University name: Queen's University Belfast

Course & module name: Module MGT7185: Strategy and

Leadership

Student name and student number:

Title of written organisational / sector research: Study of

strategic and leadership management in Haier Group.

Date of submission:

Word count: 3000

Table of Contents
INTRODUCTION...............................................................................................................3

BACKGROUND.................................................................................................................3

CHANGE MANAGEMENT PROCESS (BALANCED SCORECARD)..........................3

HAIER BUSINESS STRATEGY.......................................................................................4

MACRO LEVEL ANALYSIS............................................................................................5

Pestle analysis..................................................................................................................6

Porter five force Analysis................................................................................................7

MICRO LEVEL ANALYSIS..............................................................................................8

SWOT analysis................................................................................................................8

STRATEGIC RECOMMENDATIONS..............................................................................9

HAIER STRATEGIC LEADERSHIP...............................................................................10

LEADING STRATEGIC TRANSFORMATION / IMPLEMENTATION......................10

CONCLUSION..................................................................................................................11

REFERENCES..................................................................................................................12
INTRODUCTION

This report will study the fast rising of Chinese group corporation Haier to become
world’s number one home appliance maker and one of the most innovative companies
worldwide. The report will study the leadership style at the company with much focus on
the leadership style and qualities of Zhang Ruimin who made major transformation
through implementing and managing a significant change of the company’s business
strategy. The report will also analyse the company’s strategy in order to highlight its
strengths and weaknesses and identify where Haier or other organisations with similar
approach need to improve through performing micro and macro level analysis. The report
will provide some strategic recommendations that could improve Haier competitiveness
and strengthen the company position within the industry.
BACKGROUND

Haier is a Chinese multinational company specialised in electronic home appliance based

in Qingdao China. The company manufactures refrigerators, ovens, microwaves and
recently entered the mobile phone industry. According to recent reports, Haier is the
number one appliance brand globally and sustained this position since 2009.
Furthermore, Haier brand is valued at $16 billion and ranked among the 500 list
published by Fortune magazine with a revenue of $27.7 billion (Fischer et al., 2013).
Historically, Haier was founded in 1920 as refrigerators manufacturing factory Qingdao.
In 1980, the factory was on the brink of bankruptcy due to poor management and lack of
quality control until the province government appointed Zhang Ruimin in 1984 who
changed the fortunes of the factory and drove the company to the global stage (Kohlrieser
et al., 2012).

CHANGE MANAGEMENT PROCESS (BALANCED SCORECARD)

The change management can be used for implementing strategy as it helps in the process
of bridging up the gap between the formulation of strategy and implementing strategies.
The change in the management of the company by dividing it into a small or micro-
enterprise has help both the employees and the customers of the company. Balance
scorecard refers to the system of strategic management and planning that are used by the
business organisation to communicate properly about the objectives that they are trying to
accomplish. Haier group uses the balanced scorecard to improve its internal operations
and the external outcomes of those operations (Kanter and Dai, 2018). The strategies that
are implemented for change management within the organisation can be measured by
using a balanced scorecard. The four perspectives of the balanced scorecard are financial,
internal process, customers, learning, and growth. The financial measures include growth,
risk and profitability. Growth of Haier group using the new model that is implemented to
bring in a change in the management system of the company. The profitability of the
company has increased at a huge percentage level by using the new model implemented
by Zhang Ruimin. The level of risk that the Haier group is likely to encounter from the
change in the system of management. The second perspective is the customer, which
includes value and differentiation. It helps in understanding the differentiation in its
products to meet the needs of different customers. It helps in measuring the amount of
value that is provided to the customers. The third perspective is the internal business
process, which includes providing a high level of satisfaction to both the customers and
the shareholders. The Balance scorecard will help in measuring the amount of satisfaction
received by customers and stakeholders of the Haier group from the new model of
management. The fourth perspective is learning and growth, which consists of
innovation, a climate that helps in supporting change and growth (Yuhui 2016).

