Summary
Due to the high degree of commercialization and its high level of competitiveness, the home appliance industry has been considered the leader in Chinese manufacturing. The home appliance industry development strategy has a profound influence on many Chinese companies.
Founded in 1968, for 50 years Midea Group Co., Ltd. is known as "The Champion" in the home appliance industry. It has collaborated to improve the quality of life of people, through experience, new technologies, and continuous innovation. Midea has grown from a small company to a world-class company in the white goods area, with more than 130,000 employees worldwide; operates under a research, manufacturing, and marketing platform. Today, it is the world's leading white goods manufacturer and has the ability to offer the best service to customers around the world.
What are the key factors for Midea's success? What is your development strategy like?
This work analyzes Midea's development strategy, summarizing its success experiences.
Keywords marketing, competition, development strategy, household appliances.
Analysis of the development strategy of the Midea company
Introduction
Midea Group Co., Ltd. was established in 1968, but entered the home appliance industry officially in 1980. Midea always maintains strong, steady, and rapid growth. In the 1980s, its average growth rate was 60 ％, and in the 1990s, it was 50 ％. Since the 21st century, its annual average rate has been above 30 ％. Today, home appliance products are outstanding in the Chinese market. It is one of the top 500 companies according to Forbes and manufactures 20 ％ of the world's air conditioners. Midea was selected as Top Ten Listed Companies in China. At the end of the year 2017, its market value reached 3.63 billion yuan, and the annual profit was more than 100 ％.
What are the key factors for Midea's success? What is your development strategy like?
The objective of this work is to analyze Midea's development strategy and summarize its experiences of success.
The work is divided into three sections. First, the main businesses of the Midea company are presented; then, the focus of its development strategy and finally, the direction and leadership are analyzed.
Midea Group's main businesses
Midea Group Co., Ltd. is a technology group that produces excellent consumer electrical appliances, air conditioners and heating, robotics, industrial automation systems, and smart supply chains. The company provides a wide range of products and services, including kitchen appliances, refrigerators, washing machines, and various types of small appliances as the core of consumer electrical services.It also has a line of business dedicated to home and central air conditioning, heating and ventilation systems. The Kuka Group, Joint Venture of Anchuan Robot and others, form the core of the robotics and automation systems business. Ande and Zhilian are service platforms for integrated solutions and provide intelligent supply chain service.
Midea insists on the principle of "creating value for customers", strives to create a better life. It focuses on constant technological innovation to improve the quality of products and services. Every year, it provides satisfactory products and services for nearly 300 million users, key customers in all fields and strategic partners, makes life better, more comfortable.
Midea is a global company, its businesses and clients have been around the world. To date, it has more than 70,000 employees worldwide, more than 200 subsidiaries, more than 60 overseas branches and 12 strategic units. At the same time, Midea is the main shareholder of the Kuka Group, Global Leading Robot Automation Company.
Midea is the most highly rated appliance brand for three consecutive years. Achieved S & amp, Fitch, Moody's Three International Credit Rating. The rating maintains a world leadership position. According to 2017 Fortuna Top 500, Midea was Ranking 450, being 481 in 2016 than last year. According to Forbes 2017 Global 2000 Top-Up, Midea was ranked 335, 67 places higher than in the previous year. According to WPP, the world's largest communications services group, the annual ranking of 100 of Brandz's 2018 most valuable Chinese brands, Midea's ranking already reaches 26th place on the list.
The home appliance industry
The development of the home appliance industry has the following characteristics:
(1) Thanks to macroeconomic fluidity operations, industrial structure and consumption upgrade, new commodity emergence and many other positive factors, the home appliance industry continually reinforces technical innovation and product structure adjustment, facing pressure of the cost of raw materials and real estate regulation: the main operational indicators have achieved constant growth.
(2) The purchase permeability in the Home Device Network creates a new record.
(3) It is based on internet technology, hardware platforms, software and cloud computing. The realization of the remote control, the interconnection between electrical appliances, self-learning and other functions of the smart home ecosystem gradually become the mainstream.
