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Indigenous To Internationalization: Case of

Huawei Technologies Ltd.
Conference Paper April 2014
DOI: 10.13140/2.1.2964.3841

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Technology Innovation Management

April 15, 2014

Indigenous To Internationalization:
Case of Huawei Technologies Ltd.
Jawad Ahmad Choudary and Adeleye Afolabi

Its fine to celebrate success but it is more important to heed the lessons of failure.
- Bill Gates

Abstract
By tradition, internationalization has been defined as an incremental process through which
firms gradually increase their degree of international engagement (Johanson & Vahlne, 1977).
This paper aims to identify the factors associated to internationalize, from a start-ups
perspective during the growth stages. In a market mostly dominated by large companies, the goal
of transforming from a local market to the international scale puts new ventures with different
challenges. This article is vital for entrepreneurs aiming to make an entrance into a market as an
indigenous firm with the desire to internationalize. It lays emphasis on the time to take a bold
step, and helps them to overcome the late movers position in some of the advance markets.
A profound study is done on how the chosen company (Huawei Technologies) had made
strategic choices to when and how to enter in an existing and highly competitive market. Also,
the study explores the important canvases of their business model, which includes the precise
time of entry, market segmentation and pricing strategy.
The article shows that factors such as a careful segmentation of the market, determining
the exact time of entry into the market, as well as an appropriate pricing strategy, all plays a vital
role to success when a firm decides to internationalize. A valuable implication of this study
underlines how and when to enter a highly competitive market, with a short supply of assets in
hand.

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April 15, 2014

Table of Contents
1 Introduction: .......................................................................................................................................... 3
1.1 The Case of Huawei: Internationalization strategy perspective ...................................................... 4
2 Literature review .................................................................................................................................... 5
2.1 Time of Entry: First Mover vs. Late Movers .................................................................................. 6
2.2 Market segmentation: Finding the market niche ............................................................................. 6
2.3 Pricing strategy: Price for Success .................................................................................................. 7
3 Conclusion ............................................................................................................................................. 7
References: ................................................................................................................................................... 8
Books: .......................................................................................................................................................... 9

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April 15, 2014

Introduction:
A local company emerge from the roots and seeks to advance into higher positions and

ranks. The most common ways they do this is through a simple export of the product, by
developing a joint venture to sell through a current sales firm in similar business, or sell licence
to foreign companies to collect royalties. All these, they term as growth and development, as
they plan to transform from a local market to the international or global scale, and in so doing are
challenged with many hurdles on their path to internationalization and being a success. The
reasons behind those difficulties are obvious, which are access to new market, and high
technology and managerial skills. According to Mcnally (2007), it is worth studying these
problems especially when a company enters into a market as late movers.
This paper is focused on one such company - Huawei, a telecommunications company that
originated from China, as we explore the strategies adopted by the firm to become a success.
Johanson & Vahlne (1977) sees internationalization as the product of a series of incremental
decisions. The key determinant to the international success or failure of a firm tends to be a
fundamental question in Strategy and International Business (IB) research. (Peng, 2004; Rumelt
et al., 1994). Many factors also come to play when firms seek to exploit such peculiar decisions.
Several studies (Low, 2007; Mcnally, 2007; Suarez & Lanzoll, 2005) support certain factors as
shown below:

Time of Entry
Partnership
Factors associated
with
Internationalization

Pre-sales & Post Sales

Time of Entry

Market Segmentation

Market Segmentation

Research &
Development
Pricing Strategy

Pricing Strategy

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April 15, 2014

To begin with, this article briefly explains the history of the case company and primarily
focused on some specific parts related with the start-up's view of going international. In this case,
the paper provides a literature review on three main aspects, all sum of the factors involved in
internationalization, i.e. (1) time to enter the market, (2) customer market segmentation and, (3)
pricing strategy. Conclusively, the findings of this article will help entrepreneurs understand,
who is the market leader in real means. The one who enters the market first, or the one who
makes real money out of it.

1.1 The Case of Huawei: Internationalization strategy perspective

Established in 1987 and originated in Shenzhen, Huawei is the largest telecommunications
and networking equipment manufacturer in modern China. Within few years after their
inception, Huawei has been able to establish itself as a serious new competitor in the respected
Information Technology industry. The company's success owes much of its focus on being a
low-cost cloner, seeking to price its products 30 percent lower than global market leaders
(Mcnally, 2007). According to Low (2007), the company expanded its reach and grew rapidly by
focusing on the relatively poor Chinese rural regions that were ignored by larger companies, by
making and selling low-end and low-margin switches and access equipment.
Huawei embarked on a journey to internationalization when the company seek and set out
to expand its geographical presence and to upgrade its product line by focusing on the
developing countries of South-East Asia, Central Asia and Latin America, as their customer
market niche. Despite being criticised and sued for IPR in February 2003 by Cisco Systems for
allegedly infringing on its patents and illegally copying source code used in its routers and
switches. Although, the case was dropped in July 2004 with both sides claiming success. Huawei
persisted to become involved in the market of Middle Eastern nations before passing into the
developed markets of United Kingdom, United States of America, Sweden, and Netherlands.
In order to enter into a market dominated by existing giants in developing countries, it is
vital and imperative to get familiar with the market trends and user requirements of the operators
in that region. Hence, to penetrate the world's most sophisticated markets, the company appeared
to transform itself from a low-cost cloner" to a provider of integrated and customized network
solutions and services. They focused on innovative efforts that provided integrated solutions

