CASE STUDY : CHINA'S HAIER, A NON-U.S MULTINATIONAL
CASE STUDY:
CHINA’S HAIER : A NON-U.S. MULTINATIONAL
QUESTION 1 : Explain FOUR challenges faced by Haier in becoming a successful international company. The first challenge faced by Haier is the government control over their business activity. It is because China is a communist country, where they practice command economy system. It’s mean that the government has explicit control over price and supply of goods. Goods or products that Haier produce are not necessarily based on customer’s need, but are determined by the theoretical advancement of society. In this economic systems, business are owned by the state to make sure the business practice and investment will benefit the country, despite the outcome is often contradictory. Command economy system also creates an environment where little motivation exists to improve customer service or introduce innovative ideas. The second challenge in order for Haier to become successful in international business is because of the dilapidated infrastructure. Haier is originally known as Qingdao Refrigerator Plant, an old refrigerator maker company. Before Zhang Ruimin was appointed as the managing director of the company in 1984, the factory was a near-bankrupt enterprise with total loss suffered up to 1.47 million RMB. When Zhang Ruimin entered the company, he had to find loans to pay the salary for total 600 workers of that company. He had to borrow money from village farmers to cover up the worker’s salaries as it is impossible to get credits from regional banks. The third challenge faced by Haier is the poor management and lack of knowledge in international business environment. Haier has been the first Chinese manufacturing company that start to internationalize aggressively without any prior international experience, that lead them to a failure. This can be seen when Haier’s entering the Indonesian and Yugoslavian market. Because of the poor management and lack of experience in international business
CHINA’S HAIER : A NON-U.S. MULTINATIONAL
QUESTION 1 : Explain FOUR challenges faced by Haier in becoming a successful international company. The first challenge faced by Haier is the government control over their business activity. It is because China is a communist country, where they practice command economy system. It’s mean that the government has explicit control over price and supply of goods. Goods or products that Haier produce are not necessarily based on customer’s need, but are determined by the theoretical advancement of society. In this economic systems, business are owned by the state to make sure the business practice and investment will benefit the country, despite the outcome is often contradictory. Command economy system also creates an environment where little motivation exists to improve customer service or introduce innovative ideas. The second challenge in order for Haier to become successful in international business is because of the dilapidated infrastructure. Haier is originally known as Qingdao Refrigerator Plant, an old refrigerator maker company. Before Zhang Ruimin was appointed as the managing director of the company in 1984, the factory was a near-bankrupt enterprise with total loss suffered up to 1.47 million RMB. When Zhang Ruimin entered the company, he had to find loans to pay the salary for total 600 workers of that company. He had to borrow money from village farmers to cover up the worker’s salaries as it is impossible to get credits from regional banks. The third challenge faced by Haier is the poor management and lack of knowledge in international business environment. Haier has been the first Chinese manufacturing company that start to internationalize aggressively without any prior international experience, that lead them to a failure. This can be seen when Haier’s entering the Indonesian and Yugoslavian market. Because of the poor management and lack of experience in international business
References: Liu, Hong; Li, Kequan (2002) ; Strategic Implications of Emerging Chinese Multinationals: The Haier Case Study ; European Management Journal Vol. 20 ; No. 6 ; pp.699-706. Luthan F.; Doh J. P. (2012) ; International Management: Culture, Strategy and Behavior ; 8th Edition ; Mc Graw Hill. Lin, T. W. (2005) ; OEC Management Control Help China Haier Group Achieve Competitive Advantage ; Management Accounting Quaterly ; Vol. 6 ; No. 3.