As indicated, the transformations in the ICT sector and the liberalization of the market have led to the emergence of the private companies in the ICT sector including Huawei (Richter, 2000). Factors such as the Chinese large market for telecommunication equipment, strategic positioning and investments in research and development explain the reasons for the success of the company (Cheung, 2001). Being one of the pioneer companies in the telecommunication equipment manufacturing, Huawei quickly emerged as the largest company in the sector capturing both the Chinese and the Asian market. In addition, critical strategic decisions including the development of own technologies and increased competitive advantage also contributed to the companys growth and development (Segal, 2003). The main objectives of strategic decisions were to increase the share of Chinese market, expand internationally and increase competitive advantage over the foreign-based companies.
The Problems Facing Huawei
During the initial stages of establishment, the firm had problems of raising funds for development and expansion since it could not access government subsidies. In addition, existing stiff competition from established companies both domestic and foreign-based slowed the companys growth in terms of market share. Both domestic and international markets are becoming highly competitive with emerging firms claiming some share of the market (Lu, 2000). Besides, the ever-changing technological advancement poses a greater challenge to the company. New products are being developed constantly requiring the company to invest heavy in the research and development to maintain its competitiveness in the market.
Global Competitiveness of the Firm
The main objective of the company is to increase its market share both domestically and internationally. In other words, the objectives enabled the development of strategies that enhanced international expansion of the firm. Moreover, the international expansion strategies combined with innovative products have facilitated the firm to capture sizable global opportunities within the telecommunication industry. Further, the capabilities in terms of products development and finance as well as market share have increased the companys global competitiveness. In fact, Huawei is the Chinese company that is capable of competing with other global firms in the international ICT market. Currently, the company has established subsidiaries in European, North and South American markets. Moreover, the company is currently one of the major global telecommunication equipment providers and continues to expand globally amid increased competition (Wang & Zhang, 1995).
The Chinese Industrial Policy Drawn from the Analysis
The Chinese government policy on the ICT sector that encouraged the alterations from controlled to market liberalization has led to the rise of privately owned firms such as Huawei in the first phase category within the ICT ecosystem. In addition, reforms by the government in the telecommunications industry that encouraged development and growth of ICT sector led to the establishment of platform, content and application provider companies including Huawei.
China Telecom
The Cause of Emergence and Rise of the Company
China telecom is one of the government-owned companies that was created from major reforms in the telecommunications sector. Based on the policy, the Chinese government executed reforms in the ICT sector, opened up its market for new firms and did away with production forces that created obstacles hindering the development and growth of firms in the sector (Brown, 1998). The reforms in telecommunications sector led to the creation of structures that enabled the emergence of China Telecom (Amiri et al., 2013). Being a national company, China Telecom enjoyed full governments protection and accessibility to cheap loans that funded most of its operations. However, the firm was encouraged to collaborate with foreign companies to borrow technological capabilities that fostered its growth and development while sustaining the considerable sub-standard production (Zhang, 2003). As expected, the firm quickly benefitted from the multi-stage path policy and rapidly built a modern communication network, which enabled it to compete effectively not only within the domestic market but also internationally.
The Problems Facing the Company
Currently, the company is facing several problems ranging from motivation to deployment. The technological know-how and factors related to environment are within the spectrum. In terms of technical skills, the company faces protocol incompatibility and the problem of transition experience. The huge numbers of service platforms as well as giant network require substantial material and human resources. In addition, there is lack of mature experience and examples of network management, services flows and products development to learn from. Moreover, the company faces the problem of long life cycles of returns on investments.
The Global Competitiveness
The firms global competitiveness can be explained from the policy perspective and the firms competencies. Due to the developed capabilities, the firm has grown into an excellent organization offering variety of products that favorably compete with multinational corporations in the sector. According to Xia (2010), the firm has undergone huge transformations from a sparsely stretch of network system to a multinational firm that competes with larger world corporations. In addition, the company has followed the multi-stage strategy to build and expand the modern infrastructures, which increases the prospect for the company future growth and global competitiveness (Nolan, 2001). Currently, the firm is skillfully attracting partnerships with foreign companies transferring enough technology that would increase its competitiveness in both domestic and international markets (Ning, 2009). As such, the firm has developed capabilities that enable its global competitiveness.
The Chinese Industrial Policy Drawn from the Analysis
The success of the company can be attributed to the governments policy on the telecommunication sector. In fact, the governments policy, which promoted the application of imported equipments and supported joint ventures with foreign companies and finally nurturing national corporations, has encouraged the growth and expansion of firms within the sector (Segal, 1999). In most cases, companies within the telecommunications sector were encouraged to follow the path indicated by the government policy to grow into global corporations that can compete favorably in the international market. The conclusion that can be drawn is that while advancing a liberated and vibrant competitive market, Chinas economic and regulatory industrial guiding principles have been successful in the rapid establishment of a modern communication network that rivals those of advanced countries (Lardy, 1998).
Baidu
Reasons for Emergence and Rise of the Firm
Baidu emerged because of new reforms in telecommunications industry and liberalization of the market. However, the establishment of the company also originated from continued quest of the Chinese government to have its own search engines. The rise and growth of Baidu depend entirely on the large Chinese market. In addition, the capabilities of the firm to offer web services in Chinese language have contributed to its increased growth within the Chinese market. Besides web services, the companys unique products including multimedia content, wireless application protocol, personal digital assistant and mobile search have also contributed to its expansion. Further, the company is currently expanding into social networking market where the business expects to grow rapidly due to its capabilities in offering services in Chinese language.
The Problems Facing Baidu
The major problem facing Baidu is competition. In fact, the web services market is highly competitive with both domestic and international firms claiming some share of the market (Steinfeld, 1998). However, the capability of the firm to offer web services and search engines using Chinese language provides an increased competitive advantage over international firms. The other challenge the firm faces is tight control over its operations by the state agencies. Baidu is one of the most restricted and censored online firms. Further, the government-controlled program contributes to its slow expansion both within domestic and international markets since the company can offer limited web services in relation to international companies (Lardy, 2002).
Global Competitiveness of the Firm
The prospect for international expansion of the firm is limited given the type of services the company offers. The main target markets are Chinese nationals having the capabilities of understanding the contents of services offered by the company. In addition, the web and related services offered by the firm are highly competitive with most multinational and well-known brands such as Google dominating the world market. The domination of the world market by international companies decreases the worldwide expansion opportunities for Baidu. However, the developments of new products by the company have enabled Baidu target international markets particularly within Asia.
The Chinese Industrial Policy Drawn from the Analysis
Even though the market is liberalized, the services offered by firms in this industry category are highly regulated. The regulations have led to the slow growth of firms in the industry category. Conversely, the government support for the establishment and development of the content and application provider companies has been critical for the growth of domestic firms including Baidu.
References
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Zhang, Y. (2003). Chinas emerging global businesses. political economy and institutional investigations. Basingstoke, Hampshire: Palgrave Macmillan.
The case study reviews the internationalization process of the Chinese company Huawei. In particular, it analyzes the past experience of the enterprise in terms of expanding into the US market and sheds light on the companys strategic decisions regarding its attempt to re-enter this market. It is recommended that the company form strategic alliances with domestic leaders to pursue several tactical goals. In addition, emphasis should be placed on the importance of diversifying the companys product portfolio. However, most importantly, the company is advised to allocate resources toward the development of innovations to be able to enhance the quality of its manufactured goods.
Company Background
Huawei is a transnational Chinese company with headquarters in Shenzhen, China. At present, this company is the largest manufacturer of telecommunications equipment in the world. The company is engaged in the creation of telecommunications networks, the provision of a variety of related services, and the production of equipment in both the domestic and foreign markets. The company employs more than 140,000 employees (Huawei, 2016).
It is important to note that 46% of all Huawei employees are engaged in research and development (R&D) (Liu & Zheng, 2013). The research centers of Huawei are located in many countries around the world. In addition, the enterprise has partnered with 28 innovative institutions that are leaders in global technology development. Due to this cooperation, Huawei has received more than 31,000 patents over the past year alone (Liu & Zheng, 2013). In addition, the company makes a significant contribution to the development of global industry.
Huawei individualizes its products to the needs of various consumer groups in order to remain competitive. The company manufactures unique products and offers technological know-how along with cheaper services for customers through multimillion-dollar contracts with local mobile operators (Liu & Zheng, 2013). It is also crucial to note that for many years, the cost of foreign transactions has been exceeding costs in the domestic market.
Despite such an impressive executive summary, it is essential to stress the fact that attaining market share in the US has been rather challenging for Huawei. Indeed, the company found itself in several controversies, after which its image was undermined strongly. In the aftermath, Huawei was accused of copying rival technologies and was forced to cease distribution (Shaolong, 2016). In addition, the US government has banned several operations initiated by the company. Therefore, it is necessary to analyze the challenges and barriers that the company may face when attempting to expand into the US market again.
Country Background
One important fact to consider is that the American telecommunications market is quite influential, occupying the second place in volume only after the Chinese market. However, many companies face a number of country-level difficulties that do not allow them to enter the market of American industry. In particular, telecommunications networking and commodity manufacturing are typically controlled and supervised by public authorities.
This control also includes overseeing sales. The Federal Communications Commission (FCC) is the main body in this regard in the United States, and a 1934 legislative act regulates the flow of investment into the country from foreign states and enterprises (Tao & Chunbo, 2014). These measures are aimed at protecting national interests and US citizens as well as maintaining state security. The described levers of state control enable federal authorities to revoke licenses for violations of the law.
In addition, they can prohibit the signing of contracts and deny the transfer of information. However, most importantly, in the United States, ownership of more than 20% (or 25% under certain conditions) of the communications technology industry by international companies is prohibited. This ban has been applied at the legislative level, and any foreign investment exceeding this margin is blocked.
Entry Strategy
Given the companys past experiences, Huawei should pursue a global development strategy in the US market. Superior organization should be the central point of the strategy. To be more precise, emphasis should be placed on the effective coordination of organizational units with business solutions agreed on centrally. In order for this approach to be effective, it is necessary that the company follow several strategies.
First, it is crucial to develop a commodity presented in the home market and then enter the US market with a product portfolio that is adapted to the local needs (Tao & Chunbo, 2014). Second, since the American market is developed, it is necessary to offer business solutions aimed at reducing the costs of local operators.
Third, development and refinement of Huawei products should occur through collaboration with scientific and research centers and the subsequent creation of joint ventures (Liu & Zheng, 2013). Fourth, it is important for the company to compete with global players. Thus, the competitive advantage of the company will be the production of a high-tech product at a moderate price, wherein the costs of production will be lower than that of world leaders.
However, the prices for such products are falling. According to experts, prices will continue to fall by 10% on average, which may negatively affect the organizations ability to provide software and enhance network quality and bandwidth. In order to remain competitive, the company will need to modernize its products and take into account the rapid development of the industry, as this leads to the fact consumers are faced with an increasing range and choice (Shaolong, 2016).
The company needs to expand the infrastructure of key markets, manufacture technologically sophisticated solutions, and achieve product diversification. The current strategy of Huawei has been focused on the creation of a mobile broadband network operating on gigabit traffic (Shaolong, 2016). Nevertheless, experts recommend developing an optical network that will be more operational but less expensive to maintain. Also, it will be important for the company to build an infrastructure in the US market in order to centralize data and data points.
Interestingly, electrical components are the main raw material in the production processes for Huawei (Tao & Chunbo, 2014). Given the nature of the industry and the low possibility of new entrants, Huawei should acquire higher-quality (and more expensive) raw materials from reliable suppliers. Consequently, the diversification of raw materials will be insignificant, and it will be possible to shift suppliers as necessary while reducing their power.
Marketing and R&D Strategies
Importantly, the company should customize the marketing mix. Huawei should employ price skimming so that management can recover costs. In addition, a particular emphasis should be placed on the companys positioning strategy due to its previous negative experience in the country. Positioning should be aimed at addressing customer needs and reaching its main target groups (Wild & Wild, 2015).
In addition, product attributes, benefits, and offerings should be refined in accordance with US consumer requirements. As for promotion and advertising, each of these measures should be targeted at producing a positive client response. The target audience can be reached through broadcast media, and the heaviest advertising should be employed in major areas so as to attract the attention of the general public.
At present, the company has already decentralized R&D. In particular, in the United States, the company has a research center for the development of innovations (Huawei, 2016). In it, Huawei employees have access to the latest developments and can exchange them at a level still unavailable in China. In terms of expatriates, these workers share the latest methods and information on production technology with their Chinese colleagues. Therefore, the companys innovative system works in such a way that employees from different countries transfer developments and complement each others expertise in order to strengthen the companys position and achieve competitiveness.
