Haier Number Three

Haier - Number Three

Haier

Haier is a “full line generalist” and market leader in the home appliance industry in China. Haier’s value propositions are product quality, continuous innovation using “dynamic growth cycle” (Exhibit A), competitive prices and customer service. Haier’s strategy of entering global markets with “niche” products like compact refrigerators, freezers and portable washers has provided them significant market share as “product specialists” establishing them as number five globally. Haier’s goal is to step up to the third position worldwide. To be able to do so, Haier has to expand into conventional product categories globally and compete against companies which have their home base and biggest markets in the developed countries.

Developed nations are the most mature market for home appliances industry. Therefore, it is difficult to penetrate these markets or steal market share from other established companies. The main problem for Haier in gaining significant market share in developed countries is the poor quality perception of Chinese products.

Maytag

Maytag Corporation is the third-largest U.S. home appliance manufacturer at this time. Out of the nine main home appliance products in US, Maytag hold one of the top positions in six categories. Maytag’s target market is medium to high-range of appliance buyers. It does not cater to low-end segments or to retailers which serve to the low-end segments.

What should Haier do?

With respect to Haier’s objective of growing into third largest home appliance industry worldwide, the first alternative for Haier is to acquire Maytag and penetrate in the high-end appliance market gaining significant US market share instantly. Another alternative is to continue using their dynamic growth cycle (Exhibit A) approach and gradually build brand equity in United States and other developed global markets.

Decision factors

Brand Equity - . Haier has been looking for opportunities to increase its brand recognition and reputation as a premium quality global appliance manufacturer. Acquiring Maytag will bring instant and strong brand equity increasing Haier’s reputation worldwide giving them an entry into conventional and high-end product categories globally.

Current Market Trends - In past ten years the market segment for mid-range products has decreased by 21% where as market for high-end and low-end products have increased by 13% and 8% respectively. This Polarization of market suggests future growth prospects for high-end products which Maytag has and low-end products where Haier has a strong presence. Acquisition of Maytag by Haier will perfectly complement Haier’s line of product by expanding it towards high-end products taking advantage of huge growth in this segment.

Competition – Whirlpool, GE and Electrolux are the US market leaders in the home appliance industry. Even though Maytag’s market position and profitability had eroded in recent years, it is the fourth largest appliance manufacturer in US. There are chances of any of these companies to acquire Maytag which can hurt Haier’s ambitions of becoming number three. Electrolux is suspected to acquire Maytag and can bring a major threat to Haier as Electrolux has understood the polarization of appliance market and is focusing its energy towards the two main segments of low-end and high-end products. It has separating its sales force to serve these different segments. Also, Electrolux is using the globalization trend in its favor by sending assembling