TEN
Cracking the American Retail Market
Who Is Haier?

First we observe and digest. Then we imitate. In the end, we understand it well enough to design it independently.

—Zhang Ruimin, CEO of the Haier Group

IT WAS NOT EXACTLY a boardroom panic, but there was no question that the top management of Whirlpool, one of America’s leading household appliance manufacturers, was beginning to see a looming threat on the horizon. Whirlpool’s senior executives had just learned that the company’s troubled rival, Maytag, was up for sale and that it might well become the property of a Chinese competitor, Haier. If the sale went through, Haier would be able to market its products under a well-known American brand name, and that promised to turn Haier into an even more formidable competitor.

Although American consumers tended to look at Haier as a manufacturer of cheap refrigerators and air conditioners, Whirlpool already had a deeper knowledge of the company. Whirlpool had tried to break into the China market years earlier through a joint venture with Haier’s leading competitor, Guangdong Kelon. Kelon’s strategy had looked good enough on paper, but the company had fared badly in a head-on competition with Haier. Worse, Whirlpool had lost millions of dollars when it made the unwise decision to try to dump refrigerators using Freon as a coolant on the Chinese market. The joint venture’s executives had reasoned that the Chinese buying public was unlikely to be aware of the fact that the use of Freon, which damages the ozone layer, was already prohibited in many more developed markets. They had guessed wrong. The Chinese knew about Freon, and they shunned Whirlpool and Kelon’s product line. Now—faced with the possibility of having to compete with a Chinese dragon armed with an American brand name—Whirlpool felt that it needed to outbid Haier, and in the end it paid a substantial price to protect its home turf.

Haier’s first foray into the U.S. market had seemed innocuous enough. The company had started in a niche market, selling inexpensive mini-fridges for student dorm rooms. Haier executives soon realized that college students were short of space, so the mini-fridges were designed to double as computer desks, which students liked. Meanwhile, the major players like Whirlpool looked on with amusement. The cheap fridges seemed to confirm the stereotype that the Chinese were not up to competing at the high end of the market. As it turned out, Haier was following the carefully thought-out strategy of its founder, Zhang Ruimin, who was convinced that the most effective way to enter a developed market is to focus on sectors that the major players consider too insignificant to bother with.

Having conquered the market for America’s college dorms, Haier introduced a refrigerator designed to act as a wine cooler. Normally, only passionate collectors bother to keep wine at an electronically regulated, precise temperature, and usually the equipment to meet their standards was inordinately expensive. But Haier’s coolers sold for around $200, allowing young urban professionals to experiment with the privileged lifestyle of a connoisseur. Before long, Haier dominated the market in wine coolers. What Haier was after, however, was not just profits but acceptance by the leading American discount chain stores. It had taken Haier a year just for its sales department to arrange a meeting with Walmart. Haier’s niche products were the wedge needed to get in the door. By the time Haier’s U.S. competitors realized what was happening, it was already too late.

Already a Giant in China

The man responsible for Haier’s success, Zhang Ruimin, had entered the U.S. market with a strategy that relied on stealth. Zhang’s tactic was to identify an overlooked segment of the market, test the waters, and then spread out progressively to more competitive sectors.

While many Americans thought of Haier as just another low-cost producer of inexpensive appliances, Haier was, in fact, already a giant. It had long ago become the leading appliance producer in China, where its products regularly sold at a premium of 15 to 20 percent above market price. Given the choice between expanding market share by price-cutting or improving quality, Haier had always gone for quality. Haier was a winner not because it was cheaper but because it was better than its competition. It was also better organized. The Wall Street Journal called Haier the best-managed company in China. In expanding its reach to international markets, it was certainly one of the most successful. The Haier Group’s companies were listed on both the Hong Kong and Shenzhen Stock Exchanges.

Haier’s astonishing rise was due in large part to the foresight of Zhang Ruimin, an avid reader of books on modern business strategy. The saga that led to the creation of Haier had begun in 1984, just five years after China’s first tentative steps toward a market-driven economy. A still relatively small band of private entrepreneurs were struggling to stay afloat, but it was already apparent that China’s economy was going to experience dramatic changes. Support for state-owned enterprises was shrinking, and in the private sector, fortunes were being made.

At the time, Zhang had what appeared to be a stable civil service job as vice-general manager of the home appliance division of the municipal administration of the city of Qingdao. The factories in Qingdao were turning out refrigerators that were so shoddily constructed that they barely worked, yet demand was so high that customers were lining up to buy them as fast as they came off the assembly line.

