Global Strategy and Competitiveness

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Human Resource Strategy of Haier Outside China and its Effectively

Haier’s human resource strategy in the world market has been motivated by its need to beat stiff competition abroad. This company is the leading firm in the white goods in China. It has had consistent growth in the home country and currently it is ranked the sixth largest electronic firm in the world. The human resource strategy employed by this firm is based on various factors affecting particular foreign markets.

The firm has employed Host Country National strategy of human resource. This strategy has been appropriate for this firm for a number of reasons. According to a report by Palepu, Khanna and Vargas (2005), Haier Group of Companies has been keen to employ host country nationals for a number of reasons.

The first and most important reason is that the locals understand the local market better. This firm would pick only those employees in the foreign country who have had an experience in promoting brands. This is important because the firm has insisted on using its brand even in international markets.

Such experienced employees are aware of the best strategies that could be employed within the local markets to achieve the best results. As such, this firm would only need to provide the necessary resources for this team to penetrate the market. Haier would select specific entities that are well known in marketing specific brands to market its brand. These entities would be allowed to recruit locals to help in marketing Haier’s products.

Another reason that has made Haier to adopt this strategy is that the strategy would make the products be easily acceptable in the international markets. When consumers are reached through their country nationals, they would have the feeling that the product is their own other than being viewed as a foreign product. This strategy is also favored by many foreign governments because it creates jobs.

This strategy is very effective. One of the reasons that make this effective is that it reduces costs of operation. When locals are used, the firm would reduce its budget in research and development in the foreign country. The locals have a deep understanding of the local market. As such, they may not need to be trained to understand market forces. This strategy is also very helpful for this firm because it allows it to understand local competitors much easily. Because most of the employees would be taken from this industry, they are better positioned to champion winning strategies for the firm.

The Trade-Offs and Challenges Haier Faces in Establishing a Competitive Brand in the Global Market In Addition To In the Domestic Market

Haier experienced a massive growth in size during the nineteenth and twentieth century, especially due to the non-open market that China had enforced. The country had a very large population which was a large ground for growth of this firm, given that foreign firms were not allowed in the country. It only had the local firms to compete with, and through its strategy of outsourcing for some services, its products gained fame for quality.

As such, the firm became the best firm in white goods industry. However, by 2004, China had given in to the international pressure and opened up its markets to the international firms. New form of competition was introduced into the local market. With the open market, Haier also considered opening up subsidiary firms abroad to heighten its competitiveness. Haier had to restructure itself in order to remain as competitive as it had been even in the face of new competition which was obviously fiercer than the one that existed before.

In order to achieve this, the firm had to trade off some of its benefits and this came with a lot of challenges. The first trade-off was given by the government of China. By allowing foreign firms to operate in the local market, Haier had to forego a large chunk of its market share in China for foreign firms like Lucky Goldstar (LG), General Electric and many other foreign firms.

In its place, the firm acquired international markets some of which were previously dominated by the new entrants into the Chinese market. The firm also had to get into joint venture programs with other firms in order to remain competitive. According to Palepu, Khanna and Vargas (2005), Haier entered a joint venture with a number of German firms in its quest to improve quality of its products. This strategy involved some kind of trade-off between this firm and the outsourced German firms.

Haier had to share its profits with the other firms, a fact that lowered its net profits hence net income were considerably low. The firm also entered an agreement with these firms that it would sell the other firm’s products to the Chinese market, a deal which would strain Haier’s resources. In return however, Haier managed to get quality for its products. Haier became a well known firm for its quality products.

The Similarities and Differences in the Electronics Market (HTC Corporation) and the White Goods Market (Haier)

The electronics market and the white goods market share similarities. As witnessed in the case of HTC Corporation, the electronics market is very dynamic. New products come into the market so frequently. This is the same case with white goods markets. The industry is so innovative and every firm is determined to introduce a new product into the market. Emerging technologies is the driving force in both cases.

As such, both markets require massive investment into research and extensions in order to manage market requirements. In both markets, competition is rife. While HTC faces challenge from such developed firms like Samsung, Nokia and Apple, Haier is facing competition from such developed firms as General Electric, LG and Amana.

