Haier's Internationalisation Strategy and Management System

This article discusses Haier's internationalisation strategy since the early 1990s, how it differs from Western enterprises, its success, and principal features of its management system. The article also covers the company's focus on innovation, customer satisfaction, and speed to market. The subject is business and management, and the course code is not mentioned. The college/university is not mentioned.

C M V S RA A DO PETITI E T TEGY N
VAAINNO TION

COMPETITIVE STRATEGY AND INNOVATION: 1
Contents
Main features of Haier's internationalisation strategy since the early 1990s..........................................3
Haier's internationalisation strategy differ from the pattern of international development
typical of Western enterprises............................................................................................................4
Success of Haier's internationalisation strategy................................................................................6
Principal features of Haier's management system............................................................................9
Haier's principles and methods of management differ from those deployed by Western
companies...........................................................................................................................................10
References..........................................................................................................................................13

COMPETITIVE STRATEGY AND INNOVATION: 2
Answer to Q. 1
Main features of Haier's internationalisation strategy since the early 1990s
Since 1990, Haier has been featuring two key business strategies named as speed and
differentiation. International strategy has abled the Haier to win the consumers by satisfying
the customer needs as fast as possible. The company also strives to introduce brand new
products with different features to meet different demands of different consumers. For
example- President of U.S. asked Haier Company to design a refrigerator that has such
operation feature that the freezer has pull-out drawers for the US market. Haier was able to
execute with a prototype of micro-freezer in next 17 hours. This signifies firm`s speed
strategy (Andersen, Ahmad and Chan, 2014).
Apart from business strategy of speed, the company ardently resembles the business strategy
of differentiation in its operation. After visiting the rural area, employee discovered that rural
customers use their washing machines to wash both their clothes and vegetables. Sooner, the
company started such machines versatile enough to wash both vegetables as well as clothes
(Dodgson, 2018).
It is identified that Haier managed to be successful by incorporating seven different factors
such as customer service, operating efficiency, and speed to market, innovation, and product
quality in its operation. Haier was able to succeed in every area to become the fastest growing
company (Lok and He, 2017). To become successful in its business, the company maintained
good corporate culture, efficient business strategy, and OEC management-control system that
enforces work rules and discipline. The director of human resource management explained
the OEC acronym as O for overall, E stands for everything or everyone, C Stands for clear
and control (Boermans and Roelfsema, 2015).
Until 1984, Haier was facing the debt of about 1.47 million. Initially, Haier started to
manufacture only one product named refrigerator. Haier was only confined to Chinese

COMPETITIVE STRATEGY AND INNOVATION: 3
market. I kept focusing on producing such goods that would attain a good reputation in the
market. The organisation has been featured with Total Quality Management (TQM) and OEC
management control system. The company started featuring its strategies with diversification
and expansion of products after gaining experiences and reputation at the first stage. The
strategies of “activating shock fish” was introduced. It started expanding the product varieties
with 12 twelve new products in between 1992-1998.
After the introduction of E-commerce, Haier group strived to feature e-commerce in its
operations. Haier started from home appliances enterprises to set-up e-commerce. Haier
started finding the suppliers and individual consumers that establishes a purchasing platform
from B2B to B2B. By implementing this purchasing platform, it established a co-operative
relationship with suppliers and customers such as electronic B2B platform to track the order
status timely (Yang et al., 2016). Haier uses B2C platform that accomplish consumer with
music, consider the recommendation of professional shopping advices. Haier followed both
in its internationalisation strategy B2B and B2C that is traditionally called B2X. The
company started following this path B2X because of its potential demand in its users. Mainly
“X” is the potential demand for the company that helps them to identify potential customers
and the market.
Answer to Q. 2)
Haier's internationalisation strategy differ from the pattern of international
development typical of Western enterprises
The below discussion takes the opportunity to evaluate how internationalisation strategy of
Haier differs from other international patterns. Already, Haier has many rivals who are
almost equal in size. The critical success factors for electronic industry especially for
customers are affordable prices, value-added services, innovations (R&D) and high quality.
Industry players such as Whirlpool, GE Appliances, Electrolux, and Matsushita are all based

COMPETITIVE STRATEGY AND INNOVATION: 4
on the strategies that give greater importance to such factors. All the companies enjoy high-
brand recognition and service network of worldwide. To compete in such a cut-throat
competition, a company should possess and develop cutting-edge technologies in the global
market (Meyer et al., 2017).
Before Haier, Whirlpool managed to implement the international strategy. Although, Haier
has different approaches to expand its business through various key success factors.
Whirlpool is the market leader in its home country and exports to the international market.
Whirlpool uses different modes of entry such as either through acquisition, joint venture, or
exporting directly. Whereas, Haier has establishes different approaches through brand
building. Haier has acquired different famous brand companies named Maytag, Jenn-Air,
Inglis, Bauknecht, KitchenAid (Bai, 2016). The successful acquisition process of Haier aimed
to recognise the target foreign markets. On the contrary, Whirlpool had a successful joint
collaboration with the Philips that helps the company to penetrate the Europe market. As far
as the R&D and innovation is concerned, Whirlpool has 70 manufacturing and technology
centres in the world. Whirlpool is the industrial significant player. In context to the
internationalisation of Whirlpool, Haier has to consider its international strategy.
Haier operates in different industries for more than 25 years. It has been developing by
engaging in technical research, global expansion, and new product development. In addition
to this, Haier has been holding first place worldwide in various segments such as compact
refrigerators in US, washing machines in Iran and air conditioners in Cyprus. The company is
holding a share of 5.3% in the world market.
After applying the Porter`s theory, Haier expanded in abroad to make its products that are
more responsive to consumers in the international market. Apart from the other components,
Haier encounters high rivalry intensity and support the industries to make huge investments

