Battling Perceptions: The Next Challenge in Huawei's Globalization Agenda


Battling Perceptions: The Next Challenge in Huawei's Globalization Agenda
Case Code: BSTR498
Case Length: 20 Pages
Period: 1889-2016
Pub Date: 2016
Teaching Note: Available
 Price: Rs.600
Organization: S.A.C.I. Falabella
Industry: Retail
Countries: Chile, Latin America
Themes: International Business, Brand Management
Battling Perceptions: The Next Challenge in Huawei's Globalization Agenda
Abstract Case Intro 1 Case Intro 2 Excerpts

Abstract

This case discusses the journey of Shenzhen-based networking and telecommunications equipment and services company, Huawei Technologies Ltd. (Huawei), and its emergence as a global brand from China. Huawei entered the Chinese telecommunications equipment market in 1987. Despite its late entry, it quickly made its presence felt, outwitting giant international telecommunications companies in the process. The company was also hugely successful in the developing markets such as Russia and Africa. However, Huawei faced several challenges in mature markets such as the US, Australia, and Europe.

In 2011, the company started facing opposition in the US, Australia, and the European Union for its telecom equipment. Both the US and Australia alleged that Huawei entered backdoors into its establishments at the behest of the Beijing government, giving China a better chance to spy on the US. The allegations had their roots in the past association of Ren Zhengfei (Ren), Huawei's founder, with the PLA. Huawei's culture of secrecy, lack of openness and transparency, and Ren's unwillingness to give public interviews only strengthened the opposition the company faced. Amidst concerns related to national security, Huawei was banned from bidding for telecom equipment projects in both Australia and the US.

Notwithstanding its battle against the accusations of espionage leveled against it, the company continued to be optimistic about its growth. Despite a slowdown in its telecom business, in 2011, Huawei announced its plans to become a US$ 100 billion company by 2020 from US$ 27.4 billion in 2010. The company planned to achieve this ambitious goal by focusing on new engines of growth — the consumer business group and the enterprise business group established in 2011. Since Huawei was locked out of the lucrative US telecom market, the company forayed into the US consumer and enterprise markets where there was less political interference. However, achieving success in these markets had its own share of challenges.

Some analysts stated that one of the biggest challenges for Huawei in the US was building a brand in a market where Apple had a 44.2 percent market share for the quarter ending July 2015. Others felt that a lack of brand recognition was a bigger hurdle for Huawei's smartphone ambitions in the US. To drive growth in the lucrative US market for consumer and enterprise products, Huawei planned to launch enterprise products and high-end smartphones challenging Apple and Samsung. Some industry experts believed that large enterprise customers doing business with the US government would think twice before working with Huawei due to the security concerns associated with the company. Moreover, they felt that the company lacked the innovative edge that American multinational technology company, Cisco Systems Inc. (Cisco), and American global information technology company, The Hewlett-Packard Company (HP), had in the enterprise network market.

Huawei was optimistic about gaining visibility in the US consumer market and about the global appeal its partnership with Google for its Nexus 6 smartphone would engender. However, some analysts raised doubts over Huawei's ability to parlay the deal with Google into a stronger position in the US smartphone market. To add to its troubles, in July 2015, telecom companies in Australia were barred from using equipment from Huawei amidst security threats. This meant that Huawei would lose its business in Australia since it provided equipment for consumer devices and backend networks for Vodafone and Optus. And Huawei’s troubles were only expected to increase. In October 2015, Pentagon and the US military announced their plans to ban the use of Huawei equipment. This was a blow to the company’s ambitions to make inroads into the US consumer market, especially the enterprise market where enterprises worked in association with the US government. Some analysts stated that despite Huawei making several efforts to deal with the allegations related to cyber security issues, it was too late for the company to attempt an image makeover.

Issues

The case is structured to achieve the following teaching objectives

  • Analyze the effectiveness of Huawei's lobbying efforts for tackling espionage accusations against the company
  • Design a cohesive global corporate communications program to proactively address media speculation about Ren’s close ties with the PLA
  • Tackle concerns related to lack of openness and transparency at Huawei
  • Apply strategies that help Huawei achieve brand recognition in the intensely competitive US smartphone market and enterprise market
  • Apply strategies for Huawei to become a US$ 100 billion company by 2020

Contents

Keywords

Huawei Technologies Ltd, Ren Zhengfei, People's Liberation Army, Chinese Telecommunications Market, National Security, Espionage, Wolf Culture, Cyber Security, Smartphone Market, Consumer Business, Enterprise Business, Internationalization Strategy, National Broadband Network, Cisco, Xiaomi, Apple, Samsung, Google, ZTE Corporation

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