Strategic Audit of Haier Group
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Transcript of Strategic Audit of Haier Group
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Strategic Audit of Haier Group
Case 24 Strategic Management MGMT 436Group 5
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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)
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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)
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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)
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B. Strategic Posture
MissionTo 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)
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Policies(Jw Hayes)
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)
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Strategies
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
Three Stage Growth Plan
L., and Hunger 24-23-24)
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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 GoalTo be listed among Fortune 500 Successful Companies
L., and Hunger 24-23-24
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2. Corporate GovernanceA. Board of DirectorsName 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)
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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
OTHER BOARD MEMBERS ON BOARD MEMBERS
(Bloomberg, 2011)
(Jw Hayes)
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L., Thomas, and David Hunger. Strategic Management
and Business Policy: Achieving Sustainability.
Pearson College Div, 2009. 24-1-24-26. Print.
Haier: about us. (2011, May 10). Retrieved from
http://www.haiereurope.com/en/haier-mission
Bloomberg, Initials. (2011, May 10). Industrial
conglomerates. Retrieved from
http://investing.businessweek.com/research/stocks/private/
board.asp?privcapId=29621318
(Jw Hayes)
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III. External Environment (EFAS table) (John Lerch)
A. Natural Environment
Weather factors associated with shipping overseas (T)
Long shipping times (T)
Economic B. Societal Environment
Lower production costs in China (O)
United States market is the largest in the world (O)
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Rapid growth in electronics market (O)
High initial costs for producing products with more
features than (T)
Technological
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)
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Rivalry high in the U.S. (T)
Able to expand product lines through partnerships (O)
C. Task Environment(John Lerch)
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III. EFAS Table(John Lerch)
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IV. Internal Environment (John Taylor)
1. Corporate Structure1. 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 Culture1. 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
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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)
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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)
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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)
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Weight Rating Wieghted Score
0.1 4 0.40.1 3 0.3
0.05 3 0.150.1 2 0.20.1 3 0.3
0.1 2 0.2
0.05 1 0.050.1 1 0.10.1 2 0.20.1 1 0.1
0.1 1 0.1
1 23 2.1
Weaknesses
Strengths
85% of company orders came from top 10 Chain stores in U.S. and Europe
could weaken its competitiveness when facing even more serious competition in the futureaddress the "smart kitchen" concept developmentcould enable the company to capture and respond to trends in local markets and increase competitiveness
practically unknown or unheard of in the U.S.plans to launch more aggressive TV Campaigns
Outdated website does not help
to help the company explore business opportunities worldwide
Sluggish new technology developmentNeeds to develop "Smart appliance" technology
Lack of U.S. Distrubution centers
Total
Two Brothers LogoTV Advertising
IFAS TableInternal Factors Comments
Promotion by outdoor advertisement, airports, magazines, trade publications and internet.
Average annual growth rate of 78% from 1984-2001Ranked 4th in major appliance sales worldwide 2004
Agreement with COSCO in 2004Strong Distribution Network and good relations with
chain and individual stores
(John Taylor)
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V. Analysis of Strategic Factors (John Lerch)A. Situational Analysis (SWOT)
1. Strengths
2. Weaknesses
3. Opportunities
a) Introduction of products to U.S. market at lower cost
b) International Partnerships
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
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V. Analysis of Strategic Factors (John Taylor)
B. Review of Current Mission and Objectives1. 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.
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V. SFAS Table (John Lerch)
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VI. Strategic Alternatives and Recommended Strategy
(Shavera)A. Strategic Alternatives
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.
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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)
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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)
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Wheelen, T & Hunger, J. (2010). Strategic Management and Business Policy. 12th Ed. Prentice Hall.
(Shavera)
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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.
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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.
(Travis)
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VIII. Evaluation and Control (Nick)
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