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.

CEO of Haier

In 1984, Zhang Ruimin (then the deputy manager of the former Qingdao Home Appliance Company), was appointed director of the Qingdao Refrigerator Factory which was initially a small, ailing and collective-system-based factory with a total debt of RMB1,470,000. The factory has since grown to become what is now known as the Haier Group, China's top home appliance brand name. Haier has witnessed a significant prosperity, and gained worldwide recognition over the past 25 years. In 2008, its global business totaled RMB119 billion. In March, 2008, it was ranked among China's Top 10 Global Brands by the Financial Times for the second time.
To improve Haier's management efficiency, Zhang Ruimin combined Chinese traditional culture and western experiences in modern business management. Haier then established the OEC, the market chain management system, the Individual-goal combination, and the operation excellence. Zhang Ruimin's management systems have been widely acknowledged by domestic and overseas management professionals. Haier's business experiences have been introduced into 16 case studies in business mergers, financial management and corporate culture by 7 foreign educational institutes, including Harvard University, University of Southern California, Lausanne Management College, the European Business College and Kobe University. Haier has been recommended to the EU Case Studies by the Lausanne Management College for Haier market chain management programme. As the informationization era comes, Haier starts its reengineering of IT-oriented process, seeking to realize a business type of operational excellence, which is named in the field of business management as "Haier's informationization revolution".
In 1997, Zhang Ruimin acquired the Entrepreneur Award of the Year issued by Asia Weekly. In 1999, he was ranked the 26th among the World 30 Most Respected Business Leaders by the Financial Times. In September, 2002, he was named a Global Business Leader and the Outstanding Donator by the United Way International (UWI), the only entrepreneur in China that has received the same honor. In August, 2004, he was ranked the 6th among Asia's 25 Most Influential Figures in Business by Fortune, foremost among all Chinese entrepreneurs. In November, 2005, he was ranked the 26th of the World's 50 Most Respected Business Leaders by Financial Times, being the only selected Chinese entrepreneur.
Zhang's goal is to gain global recognition for the Haier brand. According to the Euromonitor, among the global white-goods manufacturers, Haier is ranked the 4th in terms of overall sales and the 2nd in terms of brand sales. Haier has for the fourth consecutive time been rated as the No.1 Chinese Mainland Corporation regarding the Comprehensive Leadership in the annual survey of Asia¡¯s top 200 companies by the Wall Street Journal in 2006. Having ascended to among world top brands with an expanding market, it is now imposing a rapidly growing influence over the global market.
Zhang Ruimin and his colleagues have dedicated their wisdom, time and energy into turning a small collectively-owned factory into a successful, globally recognized multinational company. Now they are creating a process system and a business type of operational excellence to further meet the needs of users worldwide and to contribute to China a truly excellent corporate identity in the global market. They can, they will and they are going to keep enriching this identity, and contributing to the prospering of the national industry of China.

Introduction

Haier is the world's 4th largest white goods manufacturer and the most valuable brand in China. With 29 manufacturing plants, 8 comprehensive R&D centers, 19 overseas trading companies across the world and more than 50,000 global employees, Haier has developed into a giant multinational company. In 2008, Haier gained global revenue of RMB119 billion.

Guided by the business philosophy of CEO Zhang Ruimin, Mr. Zhang Ruimin Chairman and Chief Executive Officer Zhang Ruimin, a Chinese Han, was born on January 5, 1949 in Laizhou, Shandong. He holds the title of senior economist and was awarded a MBA degree from the China Technology University in 1995. He is now the Chairman of the Board of Directors and CEO of the Haier Group.

Haier has experienced the development stages, noted as Brand Building, Diversification and Internationalization. At the end of 2005, Haier came to its 4th strategic stage of global brand building. Thanks to 25 years of efforts, its reputation throughout the world has been heightened significantly. In 2008, the brand value of Haier amounted to impressive RMB 80.3 billion. Since 2002, Haier has topped the Most Valuable Brand tally for seven consecutive years. Nineteen Haier branded products, including refrigerator, air conditioner, washing machine, television, water heater, computer, mobile phone and home appliances integration, have been awarded as Chinese Famous Brand products. Haier refrigerator and washing machine are among the first group of Chinese World Famous Brand products awarded by the General Administration of Quality Supervision, Inspection and Quarantine of the P.R.C. In March 2008, Haier was selected as one of the "China's Top 10 Global Brands" by Financial Times for the second time. In June 2008, Forbes released the world's "600 Most Reputable Companies", of which Haier ranked the 13th and the 1st among Chinese companies. In July 2008, Haier ranked first in terms of overall leadership among Chinese mainland companies in the Wall Street Journal Asia's annual survey of "Asia's 200 Most Admired Companies". Haier has become an international brand, and its prestige is rising fast with its expansion into the international market.

Haier's managerial models of "OEC", "market chain" and "individual-order combination" have been highly recognized worldwide. Its experience has also been introduced into case studies of many foreign educational institutes, including Harvard University, University of Southern California, International Institute for Management Development (IMD), the European Business College (in France) and Kobe University. Its "market chain" management practice has also been accepted into the EU case study library stock.

Haier believes 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.

http://www.haier.com/index.asp

“Haier” ---a famous company in China

Haier

---ethical and social responsibility policies---

“Reputation is more important than sales volume”
As to Haier, quality is the essence of a product, so as reputation to a business. A product should be deemed as acceptable only when it satisfies the customer very well. The point of marketing is buying rather than selling, that is, securing customer loyalty by building good reputation in the process of selling.

“Customer is always right”
In 1995, Haier put forth the concept of “Star Service” based on the principle that customer is always right. Their business relies on customers for success. The business is successful only when the customers are satisfied that.

“The aim of our work is your satisfaction”
At Haier, a technically acceptable product is not necessarily a qualified product. Only products of customer satisfaction are qualified. Products fail to meet customer needs are of little marketability and thus of little profitability. Therefore, the yardstick used to measure the performance is customer satisfaction. Never say “No” to customers.

---type of security and risk management---

“OEC Approach”
The "All-around Optimized Management Approach" was Haier's first major initiative in innovative management. First implemented in 1986 and later named the "OEC Approach", this management style entails clear and comprehensive control over all company functions. The purpose of the "OEC Approach" is to achieve each day's plan, evaluate that plan, and improve upon those daily accomplishments 1% better than the day before. The "OEC Approach" has been the cornerstone of Haier's management culture for more than 20 years. In 1993, then vice premiers Zhu Rongji and Li Lanqing, together with then secretary of the CPC Shanghai Municipal Committee Wu Bangguo signed a joint directive to promote Haier's "OEC Approach" nationwide.

“Individual-Goal Combination Management System”
Haier's "Individual-Goal Combination" management system means that every employee is an independent and innovative SBU with the goal of achieving primacy in the marketplace. The "Individual-Goal Combination" aims at creating a competitive market target for each SBU. Zhang Ruimin's management innovations have been recognized widely by international management institutions. In 1998, Mr. Zhang was invited by the Harvard Business School (HBS) to deliver a speech on his corporate philosophies. Haier's "Activate Shocked Fish" strategy, whereby a failing company's latent potential is realized and maximized, was used as a case study by HBS. In 2000, Mr. Zhang delivered another speech to IMD in Switzerland. Haier's strategy has also been studied at numerous institutions including the University of Southern California, IMD, INSEAD, Kobe University (Japan). Haier's "Market Chain" management was included in the European Union's case study database. Haier's "Individual-Goal Combination" management sytem is currently assisting companies around the world to better manage their storage and due receivable systems.