Facing the China’s Telecom Equipment industry double-digit grow and becoming the largest telecom market in the world, all leading firms in each subsectors of Global telecom equipment take this opportunity to invest in china. Huawei, a Chinese challenge, was starting its challenge to Cisco insurmountable leadership position in international telecom equipment industry. Besides, to succeed its challenge Cisco in this industry, Huawei’s needed to show it pin-point company strategy on its capabilities and core competencies, generic competitive strategy framework and international strategy to against Cisco.
Huawei’s Capabilities and Core Competencies Huawei’s Resources audit First of all, Huawei’s existing finance funds is large included working capital such as investment on more than US$370 million for its own Code-Division Multiple Access Technologies. On the other hand, Huawei’s have its “guanxi” relationship network to raising funds. For example the bank will give financial support and give favorable credit limit for the company. This showed Huawei’s have enough finance resource to supporting it strategy.
Secondly, Huawei’s human resources own total 24,000 employee’s majority of staff have high education level such as bachelors, master or Phd. Furthermore, the overall standard of the staff training is higher because all new employees were put through intensive military-style training for few months. In addition, it affects the intangibles resources such as the morale and business culture. The morale is high because military-style focus on team-success rather than individuals, the business culture of Huawei’s was aggressive on marketing and highly sensitive of global trend.
Thirdly, Huawei’s physical resources included production facilities, six research laboratories in china, Russia, India and Sweden, it headquarters technologies house was 1. 8 square-kilometer properties together with 55 branch offices worldwide eight regional headquarters. Furthermore, the company has information technology on its IT systems such as Corporate Management Systems which integration with product development and supply chain. Finally, Huawei’s owned many intellectual properties-patent. At the ended of 2004, more than 8,000 patents was owned, which 800 is applied for more than 20 countries.
Value Chain Analysis Value Chain Analysis describes the activities that take place in a business and related to the business core competencies. It can classify by primary activities and supporting activities. First, from the firm infrastructure of supporting activities, leadership of maturity background affect the human resources to establish a strong service culture in aggressive marketing policy by provide maturity training.
Huawei’s also concerned the primary activities improvements by replica the Western Management Systems to the Company includes financial, human resources systems. tc. The management systems enhance the company efficiency management on human resources and marketing together with the other primary activities. Also, in Human Resources activities, Huawei’s giving high salary to keep the workforce and the morale of the Company. Huawei’s staff is exceptionally high pay by Chinese standard with housing and other benefits. The higher morale and educated levels help the services delivery more effective and efficiency by actively obtain customers opinion.
Huawei’s director vision is to build innovation capability into the company. The company focus on it technology development, Huawei’s put through many resources such as finance investment and human resources on research & development, it lead to a large number patents created. The patents improve the company technology level. As a result, the Company can develop high technology products. Because of the focusing on the innovation of technology development, Huawei’s recruiting highly education levels staff for R&D department.
Furthermore, the Company classify it R&D institutes into three types, technology watch, source of innovations and approach market over the place of Sweden, India and Russia. Moreover, to increase the products quality, the Company had integrating its marketing people into its core R& D team, thus the R&D headquarters are less timely and responsive manner and purchases of Western Management systems. In primary activities, adopt western model of corporate systems lead to improve Huawei’s management system by international best practices.
It was also benefit to inbound logistics as supply chain management and quality control on operations. As the company infrastructure and culture are aggressive. Huawei’s marketing is focus on organizational aggressiveness, for examples; they invited as many prospective buyers as possible to visit their headquarters and went all kind of trade shows and exhibitions. Furthermore, they offered some free of charge testing period services for their clients and aggressive pricing strategy. Capabilities and Core competencies
The value chain analysis showed Huawei’s have two core competencies. First, Huawei’s can develop new products from low cost engineering because the linkages of Human Resources and Technology development. Second, design and improve products to meet customers need by the linkages of marketing and technology development. Third, aggressive market strategy from Company specific culture is the linkages of firm infrastructure and marketing. Those core competencies meet the criteria of valuable to the customer, because the products are reliable, suitable and low price to meet customer needs.
