Resource and Capabilities of Huawei - Essay Example

Resource and Capabilities of Huawei Introduction Huawei (firm) emerged as one of the leading competitors of Cisco by offering high end networking equipments at relatively low cost. The gradual emergence of the firm on international scene also indicates the value of inexpensive engineering and R&D as to how it can improve the resources and capabilities of a firm to achieve the relative degree of strength in international market. Firm’s strategy has been attractive for those firms which were looking for reducing their costs on developing efficient networking capabilities to take advantage of the emerging technologies. Global telecom market has gone through systematic changes wherein from a fragmented industry, it become more like a centralized industry with focus on developing core competencies through the centralization of manufacturing and production facilities. With the changes in the technology however, there occurred a systematic shift into the way organizations in the industry attempted to dominate the market. However, there still remains a big question mark as to whether the firm will be able to climb the technology ladder and start offering high end technology products in the international market. It is also critical to note whether the firm will be able to challenge CISCO-one of the leading providers of networking and communication equipments in the international market. If it can what resources and capabilities it may require to successfully challenging the CISCO. This paper will discuss the resource and capabilities of the Huawei and will further discuss as to what resources and capabilities it will require to successfully challenge CISCO. Resource and Capabilities The resource based view of the strategic management indicates as to how firms can develop their internal resources and capabilities in order to perform better than their competitors. Resource based view also indicate that a firm must deploy its resources in most efficient and optimal level so as to maximize the returns for shareholders. Development of strategic capabilities is therefore one of the most critical aspects of strategic management which a firm needs to perform. The acquisition of various resources and competencies therefore offer a firm a great opportunity to develop its competitive advantage and successfully meet the competitive challenges. (Cromb,2006). The resource capabilities can either be specific to the organization as well as generic capabilities that allow firms to focus on their customer needs and requirements to deliver value. Various studies indicate that the high performing firms which focus on delivering value to a greater extent basically distinguish such firms from the low performing firms.(O’Regan & Ghobadian, 2004). Firms therefore need to deploy their resources with relatively superior competencies in order to derive the required benefits. What is also significant to understand that the sources of competencies can be different and different firms in the industry may create different and unique competencies in order to take competitive advantage? This also means that apart from creating generic capabilities, a firm must also be able to develop its own unique core competencies which essentially determine the competitive edge for the firm. The following section will discuss the resources and capabilities of Huawei. Resources and Capabilities of Huawie Huawei is an interesting case of extensive R&D facility which allowed it to dominate the domestic as well as international market. The existing resources and capabilities of the firm are: Dedicated R&D One of the most important capabilities of the firm is its high end R&D facilities in which firm has indigenously invested. Almost 60% of the R&D workforce of the firm is either holding masters level education or PhD level education indicating the firm has a very diverse and highly trained staff which is capable of delivering in an environment which is competitive and require continuous focus and effort to produce technologically superior products. Apart from the fact that the firm has highly educated and trained R&D staff, the diversification of the R&D facilities is another important capability of the firm. Firm not only have the R&D facility in China but they are also located in almost all major parts of the country including India wherein firm is able to tap into the knowledge and expertise of diversified workforce which allow it to integrate foreign knowledge and expertise to not only serve its local market but also the international market. Further, the R&D efforts of the firm are also joint with many industry leaders such as IBM as well as Sun etc which further strengthen firm’s position as a diversified firm with diversified resources and capabilities to tap the new and international markets. However, Huawei does not rely on getting technology from the foreign firms as this strategy is considered as ineffective by the firm. Low Cost One of the strongest capabilities of Huawie is still ability to offer same products at at-least 40% less cost as compared to its closer competitors. This also means that Huawei not only has the access to cheap labor but its R&D expense is low too as compared to its competitors. Its ability to offer low cost products therefore basically allows its customers to enjoy the same quality of services at relatively low cost. Though Huawei’s R&D facilities are geographically scattered however, it still allow the firm to maintain its low cost advantage due to availability of cheap labor in China. Strong Networking Chinese firms are normally inter-linked with other firms in the market and there is an strong concept of guanxi wherein firms are often inter-related with each other and leverage each other’s capabilities. Huawei also has the one of the strongest networks in the market wherein it has formulated exclusive joint ventures as well as other strategic alliances with various Chinese firms to offer those services as well as other facilities. Formation of strategic alliances with other large firms not only allow the firm to lock in its customers but also allow it to tap into the resources of its partners in order to leverage itself into the international market. It is also because of this reason that Huawie has been able to secure cheap funding from the State owned banks to finance its expansion into new markets. Corporate Culture Another important core competency of the firm is its corporate culture wherein it has developed itself into one of the best organizations