Key words: ICT, Huawei, marketing research, marketing strategy
Huawei Technologies Co. Ltd. is a Chinese multinational networking and telecommunication equipment and services company headquartered in Shenzhen, Guangdong. It is the largest telecommunication equipment manufacturer in the world, having overtaken Ericsson in 2012. Huawei was founded in 1987 by Ren Zhengfei, a former engineer in the People's Liberation Army [1].
Huawei is a leading global telecommunication solutions provider with long-term partnerships with operators around the world. Huawei's products and solutions is about wireless products (LTE/HSPA/WCDMA/EDGE/GPRS/GSM, CDMA20001xEV-DO/CDMA2000 1X, TD-SCDMA and WiMAX), core network products (IMS, Mobile Soft switch, NGN), network products (FTTx, xDSL, Optical, Routers, LAN Switch), applications and software (IN, mobile data service, BOSS), as well as terminals (UMTS/CDMA). Major products are designed based on Huawei's ASIC chipset and utilize shared platforms to provide quality and cost-effective products. Huawei's products and solutions are deployed in over 100 countries and serve 36 of the world's top 50 operators. Huawei's R&D centers are built in many countries, such as Silicon Valley and Dallas in USA, Stockholm in Sweden, Moscow in Russia, Bangalore in India, and Beijing, Shanghai, Nanjing, Shenzhen, Hangzhou, Guangzhou in China.
Huawei is a leading global ICT solutions provider. Through its dedication to customer-centric innovation and strong partnerships, we have established end-to-end capabilities and strengths across carrier networks, enterprise/industry, and consumer fields. We are committed to creating maximum value for telecom carriers, enterprises, and consumers by providing competitive ICT solutions and services. Products and solutions of the company have been deployed in over 140 countries, serving more than one-third of the world’s population.
Huawei’s vision is to enrich life through communication. By leveraging company’s experience and expertise in the ICT sector, it helps bridge the digital divide by providing opportunities to experience broadband services, regardless of geographic location [2].
Contributing to the sustainable development of society, the economy, and the environment, Huawei creates green solutions that enable customers to reduce power consumption, carbon emissions, and resource costs.
Ren Zhengfei, a former deputy director of the People's Liberation Army engineering corporation, founded Huawei in 1987 in Shenzhen. Rather than relying on joint ventures to secure technology transfers from foreign companies (which were often reluctant to transfer their most advanced technologies to Chinese firms), Ren was focused on local research and development to produce the switches through reverse-engineering of foreign technologies. At a time when all of China's telecommunications technology was imported from abroad, Ren hoped to build a domestic Chinese telecommunication company that could compete with foreign competitors.
During its first several years the company's business model consisted mainly of reselling private branch exchange (PBX) switches imported from Hong Kong. Meanwhile, it was reverse-engineering imported switches and investing heavily in research and development to manufacture its own technologies. By 1990 the company had approximately 500 R&D staff, and began its own independent commercialization of PBX switches targeting hotels and small enterprises [3].
The company's first major breakthrough came in 1993, when it launched its C&C program controlled telephone switch.
It was by far the most powerful switch available in China at the time. By initially deploying in small cities and rural areas and placing emphasis on service and customizability, the company gained market share and made its way into the mainstream market. The company also developed collusive joint venture relationships with local authorities, whereby it would provide “dividends” to the local officials in exchange for their using Huawei products in the network. Ahrens writes that these methods were “unorthodox, bordering on corrupt,” but not illegal. Another major turning point for the company came in 1996, when the government in Beijing adopted an explicit policy of supporting domestic telecommunications manufacturers and restricting access to foreign competitors. Huawei was promoted by both the government and the military as a national champion, and established new research and development offices [4, p.249].
Guided by the 4Ps theory, this paper has put forward some suggestions about Huawei’s marketing strategy for smartphones in china World, based on a survey about the market and customer’s needs and demands. It is hoped to provide some useful reference for its marketing in Kazakhstan. Huawei's high-quality products that offer a superior experience have been well received among consumers, and that the company has established and reinforced its brand image in the mid-range and high-end markets. Huawei's mid-range and high-end smartphones, Mate7 and P8 in particular, as well as Honor-branded phones, have made solid progress, helping us guarantee quality and sustainable growth in the consumer business.
