Haier - a Chinese Manufacturer

Problem Statement:

Haier, a Chinese refrigerator manufacturer and one of the largest home appliance makers in both domestic and globally, had not only dominated Chinese market but it had also expanded successfully in global market. Starting with a defunct refrigerator in Qingdao, Haier went to international market in 1997 and has already gained 4% of global market of large kitchen appliances in 2002. In the following paper, I will analysis the specific strategies Haier utilized to make its global expansion effectively and efficiently. Also, the overseas markets have several different aspects comparing to its domestic China market, analyzing how Haier turned to be the number one company in China from a company at the edge of bankruptcy will definitely help us to approach its global strategies. By analyzing how Haier operated domestically will tell us what it could learn from the operation experience it already had and what it still need to improve and develop to adapt to the new international market. So the question I want to ask after I read the case is what makes Haier expand overseas successfully? This is the key component for the long-term development of Haier since the margins on domestic sales were shrinking from 9.4% (1999) to 2.6% (2004) for competitions from local firms and foreign multinational. Haier needs to explore new international market so that it can be a long-standing company within the industry.

Analysis:

Haier had its first move into overseas markets by exporting. This expansion strategy has the lowest level of risk. After this, Haier then formed Joint Ventures to share the risk together with local foreign companies. JV with Mitsubishi in 1994 and JV with Yugoslav company were both successful examples. However, Haier’s version is not just export products and earns foreign currency but to establish a brand reputation worldwide. So after gained some operation experiences of oversea markets, Haier began to sell its product under its own brand. Instead of emulating LG, which had $24 billion total revenue in 2004 and expanded international successfully by focusing on China and Southeast Asia, Haier decided to challenge the most difficult oversea market- The United States and Europe. Haier’s executive board believed that if they can enter and stayed in those two markets successfully, then their product can meet the highest quality standard and it can help to build worldwide reputation which, later, is a intangible resource that makes Haier’s expansion to other oversea markets much easier. It turned out that Haier, actually, conducted this strategy very effectively because in 2004, about 70% of its overseas sales came from the developed markets of Europe, the United States and Japan. After deciding which market it wanted to compete and entry modes it implemented, Haier need to choose from four global strategies. From my point