HUAWEI INTERNATIONAL COMPANY
Table of Contents
The world has been digitalized and reduced into a global village. People can communicate and conduct business online. Huawei Company is outstanding by ensuring that this is possible through the manufacturing of smartphones that facilitate communication through information passing. The company has established itself all over the globe and has its operations across all the continents. It has, however, faced numerous challenges when trying to establish itself in the international market due to competition from other companies and political factors, and geographical factors in a new market environment. Taxation is one of the political factors that the company faces in the new market environment. It should comply with the government policies to take roots in the international market. To overcome all these challenges, the company should be innovative to take market advantage and reduce competition from other companies. This is by ensuring they come up with new technology which is up to date and caters to the needs of their customers. The company should also do enough research on the business environment of the countries they want to establish themselves. This will help in identifying the potential threats to the stability of the business and professionally respond to them. It should also comply with business registrations by the government in the new market environment.
Huawei International Company
Huawei is a Chinese manufacturing company that deals with the production of smartphones. The company has its business competitors who include Techno, Apple, and Samsung, Nokia, and others who produce smartphones, therefore posing competition in the job market. The company makes billions of money from the sales they make annually across the world. The customers who use their products are mainly people in urban areas and students in higher learning levels who rely heavily on computer devices to facilitate their learning. The company, however, tried to establish a new market in the United States, but it was faced with cultural, environmental, and political factors while selecting the company in the new market environment. This paper examines how the company can use international trade theories to deal with these issues and the import and export theories and trade model to be adopted by the company.
Huawei was founded in 1987 by Zhengfei, a former officer in the Chinese people’s liberation army in China. It is a global company that deals with Smartphone devices and information communication technology. The company has over 19400 employees, and it operates in over 170 countries. Their services are extended to billions of people all over the world. However, this company is owned by its employees through the Huawei investment and holding the Ltd union. There is no other organization outside their employee’s shares in the company, not even any particular government. The main goal of Huawei is to create a fertile business environment by creating space for every person. It aims at giving its customers the best service in the field of ICT infrastructure and Smartphone devices. By the end of the year 2020, the company had an active membership of more than 600 industrial organizations, including academic associations, industrial Alliances, open sources, and standard organizations. The company philosophy is customer-centered, and it aims at innovations to meet the needs of its customers. The company’s potential market is the urban population who live in developed areas where there are Wi-Fi connections. Students in higher levels of learning are also their customers because they highly rely on smartphones to facilitate their online teaching. Young people are likely to use Huawei products more than old-aged people.
Huawei International Company has to consider some factors that will affect their operation in the US. These factors will determine the supply and demand of their products. These factors are political, economic, cultural, and environmental, and they will directly or indirectly affect their market.
This refers to the influence of the government on the market. They influence the business through government policies, tax policies, trade restrictions, political unrest, competition regulation, and import-export regulations. Tax policies can significantly affect the Huawei Company in the United States of America. Increasing the taxes will result in Huawei increasing the prices of their products. This will affect the demand for these products because the number of people who will afford to buy these devices will decrease. High tax rates on imported goods may also affect the cost of Huawei products. The company should comply with all tax policies to avoid the closure of its operation by the government.
Government policies also play a significant role in the type of market in a country. The political culture of the country determines them. The guidelines are established to guide businesses. These policies influence interest rates rate, while a low interest rate attracts more investment increasing consumer spending. Government enters into a bilateral agreement with other nations to reduce barriers to business. Huawei should be flexible to be able to respond to changing rules and policies. Political stability in the United States of America has been attracting many foreign investors. They are assured of their security and that of their products. When the government is stable, it makes a business-friendly policy that will promote all businesses without discrimination. Investors will also start their market in different parts of this country, expanding their market and making their products available for their customers.
Trade restrictions are of different types. Tariffs, licensing requirements, and standards. Reduction of trade restrictions benefits consumers. These restrictions are put in place to protect the domestic industries by making imported goods expensive. The government also limits the number of goods that are imported. Huawei needs to be aware of these trade restrictions, apply for licenses to operate in the US, and meet the health and environmental standards to carry to its operation effectively.
These factors play a significant role in determining the prices of products and services. They may affect the market directly or indirectly. They can also change the supply and demand of these devices because they affect the purchasing powers of customers. These factors are unemployment, inflation, interest rates, exchange, and economic growth. Unemployment affects the market of commodities. When a large population is unemployed, the amount of money they will be getting will always be directed to their primary needs like buying food, clothes. They will be unable to purchase the Huawei devices; hence the demand for these devices will be deficient.
