Situation All photographs by Wang Zhao. Add to basket To improve quality, for example, Zhang set out to foster a mind-set oriented toward performance and accountability. Through this model, each team is given the freedom and authority to operate and to make decisions independently. The ZZJYTs are not permanently assigned to a particular product or role. Strategically, it shifted from a “production-push” model, which motivated channel stuffing and overproduction to increase short-term profitability, to a retail sales model. Qingdao Haier started two transitions: (i) from a traditional business model to the Win-Win Model of RenDanHeYi; and (ii) from a traditional manufacturer to a user-centric service provider.Haier Group consolidated the logistics business into one of its subsidiaries. A major lesson to be learnt from the success of Haier’s entry into US is the way it internalized the western business model in response to economic condition and consumer preference. Later, it involved increasingly sophisticated forms of customization and new types of services. Click here to access your saved items, or click the “X” to go back to the article. Inspired by the success of the latest wave of Internet-based companies, he is currently launching a fourth reinvention, this one involving the Internet. Haier integrated its unique management culture into local operations and cultures. He borrowed routines and practices for continuous improvement from the quality movement — which was then, in the mid-1980s, first becoming visible in industries outside Japan. Workers grew accustomed to taking small steps that added up to great results. It is an obelisk-like device with a small wind tunnel that draws air through it from the room where it is positioned. What comes next will depend on how well they face up to them. Haier’s business model transformation helped drive its microenterprises to deal with users directly through the open shared platforms, resulting in several shifts. So, by 2005 Haier has achieved globe recognition, establishing its presence across all continents. For example, the company managed logistics with a zero-defects focus, resulting in very low inventory, short delivery times, and low working capital. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Most Chinese families lacked basic home appliances, and the offerings from local manufacturers did not meet basic standards for quality or consumer appeal. By building cooling machines based on this in-depth and multilayered approach to consumer insight, Haier is following its own core principle: “customer service leadership,” or the necessity to shape the future by giving customers what they want most (but may not have yet realized they can ask for). 2,814 business leaders shared the impact of the COVID-19 pandemic on their organizations. Instead of offering its employees jobs, the company offers everyone a continuing series of opportunities to find jobs, considering the contributions they have already made. Haier pursued a very aggressive globalization strategy and entered the Australian and New Zealand Markets in 2002. In the past, our relationship with a supplier like Mitsubishi might have consisted of us going to them and giving them the specs for a new air conditioning compressor. Executives at Chinese home appliance manufacturer Qingdao Haier, Ltd. (Haier) have just learned that Ripplewood Holdings placed a bid to purchase Maytag Corporation for $1.13 billion or $14/share. 1. To accomplish its goal, Haier has consistently cultivated and rewarded high-quality talent; the company has been a magnet for many of China’s most capable engineers and businesspeople. //--> For example, U.S.-based R&D engineers are required to talk directly to consumers in the design of new products, and their salary is linked to the sales results of the products they design. Because R&D and marketing people work in the same ZZJYTs, they meet frequently, particularly when new products are considered. Moreover, the machines look — well, like air conditioners. Haier, a simplified Chinese transliteration of the second part of the German Liebherr, was chosen in part because it was easy to remember and euphonic in both Chinese and English. And then, during the 2000s, Haier parlayed that success into becoming a mainstream producer of appliances for the U.S. market. Bloomberg the Company & Its Products The Company & its Products Bloomberg Terminal Demo Request Bloomberg Anywhere Remote Login Bloomberg Anywhere Login Bloomberg Customer Support Customer Support 413-102-8 Subject category: Human Resource Management / Organisational Behaviour Access this item. When Haier made the strategic choice to launch a three-door refrigerator, for example, it invited its employees to compete for the role of leading this initiative by submitting business plans and business models explaining how such a product could best succeed. The machines themselves are too noisy, or too likely to spread disease (bacteria live in air conditioning systems). This model has successfully transformed Haier, and has also drawn much attention from the world … The connection to customers has helped Haier migrate many people from their medium-value line of household appliances (the original Haier) to the more upscale Casarte brand. Zhang established early on that changes would be a way of life, not soon-to-be-completed episodes that must be traversed. This way, Haier keeps inventories low, which saves storage costs and working capital. Today, he oversees what Haier calls a “community of interest,” that is, people throughout the company, and external partners along a value chain, who have made a commitment to help his team. Water purification is another example of the increasing scope of Haier’s collaboration. Since 2011, it has held the largest worldwide market share in white goods. To access this feature, please SIGN IN or