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425ECONOMIC SCIENCES
STRATEGIC ANALYSIS OF HUAWEI IN RUSSIA: SWOT AND PEST ANALYSIS
Grigan N.
Master's degree student Shanghai University, SILC Business School
Abstract
Founded in 1987, Huawei is a leading global provider of information and communications technology infrastructure and smart devices. [1] The company is ready to offer the Russian market a unique technological experience, joint development of hardware and software solutions with Russian suppliers, as well as the organization of joint ventures in Russia. The article presents the results of SWOT and PEST analyzes of the company in the Russian market and offers recommendations for improving the company's work.
Keywords: strategic management, strategic analysis, PEST analysis, SWOT analysis
In today's tough competitive market conditions, characterized by increased competition between market participants, with a high dynamism of changing situations in the market, organizations should not only focus their attention on the state of their internal environment, but also should form a long-term strategy of behavior that would allow them to react to all changes in the internal and external environment of the organization in a timely manner. At the same time, the acceleration of organizational changes, the emergence of new requirements on the part of the consumer and a change in consumer's position, an increase in competition in the field of resource provision, internationalization and business enlargement, the emergence of new, often completely unexpected opportunities for business development, the development of information networks that allow to optimize information flows, wide openness of modern technologies, an increase in the role of human resources, as well as a number of other significant factors have led to a sharp increase in the importance of strategic management and strategic planning in the activities of organizations of various profiles.
One of the most important aspects of developing an organization's development strategy is strategic analysis. As known, strategic analysis is a way of researching and transforming a database obtained as a result of analyzing the external and internal environments of an organization into its strategy. The strategic analysis process uses various tools to analyze the external environment, understand what is happening around the organization, predict what may happen in the future, and adapt the organization's business to this expected situation. These tools help managers of the organization to systematically analyze the external and internal environment and form an appropriate response to possible changes. These tools are collective and help managers create a common understanding of what is happening as well as of the elements that constitute the current situation. Some of the tools used in business are SWOT, PEST, value chain, vision, mission, BCG matrix, comparative analysis, balanced scorecard, etc. [2]
Modern companies invest a large number of different resources (time, money, human and intellectual capital) in the development and further implementation of various strategic tools. Studies reflecting the use of
strategic analysis tools in various business organizations have shown that managers prefer to use tools that are flexible, easy to learn and use, well tested and proven [3]. Moreover, modern tools and methods of strategic management make it possible to make managers more successful in the digital age. It is shown in [4] that Chinese managers in their work prefer to use such strategic analysis tools as: PEST - analysis (share of use - 59%), SWOT - analysis (58%), brainstorming (57%) and life cycle analysis (51%). The study convincingly confirmed that managers in China prefer to use strategic tools for company development and innovation.
With this in mind, we will conduct a strategic analysis of the Chinese high-tech company Huawei in the Russian market, using the two most commonly used strategic tools: SWOT analysis and PEST analysis.
PEST - analysis is used to study the business environment of a company and is aimed at a comprehensive assessment of external factors that can significantly affect the activities of the company in question.
Political factors
The determining factor in PEST analysis is the degree to which the policy affects the business of the organization. The political stability of the country in which the organization operates, as well as the various existing commercial restrictions affecting its activities, are also imperative factors that can influence the success or failure of a business. Political factors play a huge role in investment decisions and affect not only the cost of doing business, but also long-term sustaina-bility. There is a wide range of different political factors that affect information technology companies. The political factors affecting Huawei's operations in Russia are as follows:
1. Huawei is a Chinese brand successfully promoted in the Russian market.
Huawei is a leading Chinese brand that is mainly produced in China but sold all over the world, including Russia. The company has secured rapid growth in the domestic and global markets by focusing on a strategy of quality and competitive prices. Its main areas of work are telecommunication networks, information technology, smart devices and cloud services. Since its appearance in Russia in 1997, the company has been constantly expanding the range of products offered to
Russian consumers. The company manufactures and sells a wide range of products: smartphones, laptops, tablets, headphones, smart watches, speakers, routers and other goods. The Huawei brand is well known and recognized in Russia. In 2020, the Huawei brand was the leader in smartphone sales in Russia. Huawei P40 has been named the best smartphone of 2020. Last year, the Chinese company Huawei officially unveiled its own Harmony 2.0 operating system for smartphones. The operating system will ensure the interaction and collaboration of various devices at home, in the office, in the car, while playing sports, during leisure and entertainment.
2. Huawei has good support from the political system and the Chinese government.
In China, the government is actively involved in business, issuing various regulations and applying various incentives. In particular, the Chinese government supports the telecommunications sector by providing good training for engineering students in this field of production, which increases the competitiveness of the engineering staff working in this sector and makes it highly competitive. In addition, the Chinese government provides various loans and incentives to promote local manufacturers, giving these local companies significant advantages over their foreign counterparts. At the same time, the Chinese government strictly observes all the rules and regulations of the World Trade Organization, consistently participating both in the development of a policy for interaction with the organization and in its implementation. The country has a good track record of complying with international treaties concluded with various global international partners, and there is consistency in both the rule of law and the rules of interaction.
Huawei has greatly benefited from the protectionist policies of the Chinese government. The head of Huawei, along with the heads of other high-tech companies, advises the government on international business policy. [5] This gives companies an enviable opportunity to influence regional political factors, which, in turn, influence their business to a certain extent. However, while political factors bring significant benefits to Huawei in its domestic market, the company is usually negatively influenced by political factors outside of China, including in Russia.
3. Huawei has been involved in a trade war between the United States and China. Moreover, the tension between the United States and the European Union, on the one hand, and China, on the other, is only growing.
In May 2019, Washington included Huawei in the sanctions lists in connection with the "threat to national security." America accuses the Chinese company of industrial espionage and technology theft. The arrest of Huawei's CFO in Canada has shown that political factors cannot be overlooked in the context of international business. Moreover, the President of the United States ruled out the return of Huawei to the American market. Americans are barred from investing in blacklisted companies because Washington suspects them of links to the Chinese military-industrial complex. American investors are required to dispose of the assets of these
companies by November 11, 2021. Therefore, Huawei plans to close an existing R&D center in the United States and open a similar center in Russia. The company is going to invest in R&D, that is, in research and development, in Russia, significant funds. Similar research centers are already operating in Moscow, St. Petersburg, Nizhny Novgorod, Novosibirsk and Minsk. Now they employ about 900 people, but there are plans for their significant expansion. Until 2024, the company intends to hire 1,000 more people to work on Russian territory. According to various forecasts, by 2025 investments in new-generation networks in Russia and the CIS may amount to $ 30 billion, and if the Chinese company intensifies its work on the market, its share in projects, especially in the EAEU countries, may reach 20-25% [6] ... It is planned that Huawei will create a joint venture in Russia. Moreover, Europe joined the US sanctions, to the detriment of its economic goals. Therefore, Xiaomi decided to work more actively in the Russian market [8].
Economic factors (Economic)
Economic factors have a significant impact on the profitability and overall attractiveness of the market or industry in which a company operates. When assessing economic factors, it is necessary to take into account the inflation rate, GDP growth rate, the level of disposable income, etc.
