Case Study – Huaweii
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Huawei is a global leader in information and communications technology. They were established 23 years ago, in 1988, by Ren Zhengfei. Their headquarters are currently located in Shenzhen, China. They are surprisingly a privately owned Chinese company. They began as a small distributor of imported PBX products without any telecommunication knowledge. They later made a huge breakthrough by effectively taking advantage of the technology diffusions from Shanghai Bell. This enabled them to enter the technological world. After that, Huawei began supplying gear to China’s three largest operators: China Mobile, China Telecom, and China Unicom. Huawei is currently ranked 285th on the Global Fortune 500 based on its revenue of 2013. Since then they reached a revenue of approximately 46.5 billion dollars. Their equipment is used in over 170 different countries and regions. They are well known for investing approximately 10% of their annual sales revenue into research and development and about 45% of their employees are engaged in such a sector. In order to analyse Huawei’s institutional environment we must first understand what it is. An institutional environment consists of a country’s rules, policies and enforcement processes. This in turn influences the behaviour of the individuals and organisations that operate within the country. The institutional environment can be split up into four major categories which are the economic development, the political legal dimension, the importance of instructional environment and the physical infrastructure dimension. The first category is the economic development that existed when Huawei entered the market. The Chinese economy has been growing rapidly for the last 20 years. Over the past two decades their economic growth averaged 9.5%, with their national income doubling every eight years. This increase in output represents one of the most sustained and rapid economic transformations seen in the world economy in the past fifty years. China’s purchasing power began increasing with the economy giving Huawei a sure home run when entering the market. China had set up the perfect platform for Chinese corporations to sit on. China’s extraordinary economic performance allowed both private and public companies to prosper. Huawei was not an exception. To add to their economic growth we can also layer on the fact that the world was entering the technological age and China lacked a company that could offer them home based technology. At the time all of China’s technological machines were imported from either Japan or the United States.
The second category is the political and legal dimension. For Huawei the political situation in China was to their advantage. The Chinese government has always been biased over the thought of foreign direct investment meaning that they always support Chinese corporations over foreign ones. This being said the Chinese government even helped Chinese corporations acquire lines of credit in order to fund their international growth. For China, seeing such corporations go global was almost as if they had gone too. In 1996, the Chinese government began specifically supporting domestic Chinese telecommunications firms by ending special import policies for telecoms equipment. Policies such as this helped companies like Huawei become the global monsters they are today. China singlehandedly helped Chinese companies keep their market share by not allowing foreign competition enter the market. The third category is the importance of instructional environment. The Chinese culture also helped in aid Huawei’s success. Similar to their government, the Chinese people prefer to support local firms to international ones. Culture, though we may not really think of it, has a huge influence on the market because it determines what will be successful and what will not. As the world went technological it was only logical that China followed, so Huawei being the leader at the time reaped the most rewards. Not only were they a Chinese corporation but they were also the leading R&D firm in China. Their success was immanent and the people of China helped them achieve it. Its hard to not win over the world when you have conquered a third of its population