Strategic Audit of Haier Group

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

2. Current Situation (Jw Hayes) • CurrentPerformance 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)

3. 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 (Jw Hayes) (L., and Hunger 24-1)

4. (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)

5. (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)

6. (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)

7. 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)

8. 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

9. (Jw Hayes) 2. Corporate Governance Board of Directors (Bloomberg, 2011)

10. (Jw Hayes) OTHER BOARD MEMBERS ON BOARD MEMBERS (Bloomberg, 2011)

11. (Jw Hayes) Bloomberg, Initials. (2011, May 10). Industrial conglomerates. Retrieved from http://investing.businessweek.com/research/stocks/private/board.asp?privcapId=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.

12. 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)

13. (John Lerch) 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)

14. (John Lerch) C. Task Environment • Rivalry high in the U.S. (T) • Able to expand product lines through partnerships (O)

15. III. EFAS Table(John Lerch)

16. IV. Internal Environment (John Taylor) • Corporate Structure • Started out in 1984 as a government owned enterprise. • In 2004 was organized into Haier China, Europe, America, Middle East, Spain and New Zealand Divisions. • In 1999 established a Design Center in Boston, a marketing center in New York, and a Manufacturing facility in S.C. • Corporate Culture • modify products to meet American Had built a reputation at home • (China) for quality, innovation, and customer service. • The main goal of the company was to continuously increase the volume of products sold in the U.S./ Demand*2

17. (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)

18. (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)

19. 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)

20. (John Taylor)

21. V. Analysis of Strategic Factors (John Lerch) • Situational Analysis (SWOT) • Strengths • Weaknesses • Opportunities • Introduction of products to U.S. market at lower cost • International Partnerships • Threats • Competition in U.S. market • Lower response rate for stocking certain products and overstocking • High initial investment to manufacturer products with more features than competitors

22. 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.

23. V. SFAS Table (John Lerch)

24. VI. Strategic Alternatives and Recommended Strategy (Shavera) A. Strategic Alternatives1. 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.

25. a. Pros: Enables the company to more quickly capture and respond to local trends and increase competitiveness (Wheelen & Hunger, 2010).b. Cons: Aggressive competition (Shavera) 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.

26. (Shavera) B. Recommended StrategyRecommend 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.

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

28. (Travis) VII. Implementation 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.

29. (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.

30. (Nick) VIII. Evaluation and Control