The Haier Group: U.S.

Expansion

I. CASE ABSTRACT

The Haier Group was a Chinese major home appliance and consumer electronics
manufacturer with goals of becoming the third largest appliance maker in the world and being
listed in the Fortune 500. Haier had been founded in China in 1984 as a government-owned
company to produce mainly household refrigerators. Over the past 20 years, the company had
used horizontal integration and diversification to achieve significant growth in multiple
product categories and geographic regions and by 2004 had become a global organization
widely recognized in the world community. Haier had achieved a leadership position in
China’s home appliance industry

Haier's initial stage of internationalization mainly focused on developing countries (first in

Southeast Asia) to build volume and acquire international experience before it moved into the
United States and then into Europe. The Haier Group’s strategy has been to take advantage
of its core competency in refrigeration and cooling to make a strong move into the major
home appliance industry by broadening its product line. In 1999, Haier established a design
center in Boston, a marketing center in New York, and a manufacturing facility in South
Carolina. Its strategy of localizing everything from design and manufacturing to sales and
distributions indicated that Haier had a strong long-term commitment in the United States.
The main goal of Haier America was to continuously increase its sales in the U.S. and modify
the company’s products to meet American demand. It used its design competency to attack
small market niches ignored by the major competitors and low cost advantage to compete in
the mass home appliance market on the basis of low price coupled with comparable quality.
Haire America’s line of consumer electronics had no competitive advantage in the market.

Although Haier had a good reputation in major home appliances, the brand was still relatively
new in the U.S. and had significant market shares only in refrigerators, freezers, room air
conditioners, and wine coolers. Its sales of consumer electronics were small, but growing.
The company faced a number of long-term decisions in order to build an American presence.
Some of these decisions were (1) how to integrate itself with the locality and build brand
recognition, (2) how to create the products that could meet American needs, (3) how to
achieve the cost control needed to maintain its price advantage, and (4) how to continuously
improve its services to build the trust of local customers. The main problem to be resolved
for Haier was how to differentiate itself from General Electric, Whirlpool, Maytag, and
Electrolux in major home appliances and from Sony, Panasonic, Philips, and LG in consumer
electronics and thus achieve a winning competitive advantage in the U.S. market.

The Haier Group was a Chinese major home appliance and consumer electronics
manufacturer with goals of becoming the third largest appliance maker in the world and being
listed in the Fortune 500. Haier had been founded in China in 1984 as a government-owned
company to produce mainly household refrigerators. Over the past 20 years, the company
had used horizontal integration and diversification to achieve significant growth in multiple
product categories and geographic regions and by 2004 had become a global organization
widely recognized in the world community. Haier had achieved a leadership position in
China’s home appliance industry
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 Haier's initial stage of internationalization mainly focused on developing countries (first in
Southeast Asia) to build volume and acquire international experience before it moved into
the United States and then into Europe. The Haier Group’s strategy has been to take
advantage of its core competency in refrigeration and cooling to make a strong move into
the major home appliance industry by broadening its product line. In 1999, Haier established
a design center in Boston, a marketing center in New York, and a manufacturing facility in
South Carolina. Its strategy of localizing everything from design and manufacturing to sales
and distributions indicated that Haier had a strong long-term commitment in the United
States. The main goal of Haier America was to continuously increase its sales in the U.S. and
modify the company’s products to meet American demand. It used its design competency
to attack small market niches ignored by the major competitors and low cost advantage to
compete in the mass home appliance market on the basis of low price coupled with
comparable quality. Haire America’s line of consumer electronics had no competitive
advantage in the market.

Although Haier had a good reputation in major home appliances, the brand was still relatively
new in the U.S. and had significant market shares only in refrigerators, freezers, room air
conditioners, and wine coolers. Its sales of consumer electronics were small, but growing.
The company faced a number of long-term decisions in order to build an American presence.
Some of these decisions were (1) how to integrate itself with the locality and build brand
recognition, (2) how to create the products that could meet American needs, (3) how to
achieve the cost control needed to maintain its price advantage, and (4) how to continuously
improve its services to build the trust of local customers. The main problem to be resolved
for Haier was how to differentiate itself from General Electric, Whirlpool, Maytag, and
Electrolux in major home appliances and from Sony, Panasonic, Philips, and LG in consumer
electronics and thus achieve a winning competitive advantage in the U.S. market.

Note: Please refer to the handout for full documentation of this case.

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CASE OBJECTIVES

1. To identify key success factors in two U.S. industries – major home appliances and
consumer electronics.

2. To discuss the international growth strategies that the Haier Group is using to become a
global company.

3. To analyze Haier America’s competitive strategy and competitive position in the U.S.

4. To identify the impact of the Haier Group’s CEO upon corporate performance.

5. To use portfolio analysis to analyze Haier America’s two businesses: home appliances
and consumer electronics.

6. To identify Haier America’s core and distinctive competencies.

7. To evaluate Haier America’s use of manufacturing and marketing strategies to grow sales.

8. To illustrate the importance of continual product and process design improvements as key
to acquiring and maintaining competitive advantage.

9. To compare the pros and cons of local versus internationally-sourced manufacturing and
purchasing.

10. To discuss the interrelationship between the parent Haier Group and its subsidiary, Haier
America.

11. To illustrate the use of niche marketing to obtain a foothold in a market before expanding
into the main market.

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DISCUSSION QUESTIONS

1. What are the strengths and weaknesses of the Haier Group? Haier America?

2. What are the opportunities and threats facing the Haier Group? Haier America?

3. What are the strategic factors facing Haier America?

4. Does the Haier Group have any core competencies? If yes, what are they? Which of these
are held by Haier America?

5. Does the Haier Group have a distinctive competency? If yes, what is it? Is it also held by
Haier America?

6. Discuss the role of international expansion for the Haier Group as a growth strategy.
Which international entry strategies has Haier used and which are appropriate for
continued growth?

