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For this week’s discussion, read the case study found in your textbook (Case 17): Haier
Group: Internationalization Strategy.
Remember, a case study is a puzzle to be solved, so before reading and answering the
specific case and study questions, develop your proposed solution by following these
five steps:
1. Read the case study to identify the key issues and underlying issues. These issues are the
principles and concepts of the course area which apply to the situation described in the case
2. Record the facts from the case study which are relevant to the principles and concepts of the
course area issues. The case may have extraneous information not relevant to the current course
area. Your ability to differentiate between relevant and irrelevant information is an important
aspect of case analysis, as it will inform the focus of your answers.
3. Describe in some detail the actions that would address or correct the situation.
4. Consider how you would support your solution with examples from experience or current real-life
examples or cases from textbooks.
5. Complete this initial analysis and then read the discussion questions. Typically, you will already
have the answers to the questions but with a broader consideration. At this point, you can add the
details and/or analytical tools required to solve the case.
Case Study Questions:
1. Compare and contrast the appliance strategies used by another multinational appliance company
such as LG, Samsung, Bosch-Siemens, Electrolux, Whirlpool, etc. and Haier.
2. What is Haier’s internationalization strategy?
3. Does Haier’s international strategy appear to be effective?
4. Is it likely that Haier’s success and management practices can be applied outside of China? Why
or why not?

European Management Journal Vol. 20, No. 6, pp. 699–706, 2002
 2002 Elsevier Science Ltd. All rights reserved.Pergamon

Printed in Great Britain
0263-2373/02 $22.00 + 0.00PII: S0263-2373(02)00119-6

Strategic Implications of
Emerging Chinese
The Haier Case Study
HONG LIU, China Business Centre, Manchester Business School
KEQUAN LI, Genertec Europe Temax Ltd, Cologne

Recent years have witnessed the emergence of Chi-
nese multinationals with a presence in both
developed and developing countries. Yet little is
known about them. This paper presents a case
study of one of the leading Chinese multinationals,
the Haier Group. It addresses the internationaliz-
ation strategy that has made Haier successful, fac-
tors influencing the strategy, and the strategic
implications for both Western and Chinese compa-
 2002 Elsevier Science Ltd. All rights reserved.

Keywords: Internationalization, Chinese Multina-
tionals, The Haier Group, International Business
Strategies, Developing Countries


China is rising as a globally influential political and
economic power. Having achieved an average
growth rate of nearly 10 per cent over the past 20
years, China already ranks as one of the world’s larg-
est economies and trading powers. This rapid econ-
omic development has strengthened China’s inter-
national competitiveness. Many Chinese blue chip
companies have seen the limitations of the Chinese
market and are striving to become global players.
Many of them have already quietly moved into inter-
national operations. Some exemplary names of Chi-
nese multinationals include Haier, Changhong, TCL,
HiSense, Gree, Kelon, and Chunlan.

Although the Chinese government encourages the
internationalization of Chinese companies, it has not

European Management Journal Vol. 20, No. 6, pp. 699–706, December 2002 699

yet developed a facilitating policy framework for
such activities. Many Chinese companies have
started to pursue internationalization on an experi-
mental basis while the government has adopted a
flexible and practical approach to governing their
international initiatives. For instance, it has given
special permission to certain companies to invest
overseas without being restricted by existing policy
hurdles such as foreign exchange controls.

To date, little has been known about the international
activities of Chinese companies. This paper, using the
case study method, examines strategies, influences,
and process whereby the Haier Group, a leading Chi-
nese home appliance manufacturer, has developed
into an influential Chinese multinational. Haier has
invested aggressively in a large number of developed
as well as developing countries in the last few years
and taken a large tranche of market share in those

The paper addresses strategic implications from the
experience of Haier’s successful international expan-
sion, prepares Western companies strategically for
the arrival of Chinese competitors and facilitate the
development of their strategic response. Haier has
already made some international manufacturers such
as Sanyo play catch-up (Fonda, 2002). The success or
failure in the internationalization of Chinese compa-
nies will also have an important impact on both
future government foreign economic policy and the
Chinese companies that seek to invest inter-


A Framework for Examining Haier’s

The classic environment – strategy – performance
framework is deemed appropriate for the case study
as it is suggested that the alignment of a firm’s strat-
egy with its environment is more than likely to result
in better performance (Miller and Friesen, 1983). It
has also been found that specific international
environment and business-level strategy matches are
associated with performance outcome (Carpano et al.,
1994). The change in China’s business environment
has driven Chinese companies to go international
and adopt various responsive and offensive stra-
tegies. Those that match their strategies with environ-
mental conditions may become successful.

