Corporate Reflections: Haier hones focus on quality and innovation
Updated 14:27, 07-Oct-2019
Global Business

The Chinese household electrical appliance industry is symbolic of China's manufacturing industry shifting its gaze toward the world. One of the earliest Chinese brands to globalize, Haier, turned itself from a small struggling fridge factory into the world's number one appliance brand.

In 1984, then general manager of Haier, Zhang Ruimin, smashed 76 fridges with a hammer, when customers complained about defects. Employees cried because a fridge cost more than the annual salaries of four workers. But the hammer drove home the lesson of emphasizing quality and put Haier on the way to what is today a 16-billion-U.S.-dollar brand.

Zhou Yunjie, president of Haier Group, considers the reform and opening-up policy to be one of the key reasons behind Haier's esteemed reputation all over the world.

Haier's building in Qingdao City, east China's Shandong Province. /CGTN Photo

Haier's building in Qingdao City, east China's Shandong Province. /CGTN Photo

"In the process of reform and opening-up, China's manufacturing industry has formed a standard system and technical structure with independent intellectual property rights by absorbing, digesting, and transforming the technology. And Haier is also one of the beneficiaries," Zhou said.

Faced with a new era, the company president thinks that China should reform with a more open mind, during which China's household appliances companies "must" go overseas and build own brands in other markets.

"The household appliances industry is indeed a fully competitive market. Many famous brands of household appliances in the world have entered the Chinese market. There would be no famous Chinese brand if we lock ourselves in China and call ourselves kings," he elaborated.

Zhou highlights the necessity of competing with"our superiors" and improving "our quality and management standards, so that our brand can take root in other countries."

Meanwhile, he remarks on the importance of elevating the brand. "The most important thing that Haier has been doing all the time in foreign markets is to elevate our own brand. The investment in brand is huge. So comparing with other listed companies, our profit is relatively low. But this is a long-term strategic plan. It's worth it and it's valuable."

In 1999, when multinational appliance makers raced to build factories in China, Haier, amid criticisms, decided to build a plant in the United States. It wouldn't make money until eight-nine years later. Now Haier is sold in more than 100 countries around the world, and the reinvention continues, turning its 122 factories into smart factories.

Zhou told CGTN that Haier respects different cultures, implants the mode of "the unification of the staff and orders" in different cultures, and puts forward a "salad-type" corporate culture.

"The vegetables are local, and are distributed according to local tastes, but the salad dressing is provided by Haier. This mode respects everyone and humanity, everyone's nature of wanting to be recognized and respected is the same," he further explained.

The president believes that the mode stimulates everyone's creativity and releases potential for staff members to achieve individual value.

"In Japan SANYO, according to the staff's performance, we promoted a young person aged under 40 as a leader. This was unimaginable in Japan. He was very creative, and led the team very well. This influenced SANYO itself. The Japanese media also reported a lot about this case, saying that a Chinese model was changing the development direction of Japanese enterprises and adding vitality to them."

Zhou expects that the function of community will be expanded in the future. "The community layout would move into a pattern more like 'small house big community.' The community's function will be expanded, including treating guest, entertainment, sports, and so on. You don't have much small home appliances at home, because you can wash your clothes, bake cakes in the community's sharing area."

Haier is redefining itself as an eco-system provider, not just an appliance maker, and that has raised doubts in the industry, is it getting too ahead of itself, should it be focused on its valuation and bottom line and when would this long-term approach pay off?

"This is indeed a strategic adjustment," Zhou explained. From his perspective, the era of products that Qingdao Haier represents has come to an end, and 'Haier's home' means that we have entered a new strategic stage of Haier's smart family, and this is also a new era which adapts to the internet."

Based on his words, with electricity as a connecting line, the connection is not only between equipment and equipment, but also between equipment and consumers.

The Haier Home Appliance Museum in Qingdao City, east China's Shandong Province. /VCG Photo

The Haier Home Appliance Museum in Qingdao City, east China's Shandong Province. /VCG Photo

"For example, we have established a new network. When you cook in the kitchen, the refrigerator can manage your food, and can remind you about the shelf life. At the same time, when you find that your food is not enough, you can order directly on the refrigerator, and supermarkets can deliver the food to you. When you are cooking, the refrigerator can also provide the right recipe, so you can provide your family with rich meals easily and pleasantly," Zhou elaborated.

He continued by saying: "We are connected with many organic food stores, so the consumers can eat a lot of organic and healthy products through our network. Therefore, this is the original intention of a change of our smart home."

From product to brand to ecosystem, Haier has been given loose rein to innovate its strategies - as has its peers, regardless of ownership structure. Those at the top of their game have honed their focus on quality and innovation, and that's why China's appliance making industry, almost non-existent 40 years ago, is now breaking sales records. 

(Cheng Lei also contributed to the story)