Huawei Research Essay
The purpose of this report is to find out how Huawei positioned in the industry of mobile phone. We went through all Huawei’s background, offering, purpose, market contexts and understanding the business operations of Huawei. We also analyse and evaluate what marketing strategies and marketing mix to help them hold their position in such competitive industry.
After understanding the concept of the marketing strategies, we investigate that the marketing segmentation and the targeting strategies which Huawei used to position itself in the market. We use it to compare and explain why the Huawei choose the strategies in promoting their products. After investigating the Segmentation, Targeting and Positioning (STP) marketing strategies, we have done our further report with the concept of the marketing mix as known as the 4Ps – Promotion, Pricing, Products and Place. After the identification and discussion of marketing mix, we found out that Huawei is facing some problems and we come up with our ideas, recommendation and suggestion how Huawei can overcome these current concerns and further concerns.
Huawei enterprise has segments into different markets which are carrier network business, enterprise business and consumer business. However, Huawei is targeting more towards the consumer business and it segments the market into two parts again which are low income group and high income group. According to the segment variables, Huawei’s products are mainly targeting on low income consumers as Huawei is producing low price smartphones which are affordable by the target groups. Huawei’s positioning as the world’s third smartphone enterprise and known as the world’s largest telecoms operators offering global equipment, operational services and manufacturing electronic communications devices. Huawei enterprise is in the position of low price and personal used entertaining smartphones.
Overview, Company background, Company’s offering, Purpose
Huawei Technologies Co. Ltd. is a Chinese leading ICT provider, which was founded in 1987 September by the Ren Zheng Fei, the company’s president and the ex-People’s Liberation Army engineer, established in ShenZhen, China. Huawei is a private firm that owned by its own employees. Huawei is the leading telecommunications equipment manufacturing supplier and was ranked among the top three globally in mobile phone industry. The vision of Huawei is to enhance people’s lives through communication. While their mission is to focus on their clients’ market challenges and desires by providing better ICT solutions and services in order to consistently produce maximum value for clients. Huawei’s core values have been divided into customers first, dedications, continuous improvement, openness & initiative, integrity and teamwork. (Huawei, 2014)
Market contexts, Use of concepts and Theories
Market contexts help firm to analyse and get more personalized and relevant marketing contents. Market context is also known as SWOT. Information shown below is the Strength, Weakness, Opportunity and Threat (SWOT) of Huawei. ( Huawei,2014) (1) Strength: Huawei invested a huge amount in R&D, having wide vision and experienced sales organisation to help them in emerging markets and the cost advantage. (2) Weaknesses: Lack of awareness and experience outside telecom, the margin pressure due their low price products. (3) Opportunities: Their business models are all towards cloud and have huge data solutions. (4) Threats: Many competitors are entering these developing markets.
Company planned their marketing strategies with 4Ps, which includes product, price, promotion and place. Huawei have produced low-cost smartphone to its low-income target. As its production base is in China which has low labour cost, hence Huawei could enjoy the cost advantage. Besides, Huawei is using the selective distribution strategy and also e-commerce distribution channel to sell their products. Last but not least, Huawei promotes their products by making advertisement, having exhibitions and also making a slogan that could make their low-price products well-known and recognized.
Concepts of STP
Market Segmentation is a marketing strategy that involves dividing a broad market into subsets of consumers with different requirements, characteristics or behaviors that might involve various marketing tactics to deal with. Corporations can identify the bases and develop the profiles of the resulting segments. Segmentation :
Marketing segmentation is divided into four which are geographic, demographic, psychographic and behavioral segmentations. Geographic segmentation segments the market into geographical parts to perform a company determine whether it should operate in one or a few or all the areas that geographically vital to the consumers’ needs. Examples: Nation, city, density. Demographic segmentation is the most common segmentation method for segmenting consumer groups because needs also related to the demographic elements. Examples: age, income, race. Psychographic segmentation is classification of customers with regard to different characteristic. Examples: lifestyle, personality, core values. Behavioural segmentation can filters consumers into groups according to their knowledge, attitude, habit or response to a product. Examples: occasion, benefits and user rates.
Targeting is the process to help companies to filter and select potential customers to plan marketing strategy and develop a more specific tactic to reach the amount of expected sales. There are 3 general tactics in targeting the market: Undifferentiated targeting is the strategy that the company has a very competitive product that might monopolize the market and don’t need differentiate consumer group. Concentrated targeting is the company has a very strong data and company know which consumer group they should aim and let them become more competitive in the market. Multi-Segment targeting is the technique used to focus two or more well researched consumer groups so can develop different strategies.