A higher interest rate lowers the income of consumers. This affects their spending because they will use a lot of money to service their loans and keep them current. This will result in them spending less on buying other kinds of stuff like phones, laptops. This, in turn, will lower the demand and supply of these devices. Lower interest rates will increase the money supply encouraging consumers to spend. This will increase the demand and supply of these devices. It is suitable for the Huawei Company to understand how these interest rates will affect their market. Rising inflation makes local goods expensive and imports goods cheaper hence attracting more customers. Therefore the company should consider the inflation rate to be able to determine the prices of their product. High inflation will increase the demand and supply of Huawei devices. The economic growth of the United States is highly developed. They have integrated technology into their economy to boost these developments. This offers a ready market for Huawei products as many will purchase these smartphones to communicate and also for other purposes.
The cultural factors determine the trend of the population. For example, cultural barriers, age distribution, among others. These deal with the norms, culture, and values that are acceptable within a given country. The existence of cultural barriers limits people from using various products. The company should be aware of the cultural diversity in the United States to appeal to all regardless of their culture. The social status of the target group matters a lot. The Huawei Company should produce cost-friendly products available at affordable prices for people from all social classes.
The products of Huawei should be environmentally friendly. The materials used to seal these gadgets should be biodegradable. They should also educate people on how to dispose of those devices when destroyed. Through this, they will be taking care of the environment. Environmental factors such as weather, climate change may affect the market of these devices.
The international trade theories are simply different theories that try to explain international trade. Therefore, it is a set of organizing ideas and thoughts explaining the exchange of goods and services between two entities and countries. They seek to provide an elaborate framework and what business strategies to use and how they affect international trade. The theories, however, are classified into two; classical ideas and modern theories.
These are the theories developed in the 19th century during the industrial revolution. The aim was to create an economic model to shape the growing international trade due to surplus production. The theories, however, continue to make sense and shape business ideas in the global market.
This was the earliest effort to develop an economic theory. It argued that the wealth of a country was determined by the gold and silver that they possess. According to Magnusson (2019), a government should increase possession of gold and silver by encouraging more exports than imports. In this case, the Huawei company should increase the volume of its products in the international market to maximize profit. The importance of products they sell should be very high from the expenses they incur when buying raw materials to produce their products. This idea is called protectionism. Many companies have embraced this idea by ensuring they export greater quantities of their products than the import of raw material and other essential resources. This will help the company to grow and expand in the market environment. The government plays an indispensable role in protecting businesses. In this case, the US government has introduced taxes to protect their local businesses. The company can consider negotiating with the government to reduce trade tariffs imposed on them to ensure that the company maximizes profit and reduces situations where they lost a lot of revenue.
This theory was put forward by Adam Smith in 1776, where he questioned the mercantile model. He provided his argument based on the efficiency of a country’s inability to produce goods than another country. According to him, restrictions are not necessary, and market forces should govern free trade. Therefore if a country is good in production than another country, it is better in that field and should specialize in it for mastery of skills (Patel, 2017). Huawei Company specializes in the manufacturing of smartphones. There are other companies within this market and are producing the same products produced by Huawei Company. The company should focus on specialization to develop better products than their competitors to ensure they take advantage of the market environment. This will help them build a good reputation for their customers, and their business will prosper in the international market and outshine their competitors. The people of America have a diverse culture, and they use various products from different companies. To overcome this, the company should establish their market beyond these cultural issues to ensure that they dominate the market by making their products more appealing to attract more customers from all diversity. This will help the company to have a market advantage over the other companies.
These theories emerged after World War II and were formulated by business experts such as professors, which makes them different from classical ideas that were profound by economists. The argument of these theories is based on the expansion of multinational companies
This theory was developed in 1961 by Steffan Linder. He argued that the countries that are at the same level of development have similar preferences. According to Uddin (2021), this theory postulates that the company first produces for domestic consumption, and when they explore in the international market, their potential customers are similar to those in their home country. Trade is therefore preferred to be successful in countries with the same economic standard and per capita income. Huawei Company should first identify their consumer’s goods in their country to identify the potential customers in a foreign market. In this case, most people who live in urban centers, students, and companies are the most potential customers of Huawei products. When establishing a market in the US, the company should target people living in urban areas and those in rural areas. However, they are the largest population in the country and can get products from Huawei because of their economic status. This is an opportunity for the business because the population will be able to consume their products.
