Hailing a New Era: Haier in Japan – Case Summary
Founded in 1984 by Zhang Ruimin, current CEO of the company, Haier has quickly grown from a small refrigerator plant in Qingdao, China, to a huge global leader in home appliances. As one of the most valuable brands in China, Haier designs, manufactures and sells different home appliances which including refrigerators, air conditioners and washing machines in over 100 countries.
‘Haier has experienced four stages of expansion over the past 28 years, each representing the formulation and execution of different strategies: brand building (1984-1991), diversification (1991-1998), internationalization (1998-2005) and developing a global brand (2006-now)”. (e-text PC2-11)
Haier was in financial distress and lacked basic standards and procedures needed to stay in business. Workers were known to even steal from the plant or would not show up for work. Zhang Ruimin had to redefine the rules at Haier so that its employees would have proper conduct at their place of work. These new rules (there were #13 of them) had to come into play because he had acquired a business that had fierce competition from over 300 local refrigerator plants. Haier believed that they needed to make products with the highest quality possible. And to prove their commitment, Mr. Zhang once personally pulled 76 refrigerators that needed to be fixed and smashed them in public. His action proved how far he was willing to go to manufacture a high quality product, and it is still talked about today.
During Haier’s diversification period in 1991 through 1998, they adopted a stunned-fish tactic to diversify its product lines. With this diversification they would use these acquisitions for their product growth, because the technology was available but these 20 companies did not perform well due to weak management. “They also added a substantial number of workers with different profiles and who used different forms of work organization”. (e-text pg. PC2-12) With the pressure to quickly turn around the acquired companies Haier had to develop a new workforce into its corporate culture and operation systems in short periods of time. During this time Haier started to provide their employees formal training that led to the creation of Haier’s University.
After Haier refrigerators outperformed Liebeherr’s refrigerators in a blind quality test, Haier decided to go global start with the most difficult mature markets first. They concentrated on the European and U.S. which made 3% of group sales. Then they established themselves in Asia after China joined the WTO, which allowed Haier to expand operations overseas.
The internationalization period for Haier was difficult due to the ability to effectively manage its workforce which continued to grow in their various network of foreign operations. With this growth Haier was convinced that their company needed managers from local areas to develop the sales and distribution of their organization, and to better know what customers need.
Haier’s global brand began in 2006 until now. This brand evolved and expanded into international markets and also being focused on their home markets. Haier’s strategy was to have their mainstream products become the main choice for customers in the local market. As this strategy helped Haier to grow larger through the years Mr. Zhang knew that Haier had to get onto the speedy world wide web so that they can keep up with their customer’s demand. “Recognizing the need to adapt to the Internet era with a high level of speed and responsiveness to customers, Mr. Zhang introduced a new business strategy called the Win-Win Mode of Individual -Goal Combination to (1) link each employee more closely to the clients he or she serves, and (2) satisfy clients’ specific needs by consolidation R&D, manufacturing, and marketing resources through the Internet.” (e-text PC2-13) To implement this strategy Mr. Zhang proposed reorganizing its employees into units that were self-managed. He called the units that are designed in an inverted triangle with the name, ZZJYT (jizhu jingyin ti).
Haier joined both Western management and Chinese culture to develop the ZZJYT. After a few errors were made in the beginning, but with this structure the first level would have the manufacturing, marketing, employees and R&D working with customers. With this structure there is no gap between Haier and its customers. The second level supports the first level which includes human resources, R&D, and finance support. The third level of the structure is responsible for finding and making strategic opportunities and can support the second level and facilitate resource allocation to the first level of the ZZJYT. There will be no inventory policy that requires specific planning of user resources to avoid any inventory.
