The Globalization of an Asian Firm - Huawei

The Globalization of an Asian Firm - Huawei
Table of Contents TOC \o "1-3" \h \z \u Huawei: Brief Introduction and Reasons for Globalization PAGEREF _Toc111304659 \h 3Issues Facing Huawei in its Globalization Efforts PAGEREF _Toc111304660 \h 4PESTEL Analysis PAGEREF _Toc111304661 \h 5Competition within the Telecommunication Equipment Industry PAGEREF _Toc111304662 \h 8Michael Porter’s Five Forces Analysis of the Telecommunication Equipment Industry PAGEREF _Toc111304663 \h 8Competitive Advantage of China PAGEREF _Toc111304664 \h 11Michael Porter’s Diamond Model of National Advantages PAGEREF _Toc111304665 \h 11Government’s Role in Improving a Country’s Competitive Position PAGEREF _Toc111304666 \h 13Recommendation to Improve Huawei’s Competitive Position PAGEREF _Toc111304667 \h 13Conclusion PAGEREF _Toc111304668 \h 15References PAGEREF _Toc111304669 \h 16
The Globalization of Huawei
Globalization has enhanced the growth of firms in international markets. When firms saturate their domestic market, the next strategic step is usually penetration of foreign markets. The main driver of the globalization of firms is the acquisition of new markets and strategic resources that are otherwise limited or unavailable in the home country (Lattemann et al., 2017). Globalization allows firms to become integrated into the global economy. To achieve this, firms must have a global competitive advantage (Lattemann et al., 2017). This research paper will explore the globalization of Huawei Technologies by identifying its reasons for globalization, the issues it faces in penetrating the US market, and its competitive advantage as a Chinese firm. Further, the paper will provide recommendations on how Huawei can become a competitive firm in the global market.
Huawei: Brief Introduction and Reasons for Globalization
Huawei Technologies is a Chinese global firm in the telecommunication equipment industry. It provides smart devices and other information and communication (ICT) infrastructure in over 170 countries (Huawei, n.d.). The company was established in 1987 with the mission and vision of ensuring that individuals, homes, and organizations are digitally connected. It employs about 195 000 employees to serve over 3 billion people worldwide (Huawei, n.d.). Consequently, it has become a major player in the global economy.
Huawei continues to pursue its globalization strategy to become a world leader in the telecommunication equipment industry (Huawei, n.d.). As a firm in an emerging economy, Huawei has proven that it can compete in the international arena with other companies from developed economies. According to Guo et al. (2019), Huawei is a latecomer multinational company that is slowly catching up with iconic multinational firms by transferring its competitive advantages from its home country to foreign countries. Also, Huawei has been pushed towards globalization by the home market saturation. According to Guo et al. (2019), Huawei has been forced to compete for market shares with other multinational companies from advanced countries serving the Chinese market. As Huawei grew in China, it became evident that it needed to make a strategic decision to expand internationally because the Chinese market was slowly becoming too crowded. Further, Huawei wants to meet the demand for telecommunication infrastructure, especially in areas that have been ignored by other multinational companies from advanced countries. Schaefer (2020) states that Huawei has responded to the demand for more affordable telecommunication infrastructure in regions ignored by technologically-advanced competitors.
Additionally, Huawei's willingness to acquire new knowledge has pushed it towards globalization. According to Wu et al. (2021), Huawei has been determined to learn new knowledge from western countries to enhance its competitiveness. The best way of learning is to establish a presence in foreign countries. Further, Huawei has pursued globalization to capitalize on unique opportunities. As Guo et al. (2019) reveal, Huawei has gone global to pursue technological and governmental opportunities that allow it to insert itself into the global economy. Emerging technologies and support from the government have provided windows of opportunity, and Huawei has jumped on those opportunities. Ultimately, Huawei wants to increase its bottom line, and the best way to do so its pursue markets beyond China. Lattemann et al. (2017) indicate that this is the key reason why firms expand internationally.
Issues Facing Huawei in its Globalization Efforts
While Huawei has achieved significant success through its domestic growth, its international expansion has been characterized by many challenges. It has faced several challenges, especially when trying to penetrate the US and European markets. PESTEL analysis will be conducted to explore the critical issues confronting Huawei in internationalization.
PESTEL Analysis
PESTEL is a framework used in business to analyze the macro-environmental factors affecting an organization (Perera, 2017). These factors are political, economic, socio-cultural, technological, ecological, and legal. Below is an analysis of how these factors affect Huawei's globalization into the US and Europe.
* Political Factors
The critical political factor that influences Huawei's globalization efforts is trade politics. The terms of trade imposed by foreign governments affect Huawei's ability to operate in foreign markets. For instance, the trade sanctions by the US government following the US-China trade war hinder Huawei from establishing its presence in the US (Liu, 2020). However, the case is different in some European countries. For instance, the UK government has supported Huawei's presence in the country by working with the firm to address cyber security concerns (Liu, 2020). Thus, the globalization of Huawei is affected by the political upheavals/cooperation between China and foreign countries.
