Strategic Analysis of Haier - Case Study Example

Name Professor Course Date Strategic Analysis Introduction Haier is a Chinese electronic company, which was set up in Qingdao, 1984, as a refrigerator manufacturing factory (Werner, et. at. 63). Over the years, it has grown into a global company popular for manufacturing electronics; it is now the third largest manufacturer of home appliances. Haier has managed to develop a wide base of multinational consumers, hence grabbing the largest market share of white goods, with more than 6 percent. It has been rated the best global company in China, and most accredited. It is definite that this company has a whole lot of unique cultures and strategies, which have spearheaded its consistent, exceptional results. This essay carries an extensive analysis of Haier’s strategies, which have propelled it to gain competitive advantage over their employees, especially in a world that is continually running out of talents. It aims at taking a detailed analysis of their human resource and research strategy, as well as a comparison of Haier and other multinational companies, without forgetting their strengths and weaknesses. The Process of Haier’s Growth Development Stage Period Additional Activities 1 1984-1991 Refrigerators 2 Dec 1991-July 1995 Freezers and Air Conditioners 3 July 1995-August 1995 Water heater, washing machines, microwave 4 Sept 1995- Sept 1997 Black Household appliances 5 1997-2001 Technological Advancement 6 2001 Acquired Sanyo Japan 7 2001-date High technological revolution, which entails improving already existing products Haier’s Human Resource Strategy outside China Human resource is the cornerstone of every successful company (Werner, et. at. 75). Haier’s management knows that a healthy human resource is like a well lubricated engine; it will get everything running in smoothly in the desired direction. The company has a well established strategy for ensuring that its human resource is healthy and continually works towards improving performance. Fairness and transparency is one of the company’s chief strategies, while outside China (Werner, et. at. 88). The company recognizes that there are people out there who have talents, and need a chance to demonstrate their finesse. While handling human resource outside China, it hence ensures that it recruits based on merit and not favors. It provides a common platform for people from all races to compete and merit; this means that it will be able to get talented people. It then aligns all their activities holistically to ensure that all its human resource in comfortable has a relaxed environment for work. After recruitment, in spite of the level of proficiency of the new staff, the company retrains them in an attempt to align them in the company’s culture, something that helps them to maintain a universal culture; culture is extremely beneficial for the success of any business. The company provides a competitive human resource environment by rewarding all who merit, including the slightest improvements, low performers are usually retrained, and laid off, if they do not improve, managers who do not perform are also demoted and replaced. Their workers also attend motivational and interactive seminars, which help to cut off any barriers of race, ethnicity and any other differences, which may be a hindrance to effective interpersonal relations. All these are a well calculated set of human resource that ensure success of their human resource, outside China. These are effective and exceptionally strong strategies. They ensure that the company has a clean face. This entices all worldwide talents, without a second thought, and provides a common, competitive platform which allows all their employees, in spite of race color and ethnicity, to explore their abilities and produce the best results (Werner, et. at. 103). By hiring people who are in line with the company’s philosophy, they ensure that they have an excellent pool of human resource, which means success to them. Trade-offs and Challenges Facing Haier in the Global Sector Success does not come on a silver platter. There are numerous challenges that face this company, as it fights its way towards establishing a global brand. First, there is the problem of high cost of operation. The company spends a lot of money especially while trying to penetrate new markets. High expenditure is a threat to their stability. They also face stiff competition from their opponents, who share the same vision with them. This means that they have to constantly design other strategies to counter their competitors, lest they are thrown out of business. The present world is facing a high technological revolution. The speed of technological changes is a significant challenge to this company, since they have to keep updating themselves with the latest technology. This is not only costly, but also a threat to their stability. Reluctance to move with technology may lead to poor quality and consequently loss of their market share. This means that they have to make sure they have a robust risk controlling system that advices them on emerging technology, as well as maintain a well trained team of human resource, who are constantly updated with the latest knowledge. Comparison of Electronics (HTC Corporation) with the White Goods Market (Haier) High Tech Computer Corporation, HTC, is an electronic company that is prominent for the production of smartphones and a wide range of tablets. It is a Taiwanese company, which began making smartphones in line with Microsoft’s operating system, before expanding and shifting to the Android operating system. Just like Haier, HTC Corporation has grown over the years form a small company, into a multi-national company that is now among the leading producers of tablets and smartphones in the world. These two companies have their customer’s interest at heart and are also acutely sensitive to their competitors. They, therefore, manufacture high quality products, and offer them to their consumers at the best prices possible, to counter their competitors. Their products are of high technology and are cheaper than the same quality of products from their competitors. Brand building, globalization and diversification, are among their radical strategies. HTC Corporation embraces technology without any delays; the company believes in producing high tech electronics, just as their name suggest, and will stop at nothing but the best technology in the world (Berrell and Clegg 150). They are continuously designing new appliances that come with different technology, within