国际贸易模型及分析(以华为为例)英文

1.0 Introduction (1)

2.0 Global Expansion Strategy (3)

2.1 Joint V enture (4)

2.2 Export Entering Model (5)

2.3 Contractual Entering Model (5)

3.0 Nature of International Strategy (6)

4.0 International Operation (8)

5.0 Challenge Faced & Solution (11)

6.0 Conclusion (15)

Reference (16)

Page 0 / 19International Business of Huawei

Individual Assignment

1.0 Introduction

The growth of Chinese economy in the past 20 years heavily depends on the producing labor-intensive and low-value-added goods. Today Chinese competitiveness is no longer confined to lower-end production. In fact, Chinese policymakers encourage firms going to global to build internationally recognizable brands commensurate with China’s growing global clout. Now plenty of Chinese companies emerged to challenge traditionally dominate international firms such as Huawei-Chinese tech giant.

Huawei is leading global ICT solutions provider in China its business and products offering in 140 countries and severing one third world population, which found in 1988 as distributor for phone switches and now the company becomes a comprehensive telecommunications company with network equipment, mobile broadband devices, handsets, and convergence devices. In addition to de veloping products, the company has moved into offering customer solution (Huawei, 2014).

Page 1 / 19Huawei followed Mao Zedong’s strategy of surrounding the cities with the countryside, for the international business strategy the company modified version of this strategy using the developing countries instead of countryside and developed countries take place of cities.

From developing country perspective, in 1996, Hutchison Telecommunications was the first international customer which purchased switches and related equipment for fixed-line network in Hong Kong. In the following year, Huawei formed a joint venture with Beto Corporation to produce switching equipment in Russia, aim to penetrate in the market. After entering Russia, Huawei’s products sold in Thailand, Signore, Malaysia, Brazil and South Africa with more competitive price that often 30 percent lower over its rivals (Wu and Zhao, 2007).

From developed country perspectives, in 2001 Huawei entered US and Europe market with advanced feature products at low price via upgrading software rather than hardware. German, France, Spain and UK purchased optical network products, at the mean while Huawei sale to the United Arab Emirates it also is the first Arab state with 3G. In 2004, Huawei build business relationship with Danish company for building the 3G network in Netherlands. Huawei was

Page 2 / 19involved in 14 out of 19 3G networks globally. In 2010, in alliance with Google, it launched its own IDEOS smartphone (Barfield, 2011).

2.0 Global Expansion Strategy

Driscoll (1995) mentioned three typically models for companies entering a foreign market: Export entry model, Contractual entry model, Investments model, the objective of internationalization have been achieved by three factors (firm factors, environmental factors and moderators) into account and then choose appropriate entry modes. According to abundant of literatures, which indicated Huawei desired entry model was mostly depends on host market environment condition and firm factors, while the industry characteristics play a crucial role in foreign market entering model choice.

Today, the internationalization strategy of Huawei has been gaining a huge successful. This success steps actually depends on the appropriate choice of entering model for new market and employing market strategies. Huawei utilized different market entering model for different new markets. Huawei also employs different entry models flexibly to different products. In traditional advantaged products, switching network, telecommunication power, Huawei always utilize join-venture and export. In the products without advantages, 2G mobile networks, Huawei choose to cooperate

Page 3 / 19with industry expertise of this area. For the products with technological advantage and without market resource, the company acts as joint venture, franchising or co-research.

2.1 Joint Venture

In 1996, the first international business of Huawei started at Russia the company entered Russia market via joint venture with Beto Corporation and Russia Telecom act as of Beto-Huawei. As a new player in international market, Huawei’s development in Russian market is not easy at that period. Huawei using four years to wait and learn until they obtained the first order. At the first place of internationaliz ation, Huawei’s market selecting strategy is seeking which the markets have weak infrastructure of telecommunication but with the great potential opportunity to explore. Based on the features of telecommunication products, the host market’s social and cultural conditions were considered. First, due to the network effect and telecommunication products related to information security, Huawei first chose those host markets which have good relationship with home country. Then, based on its own advantages of technological research and development (R&D), Huawei chose the joint venture as the first foreign market model (Ahrens, 2013).

