Haier Group U.S. Expansion Case Report

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The Haier Group: U.S. Expansion

A case report prepared for

MG 495 Business Policy

Fall 1st semester 2011




A. Executive Summary

1. Summary statement of the problem: The Haier Group was a strong electrical appliance maker based in China. Their stated goal from CEO Zhang Ruimin was to become a truly international company, and not just a low cost supplier to Western companies. The problem was how Haier was going to differentiate its brand from the already established brands such as GE, Whirlpool, Maytag and others. This was at a time where there was a very high saturation rate of home appliances already. 2. Summary statement of the recommended solution: Haier was not a well-known brand name outside of the United States, and therefore needed an aggressive introduction into the market place. It moved it’s national headquarters to New York, making the statement that it is committed to becoming an international player in the consumer electronic, and home appliance market. Their advantage was them having the framework in China to reduce labor and manufacturing costs that were troubling many established companies in the market. This helped them absorb rising prices of raw materials as well as labor.

B. The Situation
Haier was founded in China in 1984 and its main product it brought to market was household refrigerators. Haier was not satisfied with it’s Chinese market share and was aggressively pursuing, and considering ways to expand globally, especially into the United States market. Haier first problem was brand name, it was vastly unknown in other countries, so from 1984 to 1991, CEO Ruimin placed a Total Quality Control system in which made Haier known for high quality and innovative products. From 1992 to 1998, Haier started a Diversified Development Strategy. It went from producing one product and a staff of just 800, to over 13,000 products and more than 30,000 employees in just 6 years time. The previous two strategic implementations were needed before the third step of this, which started in 1998. That was the process of the Going Multination Strategy. Haier started by setting up in developing countries that mainly consisted of Southeast Asia, before entering into the already packed marketplace of the United States, Europe, and Japan. By early 2005, Haier had 62 distributors and more than 30,000 retail outlets around the world. In just 20 years, it went from a small factory that had debt of $177,000 to the number one Chinese household appliance market shareholder with global sales of $7.25 billion. But the company’s eventual goal was to be listed among the Fortune 500 successful companies. (Case Authors are: YongJun Lu, Robert J. Mockler, and Marc Gartenfeld. 2005)

A. Analysis of the Situation
1. Management – Haier management had clear, stated goals of global expansion, especially into the United States marketplace. They wanted to establish themselves as a global brand, and they adopted the company slogan as “What the World Comes Home To.” They opened Haier America, which was headquartered in New York City. They then established a design center in Boston, and a large manufacturing facility in South Carolina. This strategy of localizing everything from design and manufacturing to sales and distributions indicated that Haier had a strong long-term commitment to the United States.

Management knew their advantage would be low cost of manufacturing as they already had the infrastructure in China. This allowed for cheaper manufacturing and allowed them to sell higher quality products at a lower price point than the major players that already had large market share and brand names established in the United States. This was their primary problem breaking into the middle and high-end markets in the United States. They did not have the brand recognition that the already established companies...