Presentation on theme: "HAIER: TAKING A CHINESE COMPANY GLOBAL Group: 9 Hunny Agarwal(102) Hakim Datawala(115) G. H. Krishna(118) Sushant Mondal(137) Abhishek Parekh(142) Anirban."— Presentation transcript:
HAIER: TAKING A CHINESE COMPANY GLOBAL Group: 9 Hunny Agarwal(102) Hakim Datawala(115) G. H. Krishna(118) Sushant Mondal(137) Abhishek Parekh(142) Anirban Sengupta(150)
Haier Group: Highlights Number one company by Asian Wall Street Journal Chinas largest Home Appliance Manufacturer Largest Player in the compact refrigerator market worldwide Brand Haier is recognized worldwide
Haier Group: Challenges Declining Profit Margins; from 9.4% to 2.6% Overcapacity of white goods in Chinese Markets Defending its market share in China Increasing its global presence to generate $1 billion sales to US
Haier Timeline 1984 Haier started by taking over ailing Refrigerator Plant Entered into JV with German company Liebherr 1985 Crossed the threshold of RMB 1 million 1988 Gold Medal for Quality in Refrigerators and establishment as a premium brand 1991 Overcame issues of oversupply Takeover of Quindao Air Conditioner Factory and Quindao General Freezer Factory 1992 Company renamed to Haier Group Took over 500 acres of Quindao land for industrial park at cost of RMB 51 million 1993 Listing on Shangai Stock Exchange for refrigerator division. (Dilution of 43.7% stake) 1995 Took over ailing Red Star washing machine company for RMB 132 million in debt and aced the Washing Machine Market 1997 Acquisition of Yellow Mountain Electronics 15 companies had been acquired 1998 Operational Restructuring started in all companies. All companies made into profit centers. Development centers envisioned- Capital Flow (Finance), Commerce Flow (Sales), Material Flow (Logistics), Overseas (Global Operations)
Differentiating Competitive Strategy of Haier Haier gains competitive advantage by the adoption of a strategy of diversification. The company strives to be a leader by using innovative solutions in terms of technical specification and in design and creativity. Haier is different from most other Chinese manufacturers, whose aim is only to export and earn foreign currency – they produce and sell OEM products, i.e. without an own brand policy. Haier enters new markets overseas, the demands of local consumers are its starting point. So the company insists on a strategy of localization in overseas markets For example, in Europe, Haier is adopting a three in one strategy – localized construction at a factory near Venice, Italy, a design centre in Paris and a sales centre in Milan. In order to improve its own key competitive ability, Haier started a business flow restructuring in 1998 and improved significantly the companys feedback speed from the market, reducing operating costs and increasing competitiveness in the market by this restructuring.
Haier In Chinese Market Haier was the only company with leading shares across white good sectors. Haier was dominant in the RMB 48 billion refrigerator and freezer market, which accounted for about 38% of all white good sales in China. Haiers share in countrys refrigerator market was 27% in volume and 52% by revenue. Analysts estimated that the company accounted for 61% of industry profits. 2002(%)2003(%)2004(%) Refrigerator market Haier26.726.228.2 Guangdong Kelon 13.412.410.8 Henan Xinfel8.5 8.9 Washing Machine Market Haier25.825.730.4 Wuxi Little Swan 20.718.816.5 Hefei Rongshida Group 10.610.010.6 AC MarketHaier16.316.617.5 Midea10.9 11.4 Gree126.96.36.199
National Competitors In 1989,100 refrigerator producers are there which had been reduced to 20, with the 10 largest accounting for 80% of the market Leading domestic players failed to reach their growth potential due to many money-losing small competitors, who sustained by regional governments budget Protecting factors for Haier are diversified holdings, its differentiated products and its export strategy Guangdon Kelon-one of national competitors are only manufacturer of full line of home appliances. Kelon thus followed multi-brand strategy in China. Kelons new management had a new strategy to target Chinas rural population and sold a million units of low-priced brand in first year of its operation Haier already had a strong presence in rural market but they did not target specifically rural segments with different pricing strategy
Foreign Entrants After Chinese entry in WTO in December, 2001, Haier faced competition not only from local brands but also from foreign competitors like Siemens, Electrolux, Samsung, LG, Matsushita, Sony, GE and Whirlpool Many MNCs target emergence of a replacement market, specially high-end market in large cities Companies need to have a well informed sales and marketing network to capture untapped Chinese market MNCs underestimated Chinese competitors and expected competition to come from other newly arrived foreign firms, instead, they faced biggest competition from Haier and Kelon, because of equally good technology and lower price Foreign brands refrigerator unit sales represented 31% of Chienese market in 2002, from 26% in previous year. Automatic washing machine sales accounted 38% of total sales, up from 31% last year Haier has advantage of local knowledge- aware of Chinese culture and values
Retail Channels for Haier Before 2000, Haiers customers were mostly state-owned department stores, by 2004, appliance sales had moved out of the department stores and into individual specialized shops and private retail chains Distributors are major domestic chains as well as international retailers like Wal-Mart and Carrefour Introduction of Western retail models to Chinas major cities coincided with the arrival of foreign multinational appliances brands like Siemens and GE WTO-mandated opening of rest of China to foreign retailers by the end of 2004 threatened to erase domestic firm advantages beyond the first tier cities Haier has advantage of successfully tested sales approach to work on a non-uniform population, unlike in European market, where rural and semi- urban market is dominated by domestic or international hypermarkets
Haier Market Advantages Haier Products commanded 20% Premium over other brands, still a leader in sales. Haier has superiority in majorly 3 areas Market responsiveness Distribution After sales service
Market Advantages After sales service Distribution Market Responsiveness Haier Market Advantages
Market Responsiveness Focus on meeting customers needs 42 divisions act as individual companies Creating innovative machines like Single wash, Potato washers Meeting Local demand at home and abroad with Innovative models Haier Market Advantages
