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Haier's Internationalization Strategy Explained

Haier, a Chinese appliance maker, launched an internationalization strategy in 1992 by directly exporting to developed markets like Europe, Japan, and the US to gain prestige and establish their brand. This strategy of starting in difficult markets and later expanding to easier secondary markets proved successful. Haier was also motivated to internationalize by opportunities in foreign markets undergoing industrial restructuring, as well as competitive pressures at home as the Chinese market became saturated and foreign brands entered China. However, Haier initially faced barriers to internationalization like a lack of capacity and experience adapting to foreign cultures and regulations.

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46 views2 pages

Haier's Internationalization Strategy Explained

Haier, a Chinese appliance maker, launched an internationalization strategy in 1992 by directly exporting to developed markets like Europe, Japan, and the US to gain prestige and establish their brand. This strategy of starting in difficult markets and later expanding to easier secondary markets proved successful. Haier was also motivated to internationalize by opportunities in foreign markets undergoing industrial restructuring, as well as competitive pressures at home as the Chinese market became saturated and foreign brands entered China. However, Haier initially faced barriers to internationalization like a lack of capacity and experience adapting to foreign cultures and regulations.

Uploaded by

Maria Fernanda V.G
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd

Haier Company

 Triggers
Perceptive management
The Director Zhang Ruimin launched the internationalisation strategy by exporting
very creatively. With a method call “first difficult, then easy”. In 1992 Haier first
entered into the developed economies by directly exporting to Europe, Japan and
US markets, to obtain prestige and to establish their brand, with good supply and
marketing channels, learn advanced technology and management experience. When
the developed countries and regions have accumulated a good reputation, it is easy
to accept Haier products in the second and third-tier markets such as South Asia,
Asean and Central Africa.
 Motivations
- Proactive motives:
Managerial urge:
The Director Zhang Ruimin had an internationalization mindset that marked the
early stage of Haier's development. His strategic vision has remodelled Haier to
become the world’s largest appliance maker (Harvard Business Review, 2018).
Before embarking on expansion into international markets Zhang recognised the
need to first develop Haier’s capabilities and resources in his home country.
For that reason, Haier imported advanced technology in refrigeration from Germany
and spent seven years building up a strong brand name in refrigerator production
through a well-planned quality control system. Then in 1986, it sold products to
Liebherr, as a way of entering the German market, reaching US$3 million.
Foreign market opportunities
At that time, many countries in Europe and America were in the period of large-
scale adjustment of industrial structure and elimination of sunset industry, which
provided favorable conditions for Haier to find development space. At the same
time, they are the markets with the largest market capacity and the longest
consumption power.
Haier built their permanent market place through market entry or expansion to
defend or improve its market share. Haier’s exporting or other entry modes were all
focused on building a world-famous brand. They clearly declared that: “exporting to
build a brand, not to earn foreign currency”.
-Reactive motives
Competitive pressures
Domestic electronic appliance market became more competitive, and therefore, less
profitable and foreign brands began flooding into China. For that reason, Haier was
under pressure to seek new markets and customers around the world. The best
defensive strategy for Haier would be to have a presence in its competitors’ home
markets.
So, On April 30, 1999, Haier set up a production plant in South Carolina in the
United States, and initially formed a "trinity" American Haier with its design
department in Los Angeles, its Marketing Department in New York and its
production department in South Carolina.

 Barriers
Lack of productive capacity to dedicate to foreign markets: Since Haier was a state-
owned organization, they struggled to achieve performance, profitability or quality
levels that were required for a global market.
Adaptation to foreign markets: Haier were experts on the local market, but they
didn’t have any experience or knowledge of the global market; entering an existing
overseas market is already a disadvantage, especially because they set themselves
close to sophisticated competitors to push themselves.
Complexity of shipping services to overseas buyers: This is a general market risk
that Haier had to deal with since their production is located in China, but they´re
entering their products into Europe and Amercia, then they’ll assume higher costs
that may not make the internationalization profitable enough.

Common questions

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Haier's approach to 'exporting to build a brand' diverged from traditional strategies by prioritizing long-term brand prestige over short-term financial gains. Instead of emphasizing immediate profit through foreign sales, Haier focused on establishing a reputation for quality in developed markets, which in turn, led to greater acceptance in emerging markets. This inverted model leveraged exports as a tool for brand recognition and consumer trust-building rather than as a direct revenue channel .

Haier was driven by both proactive and reactive motives to pursue international markets. Proactively, Haier wanted to build a world-famous brand by strategically exporting and establishing production in competitive international markets such as the US. Reactively, the increased competition and reduced profitability in the domestic appliance market, along with foreign brands entering China, motivated Haier to seek new markets. The industrial restructuring in Europe and America also presented large untapped market capacities, aligning with Haier's expansion efforts .

Haier's initial strategy of internationalization, developed by Director Zhang Ruimin, focused on entering developed economies first through creative exporting to build the brand's prestige. This approach was termed "first difficult, then easy." By targeting established markets like Europe and the US, Haier aimed to gain a reputation for quality and reliability, which would later facilitate easier entry into less developed markets. The objective was not to earn foreign currency immediately but to establish a world-famous brand by leveraging advanced technology and management practices .

Technological adoption and collaboration were central to Haier's strategy to enhance its international brand reputation. By importing advanced refrigeration technology from Germany and establishing a partnership with Liebherr, selling products in the German market, Haier not only improved its domestic production capabilities but also acquired valuable management insights. These efforts in technology and quality laid a foundation that streamlined Haier's entry into developed markets, bolstering its international brand image .

Haier leveraged the economic and industrial restructuring happening in Europe and America, where many countries were undergoing large-scale adjustment of their industrial structures and eliminating sunset industries. This created favorable conditions for Haier to find development space, allowing it to enter markets with large capacities and significant consumer power. By situating itself in these transitioning economies, Haier was able to effectively establish a foothold that favored long-term growth and brand recognition .

The increase of competitive pressures in the domestic electronic appliance market urged Haier to look for international opportunities. The entry of foreign brands into the Chinese market made it less profitable, which pushed Haier to secure new markets and establish a defensive strategy by gaining a presence in their competitors' home markets. Consequently, setting up a production plant in South Carolina was part of establishing an American 'trinity' operation to bolster its market share amidst increasing competition .

In its international expansion, Haier took proactive measures such as establishing a production plant in South Carolina and forming a 'trinity' operation in the US consisting of design, marketing, and production departments in Los Angeles, New York, and South Carolina, respectively. This strategic setup allowed Haier to rapidly tailor its operations to meet local demands and rapidly gain insights into the market while staying competitive with existing local brands .

Haier faced several barriers to internationalization. As a state-owned organization, it struggled with achieving performance and quality levels needed for the global market. Adapting to foreign markets was another challenge because Haier lacked experience and knowledge of these markets. Additionally, the complexity and costs associated with shipping from China to markets in Europe and America posed logistical challenges, potentially undermining profitability .

Zhang Ruimin's internationalization mindset shaped Haier's early development by prioritizing the establishment of capabilities and resources at home before expanding globally. This strategic vision led Haier to import advanced German refrigeration technology and to focus on building a strong brand in China through rigorous quality control. This prepared the company for international expansion with a robust foundation, initially targeting high-competition developed markets to bolster their global reputation .

Haier's entry into developed economies such as Europe, the US, and Japan allowed it to accumulate a strong global reputation for quality and innovation. This established prestige made it easier to enter and be accepted in less developed markets, as these markets tended to follow the lead of more established regions. By first proving its products in highly competitive and quality-conscious markets, Haier could subsequently leverage this reputation to gain consumer trust in second and third-tier markets .

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