Case Stu

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dyCASE STUDY
Case 1: Haier in India: building presence in mass market beyond China 1. Why did Haier enter India? What did it plan to achieve in this new market? At First, Haier started as a small refrigerator factory in China. Zhang Ruimin put great emphasis on product quality, so he never tolerated any faulty refrigerators. By creating products under the value of quality awareness, Haier became the world’s biggest appliance seller by retail volume. In 1990s, Haier marched into global markets and used internationalization strategy. Haier made a great effort to break the bias that “made-in-China” products are of low quality. As Haier achieved success in the US and Europe by creating high quality brand image, it widened its scope more and more. At the time of 1980s, India was not a good target market for Haier to approach because the Indian government was acting very defensive to foreign companies. However in 1991, as India experienced payment crisis, the country had to liberalize and open up the market to foreign investments. As China encouraged companies to go overseas by subsidizing by policy banks’ loans, Haier decided to enter the Indian market. China chose Indian market as a target because India had the world’s second most populated economy and was experiencing rapid economic growth. The growth rate was similar to the one seen when Haier first achieved success in china. Also, Haier could expect several advantages from Indian market such as rising disposable income, an expanding middle class, and a relatively low entry barrier in the white good market. Banerjee, Haier India’s president, noticed that as the company was already gaining power as a major player in global market, appropriate strategy and direction would give Haier huge opportunities in the expanding market of India. Banerjee made specific targets for the company – to garner 20% of India’s white goods market in five years and to become one of the top three industries in seven years. Also he wanted to build an integrated manufacturing facility. The background of entry to Indian market was quite attractive. India’s white goods market, where Haier wanted to penetrate and achieve in top rank, was a growing piece of pie. From the materials offered in the case, [EXHIBIT 3], the home appliance sector was growing between 11% and 14% annually and Consumer Electronics sector was growing from 11% to even 30% in 2003. Economic growth brought increase of household income and middle-class. This is a positive situation for Haier because there would be more double-income and nuclear families which means more demand for house appliances. As Haier was already a global brand, it tried to expand its market more widely. As a result, India seemed to be suitable because its gross population was huge, and India was a developing country where more people would demand appliance as time goes by. Haier regarded India as a chance to generate disposable income for electronics purchases. With anticipation of the high market demand, Haier had plans for new plants, new production lines, capacity expansions, and even Greenfield investments.

2. Evaluate Haier’s entry strategy in India. What was and was not working? Why? Although many Chinese companies choose to first enter developing countries and then later more developed countries, Haier approached in an opposite way. So at the time when Haier entered Indian market, the company already had experience in high-end markets in the US and Europe. Because US and Europe market is mature market and competition is more fierce, Haier would have already known some strategies to appeal customers.

Although Haier had experience and sources to attract customers, the entry strategies used in India were not all successful. Their production anticipation turned out to be too hasty. On the other hand, image setting strategy was quite successful because their global branding strategy made Indian people believe Haier as a high...
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