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Haier Management Control on a Tactical Level Case Solution

Solution Id Length Case Author Case Publisher
2665 1455 Words (6 Pages) Emily Ho, Amy Lau, Jun Han University of Hong Kong : 108-026-1
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Haier Group was experiencing high growth and was one of the leading manufacturers of white goods in China. The company was expanding rapidly globally as well. While Haier had started as an almost bankrupt manufacturer of refrigerators in Qingdao, China, initially, it had soon steered onto the path of success. Initially, the company had a low-skilled labor force and experienced low levels of productivity and compromised product quality. As a result, the company was loss-making. However, under the leadership of Zhang, the company experienced rapid changes. Having taken over the company's reigns in 1984, Zhang revamped the company culture, processes, and strategy to give way to corporate rules and policies and a management system that was based on incentives for the employees. These changes led Haier to become one of the leading and most successful companies around the globe. The case study focuses on the management control system established by Zhang and the various implications of the same on employee motivation, improved performance, and optimal operational efficiencies.

Following questions are answered in this case study solution:

  1. How does Haier’s management control system work? What are possible advantages and disadvantages of this system? How well does it support strategy? 

  2. Which changes, if any, would you as a consultant suggest to this control system? Why? 

  3. Which role does the finance division play in this system? How is this division organized? How would you organize it? How well does it serve the needs for accounting information?

  4. What is the role of the business financial officer (BFO)? What are her/his challenges?

Case Study Questions Answers

1. How does Haier's management control system work? What are the possible advantages and disadvantages of this system? How well does it support strategy? 

Haier’s management control system was stringent and worked through micromanagement and close supervision. The company had developed a focus on maintaining the cultural values and norms within the company to ensure high performance. In addition to focusing on improving and maintaining a performance-enabled organizational culture, the company also adopted an OEC management technique which focused on dividing departments into smaller teams and then working with targets and goals with these teams to ensure high quality and consistency. This management tool and technique also required routine discussions to discuss shortcomings and discrepancies, and then devise means of overcoming them.

The system is beneficial in allowing the company to understand its processes better and make the required changes in the same in a timely and organized fashion. Moreover, this control system enabled the identification of internal strengths and weaknesses and allowed the management to use the same for external opportunity capitalization. However, this control system was time-consuming and required high resource investment in terms of labor. Not only was the processing time-consuming in terms of the discussions and everyday understanding of tasks and their operationality, but smaller teams also disabled the company from working with multi-functional and interdepartmental teams more often. 

The control system, however, effectively matches and supports the company's broader strategy of aggressive growth. This growth strategy was complimented by the company's decision on on-site and off-site manufacturing and marketing. The control system allowed the company to translate and quantify performance - therefore making it easier for the leadership and the management to track progress and success with respect to growth targets in existing markets as well as for new markets. Each business unit and the smaller teams within the units were assigned quantitative goals and targets which they would need to achieve. These quantifiable goals and targets were specific and part of the company's culture as well. 

2. Which changes, if any, would you as a consultant suggest to this control system? Why? 

Haier worked through a stringent and narrow management control system. The company micromanaged its employees and used autocratic management tools and techniques to enable, assess performance, and achieve goals. As a consultant, I would make three grounded changes in the control system.

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