Huawei Strategy Analysis
External Analysis
Threat to Entry
China was facing a boom in the industry of telecom equipment, and the growth was continuing. Discovering such great potential in China’s market size, foreign companies started to see advantages in entering China; however, their entry was restricted due to government policy. This ownership restriction by the Chinese government largely raises the entry barrier, forcing most foreign firms to set up joint ventures with local Chinese companies to enter the industry. Should a firm decide against forming joint ventures, they would be completely barred from the Chinese market. Secondly, the industry involves a high level of capital investment for manufacturing, engineering, research and development, equipment, etc. This huge financial pressure prevents firms from entering the industry. Therefore, the threat to entry is low.
Supplier Power
Suppliers of the telecom industry include raw material providers and equipment manufacturers. Suppliers’ power has been increasing over the years, due to the development of technology and the demand of the changing market. In the early years between 1960 and 1980, since a large amount of suppliers existed in the industry with great specialization, the telecom manufacturers always needed to find a specific supplier for a certain part of production. However, as digital technology, the Internet, and networking advanced the pace of telecom services and the range of products demanded, the suppliers were required to be more diverse than ever. To remain competitive, they had to produce this large range of products, causing smaller businesses to be integrated into larger, concentrated companies. Therefore telecom manufacturers have many more options to choose from along the production line, and the suppliers hold less power.
Rivalry
The intensity of rivalry is medium. For one, the number of main competitors is large without significant differences in the market share held. According to Table 2, Huawei
Threat to Entry
China was facing a boom in the industry of telecom equipment, and the growth was continuing. Discovering such great potential in China’s market size, foreign companies started to see advantages in entering China; however, their entry was restricted due to government policy. This ownership restriction by the Chinese government largely raises the entry barrier, forcing most foreign firms to set up joint ventures with local Chinese companies to enter the industry. Should a firm decide against forming joint ventures, they would be completely barred from the Chinese market. Secondly, the industry involves a high level of capital investment for manufacturing, engineering, research and development, equipment, etc. This huge financial pressure prevents firms from entering the industry. Therefore, the threat to entry is low.
Supplier Power
Suppliers of the telecom industry include raw material providers and equipment manufacturers. Suppliers’ power has been increasing over the years, due to the development of technology and the demand of the changing market. In the early years between 1960 and 1980, since a large amount of suppliers existed in the industry with great specialization, the telecom manufacturers always needed to find a specific supplier for a certain part of production. However, as digital technology, the Internet, and networking advanced the pace of telecom services and the range of products demanded, the suppliers were required to be more diverse than ever. To remain competitive, they had to produce this large range of products, causing smaller businesses to be integrated into larger, concentrated companies. Therefore telecom manufacturers have many more options to choose from along the production line, and the suppliers hold less power.
Rivalry
The intensity of rivalry is medium. For one, the number of main competitors is large without significant differences in the market share held. According to Table 2, Huawei