STRM043 - Competitive Strategy and Innovation: Haier Group Analysis

This report provides a comprehensive case study analysis of the Haier Group's internationalization strategy. It begins by defining competitive strategy and innovation, setting the stage for examining Haier's approach. The analysis delves into the main features of Haier's internationalization strategy since the early 1990s, contrasting it with typical Western enterprise development patterns. It includes a PESTEL analysis and Porter's Five Forces analysis to understand the external and competitive environments. The report assesses the success of Haier's strategy, exploring the factors contributing to its achievements. Furthermore, it examines the principal features of Haier's management system, comparing its principles and methods to those used by Western companies. The report concludes by drawing lessons for both Chinese and Western enterprises, offering insights into global business strategies and management practices.

Competitive Strategy And
Innovation

Table of Contents

INTRODUCTION
A competitive strategy defined as a long term plan of action here an organisation devises
for accomplishing all the competitive advantages over its competitors after analysing the strength
as well as weakness of the latter and comparing them to its own. These strategy related with the
innovation because for launch new products & services require to apply new competitive
strategy to get success. Innovation is a procedure where consisting of different activities to
disclose new ways to do things. Through this procedure create bigger opportunities and are
critical for the survival, economic growth and success of an organisation. This report based on
the case A of Haier group is a multinational home appliances and consumer electronics
organisation. The company situated in Qingdao, china and design & produces products like
refrigerator, microwave ovens and many others. In this report consist of primary characteristic of
the internalization scheme of 1990 and changes in western enterprises. Along with analysis
success of plan of action and important features of Haier management system.
CASE A
1. Main features of Haier's internationalization strategy
Contemporary strategy evaluation select by manager with the concepts, framework and
techniques required to make better strategic decisions (Bouncken And et.al ., 2019. ). These
strategies endeavours to be both rigours and relevant. Internationalization strategy is defined as
distributed subsidiaries act independently and conduct as if they were belonging from local
organisation with lesser connection from the parent organisation. These strategy leads as high
level of selection to the local business environment. There are defined different dimension of
group action scheme since the early 1990s. During the 1990s, Haier taken 16 other Chinese
companies with the outcomes that it became a supplier not only a wide network of domestic
appliances but also televisions, telecom equipments and other consumer electronic products. Entered a number of overseas market: From the starting of 1992 to 1997 Haier set up a
number of partnership mainly in particular place of Asian to analysis active concern
systems. Directly export: The company take decision to manufacturer in China and exportation to
another nations to secure from set again cost and tardily cover all over the industry
effectively.
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 Divided production strategy: As per the development market has been divided into
different segments but company apply demographic age segments where categorised by
age such as 18-25, 25-30, 28-40 and 40-55 to target various customer based as per the
orientation as well as expending. Covering all retable organisations: Haier conducted analysis to collect information about
relatable companies after that take relevant steps in the context of an organisation (Chen
and Liu, 2019). Established good brand image at market place : Due to coming different changes
company change their pricing policies that based on low to middle class people to
enhance the profitability of the business.
 Set up subsidiaries in various industries: The company open new subsidiaries into
different enterprises after collect information and it is profitable for the business.
The company has been following different strategy at different stages which is started
from 1984 to 2015 and as per the changes apply changes in products and related strategy. In the
year of 1984 Haier follow brand building strategy where existence inside the Chinese activity by
select and client services. In 1991, apply condition approaches in which company adopt other
Chinese industries to increase product network. After that apply internationalization strategy in
1998 to enter 19 different international market as well as sustain as the global largest internal
convenience institution in regards of technology of results. Due to coming changes in modern
enterprises company apply global brand strategy in 2005 where alteration as per commodity
motivated to a consumer driven as per the request manner. Economic process utilise world origin
to develop organisation in regard of localized mainstream brands. After that in 2012 apply the
networking strategy where system undertaking scheme personify (Cornett, Erhemjamts and
Tehranian, 2019). These strategies are changing as per the international development of Western
enterprises. All the features are different from international development because when
organization enhance its operations into other countries so apply different types of strategies.