However, in the past financial year, the resources allocated to R&D have decreased by 0.5% in relation to the increased revenue, as evidenced in Chart 1 (see Exhibit below). Interestingly, Chinese researchers who return to China from the US R&D center modernize the production there. Thus, the existing knowledge cycle allows for the transfer of new technologies and developments to all branches of Huawei. Consequently, as a result of further internationalization, the company will be able to continue to acquire new technologies and modernize the existing arsenal of developments for the creation of new assets and their further distribution (Wild & Wild, 2015).
Opportunities and Challenges
One of the greatest challenges that Huawei currently faces is linked to the companys reputation in the US market, which was undermined after the occurrence of intellectual property infringement. In addition, the greatest threat to the companys internationalization is the US government, which has rather rigid conditions governing the activities of foreign firms (Tao & Chunbo, 2014). In this regard, Huawei needs to cooperate with national companies in order to gain the trust of the government and collaborate with US-based innovation development centers to avoid the possibility of violations.
The low risk of new competitors is one of the opportunities for internationalization. The company produces inexpensive but high-quality commodities, which will intensify competition in the market among existing leaders. Thus, the company will need to raise the interest of American manufacturers and form contracts with the main players in the market (Tao & Chunbo, 2014).
Moreover, Huawei needs to build trust and expand the workforce by attracting American employees in order to take into account the cultural characteristics of management (Wild & Wild, 2015). In general, the main opportunity for the company in relation to the US market is the creation of next-generation devices and services. They will be more effective from the buyers point of view and will be more accommodating to legislative regulations.
Evaluation and Conclusion
Overall, it can be concluded that Huawei should continue to adhere to its strategy of building global collaborations. In order to avoid direct competition, it is strategically important for the company to cooperate with world industry leaders to benefit from existing competitive advantages (Liu & Zheng, 2013). With the help of strategic alliances, Huawei will be able to achieve relatively cheap production. In addition, the company will be able to develop innovative processes to improve commodities.
In general, the global strategy of Huawei should strive to change the focus of activities toward the creation of services correlated with world technological standards and the expansion of infrastructure (Wild & Wild, 2015). In addition, the production of more sophisticated technological solutions and the diversification of products will allow the company to achieve greater competitiveness in new markets.
Liu, X., & Zheng, X. (2013). From technological imitators to technological leaders: Evidence from Huawei case study. International Journal of Technology, Policy and Management, 13(1), 1-14.
Shaolong, Y. (2016). The Huawei way. New York, NY: McGraw Hill.
Tao, T., & Chunbo, W. (2014). The Huawei story. Thousand Oaks, CA: SAGE.
Wild, J., & Wild, K. (2015). International business (8th ed.). New York, NY: Pearson.
Exhibit
Chart 1. Total operating expenses of Huawei (Huawei, 2016, p. 50).
Political: Political forces often influence how smartphone companies operate internationally. Particularly, the growing level of protectionist policies in some western countries, such as the United States (US) and the United Kingdom (UK), are impacting how foreign companies operate through increased government control and oversight (BBC 2019). This action limits the level of growth for smartphone companies because some of them have outsourced their services to service providers who are located in other nations. Therefore, their operations are dependent on the good political relations between countries (Tao & Chunbo 2014).
Technology: The development of the 5G network in the mobile telecommunications market is set to revolutionise the industry through increased speeds, low production costs and enhanced energy efficiencies (Vaswani 2019; Yan 2019; Wang, Zhou & Sha 2017). In addition, the growth and acceptance of smartphones, as a popular communication device, has created opportunities for companies to develop products that exploit the potential for enhanced virtual communications, such as social media (BBC 2019). These technological forces could impact a companys business processes and market position by influencing its preparedness to embrace new technology and convey the benefits to customers (Tao & Chunbo 2014).
Microenvironment Analysis
An increase in the number of people who use smartphones implies a growth in the market size for mobile phone companies. For example, there has been a surge in the percentage of smartphone users in the UK from 63.12% in 2014 to 75.4% in 2016 (MIC Research Team 2016). This growth signifies the potential for an increase in market share for Huawei. Table 1 below shows the companys market share, relative to its peers.
Table 1. Huaweis market share (Adapted from Lomas 2018).
Company
Market share (%)
Huawei
13.3
Samsung
19.3
Apple
11.9
Xiaomi
8.8
Oppo
7.6
Others
39
According to the data highlighted above, Samsung has the largest market share (19.3%) for a single company, followed by Huawei, which commands a 13.3% share in the mobile telephone sector (Lomas 2018). Xiaomi and Oppo command less than 10%, while other smartphone companies control the rest of the market. Huawei has also developed strong links with its suppliers, such as T-mobile, Vodafone and Clearwire (MIC Research Team 2016; Tao & Chunbo 2014). They provide key components for making smartphones and have a strong impact on the firms operations because of their strong control in the market (MIC Research Team 2016).
Internal Environment
Huaweis internal environment will be analysed by reviewing its pricing, capital, quality and brand potential. One of the firms key competencies is its competitive pricing. Apple and Samsung have long been considered to be market leaders in this regard with few options available to purchase cheaper mobile phones. Huaweis success has been pegged on bridging this gap through competitive pricing (Tao & Chunbo 2014). Comparatively, one of Huaweis weaknesses is limited capital because it does not have the cash reserves that its rivals do. This constraint negatively affects the companys effectiveness in the industry.
Similarly, compared to its peers, the Chinese firm has a weaker brand name. Consequently, it has a smaller brand following, which makes it less impactful in the market. Nonetheless, innovation and technology developments in the smartphone industry (such as the 5G technology) have created new opportunities for growth (He & Yang 2019). Lastly, lucrative global markets such as the US and India offer immense potential for growth because Huawei has not had a significant impact on any of them (MIC Research Team 2016).
SWOT Analysis
Table 1. SWOT Analysis (Source: Developed by Author).
He, Y & Yang, M 2019, Research on cross-layer design and optimization algorithm of network robot 5G multimedia sensor network, International Journal of Advanced Robotic Systems, vol. 16, no. 4, pp. 1-10.
Wang, H, Zhou, Y & Sha, W 2017, Research on wireless coverage area detection technology for 5G mobile communication networks, International Journal of Distributed Sensor Networks, vol. 13, no. 12, pp. 212-239.
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The ‘varieties of capitalism’ approach is an institutional theory that can also be discussed as a firm-centred theory. According to Soskice and Hall (2001), this theory is actor-centred; actors include not only firms but also stakeholders who are involved in relations in the sphere of the political economy. Firms develop in certain economic and political environments that can be viewed as coordinated market economies and liberal market economies, depending on the aspect of coordination and relationships of the companies with other actors in the system (Prevezer 2017; Soskice & Hall 2001). One more category from the varieties of capitalism is identified by researchers: an emerging market economy or a transitional economy (Prevezer 2017). China is among those countries that are on the path to capitalism, and currently, it is an emerging market economy (Mohan 2013). The purpose of this paper is to analyse Huawei’s strategies and policies in the context of China as an emerging market economy with reference to the specifics of the varieties of capitalism as an institutional theory.
Theoretical Implications Regarding Institutions and Their Role in Economic Growth
Primary institutions related to the varieties of capitalism in this institutional approach are property rights, the legal system, the nature of a state and markets as a recently added institution (Hancké 2009). These are identified with reference to the issue of coordination as the background to varieties of capitalism (McNally 2013a). In this context, institutions should be discussed as sets of norms and rules to address or follow in order to develop effective relationships in an environment of highly coordinated or less-coordinated economies. While analysing the role of these institutions in influencing the political economy of a country, researchers have also evaluated their role in economic growth (Prevezer 2017; Soskice & Hall 2001). Economic progress and the stability of countries are associated with property rights that should be protected by the state to guarantee firms’ growth, a legal system that should be independent and authoritative, the centralised or decentralised nature of a state and free markets as environments for profit-oriented competition (McNally 2013b). These key institutions are the basis for firms’ development within the context of a coordinated market economy or a liberal market economy.
Debates regarding the role of the discussed institutions in influencing a country’s economic growth focus on the reason why these institutions can be viewed as critical. According to Prevezer (2017), the legal system, property rights and nature of a state as well as markets are directly correlated with a country’s progress in the global arena. Douma and Schreuder (2008) also note the fact that if a country’s legal system is non-corrupted and oriented to protecting the interests of firms and individuals, companies will have more opportunities to develop and become more competitive and profitable. If a country has developed markets based on appropriate regulations, this aspect also contributes to economic growth (McNally 2013b; Soskice & Hall 2001). Furthermore, if property rights are diverse – including private and state ownership – and protected, firms and individuals will receive more opportunities to grow while supporting an overall economic rise (Soskice & Hall 2001). As a result, these primary institutions are important in guaranteeing economic growth in a country regardless of its type according to the varieties of capitalism classification.
However, additional institutions serve to fuel debates on the role of the discussed primary institutions in affecting economic growth. Aguilera and Jackson (2010) concentrate on trade unions, associations of workers, professional networks and shareholding networks as institutions that can also contribute to economic progress. These institutions are based on the power of collaboration to support firms and share coordination activities (Aguilera & Jackson 2010; Prevezer 2017). Institutions that guarantee information-sharing contribute to firms’ development and profitability (Mohan 2013; Soskice & Hall 2001). Therefore, the question regarding the role of primary institutions remains debatable. Nevertheless, the discussed primary institutions guarantee the progress of a firm in a regulatory context and a specific market; thus, these institutions are viewed as more important for the economic growth of a country than additional or meta-institutions. Furthermore, institutions depend on each other, and the complex of primary institutions presents the background for the economy’s rise if the proposed rules and norms provide companies with an advantage in developing and gaining revenues.
Institutions in China and Their Evaluation
China is a country that requires detailed discussion in referring to the ‘varieties of capitalism’ approach because it is an emerging market economy that can have or lack features of both coordinated and liberal market economies (Lüthje 2013). Such primary institutions in China as property rights, the nature of a state and the legal system have specific characteristics. According to Prevezer (2017, p. 226), ‘rural land rights,’ ‘enterprise property rights,’ ‘urban developmental rights’ and ‘state-owned enterprise ownership rights’ can be discussed as common property rights in China. Research on the topic indicates that the rights of state-owned enterprises continue to be most effectively protected because of the provided security of proprietors and the state’s orientation to the further development of these firms (Lüthje 2013; McNally 2013a). In this context, private property rights remain underrepresented in the sphere of business and unprotected in contrast to enterprise property rights.
Focusing on the nature of the state in China, it is important to note that it is a party-state with elements of decentralisation (The Economist 2014). As a result, the legal system adopted in China and particular features of the country’s fiscal capacity should be viewed as decentralised and weak in comparison to Western patterns because of the Chinese Communist Party’s influence on their regulation (Hou 2014; Prevezer 2017). Prevezer (2017, p. 237) notes that ‘this is an overtly politicized legal system; the Party mechanisms are seen as alternatives to the judicial system.’ Moreover, corruption develops at all levels of the legal and judiciary systems in China in spite of governmental anti-corruption activities, and this aspect affects the quality and impact of these institutions.
The analysis of the rule of law in the country should be realised with a focus on such indicators as property rights, governmental integrity and judicial effectiveness as these measures have been proposed by the Heritage Foundation and its Index of Economic Freedom. Such measures are effective when reflecting on the rule of law in China because these institutions are traditionally assessed when it is necessary to analyse the economic potential of the country, and they are indicative of the situation in China according to data from multiple sources. Property rights in China are repressed because of corruption (The Heritage Foundation 2017). The level of governmental integrity is also low. In assessing the independence of the judiciary and freedom of the press in the country, it is possible to state that judges are moderately free in their decisions, but there are constraints on the freedom of the press (The Heritage Foundation 2017). However, any measure of the independence of the judiciary seems inappropriate as researchers tend to focus on the lack of judges’ independence because of the political impact on their activities.
Much attention should be paid to the factor of centralisation and decentralisation in this case. This indicator is important for China because, despite a national debt of about 300% of GDP and specifics of focusing on state-owned enterprises and bureaucratic institutions that do not contribute to economic progress, this decentralised country controlled by the Communist Party remains one of the most actively developing economies in the world (Prevezer 2017; Schwab 2017). Measures of business freedom, trade freedom, financial freedom and investment freedom are proposed by the Heritage Foundation (2017) as non-biased indicators, effectively demonstrating the controversy typical of the phenomenon posed by the Chinese economy. Thus, decentralisation in provinces exists alongside centralised control; the development of capitalism is being realised under the Communist Party’s control, market institutions are developing in the context of state-owned enterprises and business and trade freedom are being observed along with repressed investment and financial freedom. These measures are also reflected by Schwab (2017), according to the data of the World Economic Forum.
