Introduction Nowadays, violent competition is among the telecom equipment industry. Achieving success in this market is not an easy task to do so. However, a Chinese company – Huawei, which was becoming a global corporate, was considered as a “China Achievement”. Although it still left behind the greater challenger – Cisco, it grew quickly and might threat to Cisco. Before discussing how it can strengthen it’s capabilities and challenge Cisco, the basic analysis is to identify it’s resources and core competencies.
For replying Question 1 To identify Huawei’s resources and assess its capability and core competencies, a esource audit and Porter’s value chain should be applied. By using both of these analysis in this case, Huawei has both tangible and intangible resources, and which are recognized and divided into nine categories based on the value chain activities (please refer to the appendix 1). In firm infrastructure, military background and culture is a unique resource to Huawei. The unique background and culture is due to Ren Zhengfei and his connection to the Chinese army.
This resource brought material contract orders from military at the business early stage, and no other companies can have the same background and gain such benefits like Huawei. Therefore, it is an important unique resource to Huawei. This resource not only brought some material contracts to Huawei, but also some financial supports. However, this resource is fragile. If Ren Zhengfei left or Join its competitors, this unique resource is no longer existed. Moreover, the management style is strict and aggressive over the organization.
As a result, Huawei are going to be global organization, and not only adopt the military management style, but also the foreign corporate management systems in different areas. Reviewing its human resources, it has high educated but low pay employees, specially in China. Also it provided intensive military-style training to all new staff. Besides adopting military-style training, a national recruitment system in China sector and the foreign corporate management system also are utilized in the manpower management over the period. As mentioned before, the foreign corporate management system was applied in different areas.
It also applied in its technology as to enhance the product development and quality. And it provided tailor-made technology and services to satisfy their customer’s requirements. In addition, 48% of 24,000 employees were ssigned in R, and more than 10% its total revenue invested in R. Finally, it’s the third-generation (36) mobile communication technology is an advanced resource in the industry. This achievement made by huge investment in wide-band CDMA ownership together with theses resources and activities build strength in its technology and threat to its competitors.
To analyze its procurement, the main resources are low labour cost in R&D in China and around 25% of patent obtained on par with its competitors in telecom equipment sector. Since it foothold in the low-end international markets at the eginning, its material costs were comparative low and suited to its market. As a result, these factors granted Huawei which could supply routers at 40% cheaper than its rivals. These allow Huawei having ability to cut-price and fght with powerful competitors. To be cost leadership, it takes the advantage in such elements. For the future development, it planed to acquire 3com for enhancing its technology.
Furthermore, its supply chain – the inbound, operation and outbound sectors are mainly influenced by 18M. For the operation, many centers, laboratories and headquarters are located in developing countries, for example, in China and India. Its marketing & sales was studied, strong customer resource and large market share in China were found. For achieving its globalization, cut-price products is a part of its aggressive strategy for winning contracts. Huawei’s brand name created a low-cost image in the international. However, low price could not help it occupying the markets in the developed countries.
Therefore, it paid effort on standing out it network reliability for satisfying customers’ needs – high quality. Finally, it was ranked quite well in both equipment supply and services comparing its international rivals n some researches. In US, its marketing strategy was not succeed, and made confusion due to name of Futurewei. Last, a 3-month free of charge services was provided to its customers in France. And those equipments and services were designed specifically for their customers. All activities almost were found, this helps for assessing its value chain linkage.
Identifying and evaluating core competencies Core competencies, also called competitive advantages, are strong or unique skills and abilities of a company to connect its activities. Value chain linkage is the connections of its activities. Hence, focusing on its value chain linkage, its core competencies will be easily assessed. But the core competencies should have the following characteristics, otherwise they are only some ordinary skills and abilities. The characteristics of core competencies:- It should be valuable in their customers’ eyes. It may be unique or rare. It is difficult to duplicate or time-consuming and costly.