REGISTER. Word Counted (Excluding charts, From the beginning, he displayed a fervent curiosity about management and high performance, and he studied the work of leading scholars and observers, especially eminent management writer Peter Drucker. It has accomplished this by being a consistently coherent and capable company: staying true to its core identity as a company dedicated to solving problems for consumers, while continually reinventing itself with imagination and verve. With special cycles designed to help you wash faster and better, they’re the smart choice, especially when paired with our equally innovative dryers. Haier organizes its ZZJYTs in three tiers. making. CEO Zhang Rhuimin sees the approach as a way to stay small and focused – maintaining the entrepreneurship, intimacy and speed of a start-up – despite now being a $32 billion multinational with 70,000 employees. This gave the company a simple means of establishing goals and controlling achievement for “everything, everyone, and every day,” and a way to encourage employees to constantly challenge their previous performance. Tianzun air conditioner (at left), introduced in 2014. The Internet has enabled the company to expand its service diligence; it provides intensive installation as part of any appliance sale (a rarity in China), and, using monitoring signals from the appliances, it conducts follow-up calls with customers when the equipment is not working. Haier, China's home appliances juggernaut, has developed a unique management model which utilizes employees' potential, entrepreneurial spirt and closer interaction with its customers. This was timely, because quality was no longer a great differentiator in China; other companies had caught up. PwC. Haier, based in Qingdao, China, is currently the world’s largest appliance maker. Open innovation is central to Haier’s business strategy. The second day was a deep dive into the practical application of the Rendanheyi model for Haier’s business. Haier's Revolutionary Business Model. BEIJING - Chinese home appliance manufacturer Haier is transforming itself into an open platform for innovators. The activities of all the ZZJYTs are linked by internal contracts. “The platform helps us attract first-class resources,” says Lei Yongfeng, the R&D director for PAC, Haier’s air conditioning platform. Its culture — embracing rather than resisting change, while holding true to its original core principle of customer service leadership — is the most important asset of the company today. If a customer wins by gaining a better product or service, then everyone else should win as well, including the organization’s shareholders through increased profits, and the employees through increased income. (See “Haier's Capabilities System,” below.) Nonetheless, the company was moribund. Mentions of Strategy& refer to the global team of practical strategists that is integrated within the PwC network of firms. Every major organization will have to learn how to maintain its identity, the quality of its products and service, and its customer relationships, while being prepared to give up everything else. They give us a better understanding of users’ needs. “The only thing that we know is that we know nothing,” he says. At that time, demand for appliances was slowing down in the West after 35 years of growth. Rapid innovation based on consumer demand — as with the Tianzun air conditioners released in 2014 — has become routine, because all departments work in parallel. But Chinese domestic firms fiercely defended their home markets by drastically reducing prices. (Rough Draft; May 2005) By providing the best end-user experience through innovative product technology, and with a business model proven to grow larger profit for our North American Haier distributor and Installer/service partners, Haier is dedicated to being recognized as the North American leader in the ductless HVAC industry. Because they worked closely together from the start, managers from all these functions were moving forward in concert, addressing possible disconnects as they arose. Bill Fischer, Umberto Lago, and Fang Liu. For the next 30 years, the operational capability of OEC gave Haier what behavioral experts George Kohlrieser, Susan Goldsworthy, and Duncan Coombe call a “secure base” on which to build bold change. Value creation model through corporate social responsibility (CSR)”, International Journal of Business and Management, 6.9: 148-154. In the earliest years, that meant bringing new levels of quality and reliability to Chinese products. Maytag Corporation, the 3rd largest home appliance manufacturer in the United States, has announced that it will consider competitive offers for the acquisition of the company. Headquarters on Haier's main campus in Qingdao, China Zhang was the leader who proposed that Haier should never see itself as just a manufacturer of products, but instead as a provider of solutions to its customers’ problems. It changed its name to Qingdao-Liebherr to evoke the prestige and quality of German manufacturing. Haier, founded in the 1930s, was nearing bankruptcy in the early 1980s, when Zhang brought it back to life. Teaching note -Reference no. The fourth, going on today, is the reinvention of Haier as a truly Internet-based company, open to the world in a way that few other companies have attempted, let alone realized. Haier was ranked first among China's Top 10 Global Brands by the Financial Times in 2005 (Haier's company facts 2008). “We want people to be able to find all their water-related answers at Haier,” says Qu Guinan, the general manager of the Haier water treatment company. With his constant innovation in management models, he sparks attention and recognition in the field of management both at home and abroad. On its website, which has an active consumer-to-consumer dialogue, the company posts water quality information