Case Study I

HAIER’s foray into International Markets :

In the late 1990s, the Haier group (Haier) was the leader in the Chinese consumer appliances market (with a 39.7%, 50% and 37.1% market share in refrigerators, air-conditioners and washing machines respectively in December 1998). But deflation in the Chinese economy slowed sales.

ut deflation in the Chinese economy slowed sales growth from 50% in 1998 to around 30% in 1999. Haier decided to look for new markets. Since the US had a large demand for consumer appliances, Haier entered the US market in 1999. Analysts were doubtful about Haier's acceptability to American consumers, as there was a general perception in the US that Chinese goods were of low quality. Haier, however, was confident that with its product differentiation strategy it would be able to create a positive image for its products among the American public. In the early 2000s, the consumer appliances market in the US started hotting up as Haier entered the market. By 2009, Haier products were sold in 9 of the 10 top retail chains in the US.

With Wal-Mart agreeing to stock Haier products, many analysts believed that Haier would be able to shake up the US consumer appliances market. In 2009, Haier had a 6% market share in the US refrigerator market; it stated that it was aiming for a 15% market share by 2015.

The history of Haier dates back to 1984 when Ruimin Zhang (Zhang), a bureaucrat with the local government was asked to take charge of Qingdao General Refrigerator Factory, a state-owned enterprise that is manufacturing refrigerators for sale in China. When Zhang took over the management, the company was on the brink of bankruptcy, with no funds to pay the salaries of its employees or to invest in new product development. When Zhang took charge of the company, he realized that the company did not look after the quality of its products; nor did it bother about customer satisfaction. In 1985, Zhang started importing technology from a German firm and began manufacturing technically sophisticated refrigerators.

Zhang emphasized the elements of customer satisfaction and quality control in the company. In 1985, when a customer complained about the poor performance of his refrigerator, Zhang conducted a quality check and found that out of 400 refrigerators inspected, 76 were defective.

He had all the defective refrigerators destroyed with a sledge-hammer. According to Zhang, this made the workers realize that quality is of only two types - acceptable and unacceptable. In 1989, the company changed its name to Qindao Refrigerator Co. Ltd., and it was restructured with funds raised from banks and government agencies. In 1991, the company once again changed its name to Qindao Haier Group Co. and in the same year it merged with Qingdao Air-conditioner Plant and Qingdao Freezer General Plant. In 1992, the company set up Qingdao Freezing Equipment Co. In the same year, it merged with another previously state-owned enterprise Qingdao Condenser Factory, which manufactured refrigerator condensers.

In the same year it became the first company in China to get ISO 9001 certification, and the company's name was changed to the Haier Group. In 1993, Haier went in for an IPO of RMB 50 million and got listed on the Shanghai Stock Exchange (SSE).

During the mid-1990s, Haier began to grow through mergers and acquisitions. In 1995, it merged with Red Star Electric Appliance Company (and five of its subsidiaries). This company manufactured washing machines. It also acquired Wuhan Elec-appliance Co., which manufactured freezers and air conditioners. Between 1995 and 1997, Haier acquired seven companies and started exporting its goods to foreign markets.

By 1997, Haier was the number one consumer appliances brand in China and the market leader in all its product segments, which included refrigerators, washing machines, microwave ovens and freezers and its revenues were reported at $1.15 billion (10 billion Yuan)...

Haier's Competitors in the US Market

USA was the world's largest and most competitive market for consumer appliances. The consumer appliances market can be segmented on the basis of products into kitchen appliances and home comfort products. Included in kitchen appliances are products such as dishwashers, disposers, compactors, food preservation appliances, refrigerators, freezers etc.

In the home comfort segment are included products such as room air-conditioners and dehumidifiers. The home appliances market in the US was dominated by American companies, namely GE Appliances (a subsidiary of General Electricals), Whirlpool and Maytag. The only strong foreign player in this market was Sweden's Electrolux. GE Appliances, Whirlpool, Maytag and Electrolux together accounted for around 98% of the 9 million standard refrigerators sales in the US every year. In the 1990s, many Asian players such as LG Electronics and Samsung entered the US market in a big way. The big four companies in the US market concentrated on the high- end market comprising full-size refrigerators and washing machines, since the margins in this segment were high...

Strategies in the US Market

Haier decided to compete with the US brands on the quality plank rather than on price. However, analysts felt that it would be very difficult for the company to win over American consumers who associated Chinese goods with low quality. To strengthen its presence in the US market, Haier adopted a localization strategy.