Positioning is improving the awareness, perceptions and impressions of consumers. Positioning can be a really efficient instrument to tempt consumers. Companies can utilize the concept of positioning and differentiation to identify themselves by bringing the distinctive value and benefits to consumers and become more competitive.
Carrier network business, enterprise business and consumer business are the three core business segments that divided by Huawei enterprise. The first segmentation which is carrier network business is mainly emphasizing on telecommunications operator and services worldwide. In order to achieve this, Huawei develop various wireless network products, at the same time they offer consistent experiences and effectives solutions to their customers. Secondly, enterprise network business mainly serves government, public utilities and enterprises customers. It provides great efficiency to ICT solutions, hardware equipment and services which include network infrastructure, cloud computing, and enterprise information solutions. Huawei aims to become one of the leading global mobile phone brands by 2015. As the results of it, the third market segment develops and manufactures consumer product, for example mobile broadband devices, home devices, smartphone, and related applications. The enterprise highly focuses on fulfilling consumers’ needs and wants. Above are generally three business segmentations that Huawei enterprise focuses on. However, to meet the assignment question requirement, Consumer Business segment is interpreted in more detail forms as below.
Upper and upper-middle
Uniqueness, brand image, deliverability and relevant
Working and lower-middle
Desirability, deliverability and relevant
Based on demographic segmentation, Huawei sorted it’s customer to low-income segment and higher income segment. As a relative new comer in smartphone market, Huawei have already captured the attention of low-income segment customers (Segmentation A), who are earning relative low income and stands at the working or lower-middle of social class. This segment has a normal or economy lifestyle and they emphasize more on the value of money. While in segmentation B, who has higher income or work as supervisor and above. They are standing on the upper or upper-middle of social class. Hence they are having a luxury lifestyle, which focus more on the uniqueness or appearance.
According to research firm Gartner, smartphones’ share of worldwide mobile phones sales in year 2012 went up 12.3 percent every year from 26.6 percent in 2011, driving overall mobile sales consistently as feature phones showed a decline in demand. However, smartphones market is rapidly well structured, in order to capture the consumers’ eyes and able to compete with others well-known brand, Huawei enterprise firstly decided to target one significant segment to enter the smartphone market. Target lower-income segment:
From the demographic segmentation, Huawei targets at low-income segment consumers. As a new-comer of mobile device market, Huawei started its business at lower-end market segment. More than half of those Huawei phones were sold to people with household income of $35,000 or less, a low income segment.(NPD, 2012) Huawei succeeded in its smartphone business is due to the aggressive lower-end pricing, said Neil Shah, analyst of wireless device strategies at Strategy Analytics. The production cost is lower than other smartphone brand, and the company set it’s smartphone product at lower price, it directly attract those low income consumers to buy Huawei smartphone or tablet products. The company designs low profile development to meet growing domestic demand for cheaper smartphone, and it also indirectly stimulate the country’s economics.( Bourcier, J.,2014) The reason that Huawei chooses to target lower-income market is that lower production cost yet bigger income.( Khan, S., 2013) It can be explained that lower income consumers have more affordability and more willingness to buy the low cost smartphone. As a result of it, bigger profit margin is successfully gained.
Besides, global market giant such as Samsung and Apple have long ignored the lower-end market, it the best chance for Huawei to dominate the lower-end market segment consumers, and it proved that Huawei has succeeded setting their aggressive marketing strategy. Finding others omission and work on it is their strategy to capture the consumers’ wants and needs. It is also the second reason that Huawei tends to target lower-income consumers. For example, Huawei I M835 model Android smartphone retails at $39, and it is cheaper than some others smartphone brand, at the same time, the average smartphone selling price was $335 in 2013, IDC reported. According to the store assistant Ron Wemirovsky, Huawei’s smartphone attracts lower-income customers. The Huawei M835 is the cheapest Android smartphone in the market.(Tung, A., 2014) Furthermore, South Pacific at Huawei’s regional marketing director, Tang Siew Wai, claimed that their overall strategy is to extend its business from B2B to B2C, mainly to make well known Huawei -branded, and shifting it’s smartphone business products from lower-end products to both middle and high range products globally. (Khan, S., 2013)
Huawei maintains its strong market position. According to IDC, Huawei maintained the third position over the world, it attained the highest yearly increase among the leading vendors, and raised its brand portfolio with a higher proportion of self-branded unite compare to other enterprises (Troianovski, A., 2014). Furthermore, Huawei enterprise also maintained their strong market position in other field, for example they are the world largest telecoms operators offering global equipment, operational services and manufacturing electronic communications devices such as smartphone and tablets.
