USA
Introduction
Haier America plant and Haier's globalization strategy
Haier's localization branding strategy has three phases, ie. initial period, further developing period and branding period. These three phases demonstrate how Haier enters the world marketplace.
In phase 1, Haier did not pay attention to revenue, but also brand reputation in the practice of product exportation
In phase 2, Haier made decision to exploit market and then to establish manufacture plants in foreign countries.
In phase 3, Haier used local resources of design, manufacture and distribution in foreign countries. If this process is likened to a tree, these three phases are seeding, rooting and harvesting.
These three phases developed in practice while the awareness of Haier management of international business were deepened.
1. Common understanding of the strategy to exploit market in developed countries before developing countries by gaining recognitions of local consumers for Haier brand.
First of all, Haier management realized that traditional concept on export should be abandoned and believed that purpose of a company to export products was not only for revenue, but also for brand recognition enhancement.
To survive the fierce competition in the world marketplace, Haier adhered to the strategy to exploit market in developed countries first and in developing nations second. Haier started globalization strategy in some European countries and the United States. After some progress has been made, Haier shifted the efforts to exporting products to developing countries in condition that Haier trademark being used for the products to be exported. Haier gained the public recognition for Haier branded refrigerators with Haier product quality.
2. Haier has made significant success in implementation of the strategy to incorporate local resources of design, manufacture and distribution in foreign countries as part of Haier's policy to exploit international market (of the products, one third manufactured and distributed in China, one third manufactured in China and distributed overseas and one third manufactured and distributed in foreign countries). Haier has established 10 information centers and 6 design institutes in foreign countries for development of competitive products on the basis of local consumers' demands. Since 1996, Haier has started manufacture in Philippines, Indonesia, Malaysia and the United States. In April, 1999, Haier established a plant in South Carolina symbolizing the start of Haier's policy to incorporate local resources of design, manufacture and distribution in foreign countries by the design institutes in Los Angeles, the manufacture plant in South Caroline and utilization of local finance and talents with an aim to develop Haier a world's recognizable brand. Haier CEO Zhang Ruimin summarized Haier's development policy as "globalization plus localization". Globalization means policy-making with consideration of worldwide opportunities while localization means the process in which Haier brand becomes recognized in local areas. An example is Haier's advertisements including "What The World Comes Home To" in the United States and "Haier and Higher" in Europe.
3. Efforts to be paid for satisfaction of advanced customer demands. Haier's goal in implementation of the globalization strategy is to become world's recognizable brand. Haier believes that it is not enough to only focus upon product quality, but satisfaction of local consumers' demands. Haier energy efficient Freon-free refrigerator is a good example as this product did not only meet international environmental protection criteria, but also satisfy consumers' needs. The product consumes 50% less power than any other model as a result of incorporating advanced technology and gains world recognition. This refrigerator meets Germany Class A Criteria and consumers of this model product in Germany may receive government subsidy. In addition, Haier products sold in American market have met USA 2003 Criteria on Energy Efficiency.
Chinese largest investment project in the USA
On April 30, 1999, Haier held a foundation stone laying ceremony for Haier's 445,000 square meter production plant in Camden, South Carolina. The project was completed by six phases. The phase 1 project of 27,000 square meter refrigerator plant was put into operation in March, 2000 with an annual production capacity of 500,000 units, ranking 6th of its kind in the United States.
Why does Haier set up a plant in the USA?
Firstly, Haier is to exploit market in the United States. China 1998 and 1999 refrigerator export to the USA was valued at USD47.18 million and USD60.81 million, respectively, of which Haier products was USD17 million and USA31 million each. Statistics show that the minimum production volume for a refrigerator plant to gain profits was 280,000 units. Haier's current refrigerator export is far more than this figure.
From the official statistics, the market share of Haier compact refrigerators below 180L in the United States is over 30% and is expected to get to 50% in 2002. However, it was difficult to ship large volume Haier refrigerators to the United States due to the long distance between the two nations. The successful operation of Haier America plant has helped Haier to reorganize its production structure and to expand its market share in the United States.
Secondly, it can effectively avoid non-tariff barrier of international trade to operate a manufacture plant in the United States. An example of freight, the USA administration once raised of container freight by about 50% for the goods shipped from Asia to the United States. Some other problems, such as technical barrier, would not be easily solved even if China becomes a WTO member. Haier believes that the key to further exploit American market is to reduce the cost for entering American market.
Localization greatly relies upon utilization of local talents resource.
Haier America was Haier's first company established in a foreign country to implementing Haier's overseas promotion policy. Haier believes that the fundamental strategy for Haier America to become a localized company is to use local talents resource that is to make employees of Haier America understand and accept Haier's philosophy in business practice. Haier did not send Chinese management, but hire Americans to manage the plant.
One of the management of Haier America Trading Company is Mr. Michael, president with an annual remuneration of USD250,000. What Haier did was to introduce Haier corporate culture to him, and then he helped all the employees to share common understanding of it. Obviously, this could not be done by any Chinese employee of Haier.
In practice, this method has proven to be practical for American market and culture. Mr. Michael became confident for Haier and Haier corporate culture with the development of Haier's business in the United States. He believes that Haier is an energetic and potential enterprise and is determined to approach his goal that the sale of Haier America accounts for one third of Haier's global revenue in a possibly short period.
To exploit American market, he often works overtime. Many Americans think that working in Sundays is unbelievable, or even ridiculous. However, Mr. Michael often takes software and notebook computer home on Sundays. He also visits Haier's headquarters in Qingdao quite often as he enjoys good impressions of the ambitious spirit and high efficiency of Haier employees who receive him every time. He wishes to work for Haier as his career in his whole life.
