Haier in India: Building presence in a

mass market beyond China

 Why Did Haier Enter India?
• High GDP growth rate leading to increase in disposable income.
• High growth rate in the Home Appliances sector.
• Expected growth rate for the Home Appliances sector was 20% for
2005-10.
16
14
12
10
8
6
4
2
0
2000 2001 2002 2003 2004
GDP Growth Rate Home Appliances sector growth rate
 Why Did Haier Enter India?(contd.)

• Low penetration in Home Electronics.

• Huge scope for growth in rural India.
• Favourable government policies.

Market Penetration in 2004

25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
Television Refrigerator
 PESTLE Analysis
• Political
• Political stability.
• International Stability.
• Industrial policy can vary depending upon the ruling
party.
• Political hassles often slow down reforms.
• Economic
• High GDP growth rate.
• Increasing disposable income.
• High Inflation may lead to high wage demands from
employees.
• High tax rates and dual taxation were major issues.
• Economic Reforms and globalisation.
 PESTLE Analysis(contd.)
• Social
• Consumer Durables seen as status symbols.
• Changing lifestyle will increase demand for consumer durables.
• Technological
• Hardware manufacturing in India was not upto global
standards.
• Technology was not a major problem as Haier could easily
import it.
• Legal
• Standard Employment Laws.
• Slow legal process caused disputes to be long-drawn.
• Environmental
• Pollution was a major problem in India.
• No environmental laws were in place specifically for electronics
industry.
 Porter’s Five Forces Analysis

Threat of
New
Entrants

Rivalry
Bargaining among Bargaining
Power of Existing Power of
Supplies Competitor Buyers
s

Threat of
Substitute
Products or
Services
 Porter’s Five Forces Analysis
• SUPPLIER POWER:
a) Haier developed vertical integration in 1990s for controlling its supplies.
b) Haier also formed a good relation and collaboration with their suppliers to secure their support for price,
quantity and facilities.

• BARRIERS TO ENTRY:
a) In this business the company has set the high barrier of entry such as large capital for manufacturing set up
and innovation.
b) The company has also well positioned its brand globally and has applied effective marketing strategy to
create barrier of new entry.

• BUYER POWER:
a) Haier streamlines its business up to distribution to supply to the retailer.
b) Haier patterned all its products and focused on the after sales services to create a differentiation in the
market through innovation, quality and price.

• THREAT OF SUBSTITUTEs:
a) In 1984, there were 100 refrigerator makers to compete in China market. Now, the number has increased to
a great extent. Haier has realized the competition and invested more in R&D for improvement and
innovation.
b) With the advancement of technology, duplication of products is a threat.

• COMPETITIVE RIVALRY:
a) As Haier business has become huge with its large capital, other companies struggle more to stay in market.
b) With the current economy downturn, most companies are tending to reduce prices to capture a greater
market share. Some companies even use this strategy for penetration into the market.
 Haier’s
Targets for Indian Market
• T.K. Banerjee was appointed as the president of Haier’s
Indian operation.
• Banerjee wanted Haier to be in the top three brands in
the home appliances in India.
• A policy of “Three-in-one” Localization was followed.
• The target was to gain 20% of India’s white good market
in first 5 years and to be among the top three players in
the industry in 7 years, i.e. by 2010.
• Planned to launch an India-centric product line for
Indian consumers.
• For sales, it developed a network of direct dealers and
distributors in India.
Haier’s Expansion Strategy
 Haier India Strategy Timeline

• Launched 3 in 1 aggressive strategy of localization (produce

locally, carry out local sales strategy & create products catering to
1999 local needs).

• Outsourced the product .

• Did not want to execute rapid localization because of fear of
2004 failure.
• Set up a manufacturing Unit at Pune.
• This acted as a sourcing hub for delivery to middle east hence
2007 delivery time cut down.

• They maintained their brand message as‘ Inspired Living.

2012 • Simple brand communication -- that Haier is a global player.
 Haier India Strategy
ALLIANCES-Entered the Indian new market through strategic alliances with
Fedder Lloyd Corporation to gain by sharing the development costs and risks
with the local partner.

Felt that it might benefit from its local partner’s knowledge of a host nation’s
competitive conditions, culture, language, political systems and business systems.

PREMIUM PRICING-They stuck to premium pricing strategy(5%). They

bothered about how consumers perceive them . Did not wanted to get perceived
as low cost Chinese brand . Focused on value war rather than price wars

BRAND COMMUNICATION-They followed this very simple brand

communication to prove that Haier is a global player.

PRODUCT STRENGTH-They did not compromised on quality.

 Strategies That Failed

It failed to achieve the set revenue targets.

Investments were not paying off and the

operations needed an overhaul.