It opened a design center in the Los Angeles and employed US designers for designing its products for the US market. Haier also opened a marketing center in New York. The company focused on enhancing consumer awareness about the company and its products. Commenting on Haier's strategy, Zhang said, "We want consumers to feel that Haier is the one company that comes closest to satisfying their needs." For instance, none of the consumer appliances companies in the US offered a compact refrigerator to satisfy demand from college students who could not afford normal size refrigerators...

Going High-End

Most analysts felt that Haier would feel the real competition only when it entered the high-end market. In the compact refrigerator segment, Haier did not face much competition from established players in the US, who did not focus on the low margin segment.

However, the major US players were keeping track of Haier's activities. Commenting on the competition from Haier, GE Appliances Chief Executive, Jim Campbell said, "I take it very seriously. They may be producing only 200,000 refrigerators per year now, but that's going to get bigger."

On the negative side, some analysts felt that Haier lacked the brand image to make a dent in the high-end segment. They pointed out that in general US consumers were brand-conscious, and this was especially true in the case of high-end products. The lack of a positive brand image in this consumer segment would probably make it difficult for Haier to succeed in the high-end markets. Analysts felt that Haier had an additional weakness in its distribution and service centers...

Future Prospects

Despite a few reservations, analysts too were, by and large, upbeat about the company because of its strong performance in breaking into the American market in a short time.

Said Nicholas Heymann of Prudential Securities, "Over five years, it could become a force." With quality products and lower prices, it was felt that Haier would be able to garner a sizeable market share in the US. Haier's experience in the geographically vast and diversified Chinese market would serve it well in catering to the US market.

However, a major worry for Haier is how to fund its expansion plans. Increasing competition in the domestic markets is bringing Haier's finances under pressure.

Questions 2:

Is it possible for an organization like Haier to sustain its competition in brand conscious and quality conscious markets such as US and other countries?

Questions 3:

What are the countries that you would suggest Haier should concentrate upon? Why?

Oscar is a resident of Country B. Country B does not have a tax treaty with the USA. Oscar is an employee of a private company in country B and his employer sends him to the USA in order to do certain work needed to be done in the USA.
Here are his days of presence in the US:
• September 1, 2018, until April 15, 2019. During this time he made $200,000.
• January 1, 2019 until June 30, 2020. During this time he made $55,000.
• He does not return to the USA after this time.
Other facts:
• During each of 2018-2020 he had $155,000 of country B source interest income (would be subjected to the ordinary income tax rate here in the US if taxed here).
• The tax rates in country B are lower than of the USA by a substantial amount.
• The amounts earned that are US source earnings will not be taxed in country B at the same time.

a. Describe his tax status here in the USA and what taxes he would have to pay here. I am not interested in the computation of tax, but what income is subjected to US tax and what type of US taxes he would be subjected to on that income.

b. Assume that country B does have a tax treaty with the US that uses the terms of the 2016 US Model tax treaty. Discuss how this changes things.

EJH Cinemas, a movie theater next to your university, attracts two types of customers: those who are associated with the university (students, faculty, and staff) and locals who live in the surrounding area. There are 10,000 university customers interested in purchasing movie tickets from EJH Cinemas, with a maximum willingness to pay of $7 per ticket. There are 20,000 local customers interested in purchasing tickets, with a maximum willingness to pay of $9 per ticket. The movie theater incurs a constant marginal cost of $4 per ticket. For simplicity, assume each customer purchases, at most, one ticket.

a. What will be the amount of EJH Cinemas’ total revenue if the price is $7 per ticket?

b. What is the amount of consumer surplus if the price is $7 per ticket?

c. What will be the amount of EJH Cinemas’ total revenue if the price is $9 per ticket?

d. What is the amount of consumer surplus if the price is $9 per ticket?

e. If EJH Cinemas decides to practice price discrimination, charging $9 for a standard ticket available to everyone but only $7 for a ticket if you show your university identification (students, faculty, and staff), what will be the movie theater’s total revenue?

f. If EJH Cinemas decides to practice price discrimination, charging $9 for a standard ticket available to everyone but only $7 for a ticket if you show your university identification (students, faculty, and staff), what will be the amount of consumer surplus?

g. If you were in charge of EJH Cinemas, what pricing scheme should you use?

please show the solution.

