Haier was successful in China because their CEO Zhang had a commitment to quality and brand image at time in China where cheap, mass production was the going trend. The Haier brand won awards for quality and commanded a 15% premium compared to other brands even during times of over supply and price wars. Haier discovered that consumer would be willing to pay a premium for a quality product that will last, as opposed to a cheaper product that won’t. After building a strong brand image in the booming refrigerator industry, Zhang decided to let Haier’s reputation speak for other products through diversification. Zhang and the Haier group expanded into the air conditioner and freezer industries buy purchasing two struggling companies. After being told they would not be able to get a loan for their new headquarters, Zhang made the decision to offer 43.7% of its company up in an IPO, a risky move that would have destroyed Haier if it failed.
Zhang was willing to take risks to move Haier forward, and it paid off. With a focus on quality, Haier’s touch was gold to any industry they moved into, including following divisions of washing machines, kitchen and bath, tech equipment, and direct affiliates including communication and biological engineering. By 2004, Haier was the number one appliance company in China after successfully overtaking domestic rivals and defending its ground against international companies trying to export to China. As Haier became more diverse, the competition became increasingly tough because they were now running into specialist companies in each industry, and were worried if they would be able to compete. But their commitment to quality and ethical management helped them to defeat their biggest competitors who were not so ethical, in the case of Kelon, or as well run as Haier.
The Essay on Merrill Lynch – Company And Industry Background
BackgroundMerrill Lynch is one of the world's leading financial management and advisory companies, with offices in 38 countries and total client assets of approximately $1.5 trillion. As an investment bank, Merrill Lynch is a leading global underwriter of debt and equity securities and strategic advisor to corporations, governments, institutions and individuals worldwide. Through Merrill Lynch ...
Haier’s market advantages are that they can charge a premium and still lead industries in sales due to brand name, and that cannot be imitated. They also began to invest in R&D as well as setting up a computer run service system in 1990 that was one of the first of its kind. By 2004, Haier’s service network and warranty was renowned in China, covering full repair costs exceeding government regulation and next day service. The final aspect that made them the best was their distribution chain. Haier had reorganized logistics into a single company serving the entire group. Other Chinese companies like Midea and TCL had separate logistics operations for each product line. This helped them streamline distribution and save on economies of scale. This also allowed them to quality control to the highest degree since all of the products were at a central location where they could be inspected.
Haier’s decision to go into developed, large, competitive markets was a bold strategy that many companies would have decided not to do, but again, it succeeded for Haier. Because they were in these large markets earlier than other Chinese competitors, they were able to grab market share in the large markets of US and Europe through their commitment to quality and service. Once, they were well ingrained in those large markets, they had an even stronger reputation for when they wanted to move into the smaller markets of Southeast Asia. In order to break into these large developed markets however, Haier needed a niche and they found one in competitive refrigerators for students and offices.
The Essay on Ansoff's Product Market Grid
The Ansoff product-market matrix helps to understand and assess marketing or business development strategy. Any business, or part of a business can choose which strategy to employ, or which mix of strategic options to use. This is one simple way of looking at strategic development options: Each of these strategic options holds different opportunities and downsides for different organizations, so ...
US manufacturers were only selling full size refrigerators because the return on smaller ones was believed to be too low. With minimal competition, Haier brought in high margins and got the foothold that they needed. Another strategy that they employed was to staff their divisions with local employees of that country so that they could interact with and relate to customers better. Only the technical service teams were staffed with employees from China. They didn’t just want to export products abroad, they wanted their great service to go also, and they needed native employees for that.
Haier relied on product differentiation and response speed to compete abroad with companies like GE and Whirlpool. They paid close attention to consumer needs and had 18 design centers to rapidly facilitate product developments. This allowed Haier to provide needed products before their competitors, with salespeople providing market intelligence to model managers.
Haier can build on its success in niche products to become a more global brand because what they have going with the mini fridges can be translated over to sales later on. A college student who owns a Haier mini fridge and likes the quality of the fridge is more likely to consider buying another Haier when they move into their own home. Quality appliances is quality appliances, whether they are full scale fridges or mini ones. Consumers today are looking for value and functional features in their products, and those companies that have the best brand name can charge premiums for their products. By being on the cutting edge of development, Haier can achieve this.
What is going for Haier’s expansion is the perceived quality of their products and their reputation as an international brand. Brands that are successful enough to go international are usually cemented with elite status in the eyes of the buyer which works for Haier. Also, Haier’s commitment to quality helps them defend against the stigma that associates Chinese products with lower quality since quality in Haier’s main focus. If Haier stays on top with quality and service and continues to be on the cutting edge of their development team with what the customer wants in their appliances, I believe that they will be able to compete and become a strong global brand in high-end white goods.
The Review on Impact of Product Price and Brand Name on Quality Perception
In ordinary usage, price is the quantity of payment or compensation given by one party to another in return for goods or services. In modern economies, prices are generally expressed in units of some form of currency (For commodities, they are expressed as currency per unit weight of the commodity, e.g. Tshs per kilogram.) Although prices could be quoted as quantities of other goods or services ...
Haier’s three thirds strategy reminds me a bit of Microsoft and GE in that they are forcing themselves to have a certain percentage of revenue and market share and then trying to model their strategy around that. I think it should be the other way around, modeling their strategy so that they are successful, and just let the product earn the market share that it earns. Putting unnecessary and sometimes infeasible goals out there leads to taking unnecessary risks. That being said, in the case of Haier, at least their strategy helps them diversify markets to insulate them from individual countries’ struggles. If they are number 3 in the world and one country’s economy is struggling, Haier will still be in a strong position. From the information given in the charts, Haier is 3rd for brand name in large kitchen appliances and 5th in manufactured appliances globally.
They have a commanding lead in the Chinese market by over 13% in refrigerators, 5% in washing machines, and 6% in air conditioners. One glaring problem with Haier’s plan is their lack of penetration in the United States for Large Household appliances, which does not include mini fridges. Haier only has 1% of the US market and is considered a low price product in the US as of 2003. LG and Samsung are viewed as the higher priced, higher quality products in the United States. Without Haier’s quality niche in the mind of the consumer, they wont any competitive advantage. Haier should focus on making their business as strong domestically as possible in China’s booming economy and worry less about their market share overseas, especially with the struggles in European markets and stiff competition in the US.