Despite the heated market demand, the Qingdao General Refrigerator Factory was nearly bankrupt. It had been forced to borrow from neighboring municipalities to pay its employees. The factory was a collective enterprise, which meant that the workers owned its assets. The municipality levied taxes and could influence senior management choices and major business decisions, but the lack of clarity about who was really in charge had virtually eliminated any effort at quality control. The Qingdao municipality wanted Zhang to cast aside his “iron rice bowl” (guaranteed job, income, and benefits) and take over the nearly bankrupt enterprise. Zhang accepted the challenge.

Zhang’s critical insight was to realize that in the long run, quality would be more of a determining factor than price. Zhang reasoned that the Chinese public, like everyone else, would be willing to pay a premium for a product that worked as promised and could be easily serviced if it failed to function correctly.

China had roughly 300 companies manufacturing refrigerators when Zhang took on the failing Qingdao factory. Nearly all of the factories were producing mediocre products. To get a different perspective, Zhang went to Germany and made a quick comparison between European appliances and those being produced in China. The Germans were not necessarily smarter than the Chinese, Zhang reasoned, so why couldn’t Chinese products be just as good as those of the Germans? Zhang defined his strategy: “First we observe and digest,” he said. “Then we imitate. In the end, we understand it well enough to design it independently.”

Zhang began by licensing the latest technology from Germany’s premium refrigerator manufacturer, Liebherr. Back in China, he marketed the factory’s revamped production line under the brand Qingdao-Liebherr. He later imported production lines from Sanyo and a Danish company, Derby, and he signed joint ventures with Mitsubishi and Italy’s Merloni. In 1991, the company’s name was changed to Qingdao-Haier. The word Haier was a transliteration of the Chinese characters for “herr” in Liebherr. In 1992, “Qingdao” was dropped, and the company became known simply as the Haier Group.

Quality Matters

While upgrading the factory’s technology, Zhang also realized that he needed to change the mentality of its workers. The crucial turning point arrived when a customer returned a defective refrigerator to the factory and asked for a replacement. Zhang looked at the refrigerators coming off the assembly line and discovered that 20 percent of them didn’t work. In a less than subtle gesture, he had 76 defective refrigerators pulled out of the line and smashed to bits in front of the workers.

The message was clear: A new baseline for quality had been set in Qingdao. To ram the point home, Zhang had a pair of yellow footprints painted on the factory floor. Anyone whose performance was considered not up to standard had to stand on the spot and explain his or her errors to his or her fellow workers. The tactic had a shock effect in China, where face is considered extremely important. Zhang was, in fact, leveraging Chinese culture to make certain that no one missed the point that he was trying to make. Eventually, when Zhang opened factories in the United States, he would adopt some of the same principles. Workers who performed well would stand in front of a blue line, and those who performed badly would have to stand behind a red line. Peer pressure enforced the new standards more than any management directive could hope to achieve. In addition, in contrast to the lack of individual accountability that resulted from collective ownership and guaranteed employment, Haier also introduced the Western notion of a management “bake-off.” The company set a policy that the company’s top 10 managers would be publicly commended for their work, while the bottom 10 would either be fired or demoted. (In January 2009, the company demoted six vice presidents because of poor sales in its TV and personal computer divisions.)

In its second year of operation, Zhang’s rejuvenated company made more than $11 million profit. In 1988, the company won a gold medal in a national refrigerator competition. By 1989, over-supply was beginning to swamp the Chinese market and many of the manufacturers were engaged in a price war, which inevitably led to reduced profits and lower quality. Zhang decided to take the opposite approach and raise his quality standards even higher. Haier began commanding a 15 percent premium in the market, despite the price war.

Diversification Through Acquisition

By the beginning of the 1990s, Haier had begun to diversify and branched into air conditioners and freezers. Its strategy was to identify market demand and then to look for companies that were producing products that were in demand but were failing because of ineffective management. Haier’s first two candidates were the Qingdao Air Conditioner Factory and the Qingdao General Freezer Factory. Haier took over the debt of both factories and kept most of the workers. Within a year, both factories were making a profit.

