Zhang Ruimin
Encyclopedia
Zhang Ruimin is a Chinese
businessman and chief executive officer of Haier Group
. He is considered as one of the most influential and respected business figures in Asia for his work in turning a little-known, bankrupt refrigerator manufacturer into the world's fourth-largest white appliances company.
family in Qingdao
, Shandong
; his parents were employed in a local garment factory. As a youth, Zhang was swept up in the Cultural Revolution
and like many other students, he joined the Red Guards
as the movement cascaded across the country. He visited Mao's birthplace
and attended rallies in Beijing
since all schools had been closed, and when the movement was finally disbanded, he was able to avoid being sent down to the countryside
. Due to the widespread upheaval, Zhang was unable to attend college (most having been shut down); instead, he began his career in obscurity at a state-run construction company in Qingdao in 1968.
Despite his humble roots and abbreviated education, Zhang had a voracious appetite for learning, and between his shifts working at the factory, Zhang would bicycle back and forth to management courses; he also read extensively on his own. Slowly climbing up the hierarchy of the company, he was promoted to workshop supervisor and then deputy director of the company in 1980 after 12 years of hard work. In 1982, he was promoted to deputy manager of the "Household Appliance Division" of the Qingdao
municipal government. In a twist of fate, Zhang was dragooned into taking over as general manager of the Qingdao Refrigerator Plant when the previous manager left. He was the fourth person to hold the position and by then the company was in deep financial trouble with more than $10 million in debts.
to visit the company's German partner, from whom they were purchasing technology and know-how. He quickly realized that the company had a serious problem in terms of reputation and quality; it also reflected poorly upon his country. To ingrain the concept of quality into his workers, Zhang decided to conduct a demonstration with some of the factory's product.
A customer had brought a faulty refrigerator back to the factory and showed it to Zhang. Zhang and the customer then went through his entire inventory of 400 refrigerators looking for a replacement. In the process he discovered that there was a 20 percent failure rate in his merchandise. To emphasize the importance of product quality, Zhang had the 76 dud refrigerators lined up on the factory floor. He then distributed sledgehammers to the employees and ordered them to destroy the refrigerators. The workers were hesitant; the cost of a refrigerator at the time was about 2 years worth of wages. When Zhang saw the distress his workers exhibited, some even to the point of tears, he exclaimed: "If we don't destroy these refrigerators today, what is to be shattered by the market
in the future will be this enterprise!" The refrigerators were smashed to pieces; Zhang himself took part in the attack on poor product quality. One of the hammers remains on display at company headquarters as a reminder to posterity.
The benefits of Zhang's exercise soon became clear; not only did it reinforce the concept of product quality in his own workers, it also garnered the company some much needed publicity. The next year, it's refrigerators sold well in major domestic markets such as Beijing
and Tianjin
. Zhang also instituted many reforms that were completely novel to the state-run Chinese economy
at the time. To encourage productivity, Zhang tied employee pay scales to sales of the products which they produced. He also instituted a practice whereby a mistake by an employee would require that employee to stand before his co-workers to explain his error. Another new concept that Zhang introduced was customer feedback. After noticing that sales of his company's were poor in Sichuan
province, he discovered the reason to be that villagers would use the machines to wash sweet potatoes, clogging the drains in the washers. In response, Zhang had his company redesign the product to wash produce in addition to clothing.
By 1986, Qingdao Refrigerator had returned to profitability and sales growth averaged 83 percent per year. With sales of just CNY
¥3.5 million in 1984, sales rocketed to CNY ¥40.5 billion by 2000. With the success of Qingdao's refrigerator company, the municipal government asked it to take over some of the city's other ailing appliance makers. In 1988, the company assumed control of Qingdao Electroplating Company (microwaves) and in 1991 took over Qingdao Air Conditioner Plant and Qingdao Freezer.
In 1991, Qingdao Refrigerator was renamed Qingdao Haier Group, borrowing and transliterating the last syllable of its German partner, Firmengruppe Liebherr
. Zhang Ruimin stayed on as general manager, but he concurrently enrolled himself at the University of Science and Technolog
to study towards a master's degree in business administration; he graduated in 1994. He was named the chief executive officer of Haier Group
(the company had dropped "Qingdao" from the name) in 1993.
