International Business Environment: Haier Group Analysis Report

This report provides a comprehensive analysis of Haier's international business environment. It begins by defining multinational corporations and highlighting the rise of emerging market companies, using Haier as a prime example of a successful Chinese multinational. The report details Haier's history, products, and global expansion strategy, emphasizing its three-step approach and its commitment to quality and customer service. It then explores the importance of cultural integration and innovation for Haier's success in the global market. Furthermore, the report examines the opportunities and threats presented by globalization, including favorable government policies, the growing demand for green appliances, and strategic alliances. It also addresses challenges such as rising wages, intense competition, price wars, and negative country image. The report concludes by discussing the evolving roles of managers in a globalized environment, including the importance of communication, negotiation, and cultural sensitivity, as well as the differences between home and host country environments. Finally, it underscores the skills required for effective international business management.

Running head: International Business Environment
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International Business Environment
Haier Analysis

International Business Environment 1
International Business Environment: Haier Analysis
Multinational 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 more
than 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 of
its 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 2
Globalisation 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 make
efforts 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 enter
into 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 present
more 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 is
rise in the wages of workers in China. According to reports last year average hourly wages in
China 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

International Business Environment 3
in worker’s wages is a direct threat to the company because most of the firm’s production
activities are based in China. This factor will ultimately result in reducing the profit margins
for the firm. Another major challenge for the company is fierce competition in both domestic
and foreign markets. The main competitors of the firm in domestic market are Gree and
Midea. In global markets the major competitors of the firm include giant market players like
Whirlpool, LG, Panasonic, Sony and Electrolux. Whirlpool is the company which stands at
first position in manufacturing home appliances (Whirlpool 2017). Another big name
Electrolux stands for innovative products. It launched first talking washing machine in the
market. The company also introduced robotic vacuum cleaner in the world’s markets. These
are just examples from two competitors; other competitors are also well established players in
the market. Therefore the level of competition is very high in the market. This is a major
threat for the company. The next threat for the firm that globalisation presents for the firm is
price war. Now every company has access to resources around the world. Every company can
get the benefit of low production cost therefore the close price war with the competitors has
presented the price challenge for the firm. The next threat that company can face in the global
markets is negative impact from country’s image. Country’s image plays a vital role in
creating the brand image. The companies from countries like Germany, USA and Japan have
a positive impact on brand equity of the company. China does not have that good image.
Chinese products are usual perceived to be low quality and low price. This is the threat for
company’s products in global markets (Yidan 2009). The challenges and opportunities are to
be dealt with utmost care in order to survive in the global business environment.
The globalisation not only presents challenges and opportunities for the firm, integration of
culture also affects the role of manger in terms of communication, negotiation, decision-
making, human resource management, and ethical behaviour. Traditional roles of the
mangers include the role of leader, negotiator, figurehead, liaison, communication. Today
also the mangers need to perform same roles but with a slightly different perspective. The
mangers need to make employees comfortable with the change in culture. They are required
to effectively manage the organisation in such a way that supports employees to adapt to the
changes and number of conflicts of and issues and issues are resolved (Boundless 2017). Free
movement of people and products across the globe have made the job of human resource
manager more challenging. The role of HR manger which was once confined to recruitment
and solving occasional disciplinary problems now involved more strategic functions to
manage the people globally. The changed role involved functions such as effectively
handling the labour laws related issues in different countries, deciding an attractive pay and
benefits plan depending upon the country, recruitment is become more complex as the pool
of talent has widened and the most important function is managing the cultural differences
effectively. The manger should be able to understand cultures and traditions of various
nations and ensure employee satisfaction of employees coming from different cultures
(Scottter 207).
In the context of business home country can be defined as a place where the business was
first established or where the headquarters of firm are situated. The host country refers to the
country where the firm has expanded its operations outside the national boundaries (Moeller,

International Business Environment 4
Harvey, Griffith & Richey 2013). The home country for Haier is China whereas it has more
than hundred host countries. There are various differences in the environment of home and
host country. Both of the countries affect each other in various ways. Therefore to effectively
manage a global enterprise manger needs to learn various lessons. To conduct the business
effectively in this borderless world manger needs to learn, that how to maintain relationships
with international clients around the globe. The next thing that is required is the ability of
manger to navigate through the foreign culture. Having profound knowledge of both home
and host country will only enable a manager to effectively mange and resolve issues that arise
because of cultural differences. Managers need to understand that qualities and skill set that
were successful in managing domestic business can prove to be reason of failure in
international business. Today’s international business requires fluent communication skills
and negotiation skills. These are the basic skills that cannot be overlooked. The other skills
that mangers require to effectively manage the difference in the home and host country are
cultural sensitivity, multilingual and global management philosophy. Cultural sensitivity can
be defined as valuing and respecting different cultures. It can also be defined as an ability to
work effectively in culture other than your culture (Massen and Kowalewski 2010). Every
manger needs to culturally sensitive. Managers need to understand the impact of culture on
business relationships. The managers should also learn some of the common cultural
practices. They should now how people of different cultures interpret and assign meaning to
voice tones and body language. They should effectively imply cultural considerations in
negotiations. The next skill that global mangers need to have is being multilingual.
Multilingual means ability to communicate in various languages. Managers are already
efficient in the language of host country. But while managing global organisation they need
to be able to communicate in more than one language. They should at least know the
language of their largest client or trading partner. It is also necessary to communicate in such
a way that non-native speaks do not have difficulty in understanding (Bisk 2017). The next
skill is global management philosophy. Every global manger needs to have global strategic
thing thinking. To gain a strategic insight manager must be aware about the whole working of
the business on a global level. This strategic approach enables him to make best out of best
people around the planet (Clawson 2014). Dealing with the uncertainty is another important
aspect for manger , which is very essential for managing complex business organisation
(Wengrzyn 2017).Some other common skills that a manger who is forking for different
countries needs to learn are humility towards every culture, curiosity and desire to learn and
ethics and morality in personal life. The above listed skills and qualities are required for
every manager to effectively manage an international organisation. This applies for managers
of Haier group too. These skills and qualities can be acquired through the personal
experience, learning lessons from other mangers within the same or different company and
through professional learning programs designed especially for managers. Knowing about the
skills is a different thing but bringing them to regular practice is also very important. The
lessons can be brought to practice only by implying them to practical situations.
From the above report it can be concluded that globalisation is a process of integration. This
integration has resulted in creating a borderless world. The companies are now engaged in
doing businesses round the globe. This has introduced various challenges and opportunities

International Business Environment 5
for the firm. Now the social, political, legal, economical, technical and environment
implications on business are very dynamic. In case of Haier a Chinese firm that deals in
electrical appliances various opportunities and threats are identified both in domestic and
international markets. These opportunities include rise in living standards of people, rising
demand for green electrical appliances, strategic alliances and government support. The
threats for the firm include rise in wage rates in china, fierce competition, price war and
country image. Today the firm is major player in the market the credit for the same can be
given to the well-developed global strategy f the firm. The strategy provides the direction for
working in such a dynamic environment. Globalisation has not only created uncertainties in
the business environment it has also leaded to change in the role of a manager and human
resource manager. The roles have undergone the transformation in recent decades. Major
changes in role are because of cultural integration. Now the mangers are required to manage
more complex organisation structures with diverse workforce. To be successful in managing
the organisations managers need to learn various lessons. The mangers should clearly
understand the interplay between home and host country. The mangers must possess the
qualities such as sharp communication skills, good negotiation skills, cultural sensitivity,
multilingual and global strategic thinking.

International Business Environment 6
References
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International Business Environment 7
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