Haier: Taking a Chinese Company Case Study

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Haier's global competitive position is defined by the bargaining power of suppliers, substitute products and services, bargaining power of buyers and potential new market entrants. The core competencies and profitable growth through value creation that Haier has been able to attain is more attributable to leveraging subsidiary skills to create localization strategies. What emerges from an analysis of the economies of scale attained by streamlining its own value chain is the fact that Haier has the ability to define localized strategies very effectively without losing global sales and value chain momentum in the process. Haier's decision to only concentrate on those most competitively-entrenched markets could have led to pressures for cost reductions and the continual pursue of low-cost pricing strategies that would have impacted profitability. Instead, Haier concentrates on location-based economies of scale, translating local market intelligence and attaining greater market insights while reducing costs through the experience effect.

One of the core competencies of Haier is their ability to quickly gain access to foreign markets significantly different than their own. The successful launch into the U.S., where the company was able to concentrate on local responsiveness through an innovative new product development and introduction (NPDI) process, illustrates this point. The cost and time pressures surrounding local responsiveness are significant for any organization, yet for manufacturers in white goods, they are particularly challenging due to cost pressures and the pressure to keep operations profitable.

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Quantifying these differences from a cultural standpoint is possible using the Hofstede Model of Cultural Dimensions comparing the U.S. And China shown to the right. The Power Distance Index (PDI), Individuality (IDV) and Long-Term Orientation (LTO) factors are the most significant in terms of differences across cultures and illustrate why leveraging subsidiary skills is so critical for growth into emerging markets. Haier is known for having this as a core competency. Capitalizing on these differences in cultural dimension over time assists Haier in value creation, profitable growth and enabling experience effects.

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Haier's ability to transform its value chain, re-orienting it to quality management over price has in turn contributed to the redefinition of global standardization strategies in their industry. The transactional strategies of Joint Ventures and creating rapid congruence to cultures has also given Haier a unique competitive advantage globally. Haier needs to capture how these strategies are inherent value creation processes within their business and continually rely on them for the emerging economies including India that lack the clarity of structure that the U.S. market has. If Haier is to be a trusted advisor for larger appliances, it must invest in a global standardization strategy of quality, winning Malcolm Baldrige, Consumer Reports and many other awards to further support and strengthen that critical area of their strategy......

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