Strategic Appraisal – HUAWEI 4000words

Huawei, developed in 1987, is among the top global supplier of digital devices and information and communications technology (ICT) structure. Huawei is committed to providing digital to each person, organization, and home for a fully linked and intellectual world (Tao, De Cremer, and Chunbo, 2016). Huawei has over 194,000 workers and operates in more than 170 states and regions (Chacon and Rajawat, 2019, 29). The company serves over three billion customers globally. This paper will focus on the strategic appraisal of Huawei through three main parts; analysis of the internal and external environment of the firm, evaluation of its vital strategic options for development, and endorsements for improvement of the firm. The mobile communications industry has been upgrading and transforming for the last three decades, with coverage and quality of mobile network services continuing to improve (Ke, 2015). Over the years, Huawei has been the leading global supplier of telecommunication networks, intelligent applications, and devices, as well as cloud services.

Core Business: The core business of Huawei is to build a telecommunications network, offer consulting and operational services and develop equipment for enterprises and manufacture communication devices for the consumer market (Yang and Chen, 2018).

Mission: Huawei’s mission is to grow the remunerations of technology to everybody universally since they believe this can improve life for everyone at home and in organizations.

Vision: Its vision is to bring digital to every person, organization, and home to ensure that they are fully connected. This means that they will provide equal access to connections and build digital platforms that will drive the business forward by making organizations more efficient, agile, and vibrant.

Values: Huawei’s core values include customer-centricity, integrity, perseverance, dedication, openness, and growth by reflection.

Part I: External Analysis

The external exploration entails discovering the industry atmosphere of the corporation, such as competitive position, structure, social, political, global, and technological examination (Hubbard, Rice, and Galvin, 2014). The main objective of the external study is to define the threats as well as opportunities in an industry that may effort growth, productivity, and stability (Stalinska, Al Hooti, Al Wahaibi, Al Hamrashdi, and Al Maashri, 2018). The PESTEL models and Porter’s Five Framework will effectively analyze the external environment of Huawei.

PESTEL MODEL

According to Prasad (2020), the PESTEL model is a tool or framework that is used in monitoring and analyzing the macro-environmental factors that influence the organization.

Factor	Impact
Political	Political factors have gained attention in international business in the past few years. This has led to influences in trade relationships between countries and increased government oversight and control, which have greatly influenced the profitability and productivity of businesses (Wu, 2021). Huawei based in China has been impacted by the worsening trade war between China and America (Lin, Liu, Han and Chen, 2018, 83). High pressure on China by the U.S. has affected the ability of Huawei to conduct business in the U.S. and other western nations. The Chinese political conditions such as technology policy, tax policy, foreign trade, trade restrictions, and labor law have affected the economic condition of China and thus impacting the growth and profitability of Huawei. One of the greatest opportunities that Huawei is the support the Chinese government gives to the telecommunication sector as well as incentives and credits given to local manufacturers.
Economic	Huawei is a universal company, but its focal market is China and the European Union. Therefore, they are greatly affected if the European Union and China have an economic slowdown. For instance, the value-added tax affects the consumer buying ability and raises the cost of operations, thus decreasing the profitability margin. With the growth of the Chinese economy as well as emerging markets in developing countries, the company has increased the sale of technical gadgets and smartphones (Zhang and Wu, 2012). Therefore, the growth of the local market and emerging markets in developing countries has boosted the growth and profitability of the company.
Social-cultural	The sale of Huawei products has been influenced by many social aspects. These include demographics, target customers, regional demand, local culture, and social trends (Tsang and Fuschi, 2020, 120). The population growth of the world has continued to expand the Huawei market. The use of smartphones and technical gadgets is on the rise with the social trend and new culture leading to a higher demand for these devices. One of the social-cultural factors that have negatively affected Huawei in global marketing is the widespread belief that Chinese companies produce poor quality products (Guo, Zhang, Dodgson, Gann, and Cai, 2019, 850). This belief mostly exists in western countries such as the United States, thus affecting Huawei’s business in global markets.
Technological	The current technological advancements such as the Internet of Things and Artificial intelligence have led to modern innovations that influence a company’s competitiveness. With the growth of technology, the demand for innovative services and technical gadgets has become a trend in the telecommunication industry (Stork, 2012, 9). Huawei has greatly invested in research and innovation to remain relevant in the industry (Luong, 2019). For this reason, the brand has remained the leading brand in smartphones and communication technology. Its top position in the smartphone industry and 5G is certain to continue leading the telecommunication industry.
Environmental	Huawei is subject to various environmental laws. Industrial waste and the failure of the company to adhere to certain environmental standards have influenced its ability to sell in the European Union markets (Drahokoupil, McCaleb, Pawlicki, and Szunomár, 2017). However, the company has developed environmental protection policy known as the green pipe, which has focused on sustainability through reducing emissions, saving energy, and protecting the environment in their operations, thus maintaining a green supply chain (Berning, 2019, 194).
Legal	Huawei is subjected to patent laws, consumer laws, and labor laws (Pu, 2018). Huawei is expected to comply with the sort of laws in different countries. The company works with multiple employees, which demands Huawei to follow the labor and pay regulations. Huawei ought to be careful about the copyrights, patent, and consumer laws in its international operations.