Huawei operates in the field of information and communication technology. Since the company was founded in 1987, Huawei's products and services have spread across 170 countries. Currently, the company employs about 180,000 people. Huawei has total annual sales of approximately US $ 39 billion. Huawei currently operates in industries such as big data processing and storage, cloud computing, software-defined networking, and the Internet of Things. At the same time, 64% of Huawei employees are shareholders of the company.
1. Increasing competition from other international companies operating in the Russian market.
Competition is intensifying due to the development of industry standards, the rapid adoption of technology and scientific advances in competing products, short product life cycles and consumer price sensitivity. In doing so, companies must compete in factors that include product price, features, relative price and performance, quality and reliability of products and services, design innovation, third-party accessories and software ecosystem, distribution and marketing opportunities, and corporate reputation [9 ]. The leader of the Russian market at the end of 2019, Huawei, temporarily left the Russian smartphone market. Imports of smartphones under the brands Huawei and Honor fell from 3 million units (in Q1 2020) to 264 thousand units in the first quarter of 2021. At the same time, three leaders (Samsung, Xiaomi and Apple) imported 6.1 million units. Due to Huawei's problems, the share of Chinese brands in the smartphone segments with the price starting from 8,000 rubles has so far fallen to 45%, a year ago it used to reach 55%. If we consider all smartphones (with the price starting from 3,000 rubles), then the share of Chinese brands fell even more - from 56% to 44%, since Huawei controlled the low-budget segment. The trade
war between the United States and China has so far changed only the alignment among the market leaders, and the pandemic and its consequences have sharply increased the demand for advanced smartphones and significantly reduced the market for cheap devices.
2. Decreasing purchasing power of Russian consumers and rising unemployment in Russia.
The purchasing power of the population is often considered as one of the indicators of the well-being of the country as a whole, since it depends on many factors. It is influenced by wages, the development of the economy, and the standard of living of citizens in general. Given the economic crisis that is developing due to instability in the oil market, as well as due to the coronavirus pandemic, it is quite difficult to give any positive forecast data today. And, naturally, this has the most negative effect on the purchasing power of the citizens of the country [9]. Also, due to the pandemic, the protracted economic crisis and the increase in the retirement age, there is a noticeable increase in the number of unemployed in Russia. The Ministry of Labor assumes that in 2021 the number of officially registered persons without employment will be about 5.4%. All this, ultimately, can lead to an increase in demand for the company's products, which are distinguished by relatively low prices and high-quality goods.
3. China's new labor law policy and rising labor costs.
The data shows that sales of Huawei smartphones have grown strongly in recent years. Thus, the share of the company's products in the global smartphone market in 2020 was 17%, an increase of 3% compared to the previous year. However, the Chinese government is introducing new OSH laws that are driving up labor costs. By strictly adhering to the introduced laws, Huawei is forced to increase the salaries of its employees. And this leads to additional costs for the company and will affect its net profit.
4. Restrained growth of the world economy and noticeable fluctuations in the world financial system.
The state of the world economy significantly affects the economic factors taken into account in the PEST analysis. So, analysts at the World Bank have improved the forecast for global economic growth for 2021 by 1.5%, to 5.6%. This will prove to be a record rise in the past 80 years. At the same time, the organization notes that many developing countries continue to be in a difficult situation, trying to cope with the coronavirus pandemic. By the end of 2022, the World Bank expects the world economy to grow at 4.3%. This is 0.5% higher than the January forecast. At the same time, it is specified that such indicators can be achieved only if the large-scale use of vaccines against corona-virus begins in the world. Moreover, this application should continue throughout the year. Economic growth in Russia is recovering after a fall in 2020. Its specific parameters depend on the likelihood of repeating last year's restrictions, the speed of vaccination in Russia and in the world, on the possibility of removing the most acute contradictions with the threat of being followed by sanctions (when it comes to relations with the United States and the European Union).
The global financial system is also not constant, it is changing and actively developing. This is facilitated by the change in the conditions of economy, changes in the principles of the world economy are also important. Financial globalization contributes to the integration of states into the world financial system. It allows to remove barriers between internal and external markets, makes it possible to establish multiple convenient connections between them [8].
Social factors (Social)
Social factors such as demographic trends, the structure of power in society, women's participation in the labor force, etc., have a huge impact not only on the country's economy, but also on the availability of human resources and the level of consumer demand. For Huawei, these social determinants will be:
1. In Russia, there is an increase in the number of consumers purchasing and using smartphones of various classes for their needs [9].
Russia in terms of population (146.17 million people) ranks 9th in the world as of January 1, 2021. Russian consumers have a large purchasing power in the world of mobile phones, which are an affordable commodity for the Russian population. And, although there are various obstacles in terms of social development (for example, lower incomes of the population, unemployment, social inequality, inaccessibility of Internet services), there is a steady increase in smartphone users in Russia. So, in 2020, their number was 106.23 million. Experts predict an increase in the number of smartphone users in Russia to 114.61 million people in 2025 [10]. The ease of use of smartphones and their ability to make life much easier for consumers are driving an increase in the number of smartphone users. This increases the size of the smartphone market in Russia and has a positive impact on Huawei's operations in Russia.
2. Unlike consumers from Western countries, Russian buyers do not consider Chinese goods to be inadequate to quality criteria and standards.
The current state of affairs in the company justifiably refutes the opinion prevailing in Western countries that a product labeled "Made in China" might not meet quality standards and criteria. Huawei manufactures its products from high-quality components, choosing leading manufacturers as partners, with whom it forges strategic partnerships to ensure stability of supply. This allows us to guarantee the volume and availability of components, as well as to avoid a shortage of necessary materials. Huawei's own production facility in China is built to the latest standards and guarantees perfect build quality. The company is certified by several independent third-party organizations and has received ISO 9001 (quality management), TL 9000 (ICT industry quality management) certifications, etc. Another quality that distinguishes Huawei products should be noted. The company has been supporting its products for a long time, releasing the necessary updates for it.
3. The need to take into account the socio-cultural characteristics of the sales region when forming the marketing strategy of the company.
To ensure effective communication with Russian consumers, a company needs to study and integrate into
its marketing strategy the socio-cultural trends of a particular region in which sales of its products are carried out or are planned. It should be borne in mind that the growing diversity of markets, including the labor market, represents one of the most important socio-cultural trends that influence modern marketing. When integrating the socio-cultural trends of the region into the marketing strategy, it is necessary to carry out a social and cultural analysis of local conditions, which must necessarily be based on the results of marketing research on various aspects of socio-cultural activities: drawing up short-term and medium-term forecasts of changes in the socio-cultural situation in the region; clarification of trends in the preferences of consumers of social and cultural services; analysis of competitors' activities; study of market conditions, potential and qualifications of personnel, etc.
