The Challenges of National Brand Transfer to International Brand: Huawei Technologies Corporation - Research Proposal Example

The challenges of national brand transfer to international brand: The case of Huawei Technologies Corporation Research Question and Rationale Criticshave been describing 21st century as China’s era. Since the country’s significant economic reform which started in the year 1978, the nations has experienced much phenomenal social and economic growth. These growth areas are majorly through exports, massive spending in infrastructure as well as steady market liberalization. All of the above factors helped China in entering the WTO (World Trade Organisation) in the year 2001. However, research work towards the success as well as challenges of Chinese internationalization has been limited. This can be deemed as unfavourable compared to the significant volume of studies devoted to multinational and global companies in developed nations (Coviello and Munro, 1992). The above situation provides a base for further and deeper study with respect to the internationalisation process and policies followed by Chinese companies. The study will analyse the various challenges faced by these companies while global expansion. Since it is difficult to gather all data regarding the internationalisation process of every company, a case of Huawei Corporation has been chosen as a reference to the research objective. Literature review Internationalisation According to Welch and Luostarinen (1988), internationalisation is a dynamic concept which has increased the involvement in global operations. According to their concept, both outward and inward processes should be involved in broader internationalisation concept. Beamish (1990), on the other hand, provided a comprehensive definition for internationalisation. According to him “it is process by which firms both increase their awareness of the direct and indirect influences of international transactions on their future, and establishes and conducts transactions with other countries.” Till now, internationalization can be described as a process covering various concepts. In includes many strategies and incremental decisions, involved inward and outward services or products as well as transfer of resources across global boundaries. It is also influenced by internal factors surrounding the firm as well as external market environment. Anderson defined internationalization as a method of adapting the models of exchanges and transactions across international markets (Hornsby, et al., 1994). Motivation for international expansion According to Bartlett and Ghoshal (1992), overseas expansion of multinationals has been driven by three major traditional forces. These are securing key supplies, market seeking as well as access to low-cost market factors. Motivation for international market expansion was particularly significant among firms having intrinsic advantage such as technology or brand recognition giving them competitive advantage in overseas markets. Two unusual features have been observed among Chinese firms when it comes to international investments (Athreye and Kapur, 2009). Firstly, Flow of outward FDI from china has been sooner compared to other industrialising economies like South Korea. Secondly, few of the acquisitions and capital outflow have been made towards developed economies compared to the expected developing nations. For instance, China’s Haier and Lenovo made substantial investments in United States. On the other hand, Huawei has been majorly investing in European nations. This orientation towards developed nations has been described as untraditional as labour rich nations rarely mover towards capital rich economies. According to Dunning (1988), Chinese multinational’s motivation towards internationalisation is their attempt towards ownership extension with the objective of gaining competitive advantage and exploitation of local markets and low cost inputs. In short, internationalisation process helps firms in exploiting their assets and resources. Matthews (2006) developed a model named as leverage, linkage and learning model in order to understand and evaluate the strategies used by latecomer firms for internationalization. According to this theory, these firms use their global linkages and overseas investment in order to leverage current cost advantage as well as gain knowledge regarding new sources for competitive advantage. Modes of entry Chinese companies opting for internationalising their brands have not realised any single successful strategy yet. The investment options are diverse ranging from mergers and acquisitions, direct exports, franchise as well as contractual agreements (Grant, 1996). The bottom line is companies should choose the market entry strategy that is most appropriate for globalisation of their brand as well as supplementing their resources and technology. Majority of Chinese firms have been adopting a combination of international branding, strategic alliance and investment options in different nations, depending on the firm’s risk tolerance, management capabilities, financial resources as well as ability to handle management complexities (Beebe et al, 2005). Research in this area suggests that majority of Chinese companies prefer merger and acquisitions or outward internationalization, joint ventures (inward internationalization) or partnership as their favorite strategy. Mergers and acquisitions are popular but extremely difficult, especially if the company is new in the industry or is having low brand recognition among industry experts. Also, because only a minor portion of these deals succeed in establishing and creating value. Apart from that, critics argue that there are least chances for Chinese firms marketing their services and products globally. As a result, the prospects and opportunities for Chinese organisations are much thinner compared to their western counterparts (Child and Rodrigues, 2005). Another entry strategy used by Chinese local brands for internationalization is establishing international joint ventures or entering into a partnership with the foreign enterprises. This is done either by technology licensing or OEM (Original Equipment Manufacturing). This route has been chosen by many mainland Chinese enterprises. This also suggests that Chinese firms have been consistently favoring international joint ventures as a source for expertise and technology transfer to the Chinese companies (Peng, 2000). Chinese firms have always tried to extract knowledge and learning from global organizations as well as economic phenomenon. Joint ventures are popularly known to increase the learning process as well as provide both partners access to knowledge and learning opportunities and establish new knowledge systems (Anand and Khanna, 2000). However the involvement of Chinese government such as granting Chinese firms technology access as well as permitting international firms in maintain china, have been crucial for the growing willingness among Chinese firms to globalization their services and brands (Beamish and Iris, 2003). The