SWOT Analysis
SWOT analysis is a vital asset to the company’s strategic planning efforts. This analysis aims to aid the company’s management in identifying the most influential factors and choosing an appropriate direction for further development.
Strengths
One of Huawei’s main strengths has always been its attention to the customers’ needs. From the early days of the company, when it manufactured private branch exchange switches for small enterprises, Huawei performed on-site repairs, even if that meant flying the necessary personnel there (Ofek, et al., 2018). This dedication to providing quality service is even more valuable now when the company works with large telecom operators that depend on it.
The focus on the customer does not end at repairing their equipment either; it extends to all aspects of the company’s operation. For instance, Ren Zhengfei, the founder of the company, would call for his cabs when going on business trips, which shows that Huawei is centered around pleasing its clients, not its bosses (Ofek, et al., 2018). The theme of not focusing on the executives could also be seen in the ownership policy. Only 1.4% belonged to the founder, while the other 98.6% belonged to the Union of Huawei, comprised of 81144 employees, almost half of the entire staff.
When Huawei was making efforts to expand beyond the Chinese market, it significantly increased quality. Whereas before, the company’s products were priced lower than the competition at the cost of long-term reliability, now this is no longer the case. To combat the negative reputation of Chinese products in its target markets, Huawei implemented stringent quality control and invited customers to see their facilities in China (Ofek, et al., 2018). In addition, the company invested heavily in R&D to further improve quality and technological excellence.
Weaknesses
It seems that the company’s main weakness is its lack of presence in the US. The North American mobile electronics market is said to be extremely lucrative. However, it is very different from the European and Asian markets in the way the smartphone business operates. Cellular network carriers account for 95% of the sales, and 70% of those are made by Samsung and Apple (Ofek, et al., 2018). Entering this highly competitive space was challenging for Huawei, as it had very little brand recognition in the region. In addition, the major carriers “were only interested in working with Huawei on low-end, white-label devices” (Ofek, et al., 2018).
Huawei’s strategy was focused on building its brand, so the company began selling its phones through online retailers. Despite organizing a partnership with Google and introducing options at various price points, Huawei did not gain a strong following in the US and ultimately failed at penetrating the market.
Another weakness of the Chinese technology giant is its low-profit margins. To compete with established brands, Huawei had to give customers more value for their money. Consequently, the company invested heavily in developing innovative technologies and quality control. This strategy proved to be useful in gaining market share and a positive brand image, but it is not sustainable. The CEO of Huawei’s Consumer Business Group, Richard Yu, stated that sacrificing healthy profits is not how he plans to make the company lead the global phone market (Ofek, et al., 2018). Inevitably, Huawei will have to raise its prices, which is going to bring new challenges.
Opportunities
As a technologically advanced company with unique insight into the carrier side of mobile networks, Huawei had plentiful opportunities to take advantage of. The most apparent one is the possibility of producing phones with better cellular reception. Huawei could use its technical expertise to bring 4.5G and 5G phones to the market sooner than their competitors could (Ofek, et al., 2018). However, to benefit from this, the company would first have to persuade its customers that the new technology would improve their experience dramatically.
What could be even more enticing to customers is new camera features and improved image quality. With modern smartphones, performance in games and everyday tasks is satisfactory across all major brands, and even older or lower-end models have sufficient processing power to provide a smooth user experience. Consequently, the faster, more efficient hardware that used to sell new phones now only gives marginal improvements each year. To have a substantial advantage over the competition, Huawei can further develop its camera technology. Its partnership with Leica has already produced impressive results, so it is only logical that the company continues to work in this direction.
Threats
For any company in the smartphone business, one of the biggest threats is competition, and Huawei is no exception. The rivalry with Apple and Samsung in the US is particularly challenging for Chinese manufacturers. However, the situation becomes even more difficult with the US legislators attempting to ban companies connected to China from working with American businesses (Ofek, et al., 2018). This is a significant danger that can render all Huawei’s previous efforts at building a brand image in the US futile.
Market Segmentation
Market segmentation and target market selection are done using demographic approaches, geographic approaches, and behavioral approaches.
Demographic Segmentation
The demographic segmentation for Huawei is based on age, income, and consumer preferences. The youth that is not looking for much in a phone and just needs simple social functions should be happy with the ultra-accessible Y series (Ofek, et al., 2018). Adult customers who want more features and better hardware, but cannot afford to spend a large amount of money on a phone are targeted by the G series that combines performance with an appealing price. Those who are not thrilled about every new technology Huawei has to offer, but still want a premium high-status phone choose the P series (Ofek, et al., 2018). Finally, users who wish to be at the bleeding edge of progress at any cost purchase Mate series smartphones.
Geographic Segmentation
Huawei sells most of its smartphones in Asia, China, and Europe; besides, it tries to enter the US market but is yet to find any meaningful success in that field. The three main markets differ significantly in their consumers’ tastes. Asian shoppers see buying a smartphone as an emotional experience; they are excited by new features and advanced technology (Ofek, et al., 2018). Consequently, Huawei targets this segment with its most innovative Mate series. The Chinese market is similar, although more fashion-oriented – smartphones there often serve as a status symbol. The flagship P and Mate series phones are meant to satisfy this market’s demand. Finally, European buyers are the most rational in choosing a phone: they are concerned about privacy and value for money. Huawei has a variety of affordable phones for this region.
Behavioral Segmentation
Behavioral segmentation is connected mainly to the way different people buy and use their phones. The younger generation that grew up with the internet is used to making their purchases online. Marketing through traditional means that Huawei uses for its products does not reach them. To capture this market segment, the company has created an independent brand called Honor. It does not have retail locations or large-scale advertising campaigns on billboards and TV; instead, it operates almost entirely over the internet (Ofek, et al., 2018). The brand can also offer lower prices since it is not affected by the overhead of a broad network of stores, and promotes itself in relatively inexpensive ways.
The usage patterns also differ significantly among consumers, and the company needs to choose what features to develop. When Apple introduced its force touch technology, Huawei followed, expecting the function to distinguish its products from others, but it was rarely used. When Apple showed the new animojis, Huawei has decided that this feature will not bring value to users (Ofek, et al., 2018).
Decisions such as those are crucial for the company’s strategy and resource management. Developing the features that people will use can boost the brand’s image significantly, which is what Huawei desires so much. However, allocating too many resources to something that would ultimately be of very little use for most consumers is bound to diminish Huawei’s market share, when consumers choose options that provide more value. It seems that Huawei considers these choices extremely carefully and does not merely follow its competitors as it used to do.
Reference
Ofek, E., Tao, T., Yin, E., & Dai, N. H. (2018). Huawei: How Can We Lead the Way?. Harward Business School.