in the country to offer best compensation to its employees. The corporate culture of the firm is mostly based on the Military style because of the background of the man behind the success of Huawei. The Military style of management within the firm basically allowed the firm to develop a strategy wherein employees were trained to compete aggressively and take benefits of the joint efforts of the many. The so called behavior of the wolves inculcated into the behavior of the employees allow the firm to develop winning attitude in its employees. This culture was exactly matching the culture of the general Chinese society wherein issues of patriotism as well as historical roots of the country allow its employees to associate themselves with the larger context within which the firm was operating. The above analysis indicates that the firm’s internal resources and capabilities are mostly homegrown with deep roots into the Chinese culture and philosophy of management. Through the formation of strong networks duly supported low cost and high R&D, Huawei is basically able to dominate the local as well as international market. The dominance in the local market is probably one of the most important advantages that the firm has undertaken due to its unique position in the Chinese local market. However, this could not have been possible with the support of State. New Resources and Capabilities to be build As discussed above that Huawie’s resources and capabilities were mostly home-grown as it relied less on technology transfer with the foreign firms. However, CISCO on the other hand has been able to leverage itself with the aggressive acquisition strategy wherein it attempted to focus on utilizing the strengths of firms offering similar range of products in the networking industry. In order to compete with and successfully challenge CISCO, Huawei may need to develop following additional resources and capabilities: Leverage its R&D Facilities Huawie need to carefully design its acquisition strategies to acquire firms that offer superior technology. As discussed in the case that the Huawei still carry the image of a firm offering cheap and unreliable products because of being a Chinese company. It was because of this reason that Huawei offered some of its customers’ products and services at significant concessions. This lack of trust by the international buyers may be a direct result of the fact that Huawie has home grown R&D facilities which are exclusively developed by the firm itself. However, it needs to formulate strategic alliances with the international firms also in order to take advantage of their superior technological skills and knowledge. Indigenous R&D It is generally perceived that Huawie mostly mimics the products made by other firms through reverse engineering and other methods. It is because of this reason that the products of Huawei are generally perceived as unreliable despite the fact that they have been providing superior quality at affordable cost. However, the dynamics of doing business in the industry as well as the initiatives by other international firms to relocate their R&D facilities to China may soon result into the fierce competition for Huawei and it may not be able to maintain its traditional cost advantage. In order to overcome this and successfully challenge CISCO it therefore needs to develop its own indigenous R&D wherein products developed by Huawei are considered as genuine products of the firm. This will also allow the firm to develop as a brand name in international market and will further facilitate its position in the international market to successfully challenge CISCO. Development of Global Corporate Culture In order to equip itself with the new and emerging needs of the international markets and to successfully challenge CISCO, Huawei need to contiousely focus on reshaping its corporate culture and must re-align its existing military like Chinese oriented corporate culture with that of more globalized corporate culture. The failure of the firm in US market is an ample example of the lack of understanding of the international environment and culture by the firm and reflects upon the need for having a more flexible and adaptable corporate culture for the firm. CISCO has developed itself into a truly global firm by adapting the local knowledge and culture whereas Huawei is still a Chinese firm with little capability to adapt to the new cultural environment and manage it from a diversified perspective. It is therefore critical for Huawei to blend its local corporate culture with that of the global corporate culture in order to ensure that it can successfully meet the future challenges. Adapting to the new culture and environment will also allow the firm to successfully acquire new firms because most of the acquisitions often fail due to inability of the acquiring management to critical assess the cultural aspects of acquisition process. (Schraeder & Self,2003) Conclusion Huawei is the leading telecommunication services providers in China with a really aggressive history of rising on the top. Over the period of time, it has been able to capture most of the Chinese market and is also successfully competing in international market by offering less expensive products and services to its customers. The reasons behind this success are the development of resources and capabilities of the firm which provided it a solid competitive advantage. Its strong R&D infrastructure, strong networking as well as unique corporate culture have allowed it to develop itself into one of the most successful organizations of China. However, in order to successfully challenge firms like CISCO it also need to expand its R&D infrastructure by acquiring new firms, developing a unique global culture as well as development of indigenous research and development infrastructure will further strengthened its position it the market and allow it to successfully challenge CISCO. It is therefore proposed that the firm must develop and hone its existing core competencies in order to successfully challenge CISCO and other competitors. References 1. Cromb,D. (2006). Organizational Capabilities and Bottom Line Performance. Leadership & Organization Development Journal. 27 (3), p236 - 238. 2. O’Regan, N & Ghobadian, A (2004) The importance of capabilities for strategic direction and performance. Management Decision. 42 (2) p292 – 313 3. Schraeder,M, Self, D. (2003). Enhancing the success of mergers and acquisitions: an organizational culture perspective. Management Decision. 4 (5), p511 - 522. Read More