PRIYANSH RASTOGI – 21

LEANDER FERNANDES – 39
PARTH ONDHIA – 42
AKSHAY SINGH – 52
APARNA JAISWAL- 60
SAYLI JOSHI - 65
• Chinese economy growth staggered in last 20 years

• Chinese policy makers helped the Chinese firms to expand globally

• Examining of factors leading to rise in current state of competitiveness to international peers

• Firms concerned with acquiring market share initially, not focusing on profitability
• Founder & CEO – Ren Zhengfei (Former Member - PLA)

• Founded in 1988

• 2nd largest telecommunication equipment company

• Private enterprise – owned by employees

• Comprehensive telecommunications company with network equipment, mobile broadband devices,

handsets, and convergence devices
• Three pronged strategy:
- Importing foreign equipment
- Encouraging joint venture equipment manufacturing
- Promoting indigenous R&D

• Ren’s vision - to create a domestic competitor to the international telecommunications equipment

companies

• Initial strategy - reselling public branch exchange switches and fire alarms by importing
• Goal (1990) – to capture the China market, open overseas markets, and compete with foreign
counterparts

• Change in strategy – Developing its own technology i.e. by performing its own R&D rather than taking IJV
route

• Difficult time raising capital and investments

• Speed of Expansion - scaled up R&D on newer areas, like optical network transmission systems and,
later, mobile communications systems. (PLA Contract)

• Opportunity Gap – Competitors ignoring the rural market

• Strategy used - JVs or other forms of partnerships with local bureaus of posts and telecommunications

• 1995 – Expansion in R&D

• 1996 – Ending of special import policies for telecom equipment by government

• Huawei started expanding by the support of the government and winning large contacts
• 1996 - Huawei had 20 percent of the Chinese switch market, second only to Shanghai Bell

• Within a couple of years Huawei was able to take Shanghai Bell. (Aggressive Campaign)

• Economic logic – Low cost with advantages (price cutting) with help Chinese government help

• Funds for mobile business R&D was funded through proceeds from switch and optical business

• Differentiators – Huawei provided customized for value added products to it’s customers
• From 1996-2006
• Initially started facing problems - poor quality Chinese products and price
• Countries that wanted affordable technologies eagerly partnered with Huawei

• Staging & pacing

• In 1996 it’s first international customer was Hutchison Telecommunications in Hong Kong
• Vehicles
• In 1997 formed a JV with Beto Corporation in Russia

• China’s diplomatic route

• Differentiator
• Pricing by often undercutting that of it’s competitors
• 2001-2011

• Economic logic

• By providing advanced features at low cost (Lowest cost through scale advantages)

• 2001 – After Russia, it’s first major sale was in Europe to Netherlands & Germany

• 2001 – Entered in US market – for 3 years without single American customer

• Arena

• Entering the international data communication market

• Started gaining the market share of Cisco, In 2003 lawsuit against Huawei

• 2004 – Received extensive credit backing from CDB & Export Import Bank of China
• Slashed the prices below its competitors up to 70%,provided vendor financed loans

• In 2005 British Telecom included Huawei as a preferred supplier

• International Expansion (3G) - signed a global supplier agreement with Vodafone

• 2011- 2/3rd of the revenue of Huawei is coming from international market

• It worked with 45 of 50 largest carriers globally

• It has also filed more than 49,000 patents & focus more on R&D

• 2012 – Revenue has surpassed that of its competitor Ericsson

• Huawei is an employee-owned company

• 2011 – It had 1,10,000 employees worldwide

• Ren retains a direct 1.42 percent share of the company. The remainder of the shares is held by
“a trade union committee tied to the affiliate Shenzhen Huawei Investment Holding Co”

• About 64% of the Huawei staff hold what the company calls “virtual restricted shares”
• Rising factor costs

• Reduction in Poverty

• Continued slow growth in the total Population

• China has overtaken Japan as the world's second-biggest economy

• Increased Lending Rate

 Strengths
Weaknesses
Support from Chinese Government
Lack of strong presence in some regions
Huge expenditure on Research and
Development High attrition rate
Partnership with global partners Product is not marketed properly
Diversified Product
High Market Share SWOT
Analysis Threats
Protectionist tonnes of Chinese government
Opportunities may increase hatred for Huawei in other
Expand within new growth geographies countries
Technological development Entry of New competitors
Profit Margins may be reduced in future
Economic Absorptive Economies Characteristic Strategies to Accumulate Level of
growth Capacity Knowledge Knowledge
stage Accumulation
Pre- Very Low Resource Based; Unskilled Low level of inward FDI & No Low but might be
Catching up but might Labour; Low level of inward outward FDI increasing
be technology transfer
Increasing
Catching up Increasing Knowledge infrastructure & Assimilation of spill-overs from Rapidly increasing
to reach domestic industrial capacity; trade or inward FDI; Technology
peak high rate of knowledge licensing; reverse engineering
accumulation & absorption of (early stage) & R&D (late stage);
external knowledge acquisition of technology by M&A

