Haier

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HAIER
Strategic Implementation Assignment

Mandeep Singh Grover3/12/09
# 317

Question 1: Mention the defying strategic perspectives at Haier over the years. What have been the salient and meritorious points in the implementation of such strategic initiatives at Haier in China?

Answer1: Haier is one of the world’s largest manufacturer of home appliances. Haier started off as a defunct refrigerator factory in 1984. Its development from a small Chinese producer to Global player has been nothing short of amazing. The defying strategic perspectives that Haier followed over the years are: •Focus on Quality: Till the mid 1980s the refrigerator market in China was characterized by cheap and poor quality products. Zhang believed that consumers would be willing to pay a premium for quality, therefore he tried to make “quality” an inherent part of company work culture and strategy. Zhang believed in providing the consumers with nothing other than the best Implementation: Zhang once pulled 76 refrigerators off the production line for minor scratches in them and asked his workers to destroy them to make them realise a focus on making quality products would be their way of doing business. Workers were also made to be personally accountable •Brand Building: Their target was to become a first-class brand. Also other Chinese manufacturers exported products under an OEM client brand. However, on the other hand, Haier was willing to bear the early costs of establishing the firm as an independent player overseas Implementation: They spent a lot on advertising also to build an established brand •Premium Pricing Strategy: It helped to create a perception of quality in the minds of consumer Implementation: Haier did not indulge itself in price wars. Instead, in 1989, when all its competitors cut prices due to oversupply in the market, Haier raised them. Zhang discovered that Haier brand commanded a 15% premium even during a price war.

Diversification: By 1991, Haier had become China’s leading refrigerator manufacturer. Then it realised that it was time to diversify. Haier followed a strategy of acquiring only those firms that had markets and good products but bad management Implementation:

Some of the acquisitions were:

Company Product Line
Qingdao Air Conditioner Factory Air Conditioner
Qingdao General Freezer FactoryFreezers
Red StarWashing Machines
Yellow Mountain ElectronicsTelevisions & Telecom Equipments •Operational Restructuring: After a decade of adding factories, the company first re-organized to achieve greater efficiency and position itself and position itself to compete effectively with multinationals both home and abroad •Market Responsiveness: Haier followed the strategy of focussing on consumer needs. Haier’s strategy of meeting localized market demand at home and abroad with innovative models had resulted in about 96 product categories and 15,100 specifications.

Service: Haier was a new breed of company in that it had a strong after-sales services network. In 1990, Haier set up a service centre in Qingdao that used a computer system to track tens of thousands of customers.

Implementation: By 2004, Haier had a service network of 5500 independent contractors, one for each sales outlet. Haier’s warranty periods covering full repair costs either met or exceeded Chinese government regulations

Distribution: Haier Logistics offered “just in time” (JIT) purchasing, raw materials delivery, and product distribution Implementation: Haier had reorganised logistics into a single company serving the entire group. Other Chinese companies like Midea and TCL had separate logistics operations for each product line. This kind of scale and volume gave them one of the lowest logistics costs

Question 2: What strategies have Haier designed to respond to the Chinese and foreign competitors? Further discuss how effectively Haier implemented...
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