The Content of The Case
The article examines strategic management at Haier and the factors that enabled the company to gain success in the market. Haier has moved from the brink of bankruptcy to become a brand recognized all over the world in less than two years. Amy Lau, Emily Ho and Jun Han divide the development of the company into four discrete stages.
The first stage is restructuring and brand building which occurred from 1984 to 1991. Zhang Rumin, the company’s current CEO, took control of Haier when it was still a refrigerator producer and was experiencing a string of losses. Indeed, the company was in such a bad shape at that time that it could not even pay its employees. Some of them resigned after Rumin took over citing poor management as the reason for their resignation. On that account, Zang’s first duty was to seek payment for the dissatisfied workers to redevelop the relationship between staff and management. However, since Zhang could not receive money from mainstream financial institutions, he had to borrow from rural co-operatives (Lau, Ho and Han 3). Aside from removing Haier from the financial red, the new CEO also had to address the poor quality of production and poor discipline amongst the workers. He set up rules targeted towards disciplining the employees and managed to achieve this in an effective manner. Increased worker productivity led to improved product quality.
Zhang also enforced strict management protocols to monitor product quality and enhance after sales service. To enable quality management, the company used practices and technology from Germany, the U.S, and Japan as China was still lacking in this sector (Lau, Ho and Han 3). The company put in a lot of effort in quality control and customer service and eventually became the top-rated Chinese company in overseas markets.
The second stage is diversified development which happened between 1991 and 1998. In this period, the company merged with numerous dilapidated state companies and went beyond refrigerators and started to manufacture a wide scope of white goods like television sets, washing machines, and air conditioners (Lau, Ho and Han 4). The company engaged in this expansion to take advantage of increased demand for electronics in the Chinese market. Consequently, the company was able to realize good profit margins.
The third stage is referred to as internalization and occurred from 1998 to 2005. After successfully managing to build the brand in the domestic market, Haier placed its focus on the international market. The company felt the urge to market branded products overseas as the domestic market was already becoming overcrowded and the profit margins kept on reducing. Whereas China’s cheap labor enabled Haier to maintain low prices in the overseas markets, the prices declined in the domestic market due to a perpetual price wars as the firms fought to survive in the market (Lau, Ho and Han 5). As China joined the World Trade Organization (WTO), the competition intensified in the Chinese market due to the entry of new foreign firms. Therefore, Haier hand no alternative but to pursue an international strategy. Haier embarked on an ambitious strategy which entailed the company footing all costs involved to get the products into retail shops. Eventually, the brand gained prominence in overseas markets and was ranked fourth in the global white goods market in 2004.
The fourth stage began in 2006 and is ongoing. Since 2006, the company has expanded its portfolio to 96 products and categories being retailed in more than 100 countries spread across the world. To demonstrate the extent of Haier’s operations, the company has 64 trading firms, 30 manufacturing plants, 18 design centers, 15 industrial parks, and employs over 50,000 people across the world (Lau, Ho and Han 6). The company has placed focus on maintaining its quality whilst improving design. On that account, Haier has a come along way from a troubled firm to one of the top firms in the segment of consumer electronics.
What I Liked About the Case
I liked the case since the authors give deep insight into the restructuring process of a company. It is interesting that in less than 20 years, Haier transformed from a loss-making refrigerator producer to one of the top ranked electronic firms in the world. Despite its meteoric rise, the authors manage to demonstrate that restructuring is a complex process that takes a company through various stages before the ultimate vision is realized. A company needs to have a long-term strategy so that it can realize sustainable growth. More importantly, a firm has to change its prevalent culture for it to realize success. To that end, I really liked how the authors discussed how Haier had a poor culture before the restructuring process. Before the new CEO came in, the employees were so unproductive that they reported to world at 8.00 am only to leave an hour later. Such a culture can only lead to poor performance and places a firm at risk of being closed. The case is also admirable since it shows why good leadership is very important for any firm that wants to be successful in the market. Without good leadership, Haier would not have realized its success.
What I did not Like
I did not like that the authors failed to examine the philosophy behind Zhang Rumin that enabled him to steer the firm to success. The case makes it clear that he is the main person behind Haier’s success thus it is disappointing that the authors did not profile him. It would have been valuable to know these leadership qualities and traits, and how he applied them at Haier. He is a model leader that any company would desire thus it is important to discuss what drives the man and the notion underlying his successful strategies. I feel that the authors failed in this regard.
My Thoughts about The Case
The case shows one of the very few multinational firms that is able to engage in a successful restructuring process. Many at times, companies which try to change their fortunes through restructuring end up in failure due to poorly devised strategies and bad leadership. It is why I feel that Zhang Rumin is the main reason behind Haier’s success. Without him, the company would not be in its current good position. It would be interesting to know if Haier has any succession plan in place so that the next CEO can adequately fill the space left by Rumin after he retires.
What I Would Change
Rather than discussing how Haier measured its strategy, I would examine Rumin’s philosophy and the reason why it enabled Haier’s success. Further, I would include a section about other companies that failed to engage in successful restructuring. Such discussions would provide key lessons for successful restructuring processes.
Lau, Amy, Jun Han, and Emily Ho. Haier: Management Control at a Tactical Level. Asia Case Research Centre, University of Hong Kong, 2007.