Haier Report

1.1 A brief introduction of Haier “sincere forever”---- Haier , this is Haier’s vivid manifesto and the words that the image of Haier enterprise have been rotted in the hearts of people .Over less than 30 years of accumulation and precipitation , it has obtained remarkable achievements. Since 2002, Haier has been valued at 85.326 billion Yuan which has been the China’s most valuable brand for 5 years. In 2010, in the world’s innovative companies list of top 50, Haier which is the only brand of appliance is ranked at 28. For the first place, it started farming the product of refrigerator alone .After that, it walked “the multiplication strategy”, which was first entered into the other different kinds of household appliance production and then walked into the completely strange industry of finance and medicine. In recent years , it has been walked form the “the internationalization” path to the present “global brand” path .Today’s Haier expands to a cross of white appliances , black appliances ,beige appliances ,etc, various small appliances and pharmaceutical , biotechnology , financial services , multi—secondly areas of the company . However, from the aspect of Haier’s present situation, the pace of development is not walked smoothly as expected. In many areas, it has been met with a bottleneck. For example, the way of opening the foreign market is very tough as the result of the difficulty for foreign people to build the recognition and loyalty on Haier brand as well as the technology which doesn’t have advantage. Therefore the overseas sales are not satisfied. What can such a big Haier do so that it can be better to walk? 2. The external environment analysis 2.1 General macroeconomic environment The macroeconomic environment is analyzed based on the “PEST” 1) Policy factors: Domestic: For the development of Haier, the national policies are supported in many aspects. Such as the research of products, it enjoys the preferential benefit on tax rate and export products tax reimbursement like those series of supportive policies. But there are many flaws in the legal aspect. These flaws are mainly in two aspects: for one thing, under the socialist market economy, the Chinese related laws and regulations about the economy are imperfect and many loopholes are existed. So the market is abnormal and at same time has many irregular aspects which have effect on the steady development of Haier. For another, regarding the patent protection, although there is revenant legislation, the effect that carried out is poorly implemented. So many products have been pirated and reproduced, which are the current popular saying “the village in a mountainous areas version”. To Haier, this means a number of great loss. Abroad: in contrast with the domestic situation, although the competition about the market system and law is relatively perfect, there is high tax rate as the barrier to entry for the foreign companies like Haier. Even with the intention of protecting the local business, the local countries often take the measures like “anti-pumping”. And it results in the difficulty for Haier to walk the international road. 2) Economic factors: As the economy is developed rapidly, the market structure and institutions are constantly changing. Multinational companies, joint ventures, strategic alliances and so on. So we can see that the global economy is becoming closer and the global economy shows a integration trends. So it requires Haier must make the development strategies and measures to adapt to the economic changes in this constantly evolving and changing economic environment. Only in this way can it walk better. 3) Social and cultural factors: To the whole society, it is constantly developed. Apart form that people’s thinking, living levels and cultural standards are also changing all the time. Thus people’s needs and requirements to the products are developed unceasingly. As for the aspect of culture, due to the differences in races, regions, religious and countries, there are many kinds of culture. This means than Haier cannot stand still and it has to constantly to update and innovation so as to keep up with the pace of the Times, rather than to be eliminated. Furthermore, faced with different objects, it should treat them differently. For doing market research analysis, it can better cater to the different the different kinds of culture, which is critical for Haier to walk the path of internationalization. 4) Technical factors: Especially after the advent of the computer, the technology is changing very fast. This fast speed of changing will be a great challenge to the companies. Firstly, to the enterprise itself, it is the magic weapon for enterprise to grasp the valuable clues in this Information Age. The global 500 strong enterprise nearly are using the specialized system software like “with the friend”, SAP, which carry on the management and control with the help of electronic technology from purchasing the material to arriving at the sale, as well as each department. Secondly, to the company’s products, it needs continuous developments, reducing costs, improving the quality of the product. What’s more important is to carry on research to create new product which will be contributed to competing with other competitors. Speaking of Haier, its competitors are not a small group, like TCL, especially the Japanese brands which have the leading position in the technical aspect. So those who want to have a voice in the marketplace, technology is the key factor. Exactly for Haier, this aspect is very weak. So it is essential for Haier to have a faraway walk. 2.2 Industry Environment Environment for industry is analyzed based on Porter “Five Forces Model”. Two aspects will be talked. 