Nicole Cambridge Haier in India Globalising Operations
Introduction:
The case study is about a Chinese company Haier building its presence in a mass market beyond China. Haier is one of the largest appliance sellers in the world; who has made its name by exporting refrigerators to the global market. Due to stable growth in the domestic market, the company then launched into developed markets because they believe it was more mature and competition was fiercer. n !""#, Haier entered into the ndian market. $anagement thought that it was the best time to do so, since there was liberalisation and ease of foreign companies doing business there. This analysis analysis will focus on Haier specifically in ndia and contents relating to %upply Chain $anagement. Main issue:
&hether or not growth can be sustainable in the long run for Haier in ndia, using their present strategy 'localisation() Haier entered in ndia at a time when the economy seemed favourable for foreign companies to do business. The country entered a phase of liberalisation, consumers* household incomes were increasing and the middle class group was expanding steadily. %ince Haier inception into ndia '!""#+!""(, the company had been experiencing sluggish growth. -ear -ear after year performances was disappointing; turnover alone expanded by . / over the 0 years period, with nearly no growth in certain periods. Haier, who has been using the localisation strategy, thought that it was the best strategy to enter into the ndian market. 1lthough this strategy is not a bad one, when implementing such, all sectors of the supply chain should to be b e taken into consideration. &hich in some cases, Haier didn*t; for example there was no special emphasis on the retail outlets, other than getting the goods sold. Haier then saw the need to make some changes to its current strategies, in order to perform much better. &ith &ith a new president in place, Haier made some ad2ustments in operations, H3, marketing and sales. %ince this overhaul, the company started to experience positive growth. 4ut the million dollar 5uestion is, 6can this growth be sustainable in the long run)7 Other issues: Supplier surplus: even though the consumer durables market was hyped up in the ndian market, demand was yet to be on same par. 8roduction capacity was about 0 million in the refrigerator industry, industry, while demand was only 9.9 million. :or Haier, this is where the importance of supply chain management comes in. &hile focus should be on the entire supply chain, to curb this problem, the company will have to restructure their strategies in $arketing $arketing and %ales, perations and H3. Heavy tax burden: despite liberalisation, taxes were high on the importation of raw materials and sales tax. n addition, finish goods that were imported were duty free. This inverted duty structure alone will discourage companies from manufacturing and assembling locally in ndia. n the other hand, with the high level of tax impose on imports and sales, this tend to encourage companies in operating in the grey market.
Nicole Cambridge Haier in India Globalising Operations Haier, normally outsource their high end goods and p urchase the low end ones locally. &ith this heavy tax burden in place and the thriving grey market, this can affect Haiers* growth. Price wars/competition: most of Haier*s competitors in the ndian market compete on a low pricing strategy, whereas Haier competes on premium level. The
SWOT Analysis:
STRENGTHS >lobal presence Technological strengths in consumer electronics %ourcing hub to other markets Developed network of direct dealers 4rand recognition ?ocalisation strategy @ariety of products >ood product 5uality %trong corporate culture nnovative OPPORTUNITIES Axpand production capacity in ndia Axport to other emerging markets
WEAKNESSES %upplier surplus Heavily dependent on parent company 8oor after sales care %tagnant turnover
THREATS 8roducing less than competitors Taxation >rey market 8rice wars dwindling customer confidence
Nicole Cambridge Haier in India Globalising Operations
Suary o! SWOT:
Due to the fact that Haier made its mark in the high end markets in the B% and Aurope, they had a global presence. The company was the first Chinese brand to be known for its good 5uality in the global market. &hen Haier conducted a brand perception survey in ndia, the results showed that / of its customers didn*t realise that Haier was a Chinese brand. t is perceived mostly all over the world that once something says 6made in China7 it is of poor 5uality, cheap and inferior. Haier in ndia was also a sourcing hub to other markets. >oods that used to take weeks to reach other markets are now taking less the time to arrive when it passes through the hub in ndia. &ith the company*s localisation strategy in place, they took a step by step approach upon entering ndia. &ith this approach, they were able to spot problems and work on them immediately. 1part from the much strength, Haier in ndia had some weaknesses. They were heavily dependent on their parent company in China. They had a poor relationship with dealers, thus resulting in poor after sales care. :or the first few years in operation, they had stagnant turnover. Despite the weaknesses, Haier has a competent management team to grab the opportunities facing the company. They have the opportunity to expand production capacity in ndia and also to export to other emerging markets. %ome of the threats facing Haier are high taxation, grey market, 8rice wars and dwindling customer confidence. n order for Haier to experience growth, they will have to turn their weaknesses into strengths, capitalise on the opportunities and come up with strategies to reduce threat.
Strate"ies: STRATEGIES Strategy 1 :orm a relationship with the ndian government to bend some taxes for importing unfinished goods
Strategy 2 Axpand production capacity and brand advertising
PROS ncrease profits Create more employment ?ower cost of production %upply a variety of products 3educe grey market and price wars 4etter 5uality products
Anhance product 5uality Anhance product development arrow the gap between competitors
#ONS $ay have to return a favour to the government ot localised in its entirety
Costly Axperience losses before signs of profits
Nicole Cambridge Haier in India Globalising Operations Strategy 3 4e less dependent on parent company
Strategy mplement a technological system to deal with customers 5ueries about products or services and also one that deals with internal affairs, as well as the entire supply chain
ncrease localisation Create local employment customer retention increase sales attract potential customers manage procurement manage H3 improve efficiency and effectiveness in business operations develop closer relationship within the entire supply chain flow of information smoothly
costly train staffs to be ac5uainted with the system
Recoendation:
1ll four strategies above are important to Haier in ndia if it wants to sustain growth in the long run. However, will recommend the following three strategies Strategy ! there seems to be a communication problem within Haier*s* supply chain and also with the end consumers. 4y providing a new technological system in place for after sales services, this will retain customers and attract potential ones; thus increasing sales. n addition, by having another technological system in place, so that the entire supply chain can keep abreast as to what going on in other parts of chain will encourage smooth information flow, capital flow and aid in decision making. &ith this system, management from each sector in the supp ly chain can focus on how they can create value to their direct and indirect customers. 1nd lastly, the individual companies in the supply chain should also have a technological system in place; this will aid management in spotting problems and making decisions; thus reducing cost. Strategy 2! Haier has the opportunity to grow within the ndian market and will definitely need to expand production and brand advertising. 4eing a late comer into the market, the competitors had gain their presence and experience growth. Haier is producing way below its competitors and to be on par, they will need to increase production. Haier targets high end consumers in the urban segment and also has the potential to attract the rural segment. Strategy 1+ f producing parts locally is expensive; the management of Haier should engage in some dialog with the government on the matter of liberalising taxes on imported unfinished goods. f this is achievable, this will lower the cost of produc tion for Haier in ndia. &ith such benefits, management can focus on building brand image, providing better 5uality goods and can re+invest some money back into the business for development.
Nicole Cambridge Haier in India Globalising Operations
References
Celly, N. (2012).
HAIER IN INDIA: BUILDING PRESENCE IN A MASS MARKET BEYOND CHINA. Uniersity
o! Hong "ong.
