The Economic Environment of Business – Haier Company

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Introduction

Economic environment is a study area of economic and has a major focus is environmental issues. The central part of economic environment is market failure. Therefore, for effective economic environment, the management of an organization must focus on market success. For instance, marketing strategies must be employed to have effective environmental economics.

An international company has its market spread across countries in the world. Therefore, their market strategies and to the extent environmental economics are not confined in country of origin. This paper analyzes market strategies and environmental economics for Haier Company; an international company dealing with consumer electronics and a number of home appliances.

Background

Economic environment of any business largely depends on the kind of strategies that are used in managing competition. Most importantly, these are the strategies that are used by a company to move goods and services closer to the targeted consumers. Therefore, most of the economic environments are usually shaped by marketing strategies that have been put in place.

Additionally, use of well enhanced technologies and carrying out situational researches has been perceived to be viable means of understanding how well to invest productively. For an international organization such as Haier Company, all of the economic environments and marketing strategies must fit within the international demand for goods and services.

Therefore, in analyzing the best forms of marketing strategies, management of competition must be put into consideration. In other words, there can be no successes if companies do not have sufficient competitive niches in the market. In the case of a company such as Haier which has a major focus on electronics, its competitive niche would mainly dwell on large volume of sales compared to its rivals.

The structure of any company must also reflect modernity, and must be strategically instituted to control competition in the marketplace. Haier Company has a hierarchical form of management or organizational structure. At face value, hierarchical form of structure is equated to bureaucratic form of management. As a matter of fact, there are some negative attributes of this kind of management.

However, this company has utilized the latter management style to emerge strong especially during turbulent economic times. For example, the company had an easy way of coming out of the global financial crisis of 2009 which saw a number of companies halt their operations.

In essence, this company uses this kind of management structure to control its human resource management, accounting and other factors necessary for effective marketing. Since it is based in China, this company has used the Chinese culture of management of organization, but tries as much to customize its products in targeted markets.

There are several strategies that this company utilizes. Among them, customization of products, brand positioning and positioning of its exports are very critical.

For example, the company studies any new market in the world before moving in. if the company is to open a branch in a country such as America; the first thing is to understand the cultures of people in this part of the world for the purposes of customization. As well, the company cares about its image. For good internationalization, the company has to first come up with an image for each region targeted.

According to Rickets (2003, p. 379), economic environment is vital towards sustenance of a company in any competitive market. It is not always that various factors of economic environment add up to profitability. Some are risks and should be handled with due care.

Therefore, it is important for a company to evaluate its programs on a regular basis and devise factors to be used in developing it (Kayne, 2005, p. 231). This paper discusses important concepts in economic environment using Haier Company as the case study.

Haier Company

This is a multinational company dealing with consumer electronics as well as general home appliances. Its history dates back in 1920 although it was formally incepted long before the aforementioned year. Its initial economic activities were supplying refrigerators to the Chinese market where it was based.

It is located in China, Qingdao and some of its products include mobile phones, air conditioners, washing machines, computers, micro ovens, televisions and refrigerators.

The company has had a good run since its inception. For example, in 2010, the company was rated to have one of the huge market shares with a 6.1% acceptance in white goods. The company has been turned into government owned by People’s Republic of China.

Company Structure

The company has a hierarchical type of organizational structure which has been noted to have brought in high competitive advantages. Most importantly, this company has managed to survive even during the most turbulent environments. According to Yonggui and Hing-Po (2002, pp. 38-50), a hierarchical mode of governance can help to great lengths in managing a company during tough economic times.

The present forms of environmental turbulence require advanced form of management structures, especially the structures that can initiate control mechanism. Hierarchical forms of management are most bureaucratic. However, it is the middle management that is tasked with managing the market matters.

These are like the competitiveness of the company. According to Conklin (2006, p. 310), the hierarchical type of structure is not favored because it is most anti-social.

This company has a simple yet hierarchical structure. The board of directors in this company forms the topmost administrative posts in this company. Then, the company has some sectors that help in giving the company a more administrative impact.

For example, immediately after the board of directors is the business sectors dealing with the washing machines, a business sector dealing with water heaters and a business sector dealing with integrated channels. The company has a world wide spread image. Each of the branches in the world has structures similar to the one at the headquarters and has some administrative independence.

The management is decentralized; however, each of the branches of the company has hierarchical administration that ensures that there are effective control mechanisms. This has helped the company emerge strong in the competitive market, and mostly, in managing some of the turbulent times such as the financial crisis of 2009.

The following represent a typical diagram that suits the organizational structure of the company:

А typical diagram that suits the organizational structure of the company

Sull and Wang (2005, p. 107) note that this company has a top down kind of management prioritization. This is where the top management has total control of what is to be done in an organization. Even though it is not compulsory that the management controls everything that happens in the company, there must be information to be relayed to the management.

