Executive Summary
The report discusses the aspects of Qingdao Haier’s domestic and international activity to assess the risks and benefits of letting the company set up operations in our country. The company’s international strategy is developed with regard to openness, customer-oriented approach to production and distribution of goods, and digital development. Headquartered in China, Qingdao Haier manages to debunk popular myths about the quality of Chinese electronic goods with the help of its R&D activities. Based on the analysis of Haier’s strategies in relation to logistics, production, marketing, international collaboration, and HRM, it is recommended to let it set up operations in our country. However, to ensure the best outcomes for citizens and natural resources, the use of the point system and pollution control policies needs to be thoroughly discussed with Haier’s senior management.
Company Description
The company that the given report is devoted to was founded almost thirty-five years ago (Qingdao Haier Co., Ltd., 2017). Qingdao Haier has managed to turn into one of the most influential players in the global domestic appliances market. Nowadays, it operates in two industries and produces various types of domestic appliances and communication devices. Haier does not provide clear data concerning its workforce size, but the company plans to reduce it with the help of further automatization of production processes (Qingdao Haier Co., Ltd., 2017). In terms of annual revenue, it exceeded 119 billion RMB in 2016 and, therefore, demonstrated a 32% increase (Qingdao Haier Co., Ltd., 2017, p. 20). As it is clear from its name, the company is based in Qingdao, an eastern Chinese city in Shandong Province of the PRC.
Haier has operations in New Zealand, the United States, China, India, and five African countries, and the types of products that it offers include kitchen appliances, air conditioners, and accessories. Based on recent financial data, it can be concluded that Haier remains stable and successful (increment in profit). The company’s revenues continue to grow despite some high-profile scandals related to its approach to self-advertising. For instance, this spring, Haier was accused of disseminating fake news about receiving an international award given by WHO (Bhandari, 2018). The case above is not the only scandal that may impact the reputation of Haier in the world of international business. Among other things, such conflicts should be taken into account in this analysis since our country aims to collaborate with companies that demonstrate professional integrity to propel our economic development to the next level. In case of other potential problems, it may impact our final decision.
Brand Honors
World Top 50 Brands
On December 21, 2017, the US World Brand Lab (World Brand Lab) exclusively released 2017 (the fourteenth) “World Top 500 Brands” list. Haier ranked No. 50, 26 higher in the position than last year.
Thinkers50 2017 Ranking
On November 14, 2017, the information published on the official website of Thinkers50 shows that the latest list of Thinkers 50 Ranking is released. Zhang Ruimin, chairman of the board of directors and CEO of Haier Group was re-selected. This is the second-time finalist since Zhang Ruimin came to this list in 2015, jumping from 38 to 26 in the previous session. Zhang was the only Chinese thinker to be selected this time and the only Chinese entrepreneur to be on the list for two consecutive terms.
High-Tech Manufacturing Supply Chainnovators 2017
On May 22 local time, Gartner, the world’s leading research and advisory company, has released the award of 2017 High-Tech Manufacturing Supply Chainnovators. With COSPOPlat, Haier becomes the first company across the Asian-Pacific region that has won the award and the very first and only one in the global manufacturing industry.
May 2017 Thinker of the Month
Every month, Thinkers50 announces a Thinker of the Month and Zhang Ruimin, Chairman of the Board of Directors and CEO of Haier Group, is honored this May.
“Best Of the Best” Red Dot Award
On March 15, the winners of 2017 Red Dot Award were released in Germany, and Haier’s full-space fresh-keeping refrigerator, powerful rotary drum washing machine, panoramic drawer side-by-side refrigerator, and other 13 products won the Red Dot Design Award. Besides, the innovative S-BOX air purification won the Best of the Best Award, showing its industrial design strength to the whole world.
Chinese Best Export Brand of Home Appliance Award, 2017 Brand ZTM
Google has worked with BrandZTM and WPP Group to do a research on the brand strength of 167 Chinese brands in the market of seven countries, including the United States, Britain, Germany, and Japan, and has published the list of “2017 BrandZTM Top 30 Chinese Best Export Brands”, among which, Haier won the Chinese Best Export Brand of Home Appliance because of the positive public praise from international consumers, and ranked seventh on the list of brands with 572 points of the total brand strength.