The company had changed its name to the Haier Group in order to reflect its diversification. Just as everything seemed to be coming together, however, it faced a potential disaster. To consolidate its expanded business, Haier bought 500 acres in an industrial park for roughly $9.5 million. Its annual profits in 1992 were just under $6 million, and construction costs were estimated at nearly $12 million. Haier had been promised a bank loan to cover the amount, but less than a month after the deal had been signed, the government tightened credit in a move intended to stop real estate speculation.

As often happens, an impending catastrophe that could have driven the company into bankruptcy eventually served to accelerate its growth even faster. With no other option for raising capital, Haier decided to launch an IPO on the Shanghai Stock Exchange, offering up 43 percent of its refrigerator division. It was a risky gamble, but in the end the IPO produced more than twice as much cash as the company had been planning to borrow through its now defunct bank loan. The additional funding enabled the company to expand even more rapidly.

Haier had always focused on quality and resisted overly rapid expansion, but it now found that its successes had effectively turned it into an angel of salvation in the eyes of local politicians. In 1995, the Qingdao municipality turned to Haier to save its nearly bankrupt Red Star Washing Machine Company. Haier was expected to keep the factory’s employees and take on its accumulated debt of more than $15 million, which was again roughly equal to Haier’s annual profits. Within a year and a half, Red Star was ranked as the best washing machine manufacturer in China. By 1997, Haier had taken over 15 companies, producing products ranging from washing machines to television sets and telecommunications equipment.

Increasing Competition in Its Domestic Market

By 1998, Haier had a third of the Chinese market for washing machines, refrigerators, and air conditioners. As retail sales in the major markets began to taper off, Haier looked toward China’s rural markets, and it had begun to consolidate its sales, service, and finance operations into group-wide divisions.

But Haier now faced new challenges. Refrigerator manufacturers in China were locked in a Darwinian struggle. By the end of the 1990s, there were only 20 major producers, and ten of them accounted for 80 percent of sales. Three of these accounted for 60 percent of the market. Estimates were that a manufacturer had to produce and sell at least a million refrigerators a year to remain profitable. The large companies also had to compete with small enterprises that were often focused on one or two products. These companies often failed to sustain themselves on their own, but they were kept in business by local municipalities that were more interested in maintaining employment than in making a profit.

Haier faced competition from another refrigerator manufacturer, Guangdong Kelon, which had merged with an air conditioner manufacturer and then listed itself on the Hong Kong Stock Exchange. Kelon had signed a deal to manufacture washing machines in China for Whirlpool, and in contrast to Haier, it followed a multi-brand strategy. It sold its high-end products under the Kelon brand and then targeted the middle- and lower-market layers with cheaper products manufactured on independent assembly lines. The different product lines made it difficult for Kelon to maintain economies of scale, and it regularly posted losses. At the same time, Kelon realized that the greatest growth was likely to come from the second- and third-tier markets in rural areas, and that put it into competition with Haier. The struggle for these markets intensified when China entered the World Trade Organization in 2001, and the way was opened for multinationals to compete with Chinese brands inside China. Some of the foreign competition had already entered China under joint venture deals in the early 1990s.

The multinationals aimed for the high-end market in China’s major cities and then for the market in rural areas. Now that China had opened its doors to sophisticated Western manufacturing, most of the multinationals expected the stiffest competition to come from other multinationals. In fact, they quickly discovered that the technology being offered by Haier and Kelon was often just as good, only less costly and better designed to match Chinese tastes. The multinationals for their part had made the mistake of looking at China as a monolith. They failed to grasp the diversity of the population and the differences in taste that distinguished one region from another. China was simply too vast for most foreigners to understand, and the multinationals tended to take a “one model fits everyone” approach. The multinationals also tried to get away with selling technology that was already becoming unfashionable in the West. Then, thinking that the Chinese public would not notice the difference, Whirlpool attempted to sell refrigerators that still used Freon as a coolant. This was despite the fact that most developed countries were already moving toward a technology that was safer for the environment. The Chinese public proved just as savvy as buyers in the West, and Whirlpool racked up heavy losses.

Innovative Ideas and Creative Management

Far from resting on its laurels, Haier invested 5 to 7 percent of its revenues in R&D on a yearly basis and boasted that its products were being rendered obsolete by its own new products coming on line rather than by the products of its competitors.

But Haier’s biggest achievement appeared to be its ability to keep improving on management while maintaining its sensitivity to the Chinese market. It established a system of basic platforms that could be equipped with different combinations of standardized modules to fit any customer’s requirements. In the end, the company produced 96 product categories with 15,100 specifications. If customers wanted a special compartment in their refrigerators to store pungent Korean kimche, Haier could produce it. The ability to do this didn’t cost much, and the customers loved Haier’s adapting products to their needs.

