haier project

Pestle AnalysisPESTLE is an anonym which stands for political, economic, social, technological, legal and environmental. The scanning of the six aspects before unveiling its debut in America can get Haier closer to success.(1) PoliticalIn early 1999, Haier thought about launching its American entry. At that time, the Sino-US relation reached a high level of cooperation. Clinton government welcomed China‟s investment. Furthermore, South Carolina where Haier intended to locate provided an appealing business environment such as low price for land and made many favorite terms and regulations to allure foreign capitals. The most impressive policy was to offer foreign companies preferential tax. But there were some restricts for them also. Their productions as well as products must be environment friendly and energy saving.(2) EconomicalAmerica‟s export climbed up steadily which boosted its local manufactures. In domestic market, the purchase power was enormously great. In spite of these good news, as to refrigerator market, it was highly saturated and fully developed though mass and immense after the exploration and segmentation of many other home appliance manufacturers such as Whirlpool, GE and Panasonic. In South Carolina, many foreign companies established there offering many jobs for local people and a cluster of manufacturer was formed.(3) SocialAmerica resembled a melting pot with a high degree of tolerance. All kinds of goods in market were likely to be bought, no matter cheap or expensive. Americans tended to buy things as they liked instead of what others thought. So the riches might go to dime stores or flea markets. Americans liked spending more than saving. The average living standard was high and the average unemployment rate was low. South Carolina had a labor population of 2 million (South Carolina Statistic Report,1999), among which 77(south Carolina Statistic Report, 1999) were high school graduates and 45% (South Carolina Statistic Report, 1999) were junior college graduates.(4) Technological1990s was a prime time for the development of technology. Government implemented National Innovation Strategy which spurred a series of other technology development plans including advanced technology plan, information high way plan etc. Federal and local governments increased their inputs in technology research and granted permanent tax deduction to enterprises‟ R&D. Meanwhile, governments pushed the commercialization of technology. The impact of technology development on home appliances was profound. Manufacturers were forced to update their production and keep up with the trend of innovation.(Clinton,2005)(5) LegalTwo federal legislations at that time concerned home appliances most. The first was patent law which was implemented aggressively in late 1990s. It constructed a first-to-invent framework instead which benefited inventors; the second was adult education legislation which asked enterprises to train their employees and the cost of training was exempted from taxation. In South Carolina, there were two major acts: Business Corporation Act and Enterprise Zone Act. They enabled enterprises to withhold employees‟ income tax for 15 years so as to Facilitate cash flow. And they transferred the training responsibilities form enterprises to government.( Clinton, 2005)(6)EnvironmentalThe US Environment Protect Agency was established in 1970 to conduct environmental assessment, research and education and outline environment protection standards. Until 1999, new standards reached to the areas of air, land, water, and waste and they were supposed to go up year by year. AHAM (Association of Home Appliance Manufacturers) followed closely by establishing many related industrial standards and certificates. Manufacturers couldn‟t get recognized before abiding by these standards and obtaining some certificates.(AHAM, 2009)Industry EnvironmentHaier in USAFormed in 1999, Haier America markets and manufactures leading product categories such refrigeration, home comfort, wine cellars, laundry, dishwashers, and more. In the past few years, Haier America has successfully established retail and service networks across the United States. In addition, a $40 million, 110-acre Industrial Park was built in Camden, South Carolina that produces American-made refrigeration products for U.S. consumers. Haier also has a strong sales force nationwide, bringing products to markets throughout the United States, Canada, and South America.Haier, known for innovation and high quality, plans to push forward to continue on its path as a driving force in the appliance industry, as well as a household name in America. In April 2006, Haier America and the National Basketball Association joined together in a marketing partnership. This alliance will bring more excitement to the market and consumers in the United States.Why does Haier set up a plant in the USA?Firstly, Haier is to exploit market in the United States. China 1998 and 1999 refrigerator export to the USA was valued at USD47.18 million and USD60.81 million, respectively, of which Haier products was USD17 million and USA31 million each. Statistics show that the minimum production volume for a refrigerator plant to gain profits was 280,000 units. Haier's current refrigerator export is far more than this figure.From the official statistics, the market share of Haier compact refrigerators below 180L in the United States is over 30% and is expected to get to 50% in 2002. However, it was difficult to ship large volume Haier refrigerators to the United States due to the long distance between the two nations. The successful operation of Haier America plant has helped Haier to reorganize its production structure and to expand its market share in the United States.Secondly, it can effectively avoid non-tariff barrier of international trade to operate a manufacture plant in the United