From the figure above, it shows Huawei smartphone in significant position which is low price and personal used entertaining smartphones. Huawei’s strong market position indicates the superiority on providing services and also indicates the company is enjoying a well-known brand name that its effectively merging into new products line and market to capture market share from the competitors. Although Huawei has got its target low-end segment marketing strategy successfully, yet the company are having several strong competitors to compete with each other on the low pricing smartphone market, for example ZTE and Lenovo. According to Gartner, while Huawei and ZTE are competing with each other furiously, Lenovo’s smartphone fugitively developed its brand in the market. Other than that, Nokia has also got its low pricing strategy in China and it makes the competition among the companies that target low-end segment into a drastic scene. In conclusion, Huawei’s strong position in the smartphone market and other field products markets has strengthened the company competiveness. Besides, innovation is important for the company, the transformation of different targeting segmentation can be a way to maintain the company’s strong influence in the market.
In business world, no matter you are product or service base company, marketing mix strategies is a must in generating sales by implementing their own marketing strategies. There are 4 elements in marketing mix strategies which are product, price, promotion and place. Product
Reportedly, Huawei’s smartphone shipments show an increment of 67% annually to 13 million units in the third quarter of 2013, which captured 5% of the global smartphone market (Huawei Investment & Holding Co. Ltd, 2014). According to Kotler & Armstrong (2014), there are three levels fall under the product which are core customer value, actual product and augmented product. A research (BBC, 2013) shows Ascend Y100 is chosen as well known product in the Huawei Company as the price is below $99. This Ascend Y100 is targeting the low income customers where the customers show their core values while purchasing this product. The core customer values that can be found are the customers are spending less on the mobile phone and get an equal quality of smartphone specifications. Furthermore, actual product includes the brand name, quality level, and features. Huawei Ascend Y100 is one of the smartphone brand names in the Huawei Company. The quality of this smartphone may not as grand as those premium phones; however, it does not really feel fragile either. Ascend Y100 has an anti- fingerprint surface, as the screen and the phone is surrounded by gloss black bezel (Huawei Ascend Y100 Android phone, 2013).
The specifications of Ascend Y100 are storage capacity with 512 MB and it is expandable to 32 GB, screen sharpness of 143 pixels per inch, and it runs the Gingerbread 2.3 version of Android (Huawei Ascend Y100 Specifications, 2014). Even though Ascend Y100 is fall under the low price smartphone, but it offers all the features of most other Android smartphones such as Wi- Fi, a Web browser, and GPS. Last but not least, warranty, delivery and credit, and after sales service can be concluded in the last level, augmented product. There is a one year manufacturer warranty on the smartphone and only six months warranty for the accessories in the product’s box. Delivery process will be done upon online purchasing and credit payment services are provided too. A cross- technology method should be used by Huawei to improve their productivity on all the mobile phones especially Ascend Y100. This can increase the specifications and designation of the products. Huawei can hire more foreign employees to get different type of technology ideas and use it in developing the new products. A mixture of different ideas from different country can make a product more efficient and productive.
According to Market research institution International Data Corp. (IDC), Huawei is the third largest smartphone maker in the world, which comes after Apple and Samsung. However, a lot may ask how Huawei can make it especially with those high recognition brands like Nokia and HTC. In fact, Huawei is making a good call in the lower end smartphone market, which is also one of the reasons that Huawei became a giant in the mobile phone industry (CaixinOnline,2013). They enter the industry with the intention to create low cost smartphone to all consumers, especially those with low-income. This makes a good call because the market in China is highly competitive, where a lot of people are stuck with low-paid jobs and high living cost in the city. As Huawei has their main factory in China to assemble their product, they are able to enjoy the labour cost advantage. China is known for their cheap labour cost compared to other countries, which helps Huawei to lower their devices’ prices and competes with others.
