Taking a Chinese Company

Global in 2011PRESENTED BY GROUP D

JACOPO FERRO

ILARIA FIORE

MENJIA WUKORBINIAN MORTL

WENKAI GAO

XIAOYAN CHENCORPORATE STRATEGY DDIM2015/2016

Our Agenda

1 2 3 4

Company Introduction

Opportunities & Problems Strategic

OptionsStrategy Selection

Company Introduction0 1

Company Profile

NO.1 white-goods manufacturer in

China, leading refrigerator

manufacturer worldwide

.

Leading Manufacturer

240 subsidiaries, 61 trading companies,

24 manufacturing plants, 10 R&D centers,

21 industrial parks in 2010

Wide International Coverage

Port city in Shandong ProvinceFounded in Qingdao

From RMB 1 billion in 1984,51 million profits in 1992

136 Billion RMB Revenue in 2010

25 years of leadership

Founder and CEO Zhang Ruimin

1984 1990 1991 Early 1990s

Acquired two local companies to enter air-conditioner & freezer market

• Technology licensing agreement with German refrigerator maker• Imported production

line

Kept track of tens of thousands of customers

First exported to UK and Germany and then to France and Italy

Establishment

Service Center

Product Differentiation Venture into Overseas Markets

High-qualityproducts

Foresight of service

Attention to consumer needs & market trend

Multinational brand

History of Haier(1984-1993)

Haier Core Value

• Focus on difficult markets first Meet the principle of high qualityEnter the “difficult” developed markets first go after the relatively “easy” emerging markets

Developing Abroadlearning from the history

1984 China

1994USA

1990s UKGermanyFranceItaly

1999 India

1990s Japan

Better market intelligence Place its own people in

key positions overseas Building own design

center

Learning from the locals Staff with the localsHire local employees Mergers &

acquisitionse.g.India: alliance with Fedder lloyd CorporationItaly: $8 million to acquire a refrigerator plant in Padova, from Meneghetti SpA

Short term Long term1 2

Localization

History of Haier(1994-2010)Strategies in foreign market

Product Mix

Operation&Brand Model

More products launched Normal products Longer product line Product differentiation

1 2Limited products to start Niche market to focus

in US Product differentiation

Short term Long term

OEM(original equipment manufacturer)

Brand image building

History of Haier(1994-2010)Strategies in foreign market

Weaknesses

Experience in adapting to new markets Local Management localization Product differentiation Customer

orientation High receptivity and reaction speed

Strengths

Perception of Chinese brand (negative stereotype)Lower production capabilities abroadHigher production costs abroad

Strengths and Weaknesses in Foreign marketover Chinese companies

Strengths and Weaknesses in Chinese market

High price-quality ratio Knowledge of the local market Good after-sales &more customer-

focused Strong network-integrated & responsive

system across China, especially in logistics

Organizational advantage : • Fast response speed• Motivation for innovation& efficiency• Internal talent development.

Strengths

LEADER

CUSTOMER MANAGERSPRODUCT MANAGERS

9-30 members

ZZJYT(self-managed teams)

Strengths and Weaknesses in Chinese marketWeaknesses

Financial structureHeavy dependence on the CEO Zhang Ruimin

November 1993 2005

43.7% 60%of Qingdao Haier Refrigerator Shanghai Stock ExchangeA shares RMB 396 million

Haier Electronics Group Co. Hong Kong Stock Exchange Total 60% of book value

of Haier’s assets are listed.