Zhang began a concerted effort to expand Haier's presence abroad, beginning in Europe
, where Haier already had connections thanks to its partnership with Liebherr. In 1993, the company also began shipping its products to the Middle East
and Africa
, and also entered South East Asia in 1996. To break into the American market dominated by the likes of GE
and Whirlpool
however, Zhang realized that Haier would need to elbow its way in through under-served niche markets such as wine coolers and mini-refrigerators, popular with hotels and college dormitories. The strategy worked splendidly and by the turn of the century Haier claimed up to 60 percent of the electric wine cooler market. To further increase its visibility in the United States, Zhang also had Haier open a manufacturing plant in Camden, South Carolina
that produced full-sized refrigerators. Factories were also opened in Indonesia
, the Philippines
, Pakistan
, and Jordan
. By 2005, revenues at Haier
had surpassed $12 billion and the company employed over 30,000 people; the Financial Times
recognized Zhang Ruimin as one of the "50 most respected business leaders in the world."
in the 1970s, when the organization was resuscitated after being shut down during the Cultural Revolution
. He went on to obtain membership in the Communist Party
in 1975, a move that gave him access to valuable connections within the local government.
As a collective enterprise, Haier
is technically owned by its workers under the supervision of the government. However, it is markedly different from Chinese state-owned enterprises and Zhang has asserted that he runs Haier like a private company. Nevertheless, after having successfully turned around Haier, Zhang occasionally comes under pressure from government officials to take over other struggling enterprises. Once, he agreed to take on a pharmaceutical manufacturer, despite a dearth of experience or distribution network; the merger was less than successful. In another instance, he was urged to take on a bicycle maker, however in this case Zhang was able to resist.
In 2002, Zhang was appointed to the 16th CPC Central Committee's
alternate committee, a position that does not hold any real power or responsibility. He was reappointed to the alternate committee for the 17th CPC Central Committee in 2007.
. Zhang is known to abstain from drinking alcohol.
China
Chinese civilization may refer to:* China for more general discussion of the country.* Chinese culture* Greater China, the transnational community of ethnic Chinese.* History of China* Sinosphere, the area historically affected by Chinese culture...
businessman and chief executive officer of Haier Group
Haier
Haier Group is a multinational consumer electronics and home appliances company headquartered in Qingdao, Shandong, People's Republic of China. Its products include air conditioners, mobile phones, computers, microwave ovens, washing machines, refrigerators, and televisions...
. He is considered as one of the most influential and respected business figures in Asia for his work in turning a little-known, bankrupt refrigerator manufacturer into the world's fourth-largest white appliances company.
Early life
Zhang Ruimin was born on January 5, 1949 to a working classSocial structure of China
The social structure of China has a very long history, going from the feudal society of imperial times to the industrializing and urbanizing society of today.The teaching of Confucius taught of five basic relationships in life:...
family in Qingdao
Qingdao
' also known in the West by its postal map spelling Tsingtao, is a major city with a population of over 8.715 million in eastern Shandong province, Eastern China. Its built up area, made of 7 urban districts plus Jimo city, is home to about 4,346,000 inhabitants in 2010.It borders Yantai to the...
, Shandong
Shandong
' is a Province located on the eastern coast of the People's Republic of China. Shandong has played a major role in Chinese history from the beginning of Chinese civilization along the lower reaches of the Yellow River and served as a pivotal cultural and religious site for Taoism, Chinese...
; his parents were employed in a local garment factory. As a youth, Zhang was swept up in the Cultural Revolution
Cultural Revolution
The Great Proletarian Cultural Revolution, commonly known as the Cultural Revolution , was a socio-political movement that took place in the People's Republic of China from 1966 through 1976...
and like many other students, he joined the Red Guards
Red Guards (China)
Red Guards were a mass movement of civilians, mostly students and other young people in the People's Republic of China , who were mobilized by Mao Zedong in 1966 and 1967, during the Cultural Revolution.-Origins:...
as the movement cascaded across the country. He visited Mao's birthplace
Mao Zedong
Mao Zedong, also transliterated as Mao Tse-tung , and commonly referred to as Chairman Mao , was a Chinese Communist revolutionary, guerrilla warfare strategist, Marxist political philosopher, and leader of the Chinese Revolution...
and attended rallies in Beijing
Beijing
Beijing , also known as Peking , is the capital of the People's Republic of China and one of the most populous cities in the world, with a population of 19,612,368 as of 2010. The city is the country's political, cultural, and educational center, and home to the headquarters for most of China's...
since all schools had been closed, and when the movement was finally disbanded, he was able to avoid being sent down to the countryside
Down to the Countryside Movement
The Down to the Countryside Movement was a policy instituted in the People's Republic of China in the late 1960s and early 1970s. As a result of the anti-bourgeois thinking prevalent during the Cultural Revolution, Mao Zedong declared certain privileged urban youth would be sent to mountainous...