Varieties of Capitalism: Analysis of China’s Corporate Governance and Labour Market
As stated earlier, two types of economies according to the ‘varieties of capitalism’ approach are liberal and coordinated market economies, but there is also a third type that covers transitional economies (Prevezer 2017). The emerging market economy of China is developing market mechanisms in the context of a highly controlled state where the legal system is rather weak and where it is possible to note a lack of private property rights in the sphere of business (Hou 2014). Using neo-liberal market principles, practices and incentives and referring to strict macroeconomic regulation, China represents a unique type of economy. Much attention should be paid to such components of the varieties of capitalism and associated institutions as corporate governance and employment that can influence a firm’s progress. Furthermore, focusing on China’s shareholding structure and the role of stock market, banks and business groups in supporting businesses, it is important to note that the bank-based business environment of China is becoming more equity-based in some sectors.
The labour market and corporate governance institutions in China have developed as a response to the rule of law and the nature of a state in that country to balance the orientation to capitalism, the impact of the Communist Party and the development of private firms. China’s labour market can be viewed as flexible as it combines features of labour markets typical of liberal and coordinated economies (McNally 2013a). China represents a hybrid of institutions, as well, in terms of the status of employees and employment protection. Decades ago, China’s labour market had elements of a coordinated economy with more focus on employees’ security and protection of their rights through effective wage policies and welfare benefits. However, over two recent decades, China’s labour market has been oriented to liberal patterns resulting in reduced status and power for employees, lower employment protection, longer working hours, lower wages, obvious differences in wages between managers and workers and higher labour mobility (Prevezer 2017). These changes from a coordinated labour market to a neo-liberal market are the results of the country’s orientation to US patterns and approaches to treating employees.
As a consequence, workers’ participation and training in most Chinese firms are weak because of high labour mobility and little focus on supporting and promoting the workforce (Mohan 2013; Prevezer 2017). Instead, improvements are observed in hiring policies that reflect tendencies for turnover. The process of unionisation in the country has also shown several stages in its development. Unions are primarily state-run organisations that demonstrate dependence on Party-controlled unions and a lack of labour autonomy (Prevezer 2017). As a result, there are few independent trade unions in the country, and little attention is paid to collective bargaining. Changes in China’s economic focus have negatively influenced the trade unions that have become weaker while following liberal market patterns. Therefore, workers in China are becoming more oriented to strike activities because their rights are not being protected at the union level, and little autonomy is being proposed in terms of employee representation. However, there are also exceptions, and some firms in China are developing according to an alternative path that is a result of the country’s hybrid transitional economy.
Huawei and the Company’s Policies
Huawei Investment & Holding Co., Ltd, founded in 1988, is an example of a unique firm in the economic environment of China. The company specialises in producing telecommunications equipment and devices, representing its products all over the globe (Zhu et al. 2013). While focusing on Huawei’s corporate governance strategies, ownership and shareholding, it is important to note that the company is privately owned by its employees; more than 80,000 employees have a share in Huawei (Ho & Farhoomand 2012; Zhu et al. 2013). The private ownership sector is only now developing in the country in contrast to the sector of state-owned firms, and Huawei is one of the leaders in the private sector. The company’s type of ownership is also known as employee stock ownership.
Currently, the funding of the company is based on employees’ resources in financing operations as shareholders. In 1990, 15% of the firm’s stocks became available to employees, although employee shareholders did not receive any bargaining power. The ownership model was revised in 1997, when Huawei focused on incentivising the productivity of its employees, who actively began to take loans, buy stocks and finance the firm because the price of stocks had been lowered for them (Zhu et al. 2013). The company also referred to virtual stock options in the early part of the 2000s, and the price of stocks increased, accentuating the company’s profitability. Thus, ‘linking the net assets of Huawei and its employees’ equity price… further intertwined the interests of the company and its employees and allowed Huawei to be seen as a more significantly employee-owned firm’ (Zhu et al. 2013, p. 19). This basic model was further developed to improve the employee stock ownership approach being followed by the company.
The role of employees is an important aspect for Huawei as they hold the company’s shares. The number of shares allowed for purchase by certain employees in departments depends on the results of appraisals, employees’ experience, performance and productivity. As a result, employees receive more responsibility for their work, and their intentions regarding turnover decrease. The turnover issue is not discussed as a problem by human resource managers in the company because of Huawei’s attractiveness to employees (Ho & Farhoomand 2012). Thus, the system creates benefits for both employees and the company because of employees’ interest in Huawei’s profitability. The dividend amount is determined by the shareholders, depending on the outcome of a fiscal year (Zhu et al. 2013). Furthermore, the company’s managers can decide to withdraw stocks if employees’ work does not correspond to performance standards. Those employees having the largest share of stocks also participate in collective bargaining.
The research and development department is one of the largest in the company, and much attention is paid to training and development of employees in order to focus on the strategy of innovation and guarantee high-quality performance (Ho & Farhoomand 2012). Education and training for employees are the company’s priorities; Huawei University was established in 2005 as an education and training centre for the company’s current and potential employees (Zhu et al. 2013). The company did not merge with other companies to strengthen its potential, and its focus is on the development of its employees’ knowledge and skills in technical areas and the support of research in telecommunications technologies and innovations.
The company uses a system of trade unions to protect employees’ rights and guarantee their security. However, wage issues are discussed not in the context of trade unions but as a result of regular appraisals in order to determine the sum of bonuses and dividends that can be received by an employee (Zhu et al. 2013). The focus remains on the active and even accentuated participation of employees in Huawei’s activities, and economic progress contributes to the development of advantageous internal relations within the company.
Huawei’s Strategies in the Context of China’s Emerging Market Economy and Institutions
In discussing Huawei in the context of the emerging market economy of China, it is possible to claim that this firm is not typical of the country’s business arena. In China, the majority of firms are state-owned and collective enterprises that are typical of all industries, and only a small number of businesses are privately owned companies in the technology and information communication industries (Prevezer 2017). State-owned enterprises are supported by the government in terms of policies, regulations and financing. These companies take advantage of China’s legal system, which can be viewed as influenced by political authorities (Lüthje 2013). As a result, the progress of private companies is somewhat problematic in this context.
However, the economic phenomenon of China in relation to the varieties of capitalism lies in the fact that this economic system is a hybrid, and it is rather liberal. Therefore, Huawei follows a modern strategy of being mostly oriented to the international market, developing employee stock ownership as a unique form for China and investing in expensive research (Hou 2014; Zhu et al. 2013). As a result, Huawei can be viewed as a company that is developing according to the patterns of Western firms, and it has also adapted to features of both coordinated and liberal market economies, as well as the impact of the Communist Party.
Researchers claim that four decades ago, the protection of employees’ rights in China and labour conditions were better than three or even two decades ago because of the country’s re-orientation to a new economic model with elements of capitalism (Hou 2014; Prevezer 2017). However, in this controversial political and economic situation, Huawei has developed an effective model oriented to motivating employees and supporting the business through encouraging workers financially and providing dividends. As a result, working practices and employee protection in Huawei differ significantly from practices adopted in other firms belonging to the country in terms of training and benefits provided to employees, but they are similar in terms of focusing on high-quality performance standards. Thus, employees in Chinese firms in general are not sufficiently trained and supported or secured because of managers’ focus on the patterns of liberal economies. However, performance and productivity norms and expectations are high, leading to turnover (McNally 2013b; Prevezer 2017). In contrast, at Huawei, employees’ skills are actively trained, the employees themselves are protected and high performance standards are associated with high bonuses.
An important feature of Huawei’s corporate governance practices in the context of China’s hybrid economy is that the company applies liberal patterns in adapting meta-institutions. The economy of the country is heterogeneous because local institutional arrangements influence the flexibility and openness of local businesses in terms of funding. For example, the economy of Shanghai is internationalised and oriented to trade, in contrast to the economy of Shanxi that is developing as an exporter of resources (Mohan 2013; Prevezer 2017). The decentralisation of power in China’s regions allows for the growth of such companies as Huawei because it was established in a region that is viewed as an environment for new businesses. As a result, Huawei’s internationalisation strategies are influenced by China’s institutional characteristics and orientation to liberal market economies.
Conclusion
This paper has presented an analysis of China’s emerging market economy with reference to varieties of capitalism as an institutional theory and with a focus on Huawei’s strategies and policies in this unique context. China cannot be discussed as a standard liberal market economy or as a coordinated economy because of its orientation to capitalism as supported by the impact of the Communist Party on business. As a result, this hybrid context is advantageous for creating not only firms with low employee representation and ineffective work practices but also innovative employee- and profit-oriented firms like Huawei.
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The successful economic growth of China leads to the transformation of the global economic space, where the leading positions are still occupied by the Western countries. The new US administration, fearing economic competition, has announced a policy of containing China. At the same time, Washington is violating existing rules of international trade. Tensions in economic relations between the United States and China are growing, representing a real trade war. The novelty of the situation is that for the first time in the history of US-Chinese relations, economic contradictions between the parties resulted in such large-scale actions (Meltzer and Shenai, 2019). Identification of their consequences is beyond the scope of standard methods for evaluating trade policy measures.
According to the IMF’s fair conclusion about the trade standoff between the US and China, the main losers in the trade war are producers and consumers (Steinbock, 2018). First of all, the tariff war had an impact on consumers in the United States and China ‑ they definitely lost out on trade tensions. However, the trade war has a much more devastating effect on producers, placing them in extremely difficult conditions.
This conflict is likely to be quite protracted and may lead to increased efforts by China to promote alternative economic strategies. Naturally, the subsequent aggravation of the trade war can have a significant impact on the global economy as a whole and on certain markets, in particular, such a dynamic, turbulent, and fast-growing market as the smartphone market. Without a doubt, given the popularity and (at the moment) the indispensability of the Android operating system, one can assume the emergence of serious problems in Chinese smartphone manufacturers. According to media reports, the trade war has already cost tech companies $10 billion (Felbermayr and Steininger, 2019). It seems interesting to consider the impact of US trade sanctions on Chinese smartphone manufacturers, using the example of Huawei.
The aim of the study is to build a multi-factor model of the impact of US trade policy and sanctions on financial performance, world market share, stability, competitiveness, and prospects of Huawei. In frames of the goal, the following tasks were formulated:
To trace briefly the evolution and causes of the US-China trade war
To analyse the US restrictive trade policy, the content of the sanctions, their current application and prospects
To analyse the dynamics of operational and financial indicators of Huawei since the beginning of the application of sanctions
To systematise Huawei’s competitive advantages and their potential sustainability
Using the method of open interviews, to conduct an empirical study of the views of Chinese and American experts regarding the current situation, its true causes, consequences and prospects.
By comparing the opinions of experts, processed with the help of grounded theory, with the data of a secondary study, to assess the impact of US sanctions on customer loyalty of Huawei products, goodwill, investment attractiveness and prospects of Huawei
To develop a factorial template model of the influence of geopolitical and geoeconomic factors on the players of the global telecommunications market.
Project Background
In the summer of 2018, the United States unleashed a trade war against China. Prior to this, it seemed to many that the parties would find a compromise. Hopes for this appeared after the May consultations of the parties. However, in July and August, the United States introduced additional tariffs on imports of Chinese goods for the amount of 50 billion US dollars. Beijing responded with a similar increase in US import duties. In September, new tariffs for another $200 billion came into effect (Tankersley and Bradsher, 2018). The Trump administration openly embarked on the economic containment of Chinese expansion, not particularly reckoning with the rules of multilateral international trade. As a result, the trade conflict is acquiring signs of a large-scale and prolonged economic war with difficult to predict consequences.
Washington emphasized that the sanctions were applied within the framework of the current US Law on Countering America’s Adversaries through Sanctions (CAATSA). The reason for the introduction of restrictions was the purchase by Beijing of 10 Russian Su-35 fighter jets, as well as equipment for ground-to-air missiles used in S-400 missile systems. The restrictions Washington imposes against Beijing include a prohibition on the Chinese Ministry of Defence from issuing export licenses, foreign exchange transactions under U.S. jurisdiction, and property seizure and freezing accounts in the U.S. (Meltzer and Shenai, 2019). Already in the fall of 2018, it became known that due to the trade war between the U.S. and China, as well as mutual sanctions and restrictions, about 70% of U.S. companies decided to transfer production from China to other countries (Meltzer and Shenai, 2019).
