Bite-size Case Study

Haier: globalization of market presence

Published on March 30, 2021 Originally recorded 2014   4 min
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This chart is saying - think of the typical large company, let's say a Fortune 500 company - the company would have multiple lines of business. Then, of course, there are 200 countries in the world. If the company is just embarking, starting out on the journey to globalization of its market presence, the first question the company should ask is, "We have all of these multiple businesses, do we take all of them global, or do we prioritize across the strategic business units or product lines or divisions (whatever the company chooses to call them)?"
The second big question on globalizing market presence is, (let's say in the case of Marriott that we decided we would take the luxury brands, the Ritz-Carlton and Marriott brands, and take them global), but then "Where on earth do we go, there are 200 countries, do we enter all countries or do we prioritize? How do we make that decision? What is the logic that should guide us?"
Looking at the choice of country markets but going deeper into the choice of market segment within the country, it's the Chinese home appliance company, Haier. Haier, in the mid-1990s, said, "We want to target the US". It makes sense in some ways, it is the world's largest home appliance market. They said, "We have some advantages from China and if we can succeed in the US, we can succeed anywhere". (Almost like 'if you succeed in New York, you can succeed anywhere'.) The question for Haier was, "We make all kinds of appliances, which segment in the US should we choose? What should be our beachhead segment?" What Haier did in this particular case, (very smartly, but which had its limits) was that they said in the beginning, "Because we have no position in the market at all, zero market share, zero brand image, we will be competing on the basis of our cost advantage by shipping low-cost products from China. If we do that, we have to be mindful of the shipping costs." If you start shipping laundry machines, big refrigerators and dishwashers from China, the shipping costs will kill you. But on the other hand, things like air conditioners, compact refrigerators, and wine coolers are small appliances. By definition they are compact, so there is less 'air' compared to just the product itself. There, the shipping costs still of course are there, but relative to the product costs they are much smaller. So Haier said, "As our beachhead segment we'll start with the compact appliances, and later we'll try to figure out whether and how we should enter the large appliance market in the US."