Du Jingguo, started working for Haier as an engineer, but soon was promoted to president of Haier Asia International since 1985. He had left in 1998 and moved to Japan for 3 years because of family issues. While he was in Japan he learned their customs, business, and language of Japan. In 2002 Mr. Jingguo rejoined Haier’s management operations. Mr. Jingguo adopted the Japanese culture, Haier culture, and the unique local culture of Haier Japan. Jingguo paid close attention to cultural differences within the organization and made it easy for employees to communicate their concerns. Problems would arise when other cultures including the Chinese who did not have the same high standards of quality as their Japanese co-workers. “When Du first started running the Haier Sanyo joint venture, a Japanese director came to him with a provoking comment: “Each Chinese individual alone is smart and competent, but when you put two Chinese workers together, they will not be able to perform. The Japanese are different – we play collective games”. (e-text PC2-16) With this comment the director did not believe that the Chinese were strong enough to work by themselves. To communicate with the Japanese workers more effectively he divided them into 16 teams of ten with a total amount of 160 employees. With these teams every few nights he would go out for drinks with them and this helped them open up more to voice their concerns with Mr. Jingguo. One concern was about merit pay. The Japanese did not agree with receiving bonuses based on the workers contribution and not receive the same amount across the board for every employee.
Cultural Integration was an ongoing process for Haier. For example, when Haier decided to join Sanyo’s home appliances the managers figured that 30% of their employees would quit because they didn’t want to move to a Chinese company. Some Japanese workers don’t understand Mr. Zhang’s operation structure. They see it as a star. They also believed in job security, were they can be employed for life.
Even with all of these concerns Mr. Jingguo never stopped communicating with his employees about the plan, system, and prospects if they continued their employment with Haier.
Haier would have to be careful because their employees prefer Japanese bosses over Chinese bosses. And they are finding it hard to adapt to each other’s culture in the organization. Not to mention the inverted triangle. Mr. Jingguo and Haier will have to deal with this by having everyone in the organization trained at the Haier Culture University on the inverted triangle so that everyone can understand how it can help them together as a diversified international organization
Work Citied
e-text
Issue: Haier Japan seemed to be successful with corporate culture integration into Japanese operation, but there is deep-rooted cultural barrier among Japanese employees.
Haier, one of the most variable brands in China, has grown rapidly and rose to the top position of global home alliance industry for only thirty-three years under the leadership of CEO Zhang Ruimin and his employees (Deresky PC2.11). The keys to success of Haier are its innovative management systems, including the ZZJYT, inverted triangle structure, and Individual-Goal Combination, and also international strategy that instill Haier’s culture and those management systems in local operations (Deresky PC2.11).
In 2002, Haier officially entered Japan when it established an alliance with Sanyo Electronic, and then in 2011, acquired Sanyo’s white goods business (Deresky PC2.15). Initially, Haier targeted of JPY7 billion, and ultimately it reached to JPY35 billion with the sales of Haier washing machine and refrigerator brand occupying third and forth place in the Japanese market (Deresky PC2.17). It was great achievement for Haier, and everyone did not doubt the success in Japan.
However, Du Jingguo, the manager of Haier’s Japanese operation had difficulty in its Japanese operation. Even he learned Japanese culture and language very well and he kept communicating with employees, it was difficult to integrate culture and innovate management system in its Japanese operation in the real meaning (Deresky PC2.11). Du faced a lot of cultural differences in Japanese operation. For Japanese employees, it was hard to accept the concept of the Individual-Goal Combination that receives rewards according to the contributions. In Japanese collective culture, they favor to receive same amount of bonuses (Deresky PC2.17). Also, the Japanese value of seniority interrupted to Haier’s ZZJYT, when Du pointed young men to the director, because the concept of seniority is one of the Japanese traditions and culture in human relationship (Deresky PC2.18). Moreover, when Haier acquired Sanyo, Du and his management team estimated that approximately 30 percent of employees might quit the company (Deresky PC2.18). Because of the lifetime employment culture, they were confused to join to new company, and work in different corporate structure.
Although Haier achieved great outcome of the sales, corporate cultural integration in Japanese operation is not successful. Japanese employee did not feel comfortable with Haier’s innovative management system due to Japanese tradition and culture. The issue that incomplete cultural integration with Haier and Japanese culture might expand to another issue. After Du leave from Haier Japan, the unique corporate culture, including the ZZJYT system, inverted triangle system, and Individual-Goal Combination might collapse in Japanese operation. Actually, the employees were anxious about the company’s prospect, after the 20 years later (Deresky PC2.18). Du creates the bridge between Haier’s corporate culture and Japanese employees, so it is important theme that consider how to integrate culture again for Haier Japan.