States. An example of freight, the USA administration once raised of container freight by about 50% for the goods shipped from Asia to the United States. Some other problems, such as technical barrier, would not be easily solved even if China becomes a WTO member. Haier believes that the key to further exploit American market is to reduce the cost for entering American market.Environment for industry is analyzed based on Porter “Five Forces Mode l”. Two aspects will be talked.1) The intensity of the competition with the same industry competitors:Today‟s Haier has been involved in many domains, like living room household appliances, IT products, Mobile phones. These areas are belonged to the industry supported by high technology. As for thehousehold appliances: domestic brand TCL, foreign brands like Sharp, Glanz and so on. We can clearly see that it faces many competitors that many brands are the resident in the forefront of the global top 500 enterprise. So the competition is very intense in such a limited share of the market.Compared with these competitors, Haier‟s technology as well as the brand effect falls behind at a long distance.2) The bargaining power of buyers: Very different from the past, a new salesmodel—supermarket is emerged after the retail had a large-scale integration. Our country‟s typical representatives are “Meidi”, “Suning”. Because of their strong sales network and marketing competence, they occupy the profit belonged to the enterprise in the market. Haier makes no exception in this extremely intense competitive environment. The space of profit available to Haier has already small, while it is worse that the profit is reduced at the sale part. Under the nowadays environment, many areas Haier involved in are in the mature period. How to enhance its competitive advantage and find a better marketing method to avoid this part of profit reduction in such a fierce environment, which is critical for Haier to thing about.Management environment and competitive advantage1) Brand Establishment and Brand Loyalty: In this aspect, Haier owns an advantage.Since Haier was founded, it has been actively undertaken the society responsibility and the public welfare works to repay the society with true feelings under Zhang Huiming‟s concept ----“sincere forever”. In public welfare aspect: it has constructed 129 the primary hopr schools. What‟s more, it produced 212 volume children science and technology education cartoon “Haier Brother”, which has been rooted in the people heart. People trust Haier is not just its brand, besides its quality is really good. Apart from that, the most important is that it supplies a timely and thoughtful service after selling. This chain measures enable consumers to trust the brand and havea high degree of product loyalty.2) Expense Segmentation: As for the consumer‟s demands, it makes the productsegmentation according to many aspects rather than a generally spoken about the needs. Just like region, sex, religious brief and so on. For example, Haier invented a kind of space-saving refrigerator to cater to the American university students. Another example is refrigerator with a lock. These differences are the refined diversion of products needs which make Haier still has a high competitive advantage.Analysis of Internal environmentContents1.Resouces1.1. Tangible resources1.2. Intangible resources1.2.1. Brand and patent1.2.2. Quality and service1.2.3. Corporate culture1.2.4. Human resources1.2.5. Business processes and market chains2.Capabilities2.1 Individual ability advantage2.2 Organizing ability2.3 The external environmental advantage3.Core competitiveness3.1 Sevice3.2 innovation3.3 integration abilityAnalysis of Internal environment is the foundation of the enterprise, the starting point and basis to develop corporate strategies for winning the competition. Sun Tzu said: "Know your enemy and yourself you can fight hundreds of battles and win them all.Therefore, enterprises should analyze its internal environment or conditions, and identify internal strengths and weaknesses.The purpose to analyze the internal environmental conditions within the enterprises is to grasp the history and current situation, and define its advantages and disadvantages. It also helps companies to develop targeted strategies to effectively use their own resources to bring its advantages into play, meanwhile avoiding its disadvantages and improving its performance.When analysing the internal firm environment, it’s useful for Hair to distinguish between.Following is the conclusion of Haier’s resources, capabilities and core competiveness.1. ResourcesResources are all assets, capabilities, organizational processes, firm attributes, information, knowledge, etc. controlled by a firm that enable the firm to conceive of the implement strategies that improve its efficiency and effectiveness. A resource audit identifies and classifies the resources controlled by the firm with a view to supporting the firm’s strategies.The resources of Haier when it entered American market in 1999 are as followings:1.1. Tangible resourcesHaier purchased raw materials worldwide in parity prices and established a modern logistics center, which realized zero inventory of the finished products, with raw materials only lasting for 3 days of inventories. Haier’s floating capital turnover speed is only 160 days. Thanks for paying great attention to the premise of total quality management, the quality of Haier’s products gain much success, including unpacking 100% qualified; the location of component 100% qualified, online full inspection department product 100% qualified; the stock material without damage at 100% qualified; customer satisfaction rate at 100%, etc. Haier succeeded in fulfilling first class quality and very low inventory scale, making its price and quality strong and competitive.In 1993, The Haier group listed on Shanghai stock