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International Business Environment : Haier Analysis - IB 303

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Pennsylvania State University

   

International Business Operation (IB 303)

   

Added on  2020-03-02

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IB 303 - Multinational company can be broadly defined as any small or big company that engages in any kid of international trade. Haier is as example of successful Multinational Corporation from China. Innovation is one of the most essential factors responsible for growth and development of multinational companies. The paper aims to study the strategic mangement of Haier company and its overall strategies to withstand the business market and maintain their position.

International Business Environment : Haier Analysis - IB 303

   

Pennsylvania State University

   

International Business Operation (IB 303)

   Added on 2020-03-02

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Running head: International Business Environment0International BusinessEnvironmentHaier Analysis
International Business Environment : Haier Analysis - IB 303_1
International Business Environment1International Business Environment: Haier AnalysisMultinational company can be broadly defined as any small or big company that engages in any kid of international trade (Cullen & Parboteeah 2009). Emerging market multinational companies today are gaining top positions in the market. In 2003 the firms that occupied positions in top 2000 companies of the world were from countries like USA, Japan and Britain. But the recent list by Forbes witnesses the change in trend. Most of the companies in the list are from markets like China, Russia, Brazil and India. According to the data five of top ten companies are Chinese (Frynas & Mellahi 2015). Haier is as example of successful Multinational Corporation from China. The Haier Group was founded in 1984 in China .Company’s headquarters are in Qingdao, China. Current CEO and Chairman of the company is Zhang Ruimin. The company majorly deals in electronic home appliances. It is now world’s leading brand in white goods. Major products of the company include commercial heating and cooling systems, consumer electronics, small and big appliances. The company’s international expansion began from Indonesia. It entered Indonesian markets in 1996. Today the company is spread in almost all the major markets of the world. Haier is committed to provide high standard product quality, technical specification and after sale customers for developing a good brand image in the overseas market. Haier adopted a strategy for international markets which was divided in three steps. These steps were going out, going in and going up. With its ‘Global brand strategy the company is successful in morethan 100 countries and regions across the world (Haier 2015). Strategy plays a vital role in for the success of any firm in international market. A well-developed strategy can bring success to organisation whereas a poorly formulated strategy can result into adverse impacts for the company. Haier had a well-developed strategy to enter international markets. Haier entered global markets not only to earn foreign exchange it entered to build a global brand image. The firm adopted the approach of “taking on the more difficult ones first” for the same it develop the three step strategy of going out, going in and going in. According to the strategy the firm initially focused on building a brand image by entering the market of developed countries like USA and Japan. Later it entered the markets of developing countries by taking the advantage of good brand image from developed countries market. The last was to become a market leader with highly innovative products. Haier was successful in achieving expansion to international markets very quickly because ofits differentiated international acquisitions, cultural integration and mechanism innovation. Cultural integration is the most important aspect for being successful in the globalised market. Cultural integration can be understood as frictions created between different cultures.It affects organisation functioning and is a prerequisite for mutual trust and shared goals (Galpin & Herndon 2014). Innovation is another key factor that is responsible for the current market standing of the company. According to Buckley (2012) the main reason responsible for growth of multinational organisation is the shift in structure. The focus is now shifted to technology based goods and more investments are incurred on research and development. Innovation is one of the most essential factors responsible for growth and development of multinational companies.
International Business Environment : Haier Analysis - IB 303_2
International Business Environment2Globalisation can be described as the process which integrates people, processes and government s of different countries. The main driving force for globalisation is international business and international trade (Dreher, Gaston & Martens 2008). To be successful in business in today’s scenario, every firm needs to have a profound knowledge of its internal and external environment. Firm must be able to analyse different environmental situations that positively or negatively impact the company. Also today’s business environment is dynamic therefore forecasting becomes a tedious task for the company. The firm should makeefforts to identify various opportunities and threats in the challenging environment to deal with the changes. Identifying the opportunities and threats enable a firm to deal with the threats turn their impact positive, it also helps to grasp the opportunities ahead of competitors.Globalisation has introduced various opportunities and threats for different firms. Various opportunities are discussed that globalisation has presented for Haier. Haier has various opportunities in the domestic market. The current data reveals that favourable policies of Chinese government are improving the living standards of people. This improvement in the lives of people especially rural population will increase the demand for domestic appliances; this is an emerging opportunity for company in the domestic market segment. Another opportunity for the firm is for both domestic and international markets. The rise in the level of pollution and energy consumption is alarming situation in various parts of world. Now people are becoming more aware towards environment protection this has increased the demand for green electrical appliances. US launched a $40 project for China’s refrigerator manufactures to promote the manufacturing and sale of green refrigerators (CSR China 2006). This type of scenario existing in various countries will create an opportunity for the firms green appliances. This opportunity can be fruitful if the company develops more innovative green products. Globalisation has strengthened economic integration among nations. This integration has resulted into interdependence among various nations around the world. This integration and interdependence has presented the opportunity to the firm to enterinto strategic alliance with companies of other countries to gain competitive advantage and strengthen the brand value. The firm’s acquisition over the Japanese brand Sanyo will presentmore opportunities in countries like Vietnam. The Government’s support to firm is also an opportunity to the firm. Chinese government launched a policy in year 1999 to encourage the local firms to invest in overseas markets. This policy provides all the required support to the domestic firms to enter the international markets (Wang 2016). The integration among various nations have provided the firm with an opportunity to procure raw material and resources from anywhere in the world. This can provide the firm with the advantage of manufacturing cost reduction and increase in profit margins. To grasp this opportunity Haier should make use of the international resources.Along with the opportunities globalisation also brings various threats or challenges for the firm. The major challenges are discussed ahead. The recent emerging threat to the company isrise in the wages of workers in China. According to reports last year average hourly wages inChina were $3.6. These wages were 64 per cent high as compared to the year 2011. Thus the trend of rising wage rates does not make production in China cheap anymore. The reason for this is globalisation, now people have access to jobs in various countries and various foreign companies that invested in China are ready to pay higher prices to workers. This trend of rise
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