In both cases, quality is the only way that a firm can manage to stay afloat the market competition. Finally, in both cases, brand is a very important tool for competition. A firm that does not have a well known brand cannot manage competition. It takes long and costs a lot to build a strong brand, but it is a firm would not have otherwise but to do this.

The market is obsessed with brands. They attach quality of the item they purchase to its parent brand. If the parent brand is known for quality, then the product would receive a massive sale. In case the product’s brand is hardly known, it would be very difficult to sell the product both at the local and international markets.

Despite these striking similarities, there are differences between the electronics market and the white goods markets. The first difference is the target group. According to Yoffie (2010) the main market for electronics are the youths. They are techno servy and are keen on fashion. A product meant for this market should be sensitive on modern trends. For instance, this group is obsessed with the social media.

As such, phone manufactures must ensure that their products are internet enabled and that they can satisfy the desires of the youth. On the other hand, white goods are mainly targeted at the middle-aged. This market is characterized by young individuals who are just starting their families. Unlike the youths who look for glamour, this group looks for service.

Inasmuch as they appreciate physical attractiveness of the items they buy, they put more emphasis on the ability of the product to serve the purpose it was intended to. This is contrasting the youths who would be attracted to physical features more than the performance level.

Similarities and Differences in the Acquisition Strategies of Haier and Newell

Both Haier and Newell share a lot in common as far as acquisitions are concerned. As Montgomery (2005) states, one of the best ways through which a firm can get a competitive advantage is through mergers and takeovers. Competition in the market is so strong and therefore the bigger the firm the easier it is to gain competitive advantage.

Although this strategy may seem best suited for small and mid level companies, it is one of the most important tools that large corporations use to manage competition. Yoffie (2010) argues that this strategy is the best way of killing competition in the market. Newell strategy of acquisition bears resembles to the strategy used by Haier. Both firms are keen to acquire firms that are well known in the market.

They do not acquire just any firm, but only those with substantial market share and a strong brand name. Newell acquired Rubbermaid, a firm that was almost as strong as itself, with brand that was well known and a capital base that was over 60 percent that of Newell. Similarly, Haier Group acquired Qingdao Air Conditioner Factory and Qingdao General Freezer Factory which had very strong brand in the local market.

However, both firms differed in a way that they would select the right firm to acquire. Whereas Newell was keen on acquiring firms that were doing firm in all fronts, Haier was more concerned with acquiring firms that had problems with the management (Stewart 1990). Haier would take a firm with strong market share and brand equity, but because of lack of management, its existence was under threat.

Another difference in acquisition of firms between the two firms was the financial strength of the firm to be acquired. Whereas Newell was only interested in firms that were economically viable, Haier would take over those firms that were struggling for existence. Haier would take over a firm’s debt and settle them when it acquired such firms, an act that Newell avoided completely.

Haier’s A-Third Strategy of Production and Its Relevance

Haier has grown to become one of the strongest firms in the white goods. In its home market, it is the dominant firm in this industry, known for quality products and variety offerings in different lines. The domestic market is fast getting saturated. Inasmuch as it would be important to retain the local market share, it would equally be necessary that it explores the foreign markets to ensure that it expands its market share.

To do this, the firm has formulated ‘a third strategy’. In this strategy, a third of the firm’s production would be done locally and will find its market locally. A third of the production will be done locally and will be exported while the last third will be produced and sold in foreign countries. This strategy vision is achievable, given the current status of this firm. This firm has grown in size over the past three decades. In order to determine the firm’s suitability for this strategy, it would be prudent to conduct a SWOT analysis.

This firm has gained strength in the local and international markets in various fronts. Locally, this firm enjoys huge acceptance from the locals. Its brand is known among the locals as a mark of quality. This has enabled it to charge its products at premium prices. Through this premium pricing, this firm has been able to amass a large amount of wealth that can enable it conduct its productions internationally.

The firm also has a well established logistics unit through which it is able to export its products to the international market. The logistics unit would make it possible for the firm to take the locally produced goods to the international markets.