Technological factors
Technology is rapidly changing business models across industries. Among the technological trends affecting the company's macro environment, it is worth highlighting: developments in the field of artificial intelligence, the use of machine learning and big data analytics to predict consumer behavior, the growing importance of platforms compared to service providers, etc. [11] Technological changes taking place in a company are driven by innovations, which, in turn, are developed by entrepreneurs who strive to go beyond existing constraints. Once new frontiers are broken, technologies become obsolete and competitive advantages are lost. From a business perspective, technology can be used to gain a competitive advantage through a variety of factors. Benefits may include cheaper manufacturing, efficient customer access, improved branding, product quality, and higher levels of business intelligence [12]. According to the latest report from the Boston Consulting Group (BCG), Huawei is ranked 6th among the most innovative companies on the planet.
1. The spread of 5G technology.
5G networks are networks with ultra-high bandwidth, ultra-low latency and support for mass user access. 5G technology provides the highest quality communications for consumers, accelerates the implementation of digital and intelligent programs in various industries and contributes to the further development of society and economy.
Huawei is the leading brand for 5G services, and as such, the company's smartphone industry will profit from worldwide sales. Huawei has an edge over other companies in the development of the 5G modem. This puts Huawei in a unique position among tech giants such as Apple, iPhone and Samsung. It also means that Huawei will sell technology to other competing companies, which will generate more profits. Huawei has partnered with several other firms to improve the 5G network to combat fierce competition in the tech-savvy smartphone market. The company, along with telecom operators and industry partners from around the world, has completed over 300 projects across 20 different industries to explore 5G applications.
2. Artificial intelligence is one of the fastest growing industries.
Digital transformation and the widespread use of artificial intelligence have become the main engines of global progress. New technologies are being used in ultra-high-definition live broadcasting, distance learning, smart tourism, smart classrooms and other immersive applications, helping to transcend the boundaries of time and space. Huawei's AI strategy is to invest in fundamental research and talent development, build a complete AI portfolio for all scenarios, and develop an open global ecosystem. [13] The result is innovative solutions that help improve Huawei's profitability by creating a fully connected and intelligent world.
3. Transition to digital transformation due to the Internet of Things.
The Internet of Things is the interaction of various devices, objects and systems with each other using communication technologies for the exchange of information, its processing and analysis. The Internet of Things allows us to: reduce operating costs; improve the level of customer service; receive additional income by expanding the portfolio of services; optimize the logistics supply chain; ensure the safety of production, employees, facilities. The global 5G IoT market is expected to grow from $ 305M in 2020 to $ 6139M by 2025, with the average annual growth rate of approximately 54.3% from 2021 to 2025. It is believed that in the long term, the global 5G IoT market will gain recognition for its benefits and various applications.
The results of the PEST analysis are shown in Fig.
1.
After analyzing the external environment of Huawei in the Russian market, it is possible to detail the results of the PEST analysis and supplement them with an analysis of the internal environment during the SWOT analysis. It allows to assess the internal environment of the company, its strengths (S) and weaknesses (W). The SWOT analysis also assesses the company's external environment, its market opportunities (O) and threats from the external environment (T). Let's characterize the main factors studied in the course of the SWOT analysis.
Company Strengths
1. Huawei has a leading position in R&D and has built a strong intellectual property bank.
Many of Huawei's accomplishments stem from its research and innovation activities. The company invests 10% of its annual income in research and development every year. In recent years, these investments have exceeded 14%. It is through long-term investment in R&D that the company is at the forefront of many technology areas and retains customer confidence despite significant external pressure. Huawei conducts technology research and development in many areas, such as wireless networking, the company continues to lead 5G innovation by continually improving technology, improving network performance and improving customer experience. In the field of core networks, Huawei has developed real-time video quality enhancement technologies and achieved a major competitive advantage in technology. The company is also investing heavily in artificial intelligence technology and is seeing rapid growth there.
Huawei
Political
Huawei is a Chinese brand successfully promoted in the Russian market Huawei has good support from the political system and the Chinese government Huawei has been involved in a trade war between the United States and China. Moreover, the tension between the United States and the European Union, on the one hand, and China, on the other, is only growing.
Economic
Increasing competition from other international companies operating in the Russian market
Declining purchasing power of Russian consumers and rising unemployment in Russia China's New Labor Law Policy and Rising Labor Costs
Restrained growth of the world economy and noticeable fluctuations in the global financial system
P E
T S
Technological
The spread of 5G technology Artificial intelligence is one of the fastest growing industries
Digital transformation with the Internet of Things
Social
In Russia, there is an increase in the number of consumers purchasing and using smartphones of various classes for their needs.
Unlike consumers from Western countries, Russian buyers do not consider Chinese goods to be inadequate to quality criteria and standards.
The need to take into account the socio-cultural characteristics of the sales region when forming the company's marketing strategy
Fig. 1. PEST analysis by Huawei
Huawei recently announced it is moving from an Innovation 1.0 model to an Innovation 2.0 model. While the first model focuses on using innovative ideas to meet customer needs, the Innovation 2.0 model involves discoveries in fundamental theory and the development of new underlying technologies. At the same time, it is customary in the company to divide innovations into three types: applied innovations, product innovations, and fundamental technological innovations [1]. Huawei's significant innovation efforts are widely recognized and reflected in a number of awards, such as the prestigious Telecommunications Innovation and Internet of Things Leadership awards, which the company won in Singapore in 2018. Huawei pays great attention to long-term investment in R&D and is constantly expanding its portfolio of intellectual property rights. The company is one of the largest patent holders
in the world, claiming that respecting and protecting intellectual property rights is at the core of innovation.
2. The company has adopted and is implementing an effective and influential marketing strategy.
Since the establishment of the company, Huawei's marketing philosophy has been centered around customer needs. In international marketing, Huawei employs a scientific marketing concept that brings customers closer together and enables them to provide more detailed service. Huawei has adopted a differentiation strategy for itself and has formulated appropriate marketing strategies that take into account the economic development levels of the country and region in which it does business. In addition, business companies and sustainable development are organically integrated in order to comprehensively contribute to the harmoni-
ous and healthy development of the economy, environment and society. [15]. It should be borne in mind that successes in the implementation of the company's innovative strategy have led to significant success in the implementation of the marketing strategy. In other words, Huawei is becoming a globally renowned and influential brand known as a reliable, innovative and customer-focused telecommunications service provider. With the exception of the US market, Huawei quickly gained a large share of the international market and achieved great success in other regions of the world. [15] In particular, the company is now the second largest manufacturer and distributor of mobile phones in the world, right after Samsung, with a market share of up to 20 percent. World renowned business magazine Forbes named Huawei as one of the 100 most valuable brands in the world, worth $ 8 billion. (Forbes Media LLC, 2019).
Formulating the company's marketing strategy in Russia, the President of Huawei in Eurasia noted that the strategy should be based on five main components - T (Technology - general technologies), I (Industry -general industries), G (Growth - general growth), E (Ecosystem - common ecosystem) and R (Reliability). In the next five years, Huawei will provide increased support to Russia. The company plans to train more than 130,000 Russian personnel in the field of digital technologies and will allocate more than $ 1 billion for local procurement, research and development, and the creation of ecosystems for the development of the "Digital Community".