1) The intensity of the competition with the same industry competitors: Today’s Haier has been involved in many domains, like living room household appliances, IT products, Mobile phones. These areas are belonged to the industry supported by high technology. As for the household appliances: domestic brand TCL, foreign brands like Sharp, Glanz and so on. We can clearly see that it faces many competitors that many brands are the resident in the forefront of the global top 500 enterprise. So the competition is very intense in such a limited share of the market. Compared with these competitors, Haier’s technology as well as the brand effect falls behind at a long distance. 2) The bargaining power of buyers: Very different from the past, a new sales model—supermarket is emerged after the retail had a large-scale integration. Our country’s typical representatives are “Meidi”, “Suning”. Because of their strong sales network and marketing competence, they occupy the profit belonged to the enterprise in the market. Haier makes no exception in this extremely intense competitive environment. The space of profit available to Haier has already small, while it is worse that the profit is reduced at the sale part. Under the nowadays environment, many areas Haier involved in are in the mature period. How to enhance its competitive advantage and find a better marketing method to avoid this part of profit reduction in such a fierce environment, which is critical for Haier to thing about. 2.3 Management environment and competitive advantage 1) Brand Establishment and Brand Loyalty: In this aspect, Haier owns a advantage. Since Haier was founded, it has been actively undertaken the society responsibility and the public welfare works to repay the society with true feelings under Zhang Huiming’s concept ----“sincere forever”. In public welfare aspect: it has constructed 129 the primary hopr schools. What’s more, it produced 212 volume children science and technology education cartoon “Haier Brother”, which has been rooted in the people heart. People trust Haier is not just its brand, besides its quality is really good. Apart from that, the most important is that it supplies a timely and thoughtful service after selling. This chain measures enable consumers to trust the brand and have a high degree of product loyalty. 2) Expense Segmentation: As for the consumer’s demands, it makes the product segmentation according to many aspects rather than a generally spoken about the needs. Just like region, sex, religious brief and so on. For example, Haier invented a kind of space-saving refrigerator to cater to the American university students. Another example is refrigerator with a lock. These differences are the refined diversion of products needs which make Haier still has a high competitive advantage. 2.4 Summary based on”O” and “T” analysis Based on the above analysis and the current Haier, we can see that Haier is facing opportunities and threats. Opportunities (O): 1) The good enterprise image that gradually established around the world and the brand effect will be contributed to the path of international in the future. 2) Chinese market potential demand: Like “the household appliances go to the country”, Haier can vigorously tap the secondary market. So the market will be broader and the competition is weaker than the urban. 3) Overseas market: with the trend of global economic integration, the trade relationships among countries are becoming closer and closer. We can develop more new markets in developed countries and developing countries like India. Thus the future development prospect of overseas will be very good. 4) The product market investigation and expense subdivide are extremely appeal to the consumer needs, at the same time it enhances the competence in the market and benefit to the further expansion of the market. Threats (T): 1) The high tax rate and standard of products in some countries are the barriers to entry and add to the costs of products. 2) The technology is relatively backward, so it is difficult for Haier to compete with the same industry competitors. 3) Rapid changes of technology lead to the update of the product, which requires having high capacity of R&D and production. 4) Lots of profit margins are occupied by some buyers having large bargaining power. 3. The Internal environment analysis 3.1 Enterprise Resources Visible Resources: 1) A large scale and institutions: 29 manufacturing bases and 8 integrated R & D centers and 19 overseas trading companies and employees are more than 6 million people worldwide. 2) R & D institutions - Haier Academia Sinica, is committed to independent research and bearing the mission to supply the core technology to create the global brand for Haier. It is allied with United States, Japan, Germany and other countries and regions, owing 28 first-class technology company around the world and 12,000 square meters of research and development building and 16,000 square meters of the test base while equipped with international advanced level of soft, hardware facilities and the advantages of using the global scientific and technological resources of 48 at home and abroad with the intention of establishment and development entities. 3) Strong capital: In 2009, Haier Group achieved global turnover of 124.3 billion yuan (182 billion U.S. dollars)while the brand was valued at 81.2 billion. Invisible Resources: 1) Goodwill: Goodwill is the formation of the accumulation of a very long time and the confidence of consumer in "Haier", so it owns a strong brand loyalty 2) Corporate Culture: Haier is the combination of the concept of innovating, a precursor to strategic innovation, the direction of the organization for the protection of innovation, technology and innovation as a means to market and innovation as the goal, while along with the concept that Haier from small to large, from big to strong, from China to the world. Haier culture itself is continuous having innovation and development. Staffs active participation and the consensus is the most significant feature of the Haier culture. At present, Haier's goal is to create China's world famous brand to win the glory for the nation. The goal realizes the perfect combination of development and value of the individual pursuit. Haier employees fully prove their individual value and pursuit during the process of realizing Haier’s goal of global brand. 