| Haier: Taking a Chinese Company Global and Crossing Borders: MTC’s Journey through Africa |

1.
Was Haier’s decision to globalize into developed markets early on a good strategy? You need to be able to articulate a clear rationale about the risks and benefits of this model in offering a comprehensive assessment of the route that Haier took. Would this be a good option for other emerging market firms as well? Would you specify any caveats in applying to other firms? * Ans: Haier’s decision to globalize through developed markets was not only bold but also risky. However, on the basis of our analysis we conclude that it was a very good strategy. If the framework of four-tiered market structure discussed in Emerging Giants1 is applied, the option open to Haier to reach global markets was to penetrate through local, glocal markets. However, this would have taken a long time and also would have cost substantial resources. If this strategy is adopted they also would have faced several hurdles and competitors. * * Haier’s strategy to take an external route to reach global market made its path simple. The hurdle in this option was to penetrate the pyramid. However, Haier identified weak structures in the top of the pyramid, global part, and penetrated it successfully. After penetrating it, it started moving downwards to complete the circular path. *

* Global
Global

* * Glocal
Glocal

Local
Local

Bottom
Bottom

* The following were the risks associated with this strategy. 1 Confrontation with global players in the traditional market would have dissipated its energies - it would have been forced to fish in red ocean. 2 It would have succeeded in a price war. 3 It would not have succeeded in creating a niche market for itself. * * On the other hand Haier derived the following benefits with this strategy. 1 It entered the “blue ocean” – the deep sea and commanded a premium on its products. 2 It created a niche market among university students and offices. 3 It established itself as an American company and shed its “China” image. 4 The image created in developed markets gave Haier credibility in other developing markets. * * However, this strategy cannot be applied by all companies uniformly. Haier succeeded because it identified a specific need in developed markets and moved in fast to fulfill it. It also adopted a “while in Rome be a Roman” strategy. On the other hand, if corporations fail to identify an unfulfilled need in developed markets they will hit a hard rock while penetrating the global market. They will find competing with global brands difficult. Haier also had the backing in its home market where it was able to generate sufficient profits to fund its overseas growth. It also received support from home investors and conducive government policies. * * 2. Can Haier build on its success in niche products to become a dominant global brand in high-end white goods? What might such a strategy look like and how might this be rolled out? What is the potential for likely success of such a strategy?

Ans: Haier can build up its success in Niche Products and become a dominant global brand in high end white goods only if the following is satisfied:

1. Haier has to pay continued close attention to consumer needs in overseas markets and it must be willing to make small product modifications for markets. 2. Haier’s Research and Development must be in line with providing what hasn’t yet been provided by market leaders in specific markets. Relevant feature rich products can go a long way in bringing the customer towards the products as their requirements would be in a customized way, fulfilled by these products which are specifically not catered by bulk manufacturers which are the market leaders. 3. The above can be established only when Haier gives sufficient scope for brand loyalty to seep into the minds of consumers. This can be done by constant promotion by Haier depicting itself as a Local Brand in the markets, its operating. 4. Having local personnel will also help in making the local customers feel at home with Haier.

The strategy of building a dominant name in a market would involve-

1. .Getting the market, to know, what kind of a brand Haier is- whether it is a premium single product brand or a multi-product brand 2. As Haier would need to start by setting itself up as a niche product brand, so, the main strategy would be to get the branding done accordingly. 3. Having the highest quality products with the most stringent distribution line as well as focus to detail will make Haier capable of weathering any unforeseen incidents while entering the global emerging markets platform. 4. Reputation needed to be built so that that could be used in emerging countries. 5. Developing a relationship with the Big retail chains will help Haier in easily getting into the distribution channel of U.S and thereby lead to less gestation period in terms of branding itself as that would be done through these channels itself. 6. Having set up design centres at various places ensured that Haier didn’t lose out on the market based on prompt servicing. This would greatly help them as new orders would be available to them as they would have already developed a trust in the minds of consumers thus enabling repeat sales as well. 7. Having done all the above, Haier really needs to go on a large scale of multi product strategy and generate demand to make people buy products beyond a dorm refrigerator or a wine cellar. The trust required for getting the above purchases done can come in, only when Haier goes full throttle in branding itself locally in International developed markets to get the trust of the local consumers so that local consumers perceive Haier as a premium brand and not just any mass producer.

The above strategy would help Haier in

1. In getting a tag of differentiated products brand 2. Alongside, competition from MNC’s can very well be tackled as Haier would also have gained the know-how by then required to survive in a competitive environment. 3. If Haier can get a good name by spending on building a global brand and not just a compact refrigerator seller in the global markets, it can very well be on its way to becoming one like GE, Electrolux and the like.