Also, Huawei’s rare production advantages, the R&D headquarters and production house are located in China which general salaries standard is low, This location is rare and benefits for Huawei’s hire larger amount of R&D staff to develop technology very quickly but low cost. As results, Huawei’s can adopt aggressive marketing strategy. On the other hand, these core competencies are costly and difficult to limitable because same amount of R&D employees are very high cost outside China, but the competitors of Huawei’s are difficult to entry into China due to the restriction by the government.
Also, Huawei’s put larger amount of resources in technology development especially larger amount of finance support. Last but not least, the company culture and the relationships to getting funds of the Huawei’s are non-substitutable, because Huawei’s own military background and related to government. Huawei’s Competitive Strategy Under Porter’s Generics strategy, it is a combination between breadth of competitive scope and source of competitive advantage.
Huawei’s selected under broad target market in the scope, it is because Huawei’s provide wide-range of services and products and not narrow down it target market. Since the early 2006, the industry analyst concluded that Huawei’s threat came not from low-cost manufacturing, but from low-cost engineering. Cost leadership achieved by economies of scale, experience curve, improvements of technology and minimization of overheads. In economies of scale, Huawei’s entry the joint venture with 3Com in China and Japan, the joint venture aimed at selling to corporate customers.
Furthermore, Huawei’s tend to minimize the overheads cost by Western model system such as supply chain and development management, the process minimize the cost on production and storage cost. In experience curve, Huawei’s cooperation sell with China Telecom, China Mobile, China Netcom and China Unicome, it lead to the reducing of distribution cost and advertising cost, because those Company served more than 400 million people communicating across the country. As a result, Huawei’s achieved the criteria of cost leadership. On the other hand, Huawei’s not only focus on low cost but also differentiation of its company products.
First, The Company identifies the customer needs by hiring local personnel to tailor technologies, the policy helps the products more suitable for the customers. Also, marketing representative was transfer into its core R&D team, which the products can be improve its weakness by customers opinion, it will enhance value drivers. Secondly, as the core competencies of technology development, the R & D capabilities can support its products innovation. Huawei’s larger amount of R&D staff helps the company create patents and innovation of new technology.
Moreover, Huawei’s focus on it equipment reliability and service quality, customers will choose its product not only because of low price but the high quality and after sales services. In mid-2004, Huawei’s launched its first global image-building campaign to distance itself from its low-cost image. It create band that Huawei’s products process from low-end to high-end products and sell to overseas corporate customers. Besides, the culture and the supportive HRM policy also lead achieving differentiation. In conclude, Huawei’s competitive strategy is hybrid strategy, as both cost leadership and differentiation achieved.
However, as porter’s prescription stated that an organization must follow one of the generic strategies to achieve competitive advantages, attempting both will result in long term failure and stuck in middle. Huawei’s is facing the risk on stuck in middle. Focus in cost leadership, the low cost strategy seemed increasingly untenable because its reliance on local service partners in foreign markets would ultimately raise the cost. Secondly, foreign companies increasing their manufacturing base and R&D facilities in China would than equally competitive advantages in terms of cost leadership.
Last but not least, in differentiation, Huawei’s network was disappoint in United States because the choice of developed countries are still Cisco, it Implied that Huawei’s differentiation are not better than Cisco. As are result, Huawei’s competitive strategy will stuck in middle. Huawei’s international Strategy With reference to the Integration responsiveness grid, Huawei’s is using transnational strategy as its international strategy. First of all, Huawei’s building blocks tending to local responsiveness such as hiring local personnel to tailor the local technology then benefit back to local customer’s specific needs in France at 2011.
However, the Company also operational integration such as central management and same R&D development product, the Company culture also show the sell strategy are co-ordination with aggressive modal in different country. Secondly, the local pressures for local responsiveness make Huawei’s need to selling different network to meet the customer’s needs. For examples, In Thailand’s is selling mobile service, in contrary, Brazil’s is selling fixed-line carrier. Besides, the telecom market structure is different between the developing country and developed country.