3) Patent: Continuously developed new products, and applies to the national patent protection which ensures the creativity of enterprise product development. 4) Trademarks: Haier's new logo is composed of Chinese and English. Compared with the original logo, new logo lasted the past 20 years of brand culture, at the same time, the new design is more emphasis on the sense of the times. English flag each stroke more concise than before, a total of 9 program, "a" a reduction of one corner which means looking for targets that Haier does not look back; "r" a reduction of one branch of Haier which is a symbol of upward and forward unwavering commitment to. The core of the new English logo design is speed. The rate of organization is required to have a fast speed in the Information Age. English flag style is simple, dynamic, progressive. 3.2 Enterprise Capability 1) R & D capability: The establishment of a series of R & D institutions, such as Haier, Academia Sinica room, the Haier Group and Qingdao Municipal Science and Technology jointly established the "Qingdao Key Lab of Network Appliance, etc., and the employment of a lot of various engineering-related professional personnel, greatly enhancing the corporate R & D capability to develop new products in many areas. 2) Organization and management capacity: In this organization, the huge success is inseparable from the leadership. Such as the CEO - Zhang, his strategy of continuous adaptation to change: stages of brand strategy - "diversification strategy phase - stage international strategy - global brand strategy stage; as well as" on the matter, Albert, Nissin Hidaka, "the OEC management model, to each person market-oriented" market chain "management, to" human single one "model of development, the formation of autonomous body, which is as a fulcrum to invent for the consumers under the innovated business model of networks combining actual situation zero inventory supply-demand. Because of these strategies, management, sales model of innovation which contributes to making the" Haier "continue to move forward and to develop. 3.3 Value Chain Analysis Porter's "generic value chain": purchase logistics - Production Management - Shipping Logistics - Marketing - Services. In this value chain, "Haier" is a highlight of the service areas. Many consumers are very satisfied with Haier’s timely and thoughtful the service after selling. So consumers have full confidence in the company's products. But in fact in this value chain, it obtained a small part of the profit. Many parts are "for others to do the wedding dress". This problem is mainly concentrated in the production. Although since 1998, Haier established the specialized institution to make efforts in developing its own core technology. Because the shortage of research time, though it achieved some success, it is enough to support many key components and spare parts needs. As for the core technology, it is mostly depended on the supply of outsider, only a small part from self-restraint. So in this value chain, "Haier" did not fully grasp the initiative. It is still dependent and passive. Thus, it occupies only a small part of the profit. The most profitable part remains to be further strengthened. 3.4 Summary: "S", "W" Analysis Based on the above correlation analysis and the current status of Haier, as for Haier itself, both internal strengthens and weakness are existed. Strengths (S): 1) It owns strong brand effect and reputation and corporate culture 2) The customer trust the brand, so they have high "brand loyalty" in this brand. 3) Product-related diversification and unrelated diversification are significantly to reduce production costs. 4) It owns its unique methods and models which is fit to adapt to change and further development Weaknesses (W): 1) Although it owns a lot of available resources, it lacks the core competitiveness of enterprises. 2) In the value chain, it doesn’t grasp the core technology of product sufficiently. 3) Product development capability is relatively weak which is need to be further enhanced. 4) It is so large that there are more layers of management, institutional duplication and large bureaucracy. 4. Strategy Selection 4.1 "Haier" Strategic Overview Brand Building Phase (1984-1991) Characteristics: Focusing onrefrigerator, Hair explored and gathered experience in corporate management to lay a soild foundation for its later foundation. A localization model of management was established. Diversification Development Phase (1991-1998) Characteristics: Diversify from one product to a variety of products (in 1984, we had refrigerators only, and in 1998, we had dozens of products), from white goods to brown goods through capital operation in a way of "activating shock fish". Tangible assets were activated using intangible assets and the business was expanded and strengthened at the minimum cost and in the shortest time. Globalization Phase (1998-2005) Characteristics: Products are sold in great volume to major economic regions all over the world. With well established overseas distribution network and after-sales service network, Haier Brand is warmly received with sound notability, reputation and recognition. Global Brand Building Strategy Phase（2006—）Characteristics: In order to adapt to the trend of integrated global economy, and to manage its worldwide brand, Haier group steps into the fourth developing strategic innovative phase from 2006: the strategy phase of global brand after the Brand Strategy Phase, Multi-Dimensional Strategy Phase and Internationalization Strategy Phase. The difference between international strategy and global brand strategy: international strategy phase is based on china, radiating to the whole world while global brand strategy is to create localized Haier brand in each market. The issue to be transacted for Haier implementing global brand strategy is to promote the products' and business management competitiveness to realize win-win profits with suppliers, customers and users. Transformed from unitary culture to multi-culture, Haier realized sustainable development. 