60  Part I  The decision whether to internationalize

Exhibit 2.3
Internationalization of Haier – proactive and reactive motives

Haier Group, the Chinese manufacturer of home attained through controlling services and market-
appliances (e.g. refrigerators), was near bank- ing/distribution, and ownership advantage had
ruptcy when Mr Zhang Ruimin was appointed been achieved by developing design and R&D capa-
plant director in 1984, the fourth one that year. It bilities through utilizing high-quality local human
is under Zhang’s leadership that the company has resources.
grown into the world’s sixth largest home appliance In 2016 Haier Group acquired General Electric Co’s
manufacturer. appliance business for $5.4 billion, the Chinese com-
pany’s latest attempt to boost its presence in the
Proactive motives lucrative United States market.
Zhang Ruimin had an internationalization mindset
Reactive motives
that set the initial stage of Haier’s development. In
1984, soon after joining the plant, he introduced The entry of global home appliance manufacturers
technology and equipment from Liebherr, a Ger- into the Chinese market forced Haier to seek inter-
man company, to produce several popular refriger- national expansion. In particular, since China joined
ator brands in China. At the same time he actively the WTO, almost every international competitor has
expanded cooperation with Liebherr by manufac- invested in China, establishing wholly-owned compa-
turing refrigerators based on its standards which nies. The best defensive strategy for Haier would be
were then sold to Liebherr, as a way of entering the to have a presence in its competitors’ home markets.
German market. In 1986, the value of Haier’s exports The saturation of the Chinese home appliance
reached US$3 million for the first time. Zhang later market, with intensifying competition, has been a
commented on this strategy: ‘Exporting to earn for- major motive. After the mid-1990s, price wars broke
eign exchange was necessary at that time.’ out one after another in various categories of the
When Haier invested in a plant in the US, Zhang market. At the end of 2000, Haier’s market shares
thought it gained ___location advantage by setting up in China of refrigerators, freezers, air conditioners
plants overseas to avoid tariffs and reduce trans- and washing machines had reached 33, 42, 31 and
portation costs. Internalization advantage had been 31 per cent, respectively. The potential for further
development in the domestic market was
therefore limited.
One of the important external triggers for
the internationalization of Haier has been the
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Chinese government. Being an international

player, Haier gained some special conditions
that other Chinese companies could not obtain.
For instance, Haier had already been approved
to establish a financial company, to be the
majority shareholder of a regional commer-
cial bank, and to form a joint venture with a US
insurance company. Without its active pursuit
of internationalization, as well as a dominant
position in the home appliance sectors, it would
normally be impossible for a manufacturer to
A Haier store get approval to enter the financial sector.
Source: Sorbis/Shutterstock.

Source: based on Liu and Li (2002) and other public sources.

Hollensen, Svend. Global Marketing, Pearson Education Limited, 2019. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/hud/detail.action?docID=5994693.
Created from hud on 2020-10-15 07:31:16.