(4) The concept of health is deepened.
(5) The kitchen, bathroom and living appliances will continue to drive the growth of the industry.
Robotics and the automation industry:
Since 2013, China has been the first country of Consumer Robot. Compared to other countries, the density of robots in China remains relatively low. According to the World Health Organization, in 2050 China will have 35 ％ of the population over 60, becoming one of the oldest countries in the world. The labor force shortage and rising cost of hard work will also propel industrial companies in the direction of automation, including industrial robots and smart equipment. Their demands are going to increase rapidly.
1) Midea is the world leader in the home appliance industry, can provide users with full line products and category service programs. For example, the Midea microwave oven has a steam function that best meets customer needs.
2) Midea multiplies to build a global “R&D” arrangement and a multi-level “R&D” system. It has the investment of advanced technology that is based on user experience and product function. She has founded 20 research centers in 9 countries, including China. Its "R&D" staff amounts to more than 10,000, of which more than 300 are foreign experts.
3) Midea has stable communication channels and an intelligent system for the supply chain: these provide a solid guarantee for the constant growth of the business in the company's line.
4) You have a solid foundation for being an industrial internet company.
5) The corporate governance mechanism and the effective incentives mechanism have established the firm basis for the sustainable and stable development of the company.
Midea Group's development strategy focus
The five forces of M. Porter
The five forces of Michel Porter can be summarized as follows for the Midea company:
1) Negotiating capacity
Due to the number of manufacturers of household appliances, the competitions are very fierce. The number of suppliers is less and buyers can choose fewer alternatives. Each buyer cannot be a major customer of the supplier. In this sense, the negotiating capacity of suppliers is relatively high.
2) Competition between existing companies
There is very high competition among companies in the sector, which is evident in that:
- The growth rate of the economic benefits of the industry is decreasing. Products are not very differentiated, lower operating costs. Production capacity has evolved from scarcity to excess, and products, from increasing quantity to increasing of quality. The home appliance industry is an industry that has a high investment, especially establishes its brand, needs high amounts of capital and technology, therefore, there are barriers to entry and exit.
3) Threat of new companies
Midea is a brand company, now it has no threats from new companies.
4) Threats to alternative products
For Midea, there is strong competition for similar products.
Competitive strategy approach
Midea's overall strategic goal is to become a leader in the white appliance industry. Satisfying the consumer's quest for home appliance diversification is their starting point.
The general strategy is based on:
- The corporate strategy:
The electrical appliance industry is Midea's main business, insisting on the belief “to be big and strong, with a diversity of products”, which constitutes the main line of its basic strategy.
Internally, it has a strong e-marketing team, at the same time, it has a strong sales network. In addition, it has the brand advantage and favorable industrial capacity.
Midea's products not only include air conditioners, refrigerators, washers, and appliances, but also extend to the personal care aspects, to expand the competitiveness of the market and create greater value for the company.
- Marketing strategy
In the competitive strategy part, Midea is always looking for competitive advantages from "all directions", insisting that "priority of cost, product technology and appearance drive the trend". In the sales channel, the point of sale, promotion and advertisement, etc., they obtain resources and capture the public's attention.
Here are some examples of Midea's marketing strategies:
- Midea leads distributors by the hand to open stores; on display there is a full range of products, promotion and service, brand image is promoted: it is the innovation of the sales channel. During the holidays, Midea has a large number of promotional activities, and the media Promotionals are diverse. For example, participating in the lottery, organizing responses online. From low price to emphasis on the value and quality of products. Today, Midea leaves low-price competition, investigates consumer demand, introduces technical personnel to produce more suitable products, takes advantage of new market opportunities.
- The financial strategy: it is based on a strong investment and financing through own capital.
- The investment strategy
The investment strategy is aimed at expanding the productive and technological capacities of the household appliance industry. It is important for Midea to invest in advanced technologies, in research and development.
