Haier Group's Internationalization Strategy: A Case Study

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COMPETITIVE STRATEGY & INOVATION
HAIER GROUP

Contents
Introduction...........................................................................................................................................2
1. What are the main features of Haier’s internationalization strategy since the early 1990s and
how does it differ from the pattern of international development typical of Western enterprises? 2
2. How successful has Haier’s internationalization strategy been and why?.....................................4
3. What are the principal features of Haier’s management system? In what ways do Haier’s
principles and methods of management differ from those deployed by Western companies? What
lessons might be drawn by a) other Chinese companies and b) by Western enterprises?................6
Conclusion.............................................................................................................................................9
References.............................................................................................................................................9

Introduction
The internationalization strategy is followed by the company when it needs to expand to the
international market. The main aim of the internationalization is to expand beyond the
national markets. The need for internationalization arises when the company has explored
the national market and does not see any potential to expand domestically. However
expanding to international markets is not an easy task, the organization has to consider
various factors such as product price, quality and delivery of services on time (Attig, 2016).
The report is presented to answer the following questions;
1. What are the main features of Haier’s internationalization strategy since the early 1990s
and how does it differ from the pattern of international development typical of Western
enterprises?
2. How successful has Haier’s internationalization strategy been and why?
3. What are the principal features of Haier’s management system? In what ways do Haier’s
principles and methods of management differ from those deployed by Western companies?
What lessons might be drawn by a) other Chinese companies and b) by Western
enterprises?

1. What are the main features of Haier’s internationalization strategy since
the early 1990s and how does it differ from the pattern of international
development typical of Western enterprises?
The internationalization strategy of Haier
For improving the quality of its domestic appliances the company partnered with best
brands from Germany, Electrolux (of Sweden), Whirlpool (of the US), LG and Samsung (of
South Korea) and Bosch-Siemens (of Germany). Due to the partnership and utilization of the
best technology from these companies, Haier was able to improve the quality of its
products. By this way, the company was successful in gaining huge market share in the
domestic market. The company soon transformed itself into the best domestic appliance
manufacturer in its home market. Seeing the success in the Chinese market soon the
company realized the need for internationalization (Nielsen, 2010).
The initial internationalization strategy of Haier’s
Haier entered the international market during the 1992 and 1997. During these years the
company was able to enter a number of foreign markets. The company was able to establish
its business in South-East Asia countries such as Malaysia, Indonesia and the Philippines, the
company established joint-venture with local companies. Initially, Haier started its business
through manufacturing and selling refrigerator and air conditioners (Beelen and Jones,
2015).
After success in the south Asian market, the company expanded its business to the USA.
Here the company partnered with an importer of the domestic market appliances. The
company started to sell its products in the US market through Welbilt Appliances. Then later
on the company started selling its products under the Haier brand. The initial products of
the company included compact refrigerators and wine coolers. Most of the sales came
through the large retailers Walmarts (Taylor and Jack, 2013).
During 1997 the company started to export its products to countries like Germany, the
Netherlands, and Italy. All the products were sold under the Haier brand name. The
company was able to achieve significant business growth in Germany. Despite the company
success in the international market, the company CEO made it clear that the main aim of the
company is not to take advantage of the low-cost production in chine but instead the

company should aim to become the global brand. This will not only help the company but
also make China proud (Chan, 2011).
The company CEO announced that the company is going to increase the quality of its
products to a world-class level. The company should focus on the development of world-
class products and customers service. Mr Zhang announced that the company will achieve
its brand name in the foreign markets through the creation of a localized brand name. He
suggested that the people of the US should feel that Haier is a local US brand instead of
thinking that it is a Chinese brand, similarly for the European markets and so on. The
company’s “locally designed, locally made and locally sold” strategy involved three stages
(Deng, 2012).
 Seeding: This stage of internationalization strategy was concerned with establishing
the company business in overseas markets and building the company brand in those
countries through using the local distribution.
 Rooting: In this stage, the company established its own manufacturing units in the
foreign markets. Through this Haier was able to build its market share in
international markets.
 Harvesting: This stage involved the establishment of a research and development
facility in foreign countries.
How it is different from other companies
The company CEO suggested that the company should focus on entering challenging
markets such as the US, Europe and Japan, instead of entering the nearby markets. To make
its business success in the international markets the company planned to hire the most
experienced marketing managers from those local markets. The company believed in using
the local talent to meet and satisfy the needs and demand of the customers. The company
hired the most experienced candidates with experience in leading appliance companies
(Glowik, 2016). The company strategy of offering localized products and services is the most
effective internationalization strategy. By using this strategy, the companies can provide the
best quality products to its customers.