Poor reputation of after –sales care.

Low market share when they focused on

premium product strategy

Heavy taxation policies lead to decrease in profit

margin which resulted in decrease in demand.
 Localization Strategies
in India vis-à-vis US
Factor India Developed (USA)
Mode of Entry • 2004 – Outsourced prodn. of low end • 1994- Imported from China
goods from local manufacturers and • Strategic alliance with Welbilt in Sales
imported high end products. • 1999 – Greenfield production plant in
• 2007 - Acquired the loss making plant S.Carolina
of Anchor Daewoo in Pune
Strategy • 3 in one Strategy • Similar strategy but primary objective
Design, Manufacturing and Marketing was to fight on quality and innovation.

Focus • Regular products(innovative features), • Focus on niche products first.

priced above mkt. premium. • Diversified into normal household
• Expanded their product mix(niche electronic appliances.
products)

Marketing • Customized products. • Every effort to communicate that it

• Eg: Detergent free Washing machine . was an American brand.
• Partnership with NBA
Brand Positioning • High and Mid end  Niche products • Niche  High end products.
 Glocal Strategy of Haier
 USA
 1994- Alliance with a local import based
company
 1999 - Then setup own prodn. Plant and
gradually all the products were localized.
 Indonesia
 1992 – Started by importing from China
 1996 – Opened a production site.
 Philippines and Malaysia
 2002 – Established subsidiaries
 Middle East (Jordan, Syria, etc.)
 2002 – JVs in Syria and Lebanon
 2003 – Started operations
 2006 – 2nd production facility
 Japan
 Strategic partnership with ‘Sanyo’ to get
deeper access to their markets.
 Italy, Spain and UK
 2001 – Acquired 100% of Italian
refrigeration plant Meneghetti plant.
 Italy – HQ for Haier Europe
 Soon forayed in Spanish, German, French
and other East European markets through
JVs.
 Pakistan
 2001- Joint facility with a local electronics
company
 Soon opened their own facility.
 INDIA
 Began by outsourcing production, later
started operations by acquiring Anchor
Daewoo Electricals.
 Customized design for local needs.
 Marketed as a local product.
 Produced locally at the plant in Pune.
 Only panels for LED TVs and water heaters
are currently being imported.
 Glocal Strategy of Haier
• In almost all the major countries, it has followed the 3 in one approach.
• In some of the smaller countries , they were either assembled or imported.

• Relationship between firm’s competencies and commitment on the basis of

their entry strategy.
 Indian Consumer durables
Industry

Consumer Consumer
Appliances Electronics
White Goods
(Refrigerator, Televisions
Washing Machines, Mobile Phones
AC)

Brown Goods
(Mixers, Microwave Audio Equipments
Ovens, Iron, Fans, MP3/DVD Players
Dish Washers)
 Evolution

Late 2000s

Early 2000s
Consolidation
Mid and Increasing
late 1990s Growth penetration of high-
end products
Increasing availability
and affordability of Introduction of new
consumer finance aspirational
1980s and Liberalization products such as
Low penetration of HDTVs
early 1990s Liberalization of high-end products
markets like AC
Shift in focus from
promotion to
Pre-liberalization
innovation
Closed Market
Influx of players like
Increased product LG and Samsung
availability
Increased media
penetration & advertising
Market Share of Indian Consumer
durables in FY’13
 Advantage India
• Rising disposable income • Rural and semi-urban market
• Easy access to credit contribute to 35% of total sales
• Increasing electrification in rural • Combined market size CAGR is
areas 25% from 2010-15
• Wide usability of online sales • Huge untapped rural market

Growing
Opportunities
demand

Increasing Policy
investments support

• Attracted investment even • 100% FDI allowed in electronics

during recession hardware manufacturing sector
• USD 1 billion investment in • Duty relaxation schemes to
production, distribution and provide tax sops
R&D • National Electronic Policy
Strategies of Korean firms in Indian
Consumer durables Industry

Pursue cost leadership and

market segmentation strategies

Increase similarity of products

or provide alternatives to
existing products

Employ low cost pricing to

thwart out incumbent firms
and to become price-quality
leaders in the chosen markets
 Impact of strategies of
Korean firms on Indian market

Pursue cost leadership and

market segmentation strategies

Increase similarity of products

or provide alternatives to
existing products

Employ low cost pricing to

thwart out incumbent firms
and to become price-quality
leaders in the chosen markets
 Eric Braganza