United Arab Emirates as in 3G Wireless communication, but a CDMA network in Europe. Huawei’s aiming to sell in developing country rather than developed country. In addition, compare to Huawei’s footprint in European and United states, the company made every effort to blend into the local culture, it is because the of local pressures make the Company focus on the local market need and using different strategy. However, as the developing country market grows, Huawei’s will sell similar products in future because of there is no big different for the telecommunication network in global such as 3Gs services can use around the developed country.
Last but not least, because of the high forces for National responsiveness and high forces of Global integration, Huawei view world as distributed and interdependent units. The product development will make in China, Sweden, Russia, India and United States. The decision making are centralized at head office in China, but it is needed to focuses on specific competitive forces from each country such as culture and technology development level. Besides, the Company international strategy changes from global strategy to transnational strategy.
In 1988 the director vision is to build the technology development by the company itself but not joint venture. The director tends to sell Huawei’s product to global as seem as china, however, due to the customer needs in other country and the technology limit, the Company start joint venture-learn the experience from other Company such as 3Com. On the other hands, the internal development lead to Huawei had actively undertaken joint R&D laboratories with foreign companies. The joint venture structure emphasis the Company international strategy change to focus on local rather than global.
As well as the Company is home-grown in China, the staffs of R&D are Chinese employees, the product will more suitable from China market but not foreign. However, the company need to create brand in global, local employees are hire from different country to identify each country needs. In addition, the Company marketing team in different country also contribution the company change its strategy from global to more focus on local. As a result, the company international strategy starts changing from global to transitional strategy which more concern about the local factors in product development.
Conclusion To conclude, Huawei’s strengths on low cost engineering to design new product to meet the customer needs for different country. Based on the low cost engineering, the price of product can be lower than competitors to easily gain the market position. Also, large amount patents may lead to enhance its future profit grow. Additionally, the Company aggressive sales marketing strategy helps the company qualitative marketing research, such as focus corporate customers. The linkages between the marketing team and the research & development department improve the products quality to fit with different country.
Because of the sensitive of marketing culture, various environmental scanning and competitive intelligence processes maybe helps the company to identify trends before their competitor such as 3G of Huawei’s. Conversely, the company weakness on it brand creation. In United State, the Company struggles because the American difficulty pronouncing the name of Huawei’s. The new name “Futurewei” promotion are not adequate, the customer was confuse on Huawei’s product. As a result, the image of Huawei’s is worst in American due to two brand names for the Company.
Also, the Company did not have enough acquisition. Huawei’s did not acquisitions consisted primarily of small companies developing leading technologies in different areas within the networking industry as Cisco does (P. 135). Acquisitions may create synergy and new technologies bring into the Company, However, the director of Huawei’s shows that the Company is willing to self-development rather than using other company technology. As the patents gain from acquisition are more easily than self-development. So, Huawei’s will lose it differentiation advantages.
Because of both brand name and differentiation are the weaknesses than Cisco. As a Result, majority of the customer in United Stated is choosing to use Cisco rather than Huawei’s. To reverse the situation, Huawei’s should take actions on its generic competitive strategy, the company should choose either cost leadership or differentiation to competitive with Cisco. Since the advantages of low cost engineering increasingly untenable, Huawei’s should more focus on the differentiation rather than cost leadership. For example, development a innovative networking systems.
Moreover, the Company should take more serious on the opportunity to acquisition of the small firm but holding patent to create synergy to enhance the technology strength. As the company competition between Cisco and Huawei, more patents owned will be more easily to control the market. Last but not least, the Company should focus on image building, Huawei;s connection with Chinese army continued as a shadow around image. It will affect development in overseas such as some restriction by overseas government for technology acquisition from other Company.
Futhermore, it is more difficult to raise funds when Huawei is planning to go to public and issued shares. The Company should immediately increase the transparency of the Company background to enhance the public confidence. Finally, The brand name should create immediately, as the brand name was confuse the customer’s, Huawei’s should create a new brand name, it was suggested the company can use the short from like IBM, HP, BMW. As the brand name is important in marketing, a good brand name creation will benefit the sales of Huawei’s in the future to against Cisco.
Courtney from Study Moose
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