In January 2019, U.S. congressmen and senators introduced bills aimed at prohibiting the export of products from those Chinese telecommunications companies that violated U.S. sanctions and export laws. Washington also brought 10 charges against Chinese company Huawei, which concern the violation of trade secrets, as well as 13 charges of violation of sanctions (Hanbury, 2019). Chinese telecommunications corporation Huawei can no longer use Google applications due to US sanctions. Google decided to suspend business with Huawei, in which the Chinese company provided software or hardware development. This is due to the adding of Huawei into the “black list” of companies by the US Department of Commerce. Among the restrictions that Google imposes on Huawei, the following should be noted (Hanbury, 2019):
Huawei will lose access to the Android operating system with GMS services – they include the Google application, Chrome browser, Play Market, YouTube, maps, and other company applications and APIs.
The company will lose technical support and compatibility with Android and Google services.
Huawei Android smartphones will stop receiving operating system updates from Google.
The company has found a replacement for most of the equipment previously purchased in the United States, but has so far failed to find an alternative to Google services. So far, customers of the company with old Huawei mobile phones have access to Google Play, Google Maps and some other Google services. But for all new models of the company, all this will no longer be available. Access problems can lead to the company losing a significant share of non-Chinese customers. Following the imposition of sanctions due the U.S.-China trade war, Huawei began to develop its own operating system, known as Harmony. But now it is “far from ready,” and it will take years to develop it.
Beijing is convinced that the actions of the United States undermine the legitimacy of the status and procedures of the WTO, destroying international “production chains” and eliminating the prospects for global economic growth (Zhang, 2018). At the same time, in the end, namely isolation policy can help China become a completely self-sufficient state, and Chinese technology companies will have the potential to create truly unique competitive advantages. In 2017, in analytical reviews of the smartphone market, it was noted that Huawei should soon move Apple from second place in the list of the largest smartphone manufacturers, while the Chinese giant is practically absent in the US market. In November 2018, the new ‘flagship’ Mate 20 Pro turned out to be the most popular smartphone in the company’s history at the pre-order stage in Europe (Deloitte, 2019). These data clearly indicate the excellent prospects of Huawei in European markets.
Thus, the impact of U.S. sanctions on Huawei and its consumers’ behaviour appears to be mixed. In this regard, by following the evolution and causes of the US-China trade war, the content of the sanctions, the nature of Huawei’s competitive advantages and their potential sustainability, as well as the company’s performance indicators, one can not only assess the current and potential impact of US sanctions on Huawei, but also develop a generalized multifactor model of the influence of geopolitical and geoeconomic factors on the players in the global telecommunications market.
Literature Review
The use of sanctions as a tool for implementing policy is rooted deep in the history of international relations. Researchers rightly point out that the goal of sanctions has always been single – to influence the target country without the use of integrated military operations, weakening it and pushing it to political surrender (Munoz, 2017). One of the most effective forms of sanction pressure is currently considered economic one. This is due to the fact that in the conditions of creating a single global market, economic ties began to play an important role ‑ respectively, their break leads to significant costs (Yefremov, 2018). In fact, sanctions tools are used as measures of unfair competition in geoeconomics.
The very concept of geoeconomics was introduced into world science a quarter century ago by Edward Luttwak, who opposed it to geopolitics, which, in contrast to the economic mechanisms of geoeconomics, emphasized the achievement of global goals through direct military or diplomatic action (Luttwak, 1990). At the same time, researchers note that at the turn of the 20th and 21st centuries, armed conflicts practically did not produce the expected effect, while methods of economic pressure led to more tangible results (Wigell, Scholvin and Aaltola, 2018). On the contrary, the expected geopolitical effect was often achieved in a purely geoeconomic way, which, in turn, led to the emergence of the concept of geostrategy. The United States now applies such a geostrategy to China, having “declared” a trade war on it.
Of course, having a negative impact at the macroeconomic level, sanctions all the more pose a threat to individual companies in the target country, creating a crisis situation and the need for urgent anti-crisis measures. The crisis may not only be associated with the loss of competitive advantage, but also become a catalyst for the creation of new, truly unique advantages. During a crisis, it is especially necessary to maintain the company’s competitive advantages at all stages of the life cycle. Under the current conditions of a competitive market, it is important for a company to assess the possibility of radical strategic changes in a short time (Yefremov, 2018). In a situation where the company does not have time to meet the changing market factors, growth may slow down. At this stage, it is necessary to update technologies, increase investment in innovative projects.
Not much is known about Huawei’s own operating system – HongMeng. At the same time, it has been under development for seven years – since 2012 (Li, 2019). As representatives of Huawei rightly point out, developing an operating system is not a big deal. It is much more difficult to create an ecosystem with application support (Li, 2019). Many Western experts believe that HongMeng will fail, as operating systems without applications have no chance in clashing with the Android-iOS duopoly (Keane, 2019). However, it can be assumed that such conclusions can, in fact, be very hasty.
It is obvious that the company may completely lose the smartphone market in Western Europe if it loses access to Google services. Currently, indeed, Huawei’s sales have declined markedly after the introduction of U.S. sanctions (Deloitte, 2019). However, many smartphone manufacturing companies have experienced a significant drop in sales, nevertheless, “with honour” coming out of crisis situations through innovation.
If earlier, before the imposition of sanctions, Huawei adhered to a low-cost strategy, then in this situation, we can assume that it will have to resort to a combined strategy, including differentiation. Buyers should receive significant motivation in order to prefer the new operating system to the well-known and understandable Android and iOS. However, the example of Apple with its slogan “Think different!” and the company’s experience in “patent wars” with Samsung, suggests that there is a real possibility of creating a unique OS. Unique services are also important in creating new competitive advantages. So, the company launched its AppStore application store in the European market and plans to launch the Huawei Video Service, which will focus on younger mobile users.
It should be noted that if certain theoretical studies were conducted at the macro level concerning the impact of sanctions and trade wars on world and regional markets, as well as the economies of individual countries, there are no such studies at the micro level. In this regard, it seems necessary to expand the range of research in this area with the inclusion of the level of individual markets and companies in considering the impact of sanctions on customer behaviour and company prospects.
Methodology
The study will include the collection of secondary and primary (empirical) data. The study will use systemic, institutional, and comparative methods. Secondary data for analysis will be obtained from industry and specialized periodicals, as well as Huawei corporate reporting and industry/segment reports of consulting companies. An empirical study, within the framework of the scientific philosophy of interpretivism, will include conducting open interviews with Chinese and American experts.
Qualitative methods are absolutely necessary where it is required to formulate a new hypothesis or to comprehend the problem. Precisely for a deeper understanding of the problem, the open interview method was chosen, which allows one to get well-thought-out answers from experts. The results of the interview will then be processed using a grounded theory method, as the only completely universal type of qualitative research, that best fit the goals of theoretical validation (Clarke and Charmaz, 2013; Flick, 2018). As part of our study, 35 interviews will be conducted.
At the final stage of the study, the data of the secondary and primary research will be compiled and compared, on the basis of which, using the example of Huawei, a template model of the influence of geopolitical and geoeconomic factors on players in the global telecommunications market will be built. Gantt chart of the implementation stages for proposed research project is presented below.
Fig. Gantt chart of the research project on the patterns of consumer behaviour under the impact of US sanctions against Huawei company.
Stage 1 justification of study; looking for sources, conducting literature review; formulation of objectives and tasks.
Stage 2 analysis of the content of sanctions, policies, and the impact
Stage 3 collecting and processing empirical data
Stage 4 analysis of Huawei potential competitive capabilities in the conditions of sanctions
Wigell, M., Scholvin, S., and Aaltola, M. (2018) Geo-economics and power politics in the 21st Century: the revival of economic statecraft. Abingdon-on-Thames, Routledge.
Yefremov, D. (2018) ‘China in trade war against the US: tactical capabilities and prospects,’ Kitaêznavčì doslìdžennâ, 1, pp. 133-141.
Zhang, Y. (2018). ‘The US–China trade war: A political and economic analysis,’ Indian Journal of Asian Affairs, 31(1/20), pp. 53-74.
As indicated, the transformations in the ICT sector and the liberalization of the market have led to the emergence of the private companies in the ICT sector including Huawei (Richter, 2000). Factors such as the Chinese large market for telecommunication equipment, strategic positioning and investments in research and development explain the reasons for the success of the company (Cheung, 2001). Being one of the pioneer companies in the telecommunication equipment manufacturing, Huawei quickly emerged as the largest company in the sector capturing both the Chinese and the Asian market. In addition, critical strategic decisions including the development of own technologies and increased competitive advantage also contributed to the company’s growth and development (Segal, 2003). The main objectives of strategic decisions were to increase the share of Chinese market, expand internationally and increase competitive advantage over the foreign-based companies.
The Problems Facing Huawei
During the initial stages of establishment, the firm had problems of raising funds for development and expansion since it could not access government subsidies. In addition, existing stiff competition from established companies both domestic and foreign-based slowed the company’s growth in terms of market share. Both domestic and international markets are becoming highly competitive with emerging firms claiming some share of the market (Lu, 2000). Besides, the ever-changing technological advancement poses a greater challenge to the company. New products are being developed constantly requiring the company to invest heavy in the research and development to maintain its competitiveness in the market.
Global Competitiveness of the Firm
The main objective of the company is to increase its market share both domestically and internationally. In other words, the objectives enabled the development of strategies that enhanced international expansion of the firm. Moreover, the international expansion strategies combined with innovative products have facilitated the firm to capture sizable global opportunities within the telecommunication industry. Further, the capabilities in terms of products development and finance as well as market share have increased the company’s global competitiveness. In fact, Huawei is the Chinese company that is capable of competing with other global firms in the international ICT market. Currently, the company has established subsidiaries in European, North and South American markets. Moreover, the company is currently one of the major global telecommunication equipment providers and continues to expand globally amid increased competition (Wang & Zhang, 1995).
The Chinese Industrial Policy Drawn from the Analysis
The Chinese government policy on the ICT sector that encouraged the alterations from controlled to market liberalization has led to the rise of privately owned firms such as Huawei in the first phase category within the ICT ecosystem. In addition, reforms by the government in the telecommunications industry that encouraged development and growth of ICT sector led to the establishment of platform, content and application provider companies including Huawei.
China Telecom
The Cause of Emergence and Rise of the Company
China telecom is one of the government-owned companies that was created from major reforms in the telecommunications sector. Based on the policy, the Chinese government executed reforms in the ICT sector, opened up its market for new firms and did away with production forces that created obstacles hindering the development and growth of firms in the sector (Brown, 1998). The reforms in telecommunications sector led to the creation of structures that enabled the emergence of China Telecom (Amiri et al., 2013). Being a national company, China Telecom enjoyed full government’s protection and accessibility to cheap loans that funded most of its operations. However, the firm was encouraged to collaborate with foreign companies to borrow technological capabilities that fostered its growth and development while sustaining the considerable sub-standard production (Zhang, 2003). As expected, the firm quickly benefitted from the multi-stage path policy and rapidly built a modern communication network, which enabled it to compete effectively not only within the domestic market but also internationally.
The Problems Facing the Company
Currently, the company is facing several problems ranging from motivation to deployment. The technological know-how and factors related to environment are within the spectrum. In terms of technical skills, the company faces protocol incompatibility and the problem of transition experience. The huge numbers of service platforms as well as giant network require substantial material and human resources. In addition, there is lack of mature experience and examples of network management, services flows and products development to learn from. Moreover, the company faces the problem of long life cycles of returns on investments.
The Global Competitiveness
The firm’s global competitiveness can be explained from the policy perspective and the firm’s competencies. Due to the developed capabilities, the firm has grown into an excellent organization offering variety of products that favorably compete with multinational corporations in the sector. According to Xia (2010), the firm has undergone huge transformations from a sparsely stretch of network system to a multinational firm that competes with larger world corporations. In addition, the company has followed the multi-stage strategy to build and expand the modern infrastructures, which increases the prospect for the company future growth and global competitiveness (Nolan, 2001). Currently, the firm is skillfully attracting partnerships with foreign companies transferring enough technology that would increase its competitiveness in both domestic and international markets (Ning, 2009). As such, the firm has developed capabilities that enable its global competitiveness.
The Chinese Industrial Policy Drawn from the Analysis
The success of the company can be attributed to the government’s policy on the telecommunication sector. In fact, the government’s policy, which promoted the application of imported equipments and supported joint ventures with foreign companies and finally nurturing national corporations, has encouraged the growth and expansion of firms within the sector (Segal, 1999). In most cases, companies within the telecommunications sector were encouraged to follow the path indicated by the government policy to grow into global corporations that can compete favorably in the international market. The conclusion that can be drawn is that while advancing a liberated and vibrant competitive market, China’s economic and regulatory industrial guiding principles have been successful in the rapid establishment of a modern communication network that rivals those of advanced countries (Lardy, 1998).
