Factors leading to Haier’s expansion into the US in 1999
International expansion has mostly become popular with the advent of globalization. Companies started to look into the different international market as a potential option to grow further. Many companies in the past have attempted the same tom acquire a significant presence in their selected international destinations. However, very few companies have been successful in creating a successful image of theirs into the various international markets (Gatwiri et al., 2014). However, international expansion has never been easier for multinational companies. They had to face the different external challenges that had existed in the target country. The political, social, economic, environmental and the different other factors have kept on deterring such companies in their operation to international countries.
The current study is based on Haier and its expansion into the United States earlier in the year 1999. The expansion has had happened because of the strategies that different Chinese companies adopt. However, they had to face several challenges in their business into the United States (Li, 2016).
The current study will briefly cover the expansion into the United States in the year 1999. Moreover, the main purpose of this assignment is to analyze the different challenges that exist in the United States and the feasibility of future expansion into the United States.
The Chinese government is also aware of the benefits, which is why they support a global expansion of the various local companies. Haier on the other hand had already realized the importance to expand to a global market preferably into the United States. They were smart enough to realize the importance of expansion into the US. The expansion according to the company will help them by supporting their business expansion with various services such as product designing, production and marketing that are not possible in China (Wang, 2015). The expansion of Haier into the United States in the year 1999 was because of various following factors:
Haier is a rare innovative company that has already analyzed the importance of shifting few of its operations to a potential international market. The company had analyzed that the United States is a potential market because of the customers it has and the various resources available in the country. Haier had realized that a business expansion will be of huge requirement once there are plans for expanding the business. On realizing the fact the company had smartly entered into the US market with a single product initially. The entry was acknowledged by the US customers. However, the success could not be lived further because of few reasons such as limited resources, negative effect due to the country of origin, uncompetitive experience of international market and limited R & D capabilities. There are some more reasons such as competition in the white goods industry and the lacking framework of China to understand the international market (Shen, 2012).
Challenges faced by Haier in expansion
Creativity is the other asset that has encouraged the company for international expansion. They were innovative enough to understand the requirement to have a global centre to support the product designing and production in the nearing future. This is why the company has sensed the potentiality in the United States. The company had to suffer mainly because of the limiting capabilities and the never dying competition from the other US giants such as Whirlpool, Electrolux etc (Cardoza & Fornes, 2012).
Haier like some other companies in China was keen to expand to international platform. The company was able to identify the US as a potential market. China itself has shown its interest in supporting a global expansion to various large size companies of China. Haier was involved in exporting one third of the entire production to other international companies. Haier has opened up a R&D center in the United States. It also went ahead with the strategy to localize the human resources. In course of the strategy, the company had mostly hired the American employees. However, all such efforts di not pay off because of few reasons such as incapable R&D and the expected competition from white goods industry giants in the United States (Ellis, 2017).
Political- Politically the United States is good for business. The country is one of those few nations where Press is mostly free to express their demand. Additionally, there is political freedom to different business in the country. However, there are antitrust beliefs in the United States for the Chinese companies (Lake, 2013).
Economic- The United States is one of the powerful economies in the world. Dollar is the strongest economy in the entire world. The country is an open economy, which is good for the different business. People living in the country are the most powerful in the entire world. The economy of the country will prove to be the driving force for the economies of other Western countries (Basu & Foley, 2013).
Social- Customers are one of the most powerful in the world. Like other countries, ageing population is a concern for the country. This will create shortage of labor in the country. This will also enhance the tax rates in the nearing future. Education in the country is one of the best in the world, which means an availability of educated customers. This is very important to understand a product and judge that based on the different quality parameters (Antin & Shaw, 2012).
Analysis of factors affecting feasibility of future expansion into the US
Technology- Technology has always remained an integral asset for the country. This has helped the country and its economy. The country is facing stiff competition from rising economies such as China. However, the country will believably retain its supremacy in technology. Information Technology sector is another strength, which has catapulted enormous success to the country. This will help the different home appliance companies in having an advanced set up for Research & Development (R&D) (Lamoreaux, Sokoloff & Sutthiphisal, 2013).
