Why Was Haier So Successful in China?

1. Why was Haier so successful in China?

Haier Group is a multinational company specializing in the production of home appliances and consumer electronics. It was approximately 300 refrigerator factories in China in 1984, Haier’s CEO, Zhang Ruimin saw this, and he went to the other direction, and focusing on high quality products and services.  Haier committed on higher quality products than their competitors, Zhang believes that Haier need to provide supreme quality in order to stay for long for their industry. Haier also believe the differentiation is the key to succeed in this kind of market, they continuously increased their product range through innovation. With the large product range, not only the company always received the praise for its innovative products, but also ensured the healthy cash inflows to the company in the long run. Separately, Haier also believe a strong brand reputation would help them to globalize their company, so they not only build the great product, but also provide great after sales services to their customers. They have service network with 5500 independent contractors, to provide free temporary repairs and full repair costs within warranty periods. With the high focus on becoming a “first class brand” through large scale operations, Haier became China’s leading refrigerator manufacturer.

1. Was Haier's decision to globalize into developed markets early on a good strategy? Is Haier's "three thirds" strategy a viable or wise approach?

Yes, I think it’s a good strategy to go into developed markets first. Haier globalizes the company with 3 phases, 1) focus on social awareness of the Haier brand name; 2) localize design, production and sales; 3) pull in local resource of capital and human talent. To improve the awareness of Haier’s brand name, they decided to enter the global market by “first the hard, then the easy” approach, which getting into the market with tougher entry requirement first, and then the easy entry market. Because Haier believes that it’s relatively easy to export to those developing countries, but the influence of the company’s brand name is limited. Also, if Haier had built its brand name in the developed markets, it would be easier to sweep the easy market.

Haier’s ultimate goal is to go globalized and become a multinational like GE. Haier’s CEO, Zhang Ruimin introduced “three thirds” strategy, out of all Haier products, one is made and sold domestically, another one-third is made domestically but sold overseas, and the their one-third is both made and sold overseas.  With this strategy, Haier being easy to find the improvement areas in the developing market to achieve globalization. However, it limited Haier on one particular market, and it might lose sight of other markets, which Haier would pull out the resources from greater potential markets in order to achieve 1/3 revenue.