The ultimate example of the Haier approach occurred when a rural farmer in Sichuan complained that his washing machine kept breaking down. A Haier repair technician noticed that the machine was filled with mud. It turned out that the farmer had been using it to wash sweet potatoes. Instead of correcting the farmer, Haier reconfigured the washing machines and launched an advertising campaign boasting that Haier’s machines were ideal for washing clothes, sweet potatoes, and peanuts. In Shanghai, known for its summer heat waves, Haier introduced a tiny washing machine just big enough for a single change of clothes. In Shanghai’s tiny apartments, the machine became an instant hit. Haier followed up with a washing machine that cleaned clothes without detergent and another that washed and dried clothes in the same machine.

Most of these appliances, tightly targeted to meet local tastes, were made possible through the ingenious combination of standard modules and subsystems configured to meet local requirements on standard frames. “Periodically, we add some new features,” Zhang explained, “but the basic model is there. We don’t change randomly.”

Haier’s most innovative thinking, however, was incorporated into its creative management. In 1990, Haier introduced a computerized tracking system that enabled its newly established service system to track tens of thousands of customers. After-sales service was a rarity in China at the time, and even high-end foreign appliance brands had difficulty providing service throughout the country. By 2004, Haier had established a network of 5,500 independent contractors to provide after-sales service throughout the country. Customers could call a nationwide hotline to arrange for house calls. If the appliance had to be sent to a workshop for repair, Haier provided a replacement.

Haier also became a leader in just-in-time purchasing of raw materials. A distribution network serving the entire country operated out of 42 centers and employed 300 transport companies with 16,000 vehicles. Haier moved an average of 100,000 pieces of merchandise a day. By creating a single operation to service all its needs, Haier was able to achieve impressive economies of scale. Foreign companies contracted Chinese transport companies as well, but they often found it difficult to establish a reliable network that covered the entire country, and their costs were invariably higher.

Haier Goes Global

Despite Haier’s success, the company’s executives were cautious about the future. In the fast-changing global environment, they were constantly expecting that competition from both foreign and domestic companies would eventually catch up. In 1997, Zhang Ruimin announced a goal of having Haier produce and sell a third of its goods in China, produce a third in China to sell in foreign countries, and both produce and sell the remaining third in foreign countries.

Throughout the 1990s, Haier had been experimenting with a number of joint ventures, all of which helped build experience in international operations. But 1997 marked a turning point. Haier refrigerators had been selling very well in Germany, where Liebherr marketed them under the Blue Line brand. In a blind quality test run by a German magazine, eight of Haier’s refrigerator models beat out seven of those manufactured by Liebherr. Haier decided it was time to begin selling in Germany under its own brand name. It also introduced the Haier brand to Asian regional markets, selling refrigerators, washing machines, and other appliances manufactured in the Philippines.

Zhang made it clear that while most Chinese companies exported to earn foreign capital, Haier had a more fundamental objective. “Our purpose in exporting,” he said, “is to establish brand recognition overseas.” In keeping with that philosophy, Zhang decided to focus the company on building sales in the developed markets rather than go after the less demanding emerging markets. Zhang reasoned that if Haier could succeed in the markets where the competition was the strongest and regulations were the most demanding, it would have no trouble competing in the easier markets afterward. Once Haier had established its brand in Europe and the United States, it could enter the developing markets at the same level as well-known brands like GE, Matsushita, and Philips.

Through the Backdoor

Zhang concluded that the best tactic would be to focus on a few niche products in each market to test the reaction, while staying out of the way of potential competitors. Despite the strategy, Haier still met with challenges. To succeed, the company had to win over the major discount chain stores, which proved harder than expected. Haier’s initial entry into the American market was on a small scale at first. The opportunity to break into the U.S. market presented itself in 1994, when Michael Jemel, a partner in a New York import company, showed interest in Haier’s compact refrigerators. Only three of Haier’s compact models met U.S. energy and safety standards, but Jemel bought 150,000 of them and managed to sell all of them within a year, under the Welbilt brand.

In 1999, Jemel and Haier launched Haier America as a joint venture. With the exception of the venture’s accountant, who came from Qingdao, the Haier America staff were nearly all Americans. Zhang recognized that salaries were far higher than in China, but since he planned to sell the products at a premium, he figured that Haier could afford the cost.