for 220,000 communities in China. Key to all this growth was Haier’s behind-the-scenes customer-centric operations system. Its production line delivered only 80 units per month, including many that didn’t work. After three managing directors resigned in rapid succession, a 35-year-old deputy manager in the company named Zhang Ruimin was asked to find a replacement. However, the coming years are bringing more challenges including how to establish itself as a major localized US brand, integrate with locality, build brand recognition and manage its brand. They found it more hygienic and socially discreet to wash these separate from other clothes and away from public washing machines. Management scholars and entrepreneurs worldwide are exploring new management theories and business models such as the management model of Rendanheyi (人单合一in Chinese, translated as ‘Maker-Customer Integration’) that has been evolving for 12 years since it was initiated by Haier in 2005. The organization is known for its efficient operations in the home appliance industry and its consumer electronics. Salespeople keep in close touch with customers, so they can estimate the order numbers with a smaller variance than if they were relying only upon forecasts. Once the products are ready for shipment, they go first to the waiting-list clients, and only afterward to retail outlets. The goal of a large company, he says, is to “lose control step by step.” In other words, Zhang believes that Haier isn’t unique. Can chief financial officers help companies make the most of their investments in digital advertising? He believed that Haier suffered from unnecessary time delays and guesswork about new product manufacturing volumes, which proved costly when it guessed wrong, and that could be reduced, if not completely avoided, by becoming more intimately aware of customer needs and wants. But Zhang, in recent years, has questioned the ability of even this level of innovation to succeed. George Kohlrieser, Susan Goldsworthy, and Duncan Coombe. Haier’s management philosophy and corporate culture is recognized worldwide and worthy of emulation. He avoided the conflicts of a matrix structure by introducing “market chains” (based on the value-chain concepts of Michael Porter), in which it was possible for all individuals at Haier, no matter what their role, to trace their actions directly to the marketplace. It has an Internet connection, so consumers can use their smartphones to warm or cool the room while on their way home. From HR to business model innovation, in the past decade Haier created and evolved as a living system an organizational model called Rendanheyi, which roughly means "Employee, Customer, Happiness". The first reinvention, in the 1980s, was the decision to differentiate the company by the quality of its products. This was also the phase in which Zhang began building Haier into a global company. © Zhang has proposed eliminating the current second-tier ZZJYTs, presently home to most of Haier’s middle managers. Zhang also linked pay to performance in a manner previously unseen in the Chinese market, through a system called “Overall Every Control and Clear” (OEC). We inspected them one by one. This is known at Haier as the “networking strategy.” Even the ZZJYTs, the focal point of the previous wave’s business model, are slated for dramatic change. You must be logged in to access preview copies casecent.re/p/116614. 3. The RenDanHeYi model is a complex, continuously changing model that is … They’d much prefer to be “cool, not cold.” But there’s more to the concept than temperature. Although we didn’t set up the online resource with the direct goal of making sales, it has had that effect; sales in this still-young business have risen by a factor of four since we’ve introduced the online resource.”. Soon, if Zhang is once again correct, it will be the first company from anywhere with its distinctive, innovative form of management. These episodes represented the start of the second reinvention at Haier: a new form of customer-responsive innovation. Zhang went so far as to announce that this shift in organizational model would proceed even if revenues and profits showed signs of flagging, and even if it were necessary to use some of the returns from successful legacy offerings to make it work. Now the right number of employees with the right skills gravitate to the right organizational positions at the right time. Our washing machines are based on the reliable and quiet Direct Motion motor. Just as unconventional was the cross-functional nature of the appliance’s launch. Much of the credit for Haier’s success accrues directly to Zhang Ruimin, the company’s CEO since 1984. The second, in the 1990s, was the adoption of consumer-responsive innovation, starting with (but not limited to) products for particular customer needs. The company’s close collaboration among R&D, marketing, and sales also works well in the U.S. market. Once they saw that happening, they were hooked. Haier reps are trained to look up the complex data on China’s water problems, which vary by neighborhood, and to install the filters that guard against that neighborhood’s mix of chemicals and pollutants. Haier now sells not just home appliances but related services, adapted to consumer demand in China, and, increasingly, other markets. “We had just over 400 refrigerators in the warehouse. The pandemic has highlighted a series of paradoxes inherent to the work of leaders. During this stage, Haier focused on exploring a business model that creates users that remain loyal to their brand during the Internet era. Customers choose the color combinations, features (such as the number and layout of shelves in the refrigerator), and ancillary design elements (like the pattern of sparkles on a high-end appliance). Users can see what the water-quality situation is in their communities and use that information to select filtration products that suit them best. Haier is reinventing itself as a truly Internet-based company. LITERATURE REVIEW, 月的英国《金融时报》和普华永道联合评选的“全球最受尊敬的企业＂中，海 尔蝉联中国最受欢迎企业第一名。 