Baidu
Reasons for Emergence and Rise of the Firm
Baidu emerged because of new reforms in telecommunications industry and liberalization of the market. However, the establishment of the company also originated from continued quest of the Chinese government to have its own search engines. The rise and growth of Baidu depend entirely on the large Chinese market. In addition, the capabilities of the firm to offer web services in Chinese language have contributed to its increased growth within the Chinese market. Besides web services, the company’s unique products including multimedia content, wireless application protocol, personal digital assistant and mobile search have also contributed to its expansion. Further, the company is currently expanding into social networking market where the business expects to grow rapidly due to its capabilities in offering services in Chinese language.
The Problems Facing Baidu
The major problem facing Baidu is competition. In fact, the web services market is highly competitive with both domestic and international firms claiming some share of the market (Steinfeld, 1998). However, the capability of the firm to offer web services and search engines using Chinese language provides an increased competitive advantage over international firms. The other challenge the firm faces is tight control over its operations by the state agencies. Baidu is one of the most restricted and censored online firms. Further, the government-controlled program contributes to its slow expansion both within domestic and international markets since the company can offer limited web services in relation to international companies (Lardy, 2002).
Global Competitiveness of the Firm
The prospect for international expansion of the firm is limited given the type of services the company offers. The main target markets are Chinese nationals having the capabilities of understanding the contents of services offered by the company. In addition, the web and related services offered by the firm are highly competitive with most multinational and well-known brands such as Google dominating the world market. The domination of the world market by international companies decreases the worldwide expansion opportunities for Baidu. However, the developments of new products by the company have enabled Baidu target international markets particularly within Asia.
The Chinese Industrial Policy Drawn from the Analysis
Even though the market is liberalized, the services offered by firms in this industry category are highly regulated. The regulations have led to the slow growth of firms in the industry category. Conversely, the government support for the establishment and development of the content and application provider companies has been critical for the growth of domestic firms including Baidu.
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The case study reviews the internationalization process of the Chinese company Huawei. In particular, it analyzes the past experience of the enterprise in terms of expanding into the US market and sheds light on the company’s strategic decisions regarding its attempt to re-enter this market. It is recommended that the company form strategic alliances with domestic leaders to pursue several tactical goals. In addition, emphasis should be placed on the importance of diversifying the company’s product portfolio. However, most importantly, the company is advised to allocate resources toward the development of innovations to be able to enhance the quality of its manufactured goods.
Company Background
Huawei is a transnational Chinese company with headquarters in Shenzhen, China. At present, this company is the largest manufacturer of telecommunications equipment in the world. The company is engaged in the creation of telecommunications networks, the provision of a variety of related services, and the production of equipment in both the domestic and foreign markets. The company employs more than 140,000 employees (Huawei, 2016).
It is important to note that 46% of all Huawei employees are engaged in research and development (R&D) (Liu & Zheng, 2013). The research centers of Huawei are located in many countries around the world. In addition, the enterprise has partnered with 28 innovative institutions that are leaders in global technology development. Due to this cooperation, Huawei has received more than 31,000 patents over the past year alone (Liu & Zheng, 2013). In addition, the company makes a significant contribution to the development of global industry.
Huawei individualizes its products to the needs of various consumer groups in order to remain competitive. The company manufactures unique products and offers technological know-how along with cheaper services for customers through multimillion-dollar contracts with local mobile operators (Liu & Zheng, 2013). It is also crucial to note that for many years, the cost of foreign transactions has been exceeding costs in the domestic market.
Despite such an impressive executive summary, it is essential to stress the fact that attaining market share in the US has been rather challenging for Huawei. Indeed, the company found itself in several controversies, after which its image was undermined strongly. In the aftermath, Huawei was accused of copying rival technologies and was forced to cease distribution (Shaolong, 2016). In addition, the US government has banned several operations initiated by the company. Therefore, it is necessary to analyze the challenges and barriers that the company may face when attempting to expand into the US market again.
Country Background
One important fact to consider is that the American telecommunications market is quite influential, occupying the second place in volume only after the Chinese market. However, many companies face a number of country-level difficulties that do not allow them to enter the market of American industry. In particular, telecommunications networking and commodity manufacturing are typically controlled and supervised by public authorities.
This control also includes overseeing sales. The Federal Communications Commission (FCC) is the main body in this regard in the United States, and a 1934 legislative act regulates the flow of investment into the country from foreign states and enterprises (Tao & Chunbo, 2014). These measures are aimed at protecting national interests and US citizens as well as maintaining state security. The described levers of state control enable federal authorities to revoke licenses for violations of the law.
In addition, they can prohibit the signing of contracts and deny the transfer of information. However, most importantly, in the United States, ownership of more than 20% (or 25% under certain conditions) of the communications technology industry by international companies is prohibited. This ban has been applied at the legislative level, and any foreign investment exceeding this margin is blocked.
Entry Strategy
Given the company’s past experiences, Huawei should pursue a global development strategy in the US market. Superior organization should be the central point of the strategy. To be more precise, emphasis should be placed on the effective coordination of organizational units with business solutions agreed on centrally. In order for this approach to be effective, it is necessary that the company follow several strategies.
First, it is crucial to develop a commodity presented in the home market and then enter the US market with a product portfolio that is adapted to the local needs (Tao & Chunbo, 2014). Second, since the American market is developed, it is necessary to offer business solutions aimed at reducing the costs of local operators.
Third, development and refinement of Huawei products should occur through collaboration with scientific and research centers and the subsequent creation of joint ventures (Liu & Zheng, 2013). Fourth, it is important for the company to compete with global players. Thus, the competitive advantage of the company will be the production of a high-tech product at a moderate price, wherein the costs of production will be lower than that of world leaders.
However, the prices for such products are falling. According to experts, prices will continue to fall by 10% on average, which may negatively affect the organization’s ability to provide software and enhance network quality and bandwidth. In order to remain competitive, the company will need to modernize its products and take into account the rapid development of the industry, as this leads to the fact consumers are faced with an increasing range and choice (Shaolong, 2016).
The company needs to expand the infrastructure of key markets, manufacture technologically sophisticated solutions, and achieve product diversification. The current strategy of Huawei has been focused on the creation of a mobile broadband network operating on gigabit traffic (Shaolong, 2016). Nevertheless, experts recommend developing an optical network that will be more operational but less expensive to maintain. Also, it will be important for the company to build an infrastructure in the US market in order to centralize data and data points.
Interestingly, electrical components are the main raw material in the production processes for Huawei (Tao & Chunbo, 2014). Given the nature of the industry and the low possibility of new entrants, Huawei should acquire higher-quality (and more expensive) raw materials from reliable suppliers. Consequently, the diversification of raw materials will be insignificant, and it will be possible to shift suppliers as necessary while reducing their power.
Marketing and R&D Strategies
Importantly, the company should customize the marketing mix. Huawei should employ price skimming so that management can recover costs. In addition, a particular emphasis should be placed on the company’s positioning strategy due to its previous negative experience in the country. Positioning should be aimed at addressing customer needs and reaching its main target groups (Wild & Wild, 2015).
In addition, product attributes, benefits, and offerings should be refined in accordance with US consumer requirements. As for promotion and advertising, each of these measures should be targeted at producing a positive client response. The target audience can be reached through broadcast media, and the heaviest advertising should be employed in major areas so as to attract the attention of the general public.
At present, the company has already decentralized R&D. In particular, in the United States, the company has a research center for the development of innovations (Huawei, 2016). In it, Huawei employees have access to the latest developments and can exchange them at a level still unavailable in China. In terms of expatriates, these workers share the latest methods and information on production technology with their Chinese colleagues. Therefore, the company’s innovative system works in such a way that employees from different countries transfer developments and complement each other’s expertise in order to strengthen the company’s position and achieve competitiveness.
However, in the past financial year, the resources allocated to R&D have decreased by 0.5% in relation to the increased revenue, as evidenced in Chart 1 (see Exhibit below). Interestingly, Chinese researchers who return to China from the US R&D center modernize the production there. Thus, the existing knowledge cycle allows for the transfer of new technologies and developments to all branches of Huawei. Consequently, as a result of further internationalization, the company will be able to continue to acquire new technologies and modernize the existing arsenal of developments for the creation of new assets and their further distribution (Wild & Wild, 2015).
Opportunities and Challenges
One of the greatest challenges that Huawei currently faces is linked to the company’s reputation in the US market, which was undermined after the occurrence of intellectual property infringement. In addition, the greatest threat to the company’s internationalization is the US government, which has rather rigid conditions governing the activities of foreign firms (Tao & Chunbo, 2014). In this regard, Huawei needs to cooperate with national companies in order to gain the trust of the government and collaborate with US-based innovation development centers to avoid the possibility of violations.
The low risk of new competitors is one of the opportunities for internationalization. The company produces inexpensive but high-quality commodities, which will intensify competition in the market among existing leaders. Thus, the company will need to raise the interest of American manufacturers and form contracts with the main players in the market (Tao & Chunbo, 2014).
Moreover, Huawei needs to build trust and expand the workforce by attracting American employees in order to take into account the cultural characteristics of management (Wild & Wild, 2015). In general, the main opportunity for the company in relation to the US market is the creation of next-generation devices and services. They will be more effective from the buyers’ point of view and will be more accommodating to legislative regulations.
Evaluation and Conclusion
Overall, it can be concluded that Huawei should continue to adhere to its strategy of building global collaborations. In order to avoid direct competition, it is strategically important for the company to cooperate with world industry leaders to benefit from existing competitive advantages (Liu & Zheng, 2013). With the help of strategic alliances, Huawei will be able to achieve relatively cheap production. In addition, the company will be able to develop innovative processes to improve commodities.
In general, the global strategy of Huawei should strive to change the focus of activities toward the creation of services correlated with world technological standards and the expansion of infrastructure (Wild & Wild, 2015). In addition, the production of more sophisticated technological solutions and the diversification of products will allow the company to achieve greater competitiveness in new markets.
Liu, X., & Zheng, X. (2013). From technological imitators to technological leaders: Evidence from Huawei case study. International Journal of Technology, Policy and Management, 13(1), 1-14.
Shaolong, Y. (2016). The Huawei way. New York, NY: McGraw Hill.
Tao, T., & Chunbo, W. (2014). The Huawei story. Thousand Oaks, CA: SAGE.
Wild, J., & Wild, K. (2015). International business (8th ed.). New York, NY: Pearson.
Exhibit
Chart 1. Total operating expenses of Huawei (Huawei, 2016, p. 50).
Innovation is a key attribute of a successful business, particularly in the technology sector, which allows companies to grow and adapt to changing markets and the global economy. Innovation is characterized by challenging conventional notions, creating new frontiers, and applying meaningful strategy to fulfill consumer needs. Apparently, with the fast rate of technological development, innovation in the Information and Communication Technology (ICT) industry is becoming inevitable. It is the only platform left for players in the industry to leverage competitive advantage (He n.d.).
With the knowledge that modern consumers of products in this sector go for products that are in tandem with the latest technology, ICT companies are becoming more innovative and recruiting skilled manpower to keep up with the competition in the market (“Huawei Technologies Co. Ltd.” 2009). One such company is Huawei Technologies, a Chinese telecommunications and consumer electronics conglomerate which transitioned from a primarily regional player to a global corporation that is amongst the top industry leaders. Huawei has developed a strategy of aggressive innovation and business growth to enter new markets by providing high quality, market breaking products at lower prices than its competitors.
2009
The inception of Huawei into the ICT industry can be traced back to 1987 when the company entered the market, amid vast competition from existing players like Samsung. By 2009, Huawei was already experiencing its first breakthroughs in the international market. 2009 was a challenging year not only for the telecommunications market but also for the global economy. Even so, the Huawei’s 2009 report indicates that the company weathered the storm and maintained an upward curve in terms of ROI. For example, the company recorded increased its sales by 19% from the previous year, recording a net profit margin of $2.7 billion.
Huawei’s profitability at this time can be attributed to its relationships with telecom operators as well as the expansion of the business in the global market to 14.1% (“Huawei Technologies Co. Ltd.” 2009). In addition, the emergence of the 3G network allowed for Huawei to expand its operations in key areas of network infrastructure, software, professional services, and devices. Furthermore, in 2009, Huawei saw major changes to its organizational structure and internal processes to improve efficiency and service delivery (“Huawei Technologies Co. Ltd.” 2009).
Innovations
Just over two decades into its launch, Huawei had already taken its position in the ICT sector through customer-centric innovations. The company invested heavily in its R&D department in order to ensure that the quality of its products in the market was comparable or even surpassed those of giant players like Samsung and Apple. The organization’s efforts had already borne fruits. For example, the company launched the LTE/EPC network, one of its own kind in the world, and which was first operated in Oslo, Norway (Drahokoupil, McCaleb, Pawlicki & Szunomár 2017).