* Economic Factors
Changes in economic factors such as foreign exchange rates, interest rates, and currency risks influence Huawei's globalization efforts. As Liu (2020) indicates, these economic factors determine whether the economic conditions are favorable for Huawei to operate in foreign countries. As a foreign firm looking to operate in the US and Europe, Huawei needs to consider the foreign exchange rates and how they impact its ability to export its ICT infrastructure to foreign countries. For instance, a higher exchange rate in the US or European countries can create favorable economic conditions for Huawei to export its products to these foreign countries.
* Socio-cultural Factors
The primary socio-cultural issue that affects Huawei’s ability to operate in the US or Europe is consumers' attitudes and perceptions towards its products. Perera (2017) indicates that consumers' perceptions and attitudes towards a firm or industry must be considered when determining the socio-cultural factors affecting a business. For instance, Americans have a deep-rooted bias toward foreign firms, influencing their perception of Huawei products (Liu, 2020). In addition, products made in China are perceived as inferior (Liu, 2020) because China is not as advanced as the US and some European countries. This has influenced consumers' attitudes toward Huawei products. Consumers' mistrust of its products hinders its ability to penetrate foreign markets.
* Technological Factors
As a technology-intensive company operating in a competitive environment, the primary technological factor influencing Huawei's presence in the US and Europe is the 5G technology and related security concerns. According to Friis and Lysne (2021), the 5G infrastructure has been one of Huawei’s key achievements, giving it a place in the international arena as a worthy competitor. However, the 5G infrastructure has also raised security concerns in the US and Europe. The US and some European countries used this technological factor to ban Huawei 5G infrastructure (Friis & Lysne, 2021). However, Huawei remains one of the world's leading providers of 5G technology.
* Ecological Factors
As more people become environmentally conscious, organizations are forced to engage in environmentally-friendly activities. Huawei’s presence in the US and Europe can be affected by environmental factors such as waste disposal mechanism, carbon emissions, and pollution (Perera, 2017). In addition, governments have created environmental laws to regulate the effects of businesses on the environment. Huawei has to observe the environmental regulations in the US and Europe and address any environmental concerns consumers or governments raise. Huawei has been able to address some ecological concerns by engaging in corporate social responsibility (CSR) in foreign markets (Wu et al., 2021).
* Legal Factors
As a multinational company operating in over 170 countries, Huawei has to navigate a complex legal environment. The key legal factors faced by Huawei include privacy laws and intellectual property (IP) rights. Kirkegaard (2020) indicates that Huawei faces legal restrictions in the US and Europe, although the magnitude of the restrictions is higher in the US than in Europe. The legal restrictions can hinder Huawei’s ability to invest in these countries. The laws are also different in each country. For instance, in China, the law restricts telecommunication companies from disclosing certain information, yet in the US, the law requires these companies to disclose the same information (Liu, 2020). Balancing the legal requirements in these distinct countries presents a challenge to Huawei. Further, the IP rights in the US and Europe differ from those in China, presenting legal complexity to Huawei (Liu, 2020). Failure to comply with existing laws can result in lawsuits and threaten Huawei's presence in foreign countries.
Competition within the Telecommunication Equipment Industry
In addition to the political, economic, socio-cultural, technological, ecological, and legal issues discussed above, Huawei's internationalization efforts are also influenced by competition in the telecommunication equipment industry. Michael Porter's five forces model will be utilized to analyze the level of competition in this industry.
Michael Porter’s Five Forces Analysis of the Telecommunication Equipment Industry
According to Michael Porter the competitiveness and attractiveness of industries are influenced by five forces: the rivalry among established firms, bargaining power of suppliers, bargaining power of buyers, threat of substitute products, and threat of new entrants (Dyer et al., 2020). Below is an analysis of the competitiveness of the telecommunication equipment industry using the five forces model.
* Rivalry among Established Firms
This force examines the intensity of rivalry among the already established firms in the industry (Dyer et al., 2020). Huawei has many competitors, including Cisco, Nokia, Ericsson, and ZTE (Alsop, 2022). Apple is also a key competitor, especially in providing smart devices. These competitors have been operational in the industry for a long time, and some are technologically advanced. Also, the telecommunication equipment industry imposes high exit barriers on incumbent firms because of the specialization in technology. In addition, the companies in this industry are constantly launching new products to counter competitors' products. According to Dyer et al. (2020), the rivalry of existing companies intensifies when the number of competitors is high and the exit barriers are high. As such, the rivalry among the established firms in the telecommunication equipment industry is quite intense and threatens Huawei's success in the global economy.
* Bargaining Power of Suppliers
This force assesses suppliers' influence over the companies in the industry. According to Dyer et al. (202...