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Haier: Management Control on a Tactical Level

john brown
In the case of the Haier Group, we consider the issue of the corporation’s management control system and examine whether it is sufficient to complement the company’s globalization efforts.

Background
The Haier Group was founded in 1984 in Qingdao, China, but the corporation’s origin can be traced to the 1920s when a refrigerator factory was built to supply the Chinese market. The factory was taken over after the People’s Republic of China was established in 1949 and became a state-owned enterprise (SOE). The company’s product line has grown to include a full range of consumer appliances – refrigerators, freezers, washing machines, air conditioners, televisions, mobile phones and personal computers. More recently it has entered into the service industry, including financial and other service businesses.

Now considered a leading Chinese multinational enterprise, ranked the number one major appliance brand in the world with a 7.8% retail volume share in 2011[1], the company’s brand recognition today differs significantly from the small collective factory on the verge of bankruptcy that was taken over by CEO Zhang Ruimin in 1984. At that time, the company was a loss-maker, with a group of low-skilled and unproductive workers producing an inferior quality product. China had already begun to adopt a market economy and Ruimin’s challenge was rescue the company from it’s financial trouble and management disorder. Over the course of twenty years, Ruimin developed Haier into the globally recognized leader it is today, in four stages: restructuring and brand-building (1984-1991). Ruimin established trust between management and staff, established and enforced employee rules and regulations, and imposed strict management control on product quality and after-sales service. diversification (1991-1998). Ruimin merged with failing state enterprises and expanded operations beyond refrigerators to other white goods, e.g. washing machines, air-conditioners, TVs, etc. globalization (1998-2005). China’s entry into the World Trade Organization (WTO) intensified competition in the home market. Since Haier was experiencing constant price pressures, it moved to sell its branded products abroad, exporting to Germany first and quickly expanding its markets to 30 countries including Japan, Europe, Africa, the Middle East and North America. Approximately one-third of its revenue was generated in foreign markets. The company set up overseas trading companies and more than a dozen research and development centers abroad. By 2004, Haier was ranked fourth among the global white goods manufacturers. global branding (2006 onwards). By 2006, Haier had grown it’s product portfolio to 96 categories sold in more than 100 countries. The company focused on cementing its brands in local markets using local design, manufacturing and distribution networks. It also focused on acquiring international quality and safety certifications.

Haier’s Management Control System
CEO Ruimin placed great emphasis on establishing a set of core corporate values and a culture that sustained Haier employees’ cohesiveness. As the company grew, its corporate culture shifted a focus on process to encouraging personal achievement and growth in the organization. As goals were set, each was quantifiable and strictly measured and evaluated.

In its restructuring and brand building stage Haier implemented an OEC (Overall Everyday Everyone Everything Control and Clear) management system and established production targets and quality standards for each production team and production line. Differences between target and actual productivity were calculated daily and each team was required to find ways to improve process on the same day.

During its diversification stage, Haier focused on strengthening the culture and management systems of its... Show More

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