3. Huawei manufactures and markets a wide range of high-quality goods and services.
One of the strengths of the brand is its significant product portfolio. Huawei is the fastest growing company in a wide range of smartphones. Huawei is one of the top three smartphone brands and the top 2 in the international smartphone market. The number of smartphone shipments is increasing every year. As the brand sells more products every year, this translates into higher margins. Huawei has already covered over 170 countries and regions in a relatively short period of time and serves over 3 billion people worldwide. It is the world's leading provider of ICT infrastructure and smart devices. In addition to smartphones, the company makes various other products such as mobile and fixed broadband, tablet computers, multimedia technologies, dongles, Harmony OS and Smart TV, smart homes, cloud computing, web security and mobile device management (Huawei Technologies Co., Ltd, 2021). All products and services of the company are intended for both enterprises and individual users. Huawei's entire business is divided into three segments: corporate business, consumer and carrier.
Over the years, Huawei has invested in building a strong brand portfolio. This portfolio of brands can be extremely useful if an organization wants to expand into new product categories. The low price of Huawei products does not mean that the company has made a compromise on quality. The brand produces quality products and offers them to its customers. Although, subject to US sanctions, the company cannot compete with brands such as Samsung, Apple and Google; but
Huawei provides quality products to its customers.
4. The company's products are distinguished by a good combination of high quality and affordable prices.
It is known that one of the strengths of Huawei is its extremely competitive price. Previously, the smartphone market was dominated by luxury brands such as Samsung and Apple. Companies with cheaper alternatives found it difficult to compete with them. However, over the past 10 years, the popularity of smartphones has skyrocketed, leading to a huge demand for low-cost devices. And while Huawei is not the cheapest smartphone manufacturer on the market, it is significantly cheaper than the luxury competitors mentioned above. The main reason for Huawei's popularity is that the company offers a quality product at low and affordable prices. This is why the brand has gained a large share of the international market in a short time. The main goal of the company is to target middle- and lower-income customers by offering them economical prices.
5. Huawei is the world leader in networking equipment and has a leading position in the smartphone market.
China is the world leader in 5G technology and is encouraging equipment developers, cellular operators, industry and the public to move to a new, more efficient communication standard. At the same time, Huawei is the world leader in the supply of equipment for 5G base stations and the only equipment supplier offering solutions for all stages of 5G network deployment: from planning and construction to maintenance, in accordance with the tasks and needs of the client. Western companies are significantly behind in terms of technology and equipment characteristics in terms of price / quality ratio. That is why, for a long time, the US has been pursuing a serious policy against Huawei. Indeed, in the first quarter of 2021 alone, the number of 5G subscribers grew by 70 million and reached 290 million. By the end of the year, analysts expect 580 million people to connect to the new generation networks. To ensure the efficient operation of the created network equipment, Huawei develops innovative software for wireless networks from scratch, from conceptualization to algorithm verification and commercial implementation. Moreover, for this, the company attracts experts from various fields and mathematicians from all over the world. In addition, Huawei offers telecom operators solutions for comprehensive automatic energy management to reduce energy consumption and increase efficient operating time. However, improved hardware and software are increasing the complexity of operating and maintaining a mobile network. In this case, in order to optimally address the problem of rising operating costs in 5G networks, the company offers options for implementing artificial intelligence for autonomous operation and maintenance.
Huawei products are very popular all over the world. In particular, smartphones have gained worldwide fame. The company offers phones of both high and budget class. Its Mate 20 Pro is one of the best smartphones in the world with a beautiful design, great screen and fast performance. Huawei holds 14.6% of the global smartphone market, making it the second
largest giant after Samsung (IDC, 2021).
6. Huawei is a customer-oriented company owned by employees.
High quality service and great attention to the needs of the client contribute to an increase in the number of consumers and, subsequently, the company's income. A customer-oriented business is designed for the long term and brings the owner a stable income. When creating a company, it is necessary to make a choice, whether it will simply make money quickly or we want to create a business system that will exist and develop for a long time. After all, a customer-oriented company always pays for it in one way or another at the beginning, but receives dividends from it later. And vice versa, if you save on customer focus, you will still have to pay, maybe not immediately, but it will happen for sure.
One of the strengths of the company, highlighted by most of Huawei's customers, is that the company strives to work in a way that will bring maximum value to its customers. This has led to the creation of strong customer relationships, especially in terms of aftersales support. This allowed the company to quickly gain a strong position, both in the domestic market of China and abroad. At Huawei, employees are always encouraged and motivated to work to their maximum potential so that they can create value not only for the company's customers, but also for themselves. Back in the 1990s, Huawei adopted a stock-based payroll and contribution program for its employees, which had a positive impact on overall productivity. In addition, a Huawei employee is also interested in becoming an entrepreneur himself; therefore, having an innovative, dynamic, talented and entrepreneurial team is the most important human factor for Huawei's success. Huawei is a privately held company wholly owned by its employees. Through the Union of Shareholders, the company implements the "Employee's shareholding" scheme, in which, as of December 31, 2019, 104,572 employees participate [1].
7. In its work, the company relies on strategic partnerships with suppliers and the dealer community.
Huawei forges strategic partnerships with its suppliers, dealers, retailers and other stakeholders. The company pays special attention to the development of strategic partnerships with other world-renowned suppliers of goods and services. Through this strategic partnership, Huawei is able to expand into previously untapped markets, serving a diverse customer base. Strategic partnership allows for joint planning and business development with partners, creating a single ecosystem for a successful business partnership. As part of the Huawei Partnership Conference held in March 2021, which was attended by over 1000 representatives of the company's Russian partners, the Strategy for Creating a Community for a Single Digital Future in Russia was presented. Huawei created a partnership ecosystem in Russia, which included: industrial partners, joint solution partners, social partners, financial partners, training partners, sales partners and service partners. The basic principles of working with partners have been determined: integration. Margin sales, transparency and compliance. Revenue of partners in 2019 increased by
46%.
8. The company pays great attention to personnel training and the formation of a corporate culture.
Since its establishment, Huawei has attached great importance to the training of company personnel and the formation of a talent pool. At the annual job fair, Huawei is committed to recruiting the best university graduates in China and people with special talent in information technology. Today, education, as well as real practical knowledge and skills, are the key points for the success of the company and its employees. To create a strong talent pool, the company has developed and is implementing the "Project for the transformation of the base of promising personnel" and is implementing management solutions that help develop employees who play a key role in the company's activities.
Huawei has a great corporate culture. This allowed the company to become one of the world's leading information companies and operate quite successfully in the face of tough US sanctions. At Huawei, the following core corporate values exist and are supported: customer focus; involvement; continuous improvement; openness and initiative; compliance with the principles of business ethics; teamwork.
Weaknesses
1. The Huawei brand is not sufficiently influential in developed international markets.
Huawei has been awarded the title of "The Most Influential Chinese Brand in the World," but there are still some differences between Huawei's communications brand and other well-known telecommunications companies. First of all, at an early stage in its marketing development, Huawei adopted a "rural urban environment" strategy that sacrificed Huawei's brand image. Secondly, as a privately held company established in a developing country, Huawei has adopted a strategy of price competition in the process of entering the international market. Most of the initial products of the company are low-end products, which leads to a relatively low effect from the implementation of the strategy in the markets of developed countries. As a result, the Huawei brand lacks visibility and influence in developed international markets. [15].