exchange, and raised $300 millionfund, after which Haier provided shareholders with a stable income. Through the introduction of foreign advanced automatic production line, Haier was able to in accordance with customer needs and thus took to produce in many kinds of small batch, almost accessing to JIT production in time.The haier group started in 1992 with 780 mu of land expropriation and invested 2 billion yuan to build Haier industrial park, including Haier central institute. Haier University. In science and technology, it not only cooperated with some research institutes and domestic famous university, but established postdoctoral research station.Every year, Haier inputs more than 4% of its sales income in R&D, with 480 million yuan in 1997, accounting for 4% of its sales income that year; up to 780 million yuan in 1998, accounting for 4.6% of its sales income that year; and 1.03 billion yuan in 1999, accounting for 4.8% of the sales revenue that year and accounting for 79.2% of the total amount of the tax that year, guaranteeing its technology with strong funding. Moreover, its test center was recognized by the testing laboratory of China's household appliances. the data from haier test center have the same effect with that issued by the national authority testing institutions.1.2 Intangible resourcesInvisible resources including the enterprise fame, brand, patent, marketing channel, the loyalty of customers, human resources, corporate culture, patent of unique technology, the accumulation of the knowledge and experience, etc. The long-term intangible resources form competitive advantages for the enterprise, which is very difficult to overtake and surpass. In these fields, Haier fostered its own long-term advantages.1.2.1 Brand and patentHaier sold its products first by its reputation, following its marketing idea to create and climaxing his own brand. Since a brand couldn’t be famous worldwide without stepping outside, Haier decided to go out of the country and registered its trademark in the countries all over the world to compete globally. In order to make giant steps to enter the international market, Haier first took the lead in the domestic household electrical appliance industry through passing the ISO9001 quality system and was awarded German GS, EMC, UL, ETL, DOE, such kind of product certifications. Haier also won the European Union EN45001 laboratory accreditation, making its product directly exported to 87 countries and regionsIn environmental protection, Haier passed ISO14001 international environmental management certification. Haier also attached great importance to the technical innovation, and in 1999, it developed 582 patents, say, on average there were 2.3 patent published every day. Meanwhile in 1999, it achieved 287 new products, with commercialization rate at more than 90%, and 80% of the sales income comes from new products. Haier’s strong technical innovation ability provides sufficient technical support. Among Haier products, most of them was designed directly from customers’ feedback, which meet the demand of market on endless technology innovation.1.2.2 Quality and serviceHaier is always attaching great impotance to the quality of its product. In 1980s, Haier worked out Total Quality Management(TQM) and stick to 6Sigma（a kind of qualitymanagement concept. One of the well-known event in its quality management dates back to the year 1985 when Zhang Ruiming, the factory director of Haier, found from letters written by its consumers that there were the potential defects existing in its products. In order to really wake up the quality awareness and the market consciousness of all the employees, Zhang decided to hit 76 defective refrigerators in front of its staff. As a corporate actions, Haier’s ―hit refrigerator ―event not only changes the quality awareness of Haier’s employees, and wins a reputation for enterprise, but also incites quality competition between Chinese enterprises, and reflects the quality awareness of China’s enterprises, which has far-reaching influence on increasing awareness of the quality of the enterprises and the whole society.In service, given that product quality difference is narrower, Haier people realize that the service has become the theme of market competition, and thus it launched three principles for customers service: all 24-hour service, all-round house service, all free compulsory service. Haier's standardized service is well-known at home and abroad. In 1996, Haier won "five-star diamond award" as the only Asian enterprise offered by the Amweican high quality services association, which has the important influence on its later entrance into American market by greenfield and got great success. Corporate culture Haier initiatively learned the innovation spirit and team spirit that enterprises in both the United States and Japan esteemed with which Haier organically combined the fine traditional culture of China to form up the extremely rich and influential Haier culture.1.2.3 Corporate cultureThere are many spirits on Haier culture card: "dedicatedly serve the country, pursue excellence" is the Haier spirit; "Rapid response, immediate action" is Haier style; "Oriental bright, then western bright" is Haier capital operation view; "Difficulty before easiness " is Haier’s exploring international market idea; "Users are always right" is Haier’s services concept; "The outstanding product is out of the excellent talent " is Haier’s quality concept; "only off-season, no thought of the off-season market", " laws of market is forever in the change" a re Haier’s marketing ideas. One of the most outstanding one in enterprise management is that Haier puts forward "slope sphere theory" (that is, Haier law): thinking the enterprise as a ball on the slope, and market competition and the inertia of employees will form the downturn force. The thinking implies that without