Analyse the internal and external environment of Haier using SWOT & PESTLE 2017

• For Lenovo Pestle and Swot analysis, see Lenovo Pestle & Swot.
• For Huawei Pestle and Swot analysis, see Huawei Pestle & Swot.
• For China Mobile Pestle and Swot, see China Mobile Pestle & Swot.

1.0 Introduction

Haier is a leading global Chinese brand specializing in the manufacture and retailing of household appliances and consumer electronics. It was founded in 1984 and currently headquartered in Qingdao Shandong province of China (Haier.net) .The Company develops and designs a range of home appliances including refrigerators, microwave ovens, mobile phones, laptops, washing machines and even televisions. The company’s global revenue for the year 2017 was 241.9 billion RMB, a year on year increase of 20% from the previous year including a 25% rise in domestic revenue, while profits increased by 41% (Xinhua 2018).

2.0 PESTEL Analysis of Haier 2017 (strength and opportunities)

2.1 Political environment

Many Chinese firms looking to acquire US firms have been impeded by the introduction of the Foreign Investment Risk Review Modernization Act (FIRRMA) which was signed into law on 13 August 2018 by Trump (Klein 2018; Nash-Hoff 2018).This US law is meant to guard against the risk to US national security posed by acquisition of key of US technologies by other countries (Nash-Hoff 2018). Apart from being seen as a national threat, China has raised more concerns of overtaking the US as a technological power through investing in and acquiring USA firms and key technologies (Nash-Hoff 2018; Klein 2018).

While FIRRMA does not single out China, it still aims to curtail the use of Chinese technological companies by Beijing and other foreign governments against the US government especially in light of ZTE selling technology to Iran. The bill will negatively impact Chinese companies like Haier which have investments or intentions to invest in the USA (Lelyveld 2017).

The reverse is also happening with the government of China’s restrictions on overseas investments. China’s government and the People’s Bank of China stepped in to control out bound direct investment due to the pressure on the Yuan and falling reserves. According to Lelyveld (2017), this will lead to a drop in Chinese investments in USA. Increased caution in China’s foreign outflows will likely cause a decline in Haier’s outward investments in the USA aimed at acquiring key technologies and expanding into new markets (Lelyveld 2017).

2.2 Economic environment

2.2.1 China’s economic growth

According to BBC News (2018) China’s economy grew by 6.9% in 2017 beating Beijing’s annual expectation of 6.5%, a big pick up from previous years. The years economic growth strengthened the country’s economy and promoted the supply structure too creating growth opportunities for companies in China (Lingging 2017), a little wonder Haier’s domestic market revenue rose by more than 25% in 2017 (Xinhua 2017).

2.2.2 China’s rapid urbanization trend

According to Mintel (2017), China’s urbanization rate is expected to move from 60% in 2020 to 70% in 2050 (Mintel 2017). With China’s big urban population, this will be a great opportunity for household companies like Haier in China. According to Business Wire (2017), the global household appliance market is estimated to reach 342.82 billion US dollars by 2022 with a significant increase in demand majorly from developing countries like China, India and Middle East.

2.3 Social environment

Millennials are notable for having distinct interests and for their significant level of buying power when it comes to certain markets like technology and renting. According to Parnes (2017), technology is so important to millennials that they want it in their homes as well as palms with 86% of millennials willing to pay more for a smart home. According to Tapper (2017), 70% of Chinese millennials are home owners with ownership rate among them almost double the global average. This will be a great opportunity for a company like Haier to sell their smart home technology as well as house hold appliance market.

2.4 Technological environment

2.4.1 Rise of Internet of things

Smart homes are one of the latest innovations in the home appliance world changing the way appliances and people interact. According to Weinreich (2017), smart homes are houses featuring intelligent technology that simplifies and automates everyday activities like turning on the lights, closing the door and changing settings of the thermostat. Haier has developed the very first series of complete smart home solutions making it one of the biggest smart life solution providers (Haier 2018).The technology is fast becoming a great opportunity for Haier both in China and the global market as it gains public attention and mass adoption (Weinreich 2017).

2.5 Legal environment

2.5.1 Legal wrangles in the US

Haier has had legal wrangles with South Korean electronics giants Samsung, and LG Electronics for violating its patents in the US. According to Herh (2017), Haier filed a case against Samsung, LG among other companies for infringing on its intellectual property rights and patents in the US. Haier claimed that these companies hindered its fair competition related to ATSC (Advanced Technology System Committee) patent by colluding with MPEGLA the largest patent management company in the world (Herh 2017).

2.6 Environmental issues

The government of China has set up an environmental campaign which has seen many Chinese companies penalized for ignoring the environmental laws of China (Corner and Browaey 2017). In response, Haier has carried out the demolition of an 80M smokestack at Qingdao Haier industrial park in order to cut sulphur dioxide emissions (Haier.net).The company not only provides environment friendly products to its consumers through its green sail activities but has also inspired youth volunteer groups to plant trees through Love Haier green inspiration tree planting events (Haier.net).

