Haier Acquisition of Maytag
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In 2005, sales at appliance manufacturer Maytag were suffering due to a combination of rising material and labor costs, increasing competition, and a decreasing market share. When Maytag received a takeover bid from a private US investment group, they opened up the bidding to other offers. One of the companies considering a bid was Chinas largest home appliance maker, Haier.

Pros:
Cons:
Chinese government policy encouraged its large companies to acquire overseas brands and combine them into a single corporate global brand name. The Maytag bid would fit well with this national goal and with Haiers own stated goal of trying to make Americans feel like Haier was an established US brand instead of an imported Chinese brand.

There was a growing backlash in the US and other areas of the world against this very practice, which threatened to impact sales of Maytag if consumers resented its purchase by a foreign company.

North America was the most profitable Regon for home appliance sales, in which Haier only had a 3% market share. The acquisition of Maytag, with 15% of the market, would have substantially increased Haiers North American share through the existing brand. Haier could have used their higher global presence and experience to bring the Maytag brand to new markets.

The North American market was mature & saturated, and potential for increased growth was less than in other areas of the world like Latin America and Asia, where Haier already had a much larger market share than Maytag. In fact Maytag had very little presence in markets outside the US following an unsuccessful globalization initiative in the 1980s. The burden of moving Maytag out of the US would have been borne entirely by Haier. Also, Haier had to consider whether it would be more advantageous to try to grow the Haier brand in North America independently in the same way that Sony and Samsung had, by establishing emotional relationships with customers instead of trying to do it through volume and acquisitions.

Acquiring Maytag would prevent another Asian competitor from doing so and possibly gaining an advantage over Haier. It would have been the fastest way to achieve the desired goal of increased opportunities in US, rather than trying to create them on their own.

Haier had experience in expanding its business through manufacturing and export, but no experience merging with another existing company of the size and age of Maytag. Maytags strategy involved marketing the same appliances under different sub-brand names, like refrigerators by both JennAir and Amana. Haiers strategy was totally different, with multiple product lines under the single brand. Haier was building a reputation on innovation and niche markets, like small dorm freezers, while Maytag was offering traditional appliances with a reputation for reliability. Haier needed to decide if it would be feasible to undertake the challenge of keeping both of these two very different strategies, or try to incorporate them somehow into one. Additionally, Maytags operating income had declined due to major restructuring efforts. Their net sales and gross profits had also declined and their market share had been eroding since 2001.

Appliance manufacturing carries high fixed operating costs. Haier had already started some limited production of its own appliances in the US (allowing a “made in US” label to be affixed to Haier products) and could have further leveraged Maytags existing production facilities in the US and Mexico.

Raw materials, shipping, and labor are the most important variable costs. Maytags factories were only operating at 60% and they had recently laid off some of their workforce. Maytag had started outsourcing some of its manufacturing to South Korea due to rising labor costs in the US, and it might have been more advantageous for Haier to move the Maytag brand manufacturing to its facilities in China where labor was cheap enough to offset the other costs. However, the unionized workforce and

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Haier Acquisition Of Maytag And Essay Haier Acquisition Of Maytag. (June 30, 2021). Retrieved from https://www.freeessays.education/haier-acquisition-of-maytag-and-essay-haier-acquisition-of-maytag-essay/