Haier in the U.S. Major

Haier

In the U.S. major home appliances industry, price is a key success factor as most products are relatively commoditized and in mature markets. Building economies of scale is therefore important, as evidenced by Whirlpool's move to increase factory size and market around the world (De Jear, 2007). Another key success factor is distribution, as there are multiple channels. The ability to not only gain a foothold in retail channels but also construction channels is critical to success. In consumer electronics, success can come either through price or quality. For producers focused on price, a low cost structure is the key to success. For firms focused on quality, reducing errors in the production process and building the brand are the key success factors.

In order to become a global company, Haier has generally moved into foreign countries with a greenfield operation. They expanded throughout Asia with sales offices while retaining manufacturing in China. They have expanded into the U.S. By building manufacturing capacity and then setting up a sales office. Although they have attempted to purchase Whirlpool in the past, Haier does not typically use M&A in order to expand internationally (Ho & Farhoomand, 2007).

3. Haier America entered the market seeking to be a low cost provider of high quality white goods. The company has low-cost production but also emphasizes quality in its human resources and industrial design. The company has been able to gain access to Wal-Mart, for example, indicating success at the low cost strategy, but has focused its long-term growth on producing goods of superior quality and design (Lin, 2007).

4. Zhang Ruimin's philosophy of management emphasizes accountability, where the 20% of the company that are managers are 80% accountable for the company's outcomes. Zhang also emphasizes change, challenge and adaptation in his philosophy.

5. Zhang's impact on Haier Group performance has been significant. He took over the company in 1984 and since then has guided Haier to become a global player in the white goods industry. The company had revenues of $421,000 and now has revenues of $12.1 billion (Lin, 2007).

6. In the home appliances business, Haier has a strong portfolio. This consists of a number of items in which it has the ability to occupy a niche and build the brand, including air conditioners and refrigerators. Haier also has other complementary products. It lacks, however, a true high end product at present. In consumer electronics, Haier is perhaps weaker, since it has fewer products and therefore has less likelihood of finding a successful niche.

7. Haier America has two core competencies in low cost production and in consumer-oriented innovation. The company has distinctive competencies in its brand value -- in the top 100 of world brands -- and in its experience dealing with multiple markets, multiple channels, and multiple governments.

8. Haier's decision to manufacture in the U.S. was strategic, designed to build the brand as a localized brand rather than an imported one. This strategy appears to have been successful thus far, given Haier's ability to gain market share in the U.S. And to become the world leader in white goods. The marketing strategy is also successful, as evidenced by the increases in sales and the strength of the brand.

9. Continual design improvements are critical to acquiring and maintaining competitive advantage because in the mature industries in which Haier operates, there is little sustainable competitive advantage to be developed. Haier must continually innovate in order to stay ahead of competitors, who can be expected to match earlier innovations.

10. Local manufacturing and purchasing has reduced costs and serves a strategic purpose for Haier in becoming a localized brand. The downside to this is that Haier is subjected to higher labor and land costs in the U.S. And Europe. In addition, the company faces a human resources challenge in dealing with local workforces around the world.

11. The parent Haier Group fully owns Haier America. According to the Haier America website, the U.S. subsidiary is considered to be Haier Group's "sales and marketing arm of the Americas" (HaierAmerica.com, 2010). As such, Haier America fills a key role in revenue generation, but there is only a limited role for the company in information transfer. By virtue of building a factory, however, Haier America is established as a major internal component of the Haier Group, due to the company's high level of commitment to the American market.

12. Haier's market entry strategy is to first move into a niche. Typically, this will be with a product that domestic producers have difficulty producing and selling profitably. Haier uses its cost advantages to enter this market and this helps to build the brand. Once Haier has established in a number of different niche markets, its objective is to move beyond into more mainstream marketing and product development.

13. Haier has been so successful entering the U.S. In part because the company has pumped a lot of money into the market. This has included the building of a factory in South Carolina and the establishment of a high profile partnership with the NBA. The company has gained success as well by establishing distribution through Wal-Mart. In addition, the niche strategy has worked well, allowing Haier to build its brand in smaller products before making a big push with its air conditioners and refrigerators.

14. Haier can move from being a niche player to being a mainstream one. The company's products are already relatively mainstream. What Haier needs to make such a move is to expand its distribution. At present, it sells through Wal-Mart and some other retailers. Haier needs saturation of retailers, especially the major national and regional chains. Haier also needs to get into the new home construction market, so that its appliances are purchased by contractors to furnish new homes. This lucrative market is a distribution channel that is yet unexplored by Haier.