Haier Case Study

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3. 3. Haier uses both related and unrelated diversification strategies. A. Describe how Haier uses activity sharing and the transfer of core competencies to create value. (related diversification strategy) Haier catapulted in the last two decades producing consumer products that are sold in similar fashion. They all shared distribution channels, outbound logistics, and sales forces. Haier was able to develop core competencies through effective activity sharing of primary activities resulting in a superb competitive advantage, ultimately creating value. CEO Zhang Ruimin realized that using both strategies’ can work in Haier’s favor with the ultimate goal of getting name recognition globally. His related diversification strategy used…show more content…
Haier used these new customers for cross-selling products of differing genres. (pg. 13) One of the benefits of both unrelated and related diversification strategies according to Zhang was, “Speed and differentiation… two approaches to be better customer focused; speed in being able to satisfy customers’ needs as quickly as possible and differentiation in being able to offer new and innovative products to meet different needs. (pg. 7) Cons: (Haier can improve upon) Exhibit I perfect example of this. Companies also must recognize that, while activity sharing is intended to reduce costs through achieving economies of scope, there are incremental costs related to sharing activities (costs that are created by sharing). These costs must be recognized and taken into account when planning activity sharing or economies of scope may not be realized. When activities are shared across business units, the business units must carefully coordinate their activities to achieve effective and efficient sharing. Thus, any costs that are specifically related to coordination must be balanced by economies of scope. Business unit managers may be forced to compromise individual business-unit strategies to accommodate activity sharing, which implies that managers may have to share business-unit strategic control. Compromising business-unit strategic control may be problematic. For example, if one business-unit manager feels that another

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