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Huawei: Strategic Analysis

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James Jones

on 18 March 2016

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Transcript of Huawei: Strategic Analysis

Huawei: Strategic Analysis
Company Overview: Huawei
Vision, Mission Values and Objectives
Why we are here?
Internal Analysis
GAP Analysis & Core Competencies
External Analysis
TOWS, PESTLE, Porter's Five Forces
GAP Analysis (Internal)
Core competencies
TOWS Analysis

MK Honor
by Michael Kors
Ensuring company survival in the Global smartphone market
Five Forces
Threats of
New Entrants
Buyer Bargaining Power
Threats of
Substitute Products
Bargaining Power
of Suppliers
Rivalry among
competing firms
Huawei company overview

Internal & External Analysis of Huawei

Strategy to ensure company survival within the next three years


• Private Company, based in China

• Manufactures and distributes a wide
range of ICT products and services

• Ranked 228th (global fortune 500)

• 46.5$ billion dollar revenue
To enrich life through communication.

To satisfy customers’ needs by providing excellent ICT solution's and services in order to consistently create maximum value for our customers.

Huawei’s goal is to become the top ICT vendor for telecommunications overseas.

(Internal Analysis)
1: R&D

2: Corporate Culture
Research & Development
R&D sector is one of the key areas Huawei allocates funds

45% of Huawei's employee's are solely employed in R&D

Huawei spent $6.6 billion on R&D in 2014
Extreme resilience

Vision & collective consciousness

customer orientated (driven by the requirements)

strong focus on collaboration and work ethic
1. Significant threats posed by industry leaders; Apple, Samsung and Microsoft

Large Market Shares
Apple - High customer retention/loyalty
Established/existing distribution channels
Low-end smartphone market is more
saturated than high-end
'Wolf' culture
2. Mid-level threats posed by new entrants to the global smartphone market

Established markets (XaoMi - China)
Levaraging existing resources (distribution channels, finance & marketing resources etc.)
The rate of incremental rate year on year has continued to decline over the past decade.

Increase year on year is still strong within US market.

Number of new smartphone users is expected to rise by 46.3 million by the year 2019 (United States)
US consumers spend the most
money on on their smartphones

Typically $500 or more

Strong link between brand partnership and effective market penetration (ZTE smartphones & the U.S NBA League)

Huawei at forefront of 5G technology
Lacks an established recognisable flagship smartphone

Honor has been launched but has not effectivley aided in the penetration of new markets

Bad PR problems from data scandal aqusations

Percieved poor quality (made in China label)

Lacks experience within western markets and culture

Huawei is one of the world's largest telecommunication providers in the world

Strong support from Chinese Government

Low price - High value

Strong company focus on R&D

1. Mid-high level
2. High competitive market
3. Early/Mid growth stage of Industrial life cycle
4. Suppliers in supplementary markets diversifying
Low power level of suppliers

Self manufactued components reduces power of suppliers

Local availability of natural resources (cultural preferential treatment)

Some threat from high-end components they are unable to reverse engineer and replicate (eg Samsung screens)
EU trade polices – import/export duties and its effects on Huawei’s service and fixed costs

Tax systems and Huawei’s dominance across the EU

EU Globalization encouragement through tax cuts

Chinese government support for hi-tech


Market share

ICT industry growth

China joined the World Trade Organisation (WTO)

• Corruption

• Globalisation and socio-economic classes

• Increased disposable income

• Brand awareness

• Hi-tech supply chain planning tools

• Improved Internal/External Communication
across supply chain

• Positive effects on costing (Slotting & SCOR)

• Internet of things

• Anti-monopoly law of the People’s republic of China

• Intellectual property laws

• US Government ban

• EU law on standard-essential patent (SEP)

• Availability of rare metals

• Increasing pressure from third-parties to be eco-friendly

• Increasing awareness into recycling of old devices

Strategy (diagram)
Strategy breakdown
1. Reinforcement
2. Revitalisation
3. Adjustment
Distribution Strategy
1. Huawei’s current distribution strategy adopts a hybrid structure (Online & Retail).

2. The global sales trend show the weight is moving to e-commerce or online sales.

3. 5-10 different Collaborations with US national distributors (ASI, American Distributor INC).

Why Michael Kors
1. To renew and improve the brand image for Huawei.

2. Michael Kors already has its brand awareness and customer base.

3. Products of Michael Kors represent luxury end and high quality

Product branding differentiation

Improve branding image

1. Design differentiation
2. Faux leather backing
3. Italian leather stitching
4. Gold MK logo

1. 5G ready (reinforcement)
2. High quality GUI (Graphical user interface)
3. Longer batter life
US Smartphone Marketing Mix
• What feature does it have to meet customer needs?

• How does is look like?

• What is the name of the product?

• How is it branded

• How is it differentiated VS competitors?

• Where do buyers look for the products or services?

• How can you access the right distribution channels?

• Do you need to use a sales force?

• Experience that can be learned from competitors.

• MK Honor pricing strategies

• The reason for our strategy

Three distribution channels;


Direct sales

Distribution through Michael Kors (outlets)

1. Shared sales revenue and marketing resources.

2. Normally there is 20% markup of original price that distributors make.

3. The predicted shipment in US is 15% to 20% shipment from third quarter in 2015, which is 3.975 million to 5.3 million units.
(American distributors)
4. We predicted that the distributors would take over 65% of Huawei’s total sale

5. Based on the forecast, in long-term, averagely, the quarter revenue of all partner distributors is from $215.5 million to $161.7 million. (average price table).

6. Initially, the revenue of MK Honor for distributors could be $163.7064 million to $122.7798 million. (MK Honour markup table)

The contract includes:

1. Liability definition for both parties

2. Offers of contractual extension

3. Distribution channels (online & in store)

4. 20% of profit from the sales of MK Honor

5. Dissolution of contract

6. US Law

Thank you.
Any Questions?
1. Adopting TQM (Total Quality Management) and Kaizen for Huawei to ensure the quality of products

2. JIT (Just-In-Time) implements an effective way on saving cost of inventory
Huawei Smartphone pricing
(Truong, 2015)
(Statica, 2016)
(Statista, 2016)
(eMarketer.com, 2016)
(Gary, 2012)
Diffusion & Adoption

Diffusion of the "MK Honour" in the US market

Adoption rates based on 2010 study in US smartphone market

7.5 year timescale for adoption of production (at 10% penetration)

Adoption of of the "MK Honor" in the US market
Full transcript