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Strategic Management,[object Object],Dr. Heba El Dahshan,[object Object],C A S E 24The Haier GroupU.S. Expansion,[object Object],By,,[object Object], Osama Mosad,[object Object], Antoine Andrawos,[object Object], Shady Taymour,[object Object], Youssef Ishak,[object Object],1,[object Object]

The Haier Group,[object Object],2,[object Object]

Company Background,[object Object],3,[object Object],Haier is the world’s 4th largest white goods manufacturer and one of China’s Top,[object Object],100 IT Companies. The Business Scope of Haier is technology research, product development,[object Object],and manufacturing, trade and financial services. The key products are refrigerators/,[object Object],freezers, commercial air-conditioners, microwave ovens, washing machines,,[object Object],dishwashers, televisions, mobile phones, and computers, etc. Haier has 240 subsidiary,[object Object],companies and 30 design centers, plants and trade companies and more than 50,000,[object Object],employees throughout the world. Haier specializes in technology research, manufacturing,[object Object],industry, trading and financial services.,[object Object]

Company Background,[object Object],4,[object Object],The main problem to be resolved for Haier was how to differentiate itself from General Electric, Wirlpool, Maytag, and Electrolux in white goods and from Sony, Panasonic, Philips, and LG in brown goods and thus achieve a winning competitive advantage in the U.S market,[object Object]

CURRENT SITUATION 1 - 6,[object Object],Current Performance,[object Object],High and Growing Financials.,[object Object], ,[object Object],Annual Growth Rate of 78%.,[object Object], ,[object Object],In 2003 Global Sales reached $10 Billion.,[object Object],5,[object Object]

CURRENT SITUATION 2 - 6,[object Object],B. Strategic Posture 1 - 5,[object Object],Vision,[object Object],Become the third largest appliance maker in the world,[object Object],6,[object Object]

CURRENT SITUATION 3 - 6,[object Object],B. Strategic Posture 2 - 5,[object Object],2. Mission,[object Object],Highest quality products with minimum cost.,[object Object], ,[object Object],Develop effective strategy to survive and prosper against aggressive competition in the United States over the intermediate and long-term future.,[object Object], ,[object Object],Continues growth is our long term target.,[object Object],7,[object Object]

CURRENT SITUATION 4 - 6,[object Object],B. Strategic Posture 3 - 5,[object Object],3. Objective,[object Object],Main goal to continuously increase the volume of products sold in the United States and to modify the company’s products to meet American demand.,[object Object],To integrate itself with the locality and build brand recognition. ,[object Object],To achieve the cost control needed to maintain its price advantage.,[object Object],To continuously improve its services to build the trust of local customers.,[object Object],Expanded the amount of units in order to achieve the 10% market share in U.S. refrigerator sales in 2005,[object Object],8,[object Object]

CURRENT SITUATION 5 - 6,[object Object],B. Strategic Posture 4 - 5,[object Object],4. Strategies,[object Object],Brand name strategy, diversified development strategy, multinational strategy ,[object Object],Differentiate Products to gain competitive advantage.,[object Object],Global Growth through acquisition with strong brand name to gain recognition using the strong financial position.,[object Object],Captured some attention from the low end of the market,[object Object],Saving the cost of transportation and consolidate its price advantage by collaboration with COSCO ,[object Object],Aggressive advertising on internet and sponsorships for sports teams to improve brand recognition ,[object Object],9,[object Object]

CURRENT SITUATION 6 - 6,[object Object],B. Strategic Posture 5 - 5,[object Object],5. Actions,[object Object],After sale service is very essential to gain customer trust ( A & E Factory Service).,[object Object],Cost reduction is essential to gain competitive advantage.,[object Object],Manage the costs of manufacturing many different product models by periodically changed the modules of components ,[object Object],Fast in developing new products ,[object Object],10,[object Object]

STRATEGIC MANAGERS,[object Object],Top Management,[object Object],Zhang Ruimin, the Haier Group ‘s CEO , and his colleagues had turned Haier from a collectively run workshop into an international enterprise.,[object Object],Combined chinese traditional culture and western by establishing the OEC(overall every control and clear ) market chain system ,[object Object],Clear identity problems, causes, and find solutions one by one ,[object Object],Realize a zero distance contact with customers ,[object Object],Stimulate employee enthusiasm and competitiveness and each employee act as a manager ,[object Object],11,[object Object]

EXTERNAL ENVIROMENT 1 - 7,[object Object],12,[object Object],EFAS Table 1 - 2,[object Object]

EXTERNAL ENVIROMENT 2 - 7,[object Object],13,[object Object],EFAS Table 2 - 2,[object Object]

