Strategic Audit of Haier Group Case 24 Strategic Management MGMT 436 Group 5

Strategic Audit of Haier Group
Case 24
Strategic Management MGMT 436
Group 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)
(Jw Hayes)
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
Mission
To 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
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)
(Jw Hayes)

Strategies
Three Stage Growth Plan
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
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 Goal
To be listed among Fortune 500 Successful Companies
L., and Hunger 24-23-24
(Jw Hayes)
2. Corporate Governance
A. Board of Directors
Name
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)
OTHER BOARD MEMBERS ON BOARD MEMBERS
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
(Bloomberg, 2011)
(Jw Hayes)
Bloomberg, Initials. (2011, May 10). Industrial
conglomerates. Retrieved from
http://investing.businessweek.com/research/stocks/private/
board.asp?privca
pId=29621318
Haier: about us. (2011, May 10). Retrieved from
http://www.haiereurope.com/en/haier-mission
L., Thomas, and David Hunger. Strategic Management
and Business Policy: Achieving Sustainability.
Pearson College Div, 2009. 24-1-24-26. Print.
III. External Environment (EFAS table)
(John Lerch)
A. Natural Environment
Weather factors associated with shipping overseas (T)
Long shipping times (T)
B. Societal Environment
Economic
Lower production costs in China (O)
United States market is the largest in the world (O)
Technological
Rapid growth in electronics market (O)
High initial costs for producing products with more
features than (T)
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)
(John Lerch)
C. Task Environment
Rivalry high in the U.S. (T)
Able to expand product lines through partnerships (O)
(John Lerch)
III. EFAS Table(John Lerch)
IV. Internal Environment (John Taylor)
1. Corporate Structure
1. 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 Culture
1. 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
(John Taylor)
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)
Internal Factors
IFAS Table
Weight Rating Wieghted Score
Comments
Strengths
Promotion by outdoor advertisement, airports, magazines, trade
publications and internet.
85% of company orders came from top 10 Chain stores in U.S. and Europe
Average annual growth rate of 78% from 1984-2001
Ranked 4th in major appliance sales worldwide 2004
Agreement with COSCO in 2004
Strong Distribution Network and good relations with
chain and individual stores
0.1
0.1
0.05
0.1
0.1
4
3
3
2
3
0.1
2
Two Brothers Logo
TV Advertising
Sluggish new technology development
Needs to develop "Smart appliance" technology
0.05
0.1
0.1
0.1
1
1
2
1
Lack of U.S. Distrubution centers
0.1
1
1
23
0.4 Outdated website does not help
0.3
0.15
0.2
0.3 to help the company explore business opportunities worldwide
0.2
Weaknesses
Total
0.05 practically unknown or unheard of in the U.S.
0.1 plans to launch more aggressive TV Campaigns
0.2 could weaken its competitiveness when facing even more serious competition in the future
0.1 address the "smart kitchen" concept development
could enable the company to capture and respond to trends in local markets and increase
0.1 competitiveness
2.1
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
(John Lerch)
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
V. Analysis of Strategic Factors (John Taylor)
B. Review of Current Mission and Objectives
1. 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
A. Strategic Alternatives
(Shavera)
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.
(Shavera)
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.
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.
(Travis)
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.
(Nick)
VIII. Evaluation and Control
1. With Programs in place The Haier Group seems to have
there evaluation and control in place. The Haier group
has had three growth stages Brand Name Strategy,
Diversified Development Strategy, and Going
Multinational Strategy
(Nick)
2. To better on the already ever improving Haier Group CEO
Zhang Ruimin combined traditional Chinese culture and
Western industrial experience. Which this in turn meant the
Implementation of OEC (Overall Every Control and Clear)
market- chain system. To help aid this Strategic Business
Units were also put in place to help encourage employee
enthusiasm and competitiveness.
(Nick)
3. There have been many different plans and strategies have
been put in place to keep the management and overall company
structure ahead of the competition. Lack of technological
advancements or even sluggish technology is the only thing
holding the company. With the philosophy of the management to
already quickly identify problems, search for the cause of the
problem and find a solution one by one. There should be no
reason for this company having any problems finding ways to
evaluate and control.