First Prize of National Scientific and Technological Progress Awar
On January 9, 2017, the National Science and Technology Award-giving Conference was held at the Great Hall of the People in Beijing. The project of “Core Technology and Application of the DTMB System Internationalization and Industrialization”, co-completed by Beijing Haier Integrated Circuit Design Co., Ltd., a subordinate technology company of Haier, has won the First Prize of National Scientific and Technological Progress Award The award is one of the five great State Science and Technology Prizes set up by the State Council. And it is the first time that the house appliance industry has won the first prize, and it is also the only award-winning project gained by the industry this year.
World’s Greatest Leaders, Fortune Magazine
In the early year of 2017, Zhang Ruimin is invited to Stanford University to give a speech in the MBA class. He ranks in the World’s 50 Greatest Leaders on March 24th. Fortune magazine, the United States.
Company’s International Strategy
Given the large number of brands that Haier owns and its complicated shareholding structure, special attention must be paid to its international strategy. The company started its expansion more than twenty years ago when the first manufacturing bases were opened in three Southeast Asian countries (Haier, n.d.). During the 1990s, the company was given a wide range of quality awards, and their products were appreciated by consumers due to an innovative approach to the production of goods (Haier, n.d.). It is important to note that their success was also related to the lower level of competition in the business field. Thus, Haier was among the first large companies producing electronic goods to work in poor countries such as Indonesia.
When it comes to the features of the modern international development strategy of Haier, the company focuses on the role of networking and new technology in financial success. Haier’s overall strategy includes five important components, and internalization was its focus until 2012 (Haier, n.d.). With the help of their “market chain” approach to production and development, the company has managed to achieve success in many countries with developing economies.
Nowadays, Haier emphasizes information openness and the use of the Internet to collaborate with clients all over the world. Its current international strategy is based on client-centeredness, and Haier aims to become a digital enterprise. The regions in which Haier is concentrated include Southeast Asia, Eastern Africa, and China (Qingdao Haier Co., Ltd., 2017). The degree of their financial success also becomes obvious if to take into account that Haier has marketing centers and production facilities in wealthier countries. Among them are the United States, the United Arab Emirates, Italy, France, and Belgium (Qingdao Haier Co., Ltd., 2017). In reference to the research and development activities initiated by the company under analysis, it needs to be noted that it promotes open innovation to dispel long-term myths about the inappropriate quality of Chinese goods. Nowadays, Haier has five large research and development centers in countries with high economic potential such as the United States, Australia, and Japan (Nunes & Downes, 2016). The choice of regions for R&D activities seems to be related to the degree of their technological development.
Despite its economic success, the company needs to improve its development strategy on a regular basis due to the level of competition in the industry. Among the key business rivals of Haier are such giants as Hitachi, LG, and Panasonic. Even though the above companies and other competitors of Haier manage to reach their target customers, Haier is still among the leaders in the market of white goods (see Figure 1). As for other strong points related to its activity, Haier also belongs to the number of the most successful companies in China and some developing countries such as India. Also, in reference to strengths, Haier contributes to the global digital development since it has introduced more than one hundred patented technologies (Qingdao Haier Co., Ltd., 2017).
In general, the factors that strengthen the position of Haier in the global market can be reduced to the vast amount of countries where it operates, focus on research, and client-centeredness. However, the fact that Haier heavily relies on the domestic market, which can be advantageous to its international competitors, presents a significant weakness along with its tattered reputation (Qingdao Haier Co., Ltd., 2017). Thus, striking the right balance between international and domestic development should be considered in Haier’s short and long-term strategies.
Company’s Marketing Approach
To retain its current status, Haier pays increased attention to adjusting its marketing and advertising strategies in different countries to meet the specific needs of foreign clients. As it has been stated, the company sells various products in both developing and developed countries (India, African countries, the United States, etc.). The choice of regions where Haier’s products are sold demonstrates that the company is able to reach customers with different economic backgrounds and needs. In an attempt to please clients from different social and age groups, Haier effectively uses demographic variables for market segmentation. It helps to make predictions concerning the types of products that will be the most popular in particular countries. Popular industrial products are mainly distributed with the help of foreign production facilities, whereas large online stores are also involved in the process.
Concerning standardization and customization, Haier’s products sold in different countries usually have to meet the same quality expectations. However, customization takes place when it comes to product ranges because of differences related to target customers’ paying capacity. For instance, in 2016, Haier implemented “the strategy of offering high-end differentiated products” in Europe, which helped to increase revenues by more than fifteen percent (Qingdao Haier Co., Ltd., 2017, p. 30). At the same time, to improve performance in India, it was decided to simplify distribution channels. The choice of communication methodologies is usually related to the development of digital technology and people’s interests. In the domestic market, the majority of purchases are made using online applications, and the Internet is effectively used for product customization (Fischer, Lago, & Liu, 2015). Conversely, in poorer countries, the precedence is given to traditional communication methods.
