Huawei Technologies is the leading Chinese multinational telecommunications equipment and services firm and it has consistently sustained an internationalisation drive – having achieved significant success in its domestic operations. In furtherance of its international expansion project, it sets out to identify new markets where it can do business successfully, expand its customer base, and increase its revenues. The present paper identifies India as a potentially lucrative market for Huawei, and suggests that the company needs to adopt a product and promotions based marketing strategy to exploit the opportunities in the Indian market environment and counter the challenges and threats.
With efficient implementation of the marketing plan and consistent monitoring and evaluation, it is projected that Huawei would gain competitive advantages in market share, product offerings, and sales revenues within three years of entering the market.
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The integration of global economies and opening up of opportunities across borders made possible by globalisation has enabled many companies to explore new markets in international locations in order to expand their business (Alli et al, 2007). Although the motives for internalisation vary from one organisation to the other, many businesses that seek real growth in size, scale, and scope find it necessary to consider expansion into foreign markets at some point in their evolution. While for some firms, the domestic market is inadequate to match the production output or supply, others realise the need to pursue internationalisation to achieve economies of scale and to exploit new opportunities and resources (Hill, 2009).
Indeed, many organisations realise that they need to devise strategies that not only help them retain their customer base, but also to grow and expand their customer base and enhance their competitive advantage in this age of globalisation. Accordingly, foreign market entry and international marketing are central to the strategies that many modern business organisations adopt to remain competitive (Dess et al., 2004; Parker, 1998). This provides the basis for international marketing, which refers to the adoption and implementation of marketing practices across the border, particularly in terms of market identification and targeting, entry mode selection, as well as strategic decisions that helps a company do business and compete in foreign markets (Joshi, 2005). This background provides the context for this report, which attempts to create an international marketing plan for the internationalisation plans of Huawei Technologies, a Chinese technology and ICT solutions company
Objectives for Huawei’s Internationalisation Plan
Huawei Technologies has achieved considerable success in its domestic market in China. However, the company was not satisfied with its domestic success, and this explains why it progressively explored and entered several international markets to expand its customer base and economies of scale (Nakai and Tanaka, 2010). In seeking to enter new international markets, Huawei’s key objectives are consistent with the motivations that drive many companies to internationalise. In this regard, Bartlett and Ghoshal (2005) suggested three main objectives of international expansion: market seeking, securing key supplies, and accessing low cost factors (e.g. cheaper raw materials, labour, etc.). Put differently, Johnson and Turner (2003) suggest that companies internationalise based on the objectives of market seeking, resource seeking, efficiency seeking, or strategic asset seeking.
The objective of market seeking is especially strong in firms that have some kind of intrinsic advantage – in terms of their superior technology, resources, or brand name that may facilitate competitive advantage for them in overseas markets. In Huawei’s case, market seeking is a very strong objective for international expansion, given that the company prides itself as a leading provider of ICT solutions and has achieved brand recognition for advanced technology prowess in the markets where it already operates.
On another level, it is also possible to define Huawei’s foreign market entry objectives in terms of the product cycle theory, which suggests that the process of internationalisation typically begins with an innovation created by a firm in its home country (Vernon, 1996). When such an innovation or product matures fully in the domestic market, the firm begins to explore the possibility to going overseas with it to find new markets (Ibid). Following this theory, Huawei’s international strategy is arguably triggered by a technological advantage that can potentially enhance its competitive advantage by scanning for opportunities and interest in foreign markets in order to establish a global network of operations. Additional objective for Huawei’s foreign market entry plans are to exploit the opportunities of raising the company’s international profile and complement its domestic cost advantages with the differentiation advantages that are required abroad. These objectives are also shared by many growing companies in China that are increasingly exploring opportunities for internationalisation (Child and Rodrigues, 2005).
Assessment of the Market Environment
In order to make a successful entry into new foreign markets, it is often important for companies to undertake a thorough assessment of the market environment in their target markets. Market environment comprises the forces and actors in a given market that are outside the organisation and can affect its ability to initiate and maintain successful business relationships with its target customers (Kotler and Armstrong, 2006).
