Haier Case Study
1. Discuss the primary reasons why Haier moves from a single and dominant business strategy to a diversified strategy.

The single and dominant business strategy, which denote relatively low levels of diversification, more fully diversified firms are classified into related and unrelated categories. A firm is related through its diversification when there are several links between its business units; for example, units may share products or services, technologies, or distribution channels. The more links among businesses, the more constrained is the relatedness of diversification. Unrelateness refers to the absence of direct links between businesses.

참고 : http://wenku.baidu.com/view/6a080e260722192e4536f624

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•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 2006. Using an unrelated diversification strategy also created value according to Zhang Ruimin by capturing new customers in new product categories. Haier used these new customers for cross-selling products of differing genres. (pg. 13)

One of the benefits of both unrelated and related diversification strategies according to Zhang was, “Speed and differentiation… two approaches to be better customer focused; speed in being able to satisfy customers’ needs as quickly as possible and differentiation in being able to offer new and innovative products to meet different needs. (pg. 7)

Cons: (Haier can improve upon) Exhibit I perfect example of this. Companies also must recognize that, while activity sharing is intended to reduce costs through achieving economies of scope, there are