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Business Strategy – Haier Group Report (Assessment)


Introduction

Devising effective business strategies that improve the overall performance of an organization and its successful participation in the global market has become one of the most burning ambitions that managers in companies that intend to increase customer preference, profitability and sustain competitive advantage have assumed.

Studies point out that as a business in the local and international market is becoming more diverse and competition increasingly intense, formulating an effective business strategy has turned out to be one of the effective ways a business can exist and compete favorably.

In an oorganizational setting, the term organizational behavior is used to describe the dynamics that exist between individuals and groups in a typical workplace in addition to the operational nature of the organizations in question. There is a myriad of factors that come into play whenever people interrelate, intermingle, or work together in organizations.

These factors account for the organizational behavior issues which are significant in the day to day running of business organizations.

It is also imperative to note that the study of organizational behavior is growing in importance bearing in mind that contemporary multinational organizations are comprised of employees who have to work as cohesive teams in spite of their distinct cultural values and socio-economic and political backgrounds.

Bernardez (2009) points out that some of the practical approaches that businesses have embarked on include developing useful core competencies, value chains, supply chains, strategic directions, and competitive advantages.

As this paper examines, businesses are developing core strategies and improving on them to enhance their performance locally and globally. It is on this front that this paper analyses Haier Group, it is business strategies and how they impact on its performance.

A background of Haier Group

Haier Group is a global white electric appliance company with its Headquarter in Quingdao China (Chan 2011, p. 148). Studies indicate that the company, formerly known as Quindao Refrigerator Plant, has today established itself as a renowned brand in the whole world ranking among the top four most significant manufacturers of white goods.

In China, Haier Group is the largest white goods maker, and its various products include computers, cell phones, vacuums, televisions, microwaves, dishwashers, air conditioners, freezers, and refrigerators. Chan (2011, p. 150) indicates that its massive growth and business successes are due to the ability of its management team to make effective strategic decisions and efficient implementation of core competencies.

The company’s annual sale from over 13,000 different products it produces is approximately $8.6 billion (Chan 2011, p. 152). The company has an employee base of about 30,000 people and carries out its operations in nearly 160 countries.

In his publication, Yip (1989, p. 49) indicates that Haier Group has over the years since its inception at the beginning of 1980 developed its business in three major stages that include global expansion, diversification and developing a national reputation of quality.

On the latter, the company has implemented rigorous standards and employed total quality management systems to develop a reputation for its products such as refrigerators, and a strong brand for the company. Besides, it has diversified its offerings, expanded its products, and expanded globally.

Haier Group, internal and external factors

SWOT Analysis

Strengths

One of the critical advantages of Haier Group is its numerous sales outlets are located in different countries around the world. It is imperative to note that Haier Group over 5500 sales points and about 30 franchise stores where it distributes and sells its products to.

Due to its several joint ventures with giant companies, as discussed in the paper, the company’s ability to acquire resources and successfully expand its business to other regions has been enhanced.

The other strength the company has its product offerings that are unique and of excellent quality. Its products, such as refrigerators are built on core technology and distributed to its outlets via qualified and trained employees. The company has a unique corporate culture and offers its customers efficient after-sale services. This gives it a high reputation abroad and at home.

Weakness

One of the distressful gap that the company has is adapting to the ever-changing global market. Due to the profound changes in the worldwide market due to fluctuations in economies and the nature of its products, which are majorly traditional electronic products, the company finds it cumbersome to adapt.

Unlike its competitors like Electrolux and Whirlpool, Haier’s breakthrough in the international market is not efficient. This, in turn, makes its efficiency, output, and input relatively low.

Opportunities

Haier Company has numerous occasions in the international business arena to go out to enhance its participation in economic globalization. Being a giant company that has made tremendous advances in terms of products and services, it has more time to prepare, analyze the external environment, and set strategies for future changes.