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April 15, 2014

throughout the life cycle of communication system (Mcnally, 2007). Also, they have established
research labs with institutes of Dallas in USA; Banglore in India; Mosow in Russia; Beijing in
China, and also invested 10% of its revenues in Research & Development. In June 2011, Huawei
endorsed a five-year agreement to contribute donated services, equipment and technical expertise
all worth over US$1.4 million to Carleton University, located in Ottawa area of Canada, to
inaugurate the launch of a research lab dedicated to cloud computing technology and services.
At this moment, with 75% of its contract sales coming from outside China in 2008,
Huawei is a significant example of a firm that has nurtured its capability in the low-end domestic
market and further treated international competition as an opportunity to accumulate such
capabilities (Sun, 2009) by moving into the more lucrative and profitable value curve in
economic demand and supply, and adopted strategies that overturn their latecomer status into a
source of competitive advantage.

Literature review
There have been several debates on finding the factors that plays the important role on

whether the late-comers will attain internationalization. Some studies believe that the born global
is a series of incremental processes with the most starting from their home land. This literature
review examines few factors using the Huawei company case as a basis, to make it useful for
new entrants or late-comers. Few case studies have been done on Huawei, with most of them as
comparative analysis.
Sun (2009) wrote an extensive study on Huawei as a multinational enterprise from emerging
economies trying to enter in developing countries and further stated that in advance to
internationalization, firms make domestic market as a base to nurture their capability. In
addition to the above argument, little is known about how emerging economies multinational
enterprises develop their strategies to survive and thrive within the new world order as
latecomers (Pillania, 2009; Mathews, 2006; Ramamurti, 2004).
Many academic studies prove that first-mover advantages exist. There are equal studies
present that prove that they don't (Lanzolla & Suarez, 2005). In the case of Huawei, they were
the late-mover in the respected field and specialization but were also effective. Among many,
below are the three key factors that this article clarifies on how Huawei made their way to
internationalization.

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April 15, 2014

2.1 Time of Entry: First Mover vs. Late Movers

A first mover can be described or seen as a pioneer to a work of value and development.
Whereas, a late mover is that who came after the first mover to build upon existing works or
create similar innovation to the first mover. When does a first mover advantage occur? This is
when the first mover achieves high or expectant success from being a pioneer, mostly by profits
and expanded customer base. There are several studies that support the advantages of being a
first- mover, but equal amount of study proves that they do not. This article revealed that success
in a market depends less on being on the first or late mover, but on different circumstances in
which it occurred. This calls for a market to be carefully investigated before a product is
introduced, to avoid any downturn as you may be the driver that races ahead to just wait at the
red light alongside everyone else.
Similarly to the Huawei case, they were the late-movers to enter in a market, but gradually
became a global giant in an international market. Lanzolla & Suarez (2005) state that the pace at
which the technology of the product as well as the market for that product is expanding acts as
the determining variables to enter in a market. The above two variables (technology and market
evolution) in turn further depends on the firm's resources and capabilities. Huawei gained
capability as well as resources from their domestic region before going international. This is
because the later entrant learns from the trails of the earlier entrant (Lvesque & Shepherd,
2004).

2.2 Market segmentation: Finding the market niche

Emerging Economies (EE) firms may not be able to compete with Developing Economies
(DE) in the sense of absolute technology leadership, but they often come up with disruptive
innovations (Bower & Christensen, 1996) as well as recombination of technologies that suit the
local market. Bartlett & Ghoshal (2000) suggest that EE firms primarily enter the smaller
markets where DE giants are not yet well established.
Huaweis domestic market provided it with a platform to perform learning-by-doing
experiments. So their domestic market lies in their first customer market segment to begin with
elementarily. From there, they proceeded and started building incremental as well as disruptive
innovations. Also, Huawei being a company born from an emerging economy captured market
niche of local market before venturing into a developed market. To get legitimacy, first they

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April 15, 2014

strategically targeted the smaller markets to become an embedded brand prior to

internationalization. Thus, to avoid head-to-head experienced global DE.