Jemel concentrated on getting the big retail chains as customers. It took him a year just to get an interview with Walmart, but the strategy worked. Within three years, Haier had captured 30 percent of the compact refrigerator market in the United States. When other companies tried to copy the concept, Haier resorted to innovative design ideas that kept its products a step ahead of the competition. Haier built a $40 million industrial park and refrigerator factory in South Carolina. By 2002, Haier was selling 80,000 full-size refrigerators in the United States, accounting for 2 percent of the total market. Walmart, which hadn’t wanted to listen to Haier in the beginning, bought 400,000 compact refrigerators, washing machines, and air conditioners from Haier in 2002. Haier found it had to begin importing refrigerators from China to satisfy the growing U.S. demand. By 2005, Walmart was selling 44 Haier product lines, mostly to college students. The Haier brand was still relatively unknown, but the company was investing 10 percent of its revenues on global branding and marketing.

Maytag Enters the Picture

While Haier’s prospects were expanding dramatically, those of Maytag, one of its major American competitors, were declining at an unnerving rate. The company, which began in Newton, Iowa, in 1893, was named for its founder, F. L. Maytag, and had initially manufactured farm tools. In 1907, it developed one of the first successful washing machines, which consisted of a hand-cranked mechanism attached to a wooden tub. The company branched into refrigerators and stoves in 1946. Maytag had a solid reputation in the United States, but it had failed to keep up with changes in the global economy. It was trailing in third place behind Whirlpool and General Electric, and it was losing $9 million a year on sales of $4.7 billion. Whirlpool, in contrast, made profits of $406 million a year on sales of $13.2 billion.

Maytag had based its sales network on some 10,000 independent appliance dealers that were gradually being driven into bankruptcy by giant discount retailers like Walmart and Best Buy. Competition from foreign manufacturers, such as LG, Daewoo, Samsung, and Haier, drove prices down, reducing the company’s profit margin even further. The foreign brands also competed for floor space in the larger appliance stores. Already in debt, Maytag was looking at an even more dismal future.

On April 22, 2005, Maytag’s stock price dropped 28 percent after it failed to make its first quarterly earnings target. Maytag’s board of directors turned to the investment bank Lazard Ltd., to see if there might be an interested buyer. The board fairly quickly arrived at an arrangement to sell the company to a private equity group, Ripplewood Holdings, for $1.13 billion. The sale represented roughly $14 a share.

Haier suddenly saw Maytag as an opportunity to obtain instant brand recognition in the United States, and it made a subsequent offer of $16 a share. The offer added up to $1.28 billion. Haier did not have enough cash to cover that amount on its own, so it enlisted two financial partners, Bain Capital and the Blackstone Group. The impromptu alliance attracted the attention of the top U.S. appliance manufacturer, Whirlpool.

In contrast to Maytag, which had focused primarily on sales in North America, Whirlpool had already gone multinational years earlier. At least 40 percent of its sales were outside the United States. More than a third of its production was based in developing countries including Brazil, China, India, and Mexico. From its global viewpoint, Whirlpool saw Haier as a competitor not only in the American market but in the emerging markets as well. Besides that, buying Maytag appeared to Whirlpool to be an effective way to leverage its low-cost manufacturing in the United States and to increase its clout with the major chain stores.

Whirlpool offered $17 a share, or a 21 percent premium over the initial offer from Ripplewood. Maytag would have to pay Ripplewood a $40 million cancellation fee, but it would still come out substantially ahead. Whirlpool’s purchase of Maytag promised to make it the world’s largest appliance manufacturer. There were some concerns about it becoming a monopoly in the United States, but the company countered that there was already so much competition from Asia that the prospect of a monopoly was no longer a danger.

The offer from Haier was complicated by the fact that it had been made just as CNOOC—China’s National Offshore Oil Corporation—was attempting to buy the U.S. company Unocal. (This case is discussed in detail in Chapter 2.) The CNOOC offer had sparked a wave of jingoistic nationalism in conservative circles in Congress, and both Haier and CNOOC now faced a rising wave of suspicion about China’s long-term goals. As temperatures rose in Washington, CNOOC quietly dropped the plan to buy Unocal, and Haier also withdrew its offer to buy Maytag.

