Haier Group Corporation - Essay Example

Introduction In the business world a company’s vision and long term goals determine its ability to grow and exceed expectation. Haier Group Corporation is an example of a company that started out a simple domestic operation that had one product offering. The owner of this firm wanted changes to occur and seek greater things for this company. The Higher and Higher case study shows the trajectory of a company that became a global sensation by diversifying its business and expanding into new marketplaces. The company has already achieved great things, but it wants to become even greater. This report provides answers to the four discussion questions of the case study. The content of the answers includes information about the company’s capabilities, strengths and weakness, the value chain internal analysis and how the CEO can exploit the company’s resources to reach its goals. 1. The Haier Group Corporation is a Chinese based firm that was able to convert its medium size domestic manufacturing firm into a global giant during the past two decades. The company’s core product are home appliances in which they are 4th in the world, but the firm has not limited itself to single type product which has enabled Hair to have a diversified product offering of over 43 million products in 96 categories. The company has a superior logistics supply chain network that covers 160 countries around the world with over 50,000 sales outlets carrying their products. The size of the company and its established global network are two positive aspects of the operation which can be used by the firm to obtain a competitive advantage. The company diversification strategy and its global branding approach are two aspects that make their operation distinctive. The company is able to offer a wide array of products which makes doing business with Haeir an attractive alternative for distributors and retailers worldwide. The business growth of this firm has been limited by a centralized approach. The company has openly favored expanding its manufacturing operations into developed nations in order to show that the firm cares about the community to establish an image of a local firm. Consumers tend to have greater loyalty for domestically produced products because they have a greater impact in the local economy in the form of revenues and job creation. Haier is a local producer in marketplaces such as the United States and Europe. A critical strategy that has allowed the company great acceptance in all the marketplaces they penetrate is the fact that their products are quality items at affordable prices. Low costs products are able to achieve higher market share because the consumer pool for these items is larger (Kotler, 2002). 2. Haier is the top home appliances company in the Chinese marketplace. The company was founded in China and it has been able to learn better than others about the Chinese purchasing behavior due to its insight into the marketplace which has been mastered through a long learning curve. China is one the hottest consumer marketplace in the planet. The country has fast growing middle class that is acquiring purchasing power and is eager to purchase goods to increase the quality of life of its family. Its Chinese connection gives Haier a competitive advantage in its procurement of materials. The company can purchase in greater bulk than firms at lower prices since the firm has long term established relations with the local suppliers in China and the Asian region. Economies of scale provide companies the ability to increase its productive capacity while achieve lower production costs (Varian, 2003). The products manufacturer in foreign countries such as the United States can be sold at lower prices because the company has a lower cost structure. These advantages the company has are also an inherent weakness for a company that is trying to change its strategic focus of targeting the lower end market. This firm has over 6000 patent pending technologies that will allow the company to introduce new innovative products in the coming years (Haier, 2008). Many of these products would benefit if the company is able to change the consumer’s perception that Haier produces cheap merchandise. The new line of products could be sold at higher prices that allow better overall profitability of the company. The company needs to differentiate its production output in foreign locations. Producing the same refrigeration in the United States that is being manufacture in China does not really imply that this is American made product. Ideas such as the recent launch of a new eco-friendly appliance line that targets the high-end market is a good start for the company. 3. In order to perform an internal analysis of the company my recommendation for CEO Zhang is to perform a value chain analysis. Michael Porter n 1985 introduced the concept of value chain in his book Competitive Advantage (Netmba, 2008). The value chain is composed of five primary activities and four secondary activities. The five primary activities are inbound logistics, operations, outbound logistics, marketing & sales, and service. These primary activities are supported by human resources, procurement, infrastructure and technology. This analysis provides a comprehensive view of all the internal aspects of Haier operations. A multinational company requires an analytic tool with the capability to separate the different operating aspects. For Haier in particular logistic play a key role in the company’s ability to spread its product to 160 nations. Determining the strengths and weakness of the different operation areas will enable the company to make improvements in its value chain that will the company to become a greater global player. Technology has played in big role in the company’s ability to interconnect its operations to share information across its different operating activities. A value chain analysis simplifies the analyst job by determining the key areas that can make a difference towards improving a firm’s operations. In order to accomplish the firms long term goals marketing and sales are a key operation to focus on. The company needs to change its image in order to increase the company brand value and change the perception of their products being exclusively targeting the low-end market. A value chain analysis can be used to create an implementation plan for the use of a cost advantage or differentiation strategy. The company been successful with the use of a cost advantage strategy and are in need to determine the best way to add a differentiation strategy for its newer product lines. 4. Mr. Zhang has established very ambitious goals for Haier Corporation. His vision is very refreshing and considering its historic path there is no reason to doubt the sky is the limit for the firm. He wants Haier to be become the top player in the consumer appliance industry and for its brand name to be recognize everywhere as a manufacture that produces quality products that provide value. The diversification strategy along with its massive global rollout created a business model that adapted well to the changing business world of the 21st century. The new marketing techniques are a good idea as far as changing the general perception of the public, but Mr. Zhang must understand that the reason the company’s product are so attractive is that they offer price points that can not be matched by most of its competition. The company can introduce new more expensive appliance model to showcase their technologies and capabilities, but they should not introduced as primary strategy to replace lower-end products. In the other business lines outside the home appliance market I support radical changes in the type of products being offered. Higher price items can help increase the company gross margins. It will open doors to achieve new distribution channels in specialty stores. The long term plans of the company are solid and the firm’s managerial practices are dynamic and flexible. Market chain and individual goal combination are two managerial practices that have helped the company achieve high levels of performance (Haier, 2008). To exploit the firm’s market presence the Mr. Zhang must exploit the new marketing channels that are changing the way messages are delivered. Marketing ads utilized mobile technology is the next big thing. By the year 2012 there will be nearly 5 billion cellular devices online around the world (Plunkett Research, 2008). The internet and its marketing capabilities must be mastered by Haier in order to achieve higher levels of ecommerce sales. Conclusion Haier Group Corporation has been able to become the world #4 largest appliance retailer by utilizing a low cost strategy that combines great prices with a quality product. The firm has a great distribution network that expands into 160 countries and enabled the company to have over 50,000 retailers selling the firm’s products. The company’s biggest strength is the fact that Hair has its corporate headquarters in China a place where they top appliance firm in the nation. They have utilized their Asian connection to purchase its raw material at lower prices than the competition. Its biggest strength currently is a weakness for the firm based on its goal to become a global leader. People associated Chinese product with cheap products and new direction of Haier is to penetrate into other markets such as luxury products. The value chain analysis is the best internal analysis tool that can implemented at Haier because it involves studying the firms primary activities that formulate its operations. In order for Mr. Zhang to achieve its new vision he must change the public perception of the company. References Haier.com (2008). Company Background. Retrieved October 27, 2008 from http://www.haier.com/abouthaier/corporateprofile/index.asp Kotler, P. (2002). Marketing Management (11th ed.). New Jersey: Prentice Hall. Netmba.com (2008). The Value Chain. Retrieved October 30, 2008 from http://www.netmba.com/strategy/value-chain/ Plunkett Research (2008). Celullar, Wireless & RFID Marketplace. Retrieved October 27, 2008 from Plunkett Research database. Varian, H. (2003). Intermediate Economics: A Modern Approach (6th ed.). New York: W.W. Norton & Companies. Read More