Market environment usually consists of two different environments: micro environment and macro environment. Micro environment comprises such factors that can have direct effects on the organisation’s strategy, and these include suppliers, customers, distributors, and competitors. On the other hand, macro environment refers to the wider forces in the society that define the characteristics of the market and shape the opportunities and threats the entrant faces (Kotler and Armstrong, 2006; Svensson, 2002). These may include economic, political, cultural, demographic, and technological factors. Accordingly, these factors may likely affect Huawei’s activities in the identified international market, particularly in terms of how the company is able to find customers and establish successful business operations in the market.
India is a potentially lucrative market for Huawei Technologies to target with its internationalisation plan, with particular focus on the Indian telecoms industry segment. There are many factors in the Indian market environment that would affect Huawei in its market entry attempt. For instance, the Indian telecoms and technology market is largely crowded and saturated – thus making the industry very competitive. This means that in order to make headway in this market, Huawei needs to quickly create a distinct identity and establish a strong reputation as a reliable solutions provider and partner.
There is also the problem of negative perception of Chinese companies in India, as a number of Indians perceive Chinese firms not to be sufficiently transparent; Chinese companies also contend with the negative reputation for producing products that are of low quality (Witzel and Goswami, 2012). This means that Huawei would have to contend with the challenge of establishing trust with potential Indian partners and customers, and prove that its products and services are of high quality contrary to prevailing negative perceptions of Chinese companies in India. There are also infrastructural deficits in many part of India, especially the rural areas, which may affect Huawei’s servicing of the Indian market. Many parts of India lack not only key telecom infrastructure, but also basic infrastructures such as power supply and roads (D&B, 2010). It may therefore be challenging for new entrants such as Huawei to operate successfully in such areas.
In spite of the challenges associated with the Indian market environment in general and the telecom market segment in particular, this market is suitable to target because of the considerable opportunities it offers and the resources available. The sheer size of the market and the number of telecommunications carriers in the country offers a potentially huge customer base for Huawei to exploit. The socio-political stability of India is also an advantage, as it would facilitate a conducive business climate for new entrants into the Indian market.
Marketing objectives refer to the measures of accomplishment by which the organisation can measure the degree of success of its marketing strategies. Marketing objectives may therefore include elements such as retention, market leadership, rate of new sales growth, and other indices (Joshi, 2005). In essence, marketing objectives clarify what the organisation wants to accomplish through its marketing activities. In order for marketing objectives to help the organisation achieve the required aims and successfully implement the marketing plan, they need to meet the SMART criteria, which means that they should be specific, measurable, attainable, relevant, and time-bound (Doran, 1981).
Huawei’s marketing objectives in seeking to enter the Indian market can be discussed in terms of the Ansoff Matrix – a conceptual model and marketing planning tool that describes how the organisation links its marketing strategy with its strategic direction. The Ansoff Matrix suggests four distinct growth strategies in marketing planning, namely market penetration, market development, product development, and diversification.
Table 1: Ansoff Matrix
In line with the provisions of the Ansoff Matrix, Huawei’s marketing objectives are mainly based on market development, which involves seeking to achieve growth by selling existing products or services in new markets (Ibid). Accordingly, Huawei’s key marketing objectives are to enlarge its customer base and increase revenues by establishing itself strongly in the Indian market within the first three years of market entry. These objectives are specific because they are straight-forward and clear. They are measurable because the total revenues and incremental number of customers can be quantified to determine how much progress is being made. The objectives are also achievable and realistic because Huawei already has significant experience, proven capability, and superior technologies that allow it settle quickly and make an impact in the new market within the projected time frame. They objectives are also time-bound, given that the projected three-year period for realising the objectives provides sufficient opportunity to set timelines, monitor progress, and adjust the plan where necessary in order to ensure that the objectives are realised within the set period.
In order to determine the most appropriate marketing strategies best combination of the Marketing Mix to adopt for the planned internationalisation project, it is important to note that Huawei Technologies would be entering the Indian market as a ‘latecomer’, as opposed to a pioneer. Pioneers refer to the firms that are first to introduce a product or service in a given market and establish themselves early on. On the other hand, late comers refer to later entrants who enter a market with products or services that are already in existence or provided by existing firms (Kalyanaram and Gurumurthy, 1998). Given that being a pioneer can provide significant market-share advantages over latecomers, later entrants often need to adopt distinctive marketing strategies and positioning in order to compete favourably with the existing firms (Gao et al., 2007).