Also, the company has competencies that include core technology, which it can use to develop more sophisticated products for the market. These products can then reach the market faster as it has both foreign and domestic business partners who are interested in acquiring and distributing its products

Threats

Like other giant companies in today’s economy, Haier faces numerous threats that affect its performance in the global market. One such threat concerns funds to acquire resources to use to improve its products and business operations.

Deficiency of funds is a threat to Haier Group as it may make it less competitive and lose its power in the market. Consequently, its equally stronger competitors will take its position in the market.

Besides, another threat is the campaign today for green and environmentally friendly products. The market for its products is threatened by calls for consumers to buy products that save energy and those that are environmentally friendly. This calls for the company to change its tactics and set new production strategies which are environmentally friendly.

Team orientation

The performance of small groups within an organization is a crucial ingredient to the overall output of the entire organization. Hence, the success of any organization heavily relies on the individual production of small teams that constitute departments or divisions within an organization.

Increased productivity has been directly linked to group efficacy in an organization. Besides, there are other group dynamics elated to group efficacy that may also contribute positively to the growth of an organization.

Most studies have also revealed that group dynamics derive a lot of benefit from efficacy and the overall effectiveness of a group. Although leadership style in an organization is paramount in driving groups, leadership satisfaction may not necessarily be affected by group efficacy.

Team building is an essential organizational practice and behavior that is highly recommended for any organization seeking to boost its performance. The essence behind any team-building strategy is that when employees work or pull together towards achieving a common goal, it is more likely that the organization will realize a much faster growth compared to when they pull in different directions.

Hence, the concept of team building can be described as organizational behavior and practice that attempts to bring employees together as one cohesive team that works to achieve a common objective or goal.

In their publication, Wang, Lin, and Chu (2011, 100) point out that teamwork is a critical component in a business as it enhances performance and work success. Haier group has been able to carry out its operations effectively due to its management team that encourages team dynamics.

External factors

Competitive factors

Haier Group has over the years been capable and efficient of offering its customers due to the high competition it faces from other giant competitors like Whirlpool and Electrolux. Omar, Williams, and Lingelbach (2009, p. 180) point out that without competition, a company may lack incentives to provide best and quality products to consumers.

Indeed, competition enhances efficiency and offering quality products and services, which is what most customers require. However, too much competition in the global business arena hinders Haier Group from making maximum profits, research, and development as well as technological development.

Besides, competition may force a company to lower its prices to stay in business. This, in turn, affects a business’ ability to maximize profits.

Economic factors

One of the economic factors affecting the Haier Group is the trade cycle that Lin (2006, p. 50) describes as the fluctuation of the cost of commodities or goods in an economy. Accessing raw materials and their value are some of the challenges that Haier Group faces due to the rise, fall, stability, and continuity of cost of products.

It is imperative to note that trade cycles are a changing factor that impacts any business in an economy due to changes in the general price level.

Haier Company and its global business strategy

Developing a comprehensive plan has become an essential requirement for multinational businesses that are set to achieve benefits in terms of growth and profits. Setting up a global strategy requires a company to focus on key dimensions such as competitive moves, marketing approach, value-added activities, product offering, and market participation.

Omar, Williams, and Lingelbach (2009, p. 183) argue that integration and sharing are vital components of a global strategy that maximizes the performance of a business in international markets.

Haier Group has been able to diversify its product offerings and establish a good business brand in China. It is a quality brand, and good reputation has given it an opportunity and an advantage and made it transfer its products to developing and developed nations.

It is imperative to point out that as exemplified by Haier Group that to enhance a global business strategy, an organization must incorporate a multi-domestic approach since this maximizes a business’ local profits, revenues and competitive advantage. This, in turn, will aid it in enhancing its worldwide performance.

Globalization dimensions

Competition and marketing approach strategies

Due to intense competition in the global market today, many businesses have resorted to developing certain competitive moves to aid them to gain competitive advantage and still sell at low costs. Mohanty (2011, p. 30) points out that over the years, global strategies for most multinational companies have revolved around competitive moves across countries.

