Bachelor at

Xi'an Jiaotong-Liverpool University

Bachelor of International Marketing

MAN303(16/17) Final Year Project

28.04.2017

Written by:

Fabian Alexander Ottho

This paper is done as a part of the undergraduate program at BI Norwegian Business School. This

does not entail that BI Norwegian Business School has cleared the methods applied, the results

presented, or the conclusions drawn.

Table of Contents 1. Abstract ............................................................................................................................... 4

2. Acknowledgements .............................................................................................................. 4

3. Introduction ............................................................................................................................. 5

3.1 The Journey ....................................................................................................................... 5

3.2 Introducing the Company Huawei ..................................................................................... 6

3.3 Motivation ......................................................................................................................... 7

3.4 Research questions: ........................................................................................................... 8

3.5 Research Method: .............................................................................................................. 9

4. Literature Review .................................................................................................................. 10

4.1 Huawei and E-Marketing ................................................................................................. 10

4.2 Branding and Huawei ...................................................................................................... 13

4.3 Huawei and Marketing Communication .......................................................................... 16

5. Research Method and Data Description ................................................................................ 19

5.1 Methodologies .................................................................................................................. 19

5.1.1 Qualitative research .............................................................................................................. 19

5.1.2 Quantitative research ............................................................................................................ 20

5.2 SWOT analysis: ............................................................................................................... 21

5.3 Porter Five Forces ............................................................................................................ 22

5.4 Data Description: ............................................................................................................. 23

6. Presentation and evaluation of results ................................................................................... 24

6.1 SWOT .............................................................................................................................. 24

6.1.1 Strengths ............................................................................................................................... 25

6.1.2 Weakness .............................................................................................................................. 27

6.1.3 Opportunities ........................................................................................................................ 28

6.1.4 Threats .................................................................................................................................. 30

6.2 FIVE FORCES ANALYSIS ............................................................................................. 32

6.2.1 Buyer power ......................................................................................................................... 33

6.2.2 Supplier power ..................................................................................................................... 34

6.2.3 Competitive power ............................................................................................................... 35

6.2.4 Threat of Substitution ........................................................................................................... 36

6.2.5 Threats of new entries .......................................................................................................... 37

7. Survey ................................................................................................................................... 38

7.1 Cluster Analysis ............................................................................................................... 38

7.2 Hypotheses ....................................................................................................................... 39

7.2.1 Hypotheses-test .................................................................................................................... 39

8. Conclusion ............................................................................................................................. 42

8.1 Sub-Question 1: ............................................................................................................... 42

8.2 Sub-Question 2: ............................................................................................................... 42

8.3 Sub-Question 3: ............................................................................................................... 43

8.4 Main question .................................................................................................................. 44

9. Bibliography .......................................................................................................................... 46

10. Appendix ............................................................................................................................. 54

1. Abstract

This thesis examines how Huawei could use e-marketing and strategy to strengthen their

global brand. I had three key areas of research, being; customer’s relationship towards the

brand, Huawei’s strengths and weaknesses regarding their e-marketing capabilities, and lastly

what brand position they have in the global marketplace. To find answers to my research

questions, I used both quantitative and qualitative research to cover them more extensively,

gathering crucial information to provide enough evidence, backing up my hypothesis. By

applying models such as Porter Five Forces, SWOT and a survey, I have analysed my

research questions and testing out various hypothesis regarding Huawei’s global foothold in

the Smartphone industry.

Through extensive research, I can declare that, whether, in China or the West, the customers

want similar approaches when it comes to marketing. We can see a similar pattern regarding

special features in the smartphones that consumers tend to find this less critical when

selecting a premium phone, contradicting my initial hypothesis.

2. Acknowledgements

I would like to thank Professor Ewout Van Der Schaft for his extraordinary support in the

progress of writing this dissertation. I would also like to thank Edward Qiao for supporting

me greatly, supplying me with necessary guidance and recommendations, always being there

willing to help me. This project would not have been possible without the assistance of Mr

Raymond Yip and Imagination, taking me under their wing, giving me a chance to write a

dissertation on their behalf.

