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China Briefings

Reports on China issued by Samsung Economic Research Institute

China Business Intelligence No. 12

China Business Intelligence No. 12

Samsung Economic Research Institute Beijing Office

Dec. 15, 2006

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Highlights

I. A Firm's "Zone of Viable Diversification": The Case of Haier

  • Since 1991, Haier has aggressively pursued a corporate diversification strategy. Although Haier initially pursued expansion in related businesses, it quickly ventured into unrelated industries.
  • Currently, Haier has businesses in 13 different areas. Along with Haier pursuing greater diversification, its revenue streams are also more diverse. Electronics continues to slip as the main source of revenue. In 2005, refrigerators, air conditioners, and washing machines accounted for only 18% of Haier's total income.

II. Implications for Korean Retailers' Increasing Foray into China

  • Amongst the numerous large Korean supermarket chains and home shopping companies that entered China, a handful of department stores and other retailers are also expanding into the Chinese market. These retailers not only seek new sales opportunities in China, but also seek the market as an outlet because the Korean retail market is currently full.
  • Korean retailers' expansion in China has two positive implications. One, Korean retailers are able to take advantage of new business opportunity in emerging markets to become more globally competitive. At the same time, they consolidate their position domestically through achieving economies of scale.
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