For example, the middle level administrative officers may come up with an idea. Before it is implemented, the top managers must be informed. It is an effective way to make sure that everything is under tight controls and there are minimal chances of misuse. For example, a company may have problems with its accounting simply because there is democracy in the company.

If the middle level managers are allowed to make decisions haphazardly, it is possible that the company can collapse. On the other hand, putting so much of controls may be counterproductive. Writing about this, Zastrow (2009, p. 84) notes that hierarchical kind of management structure can be equated to bad bureaucracy.

The top most management position filled by board of directors recognizes the critical roles that are played by various sectors in the company. Also the board recognizes that all of the corporate practices have to be sound and efficient operations. Failure to do this would force the company to undertake immediate and stringent measures to sustain it.

The board is the overall manager and makes sure that all parts are well managed. This is most hierarchical and bureaucratic form of control. Zhou (2004, p. 9) notes that most of Chinese companies adopt this kind of structure, and such forms of management in various companies have made the industries not suffer from turbulent times in the world.

Being a Chinese company with its presence in the whole world, it has to adapt to structures used by most companies.

The top management of this company is assisted by various groups and committees. For example, there is the audit committee, the nomination committee, the company’s secretary office and Principal bankers, the stakeholders, independent non executive directors, the non executive directors, and remuneration committee among others. All of these are very important in this company as they help in streamlining management.

For example, the audit committee oversees all forms of transactions especially on irregularities while the remuneration committee looks at the welfare of the employees. There are groups of individuals in the company who are tasked with analyzing the welfare of current and probable customers.

Market construction for Haier Company

Market construction is part of strategic management analysis of a company. For Haier Company, strategic management analysis aims at reducing the costs operation and increasing effectiveness of the market. This company uses situational researches to explore on new markets and breaking barriers present in markets.

It has surveillance personnel who detect anything unusual about a particular market and possibilities of success in a new market for advising the top management. The company starts from simple concepts especially on production to large volumes depending on the nature of target markets. However, this company also has a focus on its local markets. Domestically, the company has agents such as specialty shops and inn in inn.

Market concentration for Haier Company

This is an economics term which also goes with terms such as seller concentration and industry concentration. Generally, it refers to distributions of goods and services or production within the industry. This is opposed distributions of company production in the market. Haier Company has achieved a lot of market concentration especially with its washing machines.

During inflations and major global crisis, its products continued to exert force in the industry simply because of good management issues. The company utilizes local raw materials to lower its production costs.

Production differentiation and Haier Company

Product differentiation refers to process and means of distinguishing an offering or a product from the others. Haier Company offers unique services that are different from other companies. For example, this company has what it calls a three-in-one framework of operation and this is complete with a localization design.

The company uses local employees and financing strategies in creating a global image/brand. The products which carry this brand are unique. However, the greatest uniqueness is in the way it engages and entering of market.

Barriers of entrance and exit for Haier Company

Being in the market mean that the image of the company is taken as it is presented. However, entering of the market and establishing the company is a hard thing. This is also the case with exiting the company. This company had to use varying strategies to enter the market, and has had problems exiting.

For example, when this company was establishing its e-business strategy, there were external barriers. They included poor technical infrastructure in China market and unwillingness from targeted customers. At times, this company finds itself in bad situations and wishes to exit but hasn’t been successful due to the image it has already established.

Marketing strategies

As noted earlier, marketing strategies are part of the economic environment of any company. According to Paley (2006, p. 324), effective marketing strategies can make a company win a sizeable share of the market competition. In essence, any company in the world, and especially the multinational companies such as Haier Company aim at gaining or going deeper into the market.

Any company should invest a lot in finding out the new means of approaching the market and eventually winning the competition. However, important in this is to understand the existing and possible incomers. For a company such as Haier Company, the managers should look at ways of improving the field of electronics.

Especially, this field of marketing is improving by day, and therefore should make sure that each new strategy employed in the competitive market is known for the purposes of countering competition. The company should also look at ways of managing global issues in regard to marketing.

There are seven major marketing techniques or strategies that have been analyzed to win in the competitive market. Kaynak (1993, p.32) analyzes them as; creation of a selling point, using testimonials, lowering of prices, painting pretty the benefits, creation of some means of attention in getting to the paper headlines, and provision of offers that customers may not resist.

Even though Haier Company cannot use all of them, there are some key strategies in these that have to be applied to remain relevant in the competitive world market. Among others, management of prices, understanding of the customers and clear advertising forms has to be used. However, the company should not use of the strategies blindly.

There should always a proper mechanism to move into the market, especially the new markets. Important in this is carrying out of informative researches that will give the company a benchmark to initiate various marketing strategies.

No particular company can ignore the critical role played by economic environment. Gerber (2007, p.34) defines economic environment as the factors that have direct impacts and effects on the management and marketing of a company.

