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With revenues of around $9 billion in 2002, electronics giant Haier Group is the 16th-largest company in China. But the top 15 companies are all state-run, making Haier the largest private company in China.

Haier is the world's largest producer of large home electronics products, such as refrigerators or washing machines, and the fifth-largest overall in the electronics industry.

Since 1984, when Zhang Ruimin, board chairman and chief executive of the company, took the helm, Haier's revenues have grown 27,000 times over. "Korean companies said we are too competitive to join forces with," said Wu Kesong, Haier's vice chairman of board of directors, when the JoongAng Ilbo met him Feb. 9. at the company headquarters building in Tsingtao, Sandong province. Haier hopes to enter the Korean market and is considering forming partnerships with Korean companies, but they seem to evade Haier's inquiries, he said.

Mr. Wu also dismissed the argument that Haier's rapid growth is purely due to cheap prices. "Many Korean companies have entered China. But Haier's products are sold at higher prices. And they sold more," he said.

Haier's speedy growth is attributable to Mr. Zhang's philosophy of "entering a difficult advanced market first, then go to easy, underdeveloped markets." When other Chinese companies were trying to make inroads into Southeast Asian countries in 1999, Mr. Zhang invested $300 million in South Carolina to construct a refrigerator factory. Haier also seeks to globalize its product portfolio in the United States. The company thought that its technology fell short of fully competing with industry leaders in the large-refrigerator market, thus it started by selling small ones, a niche product. Haier later expanded its product lines to make larger products.

The strategy was exceptionally successful. Last year, Haier accounted for 35 percent of the small-refrigerator market in the United States, and 20 percent of the total market.

The same strategy was adopted in the Chinese market. Haier tried to capture large cities, such as Beijing and Shanghai first, where world renowned products are concentrated, then expanded to other regions in China.

Haier has the largest number of overseas operations among Chinese companies. It has production bases in the United States and Uzbekistan, along with design and distribution centers.

It also has 60,000 sales outlets around the world, and a total of 18 design centers, including one in Tokyo.

But Haier is not satisfied. Late last year, Mr. Zhang announced that the company will increase the number of its overseas production bases. "Our goal is to be the No. 1 home electronics company in the world," Mr. Zhang said. "General Electronics is our rival."

Such ambition is based on Mr. Zhang's "Wolf Theory." He sees foreign companies as wolves. To counter wolves, China must become a wolf as well, he says. In other words, in reacting to foreign companies rushing to China, China must go out to the world, Mr. Zhang said.

Which is why Mr. Zhang stresses brand power. He believes that Haier can compete with multinationals only when it becomes the global top brand. In early 1990s, the company started to create a television animation series "The Haier Brothers," which featured corporate characters. As the animation was aired on television, for which the company invested $3.6 million over eight years, Chinese people began to think of Haier as a quality brand.

As a result, Haier was named the best Chinese brand for the last two years, and was ranked 95th out of 100 by World Brand Laboratory recently. Another characteristic of Haier is its strict implementation of a merit-based compensation system. In the display room of Haier's headquarters, each product was displayed with the pictures and the names of the developers. "Each researcher is another company," said Mr. Wu. If the researchers think that a product that they develop is commercially viable, Haier is committed to supporting them.

If researchers need workers, the company helps them select among the company human resources pool. If researchers succeed, they can pocket the profits, minus what the company provided to get the project started. But if the workers fail, they will have to "bear the responsibilities," Mr. Wu said. At Haier, the fixed income base of workers accounts for only 30 percent of annual wages. The rest are determined by performance.

Late last year, a Chinese newspaper selected Mr. Zhang to top the list of the 25 most influential entrepreneurs in China. But it also pointed out challenges that Haier is facing: The company is losing profitability and is being chased by other rapidly emerging electronics companies, such as TCL.

From Joong Ang Daily

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