Haier, is bringing Chinese innovation to global management practices. Earlier this month, the company celebrated its 30 years of success in the serene and colourful town of Qingdao and BR Research was present there to observe the evolution of Chinese corporate culture through Haier's lens.
The unique feature of Haier's success is that this publicly owned company has had the same chief executive since its inception, and he is still like a fountain of energy. His simple principles with no compromise on consistent quality blended well with openness to emerging global business practices are hallmarks of the company's success.
In 1984, Zhang Ruimin took over the post of director of an ailing Qingdao Refrigerator Factory and never looked back. He religiously followed a few basic rules that were lacked by his predecessors with good quality taking precedence over all else. In three decades, the bankrupt small company has transformed into $30 billion revenue generating global enterprise.
Haier started its journey with a brand building strategy in early days of China's opening up and reformation of its industrial base. The company worked like many others in importing refrigerator technology and equipment from abroad. The tactic differentiated Haier from others is not to compromise on quality by adopting comprehensive quality management system.
In early 1990s when China adopted a state policy of business mergers and acquisition, Haier decided to diversify by acquiring eighteen domestic businesses. That has resulted in expansion in scale and diversity in operations. To manage it, the company implemented OEC (overall every control and clear) management - every employee finishes his(er) job everyday with the aim to accomplish each day's plan and improve on previous day's performance. That management style became the cornerstone of Haier's innovation.
In late 1990s when China entered into WTO era, many Chinese companies became global. What differentiated Haier from conventional companies in those days of its internationalization strategy is to become global; not just to earn foreign exchange but to build its own brand. It came up with a three step strategy of going out, going in and going up. It first entered into the developed world to build the brand followed by penetration in developing countries with an already established global recognition. Becoming global has its own challenges, and it created space for implementation of Market Chain management which is based on computer information system to drive logistics and capital flows.
Haier entered the internet age by quickly adopting segmentation of marketing policy while departing from traditional production inventory-sales model. The transformation from internationalization to global strategy was to deploy global resources to create localized mainstream brands. The company consolidated its global resources in R&D, manufacturing and marketing to create global brand.
It created a unique win-win model of individual-goal combination. Individual is referred as an employee while the goal is to gain costumer's satisfaction with employees objectives is to add value to customers (not the employer). It becomes a win-win situation for both employees and customers; consequently the enterprise flourishes.
This has led Haier to enter into a networking strategy; linking into three areas: border-free enterprise, manager-free management and scale-free supply chain. A few leading management gurus and renowned digital economic writers while speaking at Haiers 30 years celebration event hailed its top managers efforts to let the company redefine management models and definitions of manufacturers in the modern days of internet age.
All these strategies paid dividends. For six years in a row, Haier was awarded the largest retail seller in world for large home appliances by Euro Monitor with its lion's share in world's biggest market China. In 2014, its global share reached double figures; (10.2%) which is twice that in 2009 at 5.1 percent. Most of the Chinese homes use its direct cool refrigerator and washing machine today.
In the connected world with a concept of purification of environment and conservation of energy, Haier is emerging with the concept of the Smart Home. According to Mckinsey Research, the economic potential of durable products and solution industry is EUR 250-500 billion per annum for Europe alone in the next decade. Haier, to the likes of other giants, is pouncing upon the opportunity to capture this nascent market. Haier air cube, "no-clean" washing machine, Haier Boguan refrigerators, Tianzun air conditioners and other smart appliances have become the symbols of its smart home strategy.
The households in Pakistan have not reached at the income levels that could let Smart Homes attain widespread usage here yet. But Pak-China friendship is well capitalized by Afridi's from tribal areas who have entered into a venture with Haier; the first Chinese business investment in Pakistan.
In 2001, Haier factory was formed by a joint venture of Haier Group and Ruba Group to produce refrigerators, home air-conditioners and washing machines with a production capacity of 300,000 units. In thirteen years, Haier's share in the local market has reached 27 percent and is targeting to achieve 32 percent share in 2015. Haier's washing machine and air conditioners are top brands in Pakistan while overall the brand is number two in terms of domestic electronics market share.
Currently the electronic market size - home appliances, consumer electronics and lighting - is $3.5 billion in Pakistan which is expected to reach $5.5 billion in 2019, Haier and Ruba joint venture eyed upon to increase its share to $1.45 billion by then. The group has also started the assembly plant for laptops, and soon it will be the first one to manufacture laptops in Pakistan under the brand name of Haier. That will be followed by manufacturing of mobile phones in Pakistan.
The good omen is that Haier's unique, yet successful, corporate culture is entering into Pakistan with a number of Chinese experts working here and that may have a spillover to other businesses as well. Plus, the Ruba Group has entered into a retail chain with 85 stores for electronics, which will be expanded to 200 stores across the country in 2015. Much more can happen with this integrated business of manufacturing to retailing by providing better after sales services and affordable instalments packages for 30 million plus middle class. Its taking electronic business at home to the next level.
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