Haier Case Study

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We will look at the other 2 strategies that Haier engaged in to ensure the success of her international expansion strategy. Haier entered the developed markets with just a few models to test the markets and steer clear of major competitors. Haier identify the needs of the markets that are not addressed and offered products that are not manufactured by her global competitors. With minimal competition, the niche products brought in high margins and Haier was able to modify and innovate when others started to imitate. With these niche products, Haier managed to catch the attention of major retail chains such as Wal-Mart and built relationship with them. Haier was in a stronger position to get the major retail chains to consider her other major products.

Another strategy was to staff with locals. Haier identified that she has to use the right people to establish the structure. By using local people, they will understand the market better and allow Haier to expand quickly. Hence, Haier started by seeking a local person with experience in the white goods market to head the country operation and eventually the person would hire a local team and develop sales and distribution channels. Haier believed that she would need to place her own people in key positions overseas to obtain better market intelligence. Haier also preferred to use temporary technical support teams from China while relying on local partners to operate the business as she hope the Haier in each country to be the Haier that was created by the locals.

Haier organized overseas sales into five large regional markets: The Americas, Europe, the Middle East, Southeast Asia and East Asia. The international divisions allowed Haier to better coordinate the global operations.

We will look at the performance of Haier in the different markets to evaluate the effectiveness of its international expansion strategy. In America, the Welbilt line of mini refrigerators was successful, which led to the joint venture with Michael Jemal called “Haier America”. Haier’s team was all American, except for the accountant. Although labour costs were much higher than in China, Haier’s strategy was to produce quality products and sell them at a premium. Haier eventually got their products into large retail chains such as Wal-Mart. Haier also focus on niche markets to avoid head-on competition with bigger brands such as GE and Whirlpool and led to Haier having significant market shares in its niche products market.

In Europe, Haier managed to hire related talent to head the operation in Europe. Haier managed to cater to the needs of the market by manufacturing built-in appliances, which are popular in the European market. Haier also understand the difference in distribution channels and consumer preferences across countries. This allowed Haier to better produce appliances that consumers in different countries preferred and better promoted the appliances through different preferred distribution channels.

In India, Haier invested heavily in building production, distribution and sales capacities as she earmarked India as a potential high-growth market. Haier formed alliance with Indian appliance firm to jointly produce and market refrigerators, then launched wide range of products and after that developed a refrigerator factory and research and development center to serve a production site for Southeast Asian and African markets. Haier found that that the “easy” emerging markets were not that easy, there were environmental, economic and distribution issues. There was a greater reliance on locals in order to solve the many difficulties.

Haier had a two-pronged strategy to better competes in the global markets: Product differentiation and response speed. Haier paid attention to consumer needs in foreign markets and was willing to make modifications to please customers. Haier build relationships and communicate with consumers to understand their needs. Haier differentiate from the bigger players by innovating and adjusting to the consumers’ needs. Haier’s has 18 design centers, some in foreign markets, facilitated rapid product development. Ideas could be quickly tested and created into prototypes. Haier has a flat structure that aids its speed, as salespeople would provide market intelligence directly to model managers who would quickly assess the feasibility and profitability of a design before producing it.

With the successes, there are also some issues and pitfalls that Haier had to address in order to move forward. Haier had done well in the US market with the introduction of niche products. However, Haier had not reached its goal of introducing the full line of products. The US market still recognize the Haier well, hence it is advisable for Haier to continue to build brand equity in order to introduce full line of products. With the expansion into global markets, Haier had experienced difficulties in establishing scale economies in some markets such as Europe. The expansion had also increased the size of the firm and increased the complexity of the operations. Haier can look into ways to better enhance her global coordination such as having different key personnel involved in the overseas operations.

Other bigger global players will continue to challenge Haier back home, building factories, distribution and infrastructure. Over time, they will be able to understand and adapt to the Chinese market, prevent Haier from gaining profits and eventually threaten her existence.

The securing of human resources is one of the main concerns in order to maintain rapid growth, especially in foreign markets. Talents are also needed to innovate and develop next generation of products. Ultimately, it is still Haier brand that is important, especially in the foreign markets in order to address the different pitfalls. With a prestigious and recognized brand, it will become easier for Haier to target different markets, secure its dominance in the Chinese market and hiring talents with ease.