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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Introduction Contd...

Haier made its first major foray into the global markets by establishing a refrigerator manufacturing facility at Camden, US, in 1999.

The localization of product design helped the company gain a foothold in the US market. By 2005, Haier had 18 design institutes, 10 industrial complexes, 22 production facilities, and 58,800 sales agents around the world.

Commenting on Haier's globalization strategy, Zhang Ruimin (Zhang), president, Haier Group, said, "We go to easier markets after we first penetrate difficult markets such as the United States and Europe.

These are much bigger markets. They are also the home markets of our largest global competitors, and we believe that if we can succeed there we can succeed in easier markets."8

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Background Note

In 1949, China embraced socialism. The state exercised absolute control over the economy; it owned the large industries, controlled supply, and set prices. Businesses and industrial houses were taken over by the state and managed by state-appointed officials. All industrial activity came under the purview of the government with state-owned enterprises (SoEs) taking center stage in the new centrally planned and controlled economy. The focus of the SoEs was on producing large quantities without much regard for customer preferences.

By 1978, the SoEs accounted for roughly 78% of the country's total industrial output and they became the driving force of the Chinese economy. The SoEs employed millions of Chinese workers and became the primary provider of social welfare and security. Jobs in the SoEs were considered a fundamental right with entitlements that included pensions, medical insurance, and housing. Worker unions became very powerful within the SoEs and that led to widespread indiscipline. The workers refused to work and used the factory facilities for their own businesses. Management control was largely ineffective with workers threatening to physically harm managers who tried to assert any authority. Inefficient managers also turned toward corruption to make money...

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8] Yibing Wu, "China's Refrigerator Magnate," McKinsey Quarterly, Issue 03, 2003.


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