2. How successful has Haier’s internationalization strategy been and why?
The Haier partnership with the Wellbilt helped the company in entering the US markets.
Under the leadership of Michael Jamal, the company was successful in establishing its
market in the US through niche products such as the small refrigerators and wine coolers.
Soon the company become the leaders in the US markets. Seeing the growth company soon
established a manufacturing plant in South Carolina. Initially, the company focused on
refrigerators. The company launched its products at a similar price as that of the local
leaders such as the GE, Whirlpool and Electrolux. The company was able to gain profits in US
markets due to its innovative design features and by offering the best quality products that
met the need and demand of US customers (Verbeke, 2013). In 2006 the company
introduced its Italian Designed products in the US markets. In 2012, the company growth led
to the creation of a research and development centre in South Carolina. In 2014 the Haier
America become a fully owned subsidy of the Haier Group. Finally, it can be concluded that
the company business expansion in America has helped the company in generating huge
profits. It’s North America internationalization strategy has helped the company being
recognised as Global leader in the domestic appliance business.
In 2000 the company established its business in Europe. It started with the establishment of
a sales office in Italy. The main aim of this office was to coordinate the sales business in
Europe. In its efforts to capture the European markets the company Meneghetti Equipment.
The company utilized the company manufacturing plant and its distribution network to
increase its dales in European countries. The company tried to position itself as a middle
range brand. The company's design centre in Italy and the research and development centre
in Germany has helped the company in establishing its Europe business. The company's
introduction of a three-door refrigerator combined with unique design has gained a lot of
attention. All these efforts were able to achieve the best business growth in European
markets. In 2010, Yannick Fierling was appointed the CEO of Haier Europe (Schweizer et al.,
2010).
The Company’s strategy to enter the Asia Pacific market involved the creation of Joint
Venture. The company utilized the skill and expertise of the local business. The company
launched its products in India through JV with Fedder Lloyd. The company JV with the Sanyo
Electric Company of Japan was profitable for the business. Through this JV, the company

was able to sell its products in Japan. The growth of Haier business in the Japan market
helped the company in acquiring the Sanyo business from its parent company. In 2012 the
company invested in New Zealand and acquired Fisher and Paykel for $751 million. Through
this acquisition, Haier was able to launch products such as dishwasher’s, washing machines
and cookers (Yiu, 2011).
The excellent growth of the company business globally has made the Haier appliance
business a Global brand. The effective leadership from top management and the vision of
the company CEO has led to the internationalization of the company business. From earlier
days of its establishment, the company has fully utilized the opportunity in the appliance
business. The increase in the Chinese economy has resulted in better living standards within
the country. Company has constantly maintained that its most important
internationalization strategy is the offering of localized products. From 2015, with a market
share of 9%, Haier has maintained its position as the world’s biggest supplier of home
appliances. Currently, the company is ahead of LG, Electrolux, Whirlpool and Samsung
(Jormanainen and Koveshnikov, 2012).
The major challenges to the Haier business are that the major sales of company products
are in the local markets. Currently, the company owns around 36% of the refrigerator
business and 46% of washing machine business in China. The company local business is
thriving but it has a lot of challenges in international markets. In the US the company has
performed well and has replaced Whirlpool as the market leader.