According to Western entities set particular scale of system which is utilized by the
business to set effective level of different items that offered by the organisation at the market
place. According to that company preparing different types of strategies for selling and take
effective decision in regard of business. Haier set new strategies for their products and connect
wit joint ventures to sell it their products in another nation easily. It helps to understand another
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country condition and how to do business in different situation. They wants to sell out products
in middle east and also sell out other equipments. The company has been decided to understand
culture of western companies after that make plan for the business expansion. Such as, when
organization begin to sell out compact coolers in the USA that time face many problems but with
joint venture understand all the legislation particular nation after that it become easy for them to
conduct business activities easily. Moreover, it restraint heir brand as well as expansion selected
items as per the demand in the market area.
PESTEL Analysis:
This is considered as a tool which is utilised through marketers for observing as well as
analysing external environments factors which has an affect upon firm. For example: Haier
group is a Chinese international customers home appliances and electronic entities. So, Pestle
analysis of respective company are discussed below: Political factors: As China is a developing economy so government is very much
interested to make flourish their growing sector. It set various rules as well as regulation
which impact electronic industry. For example: Haier is performing into huge populated
country so it has to comply the China regulation such as export, import and others. So, in
case political condition of specific country is not stable so this impact respective
organisation growth. Economic factor: This includes that factors such as exchange rates, inflation rate and
others which affects the firm positively and negatively. For example: As Haier Group is
operating internationally so this impact respective country economic condition. For it, as
economic growth is reduces which leads towards inflation so its sales get impacted as
individuals will not has power to purchase its goods. In case, country have stable
economy so they will has various opportunities to extent and enhance sales. Social factor: This includes age distribution, customer lifestyle, religion and others of
social factors has integrated impact upon operations of Haier for entering into electronic
electronic sector. For instance, they have to analysed deeply and strategy have to
concentrate upon brand awareness that will enhance their market shares. Technological factors:The products of Haier's are totally related with technology as well
as they have to always focus upon researching its products for having knowledge about
updated technology as well as keep their growth rate higher. For example: in case clients
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of respective country are desired advanced technology so they have to deliver that
technology for keeping its market safe. Environmental factors: As per the current awareness about environment to people, this is
essential for entities to keeps on contributing towards environment as well as modifying
its last process so that they do not damage it. For example: in international market, Haier
have to understand its rules for the protection of environment and follow it for avoiding
any law suits. Also, CSR practices of all type may develop reputation and contribute
towards its enterprises.
 Legal factors: For keeping its business in smoother way into various countries so Haier
have to comply that countries regulations so that its needs are accomplished. It involves
copyright, patent and others that contributes towards business security and future into
particular country.
Porters five force analysis
This is considered as a business analysis model which aids to describe why several
industries are able to survive at various level of profit. In involves five forces that frequently
applied through Haier Group for measuring intensity of competition and profit of sector. All five
forces are discussed below:
 Threats of new entrant: This represents how players of new market enforce threats to
existent one. As into electronic industry the barriers of new entrants are high not only as
it capital intensive but due to higher consumer loyalty with brand choices so this threats
is quite low for respective organisation.
 Bargaining power of suppliers: This shows that the pressure exerted through suppliers
upon business through adapting various tactics such as minimising product availability,
decrease quality or enhancing prices. So, the bargaining power of supplier into electronic
industry is high as in this there are less number of suppliers and the demand of product is
high.
 Bargaining power of buyers: This shows that consumers exert upon entities to obtain
higher quality of products at reasonable rates with great consumers service. It directly
influences Haier for attaining their goals. So, in respective industry the bargaining power
of customers is low as they are not very much focused upon price and concentrated upon
quality.
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 Rivalry upon exiting firms: This represents various number of competitors which
provide tough competition to Haier as it faces great pressure from competitive firms that
may limit one another growth potential. So, into electronic industry the rivalry of existing
firm will be low.
 Threats of substitutes products or service: This develops the competitive market more
challenging for Haier as higher threats of substitutes represents that client may utilised
alternative goods or services from another sector for meeting its requirements. Therefore,
the threats of substitutes products higher into electronic industry as cheaper products is
available into Chinese market.
2. How successful has Haier's internationalization strategy been and why?
The attainment of internalization scheme of the Haier group because of the these
strategies in the Haier group. It become the reason of success. The company had been established
as an commercial enterprise tract foreign some in the USA and the middle East. The connection
has over fifty thousand sales agents internationally and kind commodity to 100 & 60 and
preceding states of USA are now concentrating on different approaches (Danso and et.al .,
2019). In context of Haier to analyse the market conditions they conduct R&D they found that
domestic market of electronics become more competitive and not provide adequate profitability
so they decided to expand in the china market to enlarge business opportunities. In respective
situation it is very much important and understandable for Chinese companies to think globally.
