Haier Company

The Haier Group Corporation is a leading manufacturer of white goods and other home appliances globally. The Qingdao, China-based company has quickly risen to second place in the world's core refrigerators market, trailing only Whirlpool of the United States. However, Haier has taken the lead at home, accounting for more than one-third of all refrigerators sold each year and several other appliance categories such as air conditioners and dishwashers. Haier has drastically expanded its product line since the late 1990s as part of a diversification strategy that has seen the business enter areas such as mobile phones and personal computers. Simultaneously, Haier has followed an aggressive globalization strategy, establishing a global sales network in 160 countries and 38,000 retail stores. A broad network of subsidiaries with production facilities throughout China and 12 manufacturing units outside of China support the company's sales and distribution.

The Haier Group's annual sales are more than $4 billion. Pakistan, Jordan, Indonesia, the Philippines, Malaysia, Iran-and Camden, South Carolina, in the United States-are among the company's international operations. The latter facility, which debuted in 2000 and is supported by a U.S. sales and marketing headquarters in New York City, is part of Haier's aim to capture 10% of the U.S. refrigerator market by 2005. CEO Zhang Ruimin, who turned a modest, failing state-owned company into a global powerhouse at the turn of the century, deserves credit for Haier's success. The Chinese government retains control of the corporation, but it functions independently. The Shanghai Stock Exchange lists a subsidiary, Qingdao Haier Refrigerator Co., Ltd. Through its 2004 purchase of a controlling position in the Haier-CCT Holdings joint venture, the corporation is also seeking a backdoor listing Hong Kong Stock Exchange.

National Brand Leader in the 1990s

The destruction of the refrigerators signaled the start of a new era for the Qingdao factory. Liebherr's equipment and technology were installed alongside a fresh and uncompromising dedication to quality. Zhang also incorporated new management approaches for the corporation, particularly Masaaki Imai's "5-S Movement." The 5-S system created quality control through a five-step sequence of protocols: seiri (dispose of the unnecessary), seiton (organize tools in order of usage), seisoh (keep the job site clean), seiketsu (keep yourself clean), and shitsuke (keep the workplace clean) (follow workshop disciplines). "Safety" was introduced as a sixth "s" by Zhang. Workers were expected to follow the protocols or face public censure and, in the worst-case scenario, firing, historically uncommon in China.

By 1986, the corporation had begun to adapt, and the Qingdao facility had become profitable. Production had begun to increase, while sales had begun to expand steadily at 83 percent every year. The company's sales climbed from RMB 3.5 million in 1984 to more than RMB 40.6 billion in 2000, representing more than 11,600 percent.

Following the success of the refrigerator company, the mayor of Qingdao began asking the company to take over a number of the city's other failed appliance manufacturers. The company acquired Qingdao Electroplating Factory in 1988, which later became Qingdao Microwave Electric Appliance Factory. The company acquired the Qingdao Air Conditioner Plant and Qingdao Freezer in 1991. At the additional locations, Zhang immediately established the company's corporate culture and devotion to quality.

In 1992, the corporation changed its name to Haier Group. By that time, it had earned the coveted ISO 9001 quality accreditation for refrigerator production. It had also received ISO 9001 accreditation for its air conditioner and freezer manufacture by 1994. The company's commitment to quality coincided with a push to establish Haier as a national leader. Haier had become China's largest appliance brand by the end of the decade, with clear dominance in numerous product categories.

Global brand in the new century

The diversification of Haier was mostly accomplished by the end of the 1990s. Analysts questioned if the corporation had diversified too much, with items ranging from its core white goods to mobile phones and personal computing systems. The company remained one of China's fastest-growing businesses, with sales reaching $2.3 billion in 1998. By that time, the company had seized 40% of China's refrigerator sales, nearly 36% of washing machine sales, nearly 47% of all freezer sales, and nearly 37% of all air conditioner sales.

Haier launched its third development phase, adopting a new strategy: developing Haier into a worldwide recognized brand name with a relatively solid and lucrative position in China. With additional plants in Pakistan, which opened in 2002, and Jordan, which began test production in December 2003, the company established a strong presence in the Asia and the Middle East markets. By 2004, Haier had established itself as one of the most popular brands in those areas. In addition, the corporation had placed its products-though not necessarily its brand-in most of Europe's biggest retail chains.

At the turn of the century, the United States became the group's most ambitious aim. With high sales of its electric wine coolers-the company already had a 60 percent share of that niche market-its efforts to establish brand recognition accelerated. The group's U.S. activities generated more than $200 million in revenue by 2002, a drop in the bucket compared to the company's total revenue of more than $7 billion. Nonetheless, Haier remained upbeat, declaring ambitions to grow its U.S. business to more than $1 billion by the middle of the decade, to capture as much as a 10% share of the country's full-size refrigerator market.

Haier had evolved into a global, diversified home appliance leader under Zhang Ruimin's leadership. While some observers doubted Haier's possibilities in the United States-a notoriously challenging market for foreign brands-confidence in Haier's was buoyed by the company's success abroad. Haier, the world's second-largest refrigerator manufacturer, trailing only Whirlpool, is expected to maintain its dominance in China despite foreign manufacturers' expanding forays into the industry. To fund its expansion, Haier acquired a controlling position in a publicly-traded joint venture, Haier-CCT Holdings Ltd., in 2004 and obtained a backdoor listing on the Hong Kong Stock Exchange.