case analysis on Huawei is an example of joint venture strategy strengthening a Chinese firm’s international competitive advantages. Barriers to internationalisation According to Beijing Review (2005), while transforming their local brands into global brands in international markets, Chinese firms have lost most of their foreign investment money as well around 65 percent of these joint ventures have met with failure (Accenture Consulting Group, 2005). While establishing a local brand in international market, Chinese companies face many hurdles; some of them are described as follows: 1. Politics and Economy Foreign businesses have identified financial and economical risk areas in the business environment surrounding Chinese firms. The banking system of china is in need of significant reform. Chinese financial markets are vigorously opening to foreign banks which can result in high risks. Indigent local government and legal institutions are unable to provide adequate governance and protection, which results in various issues such as intellectual property and license rights. As a result of the above, foreign companies also fear to establish any medium-term or long-term partnerships or joint venture with Chinese companies (Chen, 2004; Kogut, 1988). 2. Management of Human Capital Chinese firms marketing their brands in the international market depend on its talent. They need to multiply their talents as well as include those human resource strategies that help them in identifying leaders as well as motivate workforce. Critics argue lack of managerial experience and expertise in Chinese companies as one of the major reason for their less recognition among foreign firms (Rui and Yip, 2006). Non- Chinese multinationals are still enjoying advantages in terms of prestige and pay. There is a strong strategic push among Chinese business culture as well as government in order to nurture talent in areas such as technology and science (Child and Lu, 1996). Attraction as well as retention of talented and highly skilled employees has always been a challenging task among Chinese multinationals. Attraction and retention requires long-term outlook and planning for employees as well as building an established career path for them. The human resource departments in majority of Chinese organizations lack the above planning procedures, mainly due to lack of global HRM exposure (Child and Lu, 1996; Accenture Consulting Group, 2005). Another crucial area where Chinese multinationals are poor is management. Limited attention is paid to teamwork, communication, leadership skills and creativity at universities. As a result, graduates are often unable to tackle issues in the workplace. However, government investment has grown in this sector with launch of various programs; the numbers are still low compared to the increasing rate of population and young generation in China (Child and Lu, 1996; Deng, 2004). 3. Operations and marketing The lack of management also spreads to the operations and marketing department of Chinese firms. Foreign companies have complained regarding lack of experience, knowledge and adequate management skills in Chinese firms while dealing with global transactional firms as well as global brand management. According to Zulia Zhu, AVP of Citibank, Chicago, “US companies typically allocate spending in their budgets to research and marketing in China before they invest. Chinese companies do not have this as part of their operation when considering investments in the US. This is something they have to learn” (Grant, 2005). Majority of the Chinese companies are still unaccustomed with the changing international standards, systems and regulations and thereby are unable to adopt themselves with the global styles of corporate governance. 4. Culture The culture of china can easily be describes as unique and different from majority of the western world. Two of the broad and hugely followed cultural aspects followed by Chinese firms include hierarchy and respect. There is a strong preference for families which are considered as a core unit. Also, China is a collectivist society and relies on long term perspectives, both in terms of business and personal accomplishments (Hamel, 1991). These qualities are hugely different from the culture followed in western nations creating huge risks in terms of behavior and values, both in workplace and business. Majority of Chinese firms face challenges while understanding and complementing the management styles, priorities, mindsets and cultures of other firms. A recent survey by World Bank Report revealed that of all the failed joint ventures involving Chinese companies; almost 85 percent were because of differences in corporate culture and managerial styles (Beijing Review, 2005). A comparison of Hofstede’s cultural dimensions reveals that huge difference lies among Chinese culture and those of western firms in areas such as power distance, individualism and long term orientation. As a result, most of the times Chinese companies face with difficulties such as misunderstanding, de-motivation as well as lack of commitment from their partners. Research Aim and objectives The research aim is mainly based on the internationalisation process of Chinese companies. The research will identify the various challenges faced by Chinese firm while transforming their local brands into international brands. For this study, Huawei Corporation has been chosen for understanding and analysing the internationalisation process of local Chinese brands. The research aim can be further categorised into research objectives which will be specific to the corporation. Objective 1: Understand the extent to which Huawei Company rejected the traditional concepts and strategies for internationalisation. Objective 2: Understand and evaluate the various challenges faced by Huawei while operating in various developed markets. Objective 3: Evaluate Huawei’s successful internationalisation strategies and how similar Chinese firms can use it as an example and reference for future strategy implementation Research methods Churchill and Lacobucci (2005) have categorized research methods into three broad classes: descriptive research, causal research and exploratory research method. Descriptive research basically concerns with evaluating the rate at which a particular phenomenon occurs. It depends on variables and the relationship between them and requires initial hypothesis. Exploratory research is based on discovery of insights and ideas. Casual research aims at determining the cause and effect of any relationship and is studies through experiments. Research methodologies can be further divided into primary and secondary methods. Primary research methods include surveys, experimental studies, longitudinal studies and cross-sectional studies. Secondary research methods include case studies. Apart from that, many other research methods are being used such as action research, ethnographic studies, participative enquiries and grounded theory research. Few of the research methods relevant to the current study are described as follows; Positivist