HAIER Group Corporation

HAIER Group Corporation

COMPANY DESCRIPTION

HAIER Group Corporation is a Chinese based multinational corporation manufacturing & designing electronics and home appliances. It was founded by Zhang Ruimin in 1984, and he is the current Secretary of the Haier Group Party Committee and Haier Group Chairman of the Board of Directors and CEO. The headquarters are in Qingdao, China.

Products include line include:

Ø refrigerators,

Ø air conditioners,

Ø washing machines,

Ø microwave ovens,

Ø mobile phones,

Ø computers, and

Ø Televisions.

Haier operates in the US market, Europe, China, and Africa where it has plants in five countries: Tunisia, Nigeria, Egypt, Algeria and South Africa

company environment

Haier’s environment can be described as the following:

In the past decade, along with the gradual development of the global home appliance industry, the growth rate and occupancy of the home appliance business has kept descending. One reason is the increase in cost, like human costs, materials and so on. Another reason is the decreasing of the economy. Many countries suffered the 2008 crisis, and the economy has experienced a severe recession, which leads to the weak consumption in-home appliance market. Haier has a large share of oversees markets, like the USA market, but due to frequent trade war between China and America, Haier has to put more effort into increasing the Chinese market share to guarantee the stability of earnings. However, Chinese consumers habit has already changed. They do not only care about products’ prices but also value the quantity, design, and health when they buy home appliance goods. In the Chinese market, the age that once producers produce goods, and then the goods will be consumed has already gone. Now, Chinese consumers are more fastidious when they buy home appliances. There are too many brands that consumers can choose from.

Haier is in a fiercely competitive environment. Haier ranked as the third most favored refrigerator brand by Chinese consumers, lagging behind two toughest competitors, Midea and Gree. Otherwise, some new scientific and technical corporations also wrest Haier’s market share. Besides domestic brands, an increasing number of international appliance companies enter China. The domestic market, as the main market, has appeared a noticeable threat. In the international market, Haier lags behind in capital, technology, and management when compared with multinational companies, especially the high-end market. Haier has to change itself to gain competitiveness and finally gain the recognition of consumers.

The internet has brought disruptive changes to traditional industries. Home appliance, as a traditional industry, Haier has to receive a challenge from the internet. The development of artificial intelligence technology has pushed traditional home appliances into a new era of smart home appliances. Now, both Chinese domestic and international markets, the smart home appliance, are getting more and more popular among consumers.

With the numerous new entrants into the home appliance market and excessive supply over demand, many companies lower their prices for sales turnover. In addition, some companies launch new products at a low price due to their advanced technology. All these are a threat to Haier’s market position.

Haier internal factors also constrain it to win customers’ favor. Haier is struggling with its unsuccessful information constructions. There is a great difficulty for Haier to exchange the electronic information and data effectively with its suppliers and distributors, thus leaving the purchasing and distribution costs relatively high. The rigid bureaucracy made the enterprise lose its vitality. The small businesses are able to respond more flexibly and quickly to changes in the market. The unsynchronized external information environment should be the main factor to blame for the dilemma. What’s more, Haier also failed to pay attention to effective global marketing and advertising promotion. Although Haier has already sold its goods all around the world, it’s brand awareness still at a relatively low level, especially for adults.

company products and/ or service at the market

The Company mainly engages in research, development, production, and sales of home appliances. The product portfolios are refrigerators/freezers, washing machines, air-conditioners, water heaters, kitchen appliance products, small home appliances, U-home smart home business. The Company is offering complete sets of smart home solutions to its consumers through a rich portfolio of products and brands to create a better life experience. The Company’s integration service business mainly provides customers with full-process services such as distribution, logistics, and after-sale of home appliances, household appliances, and other products, as well as other value-added services.

In 2019, it is expected that the national economy will grow steadily at a low rate; According to AVC’s prediction, the total retail sales of white goods (refrigerators, washing machines, and air conditioners) will reach RMB372.9 billion in 2019, representing a growth of 0.4% YoY. The kitchen and bathroom market will still be at a turning point. The estimation of that the retail sales of kitchen appliances and water heaters will reach RMB62.6 billion and RMB64.3 billion, respectively, representing 2.4% and 1.9% YoY decrease, respectively. Overseas Markets: According to the World Bank’s report, 2019 Global Economic Prospects, the global economy will face more severe downside risks in 2019 due to potential escalating trade tensions and fragile international finance markets. Global growth will decrease from 3% in 2018 to 2.9% in 2019. The macroeconomic slowdown will affect the demand for home appliances.

The problems that lead to the innovative approach and change of business model

After experiencing trade war, price war, economic recession, and the internet economy’s explosion, as a traditional industry, Haier’s main leaders already have been aware of the changing nature of the market, and the traditional business model is too rigid to quickly and flexibly respond consumers’ demand. The long-standing bureaucracy and linear management mindset let Haier lose its competitiveness in the market.

In order to become flexible, Haier competes through platforms – or, put another way, through linkages among independent enterprises, aligned via their interoperable technologies and their creative efforts. To allow every employee to be his or her own boss and longer delegate or empower employees. Make Haier grow collectively as an enterprise and no longer be dependent on a few key people. New opportunities can be secured quickly. Feel sensitive and respond flexibly to market changes. Maintain the passion and vitality of a pioneer.

The business model

The Qingdao-based Company is one of the household names in china for refrigerators and is now moving towards cutting edge home robotics devices and making work easier at home. Recently, Haier launched a Coton washing machine, a pocket-sized washing machine; this machine so far is considered the most innovative in the market. Haier company innovations are the cornerstone of survival in today’s world. The Company has shifted towards artificial intelligence.

Haier CEO describes the new model REN-DAN-HEYI as the most effective way of doing business since it a win-win for both the employees and the customers. REN stands for the employees, while DAN means user value, and HEYI is the unity of the entire model. The REN-DAN-HEYI model, unlike the old, focuses on an open system with free-flowing information across the board where employees are given an opportunity for self-motivation towards the company goal. The model also is geared towards making lifetime customers to the company products. The Haier Company is built on the idea of making the Company a local producer in a particular company.

REN-DAN-HEYI mean tearing apart the old enterprise structure and developing a new venture like an entrepreneur’s hub with a regional leader called micro-enterprises. The leaders have powers as equal as the CEO of the overall Company does. The micro-enterprises are an effective way of securing new opportunities as well as market research for the company products. The model also works towards the production of the homogeneous product to suit different market needs across the globe. REN-DAN-HEYI, just like a salad dresser, binds all the factors together in different regions for a superior product.

At Haier, the REN-DAN-HEYI model work interrelated with other methods to create a unique product that the world’s needs. Most companies blame factors from the external environment affecting their businesses, but at Haier, they capitalize on the external factors to make the business even better.

Comparison between the old model and the new model

The old model was hierarchically driven; all the communication and process came from the top to down. Under the old model, decision-making was slow and zeroed innovations. The innovations made were not focused on consumer needs. While on the other hand, the new model is consumer-focused and aimed at reducing the distance between the Company and them. All innovation is geared towards making the life of a consumer easier. Under the new model, the entire organization is flat, and the information flows across.

Reference

Verbeke, A. (2013). International Business Strategy. Cambridge: Cambridge University Press.

Yi, J. J., & Ye, S. X. (2002). The Haier way: The making of a Chinese business leader and a global brand. Dumont, NJ: Homa & Sekey Books.

Grant, R. M. (2016). Contemporary strategy analysis: Text and cases.

Cao, Y. (2018). The Haier model: Reinventing a multinational giant in the new network era.