The story
Huawei of China is the world’s second- largest supplier oftelecommunications equipment. The company has been expanding intointernational markets since 1997 but its brand has until recentlyremained little known outside its native country. One reason isthat Huawei is a business-to-business supplier rather thanconsumer-focused.
As part of its globalization strategy, Huawei decided to beginoperations in India in 2000.
The challenge
In India, Huawei faced various difficulties. First, the companyneeded to build a strong and distinctive brand for non-Chinesemarkets. In India in particular, the telecoms equipment market wascrowded. So Huawei needed to establish a reputation as a reliablepartner and create a distinctive identity.
Its Chinese roots worked against it on several levels. An enmitystill exists between India and China, with an unresolved borderdispute in the north and a history of armed conflict as recently asthe 1970s. Also, many Indians perceive Chinese companies to beclosed rather than transparent. Thus, Indian businesses often findit difficult to establish relations of trust with Chinesepartners.
Chinese companies also have a reputation – not always deserved –in India for producing low-quality goods. Similarly, Huawei wasseen primarily as a low-price manufacturer, which meant itsproducts were regarded as of low quality. The fact that the companyspends 10 per cent of its profits a year, about $3bn, on researchand development, was not widely known.
The response
Huawei realized that in order to compete in India it would haveto invest heavily and get to know the market and its particularfeatures.
With this in mind, it established R&D and service centers inIndia, and 90 per cent of the jobs created went to Indians. Thishelped to persuade sceptics that Huawei was interested in valuecreation in India, not just value extraction. Today, India isHuawei’s second-largest research base outside China.
At the company’s two production plants in Chennai, Huawei staffwork with local companies to help bring the latter’s productionquality up to international standards. The long-term plan is tosource as many components locally as possible. Not only are suchcomponents cheaper, they also help local companies achieve higher-quality standards, making them more competitive, spreading skillsand boosting the economy.
Huawei has also begun promoting consumer products such assmartphones. Recently the company established a link with a leadingIndian English-language news channel to sponsor a contest thatprojected Huawei smartphones as aspirational products, contrary tothe prevailing low-quality perception of Chinese brands.
To build an employer brand, Huawei has developed a strongculture of rewarding R&D talent and promoting Indian employeesto managerial positions. The hope is that this will be an addedboost to the company’s reputation in the country, which has astrong young talent base in engineering. Strengths in research andinnovation in India could help Huawei to enhance its reputationworldwide.
The lessons
There is a tendency to think of cultural barriers as beingstrongest between west and east, and writers on strategy andmarketing sometimes assume that there is a cultural affinitybetween China and India that greatly reduces such obstacles.
In fact, Chinese companies find market entry in India just asdifficult as western companies. Huawei’s strategy is one that canbe adopted by other foreign companies no matter what their origin:demonstrate trustworthiness, build relationships, commit to Indiaand provide superior quality.
- Explain the challenges faced by Huaweito enter Indian Market.
- Based on the case study, explain the market entrystrategy adopted by Huawei to enter Indian Market.