Figure 1 presents a framework for the internationaliz-
ation of Chinese companies. In this framework, the
‘environment’ is divided into positive factors
(impetus) and negative factors (constraints). As can
be seen, internationalization initiatives are driven by
both internal and external factors. Internal factors
include management aspiration, resources, and infor-
mational and technological advantage. External fac-
tors embrace trade barriers, the saturation of dom-
estic markets, international opportunities, and
responses to international competitors. Inter-
nationalization initiatives can be constrained by fac-
tors such as the economic system (international
financing and foreign exchange control), resources,
and international brand image. A successful inter-
nationalization strategy can have a positive impact
on firm’s performance.

Internationalization of the Haier
Group — a Case Study

Haier’s Development and Performance

Haier’s predecessor was the Qingdao Refrigerator
Plant (officially renamed as the Haier Group in
December, 1992). Mr Zhang Ruimin was appointed
as the plant director in 1984, the fourth one in that
year. The plant then made a loss of 1.47 million yuan
(equivalent to US$525,000). Zhang Ruimin then had

Figure 1 A Framework for Internationalization of Chinese Companies

European Management Journal Vol. 20, No. 6, pp. 699–706, December 2002700

to find loans in order to pay salaries for 600
employees. As a loss-making enterprise, it was
impossible to get credit from regional banks. Zhang
had no choice but to turn to farmers in villages to
borrow money. At the same time, he endeavoured to
improve enterprise efficiency, discipline, and quality
control. Some measures included prohibiting
employees from arriving late at work and leaving
early for home, and furthermore, forbidding urinat-
ing and defecating in workshops. To improve pro-
duct quality, Zhang Ruimin ruled that if defective
products were produced, 20 per cent would be
deducted from the salaries of all the employees

Haier developed a market-driven and innovative cul-
ture. In 1989, for instance, sales of one model of
refrigerator were high in Beijing but under-perfor-
med in Shanghai. Through market research, Haier
discovered that Shanghai residents then had
crowded living conditions, and that there was little
space for a large refrigerator. As a result, Haier
designed a smaller refrigerator only for the Shanghai
market, and sales subsequently surged. In early 2001,
based on information feedback from its Middle East
branch, Haier developed an air conditioner exclus-
ively for desert conditions. The technology contained
in the air conditioner combined strong heat-resist-
ance capability with unique exterior materials and
allowed the unit to increase its anti-erosion ability.
Once the sample was on the market, the whole orders
for 2002 were fully taken by customers from Middle
East and African countries.

As Haier’s market position was established in China,
it started to pursue internationalization from 1995
onwards and invested in manufacturing facilities in
the USA as well as numerous developing countries.
In 1984, Haier had US$1.24 million sales and
employed 600 people. Seventeen years later, its sales
reached US$19 billion and profits US$ 5.1 billion,
with over 30,000 employees. Its product range has
developed from a single line of refrigerators to 86
product categories with more than 13,000 specifi-
cations and varieties. With an export volume of
US$420 million in 2000 and more than 40,000 sales
network points established globally, Haier exports its
products to more than 160 countries and regions, and


has now become the world’s sixth largest home
appliance maker (Fonda, 2002).

In summary, Zhang Ruimin has been instrumental in
transforming Haier from a near-bankrupt enterprise
to one with discipline, a well-nurtured corporate cul-
ture of innovation and market orientation, and a glo-
bal vision. It appears that both its domestic business
strategy and internationalization strategy, to date,
have been successful.

Driving Forces for Haier’s Internationalization

There were many factors leading to the inter-
nationalization of Haier’s business, including internal
and external driving forces.