There is no doubt that Huawei is the leader in the smartphone market in China and some other countries. However, the company's performance in many other countries is very low. For example, it has an 8.36% mobile market share in the UK, which is weak compared to Apple's (51.57%) and Samsung's (28.27%). Likewise, the company has a 6.86% market share in Canada (Stat Counter, 2021). Many consumers perceive Huawei as a provider of low-cost technology devices and services. This perception did not benefit the company. It lags behind some of its competitors in image and brand awareness. The company has failed to create a brand image that rivals Apple and Samsung. In fact, many buyers consider its products to be of poor quality. Since Huawei has less capital, it lacks a clear brand image. The brand has weak marketing and therefore is a weak brand. While the brand has a clear image in some countries, it is less popular in most of the leading markets.
2. The company is poorly represented in the
United States.
The US is the leading market for smartphone brands, but Huawei's position in this market is very weak. Consumers in the US generally hold back from buying Huawei phones. With the company facing many investigations in the US, Canada and the UK, the brand has not enjoyed much success in these regions. And Huawei's position in the markets of North America and Europe is becoming weaker. At the same time, Huawei should pay more attention to some of the shortcomings affecting the company's performance. The first weakness of Huawei is that the company does not have such a rich development history as its closest competitors such as Ericsson or Cisco. Huawei is still a young entrant in the telecommunications industry, so its industry influence is not widely visible or popular. In terms of market expansion, it is difficult for Huawei to operate in the North American and European markets right now.
And the most important thing. The US government, the media, and the general public in the West will never trust a company from a communist country. This is why there are strict regulations and various investigations against Huawei.
3. Huawei allocates limited financial resources for advertising and promotion.
Huawei has limited resources to advertise and promote its products, not attaching the proper importance to advertising, and relies too heavily on the quality of its products and services. The company has not fully exploited the role of display advertising and marketing, which promotes the product to the consumer and has a significant impact on its sales. Huawei's media strategies are still not effective enough, in most cases the company focuses only on its own network resources and poorly develops communications with Russian network resources. Information about the company in the Russian media space is not constantly in demand and rarely updated. The company does not maintain the proper level of attention to itself constantly, reminding of itself only from time to time. This is not helping to increase consumer awareness of Huawei's brands.
4. Low efficiency of financial planning in the company.
Any company almost always lacks funds. Compared to other leading global brands, Huawei's capital is significantly less [15]. Because of this, Huawei's financiers should be extremely careful when planning their business operations. In addition, due to a lack of spare money, the company does not allocate enough money for branding or marketing. To make a brand accessible, it needs to invest heavily in marketing or branding. Failure to do so will lead to great brand weakness. However, financial planning in the company is not carried out properly and is not efficient enough. Experts point out some flaws in financial planning. Thus, Huawei's net contribution and profitability is below the industry average. The ratio of liquid and current assets showed that the company could use its resources more efficiently. The company has a low level of current assets compared to current liabilities, and this can also create liquidity problems for it in its operating activities [1]. Decision making, especially in the financial sector,
is highly centralized and teams' decisions must be approved by designated officials. This reduces the efficiency of operations, taking more time. In addition, the corporate culture adopted in the company does not facilitate communication between superiors and subordinates. Therefore, the company may not hear reasonable proposals that arise at the grassroots level, and make mistakes that impede the development of the company in the field of finance.
5. Huawei has poor sales planning efficiency.
In addition to the existing difficulties in entering the market, Huawei also has some weaknesses in forecasting sales and demand for products, which leads to a significant number of lost opportunities compared to its competitors. As a result, Huawei's total daily stock is quite high compared to that of other competitors. In addition, the time it takes to buy and sell goods is higher than the industry average, which means Huawei is recklessly building up its inventory, creating unnecessary costs for the business. Another reason the company's daily inventories are high compared to competitors is that Huawei is not very good at forecasting demand, which ultimately leads to increased inventories both internally and with suppliers. There is another internal weakness of Huawei - a fairly high turnover of the company's staff, which leads to the need to spend more time and effort on the development and training of its employees, including logisticians and marketers who solve sales management problems.
6. The company has low competitive experience in the markets of developed countries.
Huawei has practically no experience of competing in the markets of developed countries, because most of the company's products are sold in the markets of developing countries. The successful management experience of the company's management is also mainly related to the markets of developing countries. At the same time, there is a significant difference between the markets of developed countries and the markets of developing countries. This difference affects the economic environment, politics and diplomacy, laws and regulations of behavior, social culture and technological innovation. To firmly gain a foothold in the markets of developed countries, Huawei must overcome the existing obstacles to entering the market of developed countries, comprehensively understand the market environment and market mechanisms of these countries, master local laws and regulations, and correctly use foreign policy [15].
7. The company's activities are associated with a wide variety of disputes.
The brand has generated a lot of controversy since its establishment, which seems to be its major weakness. It also has a tainted image in the global marketplace. Aside from the spy-related controversy, there are still many forces that have tarnished Huawei's image in many Western countries and mainly in the United States. This can be attributed to the rivalry between the United States and China and the close relationship between the Chinese government and Huawei. Even now, Huawei's image is considered a big brand weakness. The brand is also accused of using its resources for espionage purposes. Because it lost support for AT&T in
the US, Huawei lost support from many other American and European partners. China has also been accused of violating various intellectual property rules. The allegations negatively impacted the brand's image, although Huawei has rejected them. The arrest of the CFO in Canada also proved that the company is in big trouble. In addition, new prohibitive laws introduced by the US and EU governments have created many obstacles to Huawei's operations in the US and European markets.
Opportunities
1. Rapid growth of the communications and telecommunications industry.
The communications industry is currently one of the fastest growing industries in the world. This is primarily due to the rapid development in recent years of world science and technology, in which the communications industry consistently and purposefully implements new innovative developments. Moreover, with the development of economic and informational globalization, people's demand for communication services will also grow rapidly [16].
The continued and growing development of mobile device and data transmission traffic provides fundamental new opportunities for telecommunications equipment suppliers. The need for a modern network infrastructure that can deliver more capacity and bandwidth at the lowest possible cost per bit will drive new investment in next-generation technologies and products offered by vendors such as Huawei. Their capabilities provide not only the creation of new data transmission networks, but also in the transformation of outdated systems into a communication infrastructure determined by the Internet protocol and high mobility.
2. Support of telecommunication companies by the Chinese government.
The Chinese government has always provided worthy support and assistance to telecommunications companies operating in the domestic market, but especially to companies entering the international market. The government attaches great importance to ensuring competition between communications enterprises in the international market. Its aim is to strengthen support for competition policy and improve the service system for foreign investment.
In terms of positive and flexible support from the government, China's Ministry of Information Industry continues to encourage major national and local operators, including China Mobile and China Telecom, to purchase Huawei telecom equipment. Huawei not only receives tremendous support from the government, but also significant assistance from national banks and local insurance companies. For example, the China Development Bank has sponsored Huawei's overseas clients a whopping $ 10 billion to purchase products from Huawei. In addition to the China Development Bank, China's state-owned insurance company Sinosure, which was involved in assisting Huawei in export financing operations, provided its partner Telemar Norte Leste SA, Brazil's largest telecommunications operator, with the ability to finance the purchase of Huawei products [17].