It is non-substitutable. It should be better than the competitor. human resources and technology together. The low cost but high educated employees were assigned in R. Due to low labor cost, and therefore huge nvestments could put into the development in its technology, for example, Global System for Mobile Communication (6SM). As a result, the leapfrogged and advanced development in technology could be achieved. And this linkage makes a core competence, which was performed better than its competitors. Although their competitors can follow this easily, it is time-consuming to gain this advantage.
The second core competence is its core R team, which is combined with its marketing employees and low-cost R labor in China. The R staff could get the detailed customers’ needs directly from the marketers, the equipments and services hen could be specifically designed for their customers. Their products and services then not only could be supplied faster, but also could respond to their customers’ requirements. Therefore, their operation could be much more efficient and effective. Quick response to the market needs, a better services and products could be provided. This can help for increasing their market share.
And there is no mention about their competitors’ performance in such area. But surely that it brings value in their customers’ eyes. Finally, it is a core competence to make their services and products be both lower cost and differential. The last one is forming Joint venture with 3Com. At the beginning, its culture is that not looking for cooperate with foreign companies. But it was changed and forms Joint venture with 3Com in China and Japan. This not only let them occupy a comparatively large market shares in China and threat to Cisco, but also increasing the fame of Huawei.
Obviously, forming Joint venture with other company is not an easy task to do so. There are much business stuff should be dealt and compromised. So this competence is difficult to duplicate. Better brand name may create customer loyalty, it is surely a value-added competence. As a result, it is a strong core competence. Answering question 2 Reviewing the nature of core competencies can help to choose suitable generic competitive strategy. In this case, Huawei applied different strategies in different countries over the period.
In China, Huawei mainly used a cost leadership strategy at the beginning. According to the first core competence finding, it entered a low-end telecom networking, as a result of employing staff at low labor rate in China and supplying equipments cheaper than its competitors. It tried to foothold the telecom networking market by this strategy. Over the time, it tried to make its business to be differential. It improved its technology to create more values to its customers, for example, it put heavy investments in its R to innovate a leapfrogged and advanced technology in GSM and wide-band CDMA.
Except for improving its technology, it also enriched its product development (technology and operation), supply chain integration (inbound, operation and outbound), human resources management (human resource), financial by four foreign corporate managements – international best practices. Moreover, a joint venture was formed with 3Com in China and Japan to manage its brand. Both cost leadership and differentiation strategies were adopted in China as the same time, this lead to a hybrid strategy forming in China.
As a result, it became having large market share in China and being successful. Then it was going to be globalization through moving in developing countries’ markets. Again, its hybrid strategy was also adopted in such countries. It repeated the same process for developing the markets in such countries like Russia, France, and etc. Besides providing products with 30% lower price than its competitors to capture the contracts firstly, a 3-month free of charge networking services especially ffered to a France firm.
In order to meet its customers’ requirements, it then employed local personnel to make tailor-made products and services to its customers. The combination of those important factors, hybrid strategy was undoubtedly used in the developing countries’ markets. As its hybrid strategy was so successful in above markets, it had been tried to be adopted in the US market. However, it failed to do so. The main problem is the low- end brand name, which was deeply introduced into the markets. Although it tried to build up a good quality and reliability image to the markets, it still not yet brought dvantage to its business.
Its weaknesses are not only the low-end image, but also it failed in areas of human resource and marketing & sales in US. In others countries, it employed local personnel to design the products and services for meeting their local customers’ needs. This made an advantage to realize the local culture, perform a better marketing & sales and enhance its technology quality and characteristics. Nevertheless, this bright ring became dark in the US market. In addition, there was a conflict between its military-style culture and US culture, so its relationship with its
US employees was nervous. As a result, its products and services could not satisfy and over the US customers’ requirements. Therefore, costs of operation and labor in US were increased and their business failed to create values in US customers’ eyes. Its hybrid strategy was unsuccessful and it was stuck in the middle in US market. According to above several findings, the hybrid strategy was mainly be using by Huawei. Although it failed in narrow market – US and stuck in the middle, Huawei adopted successful hybrid strategy in its latest broad target markets.