Pre-Frontier Declining Assimilation becomes difficult; Strategic alliances; in-house R&D; Increasing rate
marginal return of absorptive outward FDI; joint venture decline & reaching
capacity declining the flat range
• Close partnership with different players in different sectors and regions

• Decision to work with Shanghai Bell and CIT

• Focused on Rural market

• Alliance-based networks
• Cooperation with multinationals

• Universities
• Close partnership with different players in different sectors and regions

• Decision to work with Shanghai Bell and CIT

• Focused on Rural market

• Alliance-based networks Siemens – Research, production, sales services

• Cooperation with multinationals Motorola – UMTS products, solutions and

HSPA
• Universities
Prestigious companies – Joint laboratories
• Close partnership with different players in different sectors and regions

• Decision to work with Shanghai Bell and CIT

• Focused on Rural market

Europe – 43%
• Alliance-based networks USA – 36%
Japan – 21%
• Cooperation with multinationals
Advanced Country Firms
• Universities High Industry Reputation
Large Technology Base
Embedded Collaboration Networks
• Close partnership with different players in different sectors and regions

• Decision to work with Shanghai Bell and CIT

• Focused on Rural market

• Alliance-based networks Advanced Research Labs

• Cooperation with multinationals “‘Huawei High Level Talented Person

Cultivation Base”
• Universities
Western Western
Uni. MNC High Tech
W-MNC

Chinese HUAWEI Mid-High Tech

LC E-MNC
Uni. (HUB)

Low-Tech
Low-Performance
Chinese Local & other
Co.
• Developed its own technology

• Used reverse engineering to attempt complex products that did not exist in the Chinese Market

• Chinese companies would lose their market share to their stronger foreign competitors due to the JV’s

• Domestic leader in patent application in 2002

• High ratio of R&D staff to other employees

• Huawei surpassed Alcatel Bell

• Huawei was sued by both Cisco and Motorola

• Highly educated engineers available at very cheap relative prices

• R&D team physically located in China

• Customer - centric development

• China Mobile looked to launch a prepaid mobile phone services

• Huawei ability to offer cost innovation

 Huawei got
access to
IBM’s R&D
technology
centers PWC –
Financial
IBM- Management
Organize and Attempted to Set up a
manage its form a JV with large R&D
R&D 3COM center with
processes Hay Group – Siemens in
Human Formed a JV 2004
Partnered resources with Global
with IBM in issues Marine
2000 on using
IBM’s next-
generation
network
processors
2800 counties Developing Developed
• Involved large staff countries countries
presence • Offered Low – value
• Focused on
goods
customizing product • Building political
solutions
alliances
• Strong rural
• Began with Russia,
presence
Southeast Asia, Latin
America and Africa
Government Support

• Ren stated that if there had been no government policy to support Huawei, then it would not
exist

Military Relationship

• Military relationship was because of Ren’s former career in PLA engineering corps

• Huawei tried hard to distance itself from any military involvement but in early days it
received contracts to build military telecommunication networks

• Made up 0.16% in 2009 and only 0.33% of its sales in 2011

Official Support

• Had a visible support of the top leaders in Beijing

• As Huawei headquarters are in Shenzhen, it received support from its local government too

• Local banks also supported Huawei through customer financing

Policy Support

• Promotion of domestic companies over the foreign companies by State Council and Ministry of
Information Technology

Finance

• China Construction Bank and Shenzhen development Bank extended buyers credit to Huawei
 Alcatel-Lucent Cisco Ericsson Huawei
2006 16,216.96 28,484.00 25,914.31 8,503.86
2007 26,157.00 34,922.00 29,327.48 12,857.73
2008 23,938.95 39,540.00 26,910.18 18,353.54
2009 21,723.01 36,117.00 28,720.95 21,837.27
2010 21,197.90 40,040.00 29,973.50 27,658.79
2011 19,884.00 43,218.00 32,881.20 32,396.00
RESULTS OF OPERATIONS
Current
Scenario
•  Arguing China could gain access to the vast amounts
of data that will ultimately travel over 5G
• Secretary of state, has pledged to withhold
intelligence from nations that continue to use Chinese
telecom equipment
• the security risks can be managed by closely
scrutinizing the company and its softaware.
• Possibly restricting American companies from
supplying Huawei with key components