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Print Edition> Business
UPDATED: April 20, 2015 NO. 17 APRIL 23, 2015
Embracing the Online Paradigm
White goods producer Haier is changing the face of China manufacturing
By Tang Yuankai

Zhang Ruimin (CFP)

A branch of home appliance maker Haier, Rrs.com is China's first Internet brand offering merchandise with a value of more than 10 billion yuan ($1.63 billion). During the Spring Festival holiday this year (February 18-24), the online business sent e-coupons via WeChat, an instant messaging application. This more precise system for targeting customers has streamlined the company's operations. Currently, more than 70 percent of the company's WeChat subscribers are active users.

Once a refrigerator factory on the verge of bankruptcy, Haier has grown into the world's largest producer of "white goods," or major appliances, and now it is promoting Internet-directed innovation.

Fifteen years ago, Zhang Ruimin, Chairman and CEO of Haier Group, developed a view that at the time seemed sensational: A company will die without touching the Internet. He later admitted that the future was uncertain at that time, but he felt that the Internet would change the world. In 2012, Haier began implementing its Internet strategy.

In the past three decades, Haier has become an integral part of the legend of Made-in-China. The company's Internet strategy is the fifth strategy Haier has implemented. The previous four being famous brand strategy (1984-91), diversified development strategy (1991-98), international strategy (1998-2005) and global brand strategy (2005-12). With completion of these four strategies, Haier became the world's largest white goods brand. According to figures from London-based market intelligence firm Euromonitor International, Haier's international market share of white goods has reached 10.2 percent, ranking the company first for six years in a row, mainly for its product quality and service.

Made-in-China used to be equated with low-end products, but brands like Haier confound such prejudices. According to a survey by Euromonitor International, Casarte, one of Haier's subsidiaries, has become a top high-end home appliance brand in China and the world. Adrian Micu, CEO of Haier America, said that Haier has been one of the best recognized world brands by U.S. customers. The group has accumulated 8,000 sales outlets in North America, and its products have entered chains such as Walmart and Best Buy.

While making progress in the market, Haier is also innovating its management style and exploring management theories, attracting attention from foreign management academia. Marshall W. Meyer, a professor of management at the Wharton School of the University of Pennsylvania, thinks Haier has made some innovations in management that have gone beyond Western theories.

The company has never countenanced leaving manufacturing, instead opting to make progress in the sector through the employment of " Internet thinking." In Zhang's opinion, Internet thinking has two aspects: consumers, factories, sales channels and material suppliers participate in production via Internet technology; while companies manage customers instead of products. To survive in the Internet era, Haier must be a service-oriented company, according to Zhang.

Zhou Yunjie, Rotating President of Haier Group, said that to make Haier an Internet workshop, the company must focus on customer demand and create what customers want using the resources of the whole of society. "This will be the soul of Made-in-China in the future," Zhou said.

"The Internet workshop Haier is creating adopts a factory-to-consumer model," said Zhou, adding that the Internet can integrate fragmented demand and satisfy it with massive tailored production. "This is a benefit brought by the Internet," he said.

To fully satisfy diversified consumer demand worldwide, Haier has established a "whole-process interactive and open innovation ecological system" to better interact the customers, suppliers and to access the top resources in the world.

"From Haier's interaction platforms across the world, we can see the latest ideas and how customers imagine their future lives," said Li Pan, Vice President of Haier's Home Appliance Industry Group. According to him, a lot of ideas for new products have come from customer interactive platforms, such as refrigerators sold in Pakistan that can maintain cold temperature after power has been cut for 100 hours and portable mini washing machines sold in Japan.

Inside Haier, there are many "mini Haiers." Zhang divides the group into several "self-management teams," whereby staff members can formulate their own ideas by collecting consumer opinions and market information from the Internet. Once an idea is approved by senior management, the staff member developing the idea can form and manage his own team to implement the project, and all team members will share the profits of that project. By the end of February, Haier had supported the startup of 212 micro and small businesses by its employees.

In the future, Haier is likely to transform from a company making products into one that produces creators, becoming a hatching platform. Zhou said that Haier will support creators not only from the group, but also from across the world.

Copyedited by Kylee McIntyre

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