Market Entry Strategies For The Haier Group

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27th Apr 2017 Marketing Reference this

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The Haier Group was funded in 1984 in Qingdao China, its precursor was Qingdao Refrigerator Factory, a state factory and on the brink of bankruptcy (Teagarden& Cai, 2009). With 26 years development, currently the Haier Group becomes the “leading brand of white goods” (Haier a, 2010) in the world and the “most valuable brand” (Haier a, 2010) in China. Ended 2010, the Haier Group has build 29 factories, 8 research and development centers, 19 overseas trading companies and 60,000 employees in the world.

As schemed by CEO Zhang Ruimin, the Haier Group has go through a four stages development that Brand Building Strategy stage, Diversification development Strategy stage, Globalization Strategy stage and Global Brand Building Strategy stage. In 2005, the Haier Group has entered Global Brand Building Strategy stage that aims build a local brand image in each area over the world (Haier b, 2010)

1.2The Haier Group in the USA

Haier’s product was first exported to the USA in 1995. In 1999, Haier invested research& design center, manufacturing center and marketing center in the USA started the “three in one” strategy in the USA. In 2002, the Haier Group has bought the Greenwich Bank Building in New York as the North American Headquarters, indicated the USA becomes the most imported market of Haier.

International marketing

International marketing is not a new phenomenon; it can be basically defined as “the marketing of goods, services, and information across political boundaries”(Albaum, Strandskov& Duerr, 2002).

2. Market entry strategies

2.1 Export mode

Export mode can be dividing as indirect export and direct export. The indirect export mode is export through an independent organisation in manufacture’s country. It is suitable for companies without or no exporting experience, the common intermediaries are export buying agent, broker, export management company and trading company. The direct export is export to buyers or importer directly. Through direct export, the company can get a higher level of control through its distribution channels (Jeannet& Hennessey, 2004). Exporting is one of the most general adopted approaches to start internationalization as it is one of the quickest approaches to enter international market (Bradley, 2005; Kotabe, Helsen, 2008). In most cases, exporting is used as the first step to enter a foreign market. Exporting is not only the quickest approach but also the simplest approach to enter international market, in addition; the risk that the company has to assume is also lower than other foreign marketing entry strategies (Bradley, 2005).

2.2 Foreign direct investment

The term FDI means “investment in manufacturing and service facilities in a foreign country with an intention to engage actively in managing them-is another facet of the increasing integration of national economies” (Kotabe& Helsen, 2008 P35). The benefit of FDI is clearly, through FDI, company can reduce the sales cost because tariffs and transport cost can be avoid, FDI can also avoid trade barrier and government protectionism, in addition, the product or service can be easier to suit local customers’ habit, furthermore, the risk of exchange-rate can be also avoid.

The Haier Group started export in 1986, till 2004, Haier’s total export has reached $1 billions. Exporting makes Haier gain their marketing share in the international market and introduced Haier brand to worldwide customers in short time (Mockler& Liu, 2009). Haier’s export strategy is entering markets as a sequence of from difficult market to easy market, that from developed countries such as Germany and the USA to developing countries. Following this strategy, Haier first exported their product to German, after get a marketing share and brand reputation in developed countries; Haier changed a new image and began to explore markets in developing countries (Liu& Li, 2002).

The Haier Group adopted a foreign direct investment to enter the US market. In 1999, the Haier Group established a design center in Boston, a marketing center in New York, and a manufacturing center in South Carolina that formed the largest China’s FDI project in the USA (Liu& Li, 2002). The US FDI project helps Haier avoid the economic and political barriers and successfully entered the US market; it also increased the brand image and the competitiveness in the global market. However, the project makes the Haier Group suffered an enormous risk that the US market aggregated numbers of powerful competitor such as GE Appliances, Electrolux and Whirlpool; further more, the expensive US labor perhaps not a good choice for manufacturing (Tan, 2003; ICRM, 2003)

3. Culture values

3.1 Definition of culture

The term of culture can be defined in many ways by different scholars, but each of them is related to value, behavior, benefit and social. For business and marketing context, Terpstra& David (1991) claim that culture can be defined as “a learned, shared, compelling, interrelated set of symbols whose meanings provide a set of orientations for members of society. These orientations, taken together provide solutions to problems that all societies must solve if they are to remain viable” (cited in Kotabe& Helsen, 2008).

It is necessary to consider the culture difference between domestic and target market before entry. As culture can affects buyer behavior, therefore marketers have to understand the culture in an international environment and how culture influenced consumer’s wants and need (Jeannet& Hennessey, 2004)

Figure:Culture Influences on Buyer Behavior

Consumer

Cultural Forces Cultural Messages Decision process

Religion, History, Family, Language, Arts, Entertainment, Education

Symbols, Morals, Rules of Behavior, Knowledge

Selecting and Prioritizing Wants for Goods and Services

Sources: Jeannet& Hennessey, 2004

Since the Haier Group entered the US market, Haier has unremitting to inosculate with local culture. The majority of Haier products sales in the US market are not original Haier product, but specially designed for the US Market. One of the purposes of US FDI project is through localization to inosculate American culture. The “Haier Los Angeles Design Center”, “Haier America Trading Company” and the “Haier America plant” formed a “three-in-one” strategy that design, manufacture and treading in the local market. Haier cellaret is typical examples that inosculate with local culture, it through set the most suitable temperature to meet Americans’ taste behavior. In addition, Haier also employ local people from design to trading to avoid culture influence(Lu, 2009; Liu& LI, 2002; ICMR 2003).

