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Strategic Analysis: A case of Huawei Company

Updated on December 12, 2014

Huawei is a private firm based in China, which is involved in the manufacture and distribution of telecommunication equipments of various categories. This company, which was established in 1988, is famous for its cheap prices in telecommunication equipments in comparison to its international competitors. Among the company’s product portfolio, include handsets, fixed line and wireless networking equipments, data networking, optical communication platform, internet protocal telephony and virtual private network products.

By 2002, Huawei was considered to be the dominant supplier of routers and digital switches in China after overtaking Shanghai Bell. After realizing an impeccable success in China market, Huawei gradually began to enter the international market with routers that were cheaper than their international rivals were. In 2005, the company realized annual revenue of $6.7 billion for which 60% were derived from international sales. Currently, Huawei harbors world-class research institutes, Over 55 branch offices, training and customer support centers, and eight regional headquarters. This report is concerned of Huawe’s strategic analysis and its international ventures.

Challenges Faced by Huawei in its international venture

In 2006, Huawei, alongside other technological companies in China, opted to venture into global telecom equipment market. However, this venture was met with various challenges among them being the low cost engineering from its competitors. Further, the company had a low global image, in other words, it was not initially recognized, a factor which hindered the company’s achievement in global market share. In building a strong global brand, the company had to use much resources and capital, alongside extensive time before gaining ground. In some markets such as U.S, some of the customers were not able to clearly pronounce the company’s name, “Huawei”. Hence, the management had to come up with another name, “Futurewei”, which customers could find easy to pronounce. This proved to be quite a challenge since the company now harbored two names, which were sometimes confusing to customers. Furthermore, Huawei employees who had come from China found it hard to adapt to the American Culture and language. Subsequently, this led to a straining of relationship between Huawei staff and their American counterparts who had been hired by the company. In particular, Huawei executives found it hard to deal with local employees because of the language hitch.

Opportunities

Among the opportunities for Huawei, include a highly qualified and low cost workforce. This makes it possible for the company to customize its innovative products according to their clients’ needs. Further, Huawe’s other opportunity lay in its high caliber labor pool, most of who were well educated. Moreover, the company had held an exclusive right to over 10000 patents and copyright worldwide, an aspect that gave it a competitive edge over its rivals. In addition, the joint R & D laboratories held by Huawei and other foreign entities including Microsoft, Motorola, Texas Instrument, Intel, IBM and Sun-Micro system with a focus on telecom innovation gives Huawei innovation opportunities.

Threats

While venturing into the global market, Huawei faced a number of threats, which hindered its global expansion initiatives. For instance, Huawei being a Chinese company was perceived in much international market as a company whose products were cheap and unreliable. This translated that in order to win meaningful contracts; the company had to employ aggressive tactics. In some markets such as those in America, clients were always looking for high-end technological products, and not necessarily, those that were low priced. Another threat for Huawei came from its chief rival Cisco that sued Huawei for allegedly infringing on Cisco’s copyrights and patents. The ensuing lawsuits resulted into heavy penalties that included the discontinuation of some of Huawei s operations in American market.

International Expansion strategy

While entering the international market, Huawei was careful to employ the local pool of employees in order to create a local image and blend with the local market. Further, Huawei established partnership and joint ventures with re-known international firms to claim a global image. In addition, the company focused its energy in developing nations, which did not have stiff competition in comparison to developed countries. This is why the company first set base in Russia, Brail and Africa before moving into other markets.

Competitive advantage

Huawei’s major competitive advantages are derived from provision of quality equipments and services at a lower cost. The low cost of labor including engineers from China were also advantageous to the company since it enabled it to offer its products at a lower cost than competitors did. Another competitive advantage for Huawei was that it had on board, a world class management consultants IBM, Microsoft, Intel, and Price Water Cooper which assisted the company to design its strategies according to the global standards. The low cost of engineering from low cost labor especially from China and its expansive worldwide market means that, Huawei will be able to maintain its competitive advantage in global perspective. In addition, the company’s aggressive R & D department also ensured that the company stays up-to-date and improves on its innovative aspects. Further, the company will be able to sustain its R&D network since it has limited the expenditure that can be used in this department. By putting a limit on the department’s expenditure, the company ensures that resources are not used unnecessarily or misappropriated.

The performance of Huawei today

Today, Huawes performance is quite pleasing. In other words, the company can be considered as performing well both in its home and international markets. For instance, Huawei generated a total of $22 billion in sales during 2010, making it is among the top three firms dealing with telecommunication equipments globally. This is an indication that the company is doing better in its global ventures; otherwise, it could not have realized this massive volume in sales.

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