However, it is worth mentioning that those moves have mostly been successfully used by companies in China and Japan, such as Bridgestone Corporation and Haier. For instance, through competitive steps, Haier Group has been able to expand its market segments and penetrate in different countries, including the US, and establish itself in the fourth largest white goods manufacturers.

Research indicates that its effective global strategy via competitive moves has been properly strategized by its management team. Mohanty concludes his argument by exemplifying that effective strategy are vital as by moving across countries, a business enhances its bargaining power and save cost since costs vary in a different location.

Buckley and Ghauri (2004, p.87) point out in their groundbreaking publication, “Globalization, economic geography and the strategy of multinational enterprises” that a global strategy, unlike a multi-domestic strategy developed and tailored to work locally, focuses on applying a uniform market approach worldwide. Agreeably, companies can achieve huge successes by adopting a particular marketing approach.

However, it is imperative to point out that within a marketing mix, not all elements must be uniform. For instance, Haier Company’s success has not only been brought about by adopting an ordinary red square and surrounding blue dots logo, advertising theme and market positioning for its appliances but by also using different brand names for the product depending on a country.

Lin (2006, p. 50) concurs with Buckley and Ghauri’s (2004, p.87) arguments, but points out that an active market approach should take into account that inasmuch as a uniform marketing approach is a critical global business strategy, geographical location and marketing environments are also essential components that should be considered.

Value addition, an offering of products and participation in global markets

Adam Brandenburger and Barry Nalebuff in their value-added theory in business suggest that one of the most common international strategies of adding value to business activities is breaking down the value chain so that those activities are carried out in different countries (Bernardez 2009, p. 40).

In concurrence, Fang and Zou (2009, 749) posit that this is a strategic placement that many electronic companies including Haier Group in China have adopted to reduce the cost of production, labor, and sale of their products.

Besides adding value to its products, Haier Company’s strategy to participate in the global market has involved entering into markets that are of strategic significance such the US, Middle East Market and some nations in Africa like Egypt and South Africa. Participation in strategic global markets has provided it with significant competition, flexibility, and marketing advantages.

Additionally, companies with global business strategies achieve numerous benefits that include increased competitive leverage, improved customer selection, improved programs, enhanced quality of products. Mohanty (2011, p. 30) points out that the cost reductions are achieved through pooling production activities, exploiting the flexibility and lowering factor cost, as well as enhancing bargaining power.

For instance, Haier Group enjoys economies of scale by concentrating on the production of refrigerators and other white goods in different countries in almost all continents of the world. On improving its customer selection, its global strategy creates recognition of products, serviceability, and global availability, which are essential ingredients for enhancing customer preference.

Formation of joint ventures

Establishment of joint ventures by companies has been observed to be an effective business strategy that enhances its ability to access resources, capabilities, knowledge, and new markets. Beamish and Lupton (2009, p 80) point out that a business may go into joint venture agreements with another purposely to share resources and use them to enter foreign markets or potential new markets, create new services and fresh products.

In its growth strategy, Haier Group has entered into numerous joint ventures in its plan to expand internationally and compete with its giant competitors such as Whirlpool, Maytag, Frigidaire, and GE. For instance, Haier is in a joint venture agreement with the Venezuelan Government, a strategy to aid it to obtain imported products that are incredibly cheap from Abastos Bicentenario in Venezuela.

Other joint ventures it has entered are with a Germany’s premium refrigeration company called Liebherr Group in 1984, a UK’s leading retailer in general merchandise called Argos in 2011 and LIXIL Corporation also in 2011 and with Merloni Electtrodomestici Company in Italy (Chan 2011, p. 148).

In international business, international joint ventures (IJV) aid businesses to gain each others capabilities and resources that they use to develop products cheaply, reliably and faster.

