Analysis Of Huawei's Strategy
According to Kenneth Andrew’s book, a firm’s strategy can be defined as: “the pattern of decisions in a company that determines and reveals its objectives, purposes, or goals, produces the principal policies and plans for achieving those goals, and defines the range of business the company is to pursue, (...) (The) contribution it intends to make to its shareholders, employees, customers, and communities.” (The Concept of Corporate Strategy, (pp.18-19)”) With this definition in mind it is easy to understand that we are looking to understand Huawei’s goals and objectives and which approach Huawei will opt for. Through an analysis of Huawei’s behavior, its strategic objectives will be made clearer.
Starting from the Principle-Agency theory we
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This theory is based on the duality between the managers’ pursuit of growth in order to build their reputation as to ensure job security and the shareholders search for maximized profits in the long run.
Since its foundation, Huawei’s strong suit has been its devotion to R&D as well as its in-house tech development. In 2016, Huawei has focused its attention on R&D and has outspent tech-giant Apple in this department with a major investment of 11.08 billion dollars which constitutes 14,6% of its 2016 total revenue. (Huawei annual report, 2016) (The economist, 2017) Shenzhen hothouse of innovation” (April 8th 2017)
Today, Huawei’s market strategy has been an aggressive one. When arriving in a new market (US & Europe), their main aim was to broaden their market segment by selling reliable and low-end smartphones for a much more affordable price than its competitors. This is what we call a market penetration strategy and it is the strategy Huawei used in Africa, Latin America and the Middle East (prior to entering the US & European markets) where competition is less fierce. By using pricing to build share in its major markets, Huawei has inspired trust in its clients and gives off an image of reliability on behalf of its products. By comparison, Apple and Samsung focus most of their attention on reaching high profit margins through the sales of their high-end
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