Based on this reality, the marketing mix (i.e. price, products, promotion, and place) would have to be carefully evaluated to select the most effective combination suitable for Huawei as a latecomer in the Indian market. As such, the combination of product and promotion is suggested as the appropriate combination of the marketing mix that should be used in Huawei’s market entry plan. A product strategy should be central to the marketing strategy, particularly in terms of defining the product range as well as product standardisation in order to ensure the same quality products and services that the Huawei brand is renowned for in the existing markets in which it operates. This should also involve improving product and service quality through incremental innovation in order to compete favourably with existing rival products and services. This product strategy should also be combined with a promotions strategy that involves repackaging product and service offerings through effective advertising and marketing to penetrate the new market. This is best achieved by segmenting the market and focusing on specific target demographics where high impact promotional activities would generate customers seeking varieties or enhanced substitutes to existing products or services (see Matthews, 2002).
The marketing budget for Huawei’s planned market entry should be sufficient to ensure the realisation of the marketing plan objectives, while also being cost efficient at the same time. Considering that there are competing marketing initiatives and needs in the proposed plan, allocated funds must be dedicated to each aspect of the marketing effort to ensure that objectives are achieved in a measurable and timely manner (Luke, 2009).
The elements of the marketing budget for Huawei’s market entry as well as the amount allocated to each category are outlined as follows:
- Advertising and promotional activities (in telecom and ICT industry-focused journals, social media, etc)380,000
- Advertising and promotional materials (e.g. Brochures, fliers, banners, pens, calendars)55,000
- Product Repackaging & Redevelopment550,000
- Research & Development400,000
- Recurring expenses420,000
- Total Budget1,805,000
Monitoring and Evaluation:
Monitoring and evaluation is a critical phase of the marketing plan, since it helps ensure that the plan is being implemented as designed, and meeting the projected objectives. It is also useful in making it possible to adjust or modify sections of the plan in response to observed shortcomings and external unforeseen contingencies (Tourism NT, 2007).
There are a number of approaches that can be used for monitoring and evaluation, but for the present purpose, it is sufficient to adopt the McKinsey 7S Framework to monitor and assess the progress being made by the organisation towards achieving set objectives. The framework comprises strategy, structure, systems, staff, style, skills, and super-ordinate goals (or shared values). It is based on the premise that these seven components must be aligned and mutually reinforce each other in order to help the organisation determine where to realign needs to improve performance, or maintain alignment in order to sustain performance (Peters, 2011; Waterman et al, 1980).
Figure 1: The McKinsey 7S Framework:
Source: Peters (2011)
The McKinsey 7S framework would be useful in monitoring and evaluating the implementation of Huawei’s marketing plan, as each of the seven elements in the framework would be examined to determine where problems may arise along the line, and where further planning may be necessary. In specific terms, the performance of Huawei’s marketing efforts in its international expansion plan would be based on measurable elements such as extent of customer awareness and feedback in response to advertising and promotional efforts, sales response to portfolio of products and services, customer satisfaction with product and service quality, and ROI on marketing investments in relation to quarterly earnings.
Keys to Success:
- Targeted product redevelopment and repackaging to meet the specific needs of high-value ICT and telecom customers
- Focused promotional and marketing activities for maximum exposure to the targeted demographic of potential customers
- Reliable customer service and after sales maintenance support
- Faithful implementation of elements of the marketing plan in line with the time-line
- Critical Issues
The emphasis of product and promotion based marketing strategy is crucial for the success of the marketing plan. Since the telecom and ICT/telecom industry is highly dependent on quality of products and services, it is important to ensure that Huawei maintains its high product/service standard, and make necessary modifications to product formulation and packaging based on the location-specific requirements of the Indian market. Promotion is also vital, as the adopted promotional and marketing activities must be effectively implemented to establish the company’s presence quickly among potential customers. Lastly, the monitoring and evaluation process must ensure that the marketing plan facilitates Huawei’s incremental growth to a position of competitive advantage in terms of superior product offering, market share, and revenues within 3 years of entering the market.
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