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

Abstract Case Intro 1 Case Intro 2 Excerpts

Huawai - From Shenzen to Global Markets

The history of Huawei Technologies Ltd. (Huawei) dates back to 1987 when Ren Zhengfei (Ren), a former military engineer at People’s Liberation Army (PLA), founded the company in Shenzhen with the aim of making it the backbone of China's communications industry.

The company started as a sales agent for a Hong Kong company selling private branch exchange (PBX) switches with an initial investment of US$ 3400. 9 Since Huawei was a private company, it had to face the challenge of raising capital. Unlike state-owned companies in China which could raise funds from the government-owned banking system, private companies in the early 1990s had access to limited sources of funds. Huawei was thus unable to bid for important contracts. The company was forced to borrow money from large enterprises at steep interest rates of 20 percent to 30 percent. 10 But Ren and his cohorts used the funds wisely and invested around US$ 20 million in research and development (R&D). By 1990, it had acquired enough resources to open its first research laboratory. In the same year i.e. 1990, the company made its own PBX and started selling the switches to hotel networks at prices lower than those of imported devices.

During the 1980s and 1990s, most of the leading global telecom equipment companies were entering China. Since there were ownership restrictions in the country, most of the foreign companies set up joint ventures with domestic Chinese companies. The foreign companies leveraged on the local knowledge and distribution networks of their Chinese partners in a bid to reduce the risks associated with their investments. Some of the leading multinationals that entered China were Motorola, Siemens, Nokia, Alcatel, Lucent Technologies, and Ericsson. Cisco was a late entrant, stepping into the Chinese market in 1994. High-end networking products were the traditional strongholds of foreign players, with the market divided between North American, Japanese, and European vendors....

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