The proponent of this theory is Raymond Verma, a Harvard Business school professor in the 1960’s. The theory argued that a product in the market has a life cycle that has three stages (Bazirova, 2013): new product, maturing development, and the standardized product. The production and innovation of new products happen in the home country. The product undergoes the maturity stage and standardized stage, where every person knows it. Huawei Company was started in 1987 in China. During this period, Huawei products were new in the market and, therefore, in the international market’s first stage. The products reached the maturity stage, where they dominated the market in China. The Huawei products have reached the standardized product stage where the products are known in foreign countries, and also they dominate their markets. These products have dominated markets in America, Asia, Africa, and Europe. However, this theory does not provide ways that a company can use to ensure a substantial profit advantage in the global market. The company should consider the inflation rates to determine prices for their product to attract more customers.
This theory was propagated by Paul Krugman and Kewing Lancaster in 1980. The approach focuses on how multinational global companies can achieve a competitive advantage against other companies in their fields (Zhao, 2015). Huawei Company faces international competition from other companies such as Nokia, Apple, Samsung, and Techno. The company should develop a competitive advantage to ensure that they prosper in their business. It should always be aware of the barriers it will encounter when establishing a new market in a foreign country. Access to raw material is a problem likely to be encountered, and therefore the company should come up with new strategies to apply to cope with this situation. The company should develop unique business strategies and their experience in other countries to outshine their competitors. This is by providing new technologically advanced gadgets which are unique in the market.
The proponent is Michael Porter. This theory was developed in 1990. According to Porter (2011), a nation should focus on innovating and upgrading its industries to gain a competitive advantage. The gaining market advantage for Huawei Company depends on how innovative they become and upgrading their products to be able to dominate marker. There are determinants of a company’s competitive edge: local market demand condition, local suppliers and complementary industries, and local firm characteristics.
The company tries to identify the resources available in a nation in terms of materials and availability of labor. Huawei Company should locate the availability of resources required by the company. This is to determine the value of impact versus export. If there is enough labor and help in the country will ensure that the company has a sustainable competitive advantage in the market.
The home market is significant for the growth of every company. Before establishing a company in a foreign market, it is good to focus on the potential local customers. In this case, the urban dwellers and students from higher learning institutions are the local market for Huawei products.
Every company requires support from industries that provide them with inputs that are necessary for the market. Huawei Company should look at complementary companies that supply them with inputs needed to ensure sustainable complementary advantage. This will help increase productivity.
This includes the structure of the industry and its competitors in the market. There are local companies that will provide competition to Huawei Company. This healthy competition can lead to innovations to fit in the market. They are affected by government policies because the government imposes higher tariffs that hinder healthy competition and give an advantage to a particular company.
Imports are the goods and services purchased outside the country boundaries rather than the consumption of locally produced goods and services. On the other hand, experts are goods and services produced locally but sold to foreign countries. According to Simon, Schuster, and Kasahara (2013), the export should always exceed the imports for the nation’s economy to grow. This means that a lot of foreign money is coming to the country. Through imports of electronic gadgets manufactured by Huawei will be available to the people of America. A high level of imports of Huawei products will indicate a growing economy, hence increasing demand and supply of those devices. The exports and imports grow in a healthy economy. If the country’s currency is weak, it will make imports very expensive, affecting their demand and supply. The country currency, therefore, should not be vulnerable to make imports available at affordable prices. This will make the Huawei products market very low. High inflation will make consumers spend low on imported goods and services as people will lack money to buy these foreign goods to rely on domestic goods and services. Therefore, Huawei should export the products to the US because the market is good, competitive, and able to increase its sales. As they decide to ship their products, they should consider the transportation cost and the taxes so that they can set friendly prices for their products.
Huawei Company needs to be innovative to maintain itself ahead in the competition. Innovating will be done through research and development of their products which must go hand in hand with technologies (Lan, 2021). Their products should be attractive and profitable. Innovation is used as a competitive advantage. New products will allow Huawei to generate more revenues and penetrating the market to ensure broad reach. Huawei market keeps growing reach. It does not focus on a specific market. They should sell goods and services that fit consumers and the information technology industries (Park, 2021). The company adds more authorized dealers in America to increase their sales in the current market. The company also uses promotion through different social media platforms. Advertisement encourages more consumers to buy Huawei products.
In conclusion, Huawei International Company should consider the political, economic, cultural, and environmental factors that can affect their operations in South Africa. Before establishing a new market, they should be aware of the international trade theories and apply them in their operations. They can apply them to develop and maintain the new market in the US. Huawei has strategic objectives which enable them to maintain their market despite the competition. They maintain their stand through research, innovation, advertisement, and the production of more attractive goods.
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