3. Introduction

3.1 The Journey

In September 2016, I exchanged from BI Norwegian business school in Norway, all the way

to China and the city of Suzhou to finish the final year of my bachelor degree. In

collaboration with IBSS, I received a supervisor, and his responsibility was to guide me

through the process. During our first meeting, we discussed possible companies I could write

my dissertation for, and he helped me to get in touch with Imagination. Before Imagination

decided to work with me, I had to go through a Skype interview with Mr Raymond Yip, the

company’s director in Shanghai. After sealing the deal, we arranged a formal meeting at their

office in Shanghai, where I was introduced to Mr Edward Qiao who is a Senior account

manager for Imagination. During this session, I got a brief introduction to what the company

is all about, their values, goals and what they do that differentiate them from other similar

firms. I had the opportunity to select my dissertation topic, and I could pick between either

Huawei or Jaguar. I chose Huawei because I’ve worked in retail back in Norway for a total of

4 years, 2 of them being full-time, and two years part-time while studying. Huawei is a

company I know from my retail job, and I have sold countless of products made by them. I’ve

always been fascinated by how they managed to make such beautiful products, and yet keep

their products at a low price-point.

During my first semester, I had to write a research proposal, containing a comprehensive

strategic plan, on how to write my dissertation in the second half of my academic year. The

deadline was December 2016, and we sent out drafts to both Imagination and our supervisor.

After receiving some feedback, I decided to travel to Shanghai and meet Imagination to

discuss what we could improve, and keep an open dialogue regarding the next steps. After the

meeting, I received articles, surveys and secondary data related to my research topic. During

our last consultation, we made a timetable where we agreed on dates for certain parts of the

dissertation to be finished, and the final deadline. Through the process of this dissertation, I

have been working closely with Imagination and our representative, each step of the way. BI

Norway, IBSS, and Imagination have provided me with guidelines in how this dissertation

should be written, and I have tried to the best of my ability to follow these guiding principles.

3.2 Introducing the Company Huawei

Did you know that 1 in 10 smartphones sold globally is manufactured by Huawei? (IDC,

2017) Telecommunication and networking equipment providers have been around for more

than 100 years, and there is healthy rivalry within these markets. Huawei is one of those

companies that looked at this as an opportunity, rather than a threat, and this decision of being

bold in a competitive market proved to be profitable for them. Starting off as a small phone

company, selling communication services in 1987 mainly focusing on B2B the company

rapidly grew to one of the leading telecommunication providers in the world, surpassing 100

million smartphone shipments merely 30 years later. Their primary goal is to improving life in

all the corners of the world by establishing connectivity, and thereby their slogan is: “Building

a Better-Connected World” (Huawei 2016).

Huawei was founded by Ren Shengfei in 1987 (Huawei 2016), and as mentioned above, their

focus was to produce phone switches. Their sales tactics at the time only focused on B2B. Six

years later in 1993 Huawei released a phone switch named C&C08, and this was the best

telephone-switch available at the time. Huawei’s next advance happened only three years later

when Beijing ruled to partially limit overseas telecommunications corporation’s entree to the

Chinese market, by supporting local Chinese companies instead. It did not take long until

Huawei was promoted by both the Chinese government and the military as the superior choice

(Ahrens, 2014). After the Beijing policy had started to take effect, Huawei’s focus on R&D

increased (Research and Development), and by 1997 the company released its first wireless

GSM solution, expanding their operation into the metropolitan areas of China (Huawei 2016).

In that same year, Huawei managed to win an overseas contract with Hong Kong. The

company was so profitable that it opened an R&D centre in the city of Bangalore India, with

the sole focus on developing innovative telecommunication software. In the year 2000 the

company’s revenue from overseas markets reached the first USD100 million, and a couple of

years later this number increased five times, surpassing USD500 million (Huawei 2016).

The first time the company accomplished branching out to Europe was in 2004, with a Dutch

company named Telfort, and the agreement was that Huawei was to build a 3rd generation

mobile network (Harney, 2004). The contract was valued at USD25 million, and this was the

company’s first breakthrough and largest business deal in Europe at the time. One year later

the Company’s international contracts exceeded their domestic sales (Huawei.com 2016).

In 2007 Forbes magazine released their list of the 200 most influential companies of that year,

and Huawei ranked as 189th on that list (Forbes 2007).

The year after they were added to BusinessWeek’s list of “The World’s most Influential

Companies of 2008” (McGregor, 2008). By the year 2015 Huawei shipped over 100 million

smartphones, and this was 25 million more than the previous year (Huawei 2016), granting

them 1stplace in China and 3rd place in the global smartphone market. This shows us that their

focus has changed since they launched in 1987. The company that used to focus on B2B has

started to focus on B2C, changing how the company operates, and their global position among

the competitive giants such as Samsung and Apple. Huawei has been the largest

telecommunication equipment producer on the globe, after surpassing Ericsson in 2012 (The

Economist 2012). As of today, they employ more than 170 000 people divided over 170

regions and countries (Huawei 2016).