You are the director of an admission office. Your job every year is to decide the number of offer letters to issue to undergraduate degree applicants. For the academic year 2016/2017, the university has a capacity to enroll 7,200 undergraduate students, but you received more than 20,000 applications. However, you know from past year records many students also got offers from other good schools in Canada and the US. The yield rate for this university is far less than 100%.

Assume the university has spent large amount of sunk cost in its undergraduate program for a designed capacity to enroll 7,200 students, such as upgrading classrooms, expanding residential houses, hiring additional teaching instructors and administration staff. As the admission office director, you need to consider following questions:

(a) Will you issue more than 7,200 offer letters for 2016/2017 academic year?

(b) What is the trade-off between issuing more than 7,200 offer letters and issuing exactly 7,200 offer letters?

(c) How to determine the optimal number of offer letters to issue? What information do you need, and how to get such information?

In 2006, the Sigma Chi fraternity at Johns Hopkins University in Baltimore put on a weekend "Halloween in the Hood" party. One of the decorations was a skeleton hanging from a rope noose. On the invitation, which was posted on Facebook, Baltimore was referred to as an "HIV pit" and suggested that party-goers should wear rap style clothing and bling-bling. An image of an internationally prominent African-American appeared in the posting. The Black Student Union members protested to university administration, saying that Sigma Chi was being racially insensitive. A student protest emerged urging the banning of the fraternity. Individual African-American students were deeply disturbed by the noose imagery. The fraternity said it did not mean to offend anyone, and it was only a regular Halloween party. Hostility grew between student groups. The university administration suspended the fraternity, worried about its already tension-filled relations with the surrounding community and other manifestations of intolerance in the student body. Analyze the facts of this scenario critically using the following approach: a. explicitly use three (3) concepts in your analysis; b. identify and very briefly describe each concept you use and link it to specific evidence from the scenario; c. within your group of three concepts include at least one (1) concept from (Group Influences) and at least one (1) concept (Prejudice: Disliking Others) in your analysis.

1.If a company uses accrual basis accounting, accrued revenues differ from deferred revenues in that accrued revenues are

a) recorded as liabilities before the cash is collected from customers.

b) recorded as liabilities before they are recognized as revenue earned.

c) recognized as revenue earned after cash is collected from customers.

d) recognized as revenue earned before cash is collected from customers.

e) journalized only when cash is collected from customers.

2. A company paid $24,000 for six months of rent beginning June 1.   The company recorded its payment as prepaid rent. If it prepares financial statements dated June 30, the adjusting entry to be made by the company is

a) debit Rent Expense for $24,000 and credit Prepaid Rent for $24,000.

b) debit Rent Expense for $4,000 and credit Prepaid Rent for $4,000.

c) debit Prepaid Rent for $4,000 and credit Cash for $4,000.

d) debit Prepaid Rent for $4,000 and credit Rent Expense for $4,000.

e) debit Rent Expense for $20,000 and credit Prepaid Rent for $20,000.

Specialization is when a nation or individual concentrates its productive efforts on producing a limited variety of goods. It oftentimes has to forgo producing other goods and relies on obtaining those other goods through trade.

What is it that the US specializes in, that allow us to forgo the production of many other goods obtained through trade?

What client assessments are imperative for an individual taking corticotropin therapy who is also taking digitalis and an oral Glucophage?What client assessments are imperative for an individual taking corticotropin therapy who is also taking digitalis and an oral Glucophage?

suppose a police detective is about to administer a polygraph (lie detector) test on an "individual of interest" . when a polygraph is administered to an individual who is lying, the chance that the test detects that the individual is lying is 90%. additionally, when polygraph test is administered to an individual who is telling the truth, the chance that the test indicates that the individual is not lying is 84%. finally, the police detective knows that "individuals of interest" don't tell the truth 10% of the time.

- let L be the event that the person is not telling the truth ( lying).

-let Lbar be the event that the person is telling the truth.

- Let (+) be the event that the polygraph indicates that the individual is not telling the truth

-let (-)be the event that the polygraph indicates that the individual is telling the truth.

(a)- what is the P(-)?

(b)- given that the polygraph indicates that an individual is not telling the truth, what is the probability that he or she is lying?

At the prestigious university, they found their mean of the 30 accepted students was in the 98^th percentile of all sample means. Individual scores, X, are normally distributed with a mean of 550 and a standard deviation of 100.

1. What was their mean for the 30 observations?

b. What is the probability of getting a mean of 30 students that scored higher than 685?