Haier, an international icon: Success Factors and Market Challenges Essay

natural unwrap of Qingdao Refrigerator Factory in 1984, the Haier (pronounced high-er) Group is mainland Chinas largest home appliance maker (Wang and Ong 2007), and the worlds fourth largest washcloth goods manufacturer (Chen 2008).Haier was bedded basic among Chinas pull in 10 spherical differentiates by the Financial clock in 2005 (Haiers friendship facts 2008). It was also ranked 86th among the worlds 500 Most Influential Brands by World Brand Lab in 2006 and is the only Chinese brand to be among the back 100 for three consecutive years. (Haiers company facts 2008).Its Chairman and chief operating officer, Zhang Ruimin who was appointed in 1984 as the director has been credited for pulling Haier out of bankruptcy to nonplus a orbicular corporation (Zhang Ruimin 2006) with annual turn everyplace of USD16.2 billion in 2006 (Haiers company facts 2008). Zhang was ranked 26th among Worlds Most Respected backup Leaders by the Financial Times in 2005 and 6th among Asias 2 5 Most Powerful People in caper by Fortune magazine in 2004Haiers key market places are China, atomic number 63, USA, Japan (Beebe et al 2006) and India (Mumbai 2007). It has over 240 subsidiaries and 87 trading companies, design c bring downs and industrial parks and over 50,000 employees worldwide (Haiers company facts 2008).HAIERS fashion TO SUCCESSIn 1984, CEO Zhang Ruimin took over the n aboriginal bankrupt refrigerator factory (Lin 2005, 1). Today, Haier is known as a global brand. How did it become such as a success (Lin 2005, 1)?Strong leadership, customer service, harvest-time quality, macrocosm, speed, pricing, positioning, localisation of design, merchandiseion and sales, latecomer utilitys and market entry strategy are among the top ten factors for Haiers success.Strong LeadershipZhang Ruimin (Zhang), Chairman and CEO of Haier is described as down-to-earth and a charismatic leader who has worked his way up (Chinaview People Zhang Ruimin 2003). Zhang show out-of-t he-box thinking and risk-taking when he combined traditional Chinese philosophy with modern Western worry mode (Chinaview People Zhang Ruimin 2003)and avoided following norms of the industry (Wu 2003).From the OEC management model of Never Leave Todays operate on Till Tomorrow and Daily Settlement Leads to Daily Improvement to the market chain management, Zhangs unique management ideas bring won praises and is much of a discussion topic among management specialists and top universities around the world (Chinaview People Zhang Ruimin 2003).Zhangs aspiration for Haier to become a global brand began during the early stage he took on the factory (Liu and Li 2002, 701) With this ambition, Zhang set clear objectives and focuses in building the brand, diversifying product lines, going international and now building a global brand name in contrary phases (Haiers development strategy 2008).In 2006, for the fourth consecutive year (Haier introduction 2008), Haier was ranked firstborn f or overall leadership among Chinese companies in the Wall Street journal Asias annual look into of Asias 200 Most Admired Companies (Areddy 2006).Customer ServiceHaier aims to bequeath excellent customer service to do good an advantage over Western rivals who can be more complacent (Business in China in two ways hotshot Group and Haier Group succeed without the consultants 2003, 14). To achieve this, Haier developed a customer-focused culture by trim the distance between employees and customers requiring all employees to sell products, listen to customers and understand rivals products on a regular seat (Denison 2001, 222).Haier also set up more than 11,000 customer service centres in 160 countries (Yi and Ye 2003, 204) hiring and training locals to provide after-sale service to local customers (Li and Chen 2007). Haiers dedication to customer service has won the Five Star Diamond Award presented by the American Quality and Service Society (Haier 1996).Product QualityZhang kn ows that the key to excerpt and future development is to establish and continue to improve product quality. To drive theimportance of quality, Zhang ordered account open workers to destroy 76 defective refrigerators (Xu et al 2006, 30-31). As a result, Haier received the first ever discipline Gold Medal Award in Chinas refrigerator industry (Haier 1988) and ranked first in Chinas Top 15 Brands by Forbes (Kim 2003).InnovationTo improve its technology knowledge and bring about innovative products, Haier has been increasing investment in research and development (R&D) (Duysters et al 2008, 16) establishing an extensive global R&D and design network (DiPaolo and Li 2007). Its R&D investment is significantly higher than the market average RMB6.7 billion in 2006, equivalent to 6.2 percent of its sales (DiPaolo and Li 2007).Haier also