Causes of a Problem of Haier - Essay Example

1) Causes of a problem. As it appears from the case Haier has had a very successful performance so far and it was due to its unique performance management system that successfully moved from a socialist enterprise to a multinational. It is ranked as the world’s sixth largest market of large kitchen appliances. It has established a valuable brand through a successful strategy of market niches. It has also pursued some innovative human resource management practices i.e. it tied salaries and job security to performance through transparent and fair performance appraisal systems. These systems were very successful regarding the Chinese culture of management but since the company wants to increase its global installed base there is a question on how it is going to achieve it by following the same human resource management practices. These are the following: increase of employee internal competition by implementing an internal ranking of employees. Employees are judged by all performance dimensions and they have to complete their tasks the same day and have continuous self-assessments. Each employee is almost an independent profit center so entrepreneurship is developed. Managers are also continuously appraised like employees and both are given chances to improve their performance by providing abundant training. A talent pool inside the company is also created. There may be the following problems in Haier’s strategy and taking into consideration the current global financial crisis the following require some careful thinking and planning: Haier has followed a product diversification strategy i.e. it has expanded to 86 different product categories. It is doubtful if Haier can pursue the same following strategy since product expansion requires heavy investment. Then a second part of its strategy was product innovation to niche markets i.e. developing products for specific market segments. Under careful consideration this is a strategy that can be pursued at the current moment. Globalization which is the third component of the strategy is expanding to other countries in all aspects i.e. production, alliances etc. Globalization can also be limited for the time being since it requires heavy financial investment when it comes to building new factory sites that can be quite risky at this period of time. Globalization demands also understanding foreign cultures so it requires further research on this issue. The fourth component was marketing initiatives that emphasized product quality and market research. Sending a message of quality is a right strategy when an organization wants to establish a successful brand name but there is a question on how Haier in the current economic crisis can keep on holding high product prices. The last component of Haier’s strategy is the innovative human resource management practices. This has been proved successful for Chinese standards but there is a question on how these strategies are going to be successful in other countries and cultures. 2) Possible Solutions. A solution cannot be suggested without taking into consideration the global macroeconomic environment. In this case there is a global economic crisis the duration of which cannot be predicted. The global crisis has affected investments, consumers’ purchasing power, belief in the stock exchange and the banks, banks provide loans to businesses by following very strict lending criteria and as a result of the above businesses limit their expansion plans, their profit margins are reduced and in many occasions they fire people. The consumers on the other side are in a psychological “trap”, they feel insecure about their future therefore they reduce and change their consumption habits. They have become more conservative. Taking all the above mentioned into consideration, Haier has to limit its product diversification since it requires heavy investment in production and marketing and sales. The product innovation to niche markets requires usually an investment in R&D. Haier has to study carefully all its R&D expenses and do a very careful marketing study of the market segments and see which of them are so profitable at the current financial situation that an investment in R&D will be justified. The third part contains marketing initiatives that emphasized product quality and market research must also be studied carefully. Establishing a brand name is considered a good step since it helps the organization acquiring a competitive advantage and protects it from price wars since customers know the brand and prefer it. But in the current situation, the company should avoid increase further the product prices and it should reduce the marketing costs in respect of advertising etc. The fourth part is globalization, it requires heavy investment in building overseas production units. This part can be avoided for the present moment but Haier could develop further its distribution network, the joint ventures and the international technology alliances. Finally the fourth part which is the innovative human resource management practices, this is an issue that does not require heavy financial investments but it should be carefully studied on how it is going to be implemented to the global markets and make appropriate modifications. 3) Recommended solution and its implementations. A company’s strategic plan should always be long-term. Given the fact, that the global economic estimations cannot determine the duration of the current economic crisis, Haier has to develop a plan that is a combination of the above. There are two important issues: Haier’s position as a player in the strategic game is a follower and the current crisis. Haier has to examine its competitors’position and adapt accordingly. A reasonable step should be to implement market penetration. This is a typical step followed by companies that face a mature market or a problematic market as it is the current one. In other words, Haier has to increase its market share by acquiring customers from the competition. This can be done with its existing products to the existing market segments but at a global level. This means that it should further develop its local and international distribution network and if its financial status allows, it should develop further joint ventures or acquire shares of its competitors i.e. it can implement to a reasonable extent horizontal integration. In the latter case i.e. acquisitions Haier has to monitor local and organizational culture of the company acquired and adapt its human resources strategies accordingly but not to the extent that they will oppose the general Haier human resources strategy. Niche marketing can be further developed provided that there are enough customer segments that are profitable to invest. Needless to mention that a continuous customer research and monitoring should be implemented in order to watch the market trends and adapt the strategic plan accordingly. In summary, Haier should follow market penetration and horizontal integration as a solution provided that it follows all the above prerequisites. References Hellriegel, D., Jackson, S.E., Slocum J.W.Jr.(2002).Management: A Competency-Based Approach. Canada: South-Western. Read More