For example, one of the Huawei’s mobile devices, Ascend Y100 was sold for only $99. Although it is a lot cheaper than those big brands, but its function is almost as good as it is (CNN,2013). This shows that they are having competitive advantage and results a rapid growth in Huawei’s sales. According to the vice minister of Information Department of China Center for International Economic Exchanges, he pointed out that living cost in China is rising due to the inflation and the increasing Chinese wage to international standards, caused the rise in China labour cost (ChinaDaily,2013). While in India, company would able to have lower Indian labour costs and currency (BusinessToday,2014). Hence, India is a good option to set up their production base in order to keep their products at a lower price. Promotion
Promotion is the most concerned strategy by the Huawei Company where they are promoting their brand through advertising, public relations, personal selling, marketing and media. Huawei is advertising the smartphones to the world especially the low income consumers saying that they have the lowest price of mobile phones which indicates Ascend Y100 through YouTube, Congress and also TV. For instance, Huawei has introduced a new slogan in Mobile World Congress 2013 – Make It Possible. This slogan is designates for the consumers which allow them to dream by offering a vision of a mobile world where the journeys are never hindered by lines or limitations (Huawei Device Argentina, 2013). The low income consumers are now daring to dream there is a smartphone which the price is less than $99. Moreover, Kotler & Armstrong (2014) found that personal selling is the presentation by the firm’s sales department to increase the sales and build the customer relationship such as business promotion that involves trade shows.
Example, Huawei takes the opportunity to introduce their mobile phones in the Mobile World Congress (MWC) which known as the world’s largest mobile trade show (Moore, 2014). This MWC is best for Huawei to display their product such as Ascend Y100 because MWC is the world’s best venue for seeking industry opportunities, making deals, and networking (Mobile World Congress, 2014). In addition, Huawei can promote their products through TED Talk. According to TED Conference, TED is a non-profit devoted to share ideas in communities around the world, usually in the form of short, powerful talks (18 minutes or less). TED began in 1984 as a conference in more than 100 languages where Technology, Entertainment and Design converged. Therefore, Huawei can invite their professional developers to give a short talk on TED Talk to let the whole world recognise and acknowledge about Huawei’s low- price products. Place
There are 3 distribution strategies for each of the company to implement in their marketing strategy. They are selective distribution, intensive distribution, and exclusive distribution. All of these are strategies to approach the consumer through different distribution channels. In order to approach the consumers, Huawei is using the selective distribution strategy which involves selling their products in the most fitting and best-performing outlets. With a limited number of outlets, Huawei is able to concentrate on their selling effort rather than dissipating it over countless marginal ones. According to Wang Weijun, head of Huawei Device Co Ltd in China, Huawei has already signed strategic cooperation agreements with Suning, Gome and D.Phone (ChinaDaily,2012). They are the few largest privately owned retailers that sell electrical appliance in the Mainland China.
By selling their products there, Huawei is able to sell their products to the low-income group as most of them will search for a phone that includes good quality and features with a reasonable price in those electrical based retailers. They may compare the products with one another and choose the one which is good value for money. Other than selling their products in the outlet stores, e-commerce is also an important way for mobile phone sales. With the continue rise of e-commerce, Huawei is taking a step further to develop their e-commerce business. In addition to theirs online shopping mall, other e-commerce distribution channel like 360buy and Dangdang are also Huawei’s working partner in selling their mobile devices (WantChinaTimes,2012). Lastly, in order to demonstrate its product and also increase the brand recognition, flagship stores in few major cities like Beijing, Shanghai and Guangzhou, are planned to establish.
Granting to the research and the report has been executed, obviously that Huawei involved in the Smartphone industry in a great timing because the industry is in the growing stage, and Huawei uses their low pricing advantage to capture the low income consumer groups. Besides that, Huawei is still holding their strong position in the other field such like global equipment, operational services and more. After our investigation, we found out that the major problem facing by Huawei is the both competitors which are Samsung and iPhone. Although Huawei is the third biggest Smartphone provider in the world, where Samsung leads with 29% and Apple gets a 22% of the Smartphone market, but Huawei only has 5% shares in the smartphone industry and it shows a distance between Huawei and the top two competitors. This is because Samsung and iPhone already positioned well in the individual consumer market and both have a longer history than Huawei.
The reputation of China products decelerates the sales of Huawei in the overseas market causes Huawei having problem to get the high income consumers’ market. In the competitive market, the changes of environmental will bring a huge impact to the company strategic so that company needs to identify and segment the market. Huawei’s marketing strategy in price is their strongest weapon to compete with the others. Huawei should expand their business to India to get cheaper labour cost to increase revenue so that they can sustain the low labour cost advantage as well. Huawei should hire more local professionals to get their ideas on the smartphone and to promote their products as the professionals will know more on the customs and the culture of the nation. With these strategies, Huawei can remain their position in the low income consumer groups and start to dominate the high income market, that’s what Nokia achieved in the 90s and 00s years.
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