COMPETITIVE STRATEGY AND INNOVATION: 5
that indicates Haier is thinking of moving abroad. While choosing the mode of entry into the
market, other strategic issues such as to sustain the business into the market successfully is a
concern. Haier uses different approaches to expand the business operation at the global level.
The company uses exporting entry mode and try to get benefit from economies of scale.
When the companies found that there is difficult to enter the market, they started applying
joint venture as an entry mode that will enable them to access the local partner`s knowledge
and know the culture of the country. Nation`s culture would assist in forming the
organisational culture. Moreover, Haier have entered into the global competition very late.
Accordingly, the existing competitors has already penetrated the market. Source of
competitive advantage and entry modes chosen by Haier has helped the company to acquire
the international market. Moreover, there are many internal factors that could help the
company to influence the Haier`s global expansion (Lu et al., 2015).
Answer to Q. 3).
Success of Haier's internationalisation strategy
Haier is one of the pioneer company in the Chinese manufacturing sector and trying to
venture it at the international level. The Haier`s experiences has demonstrated the successful
tenets of market innovation, expansion and orientation. Many western companies have
forgotten to concentrate on innovation. Haier might have recently started playing as
compared to other western multinational. However, still it has outperformed the founder of
the expansion in this sector by giving proper attention to globalisation and standardisation.
The expansion international strategy of Haier has followed the path that is generally followed
by Japanese companies. Two types of Japanese global market expanded by acquiring an
establishment first in developing countries such as Southeast Asia to acquire the international
experiences and to build the volume (Wang et al., 2016). Haier has established a set of design
to make few investment projects and enter into the developing market such as Boston, South

COMPETITIVE STRATEGY AND INNOVATION: 6
Carolina, New York. Especially, while entering into the developing countries, Haier focused
on the traditional product lines and various home appliances and further tried to expand the
technology in USA and varied its product line (Buckley et al., 2016).
Haier`s success in the United States market supported the company investment in managing
and operating the business in other countries by spinning off of technology and maintain the
brand image. For the first time, Haier took over an Italian company. As an expansion in
developing countries, Haier has done groundbreaking initiates of investment in Pakistan and
Bangladesh in 2001 (Stiebale, 2011). After the experience and confidence gained in US
market, the company started producing refrigerators especially are based on designs that are
provided by Dutch and French engineers. The product during expansion in United States
launched is being sold in European market. The objective of international strategies is to
manufacture and sell to 1/3rd of the goods in the Chinese market. The objective was named as
3 X 1/3 international strategies. To manufacture 1/3 of the total output in china and export to
the foreign markets. Haier has a set of strategic target of 30 percent of the local market to sell
all the types of home appliances. Haier must move to international market to develop Haier`s
design, marketing network, manufacturing network in USA to establish and build a reputation
of brand. The export strategy is trying to penetrate big and tough markets of Germany and
USA (He et al., 2017). Once, the company establishes its foothold in complex market and
create the reputation of the brand. It will become easy for the company to strategically
provide advantageous position in other potential market such as in developing markets. Haier
introduced successfully its product in the German market, but it is difficult to enter in the EU
(European Union). Here is the way that the company managed to acquire the international

COMPETITIVE STRATEGY AND INNOVATION: 7
market.
(Source: Languilaire, 2009)
The company strived to acquire the international market through innovation. Innovation is the
soul of national progression. The fundamental reason why Chinese customers were not able
to absorb many appliances forced Haier to find the customers at the international level. Haier
was quite aware that to move on the path of international road of expansion, it requires
technologies as the core to expand the business (Wu et al., 2016). The idea of technological
innovation is considered important for manufacturing the prototype of the appliances from
the abroad because initially Haier import the material to manufacture the prototypes of the
product. Management system and operation should be planned and established as per the
international standards. It requires the manager to be efficient and proficient in the practising
the national and international laws. Many Chinese multinational companies should make a
completely defined internal system that can accomplish the actual conditions of china and
strengthen the local management to create an appropriate corporate culture. The management
system of change and innovation in Haier during the internationalisation process can be a
source of learning (Bello et al., 2016).
Answer to Q.4)
Principal features of Haier's management system
From the time when Haier entered in the international strategies, management of Haier has
undergone some severe changes. A new system of market chain and combining of employee