3.3 Motivation

Thomas Edison once said when trying to invent the lightbulb that he has not failed; he just

found 10 000 ways for the lightbulb not to work (Eikhorne, 1967). A river does not cut

through rock because of its power, but because of persistence. I have always been fascinated

with technology, and how it helps us live our lives the way we want to. Huawei is one of

those companies that caught my attention early on, and when I received a chance to write my

dissertation about them, saying no was out of the question. My research question was chosen

by Imagination and me. I was very lucky to be selected by them to write this dissertation on

their behalf. Huawei is one of their largest clients, and we wanted to find out how important

Huawei is in the overseas market compared to the Chinese market. Also, we wanted to know

what marketing tactics Huawei should use to expand their smartphone division. We also

wanted to see what are customer’s relationship towards the brand.

3.4 Research questions:

The main question for this dissertation is:

“How could Huawei’s e-marketing contribute to strengthening their global brand?”

To find the extent of how successful Huawei’s brand marketing is, you could perform a

series of tests. By split the core question into smaller sub-questions, breaking down the

overall question. My sub-questions are:

1. What are costumers’ relationship towards Huawei as a brand?

2. What are the strengths and weaknesses of Huawei smartphone division?

3. What brand position does Huawei have in the global IT market?

These questions will be used to gain an extensive understanding of Huawei e-marketing

capabilities, and how this effect customer’s judgement towards the brand, and how this

understanding can be improved for Huawei differentiating themselves from its opponents.

3.5 Research Method:

In this dissertation, I have chosen to do a SWOT analysis of Huawei. A SWOT analysis

contributes to finding a firms; Strengths, Weaknesses, Opportunities and Threats, and it is

commonly used as a tool for brainstorming activities. The objective is to examine internal and

external aspects of the firm, to achieve an explicit goal (Humphrey, 2005). This can help me

map out where the company is stronger compared to its competitors, using this to their

advantage. The internal analysis helps us find features that we can develop further to

apprehend the competitive advantage and, what factors that can potentially hurt the firm. The

external analysis is at a macro level, and the results are often offered as a matrix chart. In the

SWOT, I will be analysing the strengths and weaknesses of Huawei’s smartphone division.

Furthermore, I have chosen to use a Porter Five Forces analysis. This is an analytical tool

comprised of Supplier power, Buyer power, Competitive power, Threat of Substitution &

Threats of new entries (Porter, 1998). This model helps us increasing our knowledge of, and

analyse the competitive advantage in the industry. After finding the competitive advantages,

the corporation must use these benefits to forming a basis for a selection of competitive

strategy. Huawei is one of the major players in the smartphone industry that keeps design

local, meaning that the design department is owned by Huawei and is not sourced out of the

company. Lastly, there will be a survey where I will collect numeric data using a platform

called Qualtrics. The survey numbers will be added to a program called SAS JMP to be

analysed to test my hypothesis, to determine whether my theory matches the collected data.

This is to find out what people’s real view of Huawei, and how this can be improved by using

e-marketing.

4. Literature Review

4.1 Huawei and E-Marketing

Information and Communication Technology (ICT) in conjunction with the internet have in

many ways changed the face of marketing. It does not matter if a company is a minor shop or

a major global brand, e-marketing has changed the game, and at the same time created new

ways of communication (Salehi ET AL., 2012). It has created a new marketplace for the

customer, and unseen new marketing opportunities marketers could only dream of 20 years

ago (Watson ET AL, 2002). These innovations shook the traditional, dominant marketing

models, and gave a basis for the birth of e-marketing. The internet has been one of the main

drivers for change in the marketing industry, resulting in a new paradigm of the marketing

genre.

E-Marketing’s role is to take the business outside national borders using the Internet, and this

new marketing strategy has reshaped how firms view the world, and how they perceive global

expansion (Strauss 2006). The central question for my dissertation, as mentioned above is

how Huawei can use e-marketing/strategy to their advantage, capitalising on this “new”

market trend. The concept of e-marketing is to use innovative technology-based marketing,

allowing interactivity between the customer and the company (Chaffey, D 2009). Knowing

what the customers want is a critical success factor, and this can change potential new buyers

view on Huawei, creating a relationship with the company. It is important that this innovative

technology is integrated with a firm’s information system as a strategy to set up and deliver

value both to the enterprise, but also to its customers. Never before, have companies had such

compelling technologies to interact with their customers, collecting data and information from

them to tailor the companies’ offerings accordingly (Rust, ET AL, 2010).