3. Friendly economic relations between China and
Russia.
Friendly economic relations between China and Russia are built on the basis of a strategic partnership between them in the political, military and economic fields. A new confrontation with the West, which China did not want and which is uncomfortable for it, led China to understand that the current situation is for a long time. After Trump unleashed a trade war against China, and Biden not only did not cancel it, but also opened a new platform of confrontation, the Chinese side turned their attention to Russia. Russia, possessing large reserves of various resources, is one of the world's largest markets. And this market is extremely open. In early March, Beijing announced that the two countries have become a strategic basis for each other, a chance for development, and that they have become global partners. According to data published by the General Administration of Customs of China, in 2020 the trade between Russia and China amounted to 103.9 billion US dollars. Russia's exports to China in 2020 amounted to USD 49.1 billion, and imports - USD 54.2 billion. The share of China in Russia's foreign trade turnover in 2020 was 18.3% against 16.6% in 2019.
Such areas as software and application development are traditionally strong in Russia. Therefore, Chinese companies working in the field of information and communication technologies have acquired strategic partners, the relationship with which is mutually beneficial.
Russia has always been and remains a priority market for Huawei. This is where the company opened its first office outside of China 23 years ago, embarking on an international expansion. Huawei has more than 1,000 sales partners in Russia, more than 30 partners for the development of joint solutions, more than 90 service and operational partners, and the number of certified specialists exceeds 10 thousand people. In 2021 Huawei intends to invest in the development of Russian partners about $ 8.5 million., such investments will help Huawei partners to increase sales by more than 30%. In Russia Huawei will focus on the development of communication, computing, cloud technologies and industrial applications, as well as on solutions using artificial intelligence. The company plans to train more than 130 thousand Russian personnel in the field of digital technologies and will allocate more than $ 1 billion for local purchases, research and development, as well as the creation of ecosystems for the development of the Digital Community. The company's activities in Russia are versatile. For example, in June 2019, the Chinese company and the Russian telecommunications giant MTS agreed to build a 5G network in Russia. In March last year, Huawei teamed up with Sberbank to launch a new cloud platform targeted at Russian businesses. In October, the company signed an agreement to help state-owned Avtodor build roads capable of supporting autonomous vehicles. What is more important, however, is that Huawei is ramping up R&D in Russia. In August 2019, the Chinese IT giant announced the construction of three new centers in Russia and will hire 1,500 Russian employees in this area by 2025. The company has also established partnerships
with over twenty leading Russian universities and research institutes.
4. Growth of global interest in 5G technologies, artificial intelligence and the Internet of things.
There is no doubt that adapting and leveraging 5G technology will create many valuable opportunities for businesses and individuals. Real-time connectivity has never been so evolved. According to Huawei's R&D department, 5G technology will definitely usher in thousands of breakthroughs, innovations and growing opportunities for enterprises and their operations in various sectors such as automotive, smart lifestyle, virtual reality, and more. Consequently, due to advances in the development of 5G technology, Huawei can have a significant impact on various industries, making the company more global and technologically dominant [18].
In the cloud services market, Huawei is launching new projects, and partnering with other companies, regions or governments to provide the required data. In addition, realizing the importance of information sharing and data security within the Chinese government, Huawei has successfully developed its own government cloud services platform to help the government better control government data. In fact, there are about 6.8 billion data points in Huawei's government cloud platform, and it is estimated that government departments exchange up to 17 million units of data every day. As a result, providing governments with an effective data management tool (cloud platform) is a profitable and sustainable opportunity for Huawei.
Certain opportunities for Huawei are emerging in the development and sale of smart home products in the Russian market. And although this product is quite new for the Russian market, more and more consumers are interested in it. This leads to a steady increase in the sales of these products.
Artificial intelligence enables consumers to use tools and data while possessing minimal technical knowledge. It helps to accelerate the dissemination of knowledge and reduce information asymmetries. This is made possible by natural language processing technology that analyzes dialects, everyday speech patterns, and natural speech patterns. In the future, such voice assistants, through machine learning, will be able to meet the needs of users. Huawei, engaged in the development and creation of artificial intelligence systems, will gain new opportunities in the field of information and communication technologies and solving non-formalized problems.
Thus, the company sees many opportunities for wider use of these technologies.
5. Adoption of a new marketing strategy in the company.
While Huawei's position as a tech company is strong enough, its marketing strategy has long been weaker than its competitors. Rather than using a consistent branding and marketing strategy, the company relied heavily on its product quality and pricing strategy to gain market share and expand its customer base. However, for any leading technology brand, a strong marketing strategy is just as important as its core business strategy. Based on this, Huawei had to focus on its
marketing strategy in order to increase its brand awareness and strengthen the company's image in the global market. Huawei's closest competitor, Apple, is known for its excellent marketing strategy, and in order to defeat its competitor, Huawei needed to improve its image through marketing.
Therefore, at the Huawei conference "Digital Community 2020", the president of the company in the Eurasia region presented an updated vision of the strategy of cooperation with Russian partners. Huawei's ecosystem building strategy is called 1 + 8 + N. The devices included in it can be divided into three levels. The central level is occupied by smartphones that act as a portal for accessing all other gadgets and services. The middle level is made up of 8 types of smart devices that perform auxiliary functions in various scenarios of use. These are smartwatches, headphones, PCs, tablets, speakers, smart glasses, car multimedia centers and smart displays. The external layer includes countless third-party solutions, including smart home and office solutions, travel, fitness and health tracking gadgets and apps, and audio and video devices. A common software and hardware platform allows all devices in the ecosystem to access and use each other's capabilities, exchange information and content.
Today, Huawei's mobile services are available to users in more than 170 countries around the world, and the monthly active audience of the HMS ecosystem is 390 million users. More than 1 million third-party content and app developers have partnered with HMS. Huawei has invested $ 3 billion in the ecosystem and committed $ 1 billion to support third-party application developers. To improve the quality of third-party applications, the company opened eight laboratories in different regions of the world. Thanks to the active development of 5G communication technologies and artificial intelligence, the next decade will become the era of the "universal Internet": all devices connected to wireless networks will freely interact with each other, offering users completely new, previously unavailable opportunities. The development of artificial intelligence will simplify the interaction between devices and people, making it more natural through voice and visual control.
At the heart of Huawei's intelligent ecosystem of all kinds of connected devices is the Huawei's HiLink hardware platform, the computing power of the latest Kirin chips, the rich set of Huawei HiAI smart interfaces, and Huawei mobile services.
Huawei's digital marketing strategy is by far the most promising and effective. This is evidenced by the recognition of its consumers all over the world, stable and high income of the company, leading positions in the world market. The strategy is based on three pillars: people, collaboration and innovation.
6. Creation of effective trade networks and transportation channels.
Internationally, the brand uses online channels for its sales. Huawei is now well positioned and sees more opportunities to expand its presence in the global marketplace by making efforts to develop its sales network.