In agreement with Beamish and Lupton (2009, p 80), Fang and Zou (2009, 750) point out that entering into a joint venture is an international strategy that businesses in uncertain foreign markets use to enhance their capabilities and win against their competitors.

However, it is imperative to note that joint ventures attract numerous and diverse management problems due to a difference in business practices, policies, and management styles, among others.

Joint ventures and management problems

In his publication, Chin (2011, p. 20) points out that even though as two or more companies can come together in a joint venture, the fact that they are owned by different individuals may present management challenges and problems. Indeed, various companies have incongruent and competing goals that if not well aligned, may affect the performance of a joint venture.

In international business, the success in the performance of companies in joint venture agreements typically relies on management and strategies. In accord with Chin, Bernardez (2009, p. 21) points out that effective joint venture performance in international business can be affected when one partner after an objective has been set, may fail to be satisfied with it or to attain it effectively.

This may affect the stability of a partnership and might lead to renegotiation of contracts, reorganization, or even termination of the organization.

Need for knowledge management, governance, and control

Most organizations do not often stick entirely to the rules and regulations. As a result, a vacuum is left where power play and conflicts can thrive. Hence, managing organizations in a systematic and well-defined way can only be achieved if the dynamics of conflict, authority, and power are well understood.

Lack of knowledge in joint venture management, governance and, control remain as some of the biting issues because they reduce cooperation between management and workers, lowers employees’ motivation and creativity, and ultimately brings down productivity and profitability. Gholami (2011, p. 152) argues that the problem is the cause of underperformance and the possible collapse of many joint ventures.

In agreement with Gholami, and other management scholars holding the same position, it is true that poor management of joint venture due to lack of skills, trust or capabilities significantly hamper its success in the international market. It is therefore imperative to point out that effective knowledge management, governance, and control are essential ingredients in joint ventures that anchor continued improvement and should be embraced both in leadership and business culture.

The above view concurs with Mary Jo Hatch model for management and control dynamics which require that managers and leaders in joint ventures create an understanding that carefully integrates all stakeholders and employees and develops a general consideration perception at all levels (Bernardez 2009, p. 21).

While this new model of operation may indeed not be easy to implement, it is essential that managers in international joint ventures slowly seek to enrich their existing business system towards acceptance of their ideologies at all levels. As a result, the creation of capabilities, good governance, and control must be seen as a essential process that will enhance a joint venture performance in the global market.

Building core competencies

According to Hamel and Prahald (1990, p. 79), one of the most potent ways corporations can succeed and make tremendous gains in global competition is through developing core competencies. Competitive advantage, capability, and competence in organizations vary and cover a broad range of areas.

Building internal and external competencies are factors in a business that is vital in moving an organization towards gaining competitive advantage. Studies indicate that achieving competitive advantage requires organizing internal factors and connecting core competencies and capabilities with available resources.

Due to the intensive competition and increasing uncertainty in the global market, it is a company with proficiencies such as Haier, a multinational white goods company, that can and has over the years steadfastly and continuously made sustainable advantages in conducting business.

Lin (2009, p. 47) indicates that it has achieved tremendous gains and ranks high among white goods companies because of its competencies and resources that are non-substitutable and exclusive and that most of its competitors do not have.

It is imperative to mention that some of the capabilities or core competencies that they have include innovative capacity, strategic flexibility, organizational learning, and effective technology, among others.

Core competencies as vital elements of Haier’s strategic capabilities

In his publication, Hamel and Prahald (1990, p. 79) point out that skill is related to functional or cultural issues in a firm, as well as managerial roles and leadership within a business.

Consistent provision of superior value and high quality and.hi-tech products and services by Haier to customers locally and internationally has been successfully determined by the company’s abilities to establish strategic business decisions as well as their strategic capabilities.

Indeed, and in concurrence with Hamel and Prahald, through competencies, Haier Group has been successful and has maintained customer satisfaction, achieved overall strategic goals and increased their production processes through advanced technologies. Additionally, its capabilities have been witnessed in the manner in which it has combined organizational knowledge, integrated technology, and coordinated production skills.