Page 4 / 192.2 Export Entering Model

Huawei started to enter Asia, Mid-east and North Africa market, where Huawei use exporting method to entry those markets. Huawei sent out many of sales and service engineers from home country to setup branches and service centers in these countries. The selection is based upon the characteristic of export entry mode: High flexibility, low resource commitment and low dissemination risk.

2.3 Contractual Entering Model

After 2001, Huawei’s products start to be sold in West Europe and North America. In these developed countries, Huawei applied variable contractual models to penetrate these markets via franchising, co-research, co-production and Co-sales the company emphasizes win-win strategy. For example, in European market, Huawei co-operate with Marconi in product development and marketing. Marconi helps Huawei to sell products in Europe using their channels. At the meanwhile, Huawei helps selling Marconi’s product in China and Asia markets. In 2002, Huawei has cooperated with Motorola in Mobile network infrastructure area by co-production method to develop the market of data communication in North American and other international markets, which joint venture with 3 com act as Huawei-3Com, the main player in data communication market. In this strategic movement, Huawei took advantages from

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3Com’s international market resource. Texas instruments, NEC, Motorola, Qualcomm, and a number of other MNCs have also cooperated with Huawei (Gao, 2008).

3.0 Nature of International Strategy

In the history of Huawei, the management philosophy of Huawei based upon two sources (Ahrens, 2013): Mao Zedong’strategy of surrounding the cities with the countryside; Louis Gerstner, the former CEO of IBM Huawei’s Customer-centric approach is based on Gerstner’s ideas.

Furthermore, strategy of Huawei shifts from product orientation to market orientation that Internationalization process and entry strategy have been changed from 1988 till now. According to Anderson (2000), in the product orientation, the most important is products and production development. Internationalization is

not the main interest but the new product can be known through the international network a request from abroad can lead to exports or licensing agreement. These international activities do not acquire fully owned subsidiaries and the industry structure for markets with new products is mainly emergent or growing. The markets are entered depends on which countries are making the inquiries. In the market orientation, this found a need in the market and has ideas of how to fill

this demand. Companies considered the market channels and brands are more

Page 6 / 19important than the products. Firm is proactive in internationalization process and willing to develop new international ventures and choose establishment model, such such as Greenfield establishment which need a lot of resources. These establishment models make it possible to penetrate markets more quickly. Marketing choose are depending on the personal preference and network is important.

Previously, Huawei invest in developing new technical and set up R&D research center in Beijing and focus on production compare with brand. Huawei corporate with some famous company in foreigner market which has a good brand, the company offers low price and high quality production to other company and gained brand advantage from other company to gain production contracts. Huawei’s internationalization process is depended on which markets inquire for their production (Gao, 2008). For example, Huawei set up a joint venture of Beto-Huawei with Russian Beto Konzern and Russia Telecom to develop Russian market in 1997. After 4 years, they got first production contract.

But in the later, Huawei joined series of marketing activities such as some exhibitions in its new market developed. The company changed its pull internationalization strategy to push internationalization and in terms of brand building aim to gain advantage through brand and production in international market. Moreover, Huawei has chosen a positive strategy to push internationalization. For

Page 7 / 19example, in 2007, Huawei planned acquire the Americans firm: 3com, but failed

for some security reasons. Because of telecommunication equipment are belonged to army field, the laws are so stringent. At the time, Huawei already has ability to restructure the internationalization.

Since 2010, Huawei has followed ABC strategy of growing average revenue per user (ARPU), increasing bandwidth and reducing cost. One way Huawei is working toward its ARPU goals is expanding from a product-driven company to an end-to-end service company, a salient strategic shift that will be the focus of much of the company’s energy over the next several years. This means that Huawei now looks to provide operation and maintenance to its customers in addition to hardware and software. Huawei is keenly aware of emerging technology trends like device computing, cloud computing, video, and information and communication technology convergence, all of which consume bandwidth at a high rate(Ahrens, 2013) .

