Haier Strategy

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Haier: A Global Brand

Executive Summary
Haier, under the leadership of CEO Zhang Ruimin, grew from a single model refrigerator firm to the #5 white goods producer in a matter of two decades. Throughout the expansion process Haier entered over 100 countries through multiple entry modes and into other industries. The 2005 financial results gave Haier reason to pause and reassess its mission and strategic intent. The primary issue was whether to continue its expansion strategy or slow down operations and engage in a stabilization strategy. After careful analysis and debate the team recommends the latter based on underutilized facilities, operational inefficiencies, and the risk involved with increasing debt. The stabilization
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To this end, the firm pursued a multidomestic strategy thereby creating autonomous operations in major markets, as well as founding 12+ R&D centers and 18 trading companies. The strategy proved sound with sales of US$13.1B for 2005 (US$4B from overseas).
The first three stages of growth culminated in a corporate culture that simultaneously pushed for increased quality, productivity, and innovation. Entering the fourth stage, “Global Brand Building”, Haier aspired to strengthen its global presence through its existing culture and further expansion into foreign markets. Zhang had his sights on creating a truly global brand name and becoming the #1 white goods provider. Haier’s record was impeccable until the 2005 financial data proved otherwise. The 35% drop in net profits prompted experts to debate whether Haier truly had the potential to become a global brand. The following section speculates on the current underlying issues related to the case.
Issue Identification
The symptoms that surface during this case are as follows: * 35% drop in net profits between 2004 and 2005 * China market: profits and margins down since 2001, operating costs up since 2000 * Overseas sales = 1/3 of total sales; however overseas sales < 1/3 of profit * Significant losses due to mobile phone business * Some facilities are underutilized (Zhang stated “we don’t need more production capability… we need higher

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