3. What are the principal features of Haier’s management system? In what
ways do Haier’s principles and methods of management differ from those
deployed by Western companies? What lessons might be drawn by a) other
Chinese companies and b) by Western enterprises?
Haier's management systems have a lot of influence from its CEO. From early time Zhang
main focus was on building the company ability towards a global domestic appliance
manufacturing business. Haier top management and leadership focused towards improving
the product quality and customer care. Zhang suggested introducing a new management
system. Since the main of the company was to serve its customers, the CEO suggested that
all the internal interaction will be in relation to the customers-suppliers relationship.
The advancement in the internet and communication technology has a great impact on CEO
thinking. For effective management of the organization process, the managers restructured
the company management. The management structure was changed from the hierarchy
structure to a decentralized team-based structure. With the use of internet technology, it
becomes difficult to manage the sales activities within China, therefore the company moved
its sales process to an entrepreneurial platform (Qingrui et al., 2013).
Use of Technology
The company CEO was able to understand the importance of the internet. Introduction of
technology improved the company interaction with the customers. CEO suggested that
digital technology will help the company in becoming an internet based company. The
company invests in technology resulted in the involvement of the customers in the whole
process of product development (Dodgson, 2018).
Innovation
Zhang believed that innovation and continuous improvement will help the company in
transforming itself into a services company. Using ICT technology the customers will be able
to order tailored made products. The use of voice and the IoT technology will be helpful in
the production of home appliance that can be controlled by voice. Through IoT, the
products can be controlled from any location. To achieve the digital objective, Haier was the
first company to partner with Apple for producing smart home appliances (Chen, 2016).

Performance management
Haier management put a lot of emphasis on performance management. Haier management
introduced performance management. The managers believed that measuring the
employee's performance improved their productivity. The company believed in offering
rewards to high performing employees. The company performance management principle
was based on the OEC concept. Here O stands for overall, E is everyone, everything and
every day, and C is referred to control and clear. According to the company CEO, there
should be an overall increase in the employee’s productivity, the employees should
complete their work every day and it is the responsibility of the management to control the
OEC model of management. Every year in December the company headquarter set targets
for each department. The company management manages the performance of each
employee (Zhao and Du, 2012).
Lessons that can be drawn from the company internationalization process
The Haier success can be attributed to its customers need. The main lesson that can be
drawn by a Chinese firm is that, by offering innovative products and according to customers
need and demand the company can enter the international market. The use of technology
and innovation brings a lot of opportunity for companies. Giving importance to customers is
the need of the hour. To offer the best products and services understanding the customers
need and demands are one of the most important responsibilities of the company
leadership. The company transition from hierarchy organization to the self-managed teams
has resulted in the transformation into a network of small groups that are responsible for
their own business (Rowley and Cooke,2014). Earlier the employees used to follow their
superiors, now they have become makers. Every department and operation was linked to
customers, every activity was based on meeting the customer's demand. The heavy
pressure from the top management and leadership has a negative impact on the employee’s
productivity. The company was able to introduce the products according to its customers
need. The CEO believed that innovation has helped the company in developing products
that have attracted new customers.
US companies are already very advanced in the use of technology. They should focus on
improving customers satisfaction. The internationalization strategy can be costly for the

business because it is the company need to do market research, production and market
research keeping in view of the situation prevailing in the domestic market. In this concept
of internationalization, the companies offer low-cost products and services in only those
countries in which they have expertise. Due to this, companies are able to offer standard
products to selected countries around the world. This strategy is a combination of
Multidomestic and global strategy. The company offers to standardize products and make
sure that it is in line with the local conditions of the country (Schuler and Jackson, 2014).

Conclusion
Through internationalization strategy, the company try to offer its products and services in
those countries where the company products are not available. Internationalization can be
achieved through managing and controlling the business in international markets and
offering the best quality products. Using this strategy the companies offer their products
and services in those countries where the business condition operating the foreign market is
similar to the condition prevailing in the domestic market. Combination of innovation and
understanding the customers need and demand has helped the company in the introduction
of new products. Investment in innovation has resulted in improvement in the quality of
Haier products. Haier has introduced many smart home products in the market (Grant,
2016). US-based companies like Walmarts can learn from Haier business is that the
customer's services and innovation can help the company in generating huge profits.

References
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