The growth Strategy of Haier Haier Group, based in Qingdao, Shandong, is the number- one home electronic appliance maker not only in China, but in the world. With its 29 manufacturing plants, five comprehensive R&D centres, 66 overseas trading companies across the world and more than 50 000 global employees, Haier makes its products available to 160 countries through more than 58 000 outlets. In 2014, Haiers global sales revenue amounted to RMB200.7 billion, or USD$32.6 billion, profits increased to RM815 billion, or USD$2.4 billion, and its world market share for home appliances reached 10.2 per cent, a lot more than the respective share of its giant competitors like Whirlpool, Electrolux and Bosch Siemens. Haier had a humble beginning. ln 1984, it was founded as Qingdao Refrigerator Factory, a small company burdened with RM81.47 million in debt. On stepping up as the general manager, Zhang Ruimin demonstrated his unique management talent. To drive home his strong belief in product quality improvement, he smashed 76 poor quality refrigerators with a sledgehammer in front of the workers and staff. Through the aggressive pursuit of innovation and quality assurance, Haier first established itself as a dominant player in the domestic appliance market, and later as a world-renowned brand. By the end of 2009, Haier had applied for 9738 patents, 2799 of which were invention patents, ranking first among Chinese appliance enterprises. In 2009, Haier applied for 943 patents, among which 538 were invention patents, implying that two invention patents were applied for each business day on average. On the basis of its independent intellectual property, Haier has participated in the setup of 23 international standards; seven of these involving powder-free wash technology and anti-electricity wall technology have been issued and implemented. At the same time, Haier has led or taken part in preparing and revising a total of 232 national industry standards, 188 of which have been issued and implemented. Haier achieved an annual sales growth rate of 70 per cent over an extended period of its first 20 years. In addition to its core business of refrigerators, Haier has developed a large number of new products suitable to the diverse preferences of different areas. Now it makes over 15 100 varieties of home appliances in almost 100 product lines, including refrigerators, freezers, air- conditioners, wasl1ing machines, microwave ovens. TV sets, mobile phones, computers and vacuums. Since 2002, Haier has topped the Most Valuable Brand list for many years in China. Haier refrigerators and washing machines are among the first group of Chinese World Famous Brand products awarded by the General Administration of Quality Supervision, Inspection and Quarantine of the PRC. ln 1990, Haier began its foray into the international market by exporting to South-East Asia. By 1995. Haler refrigerators entered the United States, Germany, Britain, Japan and other developed countries. With the rapid increase in exports. The key milestones of its global expansion include its first joint venture in Indonesia In 1996; establishing Philippine Haier Ltd and Malaysia Haier Ltd in 1997; founding the Haler Middle East Trading Company and Haier America in 1999; acquiring an Italian fridge factory in 2000; opening an industrial park in Pakistan in 2001; forming a joint venture with Japans Sanyo Electric Co. In 2002; opening the Haler (Middle East) Industrial Park in Jordan in 2005; establishing the Haier-Ruba Economic Zone in Lahore in 2006; purchasing a Sanyo refrigerator factory in Thailand and establishing the Haier Thailand Industrial Park; and acquiring a local refrigerator manufacturer in India in 2007. Take its presence in the United States as an example, in 1999 Haier set up a design centre in Boston, a marketing centre in New York, and a USD$40 million Haier-America Industrial Park in South Carolina. It was intended to meet the preference of local consumers to buy made-in-America products. As a subsidiary, Hafer-America Company draws on a common pool of resources from the Haier Group. Besides the trademark of Haier, the US subsidiary takes advantage of low costs in China through the purchase of components from Haier-China. Now Haier has attracted American consumers with a wide variety of product lines such as CTV, plasma refrigerators, bar fridges, dishwashers, wine chillers, air-conditioners and washing machines. Its products are distributed to most US major chains, including Walmart, Lowes, Best Buy, Home Depot, Office Depot, Target, Sams Club, Fortunoff, Menards, Bed Bath and Beyond, P.C. Richards, BJs, Frys, ABC and Brands Mart. Besides computer-controlled refrigerators customised for the United States, the company innovated products like energy-economised home appliances in Italy, and large refrigerators for large families in Pakistan. Under the leadership of its CEO, Zhang Ruimin, At the end of 2005, Haier came to its fourth strategic stage of global brand building. In the view of Haier, in its globalization phase it would still be based in China, radiating to the world; but in tl1e global brand building phase, it aimed to build a local Haier brand in each geographic area around the world. Since 2013, Haier has started to implement a networking strategy; that is, an internet-plus development strategy. At this fifth strategic stage, Haier continues to promote its enterprise spirit of creating resources and winning global reputation and work style of individual- order combination, quick decision-making, and to further integrate virtual and actual networks through information process transformation. To meet the dynamic needs of the users, Haier is building new internet-connected appliances based on smart home concepts and smart production systems. Despite its rapid expansion in botl1 domestic and foreign markets, Haier is still a small boat, compared to well-known multinationals in the developed countries. In 2014, Haiers total sales revenue was only 23 per cent of GEs USD$144.2 billion, and less than 7 per cent of Walmarts USD$485.5 billion.

After beginning its international expansion in 1990 by exporting to South-East Asia, Haier switched to Foreign Direct Investment (FDI) as a mode of entry. Explain why Haier changed its mode of entry, and identify the forms of FDI that Haier used, with examples from the case. (10 marks) (100 words)

Explain the reasons Haier might have had in using the different forms of FDI identified in (a). In your answer refer to the advantages that could be expected from these forms. (10 marks) (100 words)

Using Haiers presence in the US as an example, explain the strategy used and why it was successful. Use examples from the case to support your answer. (5 marks) (50 words)

The case describes Haier as a small boat compared to well-known multinationals. Explain why this might mean its strategy (as identified in c.), despite its seeming success, might be limited. Refer to disadvantages of or challenges associated with this strategy. (5 marks) (50 words)