Environmental- There is several challenges to the country environmentally. The country has progressed tremendously in the Oil industry. This is on the other hand has supported the rise of carbon emission. Additionally, the state government is very uncertain with its policies. One of such example is of separation of the United States from the Paris Climate Agreement. This might be a challenge to the home appliance industry. The different home appliance company needs to be careful in practicing the sustainability features in order to have a healthy and unobjectionable business (Jorgenson et al., 2013).
Legal- There is certain new regulations that the appliance manufacturing companies are needed to face in the future ahead. They are needed to face some new regulations apart from ISO 9000 series (Greenman & Hall, 2013).
Competitive rivalry- The home appliance industry in the United States is very competitive. This has already tested the capability of Haier in its earlier business in the United States. The industry is hugely dominated by Whirlpool, AB Electrolux, GE Appliances and LG Electronics. Haier will face tough competition from these giant companies (Patel, 2013).
Supplier power- This is also very low. Appliance companies have the dictating power with them. They even force the suppliers for quality products. This simply means that establishing a relationship with the suppliers will be comparatively easier for the Haier Company in the United States (Patel, 2013).
Buyer power- This is very high. Customers are educated and they have high concerns for quality products. Additionally, there will be pressure to produce environmental friendly products (Patel, 2013).
Threat of substitution- Threat of substitution is very low. There are not many options available as alternatives (Patel, 2013).
Threat of new entry- Threat of new entrants is on a very low side. This is because the profitability is not very secured in the appliance industry in the country. To be successful, superiority in distribution network is required. Nevertheless, this is always challenging to a company representing China due to the antitrust activity of the US people (Patel, 2013).
Feasibility of Haier’s acquisition of GE Appliances in the US
GE Appliances are expertise in manufacturing refrigerators, dishwashers, washing machines, dryers and electric ranges. They are technically advanced. The buying of GE Appliances will be beneficial for Haier in its entry into the United States in the nearing future. The buying will also avail integration to the US culture. The company had one of the best workforces in the United States, which is why things will be more suitable to the Haier Company. The company, which had once suffered a collaborative business with the industry’s big names in last decade of the twentieth century, will now have better chances to gain success. Nevertheless, Haier will now have better chances in the United States (Keupp, Palmié & Gassmann, 2012).
The existing employees in GE Appliances will probably face no significant challenges in working with the new owner company Haier. This is because Haier is one of few companies that had already tried to integrate with the local culture of the United States. They will probably pursue the same strategy because it is important for a Chinese Company to be localized with the local culture in the US. Moreover, this is because of the antitrust beliefs in the United States for the Chinese people (Keupp, Palmié & Gassmann, 2012).
The national and organizational culture is different. Haier belongs to China; however, there will be very few challenges to the company in overcoming the cultural barrier that is probable with the ownership of GE Appliances. They had already succeeded in overcoming the cultural barriers that had existed in the United States in the last decade of the 20th century (Keupp, Palmié & Gassmann, 2012).
The emerging Chinese multinationals such as Haier will not only bring happiness to the different other Chinese multinational companies but this will also encourage others as well from some other parts of world. Haier has tried to capture the market of the United States in the year 1999 but they had to satisfy with an initial success. They had to then suffer from some strategy related failure. The Haier expansion into the United States market will again be challenging. The circumstances have not so far changed. However, there is something to cheer for. The buying of GE Appliances might be helpful as the company has already impressed the US customers with its wide range of home appliances. This means that Haier now in the year 2016-17 and in years ahead will have the support of a reputed name, which it did not have in the year 1999 (Lewin, Välikangas & Chen, 2017). Following will be the different strategic implications for the different Chinese companies and for different other companies in the different parts of world:
- Their perspectives will be more positive for entering into the United States
- They will come to know that joint venturing with the local giant is indeed an effective option provided if Haier succeed after the buying of GE Appliances
- Some other Chinese companies will be encouraged for entering into the United States market because of the limitations of resources for the blue chip companies in the local country (Ghemawat & Hout, 2016)
- This will also influence the Chinese government to have an effective framework for governing the international business relations especially in the United States market
Haier’s success in the U.S. market will not only serve its objective in the United States but this will also infuse many strategic capabilities in the company, which will help Haier in other international countries. Haier has planned to operate into the United States to enhance their capabilities in product designing, production and marketing networks. The expected success in the country will help Haier become efficient body in product designing, production and marketing networks. Such capabilities will provide following benefits to the Haier Company if they succeed in the U.S. market (Ben-Jacob, 2016):
- The success will help the company move to other potential market across the globe
- An efficient product designing will mean a larger customer base in scope from across the globe
- An improved marketing network will help the company reach to potential market and leave a significant impact on the target market
- The company has so far not been able to dominate the white goods industry in the United States; however, their success into the target country will mean a rebirth of the company in the different parts of world
Lessons Learned & Conclusion
The current study has taught few important things, which are helpful for a global expansion. The first thing it taught is never to give up. Haier could not succeed when it had entered the US market in the year 1999. The company had kept on realizing their mistakes. Consequently, they end up buying one of the leading appliance company GE in the year 2016-17. The buying might be helpful for Haier in the US market in nearing future. This will also help others to embrace into the global market. The second thing it taught is to give importance to industry analysis in the local country. This will help to know the shortcomings in the respective country. Moreover, this will also help in targeting a potential international market to enhance the capabilities in the identified operational sectors.