Internal Driving Forces
It is Zhang Ruimin who has led the company, from
near bankruptcy, to stand up and grow from strength
to strength. He has firmly established his leadership
within the company. Therefore, his aspiration to
compete globally and become one of the Global 500
has played a vital role in Haier’s active pursuit of

He had an internationalization mindset from the
initial stage of Haier’s development. In 1984, soon
after having joined the plant, he introduced tech-
nology and equipment from Liebherr, a German
company, to produce several popular refrigerator
brands in China. Meanwhile, he actively expanded
cooperation with Liebherr by manufacturing refriger-
ators based on its standards, and then they were sold
to Liebherr, as a way of entering the German market.
In 1986, the value of Haier’s exports for the first time
reached US$3 million. Zhang Ruimin later com-
mented on this strategy: ‘Exporting to earn foreign
exchange was necessary at that time. However, it was
only one of two purposes. The other purpose was to
make our brand names famous internationally.’

Research has shown that global companies tend to
be major players in their home countries with a large
part of their income coming from international mar-
kets. Electrolux, Siemens, GE Electronics, and Whirl-
pool, for instance, earned 90, 56, 46 and 38 per cent
of their total income from international markets
respectively. Thus, to follow the trend and grow
strong and large, Zhang believed that Haier had to
go global.

As it became increasingly successful in China, Haier
set its ultimate objective as joining Global 500. To
achieve this, in 1998, two consulting companies,
including the BCG, were commissioned to carry out
a project on Haier’s strategy for entering Global 500.
One of the major conclusions was that trans-regional
transactions of white home appliances had decreased
and would continue to decrease. The main reason

European Management Journal Vol. 20, No. 6, pp. 699–706, December 2002 701

was that too high a shipping cost would make the
price of home appliances uncompetitive because of
their bulky sizes. Thus, exporting its products from
China would not help Haier achieve its objective.
Having a regional manufacturing presence was a
necessity for Haier to become a major international

Why should Haier move to the USA while seemingly
it has neither technological nor cost advantage? It
appears that it has gained location advantage by set-
ting up plants overseas to avoid tariffs and reduce
transportation cost. Internalization advantage has
been attained through controlling services and
marketing/distribution, and ownership advantage
has been achieved by developing design and R&D
capabilities through utilizing high quality local
human resources (Dunning, 1981).

External Driving Forces
A number of external factors have had a major influ-
ence on Haier’s internationalization activity. The
saturation of Chinese home appliances markets, with
intensifying competition, has been a major impetus.
After the mid 90s, price wars broke out one after
another in various home appliance markets. At the
end of 2000, Haier’s market shares of refrigerators,
freezers, air conditioners, and washing machines had
reached 33, 42, 31 and 31 per cent, respectively. The
potential for further development in the domestic
market was therefore limited. However, its excellent
performance in China allowed it to expand overseas.

The entry of global home appliance manufacturers
into the Chinese market forced Haier to seek inter-
national expansion. In particular, since China joined
the WTO, almost all the international competitors
have invested in China, establishing wholly-owned
companies. The best defensive strategy for Haier
would be to have a presence in its competitors’
home markets.

Haier’s initiative in internationalization was encour-
aged and supported by the Chinese government.
Being an international player gained Haier some spe-
cial conditions that other Chinese companies could
not obtain. For instance, Haier had already been
approved to establish a financial company, to be the
majority shareholder of a regional commercial bank,
and to form a joint venture with an American
insurance company. Without its active pursuit of
internationalization as well as a dominant position in
home appliance sectors, it would normally be
impossible for a manufacturer to get approval to
enter the financial sector.

Haier’s Strategy for Internationalization

As mentioned above, Haier’s strategy for inter-
nationalization was hitherto successful. There has
been a number of key components in its strategy:


Figure 2 Path of Haier’s International Expansion

Figure 3 Paths of Japanese International Expansion

(1) Haier’s international (investment) expansion in
terms of the sequence strategy has followed the path
illustrated in Figure 2. Interestingly, it has a great
resemblance to that pursued by Japanese companies
when they entered international markets. Two types
of Japanese global market expansion identified
(Jatusripitak et al., 1985) are relevant, as shown in Fig-
ure 3: Haier’s initial stage of internationalization also
focused on developing countries (southeast Asia) to
build volume and acquire international experience.
Its first overseas joint venture was launched in
Indonesia, on December 6, 1996. It signified that
Haier had taken an important step towards inter-
nationalization. This was followed by a few more
investment projects in developing countries before it
moved to the USA in 1999. It established a design
center in Boston, a marketing center in New York,
and a manufacturing center in South Carolina, with
a total investment of US$30 million, the largest FDI
from China in the USA (Table 1 chronicles Haier’s
FDI projects).

