Essay by zeching November 2014

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Case 2: Haier -­‐-­‐-­‐ Taking a Chinese company global

What are the pros and cons for Haier in entering developed markets first? Pros: Since China acceded into the WTO at the end of the 1990s, Haier is determined in entering developed markets first, based on the following reasons:

1. To earn more foreign exchange 2. To take full advantage of being the first mover and pioneer 3. To establish and build China's brand and reputation overseas, in order to

produce and compete with international brands thus allowing to meet or exceed the highest quality products standard

4. To explore the possibility of diversification and sales growth 5. To explore foreign markets and enhance sales to local or regional markets 6. To establish and continue to gain trust from overseas distributors and to bring it

back for local subsidiary in China 7. To establish Haier as an independent entity overseas as a primary bearer of all

costs 8. To sustain and secure the position in the market, thus allowing Haier to enter the

market of the developing countries at an advantageous position Cons: As a new player:

1. Difficulty to enter the market with unknown brand 2. Hard to build brand equity, due to "Made in China" is often associated with

stereotype of low quality product 3. Inability to receive a large market share in developed markets

As a newcomer, Haier needs to gain the majority of customer's trust, which could take several years for the brand to be well known and accepted From financial prospective:

4. High labor cost in the developed markets, i.e. Labor cost in the USA is 10 times of China's labor cost.

5. Facing high risk of financial support. However, Haier is willing to bear all the costs

6. Inability to take advantage of economic scales...