Haier - The Chinese Global Competitor
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Case Details:
Case Code : BSTR181
Case Length : 19 Pages
Period : 2001-2005
Organization : Haier
Pub Date : 2005
Teaching Note : Available
Countries : China
Themes :Globalization |
Turnaround
Industry : Consumer Electronics
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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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"In an era of globalization, you can't separate domestic and international markets. We've got to learn how to compete with General Electric and Whirlpool on their home turf. Otherwise, we'll lose the Chinese market." 1
- Zhang Ruimin, President, Haier Group.
"Four years ago, nobody could even pronounce Haier. Today, there is not one retailer in the U.S. who doesn't know us." 2
- Michael Jemal, President, Haier America.
Introduction
On June 21, 2005, the China-based Haier Group (Haier) made a bid of US$ 1.3 billion to acquire Maytag Corporation (Maytag), the third largest manufacturer of household appliances in the US in terms of number of units sold per annum. Industry analysts pointed out that Haier's acquisition bid was an attempt to gain direct entry into the premium segment of the US household appliances market.
On June 27, 2005, backed by equity firms - Bain Capital Partners3 and Blackstone Capital Partners4 - Haier
decided to take on Maytag's debt worth $975 million, thus increasing its bid to
$2.275 billion.
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According to a Chinese media report,5 if Haier succeeded in acquiring Maytag, it would be able to leverage upon Maytag's brand in the US market. Haier would also gain access to Maytag's technology and its extensive sales & distribution network. This would strengthen its ability to compete with the three big players of the US household appliances market - GE, Whirlpool, and Electrolux. Appreciating Haier's move, Lu Renbo, an analyst at the Development Research Center of the Chinese State Council, commented, "Haier is looking for a new way to achieve its globalization. Purchasing of a local, big name company may be the best and fastest way for Chinese home appliance makers' global expansion."6
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From being a small manufacturer of refrigerators in the Chinese town of Qindao in the early 1980s, Haier had grown to become one of the largest manufacturers of domestic appliances in the world with annual sales of RMB7 152.99 million by 2005. Haier's growth was attributed to a significant improvement in the quality of its products, which enabled it to establish itself as a leading home appliance brand in the Chinese market.
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Haier made a number of acquisitions in the mid-1990s, which allowed it to expand its range of products and become a household name in China. Haier's acquisitions mostly involved bankrupt Chinese companies in the consumer electronics industry that the company managed to turn around. Haier used a three-pronged strategy to turn these companies around - absolute regard for consumer needs and preferences, collaboration with foreign companies, and the inculcation of Haier's work culture in the acquired company. Another important factor that contributed to Haier's success was the OEC management model that created a company-wide commitment to quality. To seek new markets for its products, Haier began globalizing in the late 1990s. |
Haier - The Chinese Global Competitor
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