2009 Identifying the Actions undertaken

• Appointed as Problem Area • Vertical Expansion by
President of Haier • Sales and Marketing – strengthening its
India the weak link penetration network
• Prior Experience : • Renovated the Sales and Experience
Senior positions at structure and Centres
Electrolux and restructured the • Brand Positioning from
Videocon manpower low to mid to high end
segments.
 Eric Braganza
Pre-Braganza State of Haier India
Stagnant growth. It could
gain 3.5% share of the
market vis-à-vis the target
15%.
Entered India almost 7
years after its rivals LG and
Samsung
Poor After Sales Service
due to lack of enough
service centers, and due to
unavailability of spare
parts in them .
Had to deal with the
notion of being a “Chinese
Company”
 Eric Braganza
Restructuring of the Sales Network
• A complete overhaul of branch and regional sales structure was
done. Haier India underwent a comprehensive manpower
restructuring so that almost 30% of our workforce was new.
• It went for Forward integration by expanding the dealer
network in Tier-II & Tier-III markets . It opened Branch Sales
offices in Chhattisgarh, Jharkhand and Bihar.
• In 2010, Haier India boasted of 1500 direct dealers and 5,000
secondary dealers spread across the country.
• It offered them a gross margin of 10% to 15 % which was 3%
higher than the industry average.
• To focus on dealer retention, Haier India treated its dealers and
retailers as the First Customers.
 Eric Braganza

Expanding Haier’s presence in India

• Haier wanted its consumers to see and experience its
products.
• Thus, it has come out with Haier Experience Centres(HECs).
They showcase a wide range of products, which is not
possible at multi-brand outlets due to space constraints.
• These are actually franchisee stores that operate on revenue
sharing. Mr. Braganza aimed to increase the revenue
contribution from the HECs from 5% to 12%.
• It plans to increase the number of HECs from 170 to 275 by
2014, and the number of retail outlets from 4500 to 6000.
 Eric Braganza

Improving After Sales-Service

• Eric looked at setting up service centres known as InstaCare
across all state capitals and identified eight cities.
• He planned to deliver a six-hour service in all metro cities
(involves from the time of the call till the problem gets
solved).
• Recently Haier has announced a
LIVE chat buddy – Dr. Fido to get
the queries answered instantly on
the official website of Haier.
 Eric Braganza
Pricing Strategy
• For a product-parity market such as the consumer durables , there
is very little scope to charge premium on products.
• Too high a price won’t find enough takers, and too low will discount
the brand. Haier is a mid-priced brand.
• It did not want to sacrifice its upscale image because it wanted to
stand by the quality of the product even if the price is a little high.
• The price of Haier products was above all the price-fighter brands.
• However in premium range of televisions, refrigerators and washing
machines Haier is at least 5% cheaper than the high-end models of
LG or Samsung.
• Despite at times during weakness in the Rupee, Haier did not
reduce its price, so as not to compromise on quality.
 Eric Braganza
Diversification and Expansion
• Eric introduced 25 high end products in the existing segments like LED TVs,
deep freezers, washing machines dishwashers , etc.
• He also introduced many small home appliances such as blenders, juicers,
Tea- kettles and Toasters in the small appliances segment, which contributed
to around 3-4% of the total revenue.
• Haier invested 100 Crore in 2010 and close to Rs 50 Crore in 2011 in
expanding its refrigerator manufacturing capacity at its Ranjangaon plant in
Pune, so as to increase capacity from 10 to about 20 lakh units by 2014.
• Some major Innovations of Haier:
The 3-door convertible refrigerator & the bottom
Mounted refrigerator.
• He brought in John Abraham as Haier’s Brand
Ambassador and led aggressive campaigns like
“You Inspire Us”.

Strengths
S • Globally No-1 brand in white goods.
W
• Updated and latest technology.
• High quality products.
• Broad Product line.
• Strong presence in home appliances
segment.
• Big distributors are stocking many of
Haier’s product.
Opportunities
O T
• North-east a potential market is still
largely untapped.
• The rural market remains untapped.
• Mobiles and cellular phone market offers
new growth opportunities.
• Consumer electronics segment is
booming and set to grow at 14% CAGR.
• Tie up with big retailers will help in
growth
• High disposable income and higher
number of Nuclear Families in the society.
SWOT Analysis
Weaknesses
• Weak distribution network compared to
competitors.
• Weak service agent network.
• Slow marketing and sales promotion.
• Poor tuning with dealers.
• Poor brand visibility and awareness.
• Weak presence in TV market.
• Sales seasonality in specific segment hind
ering growth.
Threats
• Threat of being Chinese brand.
• Threat from established foreign
and local competitors.
• Infrastructure bottlenecks
especially in rural areas.
• Food inflation resulting in
slowdown of growth in the mass
segments.
• Volatile rupee-dollar fluctuations
leading to high import prices.
 Household
Appliances Industry
FY04 FY09 FY14P

