Comparison of strategies (Huawei)

The early development strategy of Huawei

Compared with the multinational corporations of developed countries, Chinese enterprises are weak latecomers, especially in the high-tech sector. The core issue of early Chinese enterprise strategy is how to grow from weak to strong, from newcomers to leaders. Huawei is a typical representative of Chinese companies during this period. Huawei focus on its operation in the early stage of development. For a company which is still too weak, “to survive is the main principle of the enterprise”. Huawei’s early strategy is divide into the following several aspects.

1.       the following strategy in technology

Imitate and follow up the multinational company’s existing products and technology, this practice is common in most of Chinese high-tech enterprises. The competition in communication equipment industry is intense, the leaders has long been the multinational companies such as Ericsson, Nokia, Cisco, Motorola etc. putting more difficult for Huawei to participate in the mainstream industry competition. Combined with the insufficient technology and the lag of the development of domestic telecommunications, as well as the shortage of professional talents, to stay in the industry, is a big challenge for Huawei.

Huawei practice ‘traditional Chinese values aided with modern western management’ as its strategy, namely pay to use the technology of multinational companies. In the process of imitation, Huawei accumulated gradually its technical capabilities. In 1996, Huawei introduced the integrated product development (IPD) and integrated supply chain management (ISC) from IBM, the imitation entered into the high speed development and closely follows the product R&D and the product update schedule of the multinational companies.

2.       reform the company product development process

On the competitive strategy, Huawei is pursuing a “destructive” strategy. When telecommunications industry was still a small industry in China, communication quality still couldn’t meet the needs of the clients, and more, the price was high and inconvenient to use, the needs of most organizations and individuals were greatly depressed. Huawei recognized this situation, seized the key to improve the communication quality, reduce the cost of technology development. Huawei put everything into the development of a SPC exchange. This product made it succeed and pull away its domestic competitors.

In the process of competition with multinational companies, Huawei adopted a strategy of “the rural areas to encircle the cities”. It established market office and engineering service system in each province, municipalities and autonomous regions in China and set up a customer manager in every region, every city and every country to make every effort to cover the operators of all relevant departments. In 1995, Huawei became mainstream equipment suppliers in rural communication market.

Huawei entered into the countryside after the success of the rural market. It provided the product with high cost performance, played a role of “low-end entrants”.  Now the core product of Huawei spread all over provinces and major cities in China.

3.       “wolf” strategy on enterprise culture

Huawei established a complete set of professional management system and process, ensure this express will run at high speed. Ren Zhengfei, the CEO of Huawei has been advocating the “wolf culture” in early years. Wolf’s focus, the discipline of wolves, aggressive, and team spirit. Within the enterprise, Ren militarized the enterprise management, including the strong labor intensity, strict management system, the cruel internal evolution system, etc. The wolf culture helps Huawei in keeping its strict order and efficiency in the process of development. From management to each team member is asked to keep highly sensitive to market development and customer needs, keep the rapid response to the changing market and strong ability to act, stay strong and show the effective team cooperative engagement capability in the process of operation.

ZHOU Yang

Source: 

Higgins, J.M. and Vince, J.W. (1993). Strategy Management, Fifth Edition. Orlando, FL: The Dryden press, pp. 236-237

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