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 major challenges faced by Huawei to enter the Indian market are as follows:

• Coping up with the cultural barriers and also the political barriers which arose because of the conflicting situations between the two countries, was the biggest challenge faced by Huawei.
• Changing the already established image/ reputation of producing and offering low quality products is what was another challenge in front of the company.
• Building a distinct brand from already established and well set telecommunication companies was another challenge in front of Huawei in India.

The market entry strategy adopted by Huawei to enter Indian Market:

Huawei followed the Aspirational marketing strategy in order to enter the Indian market. By aspirational marketing strategy we mean creating emotions among the customers and connecting them with the product by using their emotions and positioning the product in the attitudes and behavior of the customers.

• Huawei did so by firstly setting up the R& D and various service centers in various states of India and being a part of Indian culture.
• Secondly by offering jobs to the Indian youth was another strategy they applied. This helped in creating emotions among the Indian people.
• Further the company tried to involve the product more into the customers attitudes and emotions by promoting the Indian employees to higher managerial positions.
• As a result this helped Huawei enter into the culture of India, capture the emotional side of customers with their offered products and create aspirations among the customers for their products.