Huawei is a private firm based in China, which is involved in the manufacture and distribution of telecommunication equipments of various categories. This company, which was established in 1988, is famous for its cheap prices in telecommunication equipments in comparison to its international competitors. Among the company’s product portfolio, includes handsets, fixed line and wireless networking equipments, data networking, optical communication platform, internet protocol telephony and virtual private network products.
By 2002, Huawei was considered to be the dominant supplier of routers and digital switches in China after overtaking Shanghai Bell. After realizing an impeccable success in China market, Huawei gradually began to enter the international market with routers that were cheaper than their international rivals were. In 2005, the company realized annual revenue of $6.7 billion for which 60 % were derived from international sales. Currently, Huawei harbors world-class research institutes, Over 55 branch offices, training and customer support centers, and eight regional headquarters. This report is concerned of Huawei’s strategic analysis and its international ventures.
Huawei Technologies had annual revenue of US$6.7 billion and a net profit of US$470 million in 2005. This is an increase from annual revenue of US$5.8 billion and a net profit of US$470 million in 2004.
Huawei's net profits in 2002 and 2003 were US$110 million and US$380 million respectively, and it had a net profit margin of 4 % in 2002, 10 % in 2003 and 8 % in 2004. No doubt, Huawei's net profit margin drop by 2 % in 2004, Huawei is still generating profit (figure 1).
Fig. 1. Company’s net profits and annual revenue of Huawei Mobile
In 2006, Huawei, alongside with other technological companies in China, opted to venture into global telecom equipment market. However, this venture was met with various challenges among them being the low cost engineering from its competitors. Further, the company had a low global image, in other words, it was not initially recognized, a factor which hindered the company’s achievement in global market share [5, p.462].
In building a strong global brand, the company had to use much resources and capital, alongside extensive time before gaining ground. In some markets such as U.S, some of the customers were not able to clearly pronounce the company’s name, “Huawei”. Hence, the management had to come up with another name, “Futurewei”, which customers could find easy to pronounce. This proved to be quite a challenge since the company now harbored two names, which were sometimes confusing to customers. Furthermore, Huawei employees who had come from China found it hard to adapt to the American Culture and language. Subsequently, this led to a straining of relationship between Huawei staff and their American counterparts who had been hired by the company. In particular, Huawei executives found it hard to deal with local employees because of the language hitch.
There are short-term financing and long-term financing options available. Huawei's financial support from the state-owned Chinese Development Bank in the form of a US$10 billion facility and US$600 million from the Export-Import Bank of China are both forms of long-term financing.
Huawei has the foresight to invest and develop in new technologies in the industry which gives it a quantum leap in the market from its competitors.
For achieving the goal of the article, we conducted the SWOT-analysis of company’s activity. We will point the results of analysis below.
Among the opportunities for Huawei is a highly qualified and low cost workforce. This makes it possible for the company to customize its innovative products according to their clients’ needs. Further, Huawei’s other opportunity lays in its high caliber labor pool, most of who were well educated. Moreover, the company had held an exclusive right to over 10000 patents and copyright worldwide, an aspect that gave it a competitive edge over its rivals. In addition, the joint R & D laboratories held by Huawei and other foreign entities including Microsoft, Motorola, Texas Instrument, Intel, IBM and Sun-Micro system with a focus on telecom innovation gives Huawei innovation opportunities.
While venturing into the global market, Huawei faced a number of threats, which hindered its global expansion initiatives. For instance, Huawei being a Chinese company was perceived in much international market as a company whose products were cheap and unreliable. This translated that in order to win meaningful contracts; the company had to employ aggressive tactics. In some markets such as those in America, clients were always looking for high-end technological products, and not necessarily, those that were low priced. Another threat for Huawei came from its chief rival Cisco that sued Huawei for allegedly infringing on Cisco’s copyrights and patents. The ensuing lawsuits resulted into heavy penalties that included the discontinuation of some of Huawei’s operations in American market.
While entering the international market, Huawei was careful to employ the local pool of employees in order to create a local image and blend with the local market. Further, Huawei established partnership and joint ventures with re-known international firms to claim a global image. In addition, the company focused its energy in developing nations, which did not have stiff competition in comparison to developed countries. This is why the company first set base in Russia, Brail and Africa before moving into other markets [6, p.52].
