Zhang Ruimin, founder and CEO of China's Haier Group, must decide whether to acquire Red Star Electric Appliance Co., an insolvent local manufacturer of washing machines. Although Haier, slated to become one of China's first global brand names, has successfully turned around other failing enterprises by infusing its distinctive culture and management style, it is not clear whether that approach will work at Red Star. Both Haier and Red Star are "collective enterprises."
Swot Analysis of "Haier Group (A)" written by Lynn Sharp Paine, Robert J. Crawford includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Haier Red facing as an external strategic factors. Some of the topics covered in Haier Group (A) case study are - Strategic Management Strategies, IT, Managing people, Mergers & acquisitions, Organizational culture and Leadership & Managing People.
Some of the macro environment factors that can be used to understand the Haier Group (A) casestudy better are - – increasing energy prices, increasing inequality as vast percentage of new income is going to the top 1%, increasing commodity prices, technology disruption, wage bills are increasing, banking and financial system is disrupted by Bitcoin and other crypto currencies, there is backlash against globalization,
supply chains are disrupted by pandemic , competitive advantages are harder to sustain because of technology dispersion, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Haier Group (A) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Haier Red, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Haier Red operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Haier Group (A) can be done for the following purposes –
1. Strategic planning using facts provided in Haier Group (A) case study
2. Improving business portfolio management of Haier Red
3. Assessing feasibility of the new initiative in Leadership & Managing People field.
4. Making a Leadership & Managing People topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Haier Red
Strengths Haier Group (A) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Haier Red in Haier Group (A) Harvard Business Review case study are -
Ability to recruit top talent
– Haier Red is one of the leading recruiters in the industry. Managers in the Haier Group (A) are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Strong track record of project management
– Haier Red is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Sustainable margins compare to other players in Leadership & Managing People industry
– Haier Group (A) firm has clearly differentiated products in the market place. This has enabled Haier Red to fetch slight price premium compare to the competitors in the Leadership & Managing People industry. The sustainable margins have also helped Haier Red to invest into research and development (R&D) and innovation.
Digital Transformation in Leadership & Managing People segment
- digital transformation varies from industry to industry. For Haier Red digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Haier Red has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Diverse revenue streams
– Haier Red is present in almost all the verticals within the industry. This has provided firm in Haier Group (A) case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Cross disciplinary teams
– Horizontal connected teams at the Haier Red are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
High brand equity
– Haier Red has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Haier Red to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Effective Research and Development (R&D)
– Haier Red has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Haier Group (A) - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Operational resilience
– The operational resilience strategy in the Haier Group (A) Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
High switching costs
– The high switching costs that Haier Red has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Highly skilled collaborators
– Haier Red has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Haier Group (A) HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Successful track record of launching new products
– Haier Red has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Haier Red has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Weaknesses Haier Group (A) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Haier Group (A) are -
High bargaining power of channel partners
– Because of the regulatory requirements, Lynn Sharp Paine, Robert J. Crawford suggests that, Haier Red is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Interest costs
– Compare to the competition, Haier Red has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Slow to strategic competitive environment developments
– As Haier Group (A) HBR case study mentions - Haier Red takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Slow decision making process
– As mentioned earlier in the report, Haier Red has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Haier Red even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Haier Red supply chain. Even after few cautionary changes mentioned in the HBR case study - Haier Group (A), it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Haier Red vulnerable to further global disruptions in South East Asia.
Low market penetration in new markets
– Outside its home market of Haier Red, firm in the HBR case study Haier Group (A) needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Capital Spending Reduction
– Even during the low interest decade, Haier Red has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Lack of clear differentiation of Haier Red products
– To increase the profitability and margins on the products, Haier Red needs to provide more differentiated products than what it is currently offering in the marketplace.
Aligning sales with marketing
– It come across in the case study Haier Group (A) that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Haier Group (A) can leverage the sales team experience to cultivate customer relationships as Haier Red is planning to shift buying processes online.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Haier Group (A) HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Haier Red has relatively successful track record of launching new products.
High operating costs
– Compare to the competitors, firm in the HBR case study Haier Group (A) has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Haier Red 's lucrative customers.
Opportunities Haier Group (A) | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Haier Group (A) are -
Learning at scale
– Online learning technologies has now opened space for Haier Red to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Haier Red to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Leadership & Managing People industry, but it has also influenced the consumer preferences. Haier Red can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Haier Red can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Haier Red in the consumer business. Now Haier Red can target international markets with far fewer capital restrictions requirements than the existing system.
Loyalty marketing
– Haier Red has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Buying journey improvements
– Haier Red can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Haier Group (A) suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Haier Red to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Haier Red to hire the very best people irrespective of their geographical location.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Leadership & Managing People industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Haier Red can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Haier Red can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Low interest rates
– Even though inflation is raising its head in most developed economies, Haier Red can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Using analytics as competitive advantage
– Haier Red has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Haier Group (A) - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Haier Red to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Haier Red is facing challenges because of the dominance of functional experts in the organization. Haier Group (A) case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Better consumer reach
– The expansion of the 5G network will help Haier Red to increase its market reach. Haier Red will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Threats Haier Group (A) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Haier Group (A) are -
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Haier Red with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Consumer confidence and its impact on Haier Red demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Regulatory challenges
– Haier Red needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Leadership & Managing People industry regulations.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Shortening product life cycle
– it is one of the major threat that Haier Red is facing in Leadership & Managing People sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Haier Red will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Easy access to finance
– Easy access to finance in Leadership & Managing People field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Haier Red can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Haier Red in the Leadership & Managing People industry. The Leadership & Managing People industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Haier Red can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Haier Group (A) .
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Haier Red business can come under increasing regulations regarding data privacy, data security, etc.
Technology acceleration in Forth Industrial Revolution
– Haier Red has witnessed rapid integration of technology during Covid-19 in the Leadership & Managing People industry. As one of the leading players in the industry, Haier Red needs to keep up with the evolution of technology in the Leadership & Managing People sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Haier Group (A), Haier Red may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Leadership & Managing People .
Weighted SWOT Analysis of Haier Group (A) Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Haier Group (A) needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Haier Group (A) is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Haier Group (A) is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Haier Group (A) is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Haier Red needs to make to build a sustainable competitive advantage.