$100 Laptop Case - one Laptop Per Child

To: Zhang Ruimin

After reviewing the case information regarding your company Haier, I have identified some specific strategic problems, opportunities, and areas for improvement. At its core, Haier is truly a well managed company. Though your history is relatively short compared to some other multinational firms such as GE, I respect and greatly value Haier's attention to detail. The customer-centered focus I believe is of utmost importance. Since China's population is so diverse in terms of what consumers are looking for in an appliance, it is necessary to maintain a quick market responsiveness as Haier has done. This allows your company to effectively develop and produce innovative products to meet individual needs. Haier's vertical integration for distribution and the channels you have developed to deliver products in a speedy manner is also very impressive. With such a diverse array of products (over 15,000 variations) it is important to be able to deliver a microwave on the same truck as a refrigerator and washing machine.

A big opportunity for Haier is to continue to specialize in products in China that target the rural populations. Seventy-two percent of China's population lives in rural areas, yet only 10-20% of these people own appliances such as refrigerators and dish washers. Haier is in a unique position to reach this demographic because of their customer-centered philosophy. Further innovative product designs like the washer that can clean potatoes and dishes alike can allow Haier to capture this market. It is certainly one area in which international companies would struggle to compete effectively because of a lack of understanding of Chinese culture and the needs of its citizens.

The biggest domestic problem that faces Haier is the increase in international competition. Between 2001 and 2002 the foreign brand market share increased from 26% to 31%. Additionally, the national overcapacity of white goods reached a high of 30%. This has caused serious stress to Haier as they compete for a small and over occupied market. It seems that part of the reason why the multinational corporations are able to be competitive abroad is because they are all well established in their home countries.

If Haier can cause companies like GE, Siemens, Whirlpool, and LG to have to deal with domestic competition from international companies too, it could serve to level the playing field. These companies cannot fight a war on two fronts (US and China) as effectively as they can on just one (China).

Though Haier has already entered the US market, you identified that the ultimate goal was to build a widely recognizable and respected brand rather than focusing on solely bottom line financials. In the current culture of US branding efforts, I think it is absolutely necessary that Haier work with a fully integrated advertising agency with an account planning