3.0 Haier SWOT Analysis 2018

3.1 Strengths

3.1.1 Power of innovation and invention

• Haier’s power of innovation is one of its greatest strength, as can be evidenced through its wide range of air conditioners (Haier 2018).The company has been the first to innovate a complete series of smart home solutions making it a pioneer in creating a better life for its customers(Haier 2018).
• The company’s diversification strategy through acquisitions is a great strength for the company. Haier has purchased General Electronics (GE) appliances division in the US, which has given it critical access to the US market (Xinhua 2017). According to Xinhua (2017), the acquisition of GE appliances has helped the company access the US market through GE’s world class logistics, strong retail network and distribution capabilities. Other acquisitions include New Zealand's biggest white goods maker, Fisher & Paykel, helping the company expand its foothold in the global market marketplace and giving it a competitive advantage against other global players.

3.2 Weaknesses

• Over-reliance on Chinese market is one of the reasons why Haier bought GE appliances for US$5.6 billion in an effort to diversity outside its Chinese dominance and into other key markets such as the US, Japan and UK (Yu 2017)

3.3 Opportunities

• With China’s urbanization estimated in increase from 60% in 2020 to 70% in 2050(Mintel 2017), this will be a great opportunity for home appliance companies like Haier. According to Business Wire (2017), the home appliance market is estimated to reach 342.82 billion US dollars by 2022 with a significant increase in demand majorly in developing countries like China, India and Middle East. With China’s big urban population this this will be a great opportunity for Haier to increase its profit margins and grow globally.

3.4 Threats

• FIRRMA will curtail Chinese firms expansion plans into the US as they seek to acquire US firms.
• IPR violations against Haier from Samsung,  and LG threaten US operations (Herh 2017).According to Herh  (2017) MPEGLA hamper’s company’s competition through  imposing a burden on consumers by demanding unfair collusion with Samsung, LG among others. This obstructs fair competition on the company.
• China’s restriction on overseas investments is a major threat to the company. This will automatically lead to a drop in China’s investments in US,this increased caution by the government of China about the outflow will affect the company’s investments in the US(Lelyveld 2017).

References

Business Wire (2017) “Global household appliance market, market size, demand forecasts, industry trends and updates(2016-2022)-research and markets “Business Wire [Online] at https://www.businesswire.com/news/home/20170908005378/en/Global-Household-Appliances-Market---Market-Size

Corne and Browaey (2017) “China cleans up its act on environmental enforcement” The Diplomat [Online] at https://thediplomat.com/2017/12/china-cleans-up-its-act-on-environmental-enforcement/ [Accessed 31 Jan 2018].

Haier (Na) “Haier group profile “Haier [Online] at http://www.haier.net/en/about_haier/

Haier (Na) “Haier-the green sail the public welfare undertaking “Haier [Online] at http://www.haier.net/en/social_Responsibility/

Haier (2018) “Haier unveils complete smart home solutions at CES”PR NewsWire [Online] at https://www.prnewswire.com/news-releases/haier-unveils-complete-smart-home-solutions-at-ces-300581812.html

Herh Michael (2017) “Haier sues Samsung, LG Electronics for violating anti-trust law in US” Business Korea [Online] at http://businesskorea.co.kr/english/news/ict/19070-strategy-inroad-us-market-haier-sues-samsung-lg-electronics-violating-antitrust-law

Klein, X. Jodi (2018) “Donald Trump signs defense bill imposing tougher regulations on foreign investments – including China” South China Morning Post [Online] at https://www.scmp.com/news/world/united-states-canada/article/2159552/donald-trump-signs-bill-named-after-john-mccain

LelyVeld Michael (2017) “China tightens investment curbs despite reserve growth “Radio Free Asia [Online] at https://www.rfa.org/english/commentaries/energy_watch/china-tightens-investment-curbs-despite-reserve-growth-12112017101543.html

Lelyveld Michael (2017) “China’s investment in the US faces new challenges “Radio Free Asia [Online] at https://www.rfa.org/english/commentaries/energy_watch/chinas-investment-in-us-faces-new-challenges-01302017105151.html

Lingqing Z (2017) “China’s economy can sustain 6.5% growth, disprove collapse: Former World Bank economist” China Daily [Accessed 31 Jan 2018].

Mintel (2017) “China outbound-August 2017”Mintel Reports

Nash-Hoff Michael (2018) “How could we stop Chinese investors from buying US companies “Industry Week [Online] at http://www.industryweek.com/economy/how-could-we-stop-chinese-investors-buying-us-companies

Tepper Taylor (2017) “Millenials in China are twice as likely to own homes as young Americans “Money [Online] at http://time.com/money/4732889/millennials-home-ownership-china-america/

Weinreich Andrew (2017) “The future of the smart home: Smart homes & IoT: A century in the making “Forbes [Online] at https://www.forbes.com/sites/andrewweinreich/2017/12/18/the-future-of-the-smart-home-smart-homes-iot-a-century-in-the-making/#7353c42857ac

Xinhua Financial News (2017) “Chinese home appliance makers become internationally competitive”Nexis

Xinhua (2018) “Haier reports growing revenue, profits in 2017”Xinhuanet [Online] at http://www.xinhuanet.com/english/2018-01/27/c_136929732.htm

Yu, Xie (2017) “Haier bought GE Appliances for US$5.6 billion. Now it’s working on fixing it” South China Morning Post [Online] at https://www.scmp.com/business/companies/article/2116486/chinas-haier-has-plan-help-continue-turnaround-ge-appliances

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