Environmental Analysis of Huawei Technologies - Lab Report Example

? Environmental Analysis of Huawei Technologies Table of Contents Executive Summary 3 Background 5 Introduction 5 Environmental Analysis 8 Conclusion 14 Bibliography 16 Executive Summary This report discusses in detail that what opportunities and threats will be met by Huawei Technologies when the company will be extending its operations to India, the Asian Tiger. Hence the environmental analysis is carried out so that the viability of the business opportunity can be assessed , with a final conclusion advising the organization of whether it should expand its operations to India , or not, taking in to account the business economic, political and legal, social and cultural, contemporary and the technological environments. Talking about the entity at the same time, Huawei Technologies is a Chinese company which provides one of the leading next generation telecommunications networks services. In terms of networking and telecommunications equipment supplies, it is the largest organization in the People Republic of China. Located in the Longgang District, in Shenzhen, the product range of the Huawei Technologies varies from solutions which revolve around the wireless products , the core network products and applications along with the software. Based on the design of the ASIC chipset , most of the company’s products are designed in the similar way and it makes an efficient use of the shared platforms so that not only quality products are provided to the customers but at the same time, the organization can achieve cost effective manufacturing methods as well. It is firm which operates on the private high tech basis and it has expertise in the research and development along with the manufacture of the communications equipments and the telecom clients that it has are given the customized network solutions as well. The global research and development center of the company is situated in Silicon Valley as well as Dallas , Stockholm, Moscow and Bangalore. The company has the long term aim of not only manufacturing but also providing the clients with the innovative and the customized products and services so that customers can obtain long term benefits, value from these goods and services and at the same time ensure the potential of growth for the customers as well. Background The report has been designed and written in order to conduct an environmental analysis for Huawei Technologies which is intending or looking in to the option of entering the foreign market, namely India. The environmental analysis will provide with an in depth analysis of how the company which intends to enter a new market will be affected by the internal as well as the external forces. For the past many years , the organizations have been quite about the external forces which influence or affect the organization’s operations. The environmental analysis is an in depth studies of what are the process which are beyond the entity’s controls and how will those processes affect the operations of an entity. There are variety of methods which are applied when the environmental analysis of an organization is carried out, especially the Porter’s five forces and the pest analysis. The combination of such factors helps in a greater and better understanding of where the organization stands with relevance to the external forces. The importance of the environmental analysis is immense because the organization can prepare itself adequately so that it can remove the threat of being swept away from the market. Hence the organization’s design a strategic plan which plays an important role in a way it is prepared in line with the external factors which will be affecting the operations of the organization as a whole. Introduction Introducing Huawei Technologies, it is known in the market as Huawei Technologies Co., Ltd. And is a Chinese company which provides one of the leading next generation telecommunications networks services. In terms of networking and telecommunications equipment supplies, it is the largest organization in the People Republic of China. Located in the Longgang District, in Shenzhen, the product range of the Huawei Technologies varies from solutions which revolve around the wireless products, the core network products and applications along with the software. Based on the design of the ASIC chipset , most of the company’s products are designed in the similar way and it makes an efficient use of the shared platforms so that not only quality products are provided to the customers but at the same time, the organization can achieve cost effective manufacturing methods as well. It is firm which operates on the private high tech basis and it has expertise in the research and development along with the manufacture of the communications equipments and the telecom clients that it has are given the customized network solutions as well. The global research and development center of the company is situated in Silicon Valley as well as Dallas , Stockholm, Moscow and Bangalore. The company has the long term aim of not only manufacturing but also providing the clients with the innovative and the customized products and services so that customers can obtain long term benefits, value from these goods and services and at the same time ensure the potential of growth for the customers as well. Huawei Technologies is China’s largest manufacturer of telecommunication equipments; it engages in production of diverse range of products and services including traditional telecom operations such as radio access, core network, fixed access and other systems. Huawei Technologies offers services in the field of end-to-end delivery, network integration and consulting. Company also provides latest services related to the cloud computing. Thus, Huawei Technologies has large portfolio in terms of services. Huawei Technologies makes mobile devices such as IDEOS-branded smart phone and tablets. Hyawei Technologies is multinational company with offices in more than 140 countries around the world. Hyuwei Technologies is employee owned company (Huawei Technologies Co., Ltd: Company profile 2012). In 2009, Huawei Technologies was awarded the rank of number 2 telecome equipment provider in the world beating Lacatel-Lucent and Nokia Siemens; in recent years, it has won prestigious contracts against the rivals such as Ericsson and Nokia Siemens (Lee 2012). The country which has been selected for the environmental analysis in India, (taken under a hypothetical situation) which is known as the Asian Tiger. The telecommunication growth in the country is rising exponentially and can provide as a market full of opportunities to the Huawei Technologies. Telecommunication sector is just another success story which has been associated with India where everyday the industry is reporting strong and confident figures with the stead increase in the subscribers as well. Thanks to the wireless revolution , that this strong change and growth in the industry has been reported. According to the report of the telecommunication industry survey carried out in India by Ernst & Young , the sector adds 9million subscribers every month. In the year 2010, the same report by Ernst & Young reported that the telecommunications sector in the country has contributed a lot to the gross domestic product of the country as well, rounding it off to an estimation of 3.6%. ‘In the last many years , initiatives such as the operating costs and hiving off the infrastructure elements such as the towers in to separate entities , thus inviting specific investment. Passive infrastructure sharing has benefited the Indian mobile industry and its customers , reducing the cost burden of each operator and speeding the rollout of the mobile devices.’ (Unveiling India 2012 : Telecom growth continues) ‘In 2012 the total telecom penetration is expected to reach 58% to 60%. Approximately 40% of the rural users are estimated to own a phone. ‘ (Unveiling India 2012 : Telecom growth continues). There is no denying in the fact that India is a land of resources and opportunities and with the growth that the country has been experiencing in the past many years is a proof in itself that any international country which aims in entering the market will benefit a lot of this expedition. However at the same time, it exposes these foreign companies to various external factors which can affect the overall operations of the company. How Huawei will be affected with its decision to enter India, will be evaluated in this report in which the environmental analysis will be carried out. Environmental Analysis Diverting the discussion towards the environmental analysis of the expanding the company’s operations to India, we will start off by discussing the economic environment of India which consists of all the indicators such as the inflation, gross domestic product, growth rate etc. Taking a look at the economic environment of India , it is categorized as the eleventh largest country of the world in terms of the nominal gross domestic product and in terms of the purchasing parity, it is ranked as the third largest country. It is lower middle income economy where a number of foreign countries have invested in to and taking advantage of the availability of the cheap labour and cheap resources, and is recording sky high growth rates, being of the fastest growing economies of the world. With the projected growth rate of 7%. The purchasing power parity in India is so stable that it makes the country the third largest economy, and hence a is preferred country for the Foreign Direct Investment. The markets of the telecommunications as well as the automobiles components and the apparels, chemical etc has been very successful in the country and they are still growing at an increasing rate that the foreign investors have been attracted to the growth opportunities that have been offered by the country. Although the foreign investors see the potential held by the country but the strong foreign investment government policies act like a barrier since they are so rigid. But the government has now worked on introducing the positive economic reforms which have the objective of deregulation of the economy as well as giving a push to the foreign direct investment at the same time. India has a very secure position in the foreign direct investment and this particularly is important because India’s labour force does not only consist of the large proportion of the skilled personnel but they have sufficient technical expertise as well. With the middle class population of about 300million, India is definitely a country whose consumer market is growing, therefore Huawei may have a lot of opportunities waiting its way in India. Therefore the economic factors which can possibly affect the operations of Huawei Technologies in India includes that of the inflation rate, the gross domestic product, purchasing power parity and many other economic indicators, but a positive direction in the foreign direct investment depicts that the Indian government has its doors opened for the international companies who wish to expand their operations to the Indian borders. The business economic environment is very important and an organization would want to work in a country whose economy is not only offering the high probability of the returns but growth at the same time. Huawei Technologies, is therefore no exception , which would want to favour any economy which is growing and is offering the best of the returns as well. The level of investment in the economy is an important factor where the supply stream and the raw material costs should be cost effective, which are all what India offers. Moreover, in today’s energy crisis world, it is also very important that the country is abundant in the energy supplies and has a positive trend in the rate of unemployment, borrowing structures, rate of inflation etc. The positive trends in these factors ensure that the economic environment of the country has been established and therefore Huawei has a golden opportunity of simply expanding its operations to India. Secondly, taking a look at the political, legal and regulatory environment where it has been verified that obtaining a business license in India is very difficult and therefore all businesses have to adhere to the federal as well as the state level regulations which are prevalent in the country. The national regulatory environment has some very strict policies towards the whole process off operating an starting a new business in India. The government expenditure are high and as per the recorded figures of 2009, the government spending was equal to 16.3 % of the total gross domestic product receiving 14.3 % of the total generated revenue from the state owned enterprises, which shows that the role played by the Indian government whose ownership is very high. (Assessing the Political-Legal Environment of the Indian Market Place - Yahoo! Voices - voices.yahoo.com) India weighted average tariff rests somewhere in 14.4 % and the non tariff barriers exist in the country which includes the restrictive licensing requirements, and the import taxes, goods certifications and etc. Plus India is very stringent when it comes to the taxes polices and India’s income taxes and corporate taxes are high, with other types of taxes also imposed such as the a dividend tax, a property tax, and a tax on insurance contracts. Tax revenue generated by India is somewhere around 10.2%. (Assessing the Political-Legal Environment of the Indian Market Place - Yahoo! Voices - voices.yahoo.com) The foreign investment is controlled by Indian government and the interested companies have ti obtain the mandatory government approvals as well as there are limits on equity and voting rights as well. The rules are high complicated on the foreign direct investment and there are even some sectors where the where the prohibition is even imposed. There were some changes made by the Indian government which gave rules in the year 2005 imposing and maintain the restrictions on the joint ventures and permit new ones so that new terms on commercial basis can be taken in to account and can be communicated as well. For those residents who wish to open the accounts i the foreign currency need to get the approval from the federal and the state bank which has ample restrictions imposed at the same time as well. ‘Non-residents may hold conditional foreign exchange and domestic currency accounts. Capital transactions and some credit operations are subject to certain restrictions and requirements.’ (Assessing the Political-Legal Environment of the Indian Market Place - Yahoo! Voices - voices.yahoo.com) There are significant number of the political legislations which may as a result affect the operations of the Huawei technologies and therefore as a multinational company, the entity has to adhere to these regulations and the legislations which have been introduced at a federal and state level. The entity all has to ensure that the strategy has been looked in to with full consideration of the government legislations. For Huawei , the political environment shows a good chance of growth and all possible measures will be taken by the government to ensure that the right environment for the entity is being provided. Therefore it can be concluded that the stringent government regulations and non tariff trade barriers may hamper the operations expansions of any company in India and may affect its venture in the Indian market place as well. There has been ample proof which strongly suggests that the government is very strict and overbearing with the international companies and they impose some strict criterion on the company making it very difficult for them to qualify for expanding its operations to India. Indian government is known for its high involvement in the corporations which operate in the country. Indian Government has not so far declared any friendly policies towards the multi national companies and therefore Huawei will face of stringent policies by the national government, but since India is country which offers abundant consumer goods in the global market, therefore the opportunities for the companies open themselves in the country. Therefore Huawei has to be very careful and treat the expansion opportunity of expanding its operations to India. Interms of the social and the cultural environment, India is a highly diverse country which offers a mix and blend of various religious cultures, societies. In the life of many, the religious values play a very important role and the mix of cultures is widely accepted in the Indian society. The social settings of a country will also affect the influences it has on the operations of an organization. In this area, the entity has to observe the distribution of wealth, mobility in terms of social factors, the education and schooling available in the country, trends of lifestyle, time usage and leisure, work attitudes, family and relationships, fashion, tastes, preferences, interests in development, religious tastes, cultural aspects, values and norms to know the consumer behaviour of a particular country. When the external environment of a country is analyzed, the external strategic trend play a very vital role. Since the India society consists of highly potential social environment, this means that the growth rate can be facilitated. Despite the highly powerful economic country, the living standards in India are very low, and many of the manufactured goods are sent to global markets where the local can not take advantage of these commodities. This may be an opportunity or not an opportunity for Huawei. The technology environment in India is experiencing a high return and the IT sector is experiencing growth rate of approximately 35% where the Indian government is providing tax exemptions and subsidies to the organizations which are expanding in India. India is ranked after China making use of internet at large scale for e-commerce , e-education and e-accounting . Now there are a number of factors which are linked with the technological factor and most importantly the innovation rates coupled with the development time and the technological investments are all very important which are significantly seen in India . Furthermore, the incentives which are provided by the government at a federal level are also very important which can be availed by the developers of the technological products. Moreover the technology adoption in the country is equally important as well where the factor imposes a profound affect on the growth of the organization. The government is required to support the entities which are making moves towards he technological advancement and making direct investments in the technology. Since Huawei is a technological multinational company, and technology is the very basic foundation of its existence in the market. Therefore the growth of technology taking place in India can have a positive affect on the growth of Huawei in India. Some serious steps can be taken by the Indian government to ensure that the level of technology is transformed in India with the emergence of Huawei. When we take a look at the external forces such as competition, there is no denying in the fact that India is a highly competitive country where Huawei will be faced with the local as well as the foreign competition, especially from known companies such as Cisco, Ericsson, Nokia Siemens etc. The dire need for Huawei to be competitive will arise when the operations will be expanded and since these companies will be engaged in intense competition, each will have to play an important role in keeping or maintaining the position as the market leader. Entry threat and availability of the substitutes will also impose the barriers for Huawei for entering an international market. ‘Numerous challenged Cisco but none was threatening enough until the rise of Huawei.’ (PENG, M. W. (2006). Global strategy. Australia, Thomson/South-Western.) India can prove to be a very important market for the software development sources for Huawei and since it is the market leader when it comes to the customized telecom solutions , therefore it is believed that the global leader can provide the Indian consumer with the variety of the value added solutions. Conclusion Huawei can play an important role by applying its global values to India as well since the Indian growth in the telecom industry is exponential. The economy of India seems very stable as well as is reporting stables economic indicators which depict that the country is not only growing but most importantly, reporting the highest foreign direct investments at the same time as well. However on the other hand, intense competition coupled with the stringent policies of the Indian government and the availability of the local and international competitors, substitutes, barriers to entry and other such factors can pose a huge question over the success of Huawei’s venture in to the Indian market. . ‘ A few private sector firms such as Huawei in telecom are also significant patentees. Although MNCs have been very active in China since 1992, they did not participate in China’s innovative system until the beginning of 2000s.’ (REDDY, P. (2011). Global innovation in emerging economies. New York, Routledge.) Bibliography PENG, M. W. 2006 Global strategy. Australia, Thomson/South-Western. Assessing the Political-Legal Environment of the Indian Market Place - Yahoo! Voices - voices.yahoo.com Ernst & Young , 2008 Unveiling India 2012 : Telecom growth continues REDDY, P. (2011). Global innovation in emerging economies. New York, Routledge. Read More