- The financing strategy
With the completion of the operations of the company, the necessary funds are raised for its operation and to finance investments. In the financing policy, the financial risk and the capital structure of the company are considered, with the aim of reducing the cost of financing.
- The bidirectional shortening of the supply chain strategy
The speed and cost of logistics in the supply chain are always problems for companies. On the one hand, Midea has worked on the inventory of raw materials in search of zero inventory standards. On the other hand, it establishes a reasonable inventory as its objective, accelerates the operation of capital and resources, and takes advantage of supply chain integration costs.
- Dividend distribution strategy
A stable dividend policy is applied to maintain and increase the value of your shares on the exchange.
- The corporate governance mechanism and the effective incentive mechanism are important for the development of the company. Strategic cooperation
Midea continues to support the relationship between governments, dealers, clients, etc. Through charitable social activities, establish a good corporate image. It also takes advantage of the press and the media, promotes the popularity and reputation of the company.
In 2017 Midea stated that it had cooperation with the Elix company and introduced the German brand AEG to China. In addition, in the same year, Midea company and Bi Guiyuan company made collaboration agreements.
Management and leadership at Midea
In 1968, Midea Group Co., Ltd. was founded by He Xiangjian. It already has 50 years of history. In the process of its development, it encountered many difficulties, but in the end, Midea has become a well-known brand in the world. Their successes are due to the right direction and leadership. He Xiangjian has many leadership qualities. The most relevant are: insight, the global concept, the spirit of adventure and is capable of making effective strategic decisions in different situations.
In the mid-1980s, while fans were popular in China, he anticipated that air conditioning would replace the fan. In 1986, air conditioning began to explode. So Midea is the first Chinese company to produce and sell this product.
The microwave emerged in the 1990s in China, and today, sales continue to rise. At the time, popular brands were Granz, Haier, LG, and Panasonic. In 1999 Midea entered the microwave market and after two years replaced LG. Through market research and analysis, He Xiangjian found the purchasing power in the villages, but did not achieve the expected sales in this market. In 2008, the government published the policy "Household appliances come into towns", Midea also carried out the activity to boost consumption, and passed the new functions and new knowledge to consumers. Midea was not interested in the sale, but was interested in how many people participated in the activity. They had the confidence to form the market in the towns.
According to information from the microwave division, in the context of the global financial crisis, Midea's microwaves still have high sales. Faced with fierce competition, LG withdrew the microwave industry in 2006. After a year, Haier announced that its microwave production line was on hold.
conclusion ones
The key factors for the success of Midea Group Co., Ltd. they are several: from the president to the ordinary employee, they have a complete system of operations. Each department has its professional mission, each link has the appropriate strategy. Midea's development strategy plays an important role and responds to its overall strategic objective.
Of course, direction and leadership are important in the success of the company. Its chief executive has leadership qualities. Most relevant is insight, the global concept, the spirit of adventure and is capable of making effective strategic decisions in different situations.
From the point of view of the strategic environment, industrial development and competitiveness, the Midea market is large, because the concept of health is deepening, the kitchen, bathroom and living appliances will continue to drive the growth of the industry. With the aging of the population, the demand for Midea will continue to increase.
Bibliography
Strategic Competition, Micael E. Porter, 1980
Competitive Advantage: Creating and sustaining superior performanceMicael, E. Porter, 1985
The 2017 Annual Report of Midea Group., Ltd. 2018
Financial Strategy and Financial Policy of the Business Group, Zhang Yanbo, 2002
Midea's website: www. Chinamd.com
Financial Management Estreatégica, Luo Fukai, 2000
HBR's 10 Must Reads on Strategy, Micael E. Porter, 2011
Stratehy and Compeition: The Porter Collection (3 Items), 2014
Midea's website: www. Chinamd.com
Strategic Competition, Micael E. Porter, 1980
Financial Strategy and Financial Policy of the Business Group, Zhang Yanbo, 2002
The 2017 Annual Report of Midea Group., Ltd. 2018
