Strategic Audit of Haier Group

Case 24 Strategic Management MGMT 436Group 5

Current Situation (Jw Hayes) A. Current Performance 2001 to 2004

Organized into 6 Divisions:

Haier China

Haier Europe

Haier America

Haier Middle East

Haier Spain

Haier New Zealand (L., and Hunger 24-2)

Top 100 Most recognized Worldwide Brand Name

20 Year Old Company from China

Produce Home Electrical Appliances

18 Design Centers

10 Industrial Parks

30 Overseas factories and manufacturing bases

58,800 Sales offices

96 Product Group Categories To include :

Refrigerators, Washing Machines, Air Conditioners, Cell phones, TV’s(L., and Hunger 24-1)

(Jw Hayes)

2004 Global Sales $12 Billion

4th in Global Sales revenue for White goods in 2004

21% Market Share China overall Appliances

34% Market Share China Major Home appliances

14% Market Share China small electronic appliances

(L., and Hunger 24-16)

(Jw Hayes)

B. Strategic Posture

MissionTo improve the quality of life, focusing on customers' needs

Objectives Haier strives to create innovative and affordable

quality products, to deliver sincere, delightful and

caring services, in order to satisfy different customers

("Haier: about us," 2011)

(Jw Hayes)

Policies(Jw Hayes)

Expand Brand Recognition

Offer Niche products while expanding diverse product line

Maintain strict cost control to keep product prices competitive

Continue quick development programs and fast production updates

Maintain strong distribution network and supply chain relationships

(L., and Hunger 24-1-26)

Strategies

Brand Name Strategy

7 years built strong brand name in Refrigerator products

thru Total Quality control System

Products known for quality and innovation

Diversified Development Strategy

6 years to diversify product catalogue

By 2004 13,000 products in 86 categories

Three Stage Growth Plan

L., and Hunger 24-23-24)

(Jw Hayes)

Going Multinational Strategy

First move into Southeast Asia

Second expand into United States in 1990’s

European entrance in 2001

Japan expansion in 2002

2005 Haier has 62 distributors and

30,000 retail outlets worldwide

Eventual GoalTo be listed among Fortune 500 Successful Companies

L., and Hunger 24-23-24

(Jw Hayes)

2. Corporate GovernanceA. Board of DirectorsName Title Age

Zhang Ruimin Chairman and Chief Executive Officer 61

Yang Mianmian President and Director 65

Chai Yongsen Executive Vice President and Executive Director 44

Cui Shaohua Vice President and Executive Director 49

Song Chunguang Vice President, Sales Director of Pegasus Qingdao, Deputy General Manager of Pegasus Qingdao and Executive Director

43

Liang Haishan Vice President and Executive Director 40

Cao Chunhua Vice President, General Manager of Washing Machine Division and Executive Director 38

(Bloomberg, 2011)

(Jw Hayes)

Name (Connections) Primary Company Age

Wu Kesong Haier Group Company 56

Kin Kau Lam Mark Neo Telemedia Limited 56

Wu Yinong Haier Electronics Group Co., Ltd. 44

Hoi Wing Fung Henry Global Energy Resources International Group Limited

51

OTHER BOARD MEMBERS ON BOARD MEMBERS

(Bloomberg, 2011)

(Jw Hayes)

L., Thomas, and David Hunger. Strategic Management

and Business Policy: Achieving Sustainability.

Pearson College Div, 2009. 24-1-24-26. Print.

Haier: about us. (2011, May 10). Retrieved from

http://www.haiereurope.com/en/haier-mission

Bloomberg, Initials. (2011, May 10). Industrial

conglomerates. Retrieved from

http://investing.businessweek.com/research/stocks/private/

board.asp?privcapId=29621318

(Jw Hayes)

III. External Environment (EFAS table) (John Lerch)

A. Natural Environment

Weather factors associated with shipping overseas (T)

Long shipping times (T)

Economic B. Societal Environment

Lower production costs in China (O)

United States market is the largest in the world (O)

Rapid growth in electronics market (O)

High initial costs for producing products with more

features than (T)

Technological

Political-Legal High cost of competitors duties by manufacturing

overseas and selling in the U.S. (T)

Socio-cultural

Desire for new electronics in U.S. market (O)

(John Lerch)

Rivalry high in the U.S. (T)

Able to expand product lines through partnerships (O)

C. Task Environment

(John Lerch)

III. EFAS Table(John Lerch)

(John Lerch)

IV. Internal Environment (John Taylor)

1. Corporate Structure1. Started out in 1984 as a government owned enterprise.

2. In 2004 was organized into Haier China, Europe, America, Middle East,

Spain and New Zealand Divisions.

3. In 1999 established a Design Center in Boston, a marketing center in

New York, and a Manufacturing facility in S.C.

2. Corporate Culture1. Modify products to meet American Had built a reputation at home

(China) for quality, innovation, and customer service.