2.3

Pricing strategy: Price for Success

Holden (2008) considers effective pricing as a major element of business strategy. Each

and every one of us embroiled in different associations or dealings at different moment in life
mull over the constituents of a successful trade, which rest on the price. The essential key to
when to price high, when to price low, and a strategy for everything in between, impacts the
behaviour of customers, salespeople and senior managers, all alike. Profits arises when an
organization does many things right, which includes pricing. Efficiency, controlling costs, and
better profit metrics all are required for pricing success (Burton & Holden, 2008).
Huawei took advantage of pricing for the product and services they offered by cutting
unnecessary costs instead of reducing profit, by offering a range of affordable products that
include mobile phones, mobile broadband devices and home devices. They focused on cost vs.
value based pricing, which is dependent on the targeted market segment needs and wants. To
determine the effective pricing, they invested heavily on market intelligence and the products
offered by the competitor by making alliances with other partners like IBM and collaborated
with the local carrier Sakstel to build its HSPA+ & LTE networks in Canada. This also implies
that an entrepreneur needs to carefully understand the distinction between different start-ups and
their required ecosystem to attain internationalization.

Conclusion
This article highlights the requirements to internationalization, by underlining the Huawei

case, depicting how a late mover company can become international in a market filled with highend competitors. It is important to determine the time of entry in a market, and segment the lowend customers that are often ignored by the incumbents. As new start-ups, focusing on nonconsumers and lower-end customers of large firms could yield more profit. And furthermore, to
evaluate the best pricing strategy based on the segmented customer niche. All the three factors
are dependent on the technology as well as the market need and development related to the
technology in question.

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April 15, 2014

Pioneers, in general, have a higher probability and risk of failure than later entrants.
Lanzolla & Suarez (2005) supports this view, that a first mover advantage exists but companies
struggle not with whether to enter a new product category altogether but whether to enter early or
later. Remember, Once one firm has gone into the water, they have no choice but to swim.
Although, a technology start-up, as compared to other businesses should internationalize upon
inception, and not worry about failure. It is all about experimentation, thus leading to maximum
benefit for the first mover if successful.
However, underestimating the barriers to internationalization can result to a firm with
unfavourable and long lasting effects, especially when the firm is new and late mover at the same
time. In a competitive environment, the decision to enter the market should always be timed to
balance the risks of premature entry against the missed opportunity of late entry. Also, firms
should ask themselves if such time is the right time to enter the selected overseas market, i.e.
economically or politically stable. They also need to be prepared to take the risk, having
considered all the issues and ramifications to internationalize.

References:
Bartlett, C. A., & Ghoshal, S. 2000. Going global: lessons from late movers. Harvard business
review, 78, 3.
Christensen, C. M., & Bower, J. L. 1996. Customer power, strategic investment, and the failure
of leading firms. Strategic management journal, 17(3), 197-218.
Cacchione, M., Junkunc, M., Luo, Y., & Lu, S. C. 2011. Entrepreneurial pioneer of international
venturing: The case of Huawei. Organizational Dynamics, 40(1): 67-74.
Dietz, M. C., Orr, G., & Xing, J. 2008. How Chinese companies can succeed abroad. McKinsey
quarterly, 3: 22.
Holden, R. K. 2008. Kick the discounting habit: step one for more effective pricing. Journal of
Business Strategy, 29(6): 14-18.
Hoon, L. S., Wu, F., &Yuzhu, Z. 2011. Dos and don'ts for Chinese companies investing in the
United States: Lessons from Huawei and Haier. Thunderbird International Business
Review, 53(4): 501-515.

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April 15, 2014

Johnson J., &Vahlne J.E. 1977. The Internationalization Process of the FirmA Model of
Knowledge Development and Increasing Foreign Market Commitments. Journal of
International Business Studies, 8(1): 23-32
Lanzolla, G., &.Suarez, F. 2005. The Half-Truth of First-Mover Advantage. Harvard Business
Review, 83(4): 121-127.
Lvesque, M., & Shepherd, D. A. 2004. Entrepreneurs' choice of entry strategy in emerging and
developed markets. Journal of Business Venturing, 19(1): 29.
Low, B. 2007. Huawei Technologies Corporation: from local dominance to global challenge.
Journal of Business & Industrial Marketing, 22(2): 138-144.
Mathews, J.A. 2006. Dragon multinationals: New players in 21st century globalization. Asia
Pacific Journal of Management, 23: 5-27.
Peng, M. W. 2004. Identifying the big question in international business research. Journal of
International Business Studies, 35(2), 99-108.
Pillania, R. K. 2009. Multinationals and emerging markets. Business Strategy Series, 10(2), 100103.
Ramamurti, R. 2004. Developing countries and MNEs: Extending and enriching the research
agenda. Journal of International Business Studies, 35(4), 277-283.
Rumelt, R., Schendel, D., &Teece, D. (eds.) 1994. Fundamental issues in strategy. Boston: HBS
Press.
Sun, S. L. 2009. Internationalization strategy of MNEs from emerging economies: The case of
Huawei. Multinational Business Review, 17(2): 129-156.
Wu, D., & Zhao, F. 2007. Entry modes for international markets: Case study of Huawei, a
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Books:
Burton, M. R., & Holden, R. K. 2008. Pricing with Confidence: 10 Ways to Stop Leaving
Money on the Table. John Wiley &Sons. New York: Wiley.
McNally, C. A. (Ed.). 2007. China's emergent political economy: Capitalism in the dragon's
lair. Routledge.