remarkably short intervals. Their success is mainly because of their high tech facilities, which also come with extremely reasonable prices. This is contrary to the white goods market, Haier, which in spite of trying to be updated with technology does not embrace it at an ultra high speed. Haier believes in cutting down their costs of expenditure, and will carry out a highly critical analysis before embracing any new technology. They also take relatively long periods before upgrading their appliances with changing technology. However, Haier is still considered one of the best companies despite being relatively slow in technological advancement. Although HTC are too fast in technology, their clients have complained that their products lack some essential features like a long life battery. Acquisition Strategies of Haier and Newell In an attempt to increase profitability, Haier and Newell have a vision to increase their services and offer a wide range of comprehensive products that are not only reliable but also satisfactory. Acquisition is one of the best strategies that companies employ in an attempt to diversify in products and service. Hair and Newell, have their own strategies for acquisition, which compare and contrast at different levels of interaction. Acquisition for both companies is a corporate strategy potential firms are screened intensely at a corporate level. Haier and Newell can only acquire a new firm after confirming that it is at parity with the company’s philosophy, performance criteria and organization structure. As part of their strategy, they conduct a thorough financial analysis of past and present records of any firms that may be acquired. A deep analysis of their strengths and weaknesses, and a forecast, plays a crucial role in deciding which firm they should acquire. The strategy behind their acquisition is to develop a global network of companies, which will not only offer diversity, but will also give a chance for the company to discover untouched markets, and study new economies. Haier and Newell, however, have some contrasting characteristics of their acquisition strategies. Both companies identify and acquire the ownership of other firms across the globe, in an attempt to increase their international networks. When Haier acquires a firm that has already established a brand in a region, they seek to maintain the name of the company, but incorporate it under Hair group of companies. This helps them to cut on the costs of introducing their name into new markets directly. On the contrary, Newell believes in “Newellisation.” This is a process by which the company acquires and converts other firms into their product lines, within a short lead time. This means that they have to change the identity of the new firms. This is a relatively expensive process, but Newell believes that it is much easy to create a global brand by using one name in all its companies, across the globe. Just like Haier, Newell can also engage in mergers with companies which share them same status with them. This is, however, a rare technique for the company. Strategies for Entering the Chinese Market China is one of the best countries to run a company (Philip and Gary 221). It is a country with an ever growing populace, which contributes to their market growth, competitively by at least 9% annually. Many multinational companies are now trying to find a method of joining the market in China. However, unlike the white good’s market, the Chinese market is acutely sensitive and if I were the head of an international white goods company, I would exercise due attention and extreme care, while trying to penetrate through the Chinese market. For instance, the Chinese are extremely sensitive to business names. What may sound cool to a Mandarin may have a truly different meaning to a Cantonese (Philip and Gary 233). This means that any company seeking to penetrate the market should start by analyzing their name. This may pose a serious challenge to many multinational companies, which may not be willing to change their name in accordance to the Chinese culture. The best way to enter the Chinese market, therefore, would be through acquisition of an existing successful Chinese company (Young 155). This would give the management a chance to maintain the name of the acquired company, or change it, but in line with the Chinese, consumer cultures and traditions. This will be the first strategy in an attempt to enter the Chinese market. Identifying a name that has a business meaning, and associates with common cultures of the Chinese people will pave the way for easy marketing of the company. It will also facilitate prompt creation of a strong brand name in China. Once the company has been set up, I would design products, specifically for the Chinese people. This means that I would have to customize the company’s products and pack them in a way that identifies with the target market in the Chinese market (Fu-Lai 39). A clear study and efficient use of Chinese semiotics are necessary at this point. An excellent example is the liquor industry. Liquor in China is packed in a unique way that identifies with the cultural traditions and beliefs of Chinese. A new brand of liquor from the white goods market may have difficulty penetrating the Chinese market, if the company decides to maintain its western package, since the indigenous will always go for products that identify with them, right from the name, to the packaging (Young 163). The LG electronic company has developed a strong brand name because it products are custom, and stylishly designed to attract the Chinese consumer. The name “coca cola,” (in Chinese “Kekoukela”) when translated to Chinese means “Bite the wax tadpole.” This does not have any useful meaning in marketing to a Chinese; the company was hence forced to search over 40,000 words, and they landed at “Kokoukole” which means “Hapiness in the mouth.” The table below shows the results of a survey of 400 Chinese citizens of different age brackets, through social networks. The interpretation of the results shows that Chinese like to preserve their culture. Age Bracket A B C D Total 18-25 26 47 16 11 100 26-33 19 40 39 2 100 34-41 19 53 21 7 100 42-50 27 41 25 7 100 Key to the Table A- I can use any product as long as it is of superior quality. B- I cannot use products that do not rhyme with the Chinese culture. C- I like Chinese culture but I can also explore other products D- I do not like products that identify with Chinese culture. Another key strategy for a white goods company to enter the Chinese