HAIER BUSINESS STRATEGY

Brand building strategy: Haier group used the brand building strategy during 1984-
1991 as the initial business strategy. The unique product during this period was the Haier
Refrigerator. Haier group aim at brand building strategy for positional of the brand in the
mind of the targeted customers. The selection of the name of the brand is important as it
can create an impact on the mind of the targeted customer group. Haier group also used
brand sponsorship as a strategy for building its brand so that it can create a huge effect on
the market (Cook 2020).

Diversification strategy: Haier group used the diversification strategy during 1991-
1998. Haier developed white goods to the appliances that are black during this period.
Haier has developed a good and reputed brand image since its first phase, which helps the
brand to launch more home appliances in China. After establishing a huge sale in the
global market the brand aimed at participating in the food sector, financial sector, mobile
phone manufacturing, IT sector, Insurance and pharmaceutical sector.

Internalisation strategy-Haier group used the internationalisation strategy from 1998-

2005 for building the Haier group a global brand. This strategy helped the Haier group to
compete with the other international brand and not only in China's low manufacturing
cost market. Internalisation strategy has helped Haier group is raising its business
standards related to marketing, development of products, manufacturing and customer
services. This strategy mainly focused on the process of entering and tackling the markets
that are difficult and more sophisticated. The strategy of internalisation was successful
under the leadership of Zhang Ruimin and his process of bringing innovation in the
company (Liu et al., 2019).

Globalisation strategy: Haier Group used the globalisation strategy during 2005-2012 to
expand its segmentation in the market and penetrate in both developed and less
developed countries of the world. Haier group is considered as the fourth largest
manufacturer of white goods. This strategy has helped Haier group to explore the
customer base of more than 160 countries by using its global network for designing,
production, distribution and aftersales services. The market share that Haier group in the
world market after the implementation of the globalisation strategy is 5 %.

Networking strategy: Zhang Ruimin implemented the network strategy as a business

strategy in Haier in the year 2012, which is considered as an innovation in the business
management model of the third generation. Network strategy refers to the process where
multinational transformed into more than 4000 micro and small enterprises with each
employing 10-15 employees. The main reason for transforming the multinational into
micro-enterprise is that the needs of the consumers can be responded directly and it will
be in the form of a self-managed and self-driven company (Lina 2020).

MACRO LEVEL ANALYSIS

Pestle analysis and porter’s five forces analysis are done to understand the macro-level
analysis of the Haier group.
Pestle analysis
Political factors: the government of China aims towards empowering the local business
by setting some set of regulations and rules for the different types of industries. The
different types of laws such as the import-export law, employment law, trade law, tariff
laws and copyright laws are maintained and complied by the Haier group. The instability
of the Chinese government with the US government affects the business and development
of the Haier group.

Economic factors: The economic growth of China in recent years has provided
opportunities for growth to local companies such as Haier Group. The domestic market
revenue of the Haier group was more than 305 in 2018. The expected increase in the rate
of urbanisation in China from 60% in 2020 to 75% in 2050 will provide great
opportunities for the Haier group to increase its revenue. It is estimated that the market of
global household appliances will reach 342.82 billion US dollars at the end of the year
2022 due to the increase in demand from developing countries such as India and the
Middle East (Scheepers and Swar, 2020).

Social factors: The change in the lifestyle of the new generation can prove beneficial for
the Haier group as home appliances are an important part of their lives. The new
generation of people or customers is more interested in turning their homes to smart
homes by using the new smart appliances available in the market. This can be a great
opportunity for the Haier group to start selling both home appliances and smart home
technologies.

Technological factors: Haier has developed its first series of home appliances using a
smart home solution by investing in research and development of the company. The
innovation in technology will provide the Haier group an opportunity in both the global
markets and markets of China to gain a huge customer base.