4 Market selections

4.1 Segmentation

“The international market segmentation is to break down the market for a product or a service into various groups of consumers who differ in their response to the firm’s marketing mix programs” (Kotabe& Helsen, 2008). In each segment of customer should have a following feature:

Identifiable

Sizable

Assessable

Stability

Responsive

Actionable

Through market segmentation, companies divide large markets into smaller segments that products and services can be more efficiently match customers’ needs.

4.2 Positioning

Arnott(1994) claimed that positioning can be defined as “deliberate, proactive, iterative process of defining, measuring, modifying and monitoring consumer perceptions of a marketable offering”. The process of positioning can be position by the following element

Attribute

Benefit

Quality and price

Use or user

Competitor

As marketing segmentation can be s

5 Marketing mix

5.1 The definition of marketing mix

As defined as Kotler and Armstrong (2010, p 36) “marketing mix is the set of market tools the firm uses to implement its marketing strategy. The major marketing mix tool is classified into four board four groups.

5.2 Products

The product is the goods or service sells to the consumer. The product planning is included the current product line and new product policy (Borden, 1984).

Haier’s product in the US market is covered Home Appliances, TV & Video, Portables & Audio, Digital Media and HVAC, that involved with personal customer and commercial customer. Since Haier Group funded, Haier continual set high quality as a role of survive and a basis for global competition (Duysters et al, 2008). Therefore, the Haier Group always focuses on improving quality, service, design, and technological capability. Haier also pay attentions on new products, it built the Product Innovation Mode Based on Modularity Theory to enhance new product development (Chen et al, 2008)

Country of Origin effect and localization

As the FDI project in the USA, almost all the product sells in the US market are made in the USA and numbers of product are especially design for the US market. However, because of the Chinese background, the brand image is still not strong enough.

Home Appliances

HVAC

5.2 pricing

The price clearly that is an important determinant of the value of sales generated. According to Wall & Rees (2001), can be easily discovery of what customers felt the value of the product. Researching consumers’ opinions about pricing is important that it shows the value of product in customers’ view, what customers are looking for and what do customers want to pay (cited in Lu, 2009).

While Haier first entered the US market by export, because the cheap labor in China, compared with its main competitors, Whirlpool, GE and Maytag, the price advantages of Haier is clearly strong than U.S. consumers (Lu& Mockler& Gartenfeld, 2009). When Haier established the making center, Haier still set common prices as equal with competitors that widely accept by public (Haier, 2010)

5.3 Placements

David Jobber(2010)claimed that” Place involves decisions concerning the distribution channels to be used and their management, the locations of outlets, methods of transportation and inventory levels to be held.”

Wal-Mart was the first place where Haier sells products. Currently, Haier product distribution is across the US was and could be found in most of chain stores include Wal-Mart, Lowe’s, Best Buy, Home Depot, Office Depot, Target, Sam’s Club and so on, Haier also operating on line shopping through Haier America Official Website(Lu& Mockler& Gartenfeld, 2009).

5.4 Promotion

The Haier Group had been promoting the Haier brand through outdoor advertising, airports and magazines mainly, and also did heavy advertising in trade publications or on the Internet. Furthermore, Haier signed Global strategic cooperation agreement with NBA, became the first sponsor of Global appliance brand, the Haier Group also sponsored the Beijing Olympic Game to promote the brand image. (Lu& Mockler& Gartenfeld, 2009; Haier, 2010)

The sale structure of Haier America

(Lu& Mockler& Gartenfeld, 2009)

5.5 brief summery of Haier’s 4P strategy

4Ps

Haier’s 4P strategy

Reasons

product

Decent, fashionable, and graceful looking; Convenient and special function;

High-quality;

Excellent service;

Leading life trend

The product should match with Haier’s marketing and brand position;

Only products like this can compete with global giants

price

The price adapts to the public;

The same level with the global

giants

Home-appliance is a public industry, everyone needs it;

Lower price than competitors will

lower Haier’s brand value

placement

On-line shop;

retailers

On-line shopping is the most popular,

fast and efficiency way;

Retailer is still the most effective way

because they have the sales network

promotion

TV,

Billboard,

Newspaper adverting; Sponsorship;

Sales promotion;

Public relations;

Trade show

Advertising and sales promotion are

the most traditional way but effective

and efficient;

sponsor big sport games give the brand more a

(Lu,2009)

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