Lecture Notes: The Evolution and Strategy of General Electric and Haier

Introduction

• General Electric (GE) is a highly respected global brand known for its significant impact on domestic American life.
• In the early 1990s, GE attempted to acquire a small Chinese refrigerator company but was unsuccessful.
• Over time, it was GE's appliance unit that faced decline due to a focus shift to finance and aerospace.

GE's Historical Contributions

• Founded in 1892 by Thomas Edison, co-creator of the light bulb.
• GE was pivotal in manufacturing for electricity production across the U.S.
• Introduced the monitor top refrigerator in 1927—the first affordable household refrigerator.
• Played a significant role in changing American home life, reducing the need for daily shopping.

Jack Welch's Impact on GE

• In 1981, Jack Welch became GE's youngest CEO, instigating a radical restructure.
• His philosophy: be number 1 or 2 in every market, leading to significant downsizing.
• Welch emphasized the development of talent across organizational levels.
• By 2001, GE had transitioned focus to finance and aerospace.

GE Appliances' Decline

• Post-Welch, GE appliances no longer fit into the company's strategy.
• There were ongoing rumors about the appliance division being sold off.

Haier's Rise

• Qingdao Refrigerator Factory, later Haier, was struggling in the 1980s.
• CEO Zhang Ruimin implemented performance-linked pay and destroyed defective products to reform quality perception.
• By the late 1980s, their fridges were recognized as the best in China.
• Became a symbol of a new quality standard in China.

Haier's Business Model and Expansion

• Adopted a management model called "Rendanheyi" dividing into micro enterprises focusing on customer needs.
• Laid off 10,000 employees to maintain focus and efficiency.
• Entered international markets by acquiring brands like Sanyo and Fisher & Paykel.
• Struggled to gain significant market share in the U.S.

Acquisition of GE Appliances

• In 2016, Haier purchased GE Appliances for $5.6 billion.
• The acquisition aimed to strengthen Haier’s presence in the U.S. market and leverage GE’s brand equity.

Post-Acquisition Strategy

• GE Appliances retained autonomy, which was crucial for cultural integration.
• Focus on breaking the company into micro enterprises to enhance innovation and responsiveness.
• Emphasis on the Internet of Things, aiming to create connected smart home devices.

Challenges and Innovations

• GE Appliances needed to compete against established brands in the U.S. like Samsung and LG.
• Developed innovative products like the kitchen hub, a smart appliance facilitating family connectivity.
• Continued focus on open innovation through initiatives like First Build, encouraging community input and rapid prototyping.

Future Prospects

• GE Appliances showing positive growth post-acquisition, reporting a 20% profit increase.
• Haier aims for GE Appliances to become a truly global brand.
• Future challenges include adapting to changing consumer preferences and maintaining innovation momentum amid leadership changes.