Legal factors: Haier group faces a legal dispute with the giant electronic companies of
South Korea for violating its patents. A case was filed by the Haier group against
Samsung for trespassing on its intellectual property patents and rights in the US. It was
claimed by Haier that these companies act as an obstacle in the way of fair competition
connected to ATSC (Advanced Technology System Committee) patent by plotting with
MPEGLA the leading patent management company of the world (Perera 2017).

Environmental issues: Haier Group had destructed 80M smokestack at Qingdao Haier
industrial park for reducing the emission of sulphur dioxide. The company aims at
providing eco-friendly products by implementing green sail activities.

Porter five force Analysis

Threat of new entrants:

The barriers or obstacles for new entrants are high because the customers are highly loyal
towards their preferred brands. Several international brands are competing with the
products of household appliances in Europe. Therefore, it can be said that the entry of the
Haier group in the European market will not be easy. To compete with the existing
companies who have cost advantages in the distribution process in the global markets, it
will take Haier to some time to collect sufficient economies of scale.

Bargaining power of suppliers

The power of bargaining for the suppliers is low as several suppliers supply household
appliances at a lower cost of production. The main reason for the lower cost of bargaining
is that the products are not at all unique and hence the cost of switching is low. Asia
being the largest producer of home appliances allows the Haier group to control the
suppliers by lowering the power related to bargaining.

Bargaining power of customers

The customers of Haier can lower the prices of the products such as household
electronics appliances. It mainly depends on two factors such as the power related to
bargaining and sensitivity of price. The key influential factors that regulate the price
sensitivity of consumers are the level of competition, brand differentiation, competition,
and uniqueness of the product. On the other hand, factors determining the bargaining
power are cost and comfort of substituting to rival competitors of Haier (Shang 2019).

Rivalry among existing competitors

Haier ranks among 4-5 dominant players in the market of electronic and home appliances
with competition approaching from LG, Whirlpool, Siemens, Samsung, and Electrolux,
and many other brands, which manufacture the same type of products like Haier such as
washing machines, television, refrigerator, etc. This gives rise to price setting
competition and innovation of products and intensive advertisement as the consumers
focus more on quality products and services than their price.

Threats of substitute

The threats of substitutes are low, as the home appliances do not have major substitutes.
For example, the consumers can substitute air conditioners of Haier by fans for
ventilation, which are not as effective as air conditioners. Besides, smartphones
manufacture by Haier has little alternates such as landlines or satellite phones, which are
considered as the out-dated and acquiring high cost of operation (Frigo and Kip
Krumwiede, 2020).

MICRO LEVEL ANALYSIS

SWOT analysis

Strengths Weakness
 Haier group has the largest share  Haier group is heavily dependent
of the white good market in the on China as its major volume of
world. sales is reported there.
 The diversification strategy  Haier group is highly dependent
implemented by the Haier Group on the subsidies provided to them
is one of its strengths. by the government of China.
 The power of using innovation in  Poor logistics and transportation
its products has helped Haier system.
group to come up with a series of
smart home appliances (Wu 2018).
Opportunities Threats
 The diverse range of products  FIRRMA will restrain plans of
along with different price expansion of the Chinese firms
segments will help the Haier group into the US as they look for
to explore the markets of acquiring US firms.
developing countries such as India,  The rise in the wage rate in China
Middle East etc. can act as a threat to the profit
 The tie-ups with the global brands margin of Haier group.
 will help in exploring the market  The increase in the number of new
of the US and Europe. entrants into the market of home
 Increase in the urban population of appliance can be a threat to the
China will help Haier group to leading position of Haier (Han and
expect higher profit margin and Chen, 2018).
growth in the international
domains.

Haier group can use its diversification strategy, which is its internal capability to seize the
opportunity to face the external environment such as the increase in the number of new
entrants who are the growing threat to them. To compete with its external environment
Haier group need to maintain the quality and standards of its diverse products to satisfy
the needs of the existing and potential customers. The innovation power that is one of its
most efficient capabilities can help in launching new and innovative products in the
market.