9%
8% 9%
24% 22% 20% 47%
51% 48%

17% 21% 24%

Colour TV Colour TV Colour TV

AC AC AC
Refrigerators Refrigerators Refrigerators
Washing machines Washing machines Washing machines

Total size = 133 Rs. Total size = 229 Rs. Total size = 397 Rs.
Billion Billion Billion
 Recommendations

M-SIPS (Modified Special Incentive Package Scheme)

• Currently, India imports $33 billion of electronic goods, third only to the oil and
gold import bills $155 billion and $62 billion in 2012. Industry experts see
India’s electronic imports surpassing its high oil import bill by 2030.
• M-SIPS is prepared under the National Policy on Electronics 2012 that seeks to
speed up local manufacturing and curb electronics imports.
• It provides investors a subsidy of
 20-25% on capital expenditure
 50-75% for companies investing in so-called electronics manufacturing
clusters.
• Haier India should take advantage of M-SIPS and increase local production to
protect itself from the volatile rupee-dollar fluctuations and accelerate growth.
Increase presence in Rural Markets
• Rural market contributes to 15-20% of Haier‘s total revenue. Currently, LG has
5% penetration in rural market and 34% penetration in urban areas. Haier
should plan to further increase its reach in rural markets.
 Recommendations based
on 4Ps of marketing
Product
New innovative products should be launched
tailored to the needs of Indian consumers.
Product portfolio should be diversified to
reach a wider audience and cater to different
markets.
Increase in number of service centers.
Place
Expand network of Haier Experience Centers
and expand it to showcase all products under
one roof.
Expand dealership network to tier 2 and tier 3
cities.
Diversification of the distribution Network to
support the entire Product Portfolio.
Use digital media for e-tailing .
Price
Haier should position itself in the mid and
high-end segment market. (Value for money)
Pricing strategy should be tailored to keep the
price below foreign competitors' prices and
above the local competitor’s prices. (Better
products with low premium)
4 P’s Promotion
Sales promotional schemes should be given in
regular intervals to both customers & dealers.
(exchange offers, easy EMI, extended
warranty, high margin to dealers )
Increase marketing expenses to improve
brand visibility and awareness.
Focus on digital media for display and
promotion (Currently 5% of total market
budget).
Product A Product B
• Feature 1 • Feature 1
• Feature 2 • Feature 2
• Feature 3 • Feature 3
 Haier India’s Annual Turnover

Turnover (In Rs. Crore)

2500

2000
2000
1500
1503
1000 1203
972
825
500

0
2010 2011 2012 2013 2014 P
Haier India CAGR – 24.98%
Consumer durables Industry CAGR (2010-15) – 15%
 Key facts about Haier India

• The media mix - TV, online, local print ads and radio. Current focus is on television-
‘Jhukna mat’ and “Inspired by You” campaigns.
• For product categories, the monsoon season sees sales of washing machines increase,
the onset of winter sees the increase in sales of water heaters, and LED TV sales increase
at times of festivals and sporting events like IPL.
• Haier India manufactures all low end products locally such as DC-330, Window ACs and
CRT TV. While all the high end products are imported.
• Refrigerators contribute nearly 35 per cent Haier's total turnover, while the consumer
electronics panel business is the next big segment with nearly 30 per cent of the
turnover. The AC sales contribute nearly 14 per cent of the total sale, washing machines
at 10 per cent.
• As per "Indian Consumer Electronics Market Outlook 2015", Flat panel television, Tablet
and Smartphone are expected to be the top performing segments in the market.
• As per a survey, 64% were not aware of Haier brand. This suggests revaluation of
marketing strategies for enhancing brand visibility.
• 36% of people surveyed knew about Haier but only 20% of people surveyed had look on
Haier product before making a purchase decision. This shows unavailability of brand in
the customer preferred multi-brand store. (Concerned with place strategy of Haier)
 References
• http://www.sunday-guardian.com/business/consumer-durables-players-see-potential-in-
rural-market
• http://www.dnaindia.com/money/report-haier-to-manufacture-all-products-in-india-by-
2016-1809683
• http://www.way2franchise.com/resource/article/haier_strengthening_its_india_franchise
_network_of_dealers_and_service_franchise_aims_1000_cr_biz
• http://www.livemint.com/Industry/hlfCJssTzLLBgNZD1y5YIP/Consumer-electronics-firms-
to-invest-3500-crore-in-India.html
• http://www.authorstream.com/Presentation/magrawal26-549892-haier/
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to-rs-80-cr.aspx
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competing-haier-8374312
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el_tv_shipment_cagr_forecasted_through_2015.asp
• http://www.flatpanelshd.com/news.php?subaction=showfull&id=1329393118
• http://www.prnewswire.com/news-releases/203568471.html