It has also managed to penetrate the international market and currently it commands a considerable huge market share in countries like United States of America, making it one of the leading general electronic firms. It would therefore be easier to establish production units in overseas countries to manufacture a third of its products.

Despite the above strengths, this firm faces some serious weaknesses that may make it fail to achieve the desired objectives. One such challenge is its reluctance to cover the third world markets.

Using its strategy of venturing into difficult markets before the easy ones makes it spend a lot of money trying to beat competition. It would cost much less in time and material resources to cover the young markets in South East Asia that it would capturing the German and the US markets. This has given way for other competitors to capture these markets before its entry.

There is hope in both local and international markets. As Palepu, Khanna and Vargas (2005) states, the market for white goods has increased tenfold, in the last five decades. The world is embracing technology and living standards is also improving.

White goods are fast becoming a basic necessity in many homes as time become increasingly limited. Families need machines to wash their clothes, refrigerators to store their foods and such other related items. Haier stands a better chance to reap maximally from this increased market demand. Moreover, many countries around the world are lifting trade bans, hence opening their markets to international firms like Haier.

However, the above opportunities also come with some threats. As this firms gets international markets to sell two-thirds of its products, its focus on the local market may be reduced, opening up competitive advantages to other competing firms. This may be dangerous because the home market is as important as the international markets.

Similarities and Differences in the Strategic Challenges Faced By HTC and Haier in Their Operation

As HTC struggles to develop a strong brand equity that would help in marketing its products, Haier is struggling to extend its brand to new markets. Both firms are faced with many challenges in their operations and quest to achieve their set goals. These challenges are in a way similar.

One such common challenge the two firms face is that the market is saturated with better brands. As Haier struggles to expand its market, it has to come to terms with the fact that there are stronger brands in the new markets it is venturing into. Brands like LG and Sony are very strong.

As such, it would be a difficult task to convince these new markets that Haier as a brand offers more quality than the existing trusted firms. HTC has the same challenge. The electronics market is obsessed with brand name. Nokia and Samsung have developed a niche in the international market as firms that offers exactly what the customer needs but with added value. HTC is hardly known beyond its parent country. It would take a lot of effort to make this brand become a formidable force.

Another problem that both firm faces are the expenses they have to incur in these markets. In order to make the brand HTC popular, it would require a lot of promotional efforts, a fact that would reduce revenues for the firm. Similarly, to expand its market, Haier would need to do a lot of research and extension in the new markets, besides conducting awareness creation in the market. These costs would hurt its productivity.

Another big challenge that the two firms face is the stereotype that firms from China and by extension the larger Asia (with exception of Japan) produce substandard goods. Haier will have to fight this notion in the international markets, especially the American markets which makes one of the most attractive markets. Because of its decision to market its products in the first world countries, it would require this firm to convince the market that its products are as good in quality as others from other developed countries, or even better.

The same is the case with HTC. It must convince the market that despite its Asian origin, the products are produced with as good technologies as those used by other firms like Nokia and Samsung. According to Palepu, Khanna and Vargas (2005), this can be the toughest challenge. This is because once the market has developed a perception about a certain brand (especially if the perception is negative), it would be very difficult to convince them otherwise because they would not try it in the first place.

Although the two firms have similar challenges in their operations, there are some marked differences. HTC is specialized in electronics industry while Haier deals in white goods. The target group for the two firms is therefore different. While the products for HTC are targeted towards the youth, Haier products are targeted at the middle aged working class individuals.

To HTC, it is easier to convince the youths that their products are superior, especially if the products’ physical attractiveness is enhanced. Unfortunately, they can easily be swayed away from this brand. Conversely, Haier may find it easier to maintain its customers, but the big problem is convincing others into the brand.

References

Montgomery, C. (2005). Newell Company: Corporate Strategy. Harvard Business School, 9 (799-139), 1-16.

Palepu, K., Khanna, T. & Vargas, I. (2006). Heir: Taking a Chinese Company Global. Harvard Business School, 9 (906- 401), 1-27.

Stewart, D. (1990). Focus group: theory and practice. Newbury Park: Sage.

Yoffie, D. (2010). HTC Corp. in 2009. Harvard Business School, 9 (709- 466), 1- 15.

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