STRATEGIC RECOMMENDATIONS

Some of the strategic recommendations for the Haier group are provided here which help
in understanding the need for changes in the management system of the company.

 Input research and development: it can be seen the colour television used in China
has a shorter lifespan. Consumers of china are willing to switch to smart
television so that they can access their internet services from it. Haier does not
hold rank in the brands of bestsellers for television as the technical elements used
by them are not up to the mark. Hence, it is recommended that Haier needs to
expand its R&D for the manufacturing of TV sets.
 The logistic system that is followed by the Haier group needs to be improved by
using an experienced logistics expert. Haier group needs to hire efficient
professionals to deal with the faulty part of the logistic system as it will help the
managers to reformat the structure of the logistic system, which will help in
increasing the level of effectiveness and efficiency of transportation and logistics
services.
 It can be recommended that the Haier group needs to implement the cost
strategies by disposing of discrete differentiated business units, which is causing
 the negative flow of the level of profits. To maintain the cost leadership in the
global markets Haier group needs to concentrate on the core lines of products by
using the best available resources and workforce available to it.

HAIER STRATEGIC LEADERSHIP

‘’ If you want to build confidence in others, you yourself must be confident.’’ These are
the words of Zhang Ruimin the transformer of Haier. Ruimin described his leadership
style in the early days of taking charge of the Qingdao refrigerator factory as close to
authoritative. However, Ruimin followed a style that based on positive and negative
motivation. He created the tool naming as positive motivation by naming a tool after the
one who invents it while negative motivation in form of punishment was applied when
inappropriate behaviour occurs. Ruimin belief in such approach makes him more of a
transactional leader rather than authoritative. Transactional leaders as described by Bass
and Stogdill (1990), assume that employees lack self-motivation and need clear structure,
instruction and monitoring to complete the required tasks. The main advantages of
transactional leadership is that the organisation’s goals are clear for manager and
employees. Moreover, the style maximise employees output through the punish-reward
system which will direct efforts towards organisation’s goals (Deluga, 1988).(Ruimin,
2007).

LEADING STRATEGIC TRANSFORMATION / IMPLEMENTATION

Zhang Ruimin was the First Chinese entrepreneur who is invited to give a speech at
Harvard University. One of his famous management approaches known as the Overall
Every Control (OEC) management is very much popular among the various business
organisation. The most popular strategy that was implemented by Zhang Ruimin was the
“integrating Order with Personnel”, which helped in overturning the old bureaucracy
system and initiated the process of organisation networking. Network organisation refers
to a process where multinational transformed into more than 4000 micro and small
enterprises with each employing 10-15 employees (Qing-Rui et al., 2020). The main
reason for transforming the multinational into micro-enterprise is that the needs of the
consumers can be responded directly and it will be in the form of self-managed and self-
driven company. The main philosophy of such type of enterprise is that “Everyone is
their own CEO”. Such type of leadership strategy help the employees to acquire the
independence of resource allocation, increase their level of creativity and revitalise the
vigour. Zhang Ruimin has put forward a new concept of management with this above-
mentioned model. This management theory will help in the process of gaining multiple
users, independent creators and a win-win value-added approach and ecological brand
(Sun et al., 2017).

CONCLUSION

It can be concluded that the leadership style at Haier Group focuses on the leadership
style and qualities of Zhang Ruimin who made major transformation through
implementing and managing a significant change of the company’s business strategy. The
networking strategy has proved to be one of the best strategy model implemented by
Zhang Ruimin. Haier group uses the balanced scorecard to improve its internal operations
and the external outcomes of those operations. The PESTLE analysis and Porter’s five
force Analysis are done here which help in understanding the macro environment of the
company. The SWOT analysis has helped in analysing the internal capability of Haier to
seize the opportunity to face the external environment such as the increase in the number
of new entrants as a threat. Some of the strategic recommendations for the Haier group
are provided here which help in understanding the need for changes in the management
system of the company.
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