With Haier out of the way, Whirlpool was able to close the deal, but, according to Market Watch, it cost Whirlpool $2.3 billion in stock, cash, and assuming Maytag’s debts. Almost immediately, questions were raised as to whether Whirlpool had been tricked into spending far more for Maytag than it was actually worth. It subsequently emerged, according to a report in the New York Times, that Maytag had contacted more than 30 potential buyers before signing its initial deal with Ripplewood. None of the other buyers contacted had shown much interest. That added to the impression Haier had succeeded in bluffing Whirlpool into making an unnecessarily expensive purchase.

Haier had lost the bidding war to Whirlpool, but the company had achieved its ultimate objective, which was to make its brand a major player in the American appliance market. The fact that Zhang had accomplished this without having to spend Haier’s capital only made the situation sweeter.

Not long after the bidding war for Maytag, a full-page ad appeared in a glossy women’s fashion magazine. It displayed a stylishly gleaming new refrigerator in a brilliant designer orange. The color looked stunning, but it was the caption that caught the readers’ attention: “The most eco-friendly refrigerator in the world.” The message was not hard to miss. The refrigerator was simply better than the competition. The name on the refrigerator door was “Haier,” exactly the way Zhang Ruimin had wanted it all along.

Haier and Whirlpool Emerge as the World’s Two Leading Giants

In 2005, while Haier and Whirlpool were sparring with each other over the purchase of Maytag, Whirlpool’s annual sales were around $13 billion. By 2009, Haier was registering annual sales of roughly $18 billion. Whirlpool’s gross revenues were still greater than Haier’s, but Haier had emerged as the world’s largest manufacturer of refrigerators and washing machines in terms of units produced, and it was selling its products in 60 countries. In 2009, according to AP–Dow Jones, Haier’s sales in the United States increased by roughly 9 percent. Haier had 29 factories and eight R&D centers overseas and some 50,000 employees worldwide. Zhang Ruimin was quoted in China Daily Information’s Business Daily Update as saying somewhat modestly, “The International market is the best classroom for us to learn the basic rules of doing business overseas.”

In China, Haier benefitted from a government program to subsidize appliance purchases in rural areas. The subsidies were open to foreign companies as well as Chinese ones, but Haier nevertheless managed to capture 32 percent of that market. Haier’s sales to Chinese rural areas in 2009 increased by around 30 percent.

In 2010, Haier mulled over buying the appliance arm of General Electric and in the end decided that it didn’t need what GE had to offer despite the fact that the appliance division was one of GE’s biggest moneymakers. Haier’s reason for dropping the sale was twofold. First, it felt that the price had been set too high, and Zhang was not about to repeat Whirlpool’s extravagant purchase of Maytag and, second, the company was beginning to look closely at the difficulty of blending Chinese management styles with the executives inherited from recently purchased Western companies. Chinese companies were learning that it was easier to teach young Chinese students Western business techniques than it was to get Western senior executives to understand China. In January 2011, Haier did sign a memorandum of understanding with Honeywell, but as in its beginning arrangement with Liebherr, the deal involved access to technology. It covered Honeywell’s support to Haier’s research and development of “smart” home appliances, with an emphasis on low-emission, high-efficiency solutions. Honeywell declared that more than 50 percent of its energy-saving materials, intelligent building techniques, and industry control were in keeping with Haier’s global brand strategy and environmental protection policies.

As for its business strategy, by 2011, roughly half of the Haier Group’s sales were overseas, and Zhang still planned to boost that to two-thirds of the company’s total. The plan was to emphasize three areas for growth: the United States, Japan, and Southeast Asia. The United States is the world’s second most important consumer of household appliances, surpassed only by China. Japan is the third largest consumer, and Southeast Asia is growing fast. The Haier strategy called for establishing production and distribution networks and doubling its research and manufacturing capacities for each of these regions.

Haier was aiming for a 10 percent increase in sales in Japan, along with the launch of 50 new products aimed at the Japanese market. In 2009, after only eight years in Japan, Haier already controlled 40 percent of the market for small refrigerators and washing machines, and it now planned to conquer the market for larger machines.

Among all the Chinese companies trying to expand into the global marketplace, Haier ranked as one of the most successful. Under Zhang Ruimin’s stewardship, it had come a long way from the nearly bankrupt refrigerator factory that had been forced to borrow from neighboring villages to meet its payroll. More important, it was fast on its way to becoming one of China’s best-known brands abroad, earning high marks for quality and excellence, and it had achieved that relying on its own name.