7. Discuss Porter’s industry analysis forces and how each force pertains to Haier America in
terms of both major home appliances and consumer electronics. How competitive is each
industry?

8. Evaluate Haier’s position in major home appliances and in consumer electronics in the
U.S.

9. What was Zhang Ruimin’s philosophy of management? What impact has CEO Ruimin
had upon the company?

10. Explain why Haier has been so successful in entering the U.S. markets in major home
appliances and in consumer electronics.

11. Can Haier successfully move from being a niche marketer in the U.S. to being a major
competitor like Whirlpool? What does it need to do? Can it do the same thing in
consumer electronics?

12. Discuss the role of market segmentation in Haier America’s strategic management.

13. Evaluate Haier’s position within the KSA Market and apply SWOT analysis of the
company products in KSA.

Summarization of the Case Study (10 marks)

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Answering Questions from 1 to 13

1. What are the strengths and weaknesses of the Haier Group? Haier America? (10 marks)

2. What are the opportunities and threats facing the Haier Group? Haier America? (10
marks)

3. What are the strategic factors facing Haier America? (10 marks)

4. Does the Haier Group have any core competencies? If yes, what are they? Which of
these are held by Haier America? (10 marks)

5. Does the Haier Group have a distinctive competency? If yes, what is it? Is it also held
by Haier America? (10 marks)

6. Discuss the role of international expansion for the Haier Group as a growth strategy.
Which international entry strategies has Haier used and which are appropriate for
continued growth? (10 marks)

7. Discuss Porter’s industry analysis forces and how each force pertains to Haier America
in terms of both major home appliances and consumer electronics. How competitive is
each industry? (10 marks)

8. Evaluate Haier’s position in major home appliances and in consumer electronics in the
U.S. (10 marks)

9. What was Zhang Ruimin’s philosophy of management? What impact has CEO Ruimin
had upon the company? (10 marks)

10. Explain why Haier has been so successful in entering the U.S. markets in major home
appliances and in consumer electronics. (10 marks)

11. Can Haier successfully move from being a niche marketer in the U.S. to being a major
competitor like Whirlpool? What does it need to do? Can it do the same thing in
consumer electronics? (10 marks)

12. Discuss the role of market segmentation in Haier America’s strategic management. (10
marks)

13. Evaluate Haier’s position within the KSA Market and apply SWOT analysis of the
company products in KSA. (10 marks)
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Conclusion and Recommendation (10 marks)

References of your Case Study (5 marks)

Citation:
Last page of your assignment must include the complete list of the references used during the
completion of your assignment with all the details.

Format for referencing from print media like books:

FAMILY/SURNAME, Initials. (Publication year in brackets) Book title - italicised or
underlined. Series title and volume if applicable. Edition – if not the first. Place of publication:
publisher.
Example:
NEVILLE, C. (2010) The Complete Guide to Referencing and Avoiding Plagiarism. 2nd Ed.
Maidenhead: Open University Press.

Format for referencing from electronic sources:

Author of website FAMILY/SURNAME, Initials or WEBSITE name if no author is available.
(Year - in brackets) Title of website in italics or underlined. Any numbers if necessary or
available if website is part of a series. [Online in square brackets] Available from: URL.
[Accessed: followed by date in square brackets].
Example:
BBC NEWS. (2008) Factory gloom worst since 1980. [Online] Available from:
http://news.bbc.co.uk/1/hi/business/7681569.st m. [Accessed: 19th June 2012].

Report Format (5 marks) 6

Page
 Grading Rubric
Marks Obtained
Questions
Allocated Marks
1. Summary of case in one page 10
2. What are the strengths and weaknesses of the Haier Group?
10
Haier America?
3. What are the opportunities and threats facing the Haier
10
Group? Haier America?
4. What are the strategic factors facing Haier America? 10
5. Does the Haier Group have any core competencies? If yes,
10
what are they? Which of these are held by Haier America?
6. Does the Haier Group have a distinctive competency? If yes,
10
what is it? Is it also held by Haier America?
7. Discuss the role of international expansion for the Haier
Group as a growth strategy. Which international entry
10
strategies has Haier used and which are appropriate for
continued growth?
8. Discuss Porter’s industry analysis forces and how each force
pertains to Haier America in terms of both major home
10
appliances and consumer electronics. How competitive is
each industry?
9. Evaluate Haier’s position in major home appliances and in
10
consumer electronics in the U.S.
10. What was Zhang Ruimin’s philosophy of management?
10
What impact has CEO Ruimin had upon the company?
11. Explain why Haier has been so successful in entering the
U.S. markets in major home appliances and in consumer 10
electronics.
12. Can Haier successfully move from being a niche marketer in
the U.S. to being a major competitor like Whirlpool? What
10
does it need to do? Can it do the same thing in consumer
electronics?
13. Discuss the role of market segmentation in Haier America’s
strategic management. (10 marks) 10

14. Evaluate Haier’s position within the KSA Market and apply
10
SWOT analysis of the company products in KSA. (10 marks)

Conclusion and Recommendation 10

Harvard style of References 5

Report Format
5
Total 160
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