COMPETITIVE STRATEGY AND INNOVATION: 8
and order has become a reengineering process through which it was able to innovate the
products that can derive greater market prosperity to meet the needs. Generally, multinational
operations acquire high-quality personnel who have high education in specific subject such as
technology, law system, marketing and finance knowledge (Languilaire, 2009). Haier has
well established team of talented people and qualified persons. By hiring the local personnel
who are very familiar with the foreign market, various operational risks at the international
risk can be reduced. The staff was always remained a top priority in Haier, it pays attention to
coordinate the various problems related to different interest of the employees caused by
adjustment in the process of internationalisation. The effective way that Haier group has used
to coordinate the staff interests is to announcement of internal competition to hire and select
the most appropriate way to recruit the personnel and create talent among the employees
(Fischer, Lago and Liu, 2015).
The Haier`s management developed after a huge smashing of 76 inferior quality products that
lead to seek media attention when they watched a smash in the production line. This smash
lead to implementation of Japanese TQC system and tries to improve the management system
but the export system is limited through indirect with the help of agents. The company
levered the international competence with technology that is advanced and management to
innovate the range of products and explore the underdeveloped part of Western china. Two
another key business strategies that are aimed to achieve speed and differentiation. Speed of
delivery leads to satisfaction of customers and differentiation leads to introduce such products
that introduce brand new products. For example- US requested the company to design a new
refrigerator with pull-out drawers. Moreover, OEC management-control system focuses on
creating a customer value, operating efficiency, and the speed to market (Lin, 2018).
However, the Haier`s corporate culture has managed the brand in an innovative way. It has
been valued by Haier`s senior management. Innovation always remained an irremovable part

COMPETITIVE STRATEGY AND INNOVATION: 9
of Haier’s corporate culture. The unique culture of Haier that is cultivated and developed in
the last 20 years (Ren, Eisingerich and Tsai, 2015).
Answer to Q.5)
Haier's principles and methods of management differ from those deployed by Western
companies
For many organisations, it is not at all important to move abroad to create a brand name.
Haier attempts to believe that it is not possible to create a globally recognised image without
moving to abroad and to stand in the competition and grab the opportunity of improvement.
For the competitive strategy, the CEO of the company admits that “Wolves” have come and
if the company wants to survive in such cut-throat competition, it has to transform itself into
a wolf (Yidan, 2009). To achieve and establish the brand image, Haier already have a vision.
The same way, every company has its vision to stand in the competition. For example-
Samsung is driven by a single vision to lead the convergence digitalisation movement (Hu et
al., 2016). The aim of the Samsung is to develop some innovative strategies that could create
a sense of trusted market leader and enrich the lives of the potential customers. The mission
of the company is focused to achieve the best name of “digital company.” Although, both
Haier and Samsung works in the same industry, as both companies manufacture home
appliances. However, the vision and the mission differs from company to company. It is the
company’s preferences to achieve the foremost target as per the need of the hour. Both
companies would follow different strategies to achieve their purpose (Filippetti, Frenz and
Gillies, 2017).
With a purpose to grow continuously, a firm needs to set new goals as soon as one is
completed and accomplished. Moreover, China`s Haier corporation was ranked second in the
production of global refrigerator. The success of Haier is based more on brand and reputation
familiarising. The corporate strategy of international growth more focuses on creating brand
awareness and recognition. Nevertheless, it also focuses on satisfying customer`s needs and

COMPETITIVE STRATEGY AND INNOVATION: 10
increasing the market share in different market segments. Haier follows OEC management
system that is based on market competition and it strives to raise the management skills so
that Haier can achieve the sustainable competitive advantage. Every new employee has the
obligation to attend a training of minimum one month before going to the workplace. The
corporate culture of the Haier follows OEC management Sun et al., 2017).
(Source: Languilaire, 2009)
From the time when an organisation is established, Haier has a clear vision and mission of
creating a brand image. In the first stage, Haier has a vision to establish its brand image in the
local markets by satisfying the customers. Haier strongly believes that resources are created
through the innovation. Moreover, Haier has few resources as compared to its competitors.
The company decided to operate and acquire various parts of china as if to expand its
operations. Moreover, the company has also developed diversified products in various
countries such as prototypes of washing machine, televisions, and home appliances. The
mission of the company is to make the structure that could attract customer demand and
commit to the energy saving strategy of electricity Many Chinese enterprises lead to slow

COMPETITIVE STRATEGY AND INNOVATION: 11
decision-making, loss of appropriate information, less efficient economics and less
competitive in the market. However, Haier group avoid these problems in the process of
adjustments that can be good inspiration for the rest of the groups to manage their
organisational structure (Bouyoucef and Chung, 2015).
In the second stage, OEC management-control system enforces the various work rules and
discipline. The company`s senior managers concentrate to inculcate innovation in the minds
of the employee. In the third stage of strategy, a system of market chain accomplished by
group of employees has generated the concept of reengineering process that will help to
innovate the products (Grant, 2016).

COMPETITIVE STRATEGY AND INNOVATION: 12
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