. Due to the widespread upheaval, Zhang was unable to attend college (most having been shut down); instead, he began his career in obscurity at a state-run construction company in Qingdao in 1968.
Despite his humble roots and abbreviated education, Zhang had a voracious appetite for learning, and between his shifts working at the factory, Zhang would bicycle back and forth to management courses; he also read extensively on his own. Slowly climbing up the hierarchy of the company, he was promoted to workshop supervisor and then deputy director of the company in 1980 after 12 years of hard work. In 1982, he was promoted to deputy manager of the "Household Appliance Division" of the Qingdao
Qingdao
' also known in the West by its postal map spelling Tsingtao, is a major city with a population of over 8.715 million in eastern Shandong province, Eastern China. Its built up area, made of 7 urban districts plus Jimo city, is home to about 4,346,000 inhabitants in 2010.It borders Yantai to the...
municipal government. In a twist of fate, Zhang was dragooned into taking over as general manager of the Qingdao Refrigerator Plant when the previous manager left. He was the fourth person to hold the position and by then the company was in deep financial trouble with more than $10 million in debts.
Qingdao Refrigerator Plant
Early in his tenure as general manager, Zhang traveled to GermanyGermany
Germany , officially the Federal Republic of Germany , is a federal parliamentary republic in Europe. The country consists of 16 states while the capital and largest city is Berlin. Germany covers an area of 357,021 km2 and has a largely temperate seasonal climate...
to visit the company's German partner, from whom they were purchasing technology and know-how. He quickly realized that the company had a serious problem in terms of reputation and quality; it also reflected poorly upon his country. To ingrain the concept of quality into his workers, Zhang decided to conduct a demonstration with some of the factory's product.
A customer had brought a faulty refrigerator back to the factory and showed it to Zhang. Zhang and the customer then went through his entire inventory of 400 refrigerators looking for a replacement. In the process he discovered that there was a 20 percent failure rate in his merchandise. To emphasize the importance of product quality, Zhang had the 76 dud refrigerators lined up on the factory floor. He then distributed sledgehammers to the employees and ordered them to destroy the refrigerators. The workers were hesitant; the cost of a refrigerator at the time was about 2 years worth of wages. When Zhang saw the distress his workers exhibited, some even to the point of tears, he exclaimed: "If we don't destroy these refrigerators today, what is to be shattered by the market
Competition (economics)
Competition in economics is a term that encompasses the notion of individuals and firms striving for a greater share of a market to sell or buy goods and services...
in the future will be this enterprise!" The refrigerators were smashed to pieces; Zhang himself took part in the attack on poor product quality. One of the hammers remains on display at company headquarters as a reminder to posterity.
The benefits of Zhang's exercise soon became clear; not only did it reinforce the concept of product quality in his own workers, it also garnered the company some much needed publicity. The next year, it's refrigerators sold well in major domestic markets such as Beijing
Beijing
Beijing , also known as Peking , is the capital of the People's Republic of China and one of the most populous cities in the world, with a population of 19,612,368 as of 2010. The city is the country's political, cultural, and educational center, and home to the headquarters for most of China's...
and Tianjin
Tianjin
' is a metropolis in northern China and one of the five national central cities of the People's Republic of China. It is governed as a direct-controlled municipality, one of four such designations, and is, thus, under direct administration of the central government...
. Zhang also instituted many reforms that were completely novel to the state-run Chinese economy
Planned economy
A planned economy is an economic system in which decisions regarding production and investment are embodied in a plan formulated by a central authority, usually by a government agency...
at the time. To encourage productivity, Zhang tied employee pay scales to sales of the products which they produced. He also instituted a practice whereby a mistake by an employee would require that employee to stand before his co-workers to explain his error. Another new concept that Zhang introduced was customer feedback. After noticing that sales of his company's were poor in Sichuan
Sichuan
' , known formerly in the West by its postal map spellings of Szechwan or Szechuan is a province in Southwest China with its capital in Chengdu...
province, he discovered the reason to be that villagers would use the machines to wash sweet potatoes, clogging the drains in the washers. In response, Zhang had his company redesign the product to wash produce in addition to clothing.
By 1986, Qingdao Refrigerator had returned to profitability and sales growth averaged 83 percent per year. With sales of just CNY
Renminbi
The Renminbi is the official currency of the People's Republic of China . Renminbi is legal tender in mainland China, but not in Hong Kong or Macau. It is issued by the People's Bank of China, the monetary authority of the PRC...
