Haier Case Study: Market Position and Strategies for Success

This case study analyzes the Haier Group, a leading consumer electronics brand, examining its strengths, weaknesses, opportunities, and threats (SWOT). The analysis highlights Haier's strong brand name, market leadership in refrigeration, and innovative organizational structure, alongside weaknesses such as lack of advertising and dependency on China. The study explores opportunities like a growing global economy and rising affordability, while also addressing threats like rising unemployment and increasing interest rates. Strategic factors, including increasing costs and a deteriorating brand image, are also considered. The case study delves into Haier's organizational structure, core competencies, and distinctive competencies like research innovation and technological advancements. It also examines Haier's international expansion strategies, including targeting niche markets, differentiated acquisitions, localization, building production facilities, joint ventures, and franchising. The analysis concludes with a Porter's Five Forces model and a discussion of Haier's market position and strategies to become a market leader, including advertising, price wars, and market segmentation. The case study provides a comprehensive overview of Haier's business model and its position in the competitive global market.

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Case Study

Haier case study 1
Contents
Strengths and Weaknesses...............................................................................................................3
Strengths......................................................................................................................................3
Brand name..............................................................................................................................3
Market leaders of refrigeration................................................................................................3
Flat organization structure.......................................................................................................3
Flamboyant Leadership...........................................................................................................3
Technology..............................................................................................................................3
Open Innovation......................................................................................................................4
Weaknesses:.................................................................................................................................4
Lack of Advertising.................................................................................................................4
Dependency on china...............................................................................................................4
No competitive advantage in international markets................................................................4
Absence of brand loyalty.........................................................................................................4
Opportunities and threats.................................................................................................................5
Opportunities...............................................................................................................................5
Ever growing economy............................................................................................................5
Rising affordability..................................................................................................................5
Advertising..............................................................................................................................5
HOPE.......................................................................................................................................5

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Threats.........................................................................................................................................6
Rising unemployment..............................................................................................................6
Increasing interest rate.............................................................................................................6
Red ocean market with few entry barriers...................................................................................6
Strategic factors...............................................................................................................................6
Increasing cost.............................................................................................................................6
Deteriorating brand image...........................................................................................................6
Organizational structure...............................................................................................................7
Core competencies...........................................................................................................................7
Industry leaders in the refrigeration segment..............................................................................7
Zero distance to customer............................................................................................................7
Distinctive competency...................................................................................................................7
Research innovation.....................................................................................................................7
Technological advancements.......................................................................................................8
International expansion....................................................................................................................8
Targeting a niche.........................................................................................................................8
Differentiated international acquisitions......................................................................................8
Localization.................................................................................................................................9
Building Production Facilities.....................................................................................................9
Joint Venture................................................................................................................................9

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Franchisee....................................................................................................................................9
Porters Five Force Model................................................................................................................9
Buyer Power................................................................................................................................9
Supplier Power...........................................................................................................................10
Threat of new entry....................................................................................................................10
Threat of substitution.................................................................................................................10
Competitive rivalry....................................................................................................................10
Competition...............................................................................................................................11
Haier’s market position..................................................................................................................11
Zhang Rhuimin..............................................................................................................................11
US Success Story...........................................................................................................................12
Strategies to become a market leader............................................................................................12
Advertising................................................................................................................................12
Price War...................................................................................................................................12
Market segmentation.....................................................................................................................13
KSA Market...................................................................................................................................13
Strengths....................................................................................................................................13
Weaknesses................................................................................................................................13
Opportunities.............................................................................................................................14
Threats.......................................................................................................................................14

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Summarization of the case Study..................................................................................................14

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Strengths and Weaknesses
Strengths
Brand name
One of the biggest advantages of HAIER group is its strong brand name and global responsive
organization since its existence in 1984 (Global Strategic Responsiveness, 2017). Currently,
Haier is among the leading brands in the consumer electronics segments and this is owed to its
massive presence and brand awareness among consumers. Higher brand awareness in turn leads
to a higher brand experience and vice versa (Branding and Consumer Behaviour, 2014).
Market leaders of refrigeration
In the refrigeration segment, Haier is a long standing market leader (Forbes, 2012). Refrigeration
is Haier’s core competency in fact what we learn from the case study is that in order to gain
brand value in a new market, Haier focuses on the refrigeration section to begin with.
Flat organization structure
Unlike a pyramid structure, Haier focuses a flattened organizational structure to make employees
feel valued. This boosts innovation and helps keep the firm up to date.
Flamboyant Leadership
Leadership of zhang rhuimin who is one of the top 50 management thinkers of the world is one
of the major factors behind the success of the brand. With a wide experience of over three
decades, Rhuimin has built Haier from the scratch and led it to become one of the most
renowned brands of the world.
Technology
Strength of technology is a pillar that supports Haier’s brand value. Innovative and consistent
technological developments are an essential part of the group. Recently they launched a new

