Question

HUAWEI’S INTERNATIONALIZATION STRATEGY

INTRODUCTION

In October 2016, Shenzhen-based networking and telecommunications equipment and services company Huawei Technologies Ltd. (Huawei) unveiled its 14-port and 3-D Hexa-beam antennas to address the challenges associated with the 4.5G and 5G era at the 5th Annual Global Antenna and Active Antenna Unit Forum held in Paris. Commenting on the launch, Zhang Jiayi, president of Huawei’s antenna business unit, said, “Huawei focuses on satisfying the requirements of operators in the MBB (mobile broadband) era.”

Founded in 1987 in Shenzhen by Ren Zhengfei (Ren), a former military engineer in the People’s Liberation Army (PLA) – the unified organization of the armed forces of China, Huawei started as a sales agent for a Hong Kong-based company selling private branch exchange (PBX) switches. Soon, the company innovated and started selling its own PBX switches. Having established its domination over the Chinese telecommunications market, the company entered the global markets of Russia and Africa in 1996 and later mature The origin of Huawei Technologies Ltd. (Huawei) dated back to 1987 when Ren Zhengfei (Ren), a former military engineer in the People’s Liberation Army (PLA), founded the company in Shenzhen with the aim of making it the backbone of China’s communications industry.

The company started as a sales agent for a Hong Kong company selling private branch exchange (PBX) switches with an initial investment of US$ 3400. By 1990, it had acquired enough resources to open its first research laboratory. In the same year, i.e. 1990, the company made its own PBX and started selling the switches to hotel networks at prices lower than those of imported devices

HUAWEI’S INTERNATIONALIZATION STRATEGY

In the mid-1990s, the Chinese domestic telecommunications networking equipment market was dominated by giant international telecom equipment companies. Their dominance led to Huawei having a relatively weaker position in China. Ren believed that the Chinese telecommunications market was the largest and among the most open markets in the world attracting global telecommunication giants to the country. As a result, he felt, “The best food has all been eaten up by the global giants and what we can do is to have those leftovers.” This prompted Huawei to consider entering international markets. Commenting on its international expansion, Ren, said, “We were forced to go into the international market for our very survival.”

CHALLENGES IN THE GLOBAL TELECOM MARKETS

Though Huawei achieved huge success in several global markets, the US was a different story altogether. Despite bidding several times since the company first entered America, Huawei failed to win a single big contract from top-tier carriers such as AT&T, T-Mobile, and Verizon. The US telecom companies had had long relationships with home-grown suppliers such as Lucent, Motorola, and Cisco. Moreover, the US telecom majors felt that while the telecom equipment manufactured by Huawei was fine for emerging markets, it was not reliable or suitable for the 24/7 service required by networks in the US. Though by 2011, Huawei had developed some of the most innovative and fastest equipment in the telecom industry, it continued to face resistance in the US.

THE CHALLENGES CONTINUE...

While Huawei was making several efforts to crack the global telecom markets, in July 2015, Malcolm Turnbull, Communications Minister, Australia, stated that amidst security threats, telecom companies in Australia had been barred from using equipment from Huawei and ZTE. This meant that Huawei would lose its existing business in Australia since it provided equipment for consumer devices and backend networks for Vodafone and Optus. There could also be more trouble in store for Huawei with the Pentagon and the US military announcing plans in October 2015 to ban the use of Huawei equipment.....

LOOKING AHEAD

In November 2016, when the US telecom market announced its plans to build the nation’s 5G wireless network, Huawei was also gearing up to roll out its 5G wireless network by 2020. Though Huawei had earlier stated that it had given up on the US market, Ren hinted that the company had not given up on the country permanently and that it planned to make a “glorious” return to the US. However, Huawei stated that it would not focus on the US market currently but would concentrate on other global markets. According to Ken Hu (Hu), Huawei’s CEO-in-rotation, “For our 5G strategy, we currently focus on markets like China and Japan among others. In the US right now, we’re not making significant progress and we don’t have big plans for that market.”

