Huawei Globalisation Case Study Essay Example

After that small success, Huawei made a decision to enter international markets. The Russian and South American markets were first selected. Huawei entered the Russian market in 1996. However, Huawei did not get any order for the first four years. After getting the first order in Russia in 2000, the business of Huawei in the Russian market grew quickly. In 2003, Huawei’s revenue was more than USD 0. 3 billion in Russia and the surrounding markets. In the market of broadband products, Huawei occupied more than 50% of the market. Today, Huawei has become the Chinese ompany with the biggest investment in Russia. However, the performance in South America was poor and sales in this area were less than USD 0. 1 billion up till 2003. After 2000, Huawei extended its target markets to other countries, including South East Asia, Middle East and Africa. Since 2001, the products of Huawei have been sold in Western European markets through local agents. These countries include Germany, France, Spain and UK. Figures 2 & 3 show Huawei’s annual overseas sales volume and its overseas sales percentage from 1999 to 2005.

3. The Foreign Entry Modes Used y Huawei It is obvious that the internationalization process of Huawei is successful. This success depends on the appropriate market entry mode choice and market strategies employed. Huawei applied different market entry modes in different markets.

3. 1 Joint Venture in Russian Market In 1996, as a breakthrough, Huawei began its international business in Russia. It set up a joint venture, Beto-­? Huawei, with Russian firm Beto Konzern and Russia Telecom to develop the Russian market in 1997. As a new player in international

markets, Huawei’s evelopment of the Russian market was tough initially. Huawei spent four years waiting and studying the market before they got their first order. At the initial stage of internationalization, Huawei’s market selection strategy was targeting the markets that have weak telecommunication infrastructure but have great potential. Based on the features of telecommunication products, the host market’s social and cultural conditions were considered. First, because of the network effect and telecommunication products related to information security, Huawei first chose those host markets, which have good relationships ith their home country. Then, based on its own advantages of technological research and development, Huawei chose the joint venture as the first foreign market entry mode.

3. 2 Export Entry Mode in South America, Asia and Africa In the fist stage of Huawei’s internationalization, South America was selected as a target market. However, Huawei employs the export method as the entry mode. The influence factors are the issues of geographical distance and local market conditions. From 2000 onwards, Huawei started to enter the Asia, Middle East and North Africa markets. Here Huawei also used the export method o entry these markets. Huawei sent many of its sales and service engineers from HQ to setup branches and service centers in these countries. The selection is based upon the characteristics of export entry mode: High flexibility and low resource commitment and hence lower risk.

3. 3 Contractual Entry Modes in North America, West Europe and Other Countries After 2001, Huawei’s products started to be sold in Western Europe and North America. In these developed countries, Huawei applied a variety of contractual modes to enter these markets. These methods include franchising, co-­?

research, co-­? production (OEM) nd Co-­? sales (help each other to sell products in each other’s own markets). For example, in European market, Huawei cooperated with Marconi in product development and marketing. Marconi helps Huawei to sell products in Europe using their channels. At the same time, Huawei helps selling Marconi’s product in China and Asian markets. Early in 2002, Huawei cooperated with Motorola in the Mobile network infrastructure area using the OEM method. To develop the market of data communication in North American and other international markets, Huawei set up a joint venture: Huawei-­? 3Com with 3com, the main player n the data communication market. With this method, Huawei took advantage of 3Com’s R capability and international market resources. Table 1 shows Huawei’s alliances in the telecommunication industry

3. 4 Different Entry Modes for Different Products Huawei also employs different entry modes flexibly for different products. For example, for products where it has an advantage, such as switching networks and telecommunication power, Huawei often uses join-­? ventures and export methods. For products without advantages, for instance in 2G mobile networks, Huawei cooperates with the giants in this field like

Motorola. For products with technological advantage and without market resource, it uses the modes of joint venture, franchising or research.

4. The Factors That Influence the Internationalization Process of Huawei Firm factors and environmental factors are the situational influences that affect the international entry mode choice. The firm factors include firm-­? specific advantage, experience and strategy. The environment factors include Demand/competition, Socio-­? cultural conditions and Political/economic conditions. Then variables moderators, such as host/home government policies, corporate policies nd firm size, will affect the actual mode choice. First, industry

feature is a key factor that affects Huawei’s internationalization path. Huawei has taken a high commission policy to encourage the first sales in new markets. Analyzing Huawei’s internationalization process, industry feature is the most important factor that affects Huawei’s entry mode decision. Huawei’s foreign market entry mode is based on the host market environment and industry features. Therefore, Huawei uses different entry methods in different markets and for different products. As shown in the previous examples, Huawei used the join-­? enture method to enter the Russian market; used export method to enter South America, Africa and used the contractual method and joint venture to enter Europe and North America.