Haier America is a symbol of the progress Haier has achieved from the initial period of globalization to the stage of globalized Haier.
In addition to Haier America, Haier has established refrigerator and washing machine plants in Indonesia, Philippines, Malaysia and Iran since 1996. Currently, Haier has 13 overseas factories. Haier establishes the factories and trading companies in the key economic regions in the world, including the USA, Europe and Middle East, with an aim to use local resources for product manufacture and distribution and to make Haier a global recognizable brand. Haier¡¯s initial period of globalization is a foundation of Haier's second stage, Globalized Haier. The key of Haier¡¯s globalization is to introduce the international standards and criteria as the guidance of its routine management. If this is likened to a physical competition, qualification is basic for an athlete. As for Haier, product quality, financial management and marketing efficiency complying with international standards in terms of business practice are three fundamental elements to take part in the competition in global marketplace. Product exportation is the basic activity in the initial period of Haier's globalization. However, in the period of Globalized Haier, Haier China is no longer a manufacture plant exporting products, but a part of the globalized Haier which consists of Haier America, Haier Europe, Haier Southeast Asia and so on.
VOA report praises Haier's success in the United States
Staff: The VOA released a report on January 30 praising Haier's success in the United States. To seek the secret of Haier America's success in the United States, Jackson Chou, a well-known journalist of VOA, visited Haier America plant and Haier's headquarters in Qingdao. "To exploit American market, Haier established a refrigerator plant in Camden, South Carolina. Many people did not expect large investment by a Chinese company and would rather believe that Haier might purchase an ailing refrigerator plant in Camden or cooperate with a small American refrigerator company. I was surprised when I saw Haier in Camden. It is a completely new, rectangular 300,000 square meter American standard workshop."
McKinsey Quarterly: Zhang Ruimin Taking Haier Higher
Not long ago, a report, titled China's Refrigerator Magnate, written by Wu Yibing, a staff journalist of McKinsey Quarterly, was published on Edition 3/2003 with a subtitle, Zhang Ruimin, CEO of the Haier Group - the Chinese company that is the world's fifth biggest maker of white goods - describes his plan to create a global brand, is determined to create global recognizable brand. Zhang Ruimin iterated on Haier¡¯s ambition to gain worldwide recognition as a name brand in the world community through implementation of Haier's SBU management and localization policy. McKinsey Quarterly highly praised Haier's success, "Haier is seeking an effective way for branding by selling innovative products to niche consumers before expanding market share with the mainstream products. The policy has enabled Haier to earn high profits as Haier does not desire to compete world players by simply supplying cheap products".
Liu Biwei, Chinese Consulate-General in New York, accompanied by his wife, paid a visit to headquarter of Haier America and was quoted as saying, "I hope more Chinese companies purchase office buildings in New York."
On March 11, Chinese Consulate-General Liu Biwei and his wife as well as the Economic and Commercial Counselor of Chinese Consulate General in USA Yuan Zhanling visited the headquarters building of Haier America upon an invitation.
Mr. Michael showed the visiting guests around in the headquarter building and made an introduction to Haier America.
Chinese Consulate-General Liu Biwei delivered his appreciations to the Chinese and American employees of Haier America and said that ¡°Haier is not only a household word in China, but also in many countries. Like I have heard, Haier headquarters office building, an estate with the most expensive location in Broadway, New York, is a pride of Chinese people, including me, a representative of Chinese government, as it shows the world the success a Chinese company has made in the United States. I hope that more Chinese companies come to develop business in the United States." He also said that China's diplomatic mechanisms were responsible for China's economic activities and the Chinese Consulate General in USA should provide assistance to Haier and any of other Chinese enterprises carrying out business in the United States. At last, the Consulate-General Li Biwei wished every success to Haier America.
(Source: Chinese Consulate General in USA)
Havana International Fair unveiled
The 22nd Havana International Fair was held on November 1 and more than 1000 companies from 45 countries attended the event for commodity exhibition.
Xinhua News Agency Havana 01/11: 14 Chinese companies from Beijing, Shanghai, Tianjin, Zhejiang, Shandong and Shaanxi exhibited household appliances, electromechanical products, machinery, hardware, chemicals, textiles and motorcycles at the 22nd Havana International Fair. China's giant Haier group displayed air conditioners, television sets, refrigerators and washing machines and attracted attention of participants.
China made commodities were displayed in the 500 square meter No. 10 Exhibition Hall. A delegation led by Gao Yan, vice chairman of China Council for the Promotion of International Trade (CCPIT) attended the Day of China. Carlos Lage Davila, member of the Political Bureau of the Central Committee of the Communist Party of Cuba and Vice Chairman of the Council of Ministers of Cuba, and Ricardo Cabrisas Ruiz, Government Minister of Cuba also attended the event upon invitation.
Both Gao Yan and Cabrisas delivered speeches on the healthy development of Sino-Cuba economic and trade cooperation over the past few years and shared the common consensus to strengthen the ties between the two nations in terms of economic and trade cooperation and exchange.
Cabrisas visited all sections of China's exhibition hall and is quoted as saying while being interviewed with by the journalist of Xinhua News Agency that, as a economic giant, China's participation in Havana International Fair is of great significance, symbolizing the fast progress of China's manufacture industry and Sino-Cuba economic and trade cooperation. He believes that Cuba will be a potential market for Chinese products.
Havana International Fair is annually held as one of major trade business events in Latin America. The 22nd event was held during 1st to 7th, November.