Secondly, Huawei became the first telecom company to launch an end-to-end 100G solution from the routers to transformations systems. With the aid of this network, the 2009 report shows that operators were able to build ultra-broadband networks that provide high quality services to the consumers. For instance, the ultra-broadband network allows consumers to access high-definition videos. Lastly, 2009 saw Huawei step up its production of smartphones by launching Android-powered gadgets such as U8220 and U82230. The smartphones were among the most competitive in the market at the time.
Business Model
A business model refers to the strategy an organization intends to use to create value and make revenue. Like any other organization, Huawei’s business strategy is based on parameters such as key partners, key activities, key resources, customer relationships, customer segments, cost structure, revenue streams, and channels. By 2009, Huawei Technologies had already obtained partners such as developers, integrators, electronic suppliers and universities that assisted in R&D.
The main activities of the organization ranged from businesses such as IP networking and routers, to design, manufacturing, end-to-end delivery and service, and support. The resources owned by Huawei at the time included telecom equipment, R&D institutes, intellectual property, and its workforce.
The customer relationships were majorly based on price, service and support, trust and leadership. Huawei market segment was massive public – no specific target market. The channels for marketing Huawei products include corporate and regional offices, dedicated team of sales, retailers, social networks such as Facebook and Twitter, among others. The main streams of revenue at the time were majorly the sale of devices, network operations, consulting and engineering services, business solutions, and service contract fees.
Organizational Culture
Huawei’s organizational culture was initiated at the very birth of the company in 1987. The organization set out its acceptable values and code of conduct that was to be followed by all stakeholders. Of key interest then, as it remains now, was to create a pool of loyal customers by streamlining its services and products to meet customer needs. By 2009, Huawei’s annual report illustrates the progress the company had made in cultivating its unique culture in the telecom industry.
2019
Recent years have seen Huawei become a household name in many countries, particularly due to its rapid development of consumer devices alongside telecommunications networks. Huawei has increased its business and reputation through the growth of 4G networks in most developed countries and a gradual transition to 5G. Also, it now offers a wide range of smartphone devices, particularly in the low- to mid-range price point, while having many features of flagship devices which appeals to markets of developing countries (Han & Sohn 2016).
However, Huawei has faced some challenges regarding its association with the Chinese government and accusations of patented technology theft from other firms. Overall, the company is in a much better state than 10 years ago and has demonstrated significant innovation on every front.
Innovations
In 2019, Huawei has already become a household name in the telecom industry. The company’s investment in R&D across all its branches around the world. This includes the Y7 smartphone that was launched in 2018, and which has managed to compete with the latest models from companies like Samsung and Apple.
Business Model
Key partners: Since 2009, Huawei has received many partners that are helping the organization to work towards its objectives. These include the Huawei Partner Network, the Ascend, and MediaPad brands, MIT Communications Future Network as well as joint ventures with other telecom companies like Motorola, Siemens, and Telecom Venezuela.
Key activities
Huawei has stepped up its endeavors through diversification of operations and activities. Currently, the company engages in training, design, manufacturing, marketing, and sales, installation and integration of networks as well as training and certification programs.
Key resources
Huawei’s key resources include a pool of more than 170, 000 employees, telecom equipment, 21 research and development institutions, production and deployment process, know-how, intellectual property, Nexus 6P – co-designed and manufactured by Google,
Value propositions
Huawei boasts as one of China’s leading manufacturer of telecom equipment. Other than the normal telecom operations, Huawei also makes devices that are used in cloud computing. In addition, it provides top-notch technology that is used in the telecom industry.
Customer relationships
Through the creation of quality products and valuable technologies, Huawei maintains customer relations by fostering trust through efficient customer service and support that prioritizes customer satisfaction and loyalty. In addition, the company has a dedicated team of sales that ensure maintains the presence of Huawei’s products in the market. Huawei’s co-production with other companies such as Google helps to ensure that the company’s reputation remains intact in the market. The most important aspect of customer relations is arguably the pricing of Huawei’s products. The company has streamlined its products to endure that people of all financial levels can afford Huawei products. This strategy helps the organization to retain its customers.
Customer segments
Huawei’s customer segments include the massive (mobile public), governments, public safety organizations, media and entertainment, finance, and educational institutions.
Cost structure
To become a global player in the telecom industry and to compete effectively with established rivals in the industry, Huawei Technologies is left with no other option but to invest heavily in the venture. Therefore, the current cost structure leans heavily toward large expenditures (see Fig. 1). Some of the areas that cost the company include employees, facilities, manufacturing and distribution, deployment, operations, marketing, taxes, sales and support, machinery, parts, and components as well as data centers and marketing.
Figure 1. Huawei: Expenses (2012-2016) (‘Huawei’s research and development activity’ 2017).
Revenue streams
Huawei gets its ROI from different sources. For example, the sale of devices, network integration services, network operation, engineering, and consulting services, assurance service like public safety and learning services, business solutions and service contract fees. All these revenue sources are responsible for the company’s overall sales and net profit margin.
Channels
The marketing strategy of Huawei products involves different channels of distribution. These include regional and corporate offices scattered in 170 countries, retailers and dedicated salespersons, contact centers, its website, and social networks. The role of all distribution channels is mandated with the role of ensuring that the company’s products are availed in the market at the right time and in the right condition.
Organizational Culture
Organizational culture refers to the beliefs, values, and attitudes that are shared by all stakeholders and which are considered to be the drivers of the organization’s success. In essence, an organizational culture depicts what the organization is known for by the external environment. Huawei’s culture is embedded in what they call the wolf-culture. Wolves are peculiar animals that portray some interesting features that are worth emulation.
For example, the bloodthirsty character of wolves is emulated by all employees in the organization because they are highly sensitive to market dynamics and are ready to respond to any changes that take place. Secondly, wolves are generally resistant to cold. This implies that the employees of Huawei are unmoved by difficulties – they face their challenges head-on irrespective of the degree of difficulty involved.
Additionally, the wolf-culture is embraced because wolves are known to do things in teams. All the members of Huawei are encouraged by the management to consult one another and share opinions that can be helpful to the organization. Extant studies show that team building is a virtue that many organizations in the modern world rely upon to foster innovation and creativity within an organization. Experts attribute this to the fact that people are designed to think differently, and the varied opinions given by different people can be combined to solve the problem or develop a new product.
Another important feature of Huawei’s organizational culture is being customer-oriented. All the ventures the organization engages in are meant to improve customer experience and satisfaction. For example, the innovations mentioned above were intended to improve the quality of services offered in the telecom industry and avail affordable but quality products in the market. In doing so, however, Huawei is keen on the sustainability aspect of its development – especially with regards to the protection of the environment.
To this end, the company had, by 2009, implemented the use of more than 3, 000 alternative energy sources to power its operations around the world. Such a move implies that the organization is concerned about the sustainable development of both the telecom industry and society.
Arguably, members of Huawei know pretty well that integrity is at the embodiment of success in the telecom industry as it is for any other industry. As such, the company ensures that all its stakeholders conduct themselves with the highest ethical standards. Through its customer care service, Huawei ensures that it retains its customers by fulfilling its promises and providing the quality of products they promote through various platforms.
2029
Recently, Huawei has announced that it plans to overtake Samsung as the leading smartphone manufacturer. It plans to continue its aggressive expansion in the market, producing quality phones of all price ranges which would allow it to enter more markets globally as smartphone adoption increases. Furthermore, Huawei continues to invest in telecommunications infrastructure as it will continue to produce more efficient networks past the 5G generation. Other areas of growth include artificial intelligence and nanotechnology which can be adopted into telecommunication networks and devices. Overall, Huawei’s future is focused on rapid innovation and widespread adoption of its devices, ensuring its lead position as a telecommunications conglomerate.
Innovations
Huawei regards innovation as the driver of the telecom industry. This implies that a company that demonstrates the ability to come up with new quality products based on the latest technology are likely to receive more customer satisfaction feedback and therefore increased sales. The company’s design and innovation departments are forecasting that the 5G network is going to be a game changer in the world (Lin 2017).
With a speed of up to 5Gigabyte/s, the 5G network is going to revolutionize operations in the telecom sector and increase the speed of service provision via the internet. In light of this, the company plans to incorporate the network in its products within the next decade. Secondly, Huawei plans to increase the quality of its products as has been the case since its inception 30 years ago (Lin 2017). For example, the Y7 model that was launched early in 2018 has received a lot of reviews from customers who view the product as one of the best smartphones in the market today.
Business Model
Going into the next decade, Huawei’s business model is expected to have transformed to a significant extent. The company is planning to leverage effective leadership and intensify its marketing campaigns to deal with the increasing competition, especially in the smartphone sector. To achieve this, the company will redesign its website and social network advertising platforms in order to tap into the vast online market that has been increased by an increase in internet connectivity. In the same breath, the company plans to revamp its e-commerce platform in all 170 outlets around the world. This will ensure that customers can access, compare, and purchase Huawei products from the comfort of their homes. Such a move will be effective in increasing the company’s market share in the industry.
Customer relations is another segment that the company intends to look into within the next decade. This is a sensitive area because modern employees are concerned with the level and quality of customer care and service they receive. As would be expected, customers tend to buy goods from companies that treat them with respect and decorum. In light of this, Huawei seeks to increase the number of customer centers in every country. According to the organization’s projection, this will aid in helping the company to get primary feedback from real customers, and thus make the necessary rectifications that can guarantee customer satisfaction.
Also, Huawei’s model on key activities is likely to witness major changes by 2029. The company plans to increase the number of products and services offered to its customers. To achieve this, Huawei will be compelled to invest heavily in the R&D sector and acquire more production machinery and qualified manpower. Also, the company will be forced to increase the number of its collaborative research partners such as universities.
This will enable Huawei to upscale its implementation of the 5G network that could see many customers scramble for the company’s products. This will undoubtedly be a game changer. Overall, the company plans to maintain high high-end work ethics and world-class customer service that will see the company pose a threat to its rivals in the industry. Further, this business model will only be achieved if the company revisits its leadership and management structure. People who in leadership positions who are unfunctional must be demoted or retrenched and replaced by other competent leaders who can steer the company’s agenda going into the future.
Organizational Culture
10 years from now, the leadership of Huawei believes that the organization will have made many strides ahead in terms of customer experience and sustainable development. Several plans are in the company’s radar with regards to fostering its organizational culture and coping with any necessary adjustments in the next decade. To begin with, Huawei plans to streamline its customer care services across all the 170 and more countries that it operates. Basically, this would mean paying more attention to feedback and encouraging professional service delivery by all its staff.
According to the management at Huawei, they project that efficient customer service is going to increase the company’s market share and put the company in an even better position to compete effectively with other rivals in the industry. Moreover, the company believes that customer-centric innovations are the drivers of any successful technology. Huawei intends to develop products that will meet the needs and imaginations of customers and make them realize the value for their money.
Secondly, with the increasing effects of climate change, Huawei has been at the forefront in the campaign against global warming. Accordingly, the company plans to expand its safe energy operations by embracing the use of alternative sources of energy. This will help the company to serve as an example and encourage other telecom companies to do the same.
The third aspect that Huawei seeks to foster its organizational culture is teamwork. The management is working on a plan to ensure that all Huawei employees around the world collaborate in working towards the company’s goals. This will be achieved through career development and exchange programs that will be implemented by the company’s leadership within the next 10 years. Such programs will ensure that the organization attains workplace diversity which an important driver of innovation.
Discussion
As global society has entered the era of information and communications technology (ICT) which has experienced agile evolution, Huawei has taken a leap into adapting it as part of the business plan. ICT is inherently transparent and customer-driven, with technology and infrastructure centered on innovative technologies such as the cloud for collaboration. Over the last 10 years, numerous enterprises have undergone a digital transformation, and many more will continue to do so leading up to 2029.
Huawei has greatly benefited from this, offering its technologies and services for a number of purposes in order to implement innovative products, services, and customer support (“New ICT Drives Innovation”). Comparing Huawei’s image, products, business model, and culture over the last decade and predicting its growth to 2029, highlights the necessity of innovation to prosper in the competitive telecommunications sector. Huawei is ultimately able to do so through a competent approach to marketing and developing consumer devices which fill in vital market gaps and push the industry forward.
Table 1. Changes in Huawei (2009-2029): Overview.
Key Variable
2009 (past)
2019 (Present)
(Future)
1
Innovations
Promoting incremental innovations;
Focusing on innovative technological solutions;
Relying on customer-centric innovations;
Increasing network broadband.