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compressor free thin filmed solid state technology which is expected to change the face of cool
storage in the country.
Open Innovation
Haier has worked upon the concept of open innovation. The concept is simple to understand and
primarily aims at making the entire world your research team. Haier has five R&D centres
stationed at US, Europe, Australia, japan and china. At the same time they have an online
platform HOPE (Haier open partnership ecosystem) where the firm posts its research problems
to a wide audience in the hopes of finding solutions from across the globe.
Weaknesses:
Lack of Advertising
Not as innovative advertisements as competitors is a major drawback that impacts Haier’s brand
recall value. Its competitors like Philips, LG, and Samsung are leading the advertising industry.
And on the other hand, Haier has positioned itself as a comparatively low cost product as
compared to these giants. This is why it becomes imperative for Haier to control its cost and this
leads to its advertising budget taking a hit.
Dependency on china
In lot of countries, Haier products are still imported from china. And this leads to an increased
dependency on the country. Since most countries do not have their manufacturing units, it
becomes challenging to build trust among the consumers.
No competitive advantage in international markets
Unlike Sony, Samsung and Phillips, which were established in late 1800s or early 1900s, the late
entrant, Haier is left with no competitive advantage besides lower cost. In terms of design,
service delivery and brand awareness, Haier still has a long way to go.

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Absence of brand loyalty
People often associate with product lines of Haier rather than the brand and as the golden rule
goes, brand is always bigger than the product. A person buying a Hair air conditioner may or
may not buy its refrigerator. However, a Samsung or a Sony loyalist will at least try to achieve
some level of brand consistency in its home appliances.
Opportunities and threats
Opportunities
Ever growing economy
America is a land of opportunities. The increasing population has created a hub for demand. It is
often said that, America’s demand is unfathomable and it always leaves people asking for more.
The economy continues to grow, despite government’s efforts to curb consumer spending.
Rising affordability
Gone are the day when owning a refrigerator or an air conditioner was considered a luxury.
Today they are human needs and this has been possible because of increasing affordability and
individual buying power. This creates more demand for Haier products.
Advertising
Haier recently tied up with National basketball association in order to up its advertising game.
Such tie ups are a big opportunity for Haier and associations like these have an existing brand
value that Haier can bank upon.
HOPE
Haier’s open partnership ecosystem has helped them gain insights on various research issues
from across the globe. This has created a platform for the exchange of innovation and is certain
to help the brand achieve a quicker way to solve research problems.

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Threats
Rising unemployment
Rising unemployment in the states is reducing consumer buying power. Firstly, it is reducing the
demand of non-necessary products and secondly it is also increasing the time and thought
process that consumers require to invest in electrical appliances.
Increasing interest rate
Fed recently increased the interest rate to 1% and is expected to increase it even further. This is
Fed’s attempt to curb consumer spending and in turn inflation. This directly and adversely
impacts the sale of Haier products.
Red ocean market with few entry barriers
Consumer electronics market is filled with immense competition with every firm trying to
increase its market share by consistently innovating their products as per changing demands.
Also, an economy like America, is low on entry barriers, as long as an idea is innovative, the
demand is automatically created and products sold.
Strategic factors
Increasing cost
Haier has been able to compete with a low cost structure owing to minimal labor costs in China.
However, now numerous efforts are being put by the Chinese government to increase the costs of
labor in china. This will make it difficult for Haier to control their incurred costs.
Deteriorating brand image
One of the biggest problems faced by Haier is a severe mind block against usage of Chinese
products especially in developed economies like America. And till date, this ‘made in China’ tag
continues to undermine Haier products.