Opportunities & Problems0 2

Evaluation of current situation-International Market

Opportunities Threats Higher consumption power in emerging

markets: South America, India, Indonesia, Malaysia, Thailand

Technological progress especially in developed market

Government support for companies to go international

Flat growth in mature markets (e.g.: US and Europe)Fierce competition in mature markets (e.g. US and Europe)Currency volatility

1980 1990 2000 20100

2000

4000

6000

8000

10000

12000

14000

16000

18000

1170.6

4576.2

16099.1

Per Capita Disposable Income(RMB)

Evaluation of current situation-Chinese Market

Opportunities The number of middle-income groups

are increasing

Evaluation of current situation-Chinese Market

Opportunities Big gap between rural areas and urban Trend of urbanization

1980 1990 2000 20100.0

20.0

40.0

60.0

80.0

100.0

120.0 Refrigerators

urban rural

Manufacturer Market Share of Major Consumer Appliances in China (percentage of retail volume)Company Base Country 2002 2004 2006 2008 2010

Haier Group China 14.1 16.4 16.8 18.9 22.3GD Midea Holding Co. China 3.0 3.7 8.1 13.1 13.6Glanz Enterprises China 6.9 6.1 7.1 5.6 5.6Panasonic Corp. Japan n/a n/a n/a 2.8 4.2Hisense Kelon Elec. China n/a n/a 3.5 3.5 3.9Henan Xinfei Elec. China 2.3 2.4 2.8 3.3 3.3Bosch-Siemens-Hausgerate Germany 2.2 2.5 2.7 2.7 2.9Hefei Meiling Group China 2.1 1.8 2.1 2.1 2.4LG Corp. Korea 3.7 2.8 2.2 1.9 1.9Whirlpool Corp. United States 0.5 0.5 0.5 0.4 0.4Others 　 65.2 63.8 54.2 45.7 39.5

Source: Consumer Appliances, Retail Statistics, Euromonitor International, www.euromonitor.com, accessed August, 2011.

Competition with domestic and international competitors

Evaluation of current situation-Chinese MarketThreats

SWOT analysis of International Market

SWOT

S W

O T

• Staff with locals• Localization

• Customer orientation• High receptivity and reaction

speed

Strengths

• Higher consumption power in Emerging

markets• Technological progress

in mature markets• Government support for

companies to go abroad

Opportunities

• Perception of Chinese brand (stereotype)

• Lower production capabilities abroad

• Higher Production costs abroad

Weaknesses

• Flat growth in mature market• Fierce competition in mature

market• Currency volatility

Threats

TO SUM UP…(1)

SWOT analysis of Chinese Market

SWOT

S W

O T

• High quality products & good after-sales service

• Flexible organizational structure (ZZJYT)

• Distribution Networks• Customer Orientation

Strengths

• Emerging Middle Class• Development of Rural

Area

Opportunities

• Financing Problem

Weaknesses

• Domestic & International Competitors

Threats

TO SUM UP…(2)

Outcome of developing abroad & deepening at home

标题数字等都可以通过点击和重新输入进行更改，顶部“开始”面板中可以对字体、字号、颜色、行距等进行修改。建议正文 12 号字， 1.3 倍字间距。

28

1

8

No. 1 white-goods manufacturer in China

A 75% increase in Haier’s 2010 profits was 8 times its 9% increase in revenues

Rank on BusinessWeek’s 2010 list of the most innovative firms

Based on our analysis, we want to  exploit the stengths to the full catch the opportunities of the industry.

Summary

Key question to answer ：Which market to go?

Strategic Options0 3

Strategic options

Identify the problem

• where shall we expand our revenue

Find the opportunities

• Analyzed in the SWOT analysis

Brainstorm with the possible

options

• List the options• Whether to take the

opportunities?• Where exactly?Valuate the

options

Increase revenue

Revenue=price*volume

Price value

Penetration in Urban China?rising middle-income groups

Pros Motivation to innovate Catch the latest trend Higher brand image

Technologic capacity Local network to gain support Organizational advantage : Fast response

speed/Motivation for innovation& efficiency/Internal talent development.