EXTERNAL ENVIROMENT 3 - 7,[object Object],A. Societal Environment,[object Object], 1- Economic,[object Object],Growing Economy, U.S. consumer disposable income increased ,and relatively low mortgage rates maintained a fairly high demand for new homes, These positive factors simulated people’s consumption of durable goods including home appliances and consumer electronics. (O),[object Object],14,[object Object]

EXTERNAL ENVIROMENT 4 -7,[object Object],A. Societal Environment,[object Object],2. Technological,[object Object],The demand for consumer electronics was driven by technological innovation especially in digital technology. (O),[object Object],15,[object Object]

EXTERNAL ENVIROMENT 5 - 7,[object Object],A. Societal Environment,[object Object],3. Sociocultural ,[object Object],For Home appliances, the company targeted Lower-income young people and college students by offering relatively low prices on its compact appliance.(O),[object Object],Middle-aged and other people preferred well known brands and they cared about the warranty and services of the products but were somewhat price sensitive, they might try new brands especially brand loyalty now is only 35% (O),[object Object],16,[object Object]

EXTERNAL ENVIROMENT 6 - 7,[object Object],B. Task Environment 1 - 2,[object Object],1. Power of other stakeholders: Medium, Quality, Safety & Environmental regulation increasing (O),[object Object],2. Bargaining Power of buyers: Low, Technology and material can be sourced from China (O),[object Object],3. Threats of new entrants: Low, due to very high changing technology especially in digital electronics. (O),[object Object],17,[object Object]

EXTERNAL ENVIROMENT 7 - 7,[object Object],B. Task Environment 2 - 2,[object Object],4. Threat of substitutes: High, In home appliances, the threat of substitute products came largely from incremental improvements(such as energy-efficient washers and dryers or timed coffee makers) rather than from wholly new products that made previous products obsolete (such as the invention of the electric refrigerator, which replaced the icebox). (T),[object Object],5. Rivalry Among Existing Firms: High, Whirlpool, GE, Maytag, Electrolux, LG, Bosh-Siemens, Sub-Zero, Viking, ….etc. (T),[object Object],6. Bargaining Power of supplying distributors’ Power: High, Super retailers more important; mom and pop dealers less. (T),[object Object],18,[object Object]

INTERNAL ENVIRONMENT 1 - 8,[object Object],19,[object Object],IFAS Table 1 - 2,[object Object]

INTERNAL ENVIRONMENT 2 - 8,[object Object],20,[object Object],IFAS Table 2 - 2,[object Object]

INTERNAL ENVIRONMENT 3 - 8,[object Object],A . Corporate Structure ,[object Object],1. Zhang Ruimin’s management system had been widely acknowledged as a superior by domestic and overseas management professionals. (S),[object Object],2. Haier focused on organizational restructuring and management decentralizing with application of advanced information and network systems in order to fulfillment, market chain performance, logistics, capital operation, after-sales service, product inventory and operational cost reduction. (S),[object Object],21,[object Object]

INTERNAL ENVIRONMENT 4 - 8,[object Object],B. Corporate Culture,[object Object],Haier had a strongly motivated technician team, which was able to increase the company’s product competitiveness by applying more features and style designs on its existing products. (S),[object Object],22,[object Object]

INTERNAL ENVIRONMENT 5 - 8,[object Object],C. Corporate Resources 1 - 4,[object Object],1. Marketing,[object Object],a. Haier’s strengths were its relatively low prices and the unique designs and appearance of its electronics products. (S),[object Object],b. The supply and distribution functions were extremely important to Haier’s business development because they would determine how fast the company could respond to emerging market needs and how well the company could control its logistics costs. (S),[object Object],c. Haier did have an outdated Web site design, however , putting it behind Whirlpool, GW, Sony, and Panasonic. (W),[object Object],d. Haier’s product distribution in the US was nationwide, and its products could be found in most major chain retailers. (S),[object Object],23,[object Object]

INTERNAL ENVIRONMENT 6 - 8,[object Object],C. Corporate Resources 2 - 4,[object Object],2. Finance,[object Object],a. During the 17-year period from 1984 to 2001, the Haier Group had experienced a rapid growth , with an average annual growth rate of 78 %. (S),[object Object],b. In Year 2003, Haier Group’s Global sales reached $10 Billion. (S),[object Object],c. From year 2001 to 2004, Haier Group’s annual sales grew 1.7 times and its ales doubled in US market and its total exports more than tripled. (S),[object Object],24,[object Object]

INTERNAL ENVIRONMENT 7 - 8,[object Object],C. Corporate Resources 3 - 4,[object Object],3. R & D,[object Object],Compared with most of the major brands, Haier’s consumer electronics products has no competitive advantages either in technology advances or in product quality, except for their relatively lower prices. (W),[object Object],25,[object Object]