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Organizational structure
Zhang has been a stupendous leader and innovator for the Haier group. However as the company
expanded, it has been increasing difficult for one person to run the show. This is when Haier
switched to a flat organization structure by giving authority to a specific team or individual in a
particular geography. Unfortunately, no two humans think alike and as a matter of fact it often
leads to an unhealthy competition, difference in opinion and has been increasingly difficult to
transfer the same values with which the firm was built.
Core competencies
Industry leaders in the refrigeration segment
Haier’s position in the world refrigerator sales continues to remain unbeaten. In 2008, the firm
defeated whirlpool and became the largest supplier of refrigerators in the world and has
maintained its position ever since. Its current market share is at an all-time high of 6.3% after
selling over 12mn refrigerators last year.
This is why when Haier first entered America, it ensured to put its best foot forward first and
focused solely on the refrigeration business till the point the brand reached an acceptable level of
expansion.
Zero distance to customer
Especially in the overseas market, where Haier does not has its own manufacturing unit, the
conglomerate is consistently working on establishing an online ecosystem where customers can
post queries, file complaints and provide feedback (Harvard Business School, 2015). This is
Haier’s attempt to connect well with its customers oversees and in turn build trust.
Distinctive competency
Research innovation
HOPE (Haier open partnership ecosystem) is one of its kind initiative by Haier where the entire
globe becomes a part of their R&D team. It is an online portal where the firm posts its research

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problems and people from different parts of the world pitch in solutions are compensated for it.
Not only does this lead to a quicker solution of problems but also provides researchers from
different walks of the world to come together and share knowledge.
Technological advancements
Recently Haier developed a new compressor free thin filmed solid state technology. This is the
first time any firm has attempted to do something like this and is expected to change the face of
refrigerators. Their four distinctive features include no vibrations, low noise, sustainability and a
precise temperature control (Haier America, 2016). Recently launched Haier’s new touch screen
refrigerator can see your food and recommend you a recipe (C net, 2017)
International expansion
Haier’s international expansion program has certainly gained fruit and built a brand image for the
group. Although, China occupies a small 2.46% of the overseas consumer electronics market,
Haier is the reason for over 82% of that share. Strategies used by Haier include:
Targeting a niche
Haier ensures that rather than going all out in a new market, it first target a niche segment which
is usually ignored by competitors of the area. They achieved this by starting to sell only compact
refrigerators and electronic wine cellars. These two products did not face severe competition
back then. Once this was done and a certain level of brand awareness has been achieved, the
group then went on to target other segments to increase its customer base.
Differentiated international acquisitions
Rather than finding a new market and establishing there from the scratch, Haier believes in
acquiring already recognized companies as this provides them with a base to set the brand up. In
2011, Haier announced acquiring of the Sanyo group’s white products business in Japan and
South East Asia. Another year later, Haier acquired Fisher and Paykel. Soon after, GE officially
became a part of Haier. Such acquisitions have helped Haier increase its brand awareness and
also take advantage of the network and facilities of these established firms.

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Localization
Upon entering the market, Haier consistently aims at transforming its products to suit the local
needs of people. Since its competitive firms were entirely domestic, Haier made changes in its
products in order to match up to their level.
Building Production Facilities
This is most expensive and the most effective way of penetration in the foreign markets by any
firm. Initially Haier captured international markets by the conventional method of exporting to
countries outside of China but soon enough Haier realised that it is difficult to gain trust among
consumers when the firm is based miles away. Hence they started building production facilities
in the countries they wished to expand to. Haier built a manufacturing unit in USA by 2000, in
Pakistan by 2002 and Jordan in 2003. This helped customers get faster and effective service and
in turn enhanced sales.
Joint Venture
This is the most upcoming strategy of entering into a new geography. As per a recent survey,
68% of the respondents felt that their companies investments in Joint ventures is expected to
increase in the next five years (Mckinsey, 2014)Haier penetrated the Indonesian market via a
joint venture and the same strategy was adopted in Pakistan and Japan. Joint ventures offer a low
risk entering as the other partner is already aware of and has control over the socio-political
climate of the place. The group always opted for a majority stake in these ventures to give them a
tighter control.
Franchisee
Haier has 30 franchisees across the world that are reaping positive results by the quarter. This is
the fastest method of entering a foreign market and it is most well knows for adding new jobs in
the economy (Forbes, 2013).