Academic journal article Review of Business & Finance Studies

The Internationalization of Chinese Multinationals in the Middle East and Africa: The Case of Haier

Academic journal article Review of Business & Finance Studies

The Internationalization of Chinese Multinationals in the Middle East and Africa: The Case of Haier

Article excerpt

ABSTRACT:

This article investigates the internationalization strategy of the Chinese firm Haier in Africa and the Middle East and addresses strategic implications in Haier's successful entry strategies in these difficult regions. It also draws some useful lessons for the industry incumbents willing to enter these markets. A case study approach of Haier in Africa and the Middle East with an emphasize on the Algerian market is used to shed more light on the striking internationalization patterns of the firm's entry strategy in these developing regions of the globe. The results of this study suggest that, despite the hardship associated with doing business in Africa and the Middle East, Haier unlike its incumbent peers from developed nations and given its international entrepreneurship mindset, political and market acquaintances with these developing nations, seems to follow (1) an accelerated and early internationalization, (2) a dual-entry mode - entry simultaneously in developed and developing countries - and (3) an increased commitment and localization toward these markets.

JEL: M160

KEYWORDS: Internationalization, Haier, China, Africa, The Middle East, Algeria, Emerging Markets MNEs

INTRODUCTION

The last decade witnessed overwhelming growth of the Chinese Multinational Enterprises (MNEs) worldwide, with Haier at the forefront of these firms, in the home appliance industry. In a period of no more than two decades, under the impulsion of its emblematic CEO, Ruimin Zang, the firm from Qingdao transformed its nearly bankrupted firm in 1984 to China's number-one home appliance maker in 2001. In addition, it has constantly maintained its leadership since then. Globally, Haier ranked 3rd among home appliance manufacturers in terms of sales volume, with $23 billion revenue in 2011, trailing only Whirlpool and Electrolux (Euromonitor International, 2010).

China's adherence to the WTO in the late 1990s led to the accelerated internationalization of Chinese MNEs and a growing number of outbound investment projects. Under the 'Go Global' government-led initiative instigated in 1999, the central government aimed to further enhance Chinese firms' international competitiveness by reducing or eliminating foreign-exchange-related, fiscal, and administrative obstacles to international investment activities (Sauvant, 2005). In the following years, a sharp and steady surge in the Chinese outward foreign investments (OFDI) occurred. From a modest US$ 28 billion recorded in 2000, the Chinese OFDI stock worldwide reached US$ 317 billion in 2010, and more than 13,000 domestic companies established 16,000 foreign affiliates, spreading throughout 178 countries (The Chinese Ministry of Commerce, 2010).

Within the context of this globalization rush among the Chinese MNEs, in 1997 Haier developed a formal internationalization strategy, at which point CEO Ruimin Zhang announced the "three one-thirds" goal, which asserted that, out of all Haier products, one-third is made and sold domestically, another one-third is made domestically but sold overseas, and the last one-third is both made and sold overseas (Yi & Ye, 2003: page 187). The company has since relentlessly set up subsidiaries, joint ventures, or sales arms virtually in every part of the globe, even in the most difficult and remote regions. By 2011, the firm had a presence in 160 countries, with 29 manufacturing bases and 16 industrial parks in the U.S., Europe, Asia, The Middle East and Africa (See Table 1).

Unlike its established incumbents in the industry in Africa and the Middle East, Haier has been over the last 20 years harnessing the potentially vast and untapped markets of these countries, establishing sales networks and manufacturing facilities in more than 30 countries within these regions. In effect, over the last decade, Africa and the Middle East's economic growth has quickened, benefiting from growing raw material revenues and market liberalization policies, opening up new business opportunities in a market of 1. …

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