Haier Group's Strategy in the US Market|Business Strategy|Case Study|Case Studies

Haier Group's Strategy in the US Market

            
 
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Case Details:

Case Code : BSTR072
Case Length : 12 Pages
Period : 2003
Organization : Haier Group Co.
Pub Date : 2003
Teaching Note : Available
Countries : USA, China
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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"We want to become a global company. The Chinese market has been good for Haier, but the competition was weak. If we wanted to improve our ability, we had to go abroad."

- - Zhang Ruimin, President, Haier Group, 1999.1

"As a brand, Haier doesn't work. People may buy a dorm refrigerator from Haier, but I don't think they'll spend a lot of money on an appliance from a company they've never heard of."

- Nicholas P. Heymann, Analyst - Prudential Securities, 2002.2

Mission US

In the late 1990s, the Haier group (Haier) was the leader in the Chinese consumer appliances market (with a 39.7%, 50% and 37.1% market share in refrigerators, air-conditioners and washing machines respectively in December 1998).3

But deflation in the Chinese economy slowed sales growth from 50% in 1998 to around 30% in 1999. Haier decided to look for new markets. Since the US had a large demand for consumer appliances, Haier entered the US market in 1999. Analysts were doubtful about Haier's acceptability to American consumers, as there was a general perception in the US that Chinese goods were of low quality. Haier, however, was confident that with its product differentiation strategy it would be able to create a positive image for its products among the American public. In the early 2000s, the consumer appliances market in the US started hotting up as Haier entered the market. By 2002, Haier products were sold in 9 of the 10 top retail chains in the US.

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With Wal-Mart agreeing to stock Haier products, many analysts believed that Haier would be able to shake up the US consumer appliances market. In 2002, Haier had a 2% market share in the US refrigerator market; it stated that it was aiming for a 10% market share by 2005.

Background Note

The history of Haier dates back to 1984 when Ruimin Zhang (Zhang), a bureaucrat with the local government was asked to take charge of Qingdao General Refrigerator Factory, a state-owned enterprise manufacturing refrigerators for sale in China. When Zhang took over the management, the company was on the brink of bankruptcy, with no funds to pay the salaries of its employees or to invest in new product development. When Zhang took charge of the company, he realized that the company did not look after the quality of its products; nor did it bother about customer satisfaction. In 1985, Zhang started importing technology from a German firm and began manufacturing technically sophisticated refrigerators.

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1] Out of Shadows, The Economist, August 26, 1999.

2] Arndt Michael, Can Haier Freeze Out Whirlpool and GE?, BusinessWeek, April 11, 2002.

3] In 2002 Haier ranked fifth in world sales of consumer appliances; it aimed to reach the number 3 spot by 2005.

 

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