Running head: CASE ANALYSIS ON HAIER IN INDIA 1

Case Study on Haier In India

St. George’s University

Ankita Moore

BUSI 891: Globalizing Operations

Cohort IB 11

Individual Assignment #2

September 1st, 2019

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Introduction / Background

Haier, one of the most successful electronic manufacturers, was originated from China.

Unlike the strategies and management system as used widely by most China industries and with

the help of international business opportunity and strong corporate strategy, it becomes a well-

known company among electronic industry (Boris, 2014). India, one of the most economically

developed countries, has raised its economy with rising global business and increasing

population as in China which attracts international firms to invest as a part of international

expansion. Being an emerging market with high disposable income, the middle-class India

people who demand for the quality products seemed to appear.

As part of international springboard strategy (Tung, 2007), Haier acquired a failed

production factory run by Korea-India joint venture. With this, Haier gained a great advantage

from outbound logistics creating a reliable path for delivery to Middle East customers. It also

outsourced high-end goods due to inverted duty structure set up by the India government. Thus,

Haier got cumulative benefits from inward investment before direct investment. Moreover, Haier

has practiced localization strategy as its leapfrogging strategy (Tung, 2007), changing the

products that the markets demand, during America and European operations. Thus, the favorable

situations of international expansion have welcomed Haier to enter into India market.

But the real question remains as to Braganza and the company. This being, whether this

was the right venture for Haier? If so, can the company continue to preserve its growth

thereafter? Hence, with Haier new direction, the company’s sales figures started to look better

causing the market to also respond positively to this shift.

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Analysis

Employing a skilled managerial strategy, infused with a meticulous planning method lead

Haier in becoming one of China’s most successful home appliance firm in the industry. Contrary

to the tactics and leadership scheme used by most of the Chinese sectors, it is a leading electronic

firm with the aid of global business opportunities and powerful corporate strategy (Boris, 2014).

Haier Group is a multinational company that produces multiple domestic and electronic devices

following its 20-year growth. To attain the Three Third Objectives of Zhang to create Haier for a

world brand. As a world-wide growing company, India, one of the most economically

developed nations, has increased its economy as has China, attracting international companies to

invest as part of international development. The middle-class Indians who demand quality

products seemed to appear as an emerging market that has elevated disposable earnings.

As stated, big electronic companies like LG, Samsung and others have to some degree

anchored the market in India providing huge competition for Haier. In addition, the families in

India are mainly nuclear families, and the market for white goods seems to be a concern because

there is not a lot to spend. The present population searching for loved requirements and

estimates is a great chance for big sectors such as Haier, according to Abraham Maslow's theory

(Bradley, 2015). With its premium pricing strategy, Haier has developed a strong market

position. It tended to compete with worldwide companies like Samsung and LG following its

place in America and Europe. While Haier lacked the first mover advantage, they wished a more

efficient use of funds in the whole globe in the prospective emerging market. Haier therefore

intended to enter India's white goods market from a strategic management perspective. This

earned Haier excellent benefit from the outgoing logistics and created a reliable delivery route
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for clients in the Middle East. Thus, before direct investment, Haier received cumulative

advantages from the investment. In addition, during America and European activities Haier has

used its Localization approach as its leapfrogging strategy (Tung, 2007), which alters the

products demanded by customers. Moreover, as part of China's business strategy, the Chinese

government has encouraged global development. Simultaneously, the government had to allow

fully-owned foreign companies to cut tariffs and trade barriers for global investment because of

the economic crisis in India. Haier was therefore welcome to join the Indian market in the

favorable situation of global expansion.

Despite its advancement, Haier did not get first mover advantage in India since it made

its first move of international business in America and Europe. In contrast, in India, LG first

targeted the mass market with low price products without much technical innovation (Hill,

2015). On the other hand, Samsung introduced high quality products that target the middle-class

population. In addition, small local electronic firms in India which did the production with lower

profit margin also had to take into consideration. Furthermore, Haier didn't want to do price war,

and it did not plan to enter mass market. As a result, its premium pricing strategy was not

successful in India.

More than that, Haier failed to get a position in India white goods market. It might be

partly due to the lack of knowledge of the local consumers, and partly due to the improper

localization strategy. It seemed to apply localization strategy, yet there was no diversity of

products (single product "refrigerator" was introduced to the market) as practiced in China and

America. It was lost since the time of segmentation and targeting of the market (Fayerweather,

2012). Thus, Haier should evaluate their strategy from the beginning to get a desired profit in

India market.
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All international firms tried to expand the emerging developing markets such as India and

China. As the global economy increases and appearance of middle-class population, the growing

population of China and India were recognized as potential markets. India, with ascending

growth rate of population, becomes a main target for international companies. Increase in

disposable income let the India people to spend more on electronic appliances (Fayerweather,

2012). Global giants like LG and Samsung had entered India market long before Haier stepped

into the competition. LG mainly targets on the mass market, and Samsung prioritize on premium

products. Moreover, they have founded a reliable R& D unit with adequate staffs to show their

awareness of the India market. Moreover, there are also many local manufacturing firms who

worked with the low profit margins. It is undeniable that the India market is brilliantly emerging,

the supply and demand are not balanced. There are many players waiting for the explosion of the

market, yet the growth rate of the white goods market was much lower than that of the players.

In addition, India government did not prioritize the electronic markets particularly in

electrification process and transportation system to the villages. There were shortage of

electricity and irregular voltage especially in the villages, thus it was too difficult to build a

production factory. Besides, during the earlier times, India had an inverted duty structure that

hindered development of foreign direct investment (Czinkota, 2012). Moreover, local small

businesses didn’t conduct proper market-based production since they didn’t have proper research

and development center. As a result, they could only produce a non-innovative, low quality and

low-price products, and global brands are no match for them.

As Korean and Japan brands occupied emerging India market for a certain degree, they

had a first mover advantage. In addition, the mass market demanded on the low-cost products.

Therefore, there was a price war among the firms and the product has lost its relevant market
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price position. It became hard to establish a good quality product rather than lower and lower

pricing, and small businesses will have to be exempted (Cooper, 2015). When Haier entered the

market, the premium quality of the Haier’s product was not useful since the public demanded for

the low-price products. And, there was no specific modification depending on the social, cultural

and behavioral segments in the wild market instead it entered with the brand quality with

premium pricing, but the sales were not favorable. There were so many governmental constraints

and the market knowledge and commitment on the product was still lacking.

Recommendation / Conclusion

Entering a foreign market is difficult. It is particular difficult in developed regions, where

countries have remote psychic distances, as well as technical and legal requirements. If Chinese

multinationals are pursuing success in developed markets, it is necessary that a strategic

marketing programme and proper tools are implemented. Improper conduct would damage the

firm's overseas reputation and take a long time to correct (Boris, 2014). Generally, Chinese

organizations use two types of internationalization strategies, as observed in the case studies.