Today, the white goods marketplace is going through passionate competition, as more businesses are entering the market with new products. Due to that, many white goods producers are striving to fit into the environmental conditions that are changing at a fast pace by improving their business strategies.

Lin (2006, p. 50) points out that competence requires strategic capabilities controlled by an organization whereby resources are put into action to improve, sustain, and support organizational performance.

Haier Group has over the years, integrated its streams of technology, enhanced its commitment to the creation of best products and marketing practices. This has improved its performance locally in Japan and the international market.

Why not think only of core competencies

It is essential to underscore the fact that not all core competencies give competitive advantages even though most scholars, including Baker (2011, p. 299) regard them as important sources of competitive advantage.

Strategic capabilities through core competencies are essential only where a corporation can use its strength in competence to surpass other competing companies over a single line of product and not a wide range of products.

Gholami (2011, p. 152) indicates that most successful companies have stopped determining their advantage over others simply because of products since they vary and turned their focus to leadership skills.

For instance, Haier, a giant global company in the production of white goods products cannot compete with Honda Company that deals with power trains and engines in gaining a competitive edge since their products are different. This indicates that core competence is not an attribute but a variable factor.

Conclusion

To sum up, the discussion in this paper was based on the thesis statement “Devising effective business strategies that improve the overall performance of an organization and its successful participation in the global market has become one of the most burning ambitions that managers in companies that intend to increase customer preference, profitability and sustain competitive advantage have assumed”.

The analysis has indicated that in devising a business strategy, it is vital to understand the internal and external factors of a business. Also, the paper has focused on Haier Group and has exemplified that as a large business, it is business strategies, both locally in China and globally have been based on global expansion, diversification and developing a national reputation of quality.

References

Baker, J 2011, “Conceptualizing the dynamic strategic alignment competency”, Journal of the Association for Information Systems, 12(4), 299-322.

Beamish, PW & Lupton NC 2009, “Managing Joint Ventures”, Academy of Management Perspectives 75-96.

Bernardez, M 2009, “Minding the business of business: tools and models to design and measure wealth creation”, Performance Improvement Quarterly, 22(2), 17-52.

Buckley, P J, & Ghauri, PN 2004, “Globalization, economic geography and the strategy of multinational enterprises”, Journal of International Business Studies, 35(2) 81- 98.

Chan, X 2011, “A SWOT study of the development strategy of Haier group as one of the most successful Chinese enterprises”, International Journal of Business and Social Science: Special Issue, 2(11), 147-155.

Chin, A 2011, “Cultural competency key to Asian market share” InFinance, 125(1), 19- 21.

Fang, E, & Zou, S 2009, “Antecedents and consequences of marketing dynamic capabilities in international joint ventures”, Journal of International Business Studies, 40(5) 742-761

Gholami, S 2011. Value creation model through corporate social responsibility (CSR)”, International Journal of Business and Management, 6.9: 148-154.

Hamel, G & Prahald, CK 1990, “The core competence of the corporation” Harvard Business review, 79-82.

Lin, T 2009, “Haier Is Higher”, Strategic Finance 91(6), 41-49

Lin, TW 2006, “Lessons from china”, Strategic Finance 88(4): 48-55

Mohanty, S 2011, “Having analytics may not be enough: Organizations need to improve business intelligence and decision-making through guided, predictive analytics” Information Management, 21(1), 30.

Omar M, Williams R & Lingelbach D 2009 “Global brand market-entry strategy to manage corporate reputation”, The Journal of Product and Brand Management, 18(3): 177-187.

Wang, W, Lin, C, & Chu, Y 2011, “Types of competitive advantage and analysis”, International Journal of Business and Management, 6(5), 100-104.

Yip, GS 1989, “Global Strategy in a World of Nations?” Sloan Management Review, 31(1) 29-42.

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