Haier Usa

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A CHINESE SUCCESS S T O RY – H A I E R A M E R I C A – PA RT I

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The information contained in this white paper is the property of Teleos, Inc. Copyright 2005 - 2006© - Teleos Corporation – All Rights Reserved.

The information in this white paper is the property of Teleos, Inc. Copyright 2005-2006© - Teleos, Inc. – All Rights Reserved. Limited Distribution Copy

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A C H I N E S E S U C C E S S S T O RY
HAIER’S PRESENCE IN NORTH AMERICA – PART 1
I N T RO D U C T I O N

China’s trajectory is undeniably towards a more modern economy and form of government. In both respects, these solutions will be uniquely Chinese in their origin and structure. As the Chinese economy matures, the businesses contributing to its growth will have to become increasingly adept at the mechanisms they employ to access non-domestic markets. China’s future is inherently limited if it can only exist as a dumping ground for low cost and low skill manufacturing. If China’s economy is to mature, it must begin to create unique products and capture value in ways currently untapped globally. To do so will require businesses that mature from being captive producers to

manufacturers with developed product design and marketing strategies. The act of employing increasingly sophisticated marketing strategies, business development activities, and product design assistance are all a part of the successful story from Haier North America.

C H I N E S E B U S I N E S S E S M OV I N G U P T H E VA L U E C H A I N

A substantial portion of the existing flow of commerce between China and the world is onedirectional. This is most easily seen by the record-setting trade deficits between the U.S. and China. When contrasting the success Toyota has experienced versus the limited success of Subaru or the much more problematic Jiangling LandWind SUV entry into Europe, what separates Toyota from other domestic competitors was a strategy of owning their path to market, as well as exhibiting a willingness to take the time and spend the money to learn the unique needs of the North American market before entering. This observation seems overly simplistic for many; however, for most Chinese businesses, even those whose client list includes Dell and Hewlett-Packard, a history that has involved customers bringing them business without a need for active solicitation has made them unaware of the need to control and manage their own destinies. But this is beginning to change; as

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Kenneth and Geoffrey Lieberthal said in a recent issue of the HBR, “A handful of Chinese companies are already strong competitors in global markets: Haier in white goods, Konka in TVs, Galanz in microwave ovens, and Huawei in telecommunications, for instance.” “The Great

Transition”, Harvard Business Review, pgs. 7-8, 2004. Companies looking to emulate the success of Haier, Galanz, Huawei and Konka but who are unsure of how to penetrate the U.S. market on something other than price will form the second generation of competition for North American market share, a competitive landscape that will be shaped by more than price alone. HAIER IN AMERICA

Most Chinese companies have initially been successful as someone else’s captive producer of a particular good. Haier’s story has been well chronicled in the media in large part because its story is one of the few successes of a Chinese company that has built its own brand and appears poised to be one of the break-out Chinese companies in control of its own destiny. Only 17 years ago, Haier was nearly bankrupt, a dilapidated factory only capable of producing poor quality refrigerators. In 2004, Haier is the second largest global refrigerator manufacturer, behind only Whirlpool. Global sales have reached $7 billion, with 2004 sales approaching $200 million in the U.S. In...
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