's success depends heavily on innovation. The bottleneck of most Chinese companies. Haier is successful but still there some difficulties in overseas markets. In recent developments for decades, Haier has had certain technical obstacles, World rivals. It still depends, to some extent, on some important foreign companies' components such as high-performance compressors and sensors.
Appendix
Haier 5 stages of strategic development
Reference
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