Using Samsung’s technology;
Improving 5G networks;
Deploying the Y7 model
2
Innovations Strategies
Strategic innovation
Technology-driven innovation
ICT-related innovations
3
Innovations sources
Reports and annual statistics
Big Data and similar sources of information
Global information flow
4
Innovations leader(s)
Transformational leadership
Innovation-geared leadership
Visionary leadership
5
Innovations Cost
CNY 30,000
CNY 77,000
CNY 100,000
6
Product Innovations
Quality-oriented production
Quality- an innovation-oriented production
Quality-, innovation-, and diversity-oriented production
7
Process Innovation
Efficiency improvement
Optimization of all processes
Focus on R&D-geared process optimization
8
Services Innovations
Process-driven performance
Customer-oriented approach
Diversity, disruptive innovations, and customer-centered framework
9
Technology Innovations
Incremental innovations
Non-incremental innovations
Promotion of disruptive innovations as a part of the corporate philosophy
10
Business Model
Using cross-disciplinary support of experts in technology
E-commerce
Revamped e-commerce with the focus on customer relations
11
Strategic Advantage
Quality enhancement
Promotion of corporate culture
Diversity-focused culture management
12
Social Advantage
Fostering local positive traditions
Integrating social practice into the corporate environment
Encouraging diversity and positive cultural exchange
13
Social Disadvantage
Lack of diversity
Lack of control over diversity
Inability to meet the needs of any social group
14
Organization Culture
Rigid code of conduct
Promotion of customer loyalty
Promotion of customer loyalty
15
Stakeholders Value
Focus on quality
Focus on consistency
Focus on innovations
16
Customers Value
Quality products
New opportunities in technology experiences
New opportunities in technology experiences
17
Employees Value
Corporate culture
Opportunities for professional growth
Opportunities for personal and professional growth
18
Change Management
Promotion of positive improvements
Enhancement of change as a critical element of the company’s functioning
Introduction of tools for controlling change
19
Global Reach
Local production
Global production
Focus on the continuous expansion
20
Growth and Profit
Stable growth
Inconsistent growth
Rapid growth
As Table 1 shows, Huawei has made an impressive leap in its progress by deciding to focus on and invest in the development of ICT and the related technology. The company has shifted from the unorganized and traditions-driven local firm to a global corporate entity that encourages the active professional, cultural, and technological growth. In retrospect, the shift toward incorporating non-incremental innovations into the context of the firm and creating opportunities for enhancing the corporate growth are the key success factors that have allowed Huawei to gain its current level of popularity. The company has gained significant social and strategic advantages due to the current business model and corporate values deployed in its setting.
Another significant change that was made by the company in order to boost further development concerns the corporate culture and values. Specifically, the introduction of diversity and the active promotion of cross-cultural communication has led to interdisciplinary cooperation and knowledge sharing. The latter, in turn, has created premises for the transfer of the company from a typical company to a corporation that is capable of making a difference in the target market.
Huawei has shown the propensity toward retaining the traditional values of diligence and loyalty, yet it has also become open to other changes, which encompass the ability to meet diverse customers’ needs, the skills of controlling the cultural change and gearing it toward the enhancement of communication with potential customers, and other important alterations. Thus, with each innovative solution proposed to the corporate setting over the past 20 years, the ones that can potentially contribute to further progress have been selected meticulously. With a well thought-out decision-making framework and a set of values aimed at development and meeting customers’ needs, Huawei is likely to remain at the helm of the global IT market in the future.
Conclusion
From the above discussion, it is apparent that Huawei has moved a long way since its entrance into the ICT industry in 1987. The company has managed to take a position in the industry, managing to compete with giants like Samsung and Apple. A mention of Huawei today would leave one imagining the latest smartphone or technological solution that has been fronted by the organization that is headquartered in China.
With Huawei now operating in at least 170 countries, its business strategy and lessons from the past mistakes will enable it to become a force to reckon in the telecom market share. It is in the view of this fact that the organization has rolled out plans to strengthen its R&D sector and focus more on products that enhance customer satisfaction and loyalty.
In doing so, the company must remain true to its ideals of maintaining integrity in production and customer care sectors. This implies that while the company seeks to innovate and remain relevant in one of the most competitive industries, the company should not compromise on the quality of its products. The management of the organization must also be streamlined to offer the necessary leadership that is required to strengthen the stature of the company at the global stage.
In a nutshell, the success of Huawei in the ICT sector underscores the role played by technology in making lives better and more fulfilling. The 10 years challenge is an efficient strategy for predicting the pattern of technological achievements of an organization. By looking into the organization’s journey within the last 10 years, it is particularly easy to predict future ventures and developments. For example, having availed into the market the legendary Y7 smartphone, one can only guess that Y8 is in the process of being developed, and could be launched sooner or later this year.
Reference List
Drahokoupil, J, McCaleb, A, Pawlicki, P & Szunomár, A 2017, ‘Huawei in Europe: strategic integration of local capabilities in a global production network’, in J Drahokoupil (ed), Chinese investment in Europe: corporate strategies and labour relations, European Trade Union Institute, New York, NY, pp. 211-229.
Han, EJ & Sohn, SY 2016, ‘Technological convergence in standards for information and communication technologies’, Technological Forecasting and Social Change, vol. 106, pp. 1-10.
Jackson, K 2018, Huawei: leadership, culture and connectivity, SAGE, New Delhi.
Lin, Q 2017, ‘Enabling the effective open innovation in Business Ecosystem: a case study of Chinese catch-up firm Huawei’, PhD Thesis, Aalto University, Helsinki, Finland.
Humankind has witnessed an impressive breakthrough over the past few decades, with innovative IT and ICT tools having provided the opportunity to connect people across the world. Contributing to globalization extensively, companies operating in the IT and ICT industries have gained vast influence in their designated markets, yet further expansion is advised to continue their business development and charge their potential for economic growth. Moreover, due to the connection between the technology that the organizations in question produce and the social influence that these technologies leave, discussing the methods of improving the social impact of IT and ICT companies are critical. Huawei is one of such companies, with its products having shaped the realm of telecommunication significantly (Acemoglu 2015). By considering the opportunities for expanding its business to new markets and partnering with foreign companies to share experience, receive support, and address global risks, Huawei will attain even greater results in its foray into the IT and ICT markets.
Currently ranking as one of the top Chinese multinational companies, Huawei has been known as a producer of communication tools and equipment for other companies, thus representing typical business-to-business market relationships. Huawei has been enjoying quite a success not only in China but also across the world, yet several security issues and quality concerns have made it quite difficult for Huawei to retain its position as a leader in the IT industry (Chang et al. 2015). At present, Huawei boasts a sizeable market share, yet its current performance could use improvements.
Reports indicate that the joined efforts of Huawei and Samsung have recently led to a global drop in market share rates for Apple (Lin et al. 2019). Moreover, the 2019 analysis of the global market has returned the results that show the increase in Huawei’s global potential and attractiveness to its target audiences (Jo et al. 2016). Nevertheless, the organization has been dealing with a lot of pressure recently, the necessity to live up to the global quality standards being the key concern (Tsai & Chang 2018). The lack of a quality management framework that allows eliminating the slightest imperfections in the end product is what makes Huawei vulnerable to the external forces of the global economic setting. By creating a more viable competitive advantage geared toward meeting the social needs of its buyers, as well as striving to produce a better social impact, in general, should currently become the principal areas of the firm’s focus.
Comparative Analysis: Huawei’s Competitive Position
Huawei has developed a rather self-sustainable approach toward marketing its services. Due to its extraordinarily affordable prices and a flexible approach toward setting its pricing strategy in new markets, Huawei has garnered a rather strong following among a range of buyers (Liu & Chen 2016). The use of a flexible pricing approach is very important when functioning in a market dominated by brand names such as Apple, the products of which are very expensive (Saif & Aimin 2015).
Table 1: Porter’s Five Forces: Huawei in the Global Market.
Bargaining power of buyers
High (presence of numerous alternatives and recognizable brands)
Bargaining power of suppliers
Low (an array of other suppliers can provide similar services)
The threat of new entries
Middle to high (high levels of competition in the market);
The threat of new substitutes
Low (smartphones are currently unique devices)
Rivalry
Very high, with Apple and Samsung posing the key threat to Huawei
In order to explore the full marketing potential of Huawei, one should consider applying the theory known as Porter’s Five Forces. The identified framework allows outlining the external influences that shape a firm’s marketing approach and defining the probability of its success in the selected area (Bruijl 2018). Applying the Five Forces Model, one will realize that the pricing framework is currently one of the few characteristics that set Huawei apart from other organizations (Bruijl 2018). While being a rather sensible strategy to pursue in the identified area, it still requires support in order to retain its effect in the long term.
In addition, the analysis indicates that the power of buyers is quite strong in the designated area of the firm’s functioning. Therefore, it is reasonable to consider the current trends in demand among Huawei’s potential customers. Some of the most recent decisions that the company has taken in order to address changes in buyers’ behaviors include the transition from the traditional (physical) market to the realm of online retail and e-commerce (Neven & Régibeau 2017). However, given the necessity to compete against corporate giants such as Apple, Huawei may need to consider shaping its current brand image and positioning toward a more communication-driven framework.
Table 2: Huawei: PESTLE Analysis.
Political
Chinese laws are seen as problematic by a range of EU countries;
Restrictions concerning trade due to sanction and similar political issues
Economic
Changes in the cost of the labour force;
Investment opportunities and related concerns
Social
Use of products as signifiers of social status;
Infamously poor quality of a range of mass products;
Current concerns regarding the company’s ethical issues
Technological
The necessity to pioneer in the technological development;
Current opportunity: 5G internet and the related improvement in communication quality
Legal
Need to comply with the principles of the Consumer Law and Consumer Rights as they are defined by the EU;
Need to meet the rights of all stakeholders without infringing upon anyone else’s
Environmental
Rigid environmental regulations and the necessity to address the problem of waste;
Reducing the levels of carbon emission in accordance with the EU regulations.
Compared to its key competitors, Huawei presently takes a rather strong position in the market of its selection, yet the company may lose it easily lest a solid framework for maintaining customer engagement and extending public relations is provided. Given the recent outrage regarding privacy issues in Huawei’s products, as well as the overall quality of their performance, the company has found itself in a rather risky situation. While Huawei has retained its image of a cheap alternative to more sophisticated brands, the recent negative publicity concerning the problems of Huawei’s products and especially their safety leaves room for thorough contemplations.
According to the results of the analysis performed with the help of Porter’s Five Forces Model, Huawei currently lacks the definitive characteristic that could make it as competitive as its key rivals, primarily, Apple. Given the results of the PESTLE assessment, the social aspect of the firm’s performance and the sociocultural factors that shape its popularity could be incorporated into the selection of its future marketing approach. To be more accurate, it is critical for Huawei to develop a stronger rapport with its target audiences by exerting a positive social impact on its customers, as well as the global community, in a more general sense.
It is expected that, by focusing on communication with its stakeholders, primarily, buyers and potential customers, Huawei can improve its competitive advantage significantly. Although the company already has a rather strong and unique benefit compared to Apple and Samsung, specifically, extraordinarily low prices for its products, the company has experienced a recent crisis when its products turned out to have problems with data security management and, thus jeopardized the well-being and safety of the company’s customers (Shi & Jiang 2016). Consequently, Huawei needs to show its target audiences that it listens carefully to the feedback and integrates it into its new decisions.
For this purpose, the focus on building a positive social impact within the global community should be deemed as a priority for the organization at present. Much to its credit, Huawei has already been exploring the areas in which it could make a positive change, with impressive advances having been made already. However, to make further advancement in the selected area, as well as establish itself as a powerful corporate entity in the global market, Huawei will need to alter its current system of values and philosophies. Making the corporate ethical standards more rigid and locating the slightest threats to the firm’s public image should also be seen as important in light of the recent scandal concerning financial fraud at Huawei (the US charges China’s Huawei with fraud 2019). The fact that an instance of financial fraudulence has occurred at Huawei recently points to the problems in the organization’s ethical framework and, thus implies that the firm should change its current value system and philosophy in order to prevent similar cases from happening in the future. For this reason, the integration of several theoretical frameworks that will allow considering moral dilemmas from various perspectives is required. For example, it is reasonable to suggest that Huawei should work toward deploying the ideas of the Kantian moral theory into its current corporate philosophy (Mansell et al. 2018). The proposed theory implies that the notion of humanity should always be seen as the ultimate goal and not as a means to an end (Aydin & Rahman 2017). The principles of Kantian ethics will allow resolving the situations in which the needs of several stakeholders, including customers, may be mismanaged.