By using the Dawar and Frost's survival strategy that helps to position themselves in the
international marketplace as it offers the profound theoretical approach to analyse or evaluate
the Haier's internalization while exporting the goods for gaining desirable outputs. In the 21st
century the local industry of electronics dominated by the large companies as they using advance
tools to give one of their best attributes to consumers that are Electro lux, Whirlpool, LG and
Samsung. The major strategy of respective organisation before the early 1990s is Brand building
strategy that helps to capture china market by delivering high quality of products. For an
organisation it is very much important to expand their market in other countries for gaining
desirable goals and objectives. In context of Haier's in 1996 and 1997 they opened their
production facilities in the market of Indonesia and Philippines respectively and they failed to
attempt to enter into market of Thailand's domestic market due to the presence of local
companies. In the year 1998 they adopt the internalization strategy as they aimed to capture the
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nineteen market of national sphere for gaining higher level of profitability and sustainability in
market (Giménez, Madrid-Guijarro and Duréndez, 2019). The major significance of respective
strategy of internalization when the Zhang Ruimin appointed as an GM of Quigdao refrigerator
factory in the year 1984 which is a cooperative enterprise. The crucial problem that they want to
solve is to provide one of best design of products by using advance tools and techniques. The
major strategy in that situation is change in organisational culture and quality standard practices.
By following the order of Zhand they destroy the defective refrigerators to demolish the negative
effects from them. By using the ISO9001 to maintain the quality of the products and services to
serve the consumers in the best manner. Achievement of the international quality standards a
total reformation and up gradation in process (Gomes and Romão, 2019). While adopting the
internalization strategy they majorly focus on improving the customer service by building a
strong chain of network to track the consumer taste and preferences by using computerized
services for working in consumers self interest. By using respective strategy in the organisation
company can be able to improve their quality by strong fuelled demand in between the 1984 and
1989 and revenue climbed from the 3.5 million to 410 billion yuan. So internalization strategy
not only proved beneficial in improving the quality of products but also improve the culture of
organisation that is one of most important attribute for organisation to improve the profitability
within the organisation.
The another major strategy in front of organisation which is Global brand strategy that
helps to transform from the product driven to the user driven demand mode. By using respective
strategy organisation can be utilized the worldwide origin by creating the localised thought and
brand equity in market (Guo, 2019). In 2015 Haier began investing the way of integration of
internet of things into their devices to obtain the desirable outcomes positively. By collaborating
with the Stanford Artificial intelligence laboratory they found three main barriers in adaptation
of the smart home technology, lack in unified protocols and passive services with incomplete
solutions. In that time the Haier's core competency resides in the large appliance sector not in the
small electronic sector. By using Cogobuy's ecosystem and supply chain they can be able to
merge the portfolio of components. By using respective strategy organisation they become
technologically advance and able to introduce in their smart appliances across the various
products lines in major appliance industry such as air, water, clothes, security, voice control and
information.
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The another major strategy is networking strategy and its significance that consisted the
border less organisation, management free from manager and scalar chain supply. By using
respective strategy from 2015 they can be able to transform the contemporary organisation for
building the appliances for household with help of incubators for societal to become internet
oriented organisation (Martin-Rios and Ciobanu, 2019). It aimed to come across the self
managed system of contemporary organisation to acknowledge the consumers needs and
demands to reach at global market place. By using respective strategy Haier can be able to
conduct the seditious explorations in strategy, organisation, employer, users, recompense and
many more.
So by using respective strategies and tactics enterprise can be effectively sustain in
market as it is the requirement of today's competitive world. With the help of internalization
strategy which proved very much beneficial for organisation as it operates in major part of the
world by using their distinctive products and their features.
