Haier Case Study
3. 3. Haier uses both related and unrelated diversification strategies.
A. Describe how Haier uses activity sharing and the transfer of core competencies to create value. (related diversification strategy)
Haier catapulted in the last two decades producing consumer products that are sold in similar fashion. They all shared distribution channels, outbound logistics, and sales forces. Haier was able to develop core competencies through effective activity sharing of primary activities resulting in a superb competitive advantage, ultimately creating value. CEO Zhang Ruimin realized that using both strategies’ can work in Haier’s favor with the ultimate goal of getting name recognition globally. His related diversification strategy used both operational and corporate relatedness to create value. It is evident in the case study that Haier took advantage of this strategy to help in these areas:
• Inbound logistics: delivery, warehouse, quality assurance.
• Operations: quality control, assembly facilities, maintenance.
• Outbound logistics: sales force and customer service.
• Support activities: purchasing, innovation.
Exhibit 3 (pg. 18) is a perfect example of this. “It had over 240 subsidiary companies and 110 design centres, plants and trading companies, and over 50,000 employees throughout the world.” (pg. 5) Another example of creating value by using a related diversification strategy was when Haier applied innovation to product design and production from the Liebherr Corporation of Germany. This strategic move created value by not only competing and expanding its product categories, but also by creating market needs. (pg. 7) The activity sharing and market need helped create product breakthroughs like washing machines that operated without detergent or water, and refrigerators that needed no compressors. (pg. 8) Another example of creating value was when Haier entered a strategic business alliance with Sanyo. Sanyo wanted to increase its
A. Describe how Haier uses activity sharing and the transfer of core competencies to create value. (related diversification strategy)
Haier catapulted in the last two decades producing consumer products that are sold in similar fashion. They all shared distribution channels, outbound logistics, and sales forces. Haier was able to develop core competencies through effective activity sharing of primary activities resulting in a superb competitive advantage, ultimately creating value. CEO Zhang Ruimin realized that using both strategies’ can work in Haier’s favor with the ultimate goal of getting name recognition globally. His related diversification strategy used both operational and corporate relatedness to create value. It is evident in the case study that Haier took advantage of this strategy to help in these areas:
• Inbound logistics: delivery, warehouse, quality assurance.
• Operations: quality control, assembly facilities, maintenance.
• Outbound logistics: sales force and customer service.
• Support activities: purchasing, innovation.
Exhibit 3 (pg. 18) is a perfect example of this. “It had over 240 subsidiary companies and 110 design centres, plants and trading companies, and over 50,000 employees throughout the world.” (pg. 5) Another example of creating value by using a related diversification strategy was when Haier applied innovation to product design and production from the Liebherr Corporation of Germany. This strategic move created value by not only competing and expanding its product categories, but also by creating market needs. (pg. 7) The activity sharing and market need helped create product breakthroughs like washing machines that operated without detergent or water, and refrigerators that needed no compressors. (pg. 8) Another example of creating value was when Haier entered a strategic business alliance with Sanyo. Sanyo wanted to increase its