FORMATIVE ASSESSMENT 1

Read the article below and answer ALL questions that follow Huawei Transforming A Chinese Technology Business To A Global Brand Huawei Technologies was founded in 1987 in Shenzhen, China as a rural sales agent for Hong Kong-based phone and cable network businesses. In the 1996 to 1998 period, Huawei first expanded into metropolitan areas of China as urban populations exploded. Global management consulting firm McKinsey & Company predicts that Chinas urban population will hit the one billion mark by 2030 and have 221 cities with over one million inhabitants by 2025 compared to 35 in Europe. Today, Huaweis products and solutions are deployed in over 170 countries, and serving more than one third of the global population. Huawei is the third-biggest global manufacturer of routers, switches and other telecommunications equipment by market share after Alcatel-Lucent and Cisco, and the brand recently joined in the ultra-competitive smartphone race. For many observers, Huawei has seemingly come out of nowhere to become one of the worlds most dominant technology brands. Primarily a business-to-business company (B2B), its biggest gains have been outside of the public eye. Major customers include telephone and internet operators, which use Huaweis expertise to provide services to customers under their brand name, not Huaweis brand. It also lacked worldwide fame due to its Chinese origins. With up to one-fifth of the worlds population within its own Chinese borders, Huawei has been able to grow while still remaining relatively isolated.Huaweis core business can be dissected into three business groups. The first group, the Carrier Network Business Group provides wireless networks, fixed networks, global services, carrier software, core networks and network energy solutions that are deployed by almost all major communications carriers worldwide. For seven years leading up to 2012, the compound annual growth rate of Huaweis managed services division exceeded 70 percent annually, making Huawei the fastest-growing managed services provider globally. Huawei calls this it's pipe strategy, focusing on Information storage & processing, information transportation & distribution and Information presentation & creation. In April 2017, the brand announced its plans to create a separate cloud business unit as part of its plans to invest USD 1 billion to expand its cloud business. Although it received no branding benefits, by 2008, it was ranked No.3 in the global mobile equipment market. It has now successfully shed its role as an original design manufacturer (ODM) and begun to manufacture and brand its smart devices. The movement up the value chain from component manufacturer to self-branded smartphone maker is a major part of Huaweis current and future growth strategy. Huawei Consumer Business Group became the third largest smartphone manufacturer by market share in 2017 commanding 10% of the total global market.Huaweis vision is to enrich life through communication. More people are becoming connected worldwide on ever-faster devices, with greater demands on speed, usability, and a secure and personalised experience. Businesses have their own demands and use technology to manage logistics, operations and all kinds of consumer data. By 2020, interactions between people, things and the environment are expected to result in over 50 billion connection requirements from GPS, compasses, cameras and microphones, not just communications. To deal with these digital floods, Huawei is committed to provide broader, smarter, and more energyefficient pipes.Working closely with customers and being customer-centric is Huaweis greatest differentiator. It has set up 15 research institutes and centres, and 36 joint innovation centres operating directly with leading carriers worldwide to create customised technologies for each carriers unique needs and establish their competitive edge for customers. In 2016, Huawei was ranked the 46th most innovative company globally by the Boston Consulting Group. It ranked first two years in a row in terms of global Patent Cooperation Treaty patent applications from 2015 to 2016. With 180,000 employees, Huawei has over 80,000 research and development employees (comprising 45% of its workforce) in Germany, Sweden, UK, the U.S., France, Italy, Belgium, Finland, Ireland, Russia, India, and China. Huawei understands that strong brands drive innovation and this is reflected in its worldwide operations. The overall R&D expenses of Huawei totalled 14.6 percent of annual revenue in 2016. Huawei believes that its resources remain committed to a sharply-defined purpose of enriching life through communication. After its successful foray into the smartphone business, Huawei has pursued a philosophy of positioning its products as technologically-advanced problem-solvers. It aims to link its solutionproviding legacy to the worlds biggest telecommunication providers with its future platform of manufacturing and selling the most advanced phones. Huawei not only has to master the current technological level, but also anticipate future customer needs. Outsmarting current technology and setting industry