Since the global landscape is changing every year, it is crucial to develop and explore new

theories and methods, and e-marketing is an approach that offers a fresher perspective

regarding the process of industrialisation. Both Internet and ICT are important for

internationalisation and e-marketing, the problem is, however, that the traditional theories

have difficulties explaining the patterns created in the modern marketplace because of how

the internet and ICT affect the internationalisation proses. You also need to take into

consideration that the web is both a base for e-marketing, but it is also international in nature

(Moini & Tesar, 2005). Using the Internet as a sales channel for a B2C relationship and

smartphone sale is a way for Huawei to explore unknown markets in an affordable and

efficient style. If the venture turns out to something negative, pulling out is cheap.

One example of a company that has used e-marketing to its fullest potential in China is one of

Huawei’s biggest competitors called Xiaomi. Xiaomi has always sold their products online in

China to avoid expensive management fees that retailers demand, and this benefits Xiaomi’s

bottom line, increasing their profit margin substantially (Boxall, 2017)

The internet can be used as a sales channel, with a worldwide reach, overcoming scarce

resources and foreignness liability, as well to help speeding up the internationalisation process

(Arenius ET AL., 2006). Also, the Internet is a great tool to gather information about a

foreign market and improve the communication and networking with stakeholders located

abroad (Tiessen ET AL 2001). The only downside of a more global marketplace is since the

number of companies entering foreign markets has increased, the market becomes saturated

more rapidly than ever before (Axinn ET AL, 2001). Even though e-marketing promise fame

and fortune, it is not without controversies and disadvantages. It is highly dependent on

technology, and to preserve this advantage, maintenance is expensive. The rivalry becomes

more competitive through globalisation, pushing the prices down because of a constant price

war. There are also privacy issues regarding the security of the costumers since not all

websites are safe (Forneris, 2017)

By using internationalisation concepts such as the Uppsala Model (Johanson ET, AL 2003),

we can find guiding principles on how a firm should gradually intensify their activities in the

oversea marketplaces. Starting off, a company must first gain experience in the domestic

market, then move to foreign markets. The key is to expand to similar like cultures, and then

gradually move to more distant cultures over time, adapting and learning from one country to

the next. Another proposal from the Uppsala Model is that you start off with occasional

export and low quantity sales, and then increase the intensity over time. If the business

venture does not go as planned, the model states that the level of a firms’ commitment to that

country should decrease (Blomstermo ET, AL 2003). Huawei could use the Uppsala model as

guidelines when entering foreign markets, and one example is Scandinavia. If you branch out

to one of the Scandinavian countries, it would be less challenging to enter neighbouring

countries.

Scandinavia is quite similar in demography, culture, and language meaning the Uppsala

model is relatively easy to implement, and the same goes with North-America. The Uppsala

Model is not without controversies, and the main problem is that the model does not explain

the phenomenon called rapid internationalisation (Skudiene 2015). Globalisation and hyper-

globalisation have changed the way of international start-ups, and this challenges the Uppsala

Model and its old view of Internationalisation. The newer internationalisation model needs to

be added, and accommodate the forever changing global environment (Becker 2012).

4.2 Branding and Huawei

If you were to ask a company what branding means to them, they would tell you that branding

is everything. Branding is a gut feeling towards a company, and a smart cooperation knows

how powerful this tool is if used correctly (Julien (2008). Branding helps a company

differentiating themselves from other competitors. It is important to remember that a brand is

not only a name. You have brand elements such as symbols and logos (McDonald’s golden

arches, Nike’s famous swoosh, and Coke’s contour bottle) You also have slogans such as

BMW’s “ultimate driving machine” and Visa’s “Everywhere you want to be” and these

elements play a significant role in branding (Keller ET AL, 2004). Even though some

companies spend vast amounts of money on logo design, there is barely any academic

research that has explored this topic in depth, on how this affect the costumer’s behaviour

towards a brand (Schmitt ET AL, 1999), with one exception. In 1998, Henderson and Cote

conducted an empirical analysis of 195 logo designs, to determine if design differentiated

costumers view of a brand (Henderson ET AL, 1998). Something that has received greater

attention in recent years is how the merchandise a company sells is packed. Research

conducted in 2003, by Wansink showed several studies that presented a clear correlation

between package size, shape, and consumption (Wansink, 2003). This is a chance for Huawei

to show how green the company is, by limiting package size, appealing to the environmental

costumers.

If you want to change your costumer’s views and thoughts regarding your brand, you should

think of the following: Who am I, and why do I matter? (Galullo, 2013). Brand loyalty is

regarded as the most cited concept in marketing literature, and it plays a vital role in strategic

management (Hamid, 2015). Consumer loyalty lies at the centre of marketing strategy, and it

is an ongoing exploration topic. Some scholars argue that brand loyalty is so important, that it

overshadows other marketing tactics such as promotional programs and price cuts (Tepeci,

1999).

