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Sample Case Study Paper on Haier: Taking a Chinese Company Global

Haier: Taking a Chinese Company Global

Part I Internal Analysis

The core set of skills at Haier is perceivable as a mix of various capabilities and competences to enhance the quality and success of operations, including responsiveness to the demands of customers, branding, innovation of products, and development of effective channels of distribution. These competences at the enterprise are evident in the forms of both tangibles and intangibles. Some of the competences that the enterprise utilizes to influence high capabilities in its operations concern the creativity and foresightof its staff to take advantage of opportunities in the market by evaluating the needs of customers and developing innovative solutions. When a customer complained to the enterprise about his washing machine’s tendency to break down constantly, technicians observed that the cause was the clogging of the plumbing with mud as peasants used them to clean vegetables and sweet potatoes(Palepu, Khanna, & Vargas, 2006). The enterprise’s engineers evaluated the needs of peasants in China’s rural Sichuan province and modified the design of the washing machine to accommodate their needs. The new model proved to be practical for the peasants because it met their requirements. Due to the creativity and innovativeness of its staff, Haier was able to meet the specific demands and needs of its market locally and abroad, thus broadening the scope of its products and enhancing its market performance. In another instance, the foresight of the staff to set up a computerized service center in Qingdao in 1990 influenced greater efficiency in its operations and promoted better market performance in the long-term(Palepu, Khanna, & Vargas, 2006).

From the perspective of tangibles, the highly diversified nature of the enterprise’s operations and competent incorporation of effective technology have also contributed to enhanced organizational capacities. The enterprise established an independent enterprise, Haier Logistics, in a reorganization aimed at enhancing its efficiency, leading to greater specialization and quality in its operations(Palepu, Khanna, & Vargas, 2006). Diversification into the international market has also broadened the reach of its market and reduced the risks of its operations.

The mix of capabilities at Haier is too valuable, rare, non-substitutable, and costly to imitate, making the capabilities core competency resources. The mix of capabilities has differentiated the enterprise from others in its industry and allowed it to achieve profitability. The innovativeness and creativity of employees at Haier form the basis for its performance and success in business activities. They enable the success of the enterprise by providing it with sustainable and high quality human resources for the application of competent skills in its operations(Panigrahy& Pradhan, 2015). These competences are costly to imitate because they require investment in competent strategies to attract, recruit, and develop human resources. They are un-substitutable because they form irreplaceable ingredients for the enterprise to achieve such success (no other resources can influence such capacity). Additionally, the capabilities are rare since their development requires a combination of heavy investment in education, competent skill development approaches, and the provision of a facilitative work environment (Panigrahy& Pradhan, 2015). They are also valuable because they form the foundation of continued success in the enterprise’s operations.

The type of competitive advantage that Haier enjoys is differentiation. A competitive advantage grows from the approach that an enterprise employs in achieving discrete advantages such as conceiving innovative ways to conduct its operations or adopting new procedures, inputs, and technologies. Differentiation is the fundamental outcome of the way in which the product, associated services, and other activities of an enterprise influence the activities, behaviors, and choices of its buyers (the market) (Dirisu, Iyiola, &Ibidunni, 2013). In the case of Haier, focus on utilizing the innovativeness and creativity of its human resources has influenced market demand. The differentiation of Haier’s products and services is also evident in its incorporation of technological and service models that influence particular perceptions of its operations and products in the market. For example example, the incorporation of a computerized service center in Qingdao in 1990 influenced the perceptions of customers that the enterprise was a new breed of company (Palepu, Khanna, & Vargas, 2006).

Part II Strategy Implications

Haier’s decision to globalize into developed markets early on was excellent because it represented an opportunity to diversify the enterprise’s markets and reduce operational risks relating to focus on the Chinese market alone. Haier’s strategy in the expansion of its operations internationally was also suitable, because the management made logical decisions that reduced the enterprise’s vulnerability to the uncertainties that were likely in the international markets. While targeting the developed markets, Haier sought to focus on niche markets such as the manufacture of refrigerators for students and offices, thus steering clear of the markets that its established rivals targeted (Palepu, Khanna, & Vargas, 2006). This means that the enterprise focused on offering their products in niche markets that the bigger enterprises ignored. The enterprise also focused on staffing its operations in international markets with members of local communities to promote its social linkages with them and make its operations more suitable in local contexts. The management focused on the needs of customers in these markets with the willingness to make amendments to its products to please local customers (Palepu, Khanna, & Vargas, 2006). Having succeeded in the home market in China, the decision to expand to the developed markets was suitable to influence a prestigious brand personality for its products before expanding into the emerging markets.

Haier can build on the success that it has had in niche products and grow into a dominant brand in high-end white goods at the global level. Despite the market leaderships of established rivals such as Walmart in developed markets, Haier can utilize its strengths in innovation, focus on the needs of customers in niche markets, and market responsiveness to build its competitiveness in these markets and reach high levels of market performance(The Wall Street Journal article, 2013). By focusing on offering customers in the niche markets a unique user experience at affordable prices and ensuring that the products offer the customers greater value in terms of product utility, Haier could influence a high level of loyalty for its products across the markets, and hence develop into a dominant brand at the international leve (Porter, 1979)l. The brand loyalties of established competitors in the market are vulnerable, especially in sections of the market that these enterprises neglect (such as niche markets), if Haier could offer most of the same functionalities of products for a fraction of the price.

Haier’s “three thirds” strategy is a viable and wise approach because it allows the enterprise to reduce the risks of operating in one market alone, and hence increase the stability of its market and financial performances. By diversifying its markets at the international level, Haier can ensure that strong performances in one area or country of operations can compensate low performances in another, and hence stabilize its overall market performance (Garma&Plihon, 2011).

 

References

“How can Small Businesses compete with Big Competitors” (2013, December 25). The Wall Street Journal article. Retrieved from: https://www.wsj.com/articles/how-can-small-businesses-compete-with-big-competitors-1387979227

Dirisu, J., Iyiola, O., &Ibidunni, O. (2013). Product Differentiation: A Tool of Competitive Advantage and Optimal Organizational Performance (a Study of Unilever Nigeria Plc.). European Scientific Journal 9(34): 258-281. Retrieved from: http://eujournal.org/index.php/esj/article/viewFile/2174/2059

Gamra, S., &Plihon, D. (2011). Revenue Diversification in Emerging Market Banks: Implications for Financial Performance. Arxiv article. Retrieved from: https://arxiv.org/ftp/arxiv/papers/1107/1107.0170.pdf

Palepu, K., Khanna, T., & Vargas, I. (2006). Haier: Taking a Chinese Company Global. Harvard Business School Case Study.

Panigrahy, N., & Pradhan, R. (2015). Creativity and Innovation: Exploring the Role of HR Practices at Workplace. Conference Paper.

Porter, M. (1979). How competitive Forces shape Strategy. Harvard Business Review. Retrieved from: https://hbr.org/1979/03/how-competitive-forces-shape-strategy

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