Company’s Logistics Approach
A successful international strategy of Haier helped it to build strong and mutually advantageous relationships with countries all over the world. The company has more than twenty production facilities in China, Southeast Asian, African, North American, and European countries (Qingdao Haier Co., Ltd., 2017). In terms of countries with lower quality of life, the decision to build facilities is related to the presence of numerous growth opportunities.
By producing electronics in low-income regions, the company has a positive impact on their economic development and helps decrease unemployment rates. However, purely pragmatic reasons also seem to have impacted decision-making since the combination of low market saturation (in the 1990s) and attractive labor costs presents a lot of advantages. In general, Haier relies on facilities in developing countries, whereas its centres in wealthier ones primarily serve for the production of specific and more expensive products (such as smart refrigerators) and conducting research. Thus, product factors (price, predicted demand), economic situation, and the degree of technological development all have an impact on decisions concerning production facilities.
Company’s HRM Approach
The approach to human resource management utilized by Haier is quite different from that of other large Chinese companies. First, Haier evaluates its employees’ performance on a daily basis to provide incentives (Unique and innovative HR policies of Haier, n.d.). Employees working on production lines can earn points by filling special cards and answering questions concerning work goals that have been achieved. Haier uses both positive and negative motivation in its HR approach and publicizes the information on employees with the highest and lowest grades on a monthly basis. Importantly, the company is concerned about the misuse of power, and this is why a racetrack recruiting model is utilized. In general, Haier’s HRM approach can boost economic development in our country without increasing bureaucracy, but, given that many of our workers are unskilled, they will not be able to earn enough points to get bonuses. Taking into account the unique needs of our citizens related to education and monetary incentives, the approach currently used by the company in question may need to be improved if Haier is planning to enter our markets.
Analysis
As is clear from the previous sections, the benefits associated with letting the company build its facilities in our country include an inflow of capital funds and an opportunity to reduce unemployment rates. Haier’s brands are still among the most trusted ones in the industry, which means that its internal policies are constructed with reference to international ethical norms and fair employment practices. Apart from that, there are no concerns related to Haier’s economic stability. The production of Haier’s home appliances is also expected to increase our people’s access to high-quality goods due to lower transportation costs. Thus, the benefits of letting Haier enter our markets are numerous.
In terms of risks, the most recent scandals related to awards may need to be taken into account, but they are unlikely to lead to consumer boycotts and other events undermining Haier’s stability. However, our government will need to check Haier’s compliance with its internal environmental protection policies. From the analysis, it follows that potential issues related to employee performance measures and wage levels will have to be discussed. Currently, many people in our region do not possess well-developed production skills, and, given Haier’s employee evaluation system, it can be used to justify lower salaries.
Recommendations and Conclusion
The results of the analysis indicate that building partnership relationships with Haier would be extremely beneficial for our country in terms of national living standards and unemployment rates. To some extent, by collaborating with the company, we will be able to attract more attention of the international community to our economic situation, and this is why the opportunity should not be missed. However, it is recommended to discuss certain questions with the executive management of the company prior to signing any agreements.
First, keeping in mind the most recent case with fake awards, it would be necessary to make an investigation into Haier’s pollution prevention strategies and their implementation. In particular, specialists in pollution control will need to evaluate the potential impact of Haier’s production activities on our natural resources and discuss standards in case of any concerns. Also, it will be pivotal to discuss specific education programs for inexperienced employees and the way that Haier’s point system should be applied in our country to serve the best interests of workers.
References
Bhandari, B. (2018). WHO rebuts false air pollution stories in Chinese state media. Sixth Tone. Web.
Fischer, B., Lago, U., & Liu, F. (2015). The Haier road to growth. Strategy+Business. Web.
Haier. (n.d.). About Haier: History. Web.
Haier. (2017). Honors. Web.
Haier. (2018). Qingdao Haier Co., Ltd company presentation. Web.
Nunes, P., & Downes, L. (2016). At Haier and Lenovo, Chinese-style open innovation. Forbes. Web.
Qingdao Haier Co., Ltd. (2017). 2016 annual report of Qingdao Haier Co., Ltd. Web.
Unique and innovative HR policies of Haier. (n.d.). Web.