Question

The story

Huawei of China is the world’s second- largest supplier of telecommunications equipment. The company has been expanding into international markets since 1997 but its brand has until recently remained little known outside its native country. One reason is that Huawei is a business-to-business supplier rather than consumer-focused.

As part of its globalization strategy, Huawei decided to begin operations in India in 2000.

The challenge

In India, Huawei faced various difficulties. First, the company needed to build a strong and distinctive brand for non-Chinese markets. In India in particular, the telecoms equipment market was crowded. So Huawei needed to establish a reputation as a reliable partner and create a distinctive identity.

Its Chinese roots worked against it on several levels. An enmity still exists between India and China, with an unresolved border dispute in the north and a history of armed conflict as recently as the 1970s. Also, many Indians perceive Chinese companies to be closed rather than transparent. Thus, Indian businesses often find it difficult to establish relations of trust with Chinese partners.

Chinese companies also have a reputation – not always deserved – in India for producing low-quality goods. Similarly, Huawei was seen primarily as a low-price manufacturer, which meant its products were regarded as of low quality. The fact that the company spends 10 per cent of its profits a year, about $3bn, on research and development, was not widely known.

The response

Huawei realized that in order to compete in India it would have to invest heavily and get to know the market and its particular features.

With this in mind, it established R&D and service centers in India, and 90 per cent of the jobs created went to Indians. This helped to persuade sceptics that Huawei was interested in value creation in India, not just value extraction. Today, India is Huawei’s second-largest research base outside China.

At the company’s two production plants in Chennai, Huawei staff work with local companies to help bring the latter’s production quality up to international standards. The long-term plan is to source as many components locally as possible. Not only are such components cheaper, they also help local companies achieve higher- quality standards, making them more competitive, spreading skills and boosting the economy.

Huawei has also begun promoting consumer products such as smartphones. Recently the company established a link with a leading Indian English-language news channel to sponsor a contest that projected Huawei smartphones as aspirational products, contrary to the prevailing low-quality perception of Chinese brands.

To build an employer brand, Huawei has developed a strong culture of rewarding R&D talent and promoting Indian employees to managerial positions. The hope is that this will be an added boost to the company’s reputation in the country, which has a strong young talent base in engineering. Strengths in research and innovation in India could help Huawei to enhance its reputation worldwide.

The lessons

There is a tendency to think of cultural barriers as being strongest between west and east, and writers on strategy and marketing sometimes assume that there is a cultural affinity between China and India that greatly reduces such obstacles.

In fact, Chinese companies find market entry in India just as difficult as western companies. Huawei’s strategy is one that can be adopted by other foreign companies no matter what their origin: demonstrate trustworthiness, build relationships, commit to India and provide superior quality.

1. Explain the challenges faced by Huawei to enter Indian Market.
2. Based on the case study, explain the market entry strategy adopted by Huawei to enter Indian Market.

Answer 1

The question is pretty simple and below is my answer:

Q.1 - Explain the challenges faced by Huawei to enter Indian Market -

1. Building a distinctive brand. The Indian market is saturated with telecommunications firms and Huawei needed to work to distinguish itself from among them.

Huawei launched several promotional campaigns aligning its products with an aspirational marketing strategy, meaning that people aspired to own their devices. In addition, making a prolonged commitment to the new marketplace helped to increase their visibility.

2. Fighting cultural or political barriers. Disputes and conflicts between the two countries have led to distrust and difficulty in establishing relationships across borders.

Huawei responded by investing in jobs in India, which showed their interest in creating value in the communities where they were located. They also invested time in getting to know the India market and its culture, through its research and development wing. Additionally, they mobilized large-scale donation efforts in India following a series of natural disasters.

3. Low-quality reputation. Chinese manufacturers are often perceived as manufacturing low-quality merchandise. And, because of its already low prices, Huawei was part of that perception.

Huawei worked to source components for its products locally and elevate its production quality to fight perceptions about low-quality merchandise. Additional work to promote smartphones as a product consumers aspired to have helped to boost its product quality perception.

Q.2 - explain the market entry strategy adopted by Huawei to enter Indian Market.

Piggybacking Stratergy:

Piggybacking is a particularly unique way of entering the international arena.

If you have a particularly interesting and unique product or service that you sell to large domestic firms that are currently involved in foreign markets you may want to approach them to see if your product or service can be included in their inventory for international markets.

This reduces your risk and costs because you are essentially selling domestically and the larger firm is marketing your product or service for you internationally.