A major difference between Japanese companies and
Haier in the Type II path is that the Japanese concen-

Table 1 Foreign Direct Investment by Haier Group

Year Location Products

1996 Indonesia Refrigerator
1996 Philippines A/C, Refrigerator
1998 Malaysia A/C, Refrigerator
1999 Iran A/C
1999 USA Refrigerator
2000 Bangladesh A/C, Refrigerator
2000 Vietnam Refrigerator

A/C, Refrigerator,
2001 Pakistan

2001 Italy Refrigerator

European Management Journal Vol. 20, No. 6, pp. 699–706, December 2002702

trated on high-tech industries such as computers and
semiconductors which were developed at home,
while Haier has focused on its traditional product
lines — home appliances — but tried to develop its
technology in the USA.

Haier’s success in the US market supports its invest-
ment and operations in other countries through the
spin-off of technology and reputation/image. In the
ground-breaking ceremonies of an investment project
in Pakistan and a Haier Plant in Bangladesh in 2001,
all local officials linked Haier’s presence there to its
performance in the USA in their speeches. With the
confidence and experience gained in the US market,
in June 2001, for the first time, Haier acquired an Ital-
ian company. This company would produce Haier
refrigerators based on the designs provided by
French and Dutch engineers, and the products would
be sold within the European market.

(2) 3 × 1/3 International strategic objective. Haier’s
international strategic objective is to produce and sell
one third of its total output in China, make one third
of its total output in China but export it to inter-
national markets, and manufacture and sell one third
in foreign countries (therefore, ‘3×1/3’). Haier has set
a strategic target of 25–30 per cent of the domestic
market share for all types of home appliances. Zhang
Ruimin has believed that an expansion beyond this
would decrease marginal benefits, and Haier must go
overseas and develop Haier’s design, manufacturing,
and marketing networks internationally, particularly
in the USA, to build up Haier’s international repu-
tation of brand.

(3) Haier’s export strategy is entering and tackling
tough markets (those in developed countries such as
the USA and Germany) first before easy markets or
those in developing countries. Once Haier has had a


strong foothold in difficult markets and created the
reputation of its brands, it can then expand from a
strategically advantageous position into other easier
markets such as developing countries. Following this
strategy, Haier first successfully introduced its pro-
ducts into the German market, the most difficult one
in the EU.

Unlike the traditional Chinese approach to market-
ing, where Chinese companies set up their own mar-
keting companies in every country, it uses local dis-
tributors. Haier found out through market research
that, in developed countries, there are numerous
mature distributors for each product, with developed
marketing channels. These distributors are familiar
with local marketing practices and environment, and
have no barriers in language and cultural features.
Currently, Haier has established a total of 62 distribu-
torships internationally, covering over 40,000 sales
network points with exports reaching 160 countries
and regions.

Having developed a market position and gained
market share with accumulated marketing experi-
ence and brand reputation in developed countries,
Haier then started to explore markets in developing
countries. For most customers in developing coun-
tries, it would be difficult for them to question a
brand name that had already established popularity
in developed countries, and much more importantly,
the price of this reputable brand would be very com-

(4) A product-focused international market entry
strategy. Entering an international market, Haier
focuses on the marketing of one product. Once this
product becomes successful, other products will be
followed benefiting from the established brand name.
This is exactly what Haier has done in the US market.
Initially, Haier concentrated only on the marketing
of refrigerators. After they successfully secured a
market position, its washing machine lines followed,
and this required little promotional effort.

(5) One step closer to international customers than
competitors through competition against time. Haier
tries to use its design and manufacturing capabilities
to meet special requirements with minimum waiting
time, and is willing to go the extra mile to do so.
‘Would you be able to provide a triangular refriger-
ator should a customer want it? It is our philosophy
and advantage to meet such a personalized require-
ment,’ said Zhang Ruimin.