Case study question

In the context of Huawei discuss the strategies for having a global footprint which is followed by companies in an International Business setting.

Answer 1

A global entry strategy is the planned method of delivering goods and services to a global market or say destination beyond the borders of a country.It happens mainly in forms of import or export.

Benefits of going global :

• More Revenue : When one goes global, it becomes a new source of income to any company.
• More Recognition : When a company goes globally, it gets more recognizing, many people comes to know about the company.
• Different market operation: When the company goes global it operates in different markets and comes across a vast customers.

Global Market Entry Strategies:

• Export: One of the main strategy of going global is selling goods and services across borders. Example : India selling spices to US.
• Licensing/ Franchising: Many countries start business in other countries by starting franchisees or providing license to start their business.
• Joint Ventures: Many company's join hand with other company's abroad as a way to enter the market global.
• Direct Investment : By doing investments abroad. Investments are done by investing in subsidiaries abroad.

Huawei Technologies Co. Ltd. is a private company which is into telecommunication industry.It was founded in the year 1987. The company was founded by Ren Zhengfei. The company is headquartered at Shanghai, China. The company is multinational as it operates globally. The various products of huawei is mobile, fixed broadband networks, consultancy, managed services, multimedia technology, smart phone, tablets , dongles etc. The company started with an investment of $3000-4000. Today the company operates with 17, 000 plus employees and its revenue amounts to $ 60.839 billion. The company also owns asset valuing $57.319 billion. Ren started the company hoping to build a domestic telecommunications company that would compete foreign competitors. By 1990, the company had 500 R&D staff and began its own independent commercialization of PBX switches targeting hotels and small enterprises. Huawei major breakthrough came in 1993, when it launched its C&C08 program controlled telephone switch.It was by far the most powerful switch available in China at the time. Initially the company started its operation in rural areas and emphasized on service. This way the company gained market share and made its way into the mainstream market. In 1994, Huawei gained a key contract to build the first national telecommunications network for the People's Liberation Army of China. Another major turning point came their way in the year 1996, when the government adopted an explicit policy of supporting domestic telecommunications manufacturing and restricting access of foreign competitors. In the year 1997, the company won its first contract beyond the seas , they were provided with the task of providing fixed-line network products to a Hong Kong company. Huawei launched its wireless GSM -based products and then slowly moved to CDMA and UMTS. In 1999, Huawei opened a research and development center in Bangalore, India. This was with the purpose to develop a wide range of telecom software.Then from the year 1998 to 2003, huawei contracted with IBM.In the year 2000, huawei increased its expansion beyond the borders. In 2001, huawei joined the International Telecommunications Union (ITU).In 2004, Huawei made a contract to build a third-generation network for Telfort, the Dutch mobile operator. In 2005, Huawei's international contract orders exceeded its domestic sales for the first time. Huawei signed a Global Framework Agreement with Vodafone. In 2005, again it signed a contract with British Telecom(BT). In 2008, Huawei embarked on its first large scale commercial deployment of UMTS/ HSPA in North America providing TELUS's new next generation wireless network and Bell Canada with high-speed mobile access. Huawei delivered one of the world's first LTE/ EPC commercial networks for TeliaSonera in Oslo, Norway in 2009. The company launched the world's first end to end 100 G solutions from routers to transmission system that same year, to help meet the rapid growth of network traffic and enhance router efficiency and reliability and from then on it started its journey on Internal Expansion. Today it operates in 170+Countries 76,000 R&D Employees , 16 R&D Center, 45 Training Centers etc.

From the very beginning huawei leverage Word -of - mouth marketing strategy to build their brand. But from 2013, they started using " multiple legs" strategy such as advertising in different media and sponsorships. In 2013, Huawei launched its " Make it Possible " campaign aimed at making the connected world a reality for more people. The main positioning approaches of leading smartphone brands in chineese market features style/ design durability performance/ specification/ customization china's telecom giant Huawei has established about 170 countries with their smartphones divisions expanding fast. It is now the third largest smartphone brands in the world behind Samsung and Apple.