2. The main goal of the company was to continuously increase the volume

of products sold in the U.S & modify products to meet U.S. demands

C. Corporate Resources

1. Marketing

a. Introduced its Two Brothers logo into the U.S.

market to boost its brand image. (W)

b. Promoted mostly by outdoor advertisement,

airports, magazines, heavily in trade publications,

and on the internet. Outdated website. (S)

c. Little TV advertising, company sponsored sports

teams and low brand awareness. (W)

(John Taylor)

2. Finance

a. 85% of company orders came from top 10 Chain

stores in U.S. and Europe (S)

b. Average annual growth rate of 78% from 1984-2001. (S)

c. Ranked 4th in major appliance sales worldwide

at the end of 2004. (S)

3. R&D

a. Sluggish new technology development (W)

b. Needs to develop technology for “smart appliances” (W)

(John Taylor)

4. Operations

a. Reached a strategic cooperation agreement with COSCO in

2004, to help explore business opportunities worldwide. (S)

b. Strong distribution network and good relations with both

chain and individual stores. (S)

c. H.A. Has lack of U.S. distribution centers and limited

exhibition space of standard products compared to major

competitors. (W)

(John Taylor)

Weight Rating Wieghted Score

0.1 4 0.40.1 3 0.3

0.05 3 0.150.1 2 0.20.1 3 0.3

0.1 2 0.2

0.05 1 0.050.1 1 0.10.1 2 0.20.1 1 0.1

0.1 1 0.1

1 23 2.1

Weaknesses

Strengths

85% of company orders came from top 10 Chain stores in U.S. and Europe

could weaken its competitiveness when facing even more serious competition in the futureaddress the "smart kitchen" concept developmentcould enable the company to capture and respond to trends in local markets and increase competitiveness

practically unknown or unheard of in the U.S.plans to launch more aggressive TV Campaigns

Outdated website does not help

to help the company explore business opportunities worldwide

Sluggish new technology developmentNeeds to develop "Smart appliance" technology

Lack of U.S. Distrubution centers

Total

Two Brothers LogoTV Advertising

IFAS TableInternal Factors Comments

Promotion by outdoor advertisement, airports, magazines, trade publications and internet.

Average annual growth rate of 78% from 1984-2001Ranked 4th in major appliance sales worldwide 2004

Agreement with COSCO in 2004Strong Distribution Network and good relations with

chain and individual stores

(John Taylor)

V. Analysis of Strategic Factors (John Lerch)

A. Situational Analysis (SWOT)

1. Strengths

a) Promotions by outside advertisements (magazines, trade publications,

etc)

b) 85% of orders came from top 10 chain stores in U.S. and Europe

c) Ranked 4th in major appliance sales in 2004

d) Agreement with Cosco in 2004

e) Strong distribution network and good relations with chain and individual

stores

2. Weaknesses

a) TV Advertising

b) Sluggish new technology development

c) Need to develop “smart appliance” technology

3. Opportunities

a) Introduction of products to U.S. market at lower cost

b) International Partnerships

(John Lerch)

4. Threats

a) Competition in U.S. market

b) Lower response rate for stocking certain products and

overstocking

c) High initial investment to manufacturer products with more

features than competitors

(John Lerch)

V. Analysis of Strategic Factors (John Taylor)

B. Review of Current Mission and Objectives1. Needs to build brand recognition and enhance its brand image.

2. Expand U.S. facilities to allow for in country manufacturing of company products.

3. Introduce a wider range of products into the U.S. market.

V. SFAS Table (John Lerch)(John Lerch)

VI. Strategic Alternatives and Recommended Strategy

(Shavera)A. Strategic Alternatives

1. Stability Strategy: Pause/Proceed with caution.

a. Pros: Enables the company to focus on new market

strategies, and consider focusing on its core products.

b. Cons: Possible loss of market share.

2. Growth Strategy: Horizontal Growth Strategy.

Target niche markets in the U.S. by developing a wider

range of products and services to satisfy their needs.

a. Pros: Enables the company to more quickly capture and respond to

local trends and increase competitiveness

(Wheelen & Hunger, 2010).

b. Cons: Aggressive competition

3. Retrenchment Strategy: Sell Out/Divestment Strategy.

a. Pros: Allows the company to exit out of markets like the

personal computers that are struggling and unprofitable.

b. Cons: Loss of market share and a decrease in profits.

(Shavera)

B. Recommended Strategy

Recommend alternative # 2 which is the Horizontal Growth Strategy.

Haier Company needs to focus on niche markets in the U.S. to satisfy

those customers’ wants and needs. The concentration should not be

on diversification, but rather building a strong brand name and

image in the U.S.

(Shavera)

Wheelen, T & Hunger, J. (2010). Strategic Management and Business Policy. 12th Ed. Prentice Hall.

(Shavera)

VII. Implementation (Travis)

A. Competition for Haier is all over the place. Finding

something like a new hit product that will make them stick out

over all the rest will benefit the company highly. However they

need to be careful to spend their money in the right areas and

make sure it doesn’t go to waste ending in a overall bankrupt.

B. Haier needs to improve its stocking abilities by using

technology to their advantage. They seem to lack in

keeping popular items on hand and ready to ship. Using

technology will help them keep up with what sells out the

quickest in various locations.

(Travis)

VIII. Evaluation and Control (Nick)