Another Asian giant settles in Brabant

Haier set to conquer Europe

Haier is China’s largest producer of domestic appliances. This Chinese state-owned company has the ambition during the coming years to become a leading high-quality brand in Europe. An important role in these plans is reserved for the new European head office of the young IT division in Eindhoven. “Sales throughout Europe must be set up and coordinated from Eindhoven,” says William Shih, director of Haier IT Europe.

Haier started in 1984 as a state-owned producer of refrigerators. In the 1990s, the company started exporting these, as well as microwaves, washing machines and wine coolers, in particular to American discount retailers such as Wal-Mart and the German Liepherr. Around half a million Haier refrigerators are sold in the US each year. Haier ranks 89^th on the list of most influential makes in the world and CEO Zhang Ruimin is recognized by the business magazine Fortune as one of the most powerful businessmen outside the USA. And he will certainly not rest until his products have become commonplace in Dutch homes. Hungrily, and with a touch of jealousy, Ruimin eyes the profit margins booked by Philips with innovative products like the Senseo and Coolskin. Using strong brands and alliances, Haier – which is often viewed as the Chinese Philips – intends to profit from the same segments. In Europe, this strategy has since led to the establishment of a new IT division.

Low cost

Haier has expanded at a phenomenal speed in communist China. Almost bankrupt in 1985, the state-owned company is now China’s largest manufacturer of domestic appliances and has a workforce of almost 40,000. Haier has marketing and sales networks in 166 countries, generating a turnover last year of around 10 billion euro. The product range exceeds 15,000 different products, divided over 96 categories. In the 18 research centres, an average of 1.3 new products are developed every day. While Haier is a state-owned company that does not, according to Shih, mean that the authorities exercise actual control in the day-to-day running of the business. “The state is an important shareholder. You can compare it to the situation at former state enterprise KPN.” Shih, a Taiwanese, has been with Haier since March. Haier, like many other Asian companies who come to Brabant, choose for a director who was already familiar with the Netherlands. Shih formerly worked for computer maker Acer in ‘s-Hertogenbosch. During 2004 he held talks with Haier about cooperation. At the end of last year, he was invited to make the move to the Chinese multinational.

The office of Haier, at Dorgelolaan in Eindhoven, is presently inhabited by a mere 6 employees. “But within a few years, this European head office should house around 200 people generating an annual turnover of 1.5 billion euro,’ according to Shih.

Haier is actively recruiting marketing personnel and product managers whose task is to get the laptops, PCs, LCD screens and portable DVD players into the European homes. “Finding people is no problem”, Shih explains. “But training them and getting them to become familiar with the Haier culture is far more difficult. The company philosophy is centred on providing technology for a reasonable price. We want everybody to enrich his or her lives with our products. Here from Eindhoven, we are going to coordinate the Europe-wide sales of the new generation of computer, which is about the size of a mobile phone.”

Multicultural

Why does another high-tech Asian company choose Brabant as the operating base for its European expansion? Since 1990, some 150 Asian businesses have established offices in Brabant. Of these, about eighty percent have located their head office in or around Eindhoven. Usually only the management is Asian, with the rest of the personnel being multicultural with the emphasis on Dutch. The Dutch are skilled and multilingual,” clarifies Shih. “What’s more, this region offers many logistical advantages with no fewer than 3 large airports within easy reach: Schiphol, Düsseldorf and Brussels. And Eindhoven Airport of course. Also the port of Rotterdam is relatively nearby. What’s more, the Netherlands offers a number of import incentives.”

The BOM, the Brabant Development Authority, was closely involved in bringing Haier to Brabant. It regards Haier’s establishment here as the first major investment by a Chinese state-owned company in Brabant. The BOM is conducting talks with several other Chinese and Taiwanese companies that are considering establishment in Brabant. In order to serve all the European countries, Haier will be setting up various sales offices, including in Germany, Spain, France and the United Kingdom. Those will offer employment to an additional 300 persons. In the Netherlands, most of Haier’s electronic goods will find their way to consumers through the retail trade. These will most likely be sold though chain formulas, such as Media Markt, Its, Dixons and De Harense Smid. Corporate customers can buy Haier products through IT distribution channels.
Shih: “In the long-term there are plans to launch own stores and to set up a design centre in Eindhoven.”

Haier in figures
Established in: 1984
Core activities: production and sale of domestic appliances
Workforce: more than 35,000
Turnover: 10 billion euro
photo caption: Qindao, birthplace of Haier

Analysis

Why Chinese companies grow so quickly

The founders of Haier were far ahead of their time. When establishing the company in the Chinese port city of Qindao in 19984, they opted for the German-sounding name for its internationally recognised ring of reliability.

Although global trade was not high on the agenda in the Communist China of that time, the founders saw expansion as the ideal formula for gaining access to international consumers. The expansion drive of large Chinese companies is fuelled in particular by conditions on the local market. Overcapacity is common for many products. That leads to cutthroat competition and ultra-low prices. In order to survive under these conditions, many Chinese companies like Haier see the need to shift their attention to export, sooner rather than later.

China currently no longer regards itself as the dirt-cheap workshop of the rest of the world. China now wants to apply brainpower as well as muscle-power. That also goes for Haier. The company designs innovative products – such as the new generation of computers, which are the size of a mobile phone – and has the ambition to dominate entire segments of the industry.

The Chinese companies have ample cash resources. And they are second to none when it comes to cheap production. But a low price alone is not enough for a global breakthrough. That requires internationally respected brands and a well-oiled distribution channel. Haier currently serves the European market from Milan. The choice for Eindhoven, as yet only for the IT division but later perhaps for all activities, is intended to streamline the sales channels.

Source: Bedrijvig Brabant, Nov.2005