Tuesday, September 29, 2009

Business Strategy

1)For your company, which of the 3 generic business strategies is used? If differentiation, then how do they differentiate their services/products?
1) Haier as a company focus on differentiation as our business strategy. We believe that the essence of globalization is localization. For Haier, this means a “three-in- one” operational framework: complete localization of design, manufacture and marketing. Haier aims to use local financing and employees to become a part of the local community while creating a global brand.

2). For your industry, estimate how much power each of the 5 forces has (suppliers include their employees and suppliers of technology). How do they reduce the buyer and supplier power? How do they create switching costs and entry barriers?
Buyer power is great in bargaining. Buyers’ price sensitivity (both big distribution chain and consumers) and relative bargaining power are high. Buyers’ information (more information, more bargaining power) and switching costs are low. Customers compare products or service price and quality which inevitably increase the pressure to manufacturers.
In terms of supplier power, raw materials suppliers and common components are low, the technology suppliers are high and backward integration (R&D department) is possible. Haier's many international suppliers have comparatively higher technology and design capabilities, and thus have greater bargaining powers. The employees in Haier have great pressure.
There are some traditional industry rivals like Intensive competition (both domestic and overseas) , low product differentiation (basic products with some niche products) , high switching and R&D costs ,oligopoly, diversity of competitors is low , barriers to exit is medium , cost conditions(economies of scale and scope ). Firstly, many customers were unable to discriminate low price and low quality air conditioners from low price, high quality products, a price war inevitably ensued. Secondly, sometimes because of the bad weather, there was indeed a greater supply than demand.
In terms of threat of new entrants, because of the industry's huge profit potential, not only do traditional electrical appliance manufactures invest capital to rebuild equipments and expand production, but also other non-electrical appliance corporations also enter the market. Economies of scale and scope is high, capital intensive, low product differentiation, access to channels of distribution channels is high, relation with established producers (technology aspects), brand recognition and customer loyalty .
For the threat of substitute products or services like new generation products, niche products for special customer needs, relative prices and performance of substitutes. Refrigeration mechanisms do not vary and thus a threat of substitutes to Haier's products is slim.

Haier use overall Every Control and Clear (OEC), 3Rs and 3Ts support systems reduce the supplier power. By using OEC, from the CEO to the ordinary workers, everyone knows what they should do each day which helps them to assess their job performance. The logistics center arranges purchasing and distribution, and the product center arranges production; products are sent to the customers by the logistics distribution system, and payment for goods are sent to the suppliers of product center, business center and logistics center. This organizational structure realizes that Haier's external and internal factors are connected by the networks, forming its business process system.
Haier use quality strategy, supply-chain management and customer relationship management reduce the buyer power. Haier’s supreme quality has been validated by many international standards, such as ISO9001, ISO14001, UL, CSA, SAA, CE, etc. The supply-chain management include framework construction, function integration, internal supply chain integration, external supply chain integration and dynamic alliance of integrated supply chain. Customer’s information by computer systems, providing helpful service information to customers and e-Business as a method of effective utilization of information technology are customer relationship managements.

Haier puts clusters affect competition in three broad ways: 1.by increasing the productivity of companies based in the area; 2.by driving the direction and pace of innovation, which underpins future productivity growth; 3. by stimulating the formation of new businesses, which expands and strengthens the cluster itself. Barriers to greenfield entry appear to be low to medium in the appliance industry as is evidenced by the numerous new entrants over the past few years. Haier increase the speed to market, accelerated internationalization through linkages. Moreover, Haier uses strategic and organizational innovation: knowledge leverage.Now Haier is building global brands.

3) For your company, what major business initiatives are used or being considered? What software is used? Are they top-line or bottom-line initiatives? 3)Haier used Supply chain management and Customer relationship management.
Haier adopted the ERP system and BBP system (raw materials procurement systems)of SAP company to improve the online business flowsheet .After 2 years ,Haier not only improve its
Management system, but also improve the logistics efficiency, and its e-commerce platform was extended to the supply chain management including the customer and supplier which greatly promoted the development of electronic commerce.

Haier established its online mall site, providing customers with personalized products and services by using the network technology, shorting the distance between Haier and customer, improving customer satisfaction and loyalty of haier's. Its website, in addition to product online ordering sales function, the biggest characteristic is four modules for customer service, product customization, personalized intelligent guide, new product online booking and user design proposal.
SCM,CRM,TPS,ERP and OEC are used by Haier.May be you know what are SCM,CRM,TPS, ERP, but donot know what is OEC.OEC is the software of management created by Haier. The purpose of the OEC is to achieve each day's plan, evaluate that plan, and improve upon those daily accomplishments 1% better than the day before. SCM and TPS are bottom-line, CRM,ERP and OEC are top-line.

4)What type of IT organization is used? What philosophical approach do they use.
4)Fully Integrated.
Decentralized,early adopters of technology .They support and encourage the system of technology innovation failure.

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