Porter’s Five Forces Model

Porter’s five forces highlight and scrutinizes five viable forces that form various industries and aids in examining the business’s strengths and weaknesses (Bruijl, 2018). The five competitive forces are frequently utilized in identifying the industry’s structure and determining the corporate strategy (Helmold, 2019, 115). Therefore, the five forces will assess the industry competition in which Huawei is embedded as one of the most successful companies in the industry.

Forces	Impact
Competitive Rivalry	The high-The global telecommunication industry has big companies that have dominated the market, such as Samsung, Intel, IBM, and Motorola being among the big companies (Guanghui, 2019). However, Huawei products are differentiated with a positive reputation in the market. To compete effectively in the market, Huawei has focused on joint ventures, which they consider as a win-win strategy.
Threats of new entrants	High- The many new entrants due to the fact that they only require low fixed costs. Therefore, Huawei is likely to face new competitors in the market environment. New entrants such as Infinix and Tecno have disrupted the market, posing a great threat to the big companies (Kabeyi, 2018, 40). However, new entrants will require high investments to compete successfully with Huawei due to factors such as cost advantages, research, and innovation.
Threat of Substitutes	High- The telecommunication industry is fast developing with investors investing a lot of money in development and research to develop innovative and better products. This has raised the risks of substitute products in the market. Foreign competitors such as Motorola, Samsung, IBM, and Intel have had control over the market share. However, Huawei has greatly invested in development and research to remain relevant in the market.
Bargaining power of buyers	High- Due to the presence of similar products and services on the low-end market, including technical gadgets and smartphones with a similar price range, Huawei consumers have high negotiation leverage (Lim, Teo, and Yang, 2020). However, the product differentiation in terms of features and applications has made it difficult for some consumers to move from high-end products.
Bargaining power of suppliers	Low- The number of suppliers does not play a big role in Huawei since they are a weak force. The number of suppliers is high compared to the buyers thus have less control on pricing.

Opportunities

· High innovation and development -5G technologies

· Penetration into developing markets

· Strong brand establishment and product differentiation

· Unfulfilled consumer needs

Threats

· High Competition

· Multiple regulatory challenges

· Trend changes

· New substitutes

Part II: Internal Analysis

The internal analysis explores the organization’s internal environment in order to assess the competitive advantages, competencies, and resources. Huawei’s Internal analysis will be done through the Value Chain Model and the VIRO framework. Conducting the internal analysis allows a company to identify its weaknesses and strengths.

Value Chain Model

The value chain model is a set of activities that a company performs to transform a product or service from an idea to a valuable product for the market. The value chain increases the business efficiency so that it can deliver the most valuable product or service at a minimum cost.

Primary Activities

Inbound Logistics	Huawei has good inbound logistics that has helped the company to handle more than 10,000 order lines in a day (Muralidhara and Faheem, 2019, 66). Its procurement and logistics center has facilitated functions such as collecting, accepting, selecting, delivery and matching goods.
Operations	Huawei operates in more than 170 countries with more than 35,000 stores. The company has adhered to regulations and policies that govern quality management and ensure that they offer the most valuable products in the market.
Outbound Logistics	Huawei has well-structured outbound logistics where it sells its products to consumers through physical stores, showrooms, retailer outlets, and online platforms (Murmann, 2020).
Marketing and Sales	Huawei relies on both digital and traditional methods of sales and marketing activity. It sells its products through e-commerce platforms which allows marketing operations such as promotional activities, advertisement, and channel variety (Xia and Gan, 2017). They have also focused on celebrity advertisements where they hire global stars such as Saina Nehwal and Lionel Messi to promote the brand.
Services	Service entails the activity of supplying services and retaining customers after-sales. Huawei offers after-sales services through the Hicare app, online complaining portal, and its service centers.