standards are integral strategies for Huawei. There are almost 200 fourth-generation networks operating commercially across 75 countries today with another 200 still in planning stages. Meanwhile, Huaweis R&D teams have been working on developing fifth-generation (5G) networks for several years, expecting to introduce commercial 5G networks by 2020. Huaweis foresight will make it the first-mover in 5G technology when the time comes. Huaweis rotating CEO Ken Hu suggested 5G will be up to 100 times faster than 4G. Huawei is taking further advantage of its growth by becoming an international leader in various industrial standards. As a leader in cloud and storage standardisation, Huawei holds over 20 key positions in international standards organisations. From this leadership platform, Huawei can shape the future of information technology policy and help it stay ahead of competitors. Huawei has taken great strides in aligning its internal leadership and hierarchy to remain responsive in a fast-moving industry. Although a chain of command that promotes uniformity and control quality is vital for branding, it can be detrimental to innovation. Making more decentralised decisions is important, and Huawei has begun delegating decision-making authority to customer-facing roles and field offices, encouraging idea flow.By far the riskiest, and potentially the most brilliant leadership strategy, is Huaweis rotating CEO system where a small group of executives takes turns to fulfil CEO duties. Compared to one single CEO who is expected to handle multiple strategies with in-depth insight, a group of rotating and acting CEOs is believed to be more effective as they have time to better prepare for their next term as acting CEOs. This ensures that a wider breadth of expertise is present in the most senior leadership positions over time. Technical prowess, combined with unique senior management style, allows the company to operate with a fresh thinking towards its brand strategy. In 2017, its corporate branding campaign took on a very different spin as it used a picture of a lighthouse beam piercing through the darkness under an Australian night sky the beacon of light metaphor conjured up by world leaders to reflect their intention to be a guiding light for others. Huawei has been continuously leveraging technological expertise in its product positioning. The company does not hesitate to use words and phrases that describe its products as the best or the fastest. The underlying strategy is to create a very high value proposition attached to its products. The brand strategy is accompanied by a strong visibility campaign. Beyond China and the U.S., the companys smartphone brands have found potentially lucrative opportunities in India, Indonesia, Taiwan and many African countries. These newfound opportunities have linked nicely with Huaweis status as an entry-level challenger in most markets and enabled it to design and implement a global marketing strategy rather than grapple with the complexities of different maturity levels in different markets. Huaweis landmark year on the global stage came in 2005 when international contract orders first exceeded domestic Chinese sales. Recognising that an identity change would be needed to accompany its ascendance on the global stage, Huawei redesigned its corporate identity to reflect principles of customer-focus, innovation, steadiness and harmony. The new image was intended to balance internal challenges occurring within Huawei reflecting its transition from a traditional, local brand to a modern, international one. In Africa, Huawei has put tens of millions of smart devices in the hands of African youths and brought 1 million African small and medium-sized enterprises (SMEs) online. Although Huawei has achieved tremendous success in the past 30 years, it has its own unique set of business challenges. Being in the digital and technology sector where things are changing at an exceedingly rapid pace every day, it is even more important for Huawei to put innovation at the forefront of its game. For Huawei, continuing to push forward with R&D is insufficient. As a cautionary tale, Nokia spent ten times more on R&D than Apple between 2004 and 2007, yet Nokia steadfastly built products to satisfy its current key segments needs, ignoring the small number of consumers who showed great interest in future touch-screens. Similarly, Huawei must continually seek to satisfy and create future consumer needs rather than their current ones. Although Huawei is an entirely employee-owned private company, it will certainly attract attention from investors looking to latch on to its impressive growth.However, Huawei still has a relatively weak presence in the South Asian, Indian, and North American markets, which limits its potential to take a sustainable second place position behind Samsung. The board and business management of Huawei will need to take a closer look at the companys entire global business strategy and determine the next important steps for Huawei.

Question 2 (25 Marks)

ustify why Huawei needs to enhance the methods used to assess the stability of various currencies and long-term forecasting.