Apple is known to have the most loyal customers, being famous for their tribalism (Price,

2017). Another example is Xiaomi’s fan base, calling themselves Mi-Fans, having their fan

club and dedicated Mi-Fan day which is April 6th (Hong, 2017). This creating of loyalty is

something Huawei must consider and try to capitalise on. By looking at the latest

development in adherence literature, we see that it is a concern to companies that customers

are currently not as much persuaded towards the reliability aspect compared to the past,

(Bennett ET AL, 2005).

It is stated by (Schriver, 1997) that loyalty cannot be presumed as it was 50 years ago. Brand

value and customer satisfaction goes hand in hand and is a result of future behavioural

intentions and attitude. This implies that the most important job for a marketing manager is to

examine components that affected the loyalty of their customers and then find the constituents

of their loyalty. Without this understanding, it is nearly impossible for a company to find

loyalty creating actions.

With the ever-developing global marketplace, international marketing theories are trying to

resolve newly discovered management problems, and this has changed the way researchers

view branding, forcing them to develop new marketing methods and strategies. Marketing

researchers frequently speak of branding as a universal technique, and by reading the writings

of famous guru’s such as (Roberts 2004), and marketing scholars (Aaker 1999) implicitly

assumes that to build a reliable brand name, the procedure is pretty much the same across

continents and cultures. Companies need to learn how to operate in the world as one big

market, ignoring national and regional differences, and research suggests that marketers need

to standardise, instead of customising their global marketing program (Gatignon, ET AL,

1995). Researchers have examined linguistic and cultural aspects of branding, showing how

English versus Chinese brand names differs in both verbal and visual representation (Schmitt

ET AL. 1994). Marketers should, therefore, focus more the natural tendency of Chinese

customers depending on visual depiction, while English native speakers rely on phonological

representation. This means that for the Chinese, the meaning of the text is more important,

while for Westerners it is important how it rolls off your tongue when you pronounce it.

(Aaker, 1991). One of the crucial success factors for a brand to thrive is memorability

(Robertson 1989), Being one of the branding selection criteria (McNeal, ET AL 1981).

By examining brands at different scales of social and cultural context, executives can find and

identify problems that are critical to developing a successful brand (Kimberly, 2007). “It is

this sense of oneness and connection that turn brands into movements and people into

believers” (Galullo, 2013). Even though there has been much progress regarding branding,

particularly in the last decade a clear majority of significant researchers suggest that branding

will be a hot topic for debate and to conduct research on in the years to come. Many important

questions concerning branding and issues are yet to be resolved (Keller ET AL, 2004).

For Huawei, it is important to know how to position themselves in unexplored foreign

markets. How do they want the costumers to perceive them, and how can they change

negative views into something positive: Terms such as: “Made in China” used to be

something negative, but today that view has changed. Now the term “Made in China” is

referred to something more positive, something that is well-built and with quality (Statista,

2017).

4.3 Huawei and Marketing Communication

Marketing communication is a significant part of communication, preparation, assembly,

implementation and monitoring different kinds of communication activities in such a way that

it ends up generating revenue. There are many forms of marketing communication tools, and

some of them are the Personal sale, advertising, direct marketing, communication, promotion,

and public relations (Tomše ET AL, 2014). The term marketing has no fixed definition, but if

you take the definitions created by famous marketing gurus, we can conclude that the

essential task of marketing is to find and meet the desires of users in the manner of

maximising profit.

The company Huawei is not so reliant on the stakeholder’s desires since the company is

privately held by the China-based employees of the company, meaning that anyone working

outside China cannot buy into the firm (Moskowitz, 2017). This puts a lot of secrecy and

mystery surrounding Huawei, which for some is a red flag. It did not help that the company

was accused of spying on its customers (Presse, 2017). Communication, on the other hand,

can be defined as “the process of transmission of thoughts between users, or between an

organisation and its users” (Shimp, 2003). When it comes to marketing, it is significant to

know the difference between marketing communication “channel” and marketing

communication “tool” to better understand marketing communication.

There are various marketing communication tools, and the most frequent are mentioned

above. However, as a marketing communication tool, some authors say; the Internet,

sponsorship, exhibitions, fairs, etc. (Shimp, 2003). On the other hand, a marketing channel is

a way how communication travel from one source to a receiver (Belch ET AL, 2007).