¥3.5 million in 1984, sales rocketed to CNY ¥40.5 billion by 2000. With the success of Qingdao's refrigerator company, the municipal government asked it to take over some of the city's other ailing appliance makers. In 1988, the company assumed control of Qingdao Electroplating Company (microwaves) and in 1991 took over Qingdao Air Conditioner Plant and Qingdao Freezer.
Haier Group
Liebherr
* The Liebherr Group, a German manufacturing complex established in 1949 by Hans Liebherr* Liebherr Grazer AK* Liebherr T 282B, an off- highway, ultra class, rigid frame, two- axle, diesel/electricappointed...
. Zhang Ruimin stayed on as general manager, but he concurrently enrolled himself at the University of Science and Technolog
University of Science and Technology of China
The University of Science and Technology of China is a national research university in Hefei, People's Republic of China. It is a member of the C9 League formed by nine top universities in China...
to study towards a master's degree in business administration; he graduated in 1994. He was named the chief executive officer of Haier Group
Haier
Haier Group is a multinational consumer electronics and home appliances company headquartered in Qingdao, Shandong, People's Republic of China. Its products include air conditioners, mobile phones, computers, microwave ovens, washing machines, refrigerators, and televisions...
(the company had dropped "Qingdao" from the name) in 1993.
Zhang began a concerted effort to expand Haier's presence abroad, beginning in Europe
Europe
Europe is, by convention, one of the world's seven continents. Comprising the westernmost peninsula of Eurasia, Europe is generally 'divided' from Asia to its east by the watershed divides of the Ural and Caucasus Mountains, the Ural River, the Caspian and Black Seas, and the waterways connecting...
, where Haier already had connections thanks to its partnership with Liebherr. In 1993, the company also began shipping its products to the Middle East
Middle East
The Middle East is a region that encompasses Western Asia and Northern Africa. It is often used as a synonym for Near East, in opposition to Far East...
and Africa
Africa
Africa is the world's second largest and second most populous continent, after Asia. At about 30.2 million km² including adjacent islands, it covers 6% of the Earth's total surface area and 20.4% of the total land area...
, and also entered South East Asia in 1996. To break into the American market dominated by the likes of GE
Gê
Gê are the people who spoke Ge languages of the northern South American Caribbean coast and Brazil. In Brazil the Gê were found in Rio de Janeiro, Minas Gerais, Bahia, Piaui, Mato Grosso, Goias, Tocantins, Maranhão, and as far south as Paraguay....
and Whirlpool
Whirlpool
A whirlpool is a swirling body of water usually produced by ocean tides. The vast majority of whirlpools are not very powerful. More powerful ones are more properly termed maelstroms. Vortex is the proper term for any whirlpool that has a downdraft...
however, Zhang realized that Haier would need to elbow its way in through under-served niche markets such as wine coolers and mini-refrigerators, popular with hotels and college dormitories. The strategy worked splendidly and by the turn of the century Haier claimed up to 60 percent of the electric wine cooler market. To further increase its visibility in the United States, Zhang also had Haier open a manufacturing plant in Camden, South Carolina
Camden, South Carolina
Camden is the fourth oldest city in the U.S. state of South Carolina and is also the county seat of Kershaw County, South Carolina, United States. The population was an estimated 7,103 in 2009...
that produced full-sized refrigerators. Factories were also opened in Indonesia
Indonesia
Indonesia , officially the Republic of Indonesia , is a country in Southeast Asia and Oceania. Indonesia is an archipelago comprising approximately 13,000 islands. It has 33 provinces with over 238 million people, and is the world's fourth most populous country. Indonesia is a republic, with an...
, the Philippines
Philippines
The Philippines , officially known as the Republic of the Philippines , is a country in Southeast Asia in the western Pacific Ocean. To its north across the Luzon Strait lies Taiwan. West across the South China Sea sits Vietnam...
, Pakistan
Pakistan
Pakistan , officially the Islamic Republic of Pakistan is a sovereign state in South Asia. It has a coastline along the Arabian Sea and the Gulf of Oman in the south and is bordered by Afghanistan and Iran in the west, India in the east and China in the far northeast. In the north, Tajikistan...
, and Jordan
Jordan
Jordan , officially the Hashemite Kingdom of Jordan , Al-Mamlaka al-Urduniyya al-Hashemiyya) is a kingdom on the East Bank of the River Jordan. The country borders Saudi Arabia to the east and south-east, Iraq to the north-east, Syria to the north and the West Bank and Israel to the west, sharing...
