Essay about Haier Case Study

1173 Words Nov 15th, 2011 5 Pages
3. 3. Haier uses both related and unrelated diversification strategies.
A. Describe how Haier uses activity sharing and the transfer of core competencies to create value. (related diversification strategy)
Haier catapulted in the last two decades producing consumer products that are sold in similar fashion. They all shared distribution channels, outbound logistics, and sales forces. Haier was able to develop core competencies through effective activity sharing of primary activities resulting in a superb competitive advantage, ultimately creating value. CEO Zhang Ruimin realized that using both strategies’ can work in Haier’s favor with the ultimate goal of getting name recognition globally. His related diversification strategy used
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(pg. 12) In the end Zhang Ruimin utilized this diversification strategy in an attempt to gain market power.
B. Also discuss how Haier can use unrelated diversification strategy to create value.

Zhang Ruimin recognized that pursuing strictly a related diversification strategy might make Haier susceptible to failure. He states, “This is a globalised era…, no single industry can survive.” (pg. 13) By the end of 2006, Haier’s product portfolio had extended to include products ranging from washing machines to mobile phones as well as pharmaceuticals and tourism. This wide range use of unrelated diversification strategy technique created value in several ways:

• Purchasing other corporations and then restructuring their assets.
• Gaining access to information about businesses’ actual and prospective performance.

Zhang Ruimin’s vision was for Haier to become an innovative global company. He always explored new markets by giving customers what they never thought they could have or never knew they wanted. (pg. 8) He believed this was the key to long term growth. Ruimin was able to do this by reducing Haier’s overall risks by allocating resources among a diversified mix of businesses. An example of this was the unrelated mobile phone business Haier involved itself in. Due to many diagnosed reasons, Haier decided to cut its losses and sell the phone business to Qingdao Haier in

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