In early 2001, for example, attending a conference at
the head office, the general manager of Haier USA
mentioned some problems that existing freezers had
and proposed the redesign of a model for the US
market. The proposal was made in the afternoon, and
the next morning, after only 17 hours, a prototype of
such a freezer was surprisingly presented to him.
After having received feedback from consumers on

European Management Journal Vol. 20, No. 6, pp. 699–706, December 2002 703

the prototype in a US supermarket, it has been sold
well in the USA, and also attracted great interest
from other countries.

(6) Localization of human resources, capital, and cul-
ture to build up a world famous brand. Localization
of human resources is a major step for Haier as part
of its international strategy. Haier’s sales organiza-
tion was located in New York. All employees from
its general manager and assistant managers to office
staff were Americans. Only the chief financial officer
has been appointed from its head office. A minimum
salary for the American general manager is about
US$250,000 with performance-related bonuses, and
this is quite high for a Chinese company. It has also
set up research and development centers in lead
countries such as the USA and Germany. The estab-
lishment of such centers is strategically intended to
develop, acquire, and transfer technology.

With regard to the localization of capital, Haier’s spe-
cific strategic plan has been to list Haier USA on the
US stock market in three years. Haier firmly believes
that its corporate culture has been strong and suc-
cessful in China. However, it has been aware that it
is necessary to integrate its own corporate culture
with local practices and develop a Haier corporate
culture that is completely acceptable to local
employees and customers.

Constraints on Haier’s Strategy for

Haier’s initiative in internationalization has also been
subject to a number of constraints that it has to over-
come. Most of these are generic in nature, that is, they
are applicable to all Chinese enterprises intending to
go international.

Limited Resources
The capabilities of acquiring international experience
determine Haier’s speed of international expansion.
These are reflected in the capabilities for local oper-
ations, promotion, distribution, after sale service, and
cultural management and adaptation. However,
these resources are extremely scarce within China,
and thus difficult to acquire. Some of these capabili-
ties may be acquired in a short period of time by
utilizing foreign resources and learning from part-
ners and international distributors. For the long-term
point of view, Haier must acquire such resources
from China.

A lack of human resources can negatively influence
international business development. For example,
managers from the Chinese and American sides of
Haier USA both reported a certain degree of dif-
ficulty in communications. According to the US gen-
eral manager, due to the language barrier, it is very
difficult to perform a ‘brainstorming’ exercise, in
which new ideas or better suggestions may be gener-


ated as a result of the enlightenment of others during
meetings and discussions.

R&D Capabilities for Core Technology
Technological innovation is a key to maintaining a
firm’s competitiveness. In most Chinese enterprises,
there has been a lack of technological competence or
resources. This was also the case with Haier. Haier
currently develops, on average, 1.2 new products and
applies for 2.3 patents daily, and ranks number one
of all Chinese enterprises. Nevertheless, along with
other Chinese white goods manufacturers, it has
remained highly dependant on foreign key compo-
nents and technology. These include high-perform-
ance electromotors, compressors, controllers, mag-
netrons, and sensors.

Haier has been fully aware of this weakness, and has
taken the following measures to address it:

1. Increasing investment in R&D. In the period 1997–
2000, Haier’s annual R&D investment is shown in
Table 2, and it ranked number one in the industry.

2. Establishing research and design centers both
domestically and internationally. To date 15 have
been set up, with six of them in developed coun-
tries: USA, Canada, Japan, France, and The
Netherlands. The main responsibility of these
foreign centers is to help the head office develop
home appliances that meet the needs and wants
of local consumers.

3. Forming international technological alliances with
major multinationals. These companies included
those such as Mitsubishi, ESS, Lucent, Metz, and
Philips. Alliances and joint ventures have taken
place in many sectors such as refrigerator, wash-
ing machine, and digital color television.

International Brand Awareness and Image
Compared to Western multinationals manufacturing
home appliances, Haier is disadvantaged in inter-
national brand awareness and image, particularly in
developed countries. Consumers of developed coun-
tries are familiar with brand names such as GE, Elec-
trolux, Whirlpool, Siemens, Sony, Panasonics, and
LG, but few of them have heard of Haier or its pro-
ducts. Haier is a Chinese brand name, while China,
as a developing country, has for many years exported
raw materials and low value-added products. There-
fore, it is difficult to change the perception of con-
sumers in Western countries in a short period of time.