4.0 International Operation

According to abundant of literatures, the major root causes Huawei rapid development which relay on the Research and Development function. Huawei stands out among the high-technology companies that is not depends on technology from West or joint venture with others. However Huawei’s strategic choice is to cooperate and build

Page 8 / 19relationship with advanced firms in management and guidance, supplier agreement and technology partnership.

Huawei has over 70,000 product and solution R&D employees, comprising more than 45% of its total workforce worldwide. The company has set up 16 R&D centers around the world being embedded in the collaboration with suppliers, customers, universities, and leading players. Huawei invested heavily in R & D. Averagely each year at least 10 % of annual sales were put into R&D for developing absorptive capacity (Huawei, 2014).

Although wary of importing foreign technology, Huawei has actively sought out technological alliances with foreign firms are classified into three groups: with Japanese, American, and European enterprises, which has also set up 28 joint innovation centers with leading carriers, for instance, Huawei consulted with the Hay Group on improving human resources management and with KPMG and with IBM on financial management. Accenture and PWC have provided Huawei with customer relationship management and financial advice.

Therefore, Huawei in the United States, India, Sweden, Russia and China, and other places set up 12 research institutes, R & D center in each of the different research focus and direction. Using the global synchronization of the international

Page 9 / 19research system to gather the world’s technology, experience and conduct product research and development to remain leading the world’s technology. Huawei also up 28 overseas regional training centers for employee learning the local culture, vigorously promote the localization of staff. Within the scope of the localization of global operations, not only strengthen their understanding of the local market, but also made contributions to the socio and economic development for the host countries and regions (Ahrens, 2013).

Besides cooperation with leading players, Huawei never stopped research alliances with universities. Huawei has been building advanced research labs with more than 20 Chinese domestic research institutes and universities such as Beijing University since Nov. 2005. Moreover, Huawei extended investment on technological alliances to a number of foreign universities such as INATEL University, Brazil in 2003 and Shrif University, Iran in 2009 Huawei treated universities and institutes as its knowledge incubator, which enable Huawei much more benefits than expected that indicated Huawei becomes the ‘Knowledge Hub’ of ICT network in China (Zhang, 2009).

Moreover, strategic alliances are the priority strategy that Huawei used to absorb external knowledge. The universities-involved network facilitated Huawei to obtain human capital preemptively and efficiently digest frontier technology as

Page 10 / 19well. Due to the number of top Chinese universities have cooperation with foreign universities, Huawei benefits a lot in term of knowledge diffusion.

The assistance and influence provided by foreign companies with distinctive know-how or rich globalization experiences have inevitably sped up Huawei’s globalization process. Partnerships with large foreign multinationals also bring legitimacy to both companies’ product quality and international leverage(Jiang, 2005).

Huawei’s cooperation with foreign companies is aimed at creating win-win situations for both parties. On the one hand, Huawei can benefit from the best practices and know-how introduced by the experienced foreign multinationals; in the meanwhile these foreign companies can better penetrate the mainland Chinese market where Huawei is the dominant player with rich experiences.

5.0 Challenge Faced & Solution

Globalization has reduced trading barriers between both countries and multinational corporations, particularly in IT industry, there are few barriers around the world. However, globalization has also created a collision of diverse interests in the world of technology by the political and economic, which two factors result in barriers keep

arising especially in three major parties: India, Australia, and U.S.

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Many Indians argue that China gives huge export subsidies that constitute unfair trade where China gives excessive subsidies, Indian businessmen are quick to demand anti-dumping duties, and the government is quick to oblige. India has imposed more anti-dumping duties than any other country. Additional curbs have been placed on Chinese telecom equipment on security grounds. The trade deficit however continues, suggesting that dumping is not the key issue. Rather, the deficit represents the gap in productivity between the two countries, especially in manufacturing (Nathan & Aiyar, 2013). Yet despite trade and investment ballooning in the past decade, levels are not in keeping with the countries' scales. Business people on both sides complain about barriers to financial progress. Chinese are especially critical of Indian red tape, visa problems and unfriendly politics.

