HUAWEI TECHNOLOGIES CO. LTD.

GROUP 11 KUSHAL LOKHANDE PGP01022 MANISH VERMA PGP01023 PRASHANT CHOURASIA PGP01028 PRATEEK JAIN PGP01029

China Telecom Industry Scenario

1978 - 1989 Preparation Period 2001 - Present Globalization Period Inefficient Telecommunication hampered economy Immediate need to modernize telecommunication 1979 Policy of collecting telephone installation fees Introduction of advanced foreign equipment and technologies Incorporation of state-owned telecom enterprise, Shanghai Bell Telephone Equipment Manufacturing Co., JV with Belgium Bell Telephone Co. Reduction of Import tariff on Telecom product 1990 - 2000 High-Speed Development Period Series of Reforms to promote telecom industry Laying down of long distance cable network, completion of grillwork optical backbone project Focus of enterprises shifted from govt. puppets to responding to customers Reduction in telecom service fees to stimulate demand Entry of foreign telecom equipment manufacturers Rapid growth of domestic telecom equipment manufacturers Discontinuation of preferential tariffs to import to encourage domestic equipment purchase, Huawei Technologies Co. Ltd. Entering into WTO in 2001, opening up of telecom provider market Separation of China Telecom into 4 companies to bring competition in every segment Domestic equipment manufacturers pushed for international cooperation side by side developing own products Export of equipment started Exports reached US$450 m in 2003 Handset exports reached US$ 738 m in 2004

Huawei

Background

Established in Shenzhen in 1988 Vendor of imported PABX (Private Automatic Branch Exchange) Systems Shifting focus towards R&D in 1992,due to potential profits owing to high margins First domestically manufactured product, C&C08 switch in 1993 Owing to low price & matured performance, entry into urban markets Gradual Extension of products in key telecom fields
Imported Telecom products vendor Learning technology from foreign products Gaining domestic market insights Accumulating capital for future

1988-1992

1993-1996

Imitation of the imported product technology to manufacture own product Entry into the Hong Kong market

1997-Present

Restructuring internal processes Establishing overseas R&D centres & branch offices Joint Laboratories and JVs with major companies

Huawei Technologies Co. Ltd.

Huawei
Internationalize the Strategy Develop Core Business Strategy

Marketing Strategy
Strengths
Low engineering labor costs One common platform (ASIC) for all products Formidable R&D Capability Market-oriented R&D focus, customer focused approach High quality workforce

Opportunities
Huge potential for market growth in telecom industry Untapped markets in various parts of the world Potential partnerships with capable local players

Globalize the Strategy

SWOT

Total Global Strategy

Threats

Weakness
Complete reliance on internal capital sources Huge organizational structure

Competition from globally renowned brand like Cisco General perception of Chinese products in the global arena Lowering profits due to increasing R&D and marketing costs

Focus on building the Brand Making the presence felt entering international bids Building High-tech perception international exhibitions Perception about Chinese economy Brochure about Chinese transformation Huawei in China

Huawei Technologies Co. Ltd.

Huawei
Risk of Entry

Marketing Strategy

Porter s Analysis

Capital-intensive, access to finance key issue Finite amount of "good" radio spectrum Ownership of a telecom license Scarce solid operating skills and management experience

Bargaining power of Suppliers

Large number of equipment makers around Enough vendors to dilute bargaining power

Intensity of Rivalry
High degree of competition Competitors lure customers with lower prices and more exciting services Tends to drive industry profitability down High exit barriers (specialized equipment)

Bargaining Power of Buyers

Increased choice of telecom products and services Low product differentiation Low switching costs

Threat of Substitutes
Products and services from non-traditional telecom industries Cable TV and satellite operators now compete for buyers Internet becoming a viable vehicle for cut-rate voice calls

Huawei Technologies Co. Ltd.

Huawei

R&D Strategy

Shifting focus towards R&D in 1992,due to potential profits owing to high margins Company spends 10% of its Sales Revenue on R&D 13 R&D centers worldwide : Dallas, Bangalore, Moscow 46 % R & D Employees Market focused R&D approach
Mission statement : Huawei is in pursuit of realizing customers dreams in the IT sector, and becoming a business with sustainable growth Established Joint Labs with industry stalwarts Texas Instruments, Microsoft, Intel, SunMicrosystems
Marketing Sales & Customer Service, 33% R&D, 46%

Admin, 9% Production, 12%

Employee Distribution

Huawei Technologies Co. Ltd.

Huawei
Benchmarking

Competitors

Weights Product and solution Brand Market perception R&D Employee Base Market Reach Market Power 2 1 1 2 1 1.5 1.5 Total

CISCO Rating 9 10 9 9 10 10 10 9.5

HUAWEI Rating 8 6 6 9 9 7 6 7.45

Huawei Technologies Co. Ltd.

THANK YOU

Huawei Technologies Co. Ltd.