Communication can be a device that transfers a message from an organisation to its publics

(Bajde, 2013). To be considered a marketing communication channel, we believe anything

capable of sending or transmitting the message, and some examples are radio, the internet,

printed media, television, social networks (Pickton ET AL, 2001). By this, you can with

confidence say that a marketing communication tool is defined as a way of communication,

while marketing communication channel is what allows the broadcast of the marketing

message, from source to receiver.

It is important to remember that the internet and other social networks cannot be treated as

tools, but as marketing communication channels. Marketing communication on social

networks is to use social networks to reach a communications objective. Marketing mix 4P

(Product, Price, Promotion, Place) is something we find in both traditional marketing and

digital marketing (Gambhir 2013). When we talk about marketing communication on social

networks, we differentiate the campaign and the strategic approach (Zarrella, 2009). A

strategic plan can be a long-term tactic where a company devotes resources for a long time, on

a steady basis and this helps to accomplish marketing communication on social networks;

some examples are Blogs, Facebook and Twitter. These platforms contribute to improving a

company’s brand building and reputation, and this is something that Huawei must take into

consideration to strengthen their global brand.

The people in charge of marketing communication on a social network are required to use

various marketing tactics and strategies, and the differentiation should be based on offerings,

brand and target audience. It is not self-evident that the same method is fitting for all viewers

and all brands, even if the company or the brand owner are the same. To successfully

implement a marketing strategy on a social network, you must create communication that will

be perceived as meaningful from your target audience. When you as a marketer find this

valuable information, the marketer needs to use them in useful and long-lasting dialogues

(Packer, 2011). After some time, a company would have built a portfolio on how to

communicate, and reach out to their customers by using social networks. Communication on

this platform is usually reflected in the substantial but temporary changes in sales (Zarrella,

2009).

Even though market communication is a simple part of the marketing mix in traditional and

digital media as well on social networks. Social network stands out from the crowd since it

offers different marketing opportunities compared to traditional media (Tomše, ET AL,

2012). Researchers found that social networks are far more superior and efficient than

traditional media in both brand perception and brand positioning. Furthermore, they

discovered that users exposed to a brand by a blog had a more positive attitude towards the

brand, compared to someone who found an advertisement in a magazine. Huawei must take

marketing communication into consideration when they want to branch out to new customers.

If they want to attract new young buyers, they should use the digital media tools such as

social network sites such as Facebook, and blogs. Everything mentioned above talks about

social networks as something positive, but there are some downsides to this type of

marketing. The most known issue is that managing a profile takes time, a degree of effort, as

well as a certain level of knowledge (Zimmerman, ET AL, 2010). Receiving negative

feedback also increases since it is so easy, and chances are the comments received are mostly

negative because it is human nature to complain when it does not work, but never telling you

when everything runs smoothly (Sandilands, 2013).

5. Research Method and Data Description

5.1 Methodologies

Methodology is a study of methods used in science. It is systematic, theoretical examination

of a given method applied to a study. Methodology is comprised of an academic study of

principles and practices linked with knowledge. Method and methodology have different

meanings since methodology’s primary goal are not to offer answers (Irny, ET AL, 2005). It

just provides a theoretical underpinning for us to find out which method or theories we can

use to find the best possible answer to our question, for example how to calculate an exact

outcome. It typically includes concepts such as theoretical models, paradigm, phases and

qualitative or quantitative research techniques (Webster, 2017).

5.1.1 Qualitative research

“Not everything that counts can be counted, and not everything that can be counted counts”

(FYP Workshop PPT, 2016). In this dissertation, I have used both quantitative and qualitative

data, and the reason is to achieve a more useful analysis of my research questions. When you

use qualitative data alongside quantitative data, you have a higher chance of avoiding pre-

judgements, meaning it can give understanding in why an answer was given. Qualitative data

is characterised by its richness and fullness; and gives you an opportunity to explore a subject,

like it was “in real- life”. Additionally, in qualitative research, we use techniques that study

pictures and words, not numbers.

By using this method, we get further understanding and insight into an issue, in this case, the

research is aimed at Huawei. By using literature studies and secondary data supplementing a

hypothesis-generating process (Gripsrud, ET AL 2016), the qualitative inquiries help us seek

understanding and meanings, and it is vital to use critical and logical thinking. Some

disadvantages regarding qualitative data analysis are that you usually have fewer people

studied because it is more time-consuming and expensive compared to quantitative research.

Additionally, it becomes less easy to take a broad view because the sample population is

usually small, instead of using percent it is more common to use exact numbers. Another

problematic aspect to consider is the skill level of the researcher, particularly in the case of

focus groups, observation or conducting interviews (Archive, 2017).

