In 1920s China, a small factory opened in Qingdao, Shandong province, to manufacture refrigerators. Though the Qingdao factory survived for more than sixty years, by the early 1980s, poor management and heavy debt nearly forced it to declare bankruptcy. At the same time, the opening of the Chinese economy to the international market saw an influx of foreign companies seeking investment opportunities. One such company was Liebherr Haushaltergäte (Liebherr), a leading German appliance maker. Liebherr saw a burgeoning market for appliances, and proposed a partnership with the Qingdao factory, in which Liebherr’s technology and manufacturing know-how would be sold to the factory. In 1984, Qingdao Refrigerator Co. Ltd. was born out of this partnership. However, technology alone was not enough to rescue the company. That same year, CEO Zhang Ruimin, then the assistant manager of Qingdao city’s household appliance division, arrived, bringing with him management techniques adopted from Japan and the West, with a focus on building a strong brand name founded on quality products. Mr. Ruimin’s techniques were successful, and by 1991 the company had turned a considerable profit and diversified into other household appliances such as freezers, microwaves and air conditioners. Recognizing that the company’s name was no longer synonymous with its products and had a poor reputation from its prior history, Mr. Ruimin decided to take a new name. The company adopted an abbreviation of the phonetic spelling of Liebherr – written as Lieberhaier – to become the Haier Group Corporation (Haier). This name change marked the birth of a new brand name and the revitalization of the company’s image. Capitalizing on its new management and brand, Haier transformed itself into the second largest home appliance company in the world, and the number one such company in China. By 2010, Haier designed, manufactured and marketed over 15,000 products in 96 categories sold in over 100 countries throughout the world. Branding
The beginning of Haier’s brand strategy is the stuff of corporate legend. In 1985, one of the company’s customers brought back a refrigerator (still a rare luxury item in China at the time) because it did not work. Mr. Ruimin and the customer went through all the company’s available stock of refrigerators until they finally found a working model. Of the 400 or so finished refrigerators in the factory at the time, 76 were found to not be in working order. In response, he called his employees together and ordered that all of the dud refrigerators be lined up on the factory floor. He then gave sledgehammers to the workers and ordered them to smash the refrigerators. Mr. Ruimin is reported to have told the workers: ‘Destroy them! If we pass these 76 refrigerators for sale, we will be continuing a mistake that has all but bankrupted our company.” This event brought the importance of quality products to everyone in the company, and Mr. Ruimin stressed to them that quality products linked to a strong brand name were essential to the company’s survival. With this new commitment to quality, the installation of new equipment and the transfer of manufacturing know-how from Liebherr, sales rose 83% in two years. With the company’s reputation increasing, the name change to Haier created a new brand synonymous with quality cutting-edge technology that would inspire customer confidence and do away with any negative sentiments associated with the company’s former name. Developing new products backed by intellectual property rights (IPRs) such as patents ensured that the brand’s success would continue and it would maintain a competitive edge. The company and its customers also took pride in the ability of the Haier brand to successfully compete with more established international competitors. Haier knew that its brand was its most valuable resource, with brand image at the core of its business identity and strategy, therefore its early...
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