Nowadays, the number of users of social networks has increased all over the world. Moreover, three social
media platforms: Facebook, Twitter and Instagram showed the largest growth in monthly active users. Huawei can use social media to promote its products, interact with customers, and collect feedback from them. It should be noted that another new trend has emerged - sales growth in the e-commerce industry. That being said, many people shop online. Huawei can generate additional income by opening and selling online stores. Samsung, Apple and other leading smartphone brands have opened retail stores in the countries where they do business. Retail stores give shoppers the ability to actually visit brands they have used and have trusted for years. If a brand is expensive and sophisticated, then its office should reflect the same. Instead of relying on online sales alone, Huawei should open retail stores for smartphones under its own brand.
Lower shipping costs due to lower shipping prices can also lower the cost of Huawei's products, thereby giving the company the opportunity to either increase its profitability or pass on benefits to customers to increase market share.
7. Strengthening the trend of business digitaliza-
tion.
Nowadays, in order to be efficient and competitive, international companies are increasingly using digitalization - the translation of information into digital form. With Huawei's customer base growing all the time, and more and more enterprises are willing to partner with the company to improve their digital capabilities and technological development, digitalization is relevant for Huawei as well. In addition, as Huawei has successfully built its image as a reliable technology provider and strategic partner in the high-tech sector, there is a high likelihood that more and more enterprises, especially small and medium-sized enterprises, will join Huawei's global network, improving their dig-italization. According to Huawei's director of strategic marketing, more than 2 billion people will have access to mobile communications by 2025, and up to 500 million homes with broadband access will be in use, allowing Huawei to expand its global network. [1]
A new round of the information technology revolution accelerates and advances the digitalization process in general, the use of technology is spreading rapidly, both in life and in production, a powerful digital infrastructure has become an important driving force for the economy that supports its growth. Countries around the world also see digitalization as an important vehicle for shaping international competitiveness in the post-crisis era. The digital economy is growing at a rate of 10% per year, more than three times the growth rate of the global traditional economy.
8. Increased interest in solving environmental problems.
As the pace of digitalization accelerates, the information and communication technology (ICT) infrastructure is becoming smarter and more capable of supporting faster and more seamless communications. However, at the same time, it consumes a huge amount of energy and resources. The ICT industry is currently facing a major challenge to reduce energy consump-
tion, resources and other environmental impacts. Moreover, this should be done without compromising network performance and the quality of interaction with users. Huawei is committed to minimizing its environmental impact in manufacturing, during operations, and throughout the life cycle of products and services. The innovative products and solutions we create help conserve energy and reduce emissions and contribute to a zero-waste economy.
The solution to environmental problems at Huawei is carried out in several areas:
- creating environmentally friendly products involves providing customers with effective, energy-saving and environmentally friendly products and solutions that will help them reduce operating costs and reduce environmental impact to a minimum.
- using environmentally friendly operations involves reducing energy consumption and carbon emissions, as well as creating an environmentally friendly and sustainable ecosystem.
- the conclusion of contracts with environmentally friendly partners involves the inclusion of environmental requirements in the procurement strategy "Quality First" and their implementation at every stage of the procurement process, from the analysis of supplier qualifications, selection and verification to performance management and selection of materials.
For many years, Huawei has promoted the rational use of energy resources and the reduction of emissions in various industries through innovative energy solutions. The company is also actively involved in creating an environmentally friendly society, which is characterized by rational resource allocation and respect for the environment.
Sustainability is an essential element in Huawei's transformation and growth.
Threats
1. Huawei operates in a highly competitive ICT market.
The rapid development of the industry and huge market demand have resulted in fierce competition among large telecom companies. Analysis of the current situation shows that Huawei's competitors at home and abroad have very strong capabilities. Under these conditions, Huawei must advance its strengths and avoid weaknesses, take full advantage of its strong points and focus on customers to achieve further development. The smartphone industry has seen a lot of competition over the years and continues to grow at a rapid pace. Since the company has been recognized as a leading brand in the smartphone industry, it faces multiple exposure from many foreign and Chinese brands. Its competitors in the smartphone market are Samsung, Apple, Xiaomi, OPPO, Vivo, Sony, OnePlus, Lenovo and LG. This means that the emergence of a large number of players in the smartphone industry poses a serious threat to the company. Similarly, its main competitors in the tablet market are Apple, Samsung, Amazon, Lenovo, and Microsoft. In the telecommunications technology market, Huawei has made a lot of efforts to expand and find new overseas markets. At the same time, leaders in the telecommunications sector such as
Siemens, Ericsson and Motorola have successfully introduced and established their brands and have a significant impact on the established market. Therefore, in this area, Huawei not only faces competition in the domestic market, but also has to fight against world-renowned telecommunications brands.
2. Trade barriers and sanctions from the West.
The current trend of global economic integration
and informatization has had a profound impact on the internal economic development of many countries, which establish appropriate trade barriers around the world, for political and self-interest reasons. Moreover, over time, the factors of instability and uncertainty in the international market environment will gradually increase, international competition will become more intense, and protectionism will become more obvious. They can cover a wide range of issues, ranging from concerns about national security to issues related to competitiveness and fairness of trade. Guaranteed or not, hardware vendors - whether Huawei or any other vendor - will have to face these challenges and solve them.
Many regulatory and policy factors pose serious threats to global information technology players. Huawei's international business is under threat from political pressure and the trade war between China and the United States. Moreover, threats exist not only in the American market, but also in other leading markets in countries such as Canada, the UK and Japan. There, Huawei is facing strong political pressure, and this severely restricts the international business of the company and could damage its finances and image. Moreover, bans of Huawei by some countries pose a serious threat to the company. For example, countries such as the United States, Australia, New Zealand, Japan and Taiwan have decided to ban and phase out the company's products on their mobile networks [19]. Likewise, some countries have decided to restrict Huawei's operations.
3. Intercultural problems that may arise in Russia.
Huawei, when entering and operating in the Russian market, faced many problems, including the problems of intercultural management. In international marketing, it is accepted that a company, operating in the international market, must take into account the differences in cultures of different countries. Corporate employees in different countries are always culturally different due to the long-term consequences of national policies, government laws, regulations, customs and corporation decrees. Different businesses have different business goals. Currently, the main business goal of Huawei enterprises is to capture a significant share of the Russian market and make a profit, which, as a rule, does not take into account the interests of local employees of the company. But, working in Russia, the company should not only make a profit, but also protect the interests of employees, maintain a high level of employment of the local population.
4. Growth in the cost of labor, raw materials and supplies.
The main reason Huawei was able to bring cheaper quality smartphones to the market was the low labor cost. But recent amendments to labor laws by the
Chinese government have made it harder for companies to manage their costs and offer goods at a lower price, requiring higher wages for company workers. Moreover, the constant technological development of the company requires appropriate training of personnel, since the inability to keep up with market changes can lead to the loss of Huawei's business. And constant training of personnel will require additional financial costs and increase the cost of labor. The same is the case with the cost of production materials and raw materials, the prices of which have increased significantly recently. In addition, rising fuel prices have increased Huawei's production costs. These costs have increased further as other industries that provide resources for the company's operations have also been hit by higher fuel prices, which have increased their costs. As a result, all of the above led to a decrease in Huawei's profit.