. By 2005, revenues at Haier
Haier
Haier Group is a multinational consumer electronics and home appliances company headquartered in Qingdao, Shandong, People's Republic of China. Its products include air conditioners, mobile phones, computers, microwave ovens, washing machines, refrigerators, and televisions...
had surpassed $12 billion and the company employed over 30,000 people; the Financial Times
Financial Times
The Financial Times is an international business newspaper. It is a morning daily newspaper published in London and printed in 24 cities around the world. Its primary rival is the Wall Street Journal, published in New York City....
recognized Zhang Ruimin as one of the "50 most respected business leaders in the world."
Politics
Zhang Ruimin joined the Communist Youth LeagueCommunist Youth League
The Communist Youth League of China also known as the China Youth League is a youth movement of the People's Republic of China for youth between the ages of fourteen and twenty-eight, run by Communist Party of China. The league is organized on the party pattern. Its leader is its First Secretary...
in the 1970s, when the organization was resuscitated after being shut down during the Cultural Revolution
Cultural Revolution
The Great Proletarian Cultural Revolution, commonly known as the Cultural Revolution , was a socio-political movement that took place in the People's Republic of China from 1966 through 1976...
. He went on to obtain membership in the Communist Party
Communist Party of China
The Communist Party of China , also known as the Chinese Communist Party , is the founding and ruling political party of the People's Republic of China...
in 1975, a move that gave him access to valuable connections within the local government.
As a collective enterprise, Haier
Haier
Haier Group is a multinational consumer electronics and home appliances company headquartered in Qingdao, Shandong, People's Republic of China. Its products include air conditioners, mobile phones, computers, microwave ovens, washing machines, refrigerators, and televisions...
is technically owned by its workers under the supervision of the government. However, it is markedly different from Chinese state-owned enterprises and Zhang has asserted that he runs Haier like a private company. Nevertheless, after having successfully turned around Haier, Zhang occasionally comes under pressure from government officials to take over other struggling enterprises. Once, he agreed to take on a pharmaceutical manufacturer, despite a dearth of experience or distribution network; the merger was less than successful. In another instance, he was urged to take on a bicycle maker, however in this case Zhang was able to resist.
In 2002, Zhang was appointed to the 16th CPC Central Committee's
Central Committee of the Communist Party of China
The Central Committee of the Communist Party of China is the highest authority within the Communist Party of China. Its approximately 350 members and alternates are selected once every five years by the National Party Congress....
alternate committee, a position that does not hold any real power or responsibility. He was reappointed to the alternate committee for the 17th CPC Central Committee in 2007.
Personal
Zhang Ruimin is married and has one son. His wife keeps a low profile and previously worked as a party secretary at a textile factory in Qingdao. His son studied business at the Wharton School of the University of PennsylvaniaWharton School of the University of Pennsylvania
The Wharton School is the business school of the University of Pennsylvania, an Ivy League university in Philadelphia, Pennsylvania. Wharton was the world’s first collegiate business school and the first business school in the United States...
. Zhang is known to abstain from drinking alcohol.
Honors
- 1997: "Entrepreneur of the Year," Asia Weekly
- 1999: "Global 30 Most Respected Entrepreneurs (26th)," Financial TimesFinancial TimesThe Financial Times is an international business newspaper. It is a morning daily newspaper published in London and printed in 24 cities around the world. Its primary rival is the Wall Street Journal, published in New York City....
- 2002: "Businessman of the Year (2001) in China," CCTVChina Central TelevisionChina Central Television or Chinese Central Television, commonly abbreviated as CCTV, is the major state television broadcaster in mainland China. CCTV has a network of 19 channels broadcasting different programmes and is accessible to more than one billion viewers...
- 2002: "Global Business Leader and an Outstanding Donor," United Way InternationalUnited Way InternationalUnited Way Worldwide is the leadership and support organization for the network of nearly 1,800 community-based United Ways in 45 countries and territories. It advances the common good, creating opportunities for a better life for all, by focusing on education, income and health...
- 2004: "Asia’s 25 Most Influential Business Figures (6th)," Fortune Magazine
- 2005: "World’s 50 Most Respected Business Leaders (26th)," Financial TimesFinancial TimesThe Financial Times is an international business newspaper. It is a morning daily newspaper published in London and printed in 24 cities around the world. Its primary rival is the Wall Street Journal, published in New York City....
- 2009: "China's Most Powerful People," BusinessWeekBusinessWeekBloomberg Businessweek, commonly and formerly known as BusinessWeek, is a weekly business magazine published by Bloomberg L.P. It is currently headquartered in New York City.- History :...