Secondary Activities

Infrastructure	Huawei has a well-structured A.I.-based infrastructure. The factories and stores are well planned and designed to facilitate effective operation and consumer connectivity.
Human Resource Management	Huawei has highly invested in human resource management with about CNY 13.5 billion on employee management (Alkhawajah, 2019, 5. Huawei has a strong human resource strategy.
Technology development	Huawei has always paid attention to technology development, with its central area being information and communications technologies and architectures. Huawei is leading in ICT solutions (Blanchard, 2020)
Procurement	Huawei procurement has gained significant success in joint innovation with suppliers. Sustainability has played a great role in the supplier management process.

VRIO Framework

VRIO framework entails a strategic analysis tool structured to help organizations protect and uncover their competencies, capabilities, and resources, which grant them a long-term competitive advantage (Cardeal and Antonio, 2012). VRIO framework has formed a part of the larger strategic scheme that assesses the situation inside the organization.

Resource capabilities	Valuable	Rarity	Imitability	Organization	Competitive Advantage
Product Portfolio	Yes	No	Yes	Yes	Short-term competitive advantage
Financial Resources	Yes	Yes	No	Yes	Long-term competitive
Skilled and experienced employees	Yes	Yes	No	Yes	Strong competitive advantage
Access to raw materials	Yes	Yes	Yes	Yes	Sustainable competitive advantage
Distribution Network	Yes	Yes	No	Yes	Strong competitive advantage
Customer service	Yes	Yes	Yes	Yes	Sustainable competitive advantage

Strengths

· Technology Development

· Great product Portfolio

· Well-structured inbound and outbound logistics

· Adequate financial resources

Weaknesses

· Weak Brand

· Fewer Resources

· Allegations that impact the brand image

Part III: Company’s Business Strategy and Model

According to porter’s generic strategy, there are three major strategic options that are available to companies for achieving competitive advantage. These include differentiation, cost leadership, and focus (Allen and Helms, 2016). Cost leadership entails attaining a competitive advantage through lowering costs. Differentiation entails making products and services different, unique, and more attractive as compared to competitors (Gamble, Thompson, and Peteraf, 2019). Focus strategy entails focusing on a certain niche market through understanding the unique needs of the consumers and dynamics of the markets. Luong (2019) states that Huawei’s decision to utilize the generic strategies enables it to survive competitively and build a competitive advantage.

The major strategies that are used by Huawei include differentiation strategy, leadership strategy, and consumer focus strategy. Cost leadership is the core generic approach that Huawei uses in different buyer markets. The main goal of utilizing this approach is to maintain market leadership by having an effective value chain organization (Islami, Mustafa, and Latkovikj, 2020, 5). This approach has allowed Huawei to increase market share by focusing on the middle class that makes the biggest portion of the buyer market mix in their markets. Huawei focuses on easy accessibility and affordability across the globe. The cost leadership strategy has outlined myriad benefits such as expanded customer base, greater brand recognition, and higher sales targets (Dobbs, 2014). Huawei also relies on differentiation to gain growth.

Differentiation has enabled Huawei to expand its consumer base by focusing on unique product features. For instance, the company has extended its product line to differentiate itself from rivals and increase its scope of opportunities. Huawei has adopted the focus strategy in terms of giving the best value and low costs. The low-cost focus approach by serving the needs of the niche market at the lowest price possible (Allen and Helms, 2016). The best value focus strategy has focused on product attributes to meet the consumer needs and bring continuous change.

Value creation: Huawei generates value mainly through its daily operations. Huawei looks at a business from an investment point of view and has always focused on its fundamental business through maintaining a great focus on resource distribution (Cui and Liu, 2018). Competition. Openness and collaboration have been the basic principles that Huawei has adopted to create value and enhance its core competencies.

Value configuration: Value configuration entails something that creates value in a firm. This can be in the form of products and services, production efficiency, or technology (Dekker, 2013). Huawei has focused on a business model of innovation with new technology and products that are valuable, inimitable, rate and non-substitutable.

The value created: Huawei’s business model has enabled the create value and value captured. The driving forces behind research and development have continuously created long-term value (Ensign, 2011, 20). User experience, quality, and affordability have created value in the company, which has increased profitability and customer base.