5.1.2 Quantitative research

Quantitative research technique is a planned empirical examination of observable phenomena

using mathematical, statistical, or computational methods (Given, 2008). It is a research tool

to investigate larger quantities of respondents, like people, companies or countries. The

purpose of the analysis is to test a hypothesis to determine whether an assumption concerning

reality, match the data we possess (Dahlum, 2014). One example of quantitative research is to

study the relationship between alcohol consumption and babies born, which is a variable.

Examples of variables can differ, but the most common are age and gender (Svartdal, 2014).

Gender is a variable with two possible values, while intelligence and age are variables with

the sizeable amount of values.

The values are abstract, meaning they must be articulated in a concrete way to be measured

and observed. Using real values are referred to as operationalization, and one example is that

strength can be operationalized as “How much weight you can lift” (Damasio, 1999). Since

variables are abstract, imply we cannot observe them directly. This means that intelligence

and motivation are called latent variables because they are not directly observed, rather

inferred from other observable variables (Tabachnick, ET AL, 2001). It is not unusual to use

quantitative research in contrast with qualitative research, commonly known as the

examination, analysis, and interpreting of observations. The purpose is to discover underlying

patterns regarding connection, including classifications of phenomena and entities (MIT,

2010).

In this dissertation about Huawei, I have chosen to use a survey. The data being produced in a

study will always be in numerical order, later analysed by statistical and econometric methods

(Dahlum, 2014). I have conducted a quantitative data collection, testing a hypothesis. This

will contribute by producing a more representative sample, giving the opportunity for a

superior picture, discovering relative connections concerning my research question mentioned

above. Some disadvantages of using quantitative data analysis are that the data being

collected reflects a small, occasionally superficial dataset. The results are limited, only

producing numerical descriptions, instead of a complete narrative, administering less

elaborate amounts of human perception.

5.2 SWOT analysis:

The Art of War, by Sun Tzu, states that if you know your enemies and you know yourself,

you will not lose a single battle. If you only know yourself, but not your opponent you may

win or may lose. If you, however, don’t know yourself or your opponent, you are doomed to

fail (TZU, 2016). The word SWOT is not a word per se, but an acronym for Strengths,

Weaknesses, Opportunities and Threats and this tool can be used to find what challenges

Huawei’s e-marketing (Humphrey, 2012). It is used as a planned arrangement technique to

evaluate these elements of an organisation, project or business (Humphrey, 2005). It is not a

process, rather a tool used to give structure to a specific brainstorming gathering. The research

objective of a SWOT analysis comprises of specifying the purpose of a project or business

venture, categorising both external and internal aspects that can be unfavourable or favourable

to accomplish that goal. The main benefit of SWOT is that it has little to no cost, and anybody

who possesses some understanding about a company can perform a SWOT analysis, meaning

you can find steps on how to improve your business without consulting a business adviser or

external consultant (Business, 2016). The SWOT will be used to find Huawei’s Strengths,

Weaknesses, Opportunities, and Threats regarding the company’s smartphone capabilities.

The technique is comprised of an external analysis (Opportunities and Threats) at a macro

level (Technology, Legal, Demographic, Cultural, Political, Social and Economic conditions),

but also at a participant level (Suppliers, Distributors, competitors, customers). The other part

consists of an internal analysis (Strengths and weaknesses) in which an effort to find factors

that can be further developed for sustainable competitive advantage and circumstances that

can harm the competitiveness of a firm. One example is to do a value-chain analysis (Vikøren,

2013). A value-chain analysis, examines the value of the creation process in an enterprise, to

find and grow features that can increase a firm’s competitive advantage (F, 1993). A SWOT

analysis is not deprived of limitations, being unable to prioritise issues, and it does not offer

answers or alternative solution to a given problem. It is also known to yield much

information, but not all that information is valuable. Even though this might be the case, I

believe that an effective way of analysing Huawei’s smartphone division.

5.3 Porter Five Forces

Porters Five Forces analysis consist of five parts, and those five forces are; Supplier power,

Buyer power, Competitive power, Threat of Substitution & Threats of new entries (Porter,

1998). Supplier power can be divided into numbers of providers or their size. Buyer power

can be the number of customers and price sensitivity. Competitive power is numbers of

competitors in the market, customer loyalty, and quality differences. The threat of substitution

can be the cost of change or substitute performance, and lastly, the Threats of new entry can

be cost advantages and barriers to entry. These five objectives determine where the

competitive power lies in a business situation, what is the underlying factor that secures long-

term competitive power (The Economist Archive, 1994). By performing an internal analysis

of Huawei, we find that one of their core principles is to develop cutting-edge technologies,

and we can see this by looking at their emphasis towards R&D. 45% of the entire staff works

with R&D development (Huawei, 2017).