Such factors and measures include the policies, the systems in the company, the trade cycles, the levels of income in the company, the economic resources, and the wealth of the company and distributions channels (Gerber, 2007, p. 34). There are five major points of economic environments.

These are the economic conditions, the economic legislations, the international economic environment, the economic policies and the economic systems. All of these work towards guiding any company towards sound management plus strategic management of marketing.

Before moving into the market, a company should always invest in understanding various components of economic environment. Among others, the company must understand the Politics, Environment, Society and Technological advancements in the competitive world.

Most importantly, any economic environment must include management of people. People must be integrated in all policies that have to be implemented in the company. This is because all forms of management are done by people and assisted by other factors such as the technology.

The company must also evaluate itself before moving in to the market. According to Wan (2004, p. 293), failure to put in investments for researches before marketing may mean the company may fail to capture key issues in economic environment.

Haier Company and Marketing Strategies

As noted in the discussion, Haier Company is one of the companies in the world which have made successes in marketing and in its economic environments. The approach to its marketing is aligned to the definition of the market as an effective plan or arrangement meant to bring two important players in the arrangement namely the seller and the buyer for the purposes of understanding each other.

However, just as it is the case with any other seller, Haier Company seeks to have value for its goods and hoping that the customers would get value of their money from the goods and services.

This company operates under the guise of perfect competition. Firms in such kind of an arrangement or situation checks their prices, improves their technological use and invests a lot in human resource. This company has made to do all of this in one stride; that is, there is high innovation in the company, human resource is well compensated and their prices are fair.

This company has also had strong strategies meant for survival. Companies which do not have survival tactics are caught in between their successes and turbulent times. According to Swanson (2004, p. 33), marketing strategies that are concerned with survival is the name of the game especially in companies in developed nation. 2009 was a year which all companies were faced with turbulent times in terms of finances.

The companies which were not prepared for such problems went down a great deal. However, for companies such as Haier which already had survival strategies management through those turbulent times.

Haier Company and survival strategies: Strategic internationalization

In China, the market became competitive, and therefore the profitability of this company went down. It was time to make the company up again in profitability. One strategy to do this was to spread the wings of the company. There was high need to internalize the goods and services. However, the company could not have moved to international market having not thought about it strategically.

What was needed was strategic internationalization or policies that would help the company move out of its base in an effective manner. One way of doing this was to think in global terms but acting locally.

That is, employing the terms of Chinese market but placing them strategically in international markets. The stages the company used to do this was; first to be a defender of its policies, second to be a contender in the international market, and third to use orthodox methods such as dodging.

Positioning in exports

The company has placed its goods and services strategically in the international market. This has had positive impacts over the years. The strategy in positioning of its goods has been customizing the goods and services it provides. For example, any kind of innovation in its electronic goods is based on situational research.

The company must first understand what the customers in various positions wants. If customers in East Africa want computers which have power supplies which can accommodate high temperatures, the company would come up with such a measure and try to put the goods in such a market.

Management of market competition

This company is an example of companies which have managed their competition in the market well. As noted earlier, this company engages a market strategically and must follow situation researches before getting into a particular form of competition.

One way of doing this is by analyzing the strengths and weaknesses of a company. According to Rogers (2001, p. 22), any marketing strategy must have analysis of its competition, and this includes looking at the strengths, the weaknesses, opportunities and threats that a company have.

Haier Company and brand image

Any company wishing to manage its affairs well in the market must focus on building a strong image for itself. According to Sengupta (2005, p. 75), brand positioning in the market is a good marketing strategy and should never be ignored. In its course of researching for new markets, this company utilizes the marketing personnel to analyze how best the image can fit in the company.

For example, being a Chinese company, it is possible that some markets may not welcome it well. However, this company has a strategy of positioning its brand in any form of markets.

The first thing is to know the likes of the particular customers and then customize the services and goods into that particular market. For example, if Chinese culture is not welcome in America, the first thing is to make a change in culture in the kind of branch to be opened therefore.

Monopoly in production of electronic and home appliances

This company has had to wade its way in a concentrated market. However, it managed through some effective strategies. This industry has had monopolies. For example, Indian companies have been known to concentrate in production of electronics and home appliances. The companies control the market, and therefore companies such as Haier have to either employ a tactic to win the competition or else two the line of Indian companies.

Conclusions

Economic environment of a company encompasses several elements. Most importantly, the marketing strategies and how to place goods and services in a market is indeed crucial. In order to achieve this, there have to be myriad of strategies in place such as good positioning of goods and services and proper exporting if the company is an international one.

Haier Company is an electronic company which has its base and corporate culture from China. However, this company has managed to penetrate new markets using proper marketing strategies.

The company has managed severally to emerge victorious even during turbulent times such as financial crisis of 2009. This is because it has good management of all factors of production and marketing. The company has a hierarchical structure of management; however, it is successful in all aspects.

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