Haier: A Chinese Success Story
Haier has held the title of being the world’s largest white goods manufacturer and retailer for 5 consecutive years, with a retail market share of 9.7% in 2013 (www.haier.net). The company was inaugurated in Qingdao, northern China, in 1984 when founder Zhang Ruimin took over Qingdao General Refrigerator Factory. Zhang and his management team managed to turn the debt-ridden company into China’s leading refrigerator manufacturer in just 4 years; garnering the first National Refrigerators Appraisal gold medal for any Chinese refrigerator manufacture.
Since its early success, Haier has gone from strength to strength and now sells a wide variety of white goods in 6 continents and makes an annual profit of over 1.7 billion USD.
But what has driven its success outside of China and why have so many other Chinese companies floundered where Haier has flourished?
When Haier first decided to expand to the USA, the brand was virtually unknown outside of China and Chinese products already had a reputation around the world for being of substandard quality and not conforming to industry regulations.
In 1999, Haier opened its first US office and started to put into motion its strategy to conquer the US market. To persuade American consumers to buy its products, Haier had to develop a strategy to make customers trust the brand and its products. Haier did this by making the manufacturing quality of their goods paramount, to debunk the view that all Chinese goods are substandard. The quality standards at Haier even surpass those set by Japanese standards bodies.
The company also took advantage of niches left in the market by already established white goods suppliers, by developing affordable mini fridges built into desks for student dorm rooms and creating a slightly warmer compartment within freezers to ensure ice cream stays soft. These innovations appealed to American consumers and helped Haier establish itself in the North American market before expanding to Europe and the rest of the world.
The key to Haier’s success outside China, and why many other Chinese brands have failed in the same markets, is because Haier has focused on building and maintaining a brand image – one that is separate from the negative image many consumers hold of China and Chinese products. In many of Haier’s target markets, the company deliberately leaves out mention that it is a Chinese company in advertising and product brochures as they feel it would be detrimental to the brand if consumers associated the Haier name with China.
Haier’s aim is to compel consumers, especially in the USA and Europe, to think that Haier is a home-grown brand rather than one imported from China by focusing on quality and developing products customers really want, rather than what the company thinks they want.
This branding strategy has, thus far, proved a successful one. Haier has managed to maintain its momentum in US and European markets, as well as in its local Chinese market, by listening to customers and developing products based on customer complaints and suggestions. This has led to the development of washing machines for rural Chinese communities that not only clean clothes but are also able to wash potatoes; fridges with three doors for its elderly European customers, as well as freezers that are able to stay cold even after long electricity outages, for consumers in African countries.
Haier has developed research centres in both the USA and Europe where they invite consumers in, at all stages of product development, to test and give suggestions and comments on new products. This means that Haier can tailor its products to smaller market sections compared to other similar companies. For example, Haier now produces over 100 different types of refrigerator and has around 80 different target consumer groups. Other, similar companies tend to only have 7 or 8 different groups (www.suitable.dk).
Even now, when Haier is an established brand in the USA, the company is still focused on innovation and developing new products by listening to what its customers are looking for. As of 2013, the company has filed over 15,700 patents and been granted over 10,000; a truly innovative company and world research and development leader for home appliances (www.haier.net).
Haier has also taken a radical approach when it comes to management structure. The company has completely dispensed with middle managers and, instead, gives project leadership positions to the staff member who comes up with a viable new product concept. This has encouraged more creativity and innovation within the company as everyone is competing to come up with the next big thing and to be given the opportunity to develop their design from original idea to a product ready for sale.
This unique staffing structure means that Haier is constantly developing new and radical products and technologies, meaning that they are always several steps ahead of the competition and can maintain their position as the world’s biggest white goods manufacturer.
If Haier is able to keep up the pace of innovation, both with product design and the way the business is managed; the future certainly looks bright for the Chinese company.