Part IV: Issues and Challenges and Strategic Options for Growth

Huawei has faced intense competition in the domestic and international device markets from rivals such as Apple, Samsung, Xiaomi, Vivo, and Oppo. Competition has resulted in challenges in the mobile communications technologies due to more product varieties in both the high-end and low-end market. Huawei has faced challenges in the implementation of the 5G technology (Kee, Chee, Ng, and Yao, 2019, 38). For instance, United States banned the entry of Huawei into its markets and established this as a security threat. For the last few years, U.S. has permitted the installation of network equipment from Huawei. However, the political pressures have led to the exclusion of Huawei from the United States (Sutherland, 2020). Huawei has indicated slow growth due to less financial resources for operations which makes branding strategies, development, and marketing weak.

Ideally, financial resources are valuable in achieving the goals and objectives that result in increased profit margin and sales. Political factors have greatly affected the company’s operations, which has given the competitors an opportunity to take over the market. For instance, the trade war between China and U.S. has greatly affected the supply of raw materials, which makes it challenging to invent improved products. Tax imposition between the two countries has greatly affected Huawei operations in International business. Huawei’s supply chain is under intense pressure due to U.S. trade sanctions which have affected its operations and production.

Strategic Options-Ansoff Matrix

Ansoff matrix entails a strategic planning tool that offers a framework that plans and analyzes strategies for growth (Hussain, Khattak, Rizwan and Latif, 2013, 196). The four Ansoff matrix strategies include market penetration, market development, diversification, and product development (Loredana, 2017, 145). The table below indicates the strategic options for growth in Huawei company.

Market Penetration

· Increasing capital for marketing the selling products.

· Engaging investment and communication in advertising and marketing activities will allow reaching more consumers for existing products in new markets.

· Lowering the prices for old models.

· Increase production capacity to reach more customers

Market Development

· Innovative and new means of distribution

· New and enhanced channels of distribution to reach new consumers and existing consumer group in their existing market

· Research and development to identify new potential consumer markets (Wu, Murmann, Huang, and Guo, 2020)

· Regional expansions and international expansion to access various consumer groups and increase their market share (Kjellman, Yang, Wu, and Park, 2020).

· Exploring new customer segments and new market trends will allow growth and expansion.

· Engaging in strategic partnerships to access new product developments

Product Development

· Raising new products in the market.

· Developing new products from the same product line.

· Detailed research and development to facilitate product innovation.

· Controlling the overhead cost to facilitate competitive pricing.

Diversification

· Vertical diversification where Huawei will introduce new products under the same product lines.

· Huawei also needs horizontal diversification to engage and introduce new products that are not associated with the current product lines.

· Acquisitions and mergers will facilitate conglomeratic growth since they will access new markets, consumer groups, and new products and services.

Part V: Evaluation of the Strategic Options for Growth and Implementation

Strategic options are considered as creative alternatives and actions that respond to external and internal issues affecting an organization. Strategic options focus on the actors, facts, opportunities, threats ad trends in the business environment. Therefore, after analysis of the external and internal analysis of Huawei, there are various strategic options that can be used to facilitate the development, growth, and competitive advantage of the company. A series of issues and challenges that are facing the company can be solved through the strategic options included in the table below.

Option 1: Product Development

Product development entails actions and methods that are used in bring new services and products to the market or modifying the existing products (Baker, 2010, 95). Product development is essential since it relies on market research to create plans for success while selling. The company needs to sell and develop new products in their markets. The company may decide to make some modifications to the existing products or launch new products that will improve the value to the clients. This will include investing in Research and Development to generate new and innovative products. Therefore, the entire strategy needs to include techniques and methods used in each product development stage.

Huawei needs to focus on innovating its products to remain competitive in the market. Some of the product development strategies include increasing product value, modifying an existing product, changing ideas, customized packages, and creating new products. For instance, Akshay, Moaz, Deepsa, Kaustub (2019) noted that supplying consumers with personalized products has been successful for Dell. Therefore, distributing custom items will increase customer attraction since the company offers what the client wants. Customization will also lower the inventory levels and facilitate the efficiency of the supply chain.

Option 2: Market Development

Marketing development entails involves selling the existing service and products to a new group of consumers (Omsa, Abdullah, and Jamali, 2017). Expanding the sales channels can be an effective technique of increasing business. Ideally, selling to more consumers can raise revenue and raise consumer awareness about the brand offerings. Huawei should focus on more direct contact points with consumers to increase the number of buyers. Huawei has tried to capture the European and U.S. market for growth and expansion as well as reach new consumer segments through various marketing activities (Dmitrijevs, 2020). This strategy will be successful since the company owns proprietary technology that they will leverage into the new and emerging markets. For instance, Huawei Wallet and Pay in the new market will be profitable in the new customer segments.

