Haier’s internationalisation strategy Assignment Sample

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Introduction

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Haier’s strategic development may be summarised as a series of seven-year periods. This study examines each stage of Haier’s internationalisation approach in detail, examining how it varies from traditional western models, the key aspects of Haier’s management system, and the degree to which Haier’s plan has been a success thus far in the foreign market. RMB 1.47 million was owed to Haier by way of net debt. Today, Haier is the world’s largest manufacturer of home appliances (Gou and Zhou, 2021). The corporation has an annual revenue of more than $35 billion dollars. More than 23% annual growth in gross profit and 18% annual growth in sales have been achieved in Haier’s main appliance business over the past decade. More than 70,000 people work for Haier throughout the world, and the company sells its goods in 165 different countries (Yaojia, 2019).

Brand Building

Prior to expanding Haier’s business internationally, Zhang recognised the importance of first strengthening the company’s capabilities and resources in China. Resources-based views of firms emerged in the 1990s, arguing for a more secure foundation for corporate strategy development based on internal resources and capabilities as opposed to an external market emphasis (Cao, 2019). Furthermore, it became commonly accepted that competitive advantage, rather than industry attractiveness, could be used to produce greater profitability.

The quality of Haier’s products was a major issue. The Qingdao municipal government-owned enterprise was unable to compete with the private sector in terms of performance, profitability, and quality. China’s state-owned enterprises are generally protected from the effects of foreign competition (Yang et al., 2016). Multi-faceted, confusing, and competing goals, as well as political meddling are common problems for these initiatives. Talented personnel might be a challenge to attract since they tend to prefer private sector positions that provide more attractive compensation packages. The combination of these problems resulted in low morale and low levels of staff involvement, which in turn led to subpar production. Initially, Haier sought partnership with international appliance manufacturers including Merloni, Leibherr, Mitsubishi and Sanyo to overcome the quality issue (Frynas, Mol and Mellahi, 2018). With these strategic alliances, firms were able to share their knowledge and expertise, while also minimising risk and costs.

ISO:9001 certification was requested in 1992. Zhang was certain that Haier could achieve cost, quality, service, and speed gains through a fundamental rethinking and radical restructuring of business processes (Lina, 2020). The accreditation served as a marketing tool since it highlighted the company’s dedication to high standards of quality. Aside from quality improvements, Zhang realised that the company needed to enhance customer service. As a result of the company’s investment in cutting-edge technology, Haier was able to follow and monitor customer behaviour after the sale. Improved quality and customer service under Zhang’s direction increased demand and sales grew from 3.5 million to 410 million Yuan between 1984 and 1989 (Du, Kang and Ke, 2008).

Diversification

The most common way of diversification for companies is acquisition. In the 1990s, as the Chinese market expanded and the government supported corporate mergers and acquisitions, Zhang wanted to broaden the scope of his company by expanding its product line. In addition to white goods like refrigerators, washing machines, and air conditioners, Haier expanded its product line to include mobile phones, televisions, and other consumer electronics by purchasing 16 Chinese firms (Lu, Mockler and Gartenfeld, 2009).

Historically, growth and risk reduction have been the two primary motivations for diversifying an enterprise. However, Lovallo and Mendonca (2007) argues that while diversity is a speedy path to business success, it often results in poor returns for shareholders. More diverse but less concentrated organisations tend to outperform their more focused counterparts, according to Rumelt’s corporate strategy study.

‘Parental fit,’ according to Snihur and Tarzijan (2018), is an essential factor to consider when deciding which companies to include in one’s portfolio. It is possible to utilise the parenting matrix to determine how well a business unit relates to its parent. It was clear from the parent company’s diversification plan that the parent’s abilities, resources, and personality traits were well-suited to the various business units, and that the parent stood to gain significantly from each of these ventures. Throughout this time of expansion, Haier remained committed to enhancing the image of its brand by focusing on product quality and customer service as a priority (Pallas, 2016). Haier was able to sell its products at a premium price because of the combination of distinctive (often localised) product qualities and the perceived value of customer service and responsiveness.

Internationalisation

The Uppsala model proposes that enterprises increase their involvement in foreign markets in a pattern of consecutive increments through experiential learning and incremental commitments (Jiang and Holburn, 2018). As ‘internationalisation drivers’ apply pressure on enterprises, the model suggests that firms first establish themselves in their native market before expanding internationally into nations that are culturally or geographically proximate. Organizations begin by exporting conventional goods overseas, but as they acquire expertise and get more involved in international commerce, they begin to establish manufacturing subsidiaries abroad (Santos-Arteaga, Torrecillas and Tavana, 2019).

Haier’s internationalisation began between 1992 and 1997. By partnering with local businesses in South East Asia and the United States, Haier was able to export its goods to those countries as well as Germany, Italy, and the Netherlands. Exporting or joint ventures were the most common entrance points for Haier; however, the company’s regional distribution seemed a bit unpredictable when compared to other western companies (Pallas, 2016). Because of the low cost of production in China, Zhang explained, Haier’s abroad approach was to develop a globally recognised brand.

Customers and suppliers in the local market have a greater grasp of the local market and institutions, making it more difficult for foreign rivals to get a foothold (Rottig, 2016). On the other hand, Zhang recognised that by placing Haier in areas with more intelligent and tough clients, the firm would have to up its game to remain competitive. In order to enhance one’s chess abilities, Zhang said one needs play against the best players. Organizational knowledge, inspiration and drive were all fostered by this bold site selection technique.

Expanding into new areas meant that Haier had to tailor its product line to fit the demands and desires of those customers. According to Zhang, worldwide success would come from adjusting to local market demands so that buyers would see Haier as a localised brand rather than an exporter from China. When it comes to the “white goods” sector, national p