Opportunities

Options

Valuation-gains

Feasibilities

Penetration in urban China － first-tier cities Nothing

ConsHigh market saturationCompetition is highMore investment in R&D

Pros Low risk No

expenditure

ConsCompetitors may take your market share

Penetration in rural China?Trend of urbanization & increasing consumption power of

rural area

Pros Large room Strengthened Leadership

in China Brand awareness

High quality-price ratio Distribution networks Service center

Opportunities

Options

Valuation-gains

Penetration in rural China － third/fourth-tier cities ？ConsCapital for channel , logistic, service center buildingRisk of falling into price warEconomic risk

Nothing

Pros Low risk No

expenditure

ConsFlat growth of the revenue

Feasibilities

Which emerging marketHigher consumption power in emerging markets

Pros Growing market Close to US plants Possibility to further

expansion in SA

NOT enter this market: Logistic problems (the distance from

China)Exportations from US would cost too

much

Brazil Southeast Asia: Malaysia, Thailand, Vietnam

Cons Far from China US production too

expensive for an emerging market

Very different culture Possibility of

social/economical changes

Pros proximity to China low labor force cost possibility to further

expansions in SE Asia ASEAN Chinese government

influence

Cons

To bring a good volume of our product in Vietnam

Opportunities

Options

Valuation-gains

Feasibilities

social political risk

Which mature marketTechnological progress especially in developed market

Pros possibility to establish internationally our brand possibility to follow the highest world trends proximity to best high tech companies (Silicon Valley) -knowledge of the custom

Existing plants Knowledge of the US market Local partnership

Learning more from US market

Cons Higher labour cost Higher degree of

competition

Opportunities

Options

Valuation-gains

Feasibilities

Which mature market

Identify the problem Find the opportunities options

Valuate the options

Gains & Loss Feasiblity

Where to go

rising middle-income groups

Penetration in urban China Gain YesNothing Loss Yes

Trend of urbanization & increasing consumption

power of rural area

Penetration in rural China

Gain YesNothing Loss Yes

“Higher consumption power in emerging

markets

Brazil loss No

Vietnam Gain YesTechnological progress especially in developed

market

Penetration in US market Gain YesNothing No Yes

Strategy Selection0 4

How to catch the opportunities

Industry development Early stage Growing stage Mature stage

Consumer needs

Volume>Value

Volume=Value

Volume<Value

More options to make-how?

Two goals:Volume & valuePriority differs during different stages

Rural China• One-stand shopping experience & E-commerce

Online shops channels online/offline orders

logistics-fast delivery installment after-sales service

Self-owned brand store Retailing stores( Gome , Suning)

Experience store

Online channels

Value Volume

Volume-based

Experience Convenience

Fast delivery

Good service

Value-based

Urban China

Value Volume

Smart home project Smart housing appliance(investment in R&D) APPs to connect all your housing appliance(cooperation with Huawei/ Xiaomi)

Smart

Elegant

Brand buildingfrom product to life style

Differentiated product to fit in the new city lifeCompact housing appliance to cater to small space in big cities

More designs &customizationHousing appliancesCustomized products to satisfy personal needs

Old Mature Markets

Value Volume

Own plants, Know the market, own the network. Position in the mid-low segment Aim Higher

Where are we now ？

How to do ？ Brand building: improve Made in China image marketing campaign Invest on quality: Acquire High Tech Companies Continuous adequate product development

New Emerging Markets

Value Volume

• Simplify Products• Export from plants in China• Offer a competitive price that emerging households

can afford• Acquire local distributing expertise• Establish brand reputation as reliable products• After establishment on market Increase

investment and commitment

Problem

StrategyNo Brand Reputation in Southeast Asia

Enter New Markets: Malaysia, Thailand, Vietnam

How to Increase the Revenue

Identify the problem Find the opportunities Options

Strategy selection

Volume Value

Where to go

Rising middle-income groupsPenetration in urban China

　 Yes

Trend of urbanization & increasing consumption

power of rural area

Penetration in rural China

Yes Yes

Higher consumption power in emerging markets Vietnam

　Yes

Technological progress especially in developed

market

Penetration in US market

　 Yes

THANK YOUQ&A

PRESENTED BY GROUP D