Table 2 Haier’s Investment in R&D (1997–2000)

1997 1998 1999 2000

Investments in Research and Development
480 780 1030 1949

(Million RMB Yuan)
Percentage of Sales (%) 4 4.6 4.8 4.8

European Management Journal Vol. 20, No. 6, pp. 699–706, December 2002704

A Lack of Experience in International Business
Haier has been the major Chinese manufacturing
company that started to internationalize aggress-
ively. Without any prior international experience, it
often has to make progress on a trial and error basis,
and has often paid expensive tuition fees. The project
in Indonesia was the first foreign investment attempt
made by Haier. Soon after the inauguration of pro-
duction, major political turmoil in Indonesia forced
Haier to shut down this operation. A similar disaster
also occurred in Yugoslavia where wars destroyed
Haier’s operations there. With the acceleration of its
internationalization, Haier has gradually learned to
be mature and pay more attention to feasibility stud-
ies of the business environment in which FDI is

Conclusions and Strategic Implications

Haier has been one of the few pioneers in Chinese
manufacturing to have ventured internationally. To
date, its strategy for internationalization has been on
the whole successful, despite some hard lessons
learned from a few failed FDI projects. It is expected
that some more Chinese companies will follow suit
but at a slower speed of development. For instance,
TCL, a major Chinese electronic giant, having set up
sales and representative offices in the USA, Russia,
Singapore, Indonesia, India, Vietnam, Philippines,
and Hong Kong, invested in manufacturing facilities
in India, Vietnam, and the Philippines. Exporting its
products to over 80 countries and regions worldwide,
Chunlan, a diversified Chinese conglomerate, estab-
lished assembly lines for motorcycle and air con-
ditioning production in Russia, Spain, and Argentina.

Some strategic implications can be drawn from the
Haier case study:

1. Despite some external factors that have driven
Haier to go international, Zhang Ruimin’s per-
sonal leadership and aspiration have played a
dominant role in Haier’s pursuit of internationaliz-
ation. This centralized organizational structure or
individual dependence can result in a fast
decision-making process, and explains why Haier
has been able to move into a large number of
countries within a short period of time. It may also
entail a high degree of uncertainty or risk. Thus, if
a firm such as Haier has a highly competent strong


business leader, a relatively centralized structure
can work better than a decentralized one.

2. Some of Haier’s later decisions have been ques-
tioned, such as the logic of buying an Italian com-
pany where cost is high, and its technology is not
at the forefront. There are also concerns about how
Haier can balance its foreign currency require-
ments with such a rapid speed of international
expansion (Business Week, 2002). It is notable that
with the support of the Chinese government,
Haier has now got into the financial sector, and
acquired majority shareholding in a regional bank.
In addition, as a Chinese flagship company, it is
likely that the Chinese government may give
Haier some financial backing from the financial
channels that may not be available to other Chi-
nese companies. In other words, Western home
appliance companies may have to compete with
this new competitor that has a stronger base of
financial support than it appears to have.

3. Haier’s success (to date) is built on its competitive
advantage that still falls into classic competitive
paradigms: more flexible, faster, closer to cus-
tomers, and more focused. Haier can do so
because Zhang Ruimin has developed such an
organizational culture under his personal leader-
ship. This is quite similar to the earlier period of
IBM when Watson promoted a culture of ‘respect
for the individual, devotion to customers and pur-
suit of excellence in all activities’ that prevailed in
IBM. Haier’s experience has further demonstrated
the fundamental and successful tenets of market
orientation and innovation, which many Western
companies seem to have forgotten or moved
away from.

4. Western multinationals should ask themselves the
question: why can a company from a developing
country with limited resources and non-techno-
logical and cost advantage come to our markets
and take away our market share? It seems that
Haier has only recently started to play the game
that Western multinationals have played for a long
time, but in some areas it has slightly outperfor-
med the founders of the game. It may be said that
Western multinationals have paid too much atten-
tion to ‘globalization’ or ‘standardization’ and left
some ‘blind spots of markets’ at home and abroad.

5. As a company from a developing country, Haier
has some disadvantages, compared with Western
multinationals, such as a lack of resources and
advanced technology. However, to date, it has
managed to overcome such …

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