Huawei’s major competitive advantages are derived from provision of quality equipments and services at a lower cost. The low cost of labor including engineers from China were also advantageous to the company since it enabled it to offer its products at a lower cost than competitors did. Another competitive advantage for Huawei was that it had on board, a world class management consultants IBM, Microsoft, Intel, and Price Water Cooper which assisted the company to design its strategies according to the global standards. The low cost of engineering from low cost labor especially from China and its expansive worldwide market means that, Huawei will be able to maintain its competitive advantage in global perspective. In addition, the company’s aggressive R & D department also ensured that the company stays up-to-date and improves on its innovative aspects. Further, the company will be able to sustain its R&D network since it has limited the expenditure that can be used in this department. By putting a limit on the department’s expenditure, the company ensures that resources are not used unnecessarily or misappropriated.
Today, Huawei’s performance is quite pleasing. In other words, the company can be considered as performing well both in its home and international markets. For instance, Huawei generated a total of $22 billion in sales during 2010, making it is among the top three firms dealing with telecommunication equipments globally. This is an indication that the company is doing better in its global ventures; otherwise, it could not have realized this massive volume in sales [7, p.58].
Huawei had adopted an integrated cost leadership/ differentiation strategy for its business level strategy.
With its focus on R&D and owning more than 8,000 patents, Huawei is able to differentiate their products in many ways. In addition, being located in a low-cost workforce country, Huawei is able to have their products manufactured at a much lower cost compared to others [8].
Huawei engages in both value-creating primary and support activities that enables them to simultaneously pursue cost leadership/ differentiation strategy. By having an efficient production, low costs can be maintained while creating products of unique value give rises to differentiation.
Huawei's primary activities are marketing and sales, inbound logistics, outbound logistics and operations.
Huawei priced their products about 30 % cheaper than other established brands and to make it more attractive, Huawei offers attractive incentives as a sales package when pitching for major contracts.
Huawei's support activities are firm infrastructure, human resource management, service, technological development and procurement.
Huawei has a good infrastructure that enables it to effectively and consistently identify its external threats and opportunities, resources and capabilities and support core competencies.
It had a very good relationship with the Chinese military which is paramount to its success in China.
Huawei focus on having high caliber employees to build up its R&D team. With more than 85 % of its employees having a bachelors degree and above, Huawei ensures that they are highly paid by Chinese standard.
In addition, due to Ren Zhengfei's military background, new employees are put through intensive military style training for the initial months.
To offer unparallel service to its customers, Huawei hires local personnel in customers' home country as part of its strategy to tailor technologies and services according to customers' needs.
Huawei ventured early and invested in third-generation (3G) mobile communications technology and it started its own research and development (R&D) in Code-Division Multiple Access (CDMA) in 1995. With a dedicated team of 3,500 R&D employees deployed throughout research centres in China and other countries, Huawei invested more than US$370 million in wide-band CDMA (WCDMA) technologies over the next few years (figure 2).
Fig. 2. The investments in CDMA technologies studyimg in 1995 [8]
In addition, to familiarise itself with 3G industry, Huawei formed a 3G research joint venture with Japan's NEC and Matsushita in 2003, and entered the mobile handset market in early 2004. At the same time, Huawei started a joint venture with Siemens to test TD-SCDMA (China's home grown standard) mobile handsets and networks equipments.
Huawei has research centres both in China and overseas. It had a 21-storey research centre in Shenzhen, and six other research laboratories in Beijing, Shanghai, Nanjing, Huangzhou, Xi'an and Chengdu; a software development centre in Bangalore (India) and research facilities in Moscow (Russia), Stockholm (Sweden) and the Silicon Valley in California.
Flexibility is needed by firms in order to complete both primary and support activities that allow the production of differentiation products at relatively low costs.
Three sources of flexibility are: Flexible manufacturing systems, information networks and total quality management systems.
Flexible manufacturing systems enable a firm to produce a variety of products in moderate quantities with minimum human intervention. Through either patent-mining or reverse engineering, Huawei had turned high-profit and complex products into standard commodities. In addition, to offer better differentiation products, Huawei hires local personnel in customers' home country to tailor technologies and services according to customers' needs.
By linking companies with their suppliers, distributors and customers, information networks provide another source of flexibility. Ren Zhengfei's relationship with the Chinese military had helped Huawei to have a close guanxi network which other competitors do not have, and this had helped Huawei to secure big contract orders.