market is to cultivate and effectively manage government relations and also make friends with local people. This means that apart from making local friends, one should also identify the key stakeholders in the government and influential decision makers and cultivating useful relations with them. Many multinational companies which have failed to cultivate respectful relations have not made it in the Chinese market. This is because business in China depends on how connected one is, and the level of influence (Young 177). While this may be unacceptable in many countries, Chinese businessmen depend on networks to win tenders and significant contracts (Berrell and Clegg 199). It is part of their tradition to help friends. The solution to this problem is, therefore, to find the right business partner. I would also not forget to employ comprehensive marketing. A brilliant marketing strategy, which combines all the marketing “mixes” will play a vital role in helping a white goods company enter the Chinese market (Young 181). Again, while marketing, it is necessary to pay attention to the people’s culture. A marketing strategy that aims at preserving their culture will be effective in winning over the market. This may mean organizing talent shows and cultural activities that are aimed at marketing the company’s products and associating these products with the Chinese people; once they view the products as part of them, you will have won them. Lastly, I would incorporate indigenous Chinese in the board of directors, including the exact local people (Berrell and Clegg 177). These are the people who understand the Chinese market; having such people means success to the company, they are the immediate consumers of the company’s products. Their advice will hence be precious as it will help me, as a foreign head of the company to make viable and real decisions, based on their experiences, and avoid speculative decisions. A Comparison of Challenges Faced by HTC in Developing a Brand and Strategic Challenges Faced By Haier Haier and HTC, in their fight to emerge at the top crest of business, are constantly involved in strategic moves. These moves are not only aimed at expanding their area of operation, but also developing a powerful brand name that will get them moving like business giants (Lui 113). However, these strategies are not a walk in the park; these companies meet a lot of challenges in the process of putting their strategies to ground. One of the most common problems is inadequate money for implementation of their strategies. Despite the fact that these firms may have high-end strategies to meet their swollen ambitions, they cannot implement them without enough funds. The cost of penetrating new markets and building a global brand name is usually extremely high. This means that these companies have to find alternative ways, which are less costly, but effective. These companies also face the challenge of failing to get a full comprehension of the customer’s needs. Any company that wants to grow must first start by understanding their potential customers in terms of social class and their needs. However, it is difficult to understand the consumers’ needs until you take a close study at them. On the contrary, as much as Haier and HTC try to take a market needs analysis; they may not get in touch with the little fine details that influence the consumer’s decision. The companies hence end up making decisions based on speculations and theories, which may not always be true (Lui 128). These companies, therefore, should ensure they get in touch with the local consumer, on a timely basis, for interactive sessions that will allow them to understand their perspective of the market. In order to win over new markets, patience is inexorable. They have to be patient and take time to study their target markets from an interactive level, so that they can grab a deep understanding of their potential market’s motivation. Stiff competition from their opponents is an issue. HTC faces the challenge of dealing with unethical competitors, who constantly spit of their name. They have to fight through the battle of identity, which involves trying to grab the best identity before their opponents win over them. Haier, in the same line, also faces a stiff challenge from its competitors, who are constantly seeking to expand their areas of operation. The company, therefore, has to take carefully calculated steps that will not allow their competitors to overtake them in business (Lui 144). Haier, unlike HTC, is faced by a great challenge of diversity and passion for differentiation. One of the key drivers of HTC’s success is a high rate of differentiation; this provides the customer with a variety of products to choose from. Consumers will stick to such a company since they do not only want quality, but also products that have many tastes. Despite the fact that Haier has set a record of quality products that use high technology, it has not been keen to embrace diversification of its brands. They have few brands, which may be superior to those of their competitors, but due to lack of high-end distinction, the business may still have difficulty in market penetration. However, Haier has a holistic management system, which ensures that they recruit people based on pure merit (Fu-Lai 44). HTC also has a policy requiring it to recruit employees on merit. However, being a Taiwanese company, most of its top managers are Taiwan, this poses a serious challenge to them; a lucrative brand identity can only be achieved through incorporation of people from different parts of the globe in the team. Works Cited Berrell Mike and Clegg Stewart. Business Networks and Strategic Alliances in China. Northampton: Edward Elgar Publishing, 2007. Print. Fu-Lai, Tony Yu. Taiwan’s Economic Transformation in Evolutionary Perspective. New York: Nova Science Publishers, 2007. Print. Lui Ling. China’s Industrial Policies and the Global Business Revolution: The Case of the Domestic Appliance Industry. New York: Routledge Publisher,2005. Print. Philip, Kotler and Gary Armstrong. Principles of Marketing. New York: Pearson Publishers, 2009. Print. Werner, Steve, Schuler Randall and Jackson Susan. Managing Human Resource. South Western: Cengage Publishers, 2011. Print Young Laurie. The Marketer’s Handbook: Reassessing Marketing Techniques in Modern Business. New York: John and Wiley sons Publishers, 2009. Print. Hoskisson, Robert, et. al. Strategic Management: Competitiveness and Globalization: Cases. Hong Kong: John Wiley and Sons Publishers, 2011. Print. Read More