| BUSINESSWEEK ONLINE : JUNE 14, 1999 ISSUE | ||||||||
| ||||||||
 | ||||||||
| INTERNATIONAL -- ASIAN COVER STORY
'We Want to Become a Global Company' (int'l edition) Zhang Ruimin is CEO, chairman, and president of China's Haier Group Co., the country's largest appliance maker. The 50-year-old Zhang heads a company that now turns out $2.1 billion worth of refrigerators, washing machines, freezers, and other white goods. Business Week Asia Editor Sheri Prasso talked with Zhang during a recent he made to New York. Included at the bottom are some follow-up questions with Ms. Yan Mianmian, executive vice-president at Haier. Here are edited excerpts of these conversations. Q: Your sales are slowing from about 50% annually to about 30% growth this year. Why? A: This is a year for adjustment. First we have to do a lot of things with the internal infrastructure, to bring the people up to the level. In the domestic market, when you have 30% market share, it's tougher to grow. There is maturity of product lines. 30% growth will be very easy. Q: Are you experiencing any difficulties with the government asking you to acquire other state-owned enterprises? A: Of course, it is going to be difficult. But there are problems on the surface, and there are REAL problems. They may not have current technology, not enough capital. These are easy problems to fix. The real problem is they do not have the right attitude, do not have positive thinking. You can have the best equipment, but if you are not positive, forget it. As part of Haier's business culture, time is money. Time is very important. In the process of acquiring other businesses, if the problem is only equipment, it is easy to fix. But if they don't feel time is money, they'll say "I'll finish tomorrow." That is not acceptable. Tomorrow there are other things to do. Everyone is given a chance to succeed. We delegate the responsibility. Management are the ones to be questioned about low production, not just the workers. Because of the size of the company, we don't go after every individual. Q: How do you change attitudes? A: In order to change the attitude, to go from the old ideology of "it's not my job, not my department," we offer individuals incentives, rewards. But if at the end of the day, if there is no change, that person will simply be let go. Q: That's difficult in China. How are you able to do it? A: It's very true. It's not just difficult, it's extremely difficult. You can have a company culture, and any group of people within it have their own community. If you cannot change the community, you cannot change the company environment. It's not just changing the thinking, it's also maintaining it. We work on this every day. Q: Such as by using a sledgehammer? Can you tell me that story? A: It was in 1985. I started in December of 1984, as the vice-manager for the Qingdao [supervisory commission for the factory]. I was the fourth person assigned to be in charge of this factory. The prior three walked in and said, "No way, I'm not going to be part of this factory." But I stayed. When I arrived, I realized there was a real problem, and a problem on the surface. The problem on the surface was that there was no money available to pay wages, so I had to raise money to pay wages. The real problem was that the workers had no faith in the company and didn't care. Quality didn't even enter into anybody's mind. The problem was not that that the workers didn't know how to value quality. The problem was that the workers had no faith in the company. They had no better place to go. So I was looking for something to happen to change this. Otherwise, I could talk and talk and nobody would listen. So one day, a customer came in complaining [wanting to return a defective refrigerator], and I was walking up and down with him, and we went through more than a dozen. Here and there were some imperfections. After he left, I did an inspection. Out of a total of 400 refrigerators inspected, 76 of them were of poor quality. I consciously wanted something like that to happen because I needed to change the attitude. So I had the 76 lined up and got together with the factory workers to inspect them, and then after that had a meeting with the workers. It was an open forum, and everybody was welcome to make comments. What should we do? At the end, the consensus was, "We'll discount them and buy them ourselves." Well, at the time, a refrigerator cost the equivalent of two years' worth of salary. I thought, "Well, if I do that, lots of people will want discounted refrigerators." I had 760 workers, and I didn't want to make 760 defective refrigerators [so they could all buy them at discounts]. So I vetoed that consensus. We held another meeting. At that meeting, we determined who was responsible and wrote their names down the front of the refrigerators. This person would take a sledgehammer to it. Being the manager, my name was also on the refrigerators, and I did my share. We wrote down what the probem was and who was responsible. The managers were penalized financially [including me], but the workers were not. The message got through -- there's no A, B, C, and D quality. There's only acceptable and unacceptable. Q: Haier has over 20% of the U.S. market share in small refrigerators, correct? So if you are already doing well, and can keep your costs down exporting from China, why open a factory in the U.S.? A: The number is correct. One of the things we are trying to do is make Haier not just a manufacturing plant, but we want to become a global company. That doesn't mean just selling all over the world. In the U.S., we have opened this sales and marketing office in New York, we have a design center in California, and we are opening a plant in South Carolina. By having all three in the U.S., U.S. consumers will consider this to be an American brand, designed by Americans, made by Americans, and sold by Americans. The U.S. is the single largest market place. We feel ready. We want to design and make it here -- and in Europe as well. Follow-up questions with Ms. Yan Mianmian, executive vice-president: Q: When will your U.S. operations begin? A: Our factory in South Carolina will begin production at the end of 1999 or early 2000. Initially, we will make refrigerators and may move into washing machines, and maybe into air conditioners, depending on the market demands. [Opening ceremony was Friday, Apr. 30.] Q: How are you dealing with price competition and deflation in China? A: Yes, it's true, price competition is hurting everyone's profitability. If you have overproduction, you are extremely vulnerable to price-cutting. If you differentiate your product with special features, and if you open up new markets and new products, you are less vulnerable to the price-cutting situation. That is what we are concentrating on, non-overproduction, differentiation of producst, and new markets. It's not easy, but we work on it every day. Q: But aren't you diversifying too much, too quickly, into such areas as computers and pharmeceuticals? A: We don't call this diversification. Pharmeceuticals and computers are part of our growth strategy. We need to maintain market share. Once you have over 30%, it's hard to grow. We do realize this is an information age, so computers are our starting point. Televisions we make as well. This is also a starting point to get into the digital age. We are preparing to enter into the future with these products. They are all centered around quality of life, consumer goods. This is all part of our growth strategy. Q: When and where do you plan to go public overseas? A: Part of our plan is to enter the world market and to be a publicly listed company outside China. First, however, we have to make our operations efficient, and to grow in a scale strong enough to support it. Since we are currently listed in Shanghai with our Chinese operations, our new listings will be with our new businesses [such as in the U.S.]. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
|  |
 | |
 RELATED ITEMS The Stars of Asia Michael Chan, Chairman, Cafe de Coral Holdings, Hong Kong (int'l edition) ONLINE ORIGINAL: ``We Want to Become a Global Company'' (int'l edition) INTERACT E-Mail to Business Week Online | |||