Australia's trade relationship with China based on free trade deals that deserve their name entail much more than simply lowering tariffs. In relation to China, panoply of non-tariff barriers relating to consumer standards, intellectual property rights and government subsidies would need to be unravelled and harmonized (The Australia, 2013).

Protectionism pushing an information security concerned, those interests collided dramatically in 2006. In 2007, an even more dramatic confrontation led

Page 12 / 19to the largest Chinese telecommunications equipment manufacturers Huawei being warned of national security and individual privacy, intellectual property issues by congressional panel in US. While the House Intelligence report stopped short of calling for a boycott of the firms' mobile phone products, it was highly critical of the company (BBC News, 2012). In 2007, Huawei planned acquire the Americans firm: 3com, but failed for some security reasons. Because of telecommunication equipment are belonged to army field, the laws are so stringent.

According to the economic and political issues, recently national security becomes a form of non-tariff barrier pressures given by protectionism such as Cisco U.S, Telstra Australia. Due to the barrier of Western market increased Chinese government and policy marker turn to more support Huawei in variety ways like celebrity endorsement, funding local society, and investment in other areas. In recent, Huawei prefer to seek the new markets and join the world advanced product and solution exhibitions.

On February 4, 2014, Huawei has officially entered into Nepal's market by strategic alliance with Nepal Telecom, the country's State-owned telecommunication service provider. Due to the Mobile penetration reached 72.58 percent in the country. Similarly, internet penetration in Nepal increased from 19.92 percent to 27.92 percent in the first quarter of the current fiscal year and the 7.3 million internet subscribers in

Page 13 / 19the country 6.9 million surf the net on their mobile phones (China Daily, 2014). Nepal as the basic point enables Huawei building the networks that continue target Himalaya area and Pakistan to expand its business.

On February 23, 2014, Huawei unveiled five new 4G LTE devices at the Mobile World Congress 2014 trade show in Barcelona. The company, which now claims to have ranked third in terms of worldwide smartphone shipments in 2013, is trying to make waves with its new products. These products include two small tablets, a new smartphone, the "world's fastest" MiFi, and a new Net-connected watch/fitness tracker (Reardon, 2014). This show mostly enhanced the worldwide brand image and the reputation of Huawei. However, this movement is not just as simple as seen as a brand promotion. Actually it’s a strategy enable Huawei reentry the U.S market. Huawei took early steps in the US to create a better relationship with US mobile operators and transact directly with consumers through online shops. Huawei has acknowledged that the US is indeed a competitive and tough market to penetrate, and recently there have been changes in the US that provided new opportunity for other players such as Huawei to come in the US market using a different distribution strategy.

Page 14 / 196.0 Conclusion

In the international competitive landscape, the ability to create a global organizational capability is the key factor that can help the firm adapt to the changes in the dynamic environment. In the history of Huawei, the company is from product focus turn to market orientation via the different stages adoption different entry models.

From the original strategy perspective, the company in developing countries, home countries’ technological level and reputation influence the firms’internationalization significantly. To avoid this negative influence, Huawei had to enter the developing countries’ market first before it enters developed countries’ market. As a strategy, many high-tech firms choose to set up the R&D department or register subsidiary companies in developed countries to develop an international market share.

Globalization result in the reduction of trading barriers but international protectionism against the low cost carrier Huawei in the area of economic and political issues. Eventually, intellectual property is the biggest barrier the firm with the choice of an effective global strategy that takes into consideration its strengths and weaknesses in the face of the opportunities and threats in the environment, will survive.

Page 15 / 19Reference

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GM 507 International Business & Management

Individual Assignment January Semester 2014 Zhang. Y (2009), Alliance-based Network View on Chinese Firms’ Catching-up: Case

Study of Huawei Technologies Co.Ltd. Working Paper Series, United Nations University - Maastricht Economic and social Research and training centre on Innovation and Technology, Keizer Karelplein 19, 6211 TC Maastricht, The Netherlands.

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