Haier: Case Analysis

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UNITED STATES

As of 2010, Haier has a market share of 1.6% of the U.S. Consumer Appliance market (Khanna, Palepu, & Andrews, 2012). This places the company in 8th place behind such brands as Whirlpool, General Electric, and LG. As previously stated, Haier entered the U.S. market primarily on the strength of its compact refrigerator and wine cooler product lines. In short, Haier entered where there was little or no competition present. In order for Haier, to further penetrate the U.S. market, the company is going to have to build on its earlier successes and build a brand reputation inside the United States. Haier’s strategy of differentiation and customization combined with a deep commitment in research and development has provided the brand with innovative features such as the slightly warmer ice cream compartment and multi-tiered freezer compartments that appeal to U.S. consumers (Khanna, Palepu, & Andrews, 2012).

Haier should expand its focus on niche markets to engage additional consumer segments within the United States. For example, a recent study indicated that 24% of U.S. consumers would be willing to pay more for a product that is considered environmentally friendly (Environmental Leader, 2013). Additionally, the introduction of the Casarte brand in China, as a response to local demand for European luxury goods (Khanna, Palepu, & Andrews, 2012), also provides an opportunity for Haier to implement a strategy similar to what Toyota accomplished with the introduction of the Lexus luxury car brand in the 1990’s. Introduced to the U.S. market in 1989, Lexus became the number one imported luxury car in the United States by 1991 (Toyota, 2015).

Finally, Haier should expand its commitment to the ZZJYT, or self-managed teams, initiative into the U.S. market. The advantage of the ZZJYT is that it values performance, innovation, and response to customer demand above relying on a traditional corporate structure (Khanna, Palepu, & Andrews, 2012). The expansion of the ZZJYT into the Haier USA subsidiary would further strengthen the underlying commitment to regarding Haier USA as an American brand, established by American workers by incentivizing a feeling of ownership and vested interest from the American workers.

EUROPE

The European market, though similar to the United States in terms of size and maturity, presents different challenges in the areas of distribution channels and customer preferences (Khanna, Palepu, & Andrews, 2012). In response to these challenges, Haier opted to manufacture products designed for European markets solely in China and then establish multiple distribution centers to serve 17 markets. In order to increase market penetration, Haier should look to strengthen the presence of the aforementioned Casarte brand into the European market. As previously indicated, Casarte represents Haier’s product offering in the luxury brand segment of the appliance market. Additionally, Casarte is based on “Italian elegance” (Haier Group, 2015), and should be a marketable product in the European luxury market. Furthermore, Haier should continue with a focus on after-sales service to ensure brand affinity and repeat business through brand loyalty. Furthermore, Haier should apply the practice of the marketing niche brands, particularly the smaller size appliances that the company introduced in the U.S. market, to accommodate the smaller average living space in the European market, as compared to the larger residence sizes found in the United States (BBC , 2009).

CHINA

Although Haier in 2010 had achieved a leadership position in terms of domestic market share, with 22.3% of the Chinese Consumer Appliance Market (Khanna, Palepu, & Andrews, 2012), the company began to encounter competition from both foreign and domestic companies. In response to the increased competition, Haier went through an entire organizational restructuring initiative. This resulted in the ZZJYT structure of small, cross-functional teams (Khanna, Palepu, & Andrews, 2012), which Haier used to secure leadership in the largely untapped rural market. The ZZJYT structure allowed Haier to address individual rural market needs through direct customer interaction.

In keeping with the philosophy of applying strategies and capabilities acquired in one market to achieve success in another, Haier should (and has to some degree) integrate processes perfected in the U.S. and European markets into their strategies at home in China. For instance, when Haier first entered the U.S. market in 1994, only 3 of its products met U.S. energy and safety standards (Khanna, Palepu, & Andrews, 2012), so Haier had to adjust its manufacturing specifications to introduce different products into the U.S. market. Once the Chinese government began to institute energy and safety standards in 1999, Haier had a production line in place to meet and/or exceed those standards (China FAQ, 2010).

Additionally, due to governmental subsidies in 2009, in combination with Haier’s efforts to reach the rural domestic markets which resulted in a market shift from 60% in the urban market and 40% in the rural market, to 40% in the former to 60% in the latter, there is an opportunity for Haier to increase revenues through the once saturated urban market. Haier can and should do this through specific branding of the luxury Casarte brand. The Casarte brand represents a tremendous opportunity for Haier in the Chinese market. Whereas Haier has always focused on quality products and exceptional customer service, Casarte is an ultra-high end brand that markets to the increasingly discerning consumer market with higher amounts of disposable income (Want China Times, 2012).

Summary

Finally, in all markets, Haier should continue its transition from a product driven brand to a service driven brand. In that Haier, which has through partnership and acquisition, gained technological expertise in multiple product lines, including appliances, telecommunications, logistics, and even pharmaceutical now possesses the ability to combine its product lines and advantages of scales into “bundles” of services for both the foreign and domestic markets. In fact, in 2015 Haier introduced the Haier U+ Smart Home Ecosystem which integrates the company’s leadership in appliances, air conditioning, entertainment and home security into a single interactive service bundle for the entire household. It is continuing differentiation and adaptability, along with applying different strategies obtained from outside markets that will carry the Haier brand into the next decade.

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