Creating Positive Social Impact: Considerations
There is no need to stress that an organization functioning in the IT and ICT market has to deploy the tools that allow it to communicate effectively with its customers and engage in a dialogue with its buyers. However, apart from listening to feedback and responding to requests, a firm should also strive to leave a mark in the global society by challenging the perception of technology and its role in communication. The introduction of the principles of Corporate Social Responsibility (CSR) is the first step toward making a positive social impact for Huawei. Moreover, the organization will need to provide a stellar example of managing the problem of waste disposal and compliance with the current EU regulations for environmental safety by reducing waste to its possible minimum. The described alteration to the company’s public image can be performed by realigning the firm’s current priorities and introducing the concept of stakeholder ethics into its context. By viewing the global community as one of its crucial stakeholders and the s
However, on its journey toward enhancing its positive social impact, Huawei will need to take several considerations into account. First and most obvious, the issue of motivating staff members and creating a positive workplace climate should be deemed as necessary. For this purpose, one should consider using the principles of the ERG theory proposed by Alderfer as the extension of Maslow’s Hierarchy of Needs. Implying that the needs represented in Maslow’s hierarchy should be regrouped to be represented by three key categories, the ERG approach will become the platform for Huawei to develop the necessary values and promote the qualities associated with SCR in its employees (Welbourne, Rolf & Schlachter 2015). By recognizing the unique needs of its employees and satisfying them with the help of financial incentives and other types of rewards, Huawei will be able to build a new environment in which the principles of the continuous improvement of quality and the following increase in communication within the global community will become attainable goals.
The incorporation of the specified perspective will entail opportunities for embracing the needs of as vast a range of categories as possible, at the same time paying close attention to the unique requirements of each stakeholder (Khan & Baloch 2017). For instance, the introduction of three key need categories will lead to gaining a better sense of the types of requirements that Huawei’s stakeholders have and that the company will have to meet. By splitting the critical requirements of the employees into the categories of existence, relatedness, and growth needs, Huawei will be capable of developing the framework for responding to the situations in which staff members lack or are deprived of a certain aspect of growth.
The introduction of the kaizen principles will also help to improve the social impact that Huawei has been exerting on the global community. The kaizen philosophy, which can be represented as the continuous improvement of organizational processes, will help to ensure that there is a direct alignment between the goals of the company and the needs of its key stakeholders, primarily, its employees (Velmurugan & Sankar 2017). The promotion of the kaizen theory as the foundational principle of the firm’s development will help to build the system of organizational management, management of business processes and projects, and other critical constituents of running a company. Specifically, the introduction of the principles of kaizen will allow staff members to transition from the current perspective of their job as part and parcel of their daily routine to the idea of them being a part of a grand plan that will help to make a difference in the global community. Thus, a manager will be able to ignite enthusiasm in staff members in order to excel in their performance.
Furthermore, the introduction of the kaizen philosophy as the notion of unceasing professional growth will help to avoid situations that involve quality mismanagement and the following complaints from customers. Since Huawei has already witnessed the scenario in question, it is especially important for the company to address this concern and prevent further quality issues from occurring In the future. At the same time, one should recognize the progress that the company has already made with respect to the improvement of its social impact. The enhancement of the role that IT and ICT tools play in people’s life has contributed largely to the increase in the performance levels of numerous organizations, including both commercial and non-profit ones. With a rise in the extent of connectivity that members of organizations could enjoy, a vast rise in the performance rates occurred (Kuppuswamy et al. 2017). Moreover, the global community has also benefitted from Huawei’s performance, with ICT devices having been integrated firmly into the lives of millions of people (Singh et al. 2016). Therefore, Huawei has already produced a rather positive social impact with the enhancement of the global communication process and the provision of opportunities for maintaining social connections between people.
Nevertheless, Huawei needs to continue its efforts to produce a positive social impact. Presently, the firm will need to reconsider the framework that it uses to ensure that its innovative technologies can be used to their maximum capacity and bring the most positive results possible, with their side effects minimized. Huawei will have to consider the advantages that it can provide to local communities regarding job opportunities. Training options for the people that are willing to become a part of the company’s system will need to be developed to attain the described goal. The resulting change in unemployment rates within the community, coupled with the promotion of IT and ICT education among local residents will lead to a rise in the amount of positive social impact produced by the organization (Joo, Oh & Lee 2016). However, a step toward the promotion of technological competence in target audiences will imply that Huawei will have to reconsider its current financial strategy and realign its priorities, as well as shape its leadership frameworks to motivate people to acquire new skills. The promotion of lifelong learning and the enhancement of the community’s economic opportunities can be seen as a critical platform for producing a vastly positive social impact.
The focus on increasing the levels of Corporate Social Responsibility within the organization might seem like an evident change to make to the environment of Huawei, yet its positive social impact is often overlooked. By representing a model of a CSR-based organization, Huawei will introduce its community to the notion of a responsible attitude in every domain of people’s lives. As a result, the levels of community involvement in the very process of social change will rise, with citizens developing the ability to introduce improvements into the society independently.
The process of social change and the production of a positive impact on the designated environment need to be supported by appropriate theoretical frameworks. For Huawei to exert the described influence, the firm will need to shape its philosophy and value set in order to maintain continuous and consistent growth, which can be implemented when combining the principles of Six Sigma with the Kaizen philosophy. While the former will provide the framework for institutionalizing change, the Kaizen philosophy will offer the emotional and ethical principles for managing alterations within the company. As a result, a shift in the firm’s perception of social relationships, its role within the community, and the effects that it produces on the latter, will develop exponentially. As a result, Huawei will be capable of representing a positive model that other organizations and individuals can follow in order to develop the sense of responsibility required to prompt a massively positive change. Finally, the promotion of the safety and security of community members through a responsible usage of data is an important step toward improving the social environment that Huawei can consider as a possibility. However, to perform the designated change, the organization will have to strengthen its own framework for managing customers’ needs.
Enhancing Business: Issues Worthy of Consideration
Despite having advanced significantly in the environment of ITC and ICT and having built an impressive presence in a range of markets, Huawei still needs vast improvements in order to meet the ever-increasing demands of its target audiences. The issue is aggravated by the fact that Huawei has to face very stiff competition from two of the most influential IT companies, namely, Apple and Samsung. In order to survive and even strive in the market that can be described as rather unfriendly toward competitors, Huawei will have to take several crucial factors into consideration.
The quality issue is the first and the most critical concept to address when improving the firm’s current market position and increasing its market share. Despite the recent attempts at regaining the trust of its buyers, Huawei has shown the propensity toward a decline in quality, which manifested itself in poor security of users’ personal data (Syn, Sinn & Kim 2017). Therefore, the company will need to introduce more rigid principles of quality management. The introduction of a TQM-based framework for enhancing the organization’s performance and improving its control over the instances involving the production of defective items should be deemed as a necessary step toward improving the company’s current position.
Moreover, the approach toward marketing and branding that Huawei has been using could require certain modeling. Although the idea of representing the company as a cheaper substitute of the product delivered by less affordable brands such as Apple has been successful for a significant period of time, introducing new elements into the company’s promotion and introduction of its services to new markets should be regarded as an inevitable change.
In order to ensure that the principles of quality management are institutionalized in the context of the organization, one should integrate the concept of the Six Sigma model into the organizational environment. The selected framework has been used for quite a while as the method of implementing change as part and parcel of the corporate philosophy into the key organizational processes. The proposed solution toward the current issues faced by Huawei is justified by the fact that the rapid introduction of alterations to a company’s production cycle and organizational management is fraught with severe consequences leading to the disruption of key workplace processes (Hashmi, Ranjan & Anand 2018). Therefore, ensuring that the suggested ideas are fully immersed into the corporate philosophy, one will need the principles of DMAIC and DMADV, which represent the constituents of the Six Sigma Model and introduce companies to an unceasing cycle of change. As a result, innovation becomes the foundation for corporate policy, which is currently a critical change for Huawei (Hashmi, Ranjan & Anand 2018).
Finally, when exploring the issues that Huawei has been facing in the context of the global market, one should keep in mind that the problem of communication and processing feedback from its customers and employees remains one of the critical concerns for Huawei. The introduction of improved communication channels for addressing the identified gap in the company’s framework will need to be seen as a priority. It should be borne in mind that the located problem is twofold, with the issue of communication implying the lack of satisfaction among employees in the workplace and the absence of an effective communication channel between the organization and its customers to introduce the required improvements to the product quality.
Another critical issue that requires Huawei’s close focus is the task of motivating its staff members. There is no secret that the levels of motivation, engagement, and loyalty among employees define the successful organizational performance and the following rise in a company’s profit margins. Applied to the context of the target firm, the proposed task will have to be scrutinized through the lens of Alderfer’s ERG theory, which is an extension of Maslow’s hierarchy of needs, should be considered as essential. The proposed approach will help to enhance the company’s business significantly. However, when choosing the most important aspect of changing the framework of communication, one should focus on the voice of customers. Processing feedback received from buyers and representing the organization positively in the media is going to be rather complicated.
Conclusion
Having grown significantly in its home market, the firm needs to expand into the global setting in order to explore new areas and seek new opportunities for partnership and development. Throughout its existence, Huawei has proven to be quite successful in its designated area. However, with the recent increase in demand for quality combined with the rise in the levels of competition, the global market may become far too hostile for Huawei to enter. Therefore, it is essential to make several critical changes to some of the aspects of Huawei’s functioning prior to its foray into the global economy.
The current approach that the company has been using to manage its representation in media and especially the positioning of its services and products could use significant changes as well. For instance, it is essential that Huawei should focus on highlighting not only the comparative cheapness of its products compared to other brands but also the innovative solutions that it integrates into its technology. Communication with customers and the active use of direct feedback as the platform for making future changes to its products should also be considered as a possible selling point for Huawei. By creating a strong and memorable image that contains more than the idea of cheapness, Huawei will be able to gain the power required to enter the global market. The firm will be capable of improving its supply chain management by creating new partnerships, locating new investors, and increasing the range of its customers.
Changes to the corporate philosophy are also strongly recommended along with the alterations to the management of Huawei’s human resources. It is critical for the firm to monitor the levels of engagement and loyalty to the company among employees, as well as encourage their professional growth with the help of incentives. In addition, communication with the community will require enhancement. Specifically, it will be necessary for the organization to build a positive social impact through engagement in the activities that will improve Huawei’s public relations and elevate its brand above the rest of the firms in the global market. The proposed decision will allow managing some of the most recent concerns regarding the drop in the levels of trust among the company’s target customers due to the drop in the quality of products, specifically, the security of users’ private data. Overall, Huawei needs to be more considerate about its quality management and public relations in order to retain its popularity and address the described concerns.
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In times of stagnation, every company must consider its options for a change in management approach, especially in drastic situations that have the potential to drag it down from the dominating position on the market. Currently, Huawei faces significant challenges due to several factors that have an adverse effect on its growth and revenue. According to Shu (2020), despite seeing revenue of $100.7 billion, which is “an increase of 9.9% year-over-year, with a profit margin of 8%,” the company’s growth has slowed down immensely in comparison with 2019.
This issue stems primarily from the trade conflict between the United States and China, in which the company has been caught due to its sheer size and several close ties with the Chinese government (Hart & Link, 2020). This staggering growth signifies the need to change the strategy of the company and adopt the set of principles that will lead it toward the alleviation of the impact of this conflict. This essay will discuss what breakout strategy is suitable for Huawei’s senior management team that will help the company to escape its current challenging situation.
Many growth strategies were already successfully implemented by the company, as it has been expanding into the markets of over 150 countries, gained an immense customer base, and continues to release new product lines. However, the success of Huawei has been recently attributed to the special treatment that the company receives from Chinese state banks, which reduced its operational costs and allowed it to set its prices lower than its competitors could afford (Hart & Link, 2020).
These issues drag the company down, which signifies the need for the implementation of a breakout strategy. In this situation, the company still holds the dominant position within the industry, although its primary market is narrow (Finkelstein et al., 2006). The breakout strategy that is suitable for a company of this size and in this position is expanding the horizons.
The company has a significant advantage in the form of in-depth knowledge of the networks. The fact that many networks across the globe use Huawei equipment caused a major security concern to the United States, but also implies that its products are renowned for their quality (Hart & Link, 2020). Nowadays, the President and his administration try to bring additional attention to this fact and impose limitations that will severely weaken Huawei’s ability to support its growth primarily by supplying network equipment (Hart & Link, 2020). Since the concern of the company is that its 5G network equipment will be put under sanctions, it has to come up with a way to change the playing field.
The primary strategy that could prove useful for Huawei is to focus on innovative technology that will give Huawei new leverage on the market. Possibly, the early exploration of the new type of wireless communications, which is now known as 6G, will give the company the much-needed advantage. The anticipatory strategic performance is a sign of a company that can withstand most of the changes in the market, especially those stemming from political and social sources.
References
Finkelstein, S., Harvey, C., & Lawton, T. (2006). Breakout strategy: Meeting the challenge of double-digit growth. McGraw Hill Professional.
