Building market chains at Haier

Haier is a Chinese manufacturer of consumer appliances, that is redefining how we think about Chinese enterprises. Beginning its life only a few decades ago as a collective enterprise in Qingdao, and after flirting with bankruptcy in the mid-1980s, Haier has turned itself around in a way that suggests the competitive potential that lies untapped in the Chinese economy. Under the leadership of Mr. Zhang Ruimin and his management team, Haier has moved recently from technical and service innovation to managerial innovation. This case describes the most recent of these managerial initiatives: the construction of accountability chains from the market directly into the deepest corners of the enterprise. Market Chains are a means of spreading an entrepreneurial culture throughout an organization, even to those internal service parts that typically never see the customer or feel the market forces. If Zhang Ruimin is to turn Haier into an organization that is globally competitive, unleashing the entrepreneurial energies of Haier’s workforce, and building accountability into an organization that has not emphasized this in the past, is a must. This case establishes the plans that Mr. Zhang has articulated regarding this managerial transformation, and the teaching objective of the case is to explore the mechanisms of the proposal and to suggest a suitable implementation scheme. As Haier moves into a new world of global competition, the need to compete on the basis of knowledge, as well as product, is fast becoming a necessity. At the conclusion of the case, a Haier official speculates on what it will take to apply the market chain philosophy to knowledge flow? This question raises issues of managing knowledge that are applicable not only to Haier, but to all organizations who are ambitious in redefining how competition will play-out in the 21st century.