INTERNATIONAL MANAGMENT STRATEGY OF HUAWEI
Internationalization of companies revolves around the risks and profits of different market entry modes, however, Internationalization benefits cannot materialized without an action plan or strategy for achieving the given organizational objectives. Without a suitable strategy or plan, any international assignment is bound to be unsuccessful. Huawei for example adopt Porter’s model of international management strategy. The five forces model was developed by Michael E. Porter (1979) to help companies assess the nature of an industry’s competitiveness and develop corporate strategies accordingly. The framework allows a business to identify and analyze the important forces that determine the profitability
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The threat of substitute is high if the substitute provides a cost-effective trade-off compared to the original product Martinez and Wolverton, 2009).
Bargaining Power of Buyers
When buyers have the power to affect prices in an industry, it becomes an important factor to consider for a company. Buyers tend to have power over an industry if they are important to the company, this may be if the industry is such that buyers either buy in bulk, or can easily switch to another supplier (Martin, 2014).
PORTER’S FRAMEWORK AND HUAWEI
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Majority of its revenue came from Africa, Southern Asia and Middle East. These regions are representative for the economic performance of EMs during the past few years.
Revenue of Huawei in 2016 totaled CNY521,574 million, representing an increase of 32.0% year-on-year. Net profit grew by 0.4% year-on-year to CNY37,052 million. There are several reasons behind this: As the consumer business grew rapidly and contributed a larger share to total revenue, the company's gross profit margin dropped by 1.4 percentage points from 2015; also as the company increased investment in building its consumer brand and consumer sales channels, total operating expenses as a percentage of revenue rose by 1.1 percentage points relative to 2015 (Annual report,
Also, the competition between existing players in this industry is high. There are about 619,000 metal enterprises in the USA in 2005 (IBISWorld, 2007).There are many companies that produce different kinds of metal products in the market. Besides, the bargaining power of buyers is high because product difference for the buyers of the metal products is small. It is not easy to differentiate the quality of one metal product from another. In addition, the cost of switching for the buyers is low. The number of substitutes of metal products is also high thus the buyers have great bargaining power.
Threat of Substitutes: Substitution, price-to-performance, and altering costs are all factors that determine the threat of substitutes. Bob’s app informs individuals about products, services, hours, classes, and much more. Gold’s Gym is a corporate fitness facility that created an app to record progress and report health statistics. Gold’s idea differs from Bob’s which decreases the threat of substitution.
(T) • Threats to substitute products or services – Threats of alternative products or services is considered greater, other means of transportation may turn out to being less expensive.
In such situations, the buying industry often faces a high pressure on margins from their suppliers. The relationship to powerful suppliers can potentially reduce strategic options for the organization.
Hill, C.W.L (2005). International Business: Competing in the Global Marketplace (5th ed.). McGraw-Hill/Irwin. New York, NY
Differentiation of Inputs – If a company needs various inputs from different suppliers, then those suppliers have a high power.
Over the last 30 years the world has seen drastic changes in the Chinese way of making business. Nowadays, China has opened its businesses to the rest of the world, especially America and Europe (Teagarden & Cai, 2009). As a result, their economy has increased and the evolution of the companies have changed to be from closed doors to be international and multinational (Teagarden & Cai, 2009). This essay will analyze, first of all, how some Chinese companies have had success abroad, looking at the strategy that they applied to expand and to improve their products. Furthermore, this essay will show examples of successful Chinese firms, such as Lenovo and TCL Group, and how they achieve it.
In a world of free trade, growing competition and accessibility to foreign markets, the need for methodical market analysis and assumptions is steadily rising in today’s business environment. It is just a normal way of thinking to primarily intent to eliminate the financial before entering a new and foreign market. This suggests that enterprises have to develop an overall strategy for their business in order to gain competitive advantage and consequently market share. With the words of Michael E. Porter, professor at Harvard University and leading authority on competitive strategy, this desirable market success is indirectly linked to the individual structure of a market. The unique structure of a single market influences the strategic behaviour and the development of a competitive strategy within a firm. The competitive strategy finally decides whether a company performs successfully on the market or not. Referring to this interpretation of business success, M. E. Porter established his five forces framework that enables directives to gather useful information about the business environment and the competitive forces in industries.
We all know that comapanies go international for many reasons but always typical goal is comapny growth and expantions. When a company searches for new interesting markets abroad and also hires international employees, using well designed international strategy can for sure expand business on foreign markets. Internalization strategy of companies is now possible because is no problem to manage business by phone or e-mail. There is also no problem to travel by plane from Europe to Asia in few hours what was not possible in past.
Buyer power within the industry is low as substitute products are not easily accessible, unless the customer decides to negotiate with the providers.
The other side of the matter is excessive adherence to preferred suppliers neglecting the advantages competitive pricing. Competitive pricing could pave the way for reducing the price of the end product. This is what the evaluation of the T5 agreement now suggests.
Our economic development will forever be defined as our ability to succeed internationally. PwC forecasts India’s real annual GDP growth until 2050 at 8.9 percent, Vietnam’s at 8.8 percent, and China’s at 5.9 percent. The list of fast-growing emerging markets goes on and on. The U.S. forecast is a meager 2.4 percent, comparable with most Western economies. The domestic companies that are likely to see incremental growth in the coming decades are those that are not only doing business internationally, but that are developing the strategic skill set to master doing business across cultures. Cross-cultural core competence is at the crux of today’s sustainable competitive advantage. For example, political environment will tell us, as to how and why political leaders control, whether and how of international business. Legal environment, both national and international will tell us about many kinds of laws by which business firms must work. The cultural environment will tell us about attitudes, beliefs and opinions important to business people. Economic environment will tell us about the economic system being followed by the host country, which may or may not be different from home country. It will also explain the variables such as level of development, human resources, Gross Domestic Per Capita and consumption patterns that determine a firm’s ability to do business. Geography will tell us about location, quantity, and quality of the world’s resources.
"While practically everybody today is a potential mobile phone customer, everybody is simultaneously different in terms of usage, needs, lifestyles, and individual preferences," explains Nokia's Media Relations Manager, Keith Nowak. Understanding those differences requires that Nokia conduct ongoing research among different consumer groups throughout the world. The approach is reflected in the company's business strategy:
Threat of substitutes in market as best quality is not always a priority for some customers as they are price sensitive.
iii. Bargaining Power of Buyers The bargaining power of buyers is high due to the low switching costs and the availability of substitute products. iv. Threat of Substitutes