INTERNAL ENVIRONMENT 8 - 8,[object Object],C. Corporate Resources 4 - 4,[object Object],4. Operations,[object Object],a. Haier had grown in the major home appliance market by offering higher qualityand a wider range of appliances with relatively low prices. (S),[object Object],b. Haier America imported its products from china or the other subsidiaries of the Haier Group, where labor costs were much lower than in America. (S),[object Object],c. Although Haier had only one manufacturing base in America, the land available was large enough for continuous expansion. (S),[object Object],26,[object Object]

ANALYSIS OF STRATEGIC FACTORS 1 - 2,[object Object],Situational Analysis,[object Object],27,[object Object],SFAS Table,[object Object]

ANALYSIS OF STRATEGIC FACTORS 2 - 2,[object Object],B. Review of Current Mission and Objectives,[object Object],Current Mission appears appropriate,[object Object],28,[object Object]

STRATEGIC ALTERNATIVES AND RECOMMENDED STRATEGY 1 - 6 ,[object Object],A. Strategic Alternatives,[object Object], ,[object Object], 1- Integration Strategy:- moving in production path,[object Object], ,[object Object], a. Backward integration: having control on supplier,[object Object], ,[object Object],b. Forward integration: having control on distributor,[object Object],c. Forward Horizontal Integration: gaining control over competitors,[object Object],29,[object Object]

STRATEGIC ALTERNATIVES AND RECOMMENDED STRATEGY 2 - 6,[object Object],A. Strategic Alternatives,[object Object],2- Intensive Strategy:- based on existing products,[object Object], ,[object Object],a. Market Penetration: to increase market share of my existing products in existing market.,[object Object], ,[object Object],b. Market Development: introduce existing products in new markets due to excess production.,[object Object], ,[object Object],c. Product Development: introduce existing products but with adding new features to introduce finally a new one.,[object Object],30,[object Object]

STRATEGIC ALTERNATIVES AND RECOMMENDED STRATEGY 3 - 6,[object Object],A. Strategic Alternatives,[object Object],3- Diversification Strategy:,[object Object], ,[object Object],a. Concentric Diversification: introducing new related products or services to new customers.,[object Object], ,[object Object],b. Horizontal Diversification:introducing new unrelated products to existing customers.,[object Object], ,[object Object],c. Conglomerate Diversification:introducing new unrelated products to new customers.,[object Object],31,[object Object]

STRATEGIC ALTERNATIVES AND RECOMMENDED STRATEGY 4 - 6,[object Object],A. Strategic Alternatives,[object Object],4- Differentiation Strategy:,[object Object], ,[object Object],a. Cost Leadership: introduce product or service with lowest possible price compared to rivals to a broad range of customers who are price sensitive.,[object Object],b. Differentiation: introduce product or service with a unique features to a broad range of customers who are price sensitive.,[object Object],c. Cost Focus: introduce product or service with lowest possible price compared to rivals to a narrow range of customers who are price sensitive.,[object Object],d. Differentiation Focus: introduce product or service with unique features to a narrow range of customers who are price sensitive.,[object Object],32,[object Object]

STRATEGIC ALTERNATIVES AND RECOMMENDED STRATEGY 5 - 6,[object Object],B. Recommended Strategy 1 - 2,[object Object],1-Forward Horizontal Integration:gaining control over competitors where the company is having a very strong financial position.,[object Object],2-Product Development: introduce existing products but with adding new features to introduce finally a new one where Haier’s strengths were its relatively low prices and the unique designs and appearance of its electronics products.,[object Object],33,[object Object]

STRATEGIC ALTERNATIVES AND RECOMMENDED STRATEGY 6 - 6,[object Object],B. Recommended Strategy 2 - 2,[object Object],3- Concentric Diversification: introducing new related products or services to new customers where in Haier’s America, land is available for expansion.,[object Object],4- Differentiation: introduce product or service with a unique features to a broad range of customers who are price sensitive where this may be appropriate for Middle-aged and other old people who preferred well known brands and they cared about the warranty and services of the products but were somewhat price sensitive, they might try new brands especially brand loyalty now is only 35%,[object Object],34,[object Object]

IMPLEMENTATION,[object Object],A. Success in US is done by gaining more brand recognition.,[object Object], ,[object Object],B. R&D need to be improved as does increase distributions centers to more efficiently supply chain and individual retailers.,[object Object],35,[object Object]

EVALUATION AND CONTROL,[object Object],Using the good Financial Position for Acquisition on strong brand name is needed but with a careful and full study on the acquiring company to enhance Hair’s company in the US market achieving highest profits.,[object Object],36,[object Object]

THANK YOU,[object Object],37,[object Object]

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