Question 1 Ming Tai, Martin Edwards, Igor Kleyner
Lower cost and good value
Insufficient access to capital. Private, employee owned company
Product differentiation and innovation
Reliant on competitors for components, especially Samsung
Research powerhouse that is currently outspending many global players
The profitability ratio and Net Contribution % are below the industry average
Huawei has invested in building a strong brand portfolio in China
Days inventory higher compared to competitors
Dominant market share in both telecommunications and smartphones
Huawei is highly affected by high employee turnover which puts business continuity at risk
Highly skilled workforce through successful training and learning programs
Lack of brand recognition in the United States
Successful track record of integrating complimentary firms through mergers & acquisition
Phones are not sold in carrier stores in the US market
Recent marketing campaigns such as enrolling Lionel Messi to bolster its global image
Lacking partnerships with electronics retailers within the US market
Huawei's strategic collaboration with global partners such as Google and IBM
Does not focus on marketing higher end devices in the United States
It has built a culture among distributor & dealers overseas where the dealers not only promote company’s products but also invest in training the sales team
The ability to produce products at a lower cost and good value are among the chief strengths of Huawei globally which can slowly permeate into the US market. A meaningful marker of their success is becoming the second largest smartphone brand in the world. Huawei recently edged past Apple with 200 million handsets sold worldwide. This is an impressive feat considering that back in 2010, Huawei sold only 3 million devices. It is able to beat worldwide competition in low to medium end market by providing great devices at a lower cost. Concurrently, Huawei has produced a premium product that can legitimately compete with Apple or Samsung high end offerings. Superior products with great value have helped Huawei to grow substantially in markets worldwide and can help Huawei to gain a position in the US market.
Huawei is also the leader in telecommunications equipment around the globe. Lower cost and value propelled Huawei to expand its products and services to over 170 countries. A number of source conclude that the company is currently the leader in implementation of 5G technology, consistently outbidding the likes of Ericsson and Nokia. If Huawei can overcome the challenge of being perceived as a security risk and alleviate the concerns of the United States government, the future growth potential in the North American market would be formidable.
Product differentiation and innovation are powerful factors that can help Huawei gain a better foothold in the US market. Huawei offers a wide range of smartphones starting from low end to premium. The mid-range devices have impressive internals including its powerful Kirin 970 processor, 960 frame per second camera, above average battery life, compelling detail in system optimization, and the night vision mode. All these features are a step above the competition in the mid-range market. Leveraging their potent combination of product differentiation and innovation will gradually help Huawei to build its customer base in the US market.
Major research and development investment is another factor that can help Huawei in the US market. Currently, there are over 20 R&D institutes around the world, including the United States. Huawei invested $13.23 billion in 2017 in R&D, accounting for 14.9% of its total revenue. This places Huawei solidly in the top 5 companies worldwide. This has been a sore point for many Chinese companies due to lack of this type of investment and questionable track record on intellectual property. Investing more into the US market and potentially partnering up with a government “approved” company can show Huawei’s willingness to avoid a head on collision with the US government, while improving its position in the marketplace.
Huawei has many inherent weaknesses in the US market. One of the most critical is its failure to strike a deal with a major US carrier. The consumer behavior in the US is different than in most countries around the world. In the US, 90% of smartphone users purchase their phones from network carrier stores as opposed to directly from the company or tech stores. Huawei's inability to partner up with carrier stores, effectively means that most Americans do not know about the second biggest smartphone maker in the world. Admittedly, the company was on the brink of a partnership with AT&T in January 2018, but the US government effectively shut that deal down citing security concerns.
In addition to being unable to partner up with a network carrier, Best Buy stopped selling Huawei's phones, laptops, and smartwatches. This move virtually leaves Huawei with just its own website and Amazon. Huawei also does not offer the latest devices like the Mate 20 Pro in the US market. According to a number of reviews, Mate P20 Pro camera can best iPhone X and Goggle's Pixel devices, which is a remarkable technological achievement. Limited access to Huawei’s best products hurts their chances in a tight and saturated market in the US.
Huawei has not invested properly in advertising their brand in the United States. Since consumers virtually do not have access to Huawei's products via stores and network carriers, the brand remains virtually unknown. To make matters worse, Huawei spends very little in advertising as compared to behemoths like Apple and Samsung, which shell out hundreds of millions just in the US market alone.
Failure to partner up with network carriers and brick and mortar stores have severely limited Huawei’s ability to compete in US market. Huawei has not fully committed to advertising or displaying their best products, which further hinders its ability to penetrate an exceedingly competitive and saturated market. Complicating the situation even further is the current political situation. Many of Huawei’s weaknesses are effectively exaggerated by the actions of the US government and the strengths are diluted and undermined. Huawei needs to transform their strategy if it plans to remain and succeed in the US market.
Product differentiation in design and functionality
Over-dependency on sales of iPhone. About 60% in 2016 and 69% in the first two quarters of 2105
Vertical integration of operating system, software, hardware, services and applications to create a closed ecosystem
High sales price for all products, targeting mainly middle to upper class consumers
Brand equity and strong brand image. Apple was ranked #1 in brand equity by Forbes in 2018
Incompatible with non-iOS software and accessories. Android OS has about 85% global market share
Super customer services – high quality and knowledgeable sales for all Apple products and post sales supports
Narrow product selection in the product portfolio. Need another sentence to elaborate
Customer loyalty. Apples had the highest customer loyalty in laptop computers, tablets, smartphones and online music per 2017 Customer Loyalty Engagement Index
Limited distribution network. Apple relies on its retail and online stores, third-party cellular network carriers
Phenomenal advertisement campaigns and marketing strategies
High profit margin. 23.68% for the 4th quarter, 2018