a stop power, sphere will decline. The power is the basic management; The ball on the slope can not rise, therefore, it needs a up pulling power—innovation that only the enterprise can develop. Based on this theory, Haier created "OEC" management mode that teaches staff to finish what they should do today and never leave it tomorrow.1.2.4 Human resourcesBy life design and SST market chain, Haier's human resources center motivates its staff to study, make progress, and strive to perfect themselves; Haier university offer post training courses to each kind of employee, improving the quality of the staff. Through the total training, it improves the managerial skills of management personnel; Through strengthening communication with some international famous enterprise, it improves the level of the enterprise internationalization. As for the employment system, it follows the principle of "everyone is a talent, not race horses". It focuses heavily on talent not just by academic diplomas. Instead, in the internal enterprise, motivation system was set up topromote employee to be hard working, pragmatic, innovative.1.2.5 Business processes and market chainsAlong with the change of environment inside and outside, the original structure mode of Haier hindered the further development in the new period. In late 1998, Haier proposed a reform plan of organization flow (business processes).Features of Haier new organization process•market chain:in the internal of the enterprise, it faced a market of sales-information-development-manufacturing, such a cycle of the process. The next link is the market of the last link, each link was organized through the way of marketing operation. See table below to better understand to market chain.•Internal order system:the contract is signed in internal, which then helps promote the business flow to sign the contract with market. To ensure the normal operation process, Haier designs the SST system (claims, compensation, and tripping operation). Each department has "upstream suppliers", meanwhile serving "customer", which gives full play to flexibility and creativity in all departments of the enterprise, and also raises the entire managerial level in the enterprise.See the below table to better understand Business processes and market chains.Resource: /view/90f95aeb6294dd88d0d26b2e.html2. CapablitiesCapabilities are complex bundle of skills and collective learning, exercised throughorganizational processes that ensure superior coordination of functional activities.Capabilities are about the firm’s ability to integrate different different tangible resource in order to provide products or services to customer that are valued.2.1 Individual ability advantageIndividual ability advantage: personal ability in the enterprise includes operating skills,marketing abilities, managerial talent, internal coordination ability, etc.How much each layer of staff play their personal ability has relations with how much the enterprise’s added value is. How high foresight, innovation ability, and the decision-making ability of the management personnel determines the survival of the enterprise. While individual ability, especially the potential ability is closely related to the enterprise staff's incentive system effectiveness. Haier has always attached importance to the cultivation of employees’ ability. Moreover H aier’s special cohesion and good incentive mechanismmake Haier people stronger in the competition.2.2 Organizing abilityOrganizing ability, not dependent on the individual ability, includes ability that departments in the enterprise collectively play roles to better use resources and perform individual ability; the ability that each department coordinate the relationship between the enterprise and the external environment; and the overall ability that enterprise coordinate different departments.Haier’s organizing ability is very strong. The idea of "rapid response, and immediate action" is deep into its employees’ minds. Link sin the enterprise are seam lessly connected with each other, with overall cooperation, coordination and influence. When faced with a problem, collective discussions are often held to find out the sticking point. For errors, it avoids mutual buck-passing by "80/20" to deal with the errors. Namely, Management personnel assume 80% responsibility and 20% for their subordinates. Therefore, to better solve problems, they jointly study, correct, and solve, gradually improving employees’ sense of organization.In addition, Haier implements its market operation by "market chain", which makes every link of the enterprise operation closely into an organic body. Haier’s employees are clearly aware that their work is one part of the whole chain in the job that they will consider whether the quality and time of personal output can make their workmates in next link satisfied, and finally makes customers satisfied. Therefore, team consciousness between employees, departments is very strong, contributing to haier’s powerful organizing ability.2.3 The external environmental advantageThe external environmental advantage: Haier’s competitiveness also benefited from the external environment advantage. First of all, haier's development was in accordance with the macro economic reform and development, who held the advantageous development opportunity. In 1993, Haier successfully listed and rapidly solved the problem of the raising capital. Before China entered the WTO, Haier had moved its to strategic centre to international market; Secondly, Haier is located in Qingdao, Shan Dong province, the rapidly developed area of China which is famous for its convenient transportation with profound traditional culture, especially abundant in domestic famous enterprise. Visiblely, Qingdao is able to provide enterprises with excellent environment. Therefore, in the external environment, Haier has favourable advantages。