4.2 Strategic Development and Innovation 1) Strategic Alliance: More and more intense market competition come at the background of globalization, resources and capabilities of individual organizations reveals its limitations and the former competition between individual enterprises has evolved into drainage systems and channel systems competition. For example: "Nokia" and "Microsoft" company reached a coalition agreement; "HP" purchased "Kang Bai", which has a strong sales ability, and so on. Such a strategic alliance in a short time to make up for lack of business and development needs, integration of resources, lower costs, reduce waste, improve efficiency, optimize capital utilization and the rate of return, and ultimately achieve "win-win" situation. 2) New marketing strategy: Network marketing combines businesses and consumers together, to provide a new sales channel. The new channels not only simplifies the traditional multi-channel marketing in the form, and set sales, sales service, product and customer information in one query, which can also supply to meet customer needs in a timely manner, and feedback the information in a timely manner to adjust the defects, so it has very significant advantages and good development prospects. Most importantly, the network marketing also can have a "little part of" sales people do not even have to set the size of the product development space and not interim storage, thus reducing operating costs and transaction costs channels. This marketing strategy similar to the "Dell" and "direct" mode, direct contacts with consumers, avoid the bargaining power of buyers, the decrease in profits. 5. Organization Structure 5.1 "Haier" Introduction of Organizational Structure In essence, the organizational structure of Haier has experienced three major changes from the straight line functional system - a "matrix" structure - the "market chain" structure. The straight line functional system likes a pyramid, the following is the most common staff, the top is the director and general manager. Its advantage is that its easier to control to the terminal at the beginning, the straight line functional system could carry a task right down to the grass-roots level ", the response was very fast. But as the business has grown, it is difficult to adapt this organizational structure development. The biggest weakness is slow to respond to the market. To overcome this problem, Haier changed to "matrix" structure. Abscissa is the functional departments, including planning, finance, supply, procurement; vertical axis is the different projects. In terms of functions, horizontal and vertical coordinates of the contact is necessary to grasp each other's work. The development of diversified forms of business organizations, the stage can be compared quickly to mobilize all forces to promote new projects, and has great elasticity and flexibility. But this can not be carried out from the global to grasp and control. The "market chain" structure, not only the functions of the module segments, but also from a global perspective, comprehensive integration, good information to establish such a chain can be carried out quickly and timely transmission of information and feedback, making the business problems that occur and make timely adjustments and changes. 5.2 The Development of Organization Structure and Analysis With the continuous development of the organization, its size is also changing. Therefore organizations must constantly change to meet the development needs. And span of control, management level and so to make adaptive changes in the constant. And has also made market chain process reengineering, creative use of "human single one" model, each manager is an independent business body combat, everyone has their own target market and marketing goals, which can develop their own market strategies to create new markets, new demands with the fastest speed. Not the same, only changing to adapt the ever-changing circumstances in order to continuously develop and establish Haier in an unassailable position. 6. Conclusion Haier was able to transform itself from a small factory operating at an annual loss of nearly RMB 1,470,000 into the number one refrigerator brand in China, which enjoys a high reputation at home and abroad of large-scale international enterprise group. Its success is not accidental, which can be attributed to the following three aspects: First, the establishment and monitor of strategy; Second, the cultivation and use of talents; Third, cultivate a good enterprise culture. Striking the face of the achievements already made, "Haier" is not standing still and enjoy the results achieved, but in the constant improvement and constant innovation to overcome his own shortcomings and open up new markets and create new situation. As to the existing corporate culture, which still need to inject new elements, such as inheritance and development and innovation "3T" - a new corporate philosophy T (Target), is the goal, to have the first goal of competitive markets; T (Today), is the account shall be cleared daily, we should work today, not wait until tomorrow. T (Team), is the team; This allows enterprises to maintain vitality, which there will be a tremendous energy to promote enterprises developing rapidly.