5. Problems of information security and intellectual property.
Although Huawei has adopted sufficiently stringent information security measures to protect the company's intellectual property, it cannot fully guarantee that other vendors and associates won't misuse various information processing tools, patents or licenses developed by Huawei. Even a possible lawsuit to protect the company's intellectual property will still lead to losses for Huawei.
6. New technological developments of competitors.
New technology developments from some ICT competitors pose a direct threat to Huawei, as customers attracted by this new technology could be permanently lost to the company, reducing Huawei's overall market share.
7. Chinese economic reforms and government influence.
Thanks to China's agreement with the WTO, more liberalization will be allowed in China's local market. In addition, in the context of the national economic reform, transparency and accountability are identified as two top priorities when it comes to the telecommunications and data sector. Overall, while Huawei is a tech and telecommunications giant, it still faces a number of legal, data security and institutional challenges from both local authorities and the Chinese government. In addition, following the economic reform, the level of competition in the domestic market has also grown rapidly, making it increasingly difficult for Huawei to maintain and defend its dominance in the domestic market.
8. Rules and regulations of the legislation adopted by the states that make up the market of information and communication technologies.
Due to the complex international economic and political situation, doing business in different countries is associated with certain unique risks, such as civil unrest, economic and political instability, sharp fluctuations in exchange rates, foreign exchange controls, sovereign debt crisis, oversight of governance rights. and labor issues. In particular, tensions in bilateral or multilateral relations between countries can arise as a result of special situations in certain regions, such as local
wars, mutual sanctions and unrest, and can have a serious impact on Huawei's local activities and significantly affect the development of its business.
The development of the local economy and the promotion of employment of the population have recently become the focus of trade policy in many countries. Therefore, new trade protections, represented by environmental standards and intellectual property rights, are emerging that could have a significant impact on the export of Huawei communications products. The rules and regulations of different governments also pose a big threat to Huawei. Trade tensions between the US administration and the Chinese government are a very good example of such a threat. The company also faces severe restrictions from the governments of Japan, Canada and the UK. And the smartphone market in these countries has great potential for growth and expansion. In addition, the company may face lawsuits in different markets, given the differences in the laws of the participating countries and the
constant fluctuations in product standards in these markets.
9. The emergence of new competitors and substitute products.
Currently, many new players have entered the ICT market, trying to increase their market share by decreasing the share of existing companies in the market. This poses a threat to Huawei as the company could lose its customers to these new members. The number of substitute goods available is also increasing, which collectively poses a threat to the industry in general and Huawei in particular, as consumption of the goods currently in use decreases.
Let's summarize the factors discussed above in the SWOT matrix (Fig. 2).
Based on the results of SWOT and PEST analysis, the following recommendations can be proposed to improve the performance of Huawei in the Russian market.
Strengths
Huawei
Weaknesses
Huawei leads R&D and builds strong intellectual property bank
The company has adopted and is implementing an effective and influential marketing strategy Huawei manufactures and markets a wide range of high quality goods and services The company's products are distinguished by a good combination of high quality and affordable prices. Huawei is a global leader in networking equipment and a leader in the smartphone market Huawei is a customer-centric employee-owned company
The company relies on strategic partnerships with suppliers and the dealer community in its work The company pays great attention to personnel training and the formation of a corporate culture
S W
Threats T O
Huawei brand does not have enough influence in developed international markets The company is poorly represented in the USA Huawei devotes limited financial resources to advertising and promotion
Low efficiency of financial planning in the company
Huawei has poor sales planning efficiency The company has low competitive experience in the markets of developed countries The company's activities are associated with a wide variety of disputes
Opportunities
Huawei operates in a highly competitive ICT market Trade barriers and sanctions from the West Intercultural problems that may arise in Russia Growth in the cost of labor, raw materials and supplies
Information security and intellectual property issues New technological developments of competitors Chinese economic reforms and government influence
Rules and regulations of the legislation adopted by
the states that make up the market for information
and communication technologies
The emergence of new competitors and substitute
products
Rapid growth of the communications and telecommunications industry Chinese government support for telecommunications companies
Friendly economic relations between China and Russia
Growing interest in the world in 5G technologies, artificial intelligence and the Internet of things Adoption of a new marketing strategy in the company
Creation of effective trade networks and transportation channels
Strengthening the trend of business digitalization Increased interest in solving environmental problems
Fig. 2. SWOT Matrix for Huawei
Huawei should continue to improve its infrastructure in Russia by increasing the number of R&D and personnel training centers, logistics centers, and technical support and maintenance centers. It is necessary to expand the geography of the company's presence in Russia through a further increase in the number of offices and sales centers, especially in the regions of Siberia and the Far East.
The company should continue to participate in joint projects with successful Russian companies (Russian Railways, VTB, Sberbank, Yandex, Beeline, etc.) to implement modern telecommunication solutions in their activities.
A possible step for Huawei could be expanding its participation in the Russian national program "Digital Economy" to create an independent digital community (TIGER) and the development and implementation of the "Safe City" concept in Russia (Moscow, St. Petersburg, Sochi, etc.).
The work of the company in the Russian market will be associated with possible risks of activity, which have certain specifics. It is associated with the high importance of non-commercial risks, depending on the mutual influence of the political and economic environment, differences in legislation and reporting requirements of the enterprise. Therefore, for risk management in Huawei, centralization and the formation of a special structural unit are required. The main responsibility of this structural unit will be the successful implementation of the company's risk and process management strategy.
While Huawei is strong as a technology company, its marketing strategy remains weaker than those of its competitors. Rather than using a coherent branding and marketing strategy, the brand relied heavily on its product quality and pricing strategy to gain market share and expand its customer base. However, for any leading technology brand, a strong marketing strategy is just as important as its core business strategy. Huawei should also focus on its marketing strategy to build brand awareness and strengthen its image in the global marketplace.
Globally, the brand primarily relies on online sales channels. Huawei is now well positioned and should focus on building its branded retail network to further expand its global presence. Apart from marketing, it can also help boost sales and customer loyalty.
As part of our commitment to environmental issues, Huawei must strive to minimize its environmental impact during manufacturing and throughout the life cycle of its products and services. Huawei should use innovative products and solutions to save energy and reduce emissions, and contribute to a circular economy. Huawei should also make continuous efforts to work with all industry partners to build a green society.
As a customer-centric company, Huawei must conduct market research, track behavior, and conduct surveys of its customers to determine their needs and wants. This will enable employees of the company to better understand customers and anticipate their needs.
In today's environment, cybersecurity and privacy protection are top priorities for the client. Huawei
should put security and privacy at the forefront of product design to keep them safe and secure. This can help Huawei build a resilient network and address emerging challenges in the digital age.
To address the challenges Huawei faces in the Russian market in terms of brand perception and customer service, differentiated marketing should be used more widely; as well as to increase the number of corporate events and giveaways, as well as expand the number of the company's stores in Russia.
To support the promotion, Huawei could establish a network of service centers and organize online technical support in most regional centers.
The study showed that there is still significant market potential that can be explored and used by Huawei to improve its performance in the Russian market.
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