Harvard Case - Hisense-Hitachi Joint Venture (A): Expanding Internationally
"Hisense-Hitachi Joint Venture (A): Expanding Internationally" Harvard business case study is written by Paul W. Beamish, Liu Su. It deals with the challenges in the field of General Management. The case study is 11 page(s) long and it was first published on : Oct 13, 2016
At Fern Fort University, we recommend that Hisense-Hitachi pursue a phased international expansion strategy, focusing on emerging markets with high growth potential and a strong demand for affordable, high-quality appliances. This strategy should prioritize building brand awareness and establishing strong local partnerships, while leveraging technology and analytics for data-driven decision making.
2. Background
This case study focuses on the Hisense-Hitachi joint venture, established in 2006 to combine the strengths of two leading appliance manufacturers. The venture aimed to leverage Hitachi's brand recognition and technological expertise with Hisense's manufacturing capabilities and cost-effectiveness. The case study explores the company's decision to expand internationally, specifically into Southeast Asia, and the challenges they faced in navigating the complexities of a new market.
The main protagonists in the case are:
- Liu Hongxin: CEO of Hisense-Hitachi, responsible for leading the company's international expansion efforts.
- Toshiaki Tanaka: President of Hitachi Appliances, providing guidance and support for the joint venture.
- The Hisense-Hitachi team: The team responsible for implementing the international expansion strategy, facing challenges in market research, product adaptation, and cultural sensitivity.
3. Analysis of the Case Study
Strategic Framework:
The analysis utilizes a combination of frameworks to provide a comprehensive understanding of the situation:
- SWOT Analysis: Identifying the company's strengths (strong manufacturing capabilities, cost-effectiveness), weaknesses (limited brand recognition in international markets), opportunities (growing demand for appliances in emerging markets), and threats (intense competition, fluctuating currency exchange rates).
- Porter's Five Forces: Examining the competitive landscape in Southeast Asia, considering the bargaining power of buyers and suppliers, the threat of new entrants and substitutes, and the intensity of rivalry among existing competitors.
- Globalization Strategies: Evaluating different approaches to international expansion, including exporting, foreign direct investment, joint ventures, and licensing, considering their respective advantages and disadvantages.
Key Findings:
- Market Potential: Southeast Asia presents significant growth opportunities for appliances, driven by rising disposable incomes, urbanization, and a growing middle class.
- Competitive Landscape: The market is highly competitive, with established local players and global giants vying for market share.
- Cultural Differences: Navigating cultural nuances in marketing, product design, and distribution is crucial for success.
- Technological Advancement: Leveraging technology and analytics is essential for optimizing operations, understanding consumer preferences, and staying ahead of the competition.
4. Recommendations
Phased International Expansion Strategy:
- Market Selection: Prioritize emerging markets in Southeast Asia with high growth potential, strong demand for appliances, and a favorable regulatory environment. Focus on countries like Vietnam, Indonesia, and Thailand.
- Local Partnerships: Establish strategic partnerships with local distributors, retailers, and service providers to gain market access, build brand awareness, and adapt products to local preferences.
- Product Adaptation: Offer a range of products tailored to local needs and preferences, considering factors like climate, household size, and price sensitivity.
- Marketing Strategy: Develop a multi-channel marketing strategy leveraging both traditional and digital channels, including social media, online advertising, and local partnerships.
- Technology and Analytics: Implement data-driven decision making by leveraging technology and analytics for market research, customer segmentation, and performance tracking.
- Organizational Structure: Establish a dedicated international team with expertise in cross-cultural management, market research, and product development.
Timeline:
- Phase 1 (Year 1-2): Focus on market research, partner selection, and product adaptation for selected markets.
- Phase 2 (Year 3-4): Begin gradual market entry with pilot launches, leveraging local partnerships and building brand awareness.
- Phase 3 (Year 5 onwards): Expand operations, increase market penetration, and explore new markets within Southeast Asia.
5. Basis of Recommendations
The recommendations are based on the following considerations:
- Core Competencies and Mission: The recommendations align with Hisense-Hitachi's core competencies in manufacturing, product development, and cost-effectiveness, while supporting the company's mission to provide high-quality appliances at affordable prices.
- External Customers and Internal Clients: The strategy focuses on meeting the needs of customers in emerging markets by offering products tailored to their preferences and providing excellent customer service through local partnerships.
- Competitors: The recommendations address the competitive landscape by leveraging technology, building strong partnerships, and adapting products to local needs, allowing Hisense-Hitachi to differentiate itself from competitors.
- Attractiveness: The strategy is expected to be profitable, considering the high growth potential of emerging markets, the cost-effectiveness of Hisense's manufacturing capabilities, and the potential for economies of scale.
6. Conclusion
Hisense-Hitachi has a strong foundation for success in international markets. By adopting a phased expansion strategy, focusing on emerging markets, building local partnerships, and leveraging technology and analytics, the company can achieve sustainable growth and establish a strong foothold in the global appliance market.
7. Discussion
Alternatives:
- Rapid Expansion: This alternative involves aggressively entering multiple markets simultaneously, potentially leading to resource strain and operational challenges.
- Joint Venture with Local Companies: While this option offers access to local expertise and market knowledge, it can also lead to challenges in controlling operations and maintaining brand consistency.
Risks and Key Assumptions:
- Political and Economic Instability: Fluctuations in political and economic conditions in emerging markets could impact the company's operations.
- Competition: Intense competition from local and global players could hinder market penetration.
- Cultural Sensitivity: Failure to adapt products and marketing strategies to local cultural nuances could lead to customer dissatisfaction.
Options Grid:
| Option | Advantages | Disadvantages |
|---|---|---|
| Phased Expansion | Gradual entry, controlled risk, resource optimization | Slower growth, potential missed opportunities |
| Rapid Expansion | Faster growth, potential for market dominance | Resource strain, operational challenges, higher risk |
| Joint Venture with Local Companies | Access to local expertise, market knowledge | Loss of control, potential brand inconsistency |
8. Next Steps
- Conduct in-depth market research to identify priority markets and potential partners.
- Develop a detailed business plan outlining the phased expansion strategy, including financial projections and key performance indicators (KPIs).
- Recruit and train a dedicated international team with expertise in cross-cultural management, market research, and product development.
- Establish a pilot program in one or two selected markets to test the strategy and gather valuable insights.
- Continuously monitor market trends, competitor activities, and customer feedback to adapt the strategy and ensure ongoing success.
This phased approach allows Hisense-Hitachi to manage risks, optimize resources, and build a strong foundation for sustainable growth in international markets. By leveraging technology, building strong partnerships, and adapting to local needs, the company can achieve its goal of becoming a leading global appliance manufacturer.
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Case Description
In June 2014, Hisense of China and Hitachi of Japan were considering whether their 11-year-old joint venture (JV) should once again assume responsibility for its international sales. After developing a solid central air-conditioner market share in China, in 2009, the JV began to sell in various overseas regions but struggled. In April 2012, the partners agreed to have a Hisense subsidiary (the HIMC) assume full responsibility for selling the JV's products overseas. However, over the next two years, HIMC's performance in selling the JV's products overseas was unsatisfactory. In response, the partners began to discuss whether they should have the JV sell its own products again overseas. Of immediate interest was the Southeast Asian market.
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