After sale Service Pioneered after sale service concept in China 5500 independent strong contractor network National hotline customer service Free of charge replacement, low costs on repairs Haier Market Advantages
Distribution Haier Logistics pioneered JIT concept in China in fields of packaging, raw materials, delivery and product distribution reduction of inventory cycle from 30 days to 7 More focus on supplier reduction from 2300 to 1000 Utilized growing infrastructure Teamed up 300 transport companies to deliver goods Upfront cash created good cash flow for Haier Haier reorganized its logistics to server entire group unlike others Haier Market Advantages
Having economies of scales reduced Logistics costs to minimum Haier has invested lots of time, energy, money in creating distribution, overcoming chinese bureaucracy. Haier was more localized than other companies, which can be overcome easily. Haier recognizes these are tangible benefits and other competitor can acquire these benefits by outsourcing logistics. Haier Market Advantages
Haier in International Markets Revenue generated should involve Zhangs three thirds goal 1/3 rd from goods produced and sold in China 1/3 rd produced in China and sold overseas 1/3 rd produced and sold overseas Creation of Haiers Overseas Promotion Division in 1999 led to rapid growth in international sales. Haier started to venture into overseas market as a contract manufacturer for overseas brands It entered into a JV with Mitsubishi to set up Chinas largest AC plant
It was one of the first Chinese cos to engage in FDI by setting up a refrigerator and AC plant through a JV with a local firm. Haier entered Europe in 1997 by producing ACs in Belgrade. In Germany, when Haiers Blue Line refrigerators beat local firm Liebherr in a ranking, Germany became Haiers first export market. In 1997, Haier formed a JV with LKG to manufacture Haier branded products in Philippines for sale in regional market
Haier started focusing on selling its branded products overseas Haiers philosophy – To export in order to establish a brand reputation overseas unlike other Chinese firms who were interested in exporting products to earn foreign currency Chinese firms exported products under an OEM client brand as they were associated with low quality in US and other countries Haier tried emulating strategies of Sony, Samsung, LG while expanding into international markets LG was the most likely model for Haier
International Strategies Focus in the difficult market first Begin with the niche products Staff with locals
Focused on difficult markets first Home markets of larger global competitors Highest quality standards Requirements of retailers and customers are tough to meet Build a prestige and arrive with a ready made reputation in South Asian Market Zang said If we can compete in mature market with brands as GE, Matsushita, Philips, we can surely take the market of developing countries without much effort
Begin with niche Products Started with few models without directly confronting the competitors Compact refrigerators for students and offices 30% market share within 3 years. Attention from Wal-Mart and Best Buy Introduction of regular product
Staff With Locals Local people know the market very well Identify a local person with experience preferably in a leading white goods firm, to head the country operations. The person will hire a local team and set up sales and distribution network Eventually they will place their own people in key positions to get better market intelligence
International Divisions Haier Overseas America (N&S) Europe Middle East South East Asia East Asia China
Contd. Haier Products, 80% in white goods sold : 62 distributors, 30,000 retailers, 59,000 sales agents, 12,000 service personnel Operated 18 design institutes, 13 overseas factories, 11 industrial complexes.
Haier America Entered US market in 1994 with compact refrigerators captured 10% market share Michael Jemal, import company Welbeilt appliances Joint venture Haier America with Jemal in 1999 Rented space in Manhattan, 13 people all American except for the accountant Established $40 million Industrial park and a factory in south Carolina
Strategy in America To manufacture quality products and sell at premium Focus on getting Haier products into large retail chains- Home Depot, Wal-Mart etc Focus on niche markets helped to avoid competition from GE, Maytag, Frigidaire
Haier in Europe In 2000 Haier Europe headquartered in Varese, Italy, began coordinating sales an marketing in 13 European countries growing upto 17 in 2004. Product line included refrigerators,freezers,washing machines,dishwashers,microwave ovens and small appliances all designed for the European market. In 2001 Haier invested $8 million to acquire a refrigerator plant in Padova,Italy,manufacturing built in refrigerators and freezers. In 2002 Haier A/C Trading began distributing air conditioners in the local market. By 2004 Haier had an estimated 10% share of European air conditioner sales. Haiers headquarters in Varese coordinated logistics by 4 distributions centers in Italy,Spain,UK and the Netherlands.
Haier in India Haier earmarked India as a potential high growth market, and invested heavily in building up production, distribution and sales capacities in the country. In 1999 it formed alliance with Indian appliance firm Fedder Lloyd Corp to jointly produce and market refrigerators nationally. In Jan 2004 it launched a broad range of products with the goal of becoming one of the top three white goods firms in India within 5 to 7 years. In 2004 it announced a $200 million investment over 4 years to establish a refrigerator factory and R&D center that would serve as a production site for South Asian and African markets, In 2004 Haier formed an alliance with Whirlpool and Voltas to manufacture refrigerators and air conditioners for the Indian markets. In India Haier used local human resources to establish business
The Next 20 Years Haier faced a number of challenges in the coming years including moving beyond niche markets in the US to its goal of introducing a full line products. Haier did well in small scale industries but there were doubts whether a Chinese company could break into major leagues because it was a new Company. In 2005 Haier was spending about 10% of revenues of global branding and marketing, more than double the industry average. The company planned to combine its expertise in white goods with information technology relatively new area for Haier to produce intelligent home appliances. It planned to get there one step at time securing market leadership at home in each sector and then taking it globally. Haiers long term goal was to achieve one-third domestic sales, one-third exports and one-third produce and sold abroad.