3. Principal features of Haier's management system.
MS is the set of logical argument and procedures used by the organisation by ensuring
that it helps in achieving or fulfilling the requirement of tasks in order to achieving desirable
objectives (Nuruzzaman, Gaur and Sambharya, 2019). In context of Haier they develop some
sort of management system in their organisation while adopting the innovation and strategy so
that all people within firm move in systematic path. The major principle features of respective
organisation:
Governance:
In MS of organisation come a important factor which is administration, officially Haier
was a agglomerate supervising of Qingdao municipal government. In actual possession,
organisational constitution and administration are unclear as they operated two establishment
Qingdao Haier company and Haier electronics Group company Ltd. They both have opaque
relationship with one another. There are no consolidated kind of financial statements available in
front of group (.Pérez-De-Lema And et.al ., 2019). So it is very much important to build healthy
relationship with the subsidiaries for gaining development and enhancement in positive manner.
Zhang Ruimin:
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There are the opaque relationship in Haier's departments and administration construction
and whole quality resides in forth of Zhang Ruimin managing director of Haier. Respective
power come partially from their formal position as chairman and CEO and partially from the
informal authorization. Zhang soon after taking position of managing director in 1985 ordered to
destroy the 76 refrigerators by using the hammer by following the complaint of consumer by
radically change the culture of organisation. Culture of the organisation is one of most important
attribute to one that embodies quality control practices. As at that time Chinese products
regarded as poor quality consumer goods by comparing the foreign brands manufactured in
China. So leader and leadership style work as an important for organisation to bring the
establishment in China to acquire ISO 9001 certification. So it can be said that Zhang is one of
most crucial part of Haier's MS to improve their products quality and serve consumers in best
manner.
Performance management:
Performance management is the chain of activities to ensure that activities or actions
meets the goals and objectives of organisation in most effective manner (Salim, Ab Rahman
and Wahab, 2019). It helps to focus on the organisation, its department, employee and processes
which take place to manage specified tasks and duties. In context of Haier that follow
management system to ensured about answer ability and hardback by motivator approach of
incentives that are different in Chinese companies. As per head of Haier's human resource OEC
which E stands for every one, every thing at every day. O stand for overall, C for control and
clear. Respective management system helps to control every thing about the employee finishes in
regards of its job every day. By using performance management section submits divisional action
program that is month by month system of performance management that helps to compare
actual performance with the previous one.
Innovation and new product development:
In context of respective organisation they always focus on the side of consumers needs
and demands to build products as per the wish of them. In the leadership of Zhang due to the
consumer complaints organisation command to brake the refrigerators by using hammer. They
design their products to compensate the specific consumers needs such as washing machines in
rural area of china for washing the vegetables. In that regards Haier reverted to change in their
design by suggesting to farmers on their usage of cleaning vegetables and peanuts. So for
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gaining sustainability of market they use flexible design modules and subsystems to add some
more features (Salunke, Weerawardena and McColl-Kennedy, 2019). for gaining competitive
advantage and organisation extended to providing the internet of things by launching its “Smart
living” integrated wireless property helps consumers for controlling devices positively.
Building the networked enterprise:
In year 2015 they adopted the Networking strategy the idea behind respective strategy is
market responsiveness, initiative of entrepreneur and building of team to gain desirable goals and
objectives. The major concept behind is formulation of some 2000 self managed teams each have
10 to 20 grouping living in same destination. They come from the various kinds of serviceable
function and bring jointly for accomplishing the special goal and objective within the
organisation. By occupying their own accounting system and full accountability in acquiring and
distilling of worker and getting interior rules regarding disbursement, distribution of positive
stimulus in order to gain desirable outcomes. In it team have to obey orders of their supervisor
for creating the value to become the entrepreneur and makers. So in an organisation it is very
much important that all members work in a team by communicating the roles and responsibilities
with one another (Tynchenko And et.al ., 2019). In a team all people are obliged to work in
interest of others and organisation so that desirable objectives should be obtained.
The management system of Haier's that make different from the western companies
which is challenged and commitment in building high quality products for that they destroy
faulty fridges (XU and HOU, 2019). In the 80s Zhang not want to follow the manufacturing
style other Chinese companies using but they use what consumers actually want. Respective
factors provides lessons to others that consumers possess the superior position and organisation
needed to produce products as per their demand.
CONCLUSION
As per the above report it is concluded that international strategy is one of most important
step in front of an arrangement for gaining enhancement in quality of products. While expanding
in international market it is very important to owed essential information such as financial
position of market, best entry mode and political market and best strategy for expansion. For an
organisation it is very much necessary to expand in foreign marketplace to enlarge business
opportunities for that management system plays very much critical role.
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