Furthermore, Huawei's major customers in China were the big players in the industry such as: China Telecom, China Mobile, China Netcom and China Unicom. Huawei's networks in China has over 400 million people across the country, occupying 25 % of the mobile network market shares and supplying 80 % of all SMS from China Mobile.
TQM emphasizes the company's commitment to the customer and to continuously improve process through usage of data-driven, problem-solving approaches from empowerment of employee groups and teams.
Huawei is able to simultaneously reduce cost while making use of its ability to develop innovative products. This increases their flexibility which is beneficial to implementing an integrated cost leadership/ differentiation strategy.
Besides the current strategic actions which Huawei is already implementing, I would suggest that Huawei consider acquisition where Huawei will buys a controlling, or 100 % interest in another company to make it Huawei's subsidiary business within its portfolio.
They are several reasons for acquisitions and we shall look at each of them:
- Increased Market Power
Market power exists when a firm is able to sell its goods or services above competition levels or when the costs of its primary or support activities are lower than those of its competitors. Hence, to increase its market power, Huawei can use horizontal acquisition where it acquires company competing in the same industry.
- Overcoming Entry Barriers
Presently, Huawei experiences problems entering the United States market. Hence, by making a cross-border acquisition, Huawei can overcome these entry barriers and gives it more control over its international operations.
- Cost of New Product Development and Increased Speed to Market
Acquisitions allow Huawei to gain access to current and new products that are unique to the acquired firm. Returns are more predictable as the performance of the acquired firm' products can be observed and assessed prior to acquisition [8].
- Lower Risk Compared to Developing New Products
As the results of an acquisition can be easily and accurately estimated than that of developing a new product, Huawei will find that there are lower risks involved.
- Increased Diversification
Huawei can find it easier to develop and introduce new products through the acquired firm as it may be difficult to develop products that deviate from their current product lines.
- Reshaping Firm's Competitive Advantage
Competitive rivalry can affect Huawei's profitability. Thus, to reduce the effect of an intense rivalry, acquisitions actually reduce Huawei's dependence on one or more products or markets. This will in turn alters Huawei's competitive scope.
- Learning and Developing New Capabilities
Acquisition can allows Huawei to gain new capabilities which it does not currently possess. Through acquisition, Huawei can broaden their knowledge base and reduce inactivity.
In addition to acquisition, Huawei can also have a nonequity strategic alliance with other companies. A nonequity strategic alliance is a form of alliance where two or more companies have a contractual relationship such that they share some of their unique resources and capabilities to create a competitive advantage. This is used in more uncertain situations, and companies do not establish any independent company and hence do not have any equity positions.
Through nonequity strategic alliance, Huawei can have licensing agreements, distribution agreements, and supply contracts with other alliance companies. Usually, outsourcing commitments are specified in the form of nonequity strategic alliance.
In conclusion, I would recommend that Huawei consider acquisition and nonequity strategic alliance as its business strategy in the future so that it can better compete with other competitors.
This paper contributes to the theoretical orientation of marketing strategy and discuss about marketing mix (4ps) and also how the marketing mix strategy satisfied the customer. As a global company, Huawei has sought win-win development with local communities. As a responsible corporate citizen, Huawei has proactively integrated into local communities to support charities, education, environmental protection, healthcare, and disaster relief efforts.
We strive to create value for local communities and help them achieve prosperity and sustainability. They have provided attractive and timely rewards to dedicated employees. As Huawei continues to grow, they have paid more attention to their employees' career development, providing varied career paths to help their diverse range of employees realize their individual value.
The findings of this study indicate that the most important factor in age, career, monthly income, price, prefer type of phone this factor are significant. This factor is affected to the customer. These results support the ideas that despite the usefulness of the Marketing mix (4Ps) scale as a concept; it should be adapted for the customer environment as well. The marketing mix concept helps to understand the customer demand and also can understand how to capture the customer.
In conclusion, knowing how marketing mix effects the customer satisfaction being able to measure customer satisfaction. Measuring customer satisfaction can help Huawei phone service provide reliable data that can be used to monitor and maintain and adding more feature in phone to give better service to the customer.
References:
- https://en.wikipedia.org/wiki/Huawei.
- http://www.chinadaily.com.cn/china/2016–01/20/content_23160880.htm.
- http://www.huawei.com/cn/.
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- http://www.surveysystem.com/sscalc.htm.
- Baker, Michael The Strategic Marketing Plan Audit 2008. — 332 p.
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