formed alliances with tip companies such as Liebherr, Philips, Mitsubishi and Toshiba to acquire manufacturing and technological know-hows, expand prod uct lines as well as enter foreign markets (Duysters et al 2008, 11-12).The basis of Chinas advantage is low-cost labour (Zeng and Williamson 2007, 27). Haier is effect advantage of the cost advantage to provide high technology, choice and customised and specialty products at low terms (Zeng and Williamson 2007, 55). apply cost innovation, Haier gained brand awareness in the US by making compact refrigerators and wine-coloured chillers to the bunch market (Jain, Malik and Cruickshank 2006, 21).SpeedHaier understands that the speed in bringing products to customers to satisfy their needs before rivals is important to win them over (Wu 2003). Since entering US markets, Haier has gained one-third (Lin 2005, 2) of market share in the compact refrigerators for dormitories and offices and created the market for stand-alone wine coolers (Haley and Haley 2006, 46).PricingChinese products are often viewed as low quality (Xin and Yeung 2007). Aware of the poor image of Chinese products, Haier price its products at a five per cent premium over its Korean rivals, LG and Samsung (Chinese consumer durable firms eye a riskyger piece of action 2008) so that its products will be perceived as top-of-the-line (Gupta 2006).PositioningHaier positions itself as a premium brand and aims to develop Haier as a dependable, high-technology global leader (Gupta 2003). Haier is not targeting at different classes of consumers instead it wants consumers to feel that Haier is closest to satisfying their needs (Haiers Aim Develop Our Brand afield 2003).Localisation of Design, Production and SalesHaier set up local design, production and sales facilities, and industrial parks in US, Europe, Asia Pacific and Middle East and employs mainly local people (Haier Press Room 2008). With localised trading operations, Haier is able to respond more quickly to changing customers needs (Young and Nie 1996, 12) and to be accepted by the local connection (Haier Press Room 2008).Latecomer Advantages Instead of creating a new business model from scratch (Duysters et al 2008, 8), Haier, as a latecomer, has the advantage of comparing and modifying its business models against those of established rivals identifying niches, for example compact refrigerators in the US (Wu 2003) that larger rivals have overlooked (Duysters et al 2008, 8) or do not have the flexibility to adopt (Bartlett and Ghoshal 2000, 139).Market doorway StrategyHaier started exporting to tough markets such as United States (US) and Germany as Zhang (Wu 2003) believes that once it gained brand recognition in these markets, it will be easier for Haier to enter neighbouring developing countries (Liu and Li 2002, 702-703).When entering a new market, Haier introduced one product at a time. It first introduced refrigerators in the US market. Once the product becomes successful, Haier began introducing washing machines lines and other products capitalising on the brand awareness (Liu and Li 2002, 703).CHALLENGES AHEADCh inese manufacturers including Haier now face increasing challenges posed by decrease in orders from overseas markets ( worldwide recession hits China 2008), lack of resources, negative Chinese brand image, just margin throw and rising costs.Lack of R&D InfrastructureAlthough Haier increased investment in R&D, it can take years to catch up on the standard of the research in the West (Isaksen 2006). One big obstacle that marketing research firms face in China is the lack of infrastructure to carry out surveys (Isaksen 2006).Lack of Qualified Human ResourcesManagers with experience managing an international operation are scarce (Beebe et al 2006, 7). This shortage can negatively influence Haiers global expansion (Liu and Li 2002, 703). For example, managers from the Chinese and American operations find it difficult to have productive discussions due to language barrier (Liu and Li 2002, 703).Global Brand Awareness and ImageChinese companies including Haier lack global brand awarenes s in developed markets in the US and Europe (Xin and Yeung 2007, 3) and suffer negative brand image of cheap, poor quality and unreliable (Swystun, Burt and Ly 2005, 3). This negative image is further weakened with the recent milk scandal ( do in China 2008 The Challenge for Chinese Brands Going Global 2008). Changing Western consumers perception requires years of marketing efforts (Liu and Li 2002, 704).Dominant Bargaining Power of BuyersHaier distributes its products with sell giants like Wal-Mart who have large buying power (Rosenbloom and Diane 1993, 78). These retail giants pursue mass merchandising strategies that evince low prices and low margins (Rosenbloom and Diane 1993, 80). 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