By using this model, we will find and analyse the competitive forces in an industry (Huawei,

and the smartphone) and identify that company’s unique advantages, and using those

advantages to forming a basis for a selection of competitive strategy. One popular strategy is

cost leadership, and this is a strategy based on cost effectiveness, where the ability to compete

on price is a crucial factor for maintaining a competitive advantage. This is relevant for

Huawei since they need to keep production cost low but differentiate themselves on price.

Numerous of Huawei’s competitor's retail smartphones that cost up to USD1000, and blame it

on the excellence and uniqueness of their product. How can Huawei use e-marketing to

convince their customers that the quality of their smartphones is just as good, even though

their price point is 100s of dollars cheaper. Huawei must use differentiation techniques and

build their unique advantage in the competitive smartphone market, finding market niches and

exploiting them.

5.4 Data Description:

The survey was performed on a platform called Qualtrics, which is frequently used by

researchers to gather and study information, and its regarded as one of the world’s leading

research and insight platforms (Qualtrics, 2016). The survey was spread by using social media

platforms such as Facebook. I also created a QR code so that students in the library could do

my survey using WeChat. Lastly, I kindly interrupted a lecture with 200 Chinese students,

asking them to scan my QR code and do the survey. After pulling the study from the internet,

I managed to surpass my primary goal of 200 participants. The data accumulated from the

survey was used to suggest possible reasons for specific relations between variables, to later

produce models based on the relationships (Saunders, 2016). To interpret the data collected by

the survey, I added the numbers to a program called SAS JMP which is a program for

statistical analysis. When the data was successfully added to SAS JMP I started to correct the

data, deleting extreme outliers and mistakes some people added, (One example was a Chinese

student claiming he was 15 000 years old) and eliminating individuals who completed less

than 75 percent of the survey (Garbage in, garbage out).

When I ended up finishing the data rinse, I started finding patterns relevant to my research

questions, dividing the dataset into clusters that represent a different type of people. Finding

out what their perceptions, or what they liked about other brands so that Huawei could change

their e-marketing capabilities to greater increase the chance of that customer group (Cluster)

buying a Huawei next time they were on the lookout for a new smartphone. The biggest

problem I encountered with my cluster analysis was that numerous of the people finishing my

survey was too alike and this is a problem because you need variation to be able to create

clear clusters (MAN303, 2016). The positive aspects of using a cluster sampling are that it is

cheap compared to other methods, and the sample sizes are bigger and more comprehensive.

6. Presentation and evaluation of results

6.1 SWOT

As stated earlier in the dissertation, I have decided to do a SWOT analysis of Huawei

in the smartphone industry. The purpose is to find Huawei’s Strengths, Weaknesses,

Opportunities, and Threats within this highly competitive market. Listed below, you

will find the four indicators put together in a SWOT matrix. In this matrix, you will

discover the most vital factors, and identification of relationships between external and

internal features (Martin, 2015). A portion of this SWOT analysis was inspired by

MarketLine Industry Profile and their SWOT analysis (MarketLine, 2016).

6.1.1 Strengths

R&D focus

One of Huawei’s greatest strengths is their focus on research and development. 45% of the

entire workforce of the cooperation work in the R&D sector and 10% of their average revenue

is invested back into R&D. The reasoning for this high focus on R&D is developing new

products and updating the existing products. The company has 16 R&D centres and 36 joint

innovation centres worldwide. Per annual reports, Huawei’s has spent more than CNY240

billion on R&D the past decade (Huawei, 2017). This gives Huawei a competitive advantage

because technological advancements are difficult to replicate by competitors, and it keeps

Huawei at a lead and their opponents on their toes. As of December 2015, the overall number

of patents retained by Huawei as of 2016 is 62 519, and numerous of these are associated with

smartphone development (Huawei, 2016).

Customer Loyalty

Customer loyalty is one of Huawei’s most important strengths. The Chinese telecom giant

posted a 70% growth in its smartphone sales in 2015 (Skilton, 2016). Customer loyalty is vital

for any brand to survive and thrive, and the dream scenario for Huawei is to build a client

base just as loyal as their two largest global competitors (Apple and Samsung). When your

brand has a large base of loyal customers, you only need to target new customers to grow

your business, and this is a qualitative factor that will lead to cost decrease (Tong, 2015). The

Huawei brand name is a major strength, and this gives the company a competitive advantage

because of their ability to charge high fees for their premium smartphones since the customers

place additional value in the product (survey results). To apprehend the strong