Case Study Description of Huawei: Cisco's Chinese Challenger
Huawei was China's largest telecommunication equipment provider. It boasted annual revenue of US$6.7 billion in 2005, 60% of which came from international sales. Globally, Huawei had a strong position in the market for low-end routers and switches, offering products that were 40% cheaper than its competitors. However, unlike the threat from most Chinese companies, Huawei's threat came not from low-cost manufacturing but from low-cost engineering. Can Huawei leverage its strengths to climb up the technology value chain, replicating its success with low-end telecom networking in high-technology products and services? Can it build a global brand?
Swot Analysis of "Huawei: Cisco's Chinese Challenger" written by Ali Farhoomand, Phoebe Ho includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Huawei Low facing as an external strategic factors. Some of the topics covered in Huawei: Cisco's Chinese Challenger case study are - Strategic Management Strategies, Growth strategy and Global Business.
Some of the macro environment factors that can be used to understand the Huawei: Cisco's Chinese Challenger casestudy better are - – banking and financial system is disrupted by Bitcoin and other crypto currencies, technology disruption, digital marketing is dominated by two big players Facebook and Google, increasing inequality as vast percentage of new income is going to the top 1%, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing government debt because of Covid-19 spendings, supply chains are disrupted by pandemic ,
increasing commodity prices, increasing transportation and logistics costs, etc
Introduction to SWOT Analysis of Huawei: Cisco's Chinese Challenger
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Huawei: Cisco's Chinese Challenger case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Huawei Low, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Huawei Low operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Huawei: Cisco's Chinese Challenger can be done for the following purposes –
1. Strategic planning using facts provided in Huawei: Cisco's Chinese Challenger case study
2. Improving business portfolio management of Huawei Low
3. Assessing feasibility of the new initiative in Global Business field.
4. Making a Global Business topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Huawei Low
Strengths Huawei: Cisco's Chinese Challenger | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Huawei Low in Huawei: Cisco's Chinese Challenger Harvard Business Review case study are -
Sustainable margins compare to other players in Global Business industry
– Huawei: Cisco's Chinese Challenger firm has clearly differentiated products in the market place. This has enabled Huawei Low to fetch slight price premium compare to the competitors in the Global Business industry. The sustainable margins have also helped Huawei Low to invest into research and development (R&D) and innovation.
Ability to lead change in Global Business field
– Huawei Low is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Huawei Low in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Training and development
– Huawei Low has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Huawei: Cisco's Chinese Challenger Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Successful track record of launching new products
– Huawei Low has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Huawei Low has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Effective Research and Development (R&D)
– Huawei Low has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Huawei: Cisco's Chinese Challenger - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Superior customer experience
– The customer experience strategy of Huawei Low in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Highly skilled collaborators
– Huawei Low has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Huawei: Cisco's Chinese Challenger HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Strong track record of project management
– Huawei Low is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Analytics focus
– Huawei Low is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Ali Farhoomand, Phoebe Ho can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Diverse revenue streams
– Huawei Low is present in almost all the verticals within the industry. This has provided firm in Huawei: Cisco's Chinese Challenger case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Low bargaining power of suppliers
– Suppliers of Huawei Low in the sector have low bargaining power. Huawei: Cisco's Chinese Challenger has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Huawei Low to manage not only supply disruptions but also source products at highly competitive prices.
Ability to recruit top talent
– Huawei Low is one of the leading recruiters in the industry. Managers in the Huawei: Cisco's Chinese Challenger are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Weaknesses Huawei: Cisco's Chinese Challenger | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Huawei: Cisco's Chinese Challenger are -
Aligning sales with marketing
– It come across in the case study Huawei: Cisco's Chinese Challenger that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Huawei: Cisco's Chinese Challenger can leverage the sales team experience to cultivate customer relationships as Huawei Low is planning to shift buying processes online.
Slow to strategic competitive environment developments
– As Huawei: Cisco's Chinese Challenger HBR case study mentions - Huawei Low takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Interest costs
– Compare to the competition, Huawei Low has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
High cash cycle compare to competitors
Huawei Low has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Skills based hiring
– The stress on hiring functional specialists at Huawei Low has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Products dominated business model
– Even though Huawei Low has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Huawei: Cisco's Chinese Challenger should strive to include more intangible value offerings along with its core products and services.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Huawei Low is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Huawei: Cisco's Chinese Challenger can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Huawei: Cisco's Chinese Challenger, in the dynamic environment Huawei Low has struggled to respond to the nimble upstart competition. Huawei Low has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Low market penetration in new markets
– Outside its home market of Huawei Low, firm in the HBR case study Huawei: Cisco's Chinese Challenger needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High operating costs
– Compare to the competitors, firm in the HBR case study Huawei: Cisco's Chinese Challenger has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Huawei Low 's lucrative customers.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Huawei: Cisco's Chinese Challenger, is just above the industry average. Huawei Low needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Opportunities Huawei: Cisco's Chinese Challenger | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Huawei: Cisco's Chinese Challenger are -
Manufacturing automation
– Huawei Low can use the latest technology developments to improve its manufacturing and designing process in Global Business segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Loyalty marketing
– Huawei Low has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Leveraging digital technologies
– Huawei Low can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Global Business industry, but it has also influenced the consumer preferences. Huawei Low can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Huawei Low to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Huawei Low can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Huawei: Cisco's Chinese Challenger, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Creating value in data economy
– The success of analytics program of Huawei Low has opened avenues for new revenue streams for the organization in the industry. This can help Huawei Low to build a more holistic ecosystem as suggested in the Huawei: Cisco's Chinese Challenger case study. Huawei Low can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Huawei Low can use these opportunities to build new business models that can help the communities that Huawei Low operates in. Secondly it can use opportunities from government spending in Global Business sector.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Huawei Low in the consumer business. Now Huawei Low can target international markets with far fewer capital restrictions requirements than the existing system.
Developing new processes and practices
– Huawei Low can develop new processes and procedures in Global Business industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Better consumer reach
– The expansion of the 5G network will help Huawei Low to increase its market reach. Huawei Low will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Huawei Low can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Low interest rates
– Even though inflation is raising its head in most developed economies, Huawei Low can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Threats Huawei: Cisco's Chinese Challenger External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Huawei: Cisco's Chinese Challenger are -
Shortening product life cycle
– it is one of the major threat that Huawei Low is facing in Global Business sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Huawei Low in the Global Business sector and impact the bottomline of the organization.
Regulatory challenges
– Huawei Low needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Global Business industry regulations.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Huawei Low.
Environmental challenges
– Huawei Low needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Huawei Low can take advantage of this fund but it will also bring new competitors in the Global Business industry.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Huawei: Cisco's Chinese Challenger, Huawei Low may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Global Business .
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Huawei Low business can come under increasing regulations regarding data privacy, data security, etc.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Huawei Low can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Huawei: Cisco's Chinese Challenger .
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Increasing wage structure of Huawei Low
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Huawei Low.
Consumer confidence and its impact on Huawei Low demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Huawei Low needs to understand the core reasons impacting the Global Business industry. This will help it in building a better workplace.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Weighted SWOT Analysis of Huawei: Cisco's Chinese Challenger Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Huawei: Cisco's Chinese Challenger needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Huawei: Cisco's Chinese Challenger is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Huawei: Cisco's Chinese Challenger is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Huawei: Cisco's Chinese Challenger is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Huawei Low needs to make to build a sustainable competitive advantage.