Haier has had mixed success in its earlier venture into the United States in the year 1999. This was mainly because of few issues such as incompetent R&D centre, incapable presence in the US market and a tough competition from the other market giants such as Whirlpool, AB Electrolux, LG Electronics and GE Appliances. However, the joint venturing with the GE Appliances might turn the table into the Haier’s favor. This will not only benefit the Haier’s operation into the US and the other global potential markets but this will also open up ways to other giant Chinese companies in the global market
References
Antin, J., & Shaw, A. (2012, May). Social desirability bias and self-reports of motivation: a study of amazon mechanical turk in the US and India. In Proceedings of the SIGCHI Conference on Human Factors in Computing Systems (pp. 2925-2934). ACM.
Basu, D., & Foley, D. K. (2013). Dynamics of output and employment in the US economy. Cambridge Journal of Economics, 37(5), 1077-1106.
Ben-Jacob, T. (2016). The Haier Group: Improvement Upon Success. European Scientific Journal, ESJ, 12(1).
Cardoza, G., & Fornes, G. (2012). The international expansion of China’s small and medium-sized enterprises: a review. SPAIS University of Bristol Working Paper Series, 5, 12.
Ellis, R. E. (2017). Indian and Chinese Engagement in Latin America and the Caribbean: A Comparative Assessment. US Army War College-Strategic Studies Institute Carlisle United States.
Gatwiri, M., Bichanga, W. O., Loki, M., & Makau, N. F. (2014). Effects of expansion strategies on performance of selected commercial banks in South Nyanza Region, Kenya. Unpublished MBA Project School of Business, University of Nairobi.
Ghemawat, P., & Hout, T. (2016). Can China’s Companies Conquer the World: The Overlooked Importance of Corporate Power. Foreign Aff., 95, 86.
Greenman, E., & Hall, M. (2013). Legal status and educational transitions for Mexican and Central American immigrant youth. Social Forces, 91(4), 1475-1498.
Jorgenson, D. W., Goettle, R. J., Ho, M. S., & Wilcoxen, P. J. (2013). Energy, the environment and US economic growth. Handbook of Computable General Equilibrium Modeling, 1, 477-552.
Keupp, M. M., Palmié, M., & Gassmann, O. (2012). The strategic management of innovation: A systematic review and paths for future research. International Journal of Management Reviews, 14(4), 367-390.
Lake, D. A. (2013). Legitimating power: The domestic politics of US international hierarchy. International Security, 38(2), 74-111.
Lamoreaux, N. R., Sokoloff, K. L., & Sutthiphisal, D. (2013). Patent alchemy: The market for technology in US history. Business History Review, 87(1), 3-38.
Lewin, A. Y., Välikangas, L., & Chen, J. (2017). Enabling Open Innovation: Lessons from Haier. International Journal of Innovation Studies, 1(1), 5-19.
Li, J. (2016). I Came, I Saw, I Adapted: An Empirical Study of Chinese Business Expansion in the United States and Its Legal and Policy Implications. Nw. J. Int’l L. & Bus., 36, 143.
Patel, H. (2013). Report on Electronics Goods Industry.
Shen, C. (2012). Consumer awareness of Chinese brands in the United States. University of Southern California.
Wang, Y. (2015). The Overseas Development of Chinese Electronics Companies: A case study of Haier and TCL.
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
