Haier

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Market Economy Model of Chinese Management
― Case of Haier―

Hideki YOSHIHARA
(Kobe University, Japan)
OU-YANG, Tao Hua
(Tsinghua University and Zhongshan University, China)

Abstract--To explore a new style of Chinese management by the case study of Haier is the objective of this paper. Haier is the largest consumer electronics company in China. Wages of workers are only based on piece rate and determined by the rightly done jobs and the defects in their jobs. The evaluation of workers for wages is individualistic, instantaneous, quantitative, monetary, competitive and open. There is practically no room for discretional evaluation by supervisors and managers. Engineers who want to become the heads of new product development projects apply for the position with new product development plans (open competitive bidding). The salary of project managers and their subordinate engineers is determined by the market performance of new products such as the sales, the quality claims from customers and the costs of new products. Haier’s management is based on the market principles of economics. It is the market economy model of management. And it is spreading among growing Chinese companies. We may say that they are more capitalistic than Japanese companies and even

American companies.

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1. Haier Group
The objective of this paper is to explore a new style of management of Chinese companies through the case study of Haier Group (later, Haier). Haier is the largest Chinese company in the consumer electronics industry. It w as

established in 1991 when a company called Qingdao Refrigerator born in 1984 was transformed to Haier. Its product lines include refrigerators, freezers, washing machines, air conditioners, TV sets, mobile phones, PCs and so on. It is recently entering i to non-manufacturing fields like finance and service businesses. Its sales n

amounted 60.2 billion Rmb. (about 7.3 billion US dollars) in 2001 and its employees count approximately 30000. Its products are exported to more than 160 countries, and manufactured in 12 foreign countries. It is a front runner of Chinese multinational enterprises. The company is ranked the 9th in the world in the home electric appliance industry. (Appliance Manufacturer, Feb. 2001)

Haier has been growing at an incredibly high rate of 80% annually for the last nearly ten years since its start in 1991. Its size in terms of sales is already getting close to that of advanced counterparts of American, European, Japanese and Korean consumer electronics giants. Haier has become one of the world’s leading companies in the industry in ten to fifteen years. Its high growth may well be characterized as compressed growth. (Ou-Yang, 2002B)

Our analysis shows there are two reasons behind its compressed growth. The first reason is the latecomer advantage. Haier has introduced advanced technology from Western and Japanese companies. The second reason is its management. (Ou-Yang, 2002B)

In the present paper we focus our attention on management of workers at plants and management of engineers who develop new products in R&D organizations. We explore management of this company by the case study method. Our primary research method is interview. We conducted interviews to twenty five persons of Haier such as executives, managers, engineers and workers (as of October 2002). Among them were Mr. Zhang Ruimin, who was the CEO of Haier Group and Mr. Zhao Zhenzhong, who was the General Manager of Shunde Haier Electric Appliance Co., Ltd.. We collected and examined unpublished company documents such as company handbooks, materials on the bulletin boards in the factories and offices, various records of personnel evaluations, new product development plans and so on. Published materials such as books, academic papers, magazine articles and newspaper items also provided useful information to us.

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2. Management of workers
2.1. Shunde Haier Electric Appliance
Shunde Haier Electric Appliance...
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