Huawei has offered communication and hardware equipment solutions to many companies. This has played a great role in maintaining a good customer reputation. Therefore, through good cooperation and relationship in the electronic consumer market, Huawei can achieve good market development. For instance, by opening more retail stores and online platforms, Huawei will increase its brand identity and awareness in the emerging markets (Huifeng, 2016).

Option 3: Market Penetration

Penetration pricing is an effective strategy that can be used by businesses to penetrate new markets and attract more consumers to a new service or product (Kabeyi, 2018, 40). Lower prices have been used to introduce new products and services as well as penetrate into new markets. Huawei has faced pricing challenges in mature markets such as the United States that has many competitors, thus increasing the power of substitutes. The competition in its major markets, China, Europe, and the United States which demands Huawei to go out of its way to increase the market share.

To grow their customer base in the current markets, Huawei needs to continue reducing the prices and improve their network, attract new and existing customers and invest more in their product capacity. Therefore, Huawei needs to focus on fair pricing in order to penetrate into new emerging markets to achieve greater market share. For instance, Huawei can adopt the fast penetrating new product pricing strategy, which relies on low prices to increase the market segment and allow the foreign buyers to consent with the foreign products in the shortest time and fastest speed.

Option 4: Diversification

Diversification refers to when the company gets into new markets with new products that are unrelated or related to the company’s existing offerings (Onyusheva and Seenalasataporn, 2018). Diversification can be a risk more than other strategic options but can be effective it focuses on related diversification. Related diversification is the recommended type of diversification for Huawei. The diversified approach at Huawei is well structured, but the company can expand to build value in unrelated and related markets such as computers, televisions, ear pods, and portable music player. Moving into new businesses is an effective way of creating value in the disruptive age and in a highly competitive environment.

SAF Framework

The table below indicates the most suitable strategy approach for Huawei in terms of suitability, acceptability, and feasibility. This SAF evaluation will include the four strategic options and assess through exploits of opportunities and strengths, fitting Huawei’s purpose and appropriateness of strategy in terms of low risk and long term growth.

Criteria	Market Penetration	Market Development	Product Development	Diversification
Suitability- Focuses on Strengths and potentials	3	4	3	5
Acceptability- Economic performance of the strategy	3	3	4	4
Feasibility- Strategy has a valuable output and long term growth ability	4	2	4	3
Total	10	9	11	14

The table above indicates that diversification is one of the best-recommended strategies for Huawei. Considerably, the strategy is feasible, acceptable, and suitable for the company since Huawei has resources that can be utilized for diversification, thus increasing their customer base and expand on their existing markets. Over the past few years, Big tech companies have been venturing into new avenues of business that are beyond their major sectors. This has been part of business expansion and survival due to the threat of new entrants, substitutes, and intense competition in the telecommunications industry.

With the fast-changing future, Huawei needs to focus on product diversification since they cannot limit themselves to the industry that earned them their reputation. For instance, the company can focus on virtual reality and augmented reality technology such as branded headsets and smartwatches. Medical devices and linked appliances have been on the rise in their major markets. With the increase in digital and advanced communication technology, Huawei can open a web network to produce powerful and unique medical devices. The diversification approach will be essential in increasing the company’s product line and operate in different markets. The strategy will influence the competitive balance of the company in the industry and facilitate the growth and development of the company through greater abilities and core competencies.

Conclusion

A strategic appraisal is an essential tool for examining how well a business is performing, revealing the achievements as well as assessing its external and internal influences in its business environment. The strategic appraisal has reflected on the performance, core competencies, and capabilities of the business. PESTEL analysis, Porter’s five forces, value chain model, and VRIO framework examined the external and internal analysis of Huawei, highlighting the strengths, weaknesses, opportunities, and threats facing Huawei company. After an evaluation of the competitive and business environment, strategic options such as porter’s generic strategies can form the basis of survival and realization of the company’s success. The study above has assessed the external and internal environment of Huawei, recommended the strategic options, and chosen diversification strategy as the most appropriate of all. Diversification strategy will help the company compete successfully through new products and services, new markets, increased market share, and increased profits. The strategic appraisal has been effective in moving Huawei towards its strategic objectives and goals.

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