research Positivism research methodology is also known as deductive approach. It can be understood as a process where hypothesis is developed from an already existing theory. According to positivist research approach, knowledge is valid based only on observational realities and the relationships which, subsequently, are based on theory of cause and effect relationship, generating predictable results (Saunders, Lewis and Thornhill, 2007). Interpretivism It is also known as constructive research anti-positivist theory. The research approach also explains that interpretations as well as subjective interventions can be only possible answer for understating any situation or phenomenon. Interpretations are basically data derived from numerous scientific experiments pursued earlier. Generalisation of the approaches and suggestion can lead to research error, as they are exclusive view points and opinions of the researcher. As a result, it is important to study the research thoroughly and include self-reflection (Blaxter, Hughes and Tight, 2006). Ethnographic research Ethnographic research can also be illustrated as an anthropology derivative. In this type of research method focus is given on studying an entire culture. It can also be considered as a broader investigation area involving various practitioners as well as techniques. The most popular ethnographic study is participant observation. Here participants are observed as well as extensively reviewed in a live manner during in field research (Bryman, 2008). Questionnaire research Questionnaire is a primary research method. For the purpose of gaining insightful information about the area of study, it is presented to the respondents. It contains a number of questions which are in general closed ended questionnaire and open ended questionnaire. One of the biggest advantages of using this method is that it is easy to organise the collected data as well as the method helps in saving crucial time during the research (Blaxter, Hughes and Tight, 1998). Case study research Case studies are secondary research or phenomenological studies which involved exhaustive literature survey. Case studies provide an opportunity for in depth studying of a particular situation, subject or organisation. Case studies are used for gathering, evaluating and analysing useful information which can be either quantitative or qualitative. Case studies can be descriptive, illustrative, experimental or explanatory. Descriptive studies include current practices; illustrative case studies are those where current practices and policies adopted by firms are illustrated. Experimental case studies include examinations of policies, procedures and practices which faced difficulties and issues. Explanatory case studies include use of theories as a core in order to understand certain procedures and practices (Blaxter, Hughes and Tight, 1998). Research method selection and rationale The paper will firm aim to throw significant light on the various factors that motivated local companies in china to transform into international brands. The study will then review internationalisation strategies and process followed by Chinese companies in past. The above review of the literature has been used to analyse Huawei Technologies Ltd and its international policies and strategies. The overall objective of the study is to understand and evaluate the various challenges and barriers Chinese companies have been facing while transforming themselves into international brands as well as how far success has been achieved by these companies. A case analysis on Huawei will help understanding the reasons behind its internationalisation and not following traditional internationalisation theories, core competencies as well as various challenges it faced while establishing itself it developed regions. Huawei has been chosen for the study because it has the potential for current theory expansion as well as provide valuable strategic lessons which can be implemented to similar developing nations. The current study will also benefit foreign firms in evaluating the insights and implementing them in their various business strategies with China and Chinese companies. In order to examine the various research questions, the analytical tool employed in the current study is mainly descriptive and secondary research. The use of secondary research data will be very cooperative in finding out helpful data and information for the current study. Secondary data will be important for the researcher as it helps in formulation of the background of the research study to be conducted. The secondary research method for this study will mainly include document research involving various sources such as, journal articles, publications, books and internet as well as government sources (Ruskovaara and Pihkala, 2013). The reason for selecting secondary data is due to unavailability of primary data. It is very difficult to attain information from the company directly, especially in areas of confidential and internal strategic issues. Also, the research method includes specific topics covering the internationalisation of Chinese companies as well as Huawei Company. This can be attributed to the restriction in terms of timing limiting exhaustive research of every strategy followed by Chinese companies. For this reason, Huawei Corporation has been taken as an illustrative case study which will help in understanding the relevant issues faced by Chinese companies while internationalizing their brands (James and Vinnicombe 2002). The research will also use archival records such as articles and press releases of the company, past annual reports, past interviews of Huawei management and top executives. These will help in evaluating the past strategies of Huawei which can further be compared with the current strategies and subsequently evaluated. Apart from collecting data of the company, exhaustive library research for reviewing the literature will also help in better understand and evaluation of the strategies implemented by Chinese companies for internationalisation of their local brands. The major objective of the investigation is to understand and evaluate the challenges faced by Chinese firms while marketing their local brands in international market. As a result, the study will require specific information regarding the industry, Chinese companies as well as past and present global trends and perception regarding Chinese firms. The current research objective and rationale and information sources complement each other. A clear formulation of the research objectives and research questions will help in pinpointing the exact secondary resources from where data will be collected (Keller, 2005). Reference List Accenture Consulting Group, 2005. China spreads its wings: Chinese companies go global. [online] Available at: http://www.accenture.com/us-en/Pages/insight-china-spreads-wings-chinese-companies-go-global-summary.aspx [Accessed 22 March 2014]. Anand B. and Khanna, T., 2000. Do firms learn to create value? The case of alliances. 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