Haier’s survival strategy to compete with world giants
Abstract: The aim of this paper is to analyze the internationalization of Chinese companies; in particular, the very successful case - the Haier Group. This paper focuses on using a case study methodology to analyze Haier's survival strategy to compete with world giants. The following issues have been addressed to meet the respective objects: first, the Uppsala stages model and Haier's internationalization process; secondly, analysis and evaluation of Haier's strategic internationalization, using Dawar and Frost's survival strategy theory to compare with Haier's internationalization strategy; and finally, to explore the motives underlying Haier's entry strategy and development. Keywords: Internationalization, Uppsala Stages Model, Exporting, Foreign Direct Investment, Joint Venture
Since China’s WTO entry, the Chinese household electrical appliances industry, as well as other industries, is facing the reality of a globalising world economy and multi-global challenges, such as the environmental challenge, the competitive challenge, the collaborative challenge, the organisational challenge, the worldwide learning challenge and the management challenge (Bartlett and Gholshal, 2000). The Haier Group has set up a successful example in facing these realities and challenges. Competing with the global giants, Haier’s strategy mainly concentrates on their constant efforts towards internationalisation. In the past decades China was an insignificant player in international business. China is an underdeveloped country, a major FDI recipient and a late mover, with limited technological innovative capabilities. As for the Chinese internationalisation processes, little research has been conducted until now-- the so-called new era of accelerated internationalisation. This may be mainly because of China’s particular history and geographical situation. The aim of this paper is to apply a case-study approach to assess the relevance of internationalisation models and theories in analysing Haier’s specific empirical evidence.
The Uppsala stages model and Haier’s internationalisation process
FDI: foreign direct investment
The basic assumption of the Uppsala model is that companies are expected to follow a sequence from low to high commitment modes of operation and enter new markets with successively greater psychic distance. The stages are: No regular export activities—Export via independent representatives—Establishment of an overseas sales subsidiary—Overseas production (Andersen, 1993). Haier’s internationalisation process generally complies with this model in two distinguishing aspects: exporting and FDI.
QGRF, predecessor of the Haier Group, started to export in 1986.From the establishment of the Haier Group in 1992 till the year 2000, Haier’s total exporting revenue rose to US $2.8 million, to over 160 countries and regions. The exported items were refrigerators, washing machines, freezers, air conditioners etc., in white, black and cream, 69 types, 10800 items. Haier exported 60% to European countries, 20% to Japan, 16% to Southeast Asia, and 4% to other places. Haier owns 56 trading centres, 11976 service centres, and 38000 sale offices abroad. Exporting helped Haier to gain their marketing share in the international market and prompt Haier’s brand to worldwide customers. The exporting records are presented in Table1. Table1: Records of Haier’s exporting Year Amount (US$) 1986 300, 000 1993 1,800, 000 1994 1,840, 000 1995 4,200, 000 1996 5,000, 000 1997 5,636, 000 1998 7,565, 000 1999 1.38bn 2000 2.8bn
In line with the Uppsala model Haier started their internationalisation through exporting. It was sporadic and in limited quantities via agents before the establishment of the Group. Having started its exporting as indirectly (i.e. QGRF), the Group quickly moved to exporting directly. These gradually stage transition allowed Haier...
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