The resignation of famous executives in Herdo is the result of enterprise reform.

　　　　Haier’s external internationalization strategy and internal "market chain" process reform have not been successful until now, and even failed in some aspects.

　　　　On April 17th, Qingdao Haier (600690) announced that a number of senior executives had submitted their resignations. Since most of these senior executives are Haier entrepreneurs and enjoy the company’s management equity incentive scheme, resigning means giving up a large amount of equity incentive income.

　　　　It is believed that the change of Haier’s management may mean that there are huge hidden dangers in Haier’s business operation.

　　　　After the announcement, Haier’s share price plummeted continuously. Since then, the 2007 annual report released by Haier also shows that Haier’s performance did not meet expectations.

　　　　In fact, it is not only now that Haier’s performance growth is in a state of stagnation. As early as 2005, before the global turnover of Haier Group exceeded 100 billion yuan and approached the threshold of the global top 500, Haier’s growth rate had slowed down, and its dream of entering the top 500 was also frustrated year by year. Previously, Haier has maintained a rapid growth for 20 consecutive years.

　　　　Looking back at history, we will find that Haier’s rapid growth is inseparable from the different business strategies adopted in different periods.

　　　　In the 1980s, the domestic home appliance market was facing a serious market shortage. Many enterprises were satisfied with expanding production and neglected quality. However, Haier insisted on strict quality management, and on this basis, implemented brand-name strategy, which made Haier’s products get much better market praise than ordinary domestic products. In the 1990s, Haier expanded its business from refrigerators to a full range of white goods, including washing machines and air conditioners, as well as electronic products such as color TVs and mobile phones. In this process, Haier has given consideration to brand building, channel layout, terminal promotion, after-sales service, internal site management and product development, which has enabled Haier to achieve a benign development pattern of growth, expansion and profitability.

　　　　In the late 1990s, on the basis of gaining a great reputation and market influence in China, Haier began to explore the international market, pursued the internationalization strategy externally, and carried out the process reform of "market chain" internally, and its business scope also diversified from white electricity to black electricity, communication, computer and even finance, pharmacy and retail.

　　　　However, on the whole, Haier’s strategy has not been successful until now, and it can even be said that it has failed in some aspects. Therefore, after entering the new century, Haier has shown the fatigue of growth, which is also an indisputable fact.

　　　　From the root, Haier’s rapid growth in the last century mainly benefited from the rapid development of China’s home appliance market and its relative isolation from the outside world. Haier’s competitive advantage and brand advantage based on quality and channel have localization advantages compared with multinational enterprises and quality and brand advantages compared with local enterprises. This competitive point can also be seen in other China enterprises that have done well, such as Baosteel and Lenovo.

　　　　After entering the new century, with the changes of various external competitive variables such as China’s entry into WTO, the expansion of the local market, the strategic entry of multinational companies, the general improvement of the product quality of local enterprises, and the integration of channel resources, Haier’s advantages in product development, quality management, terminal promotion, etc. are not obvious, and its brand premium has dropped significantly, while its weaknesses in basic technology research and development have begun to show.

　　　　In this case, after reflection, Haier began to give up the plan to enter the world’s top 500 as soon as possible in sales, emphasizing the need to improve profitability.

　　　　As for how to improve profitability, Haier has mainly taken two strategic measures: first, to strengthen the development capability of high-end products and build high-end brands; The second is to improve the internal response ability of the enterprise, so as to respond quickly to the customer’s needs, hoping to quickly reflect the product differentiation. This can also be seen from Zhang Ruimin, CEO of Haier, who repeatedly told the media to learn from Dell, Foxconn and Toyota.

　　　　To this end, Haier launched a new round of company reform in June 2007, which changed the organizational structure of business division system according to product categories for many years, but re-divided it into six subgroups according to the different operating modes of various product lines such as white electricity and black electricity. Including white power operation group (refrigerator, washing machine, air conditioner), black power operation group (color TV, AV products, etc.), digital and personal product operation center (computer, MP3, etc.), global operation center (overseas promotion headquarters is overseas marketing department), innovation market center (domestic market), financial operation center, and cut down some product lines with poor profitability, including microwave ovens.

　　　　This large-scale change, on the one hand, will cause the ups and downs of the company’s business in a certain period of time, on the other hand, it will inevitably lead to personnel adjustment within the company.

　　　　Differences in understanding the prospect of change or power disputes over job changes are very likely to cause turmoil in management. Therefore, it is certain that the recent departure of several senior executives of Haier is the inevitable result of this round of enterprise reform of Haier.

　　　　In recent years, Haier has been pursuing the internationalization strategy, but it has not achieved the expected results. At present, the domestic air-conditioning market has been suppressed by relatively specialized Gree and Midea, and Haier’s position in color TV and mobile phones is relatively embarrassing. After several ups and downs, the computer business has not yet entered the first camp despite its rapid development. Therefore, Haier’s current core position has actually retreated to the traditional refrigerators and washing machines.

　　　　Nevertheless, Haier may explore a new path to greater success with its still strong brand resources, international resources and government resources.

　　　　(The author is an expert on enterprise development strategy)

Editor: Li Erqing