Af2108 Financial Accounting
Dr. Sunny Sun, Poly U., Only for use in AF2108 Financial Accounting, Second Semester 2010/2011.
AMY LAU JUN HAN
HAIER: MANAGEMENT CONTROL ON A TACTICAL LEVEL
The Haier Group started out as a refrigerator manufacturer in China in 1984 with imported refrigerator production technology from the German Liberhaier company. In the following two decades, Haier grew to become one of the world’s leading white goods home appliance manufacturers and was constantly regarded as an aspiring, fast growth Chinese global brand in the international arena. 1 The company’s brand recognition was in drastic contrast to the time when Zhang Ruimin, the current CEO, first took over the company in 1984. The company had been in a poor condition with a group of low-skilled and undisciplined workers; it had low productivity and inferior product quality and was a loss-making business. It was a time when China was starting to adopt a market economy and the majority of the companies were still too handicapped with poor financial resources and technical capabilities to carry out management reforms. The workers at Haier also lacked the concept of discipline, tended to ignore rules and did not pay enough attention to details. Zhang was faced with a tough mission to rescue the company from its financial burden and management turmoil. Step by step, Zhang established a corporate culture and rules, and revamped the business strategy to set up an incentive-based management control system; all of these transformed Haier into a world-class brand name. 2 Haier Electronics Co. Ltd was listed on the Hong Kong Stock Exchange and Qingdao Haier Co. Ltd was listed on the Shanghai Stock Exchange. 3 In 2005, Haier’s global revenue was US$12.8 billion [see Exhibit 1]. Although Zhang was proud of Haier’s growth and wellestablished organisational structure, he believed that one of the imminent challenges facing
1
Haier earned world-wide recognition through many awards, namely a World Climate Award from the
AMY LAU JUN HAN
HAIER: MANAGEMENT CONTROL ON A TACTICAL LEVEL
The Haier Group started out as a refrigerator manufacturer in China in 1984 with imported refrigerator production technology from the German Liberhaier company. In the following two decades, Haier grew to become one of the world’s leading white goods home appliance manufacturers and was constantly regarded as an aspiring, fast growth Chinese global brand in the international arena. 1 The company’s brand recognition was in drastic contrast to the time when Zhang Ruimin, the current CEO, first took over the company in 1984. The company had been in a poor condition with a group of low-skilled and undisciplined workers; it had low productivity and inferior product quality and was a loss-making business. It was a time when China was starting to adopt a market economy and the majority of the companies were still too handicapped with poor financial resources and technical capabilities to carry out management reforms. The workers at Haier also lacked the concept of discipline, tended to ignore rules and did not pay enough attention to details. Zhang was faced with a tough mission to rescue the company from its financial burden and management turmoil. Step by step, Zhang established a corporate culture and rules, and revamped the business strategy to set up an incentive-based management control system; all of these transformed Haier into a world-class brand name. 2 Haier Electronics Co. Ltd was listed on the Hong Kong Stock Exchange and Qingdao Haier Co. Ltd was listed on the Shanghai Stock Exchange. 3 In 2005, Haier’s global revenue was US$12.8 billion [see Exhibit 1]. Although Zhang was proud of Haier’s growth and wellestablished organisational structure, he believed that one of the imminent challenges facing
1
Haier earned world-wide recognition through many awards, namely a World Climate Award from the