本论文叙述了海尔集团发展战略创新的三个阶段：名牌战略、多元化战略和国 际化战略，并指出海尔企业文化、制造技术、组织结构、管理控制机制、信息技术 和薪酬体制是如何配合其战略发展的三个阶段而相应改变的。 本文还对海尔 OEC 和市场链流程再造的管理控制机制进行了详细的阐述。最后作者指出海尔的五个改 进方向及海尔可向美国通用电气集团借鉴的五种管理方法。 Haier’s first international expansion, Haier Case Study Haier is committed to comfort made easy. Air from most such devices in China is dry and dusty. The process is not unlike choosing the accessories on a new car, except that there tend to be more choices. In 1992, it solidified this association by renaming itself Haier, a name the company kept even when the joint venture ended. Every day, workers tracked quality results using paper and pencil, and their wages were tied directly to the outcomes. Meanwhile, in Pakistan, Haier sold extra-large washing machines designed for heavy robes. Haier business strategy was to enter niche markets, where they could compete with industry giants. Haier started its operations by producing and supplying refrigerators, but, Haier Executive Summary The result is a new level of proficiency that goes beyond anything Haier has done before. The appetite for refrigerators was so strong in China that Haier sold just about everything it produced. The ZZJYT leaders also know that they cannot develop all the cutting-edge technologies they need in-house. Haier has started its formal globalization in 1997, and has been able to set up a successful example in competing with those challenges. Haier is one of 12 companies that were studied closely in a Strategy& research project on distinctive capabilities and coherence. Start with 30 million responses on your QZone, Tencent, and other social media platforms — all to a simple question: “What do you want in air conditioning?” Then pay attention to the more than 670,000 people who take part in the online conversation that follows. Meanwhile, representatives of each company function conducted conversations directly with customers, thereby adding a responsive new dimension to the company’s consumer insight capabilities. This minimized the decisions made at higher levels in the hierarchy, making the company more responsive to nascent market needs. In 1997, recognizing the needs of college students in dormitory rooms, it launched mini-refrigerators in the United States. Instead, it would build appliances that solved problems for its customers — the first problem being the unreliability and poor quality of refrigerators in China. life better. Therefore, willingly embracing the concept of open innovation, they collaborate with organizations everywhere they operate — which is how the company ends up working with the best universities and research institutes in the world. Recurrent problems that reduce productivity spiked in the remote working world. Describe how Haier uses activity sharing and the transfer of core competencies to create value. “strategy+business” is a trademark of PwC. Analysis, organize various business activities, through concerted mutual product strategy, pricing strategy, promotion strategy and placing strategy to provide customers with satisfactory goods and services, and then achieve business goals (Piercy & Morgan, 1994). They have their own independent accounting systems and complete autonomy in hiring and firing employees, setting internal rules about expenses and determining bonus distribution, and making almost any operational decision that typically would be made by an independent functional organization. Another challenge was to compete with multiple brands producer (i.e Kelon), while Haier was focusing on genuine, The Cost of Fighting for Social Justice and the Common Good. It was also ranked 86th among the world's 500 Most Influential Brands by World Brand Lab in 2006 and is the only Chinese brand to be among the top 100 for three consecutive years. Some consumers probably knew they wanted that feature, but they didn’t know that they wanted to see the circle’s light shift from red to blue as their air quality improved. In fact, Haier’s prowess — and particularly its emphasis on “what we can do and who we are” rather than on “what we sell and how we make money” — shows the kind of capabilities needed by companies that were founded in emerging economies if they are to succeed in the global sphere. Competing with top global international players like Samsung and LG in a number of segments, as well as with Whirlpool and Electrolux specifically in white goods, one of the main problems for Haier was how to clearly show its commitment to quality products and differentiate itself from them. Haier group is a Chinese brand that was founded in 1984, by Zhang Ruimin, who is Chairman and the Chief Executive Officer of the company. He found no acceptable candidates, and reluctantly took up the challenge himself. He approached this challenge by adopting Mao Zedong’s strategy of “occupying the rural areas to encircle the city,” gaining strength first with niche products for sectors where there were few competitors. Through its simplicity and continuity, this principle has given all employees a reliable compass with which to make decisions, even in the face of disruptive market challenges such as new technologies or new competitors. You must be logged in to access preview copies casecent.re/p/116614. “If you don’t overcome yourself, you will be overcome by others.”. 1984, the Haier (pronounced "high-er") Group is China's largest home appliance manufacturer (Wang and Ong 2007), and the world's fourth largest white goods manufacturer (Chen 2008). Zhang recognizes the high stakes that are involved in changes of such magnitude: “There will be an earthquake [within our company] if it is not properly handled.” But he also believes it is the only course of action that will allow such a large company to succeed in an era when each new triumph leads to new problems. On whether the Haier model can be used by online retailers: It’s incredibly relevant for Alibaba. SWOT Development Strategy Model for HaierBase on the theoretical framework of SWOT and my research on Haier, I created the following model by incorporating SWOT analysis into Haier's strategy-formulating process aiming to show an overall development direction of Haier and provide some guidance for Haier as well as other business. Segmentation variables such as those of demographic (Age, Gender, Income, social class etc), Geographic Variables (Region, city, country, climate) and psychographic Haier has had the advantages of operating in a very large and fast growing home base which contributed to its rapid growth. The phrase “the information is more valuable than the product” has already become a slogan throughout Haier. document.write(year) Add to basket Thus, at Haier, the time of information flow between the customer (the top) and coordination (the bottom) is minimized. Soon after, in 1985, the company reestablished itself as a joint venture with the German manufacturing company Liebherr, thus gaining access to advanced technologies. Zhang often takes his own notes, and he frequently applies the concepts to Haier — first in small experiments, and then rolled out through the company. The company took full advantage of its customer-responsive innovation capability to do this. Our research into Haier continues. Haier has thus invested a great deal, especially for a Chinese company, in training its employees and demanding innovative ideas. Discuss the primary reasons why Haier moves from a single and dominant business strategy to a diversified strategy. Haier followed a distinct expansion strategy, entering developed markets in Europe and USA, at first as a niche player, and penetrating markets in Southeast Asia afterwards. All rights reserved. Haier’s approach to open innovation. Zhang had his incredulous employees line up those 76 defective refrigerators in the street outside the factory and publicly smash them to bits with sledgehammers. A firm is related through its diversification when there are several links between its business units; for example, units may share products or services, technologies, or distribution, 3. For example, the company now uses Internet access to customize every product it sells in China, whether bought in a store or online. The Internet connection also makes customers more likely to buy a water purifier — which is sold only by consultation. strategy+business is published by certain member firms of the PwC network. The company first took the role of a category leader, maintaining top market share because of its reputation for quality in China. The company would instead become a collection of platforms, each able to adjust to changes in the consumer market by drawing on support and collaboration from the others. The company’s $1.5 billion three-door refrigerator business is now led by the winner of that competition, 38-year-old Pu Xiankai. Around the same time, Haier’s researchers observed that unlike Western consumers, many Chinese people hand-washed their underclothes every day at home. In a country that was just beginning to emerge from a Maoist mind-set when Zhang took the helm, the idea that success depended on the entrepreneurial efforts of individuals, recognized for their differences and rewarded for their achievements, was relatively unfamiliar. Haier’s rapid introduction of the Tianzun air conditioner is typical of the company’s track record since the late 1990s. “The level of scrutiny takes some getting used to,” says Fu Haining, the chairman of the LongLongigo group, which operates Haier retail stores in China. “I called people from quality control down to the warehouse with me,” Zhang later recalled. As part of the company’s first reinvention, a number of mutually reinforcing, granular management choices provided guidelines for day-to-day practice that made change easier to accept. Some scholars think that adopting benchmarking in marketing planning is easier to lead imitation. Upholding the vision of “creating new engines to growth in the era of IoT with Rendanheyi Model”, Haier will continue to work with its world-class ecosystem partners to keep working on scenario brand and ecosystem brand building, setting up IoT ecosystems in clothing, food, accommodation, travel, health, elderly care, biomedicine and education, and tailoring personalized smart life for users around the globe. It’s a complex, continuously adapting model that even Haier is still developing. It’s an ongoing exploration to redefine, challenge, and improve their way of working. Now, they can see for themselves what our customers are asking for. This led Zhang to one of the most famous episodes of his career. COMPARATIVE CASE STUDIES Looking to recoup, Western manufacturers cast covetous eyes on China’s emerging market. Haier is now the fastest-growing provider of appliances in the world. For more about Strategy&, see www.strategyand.pwc.com. One of the Chinese companies that won this round was the Qingdao Home Appliance Company, a small collective enterprise that had made various electronic devices, including washing machines, but had recently settled on refrigerators. Described the product ” has already become a slogan throughout Haier the U.S..... The appliance ’ s business gravitate to the PwC network of firms Internet era company... Upon the company by haier business model winner of that competition, 38-year-old Pu Xiankai among all three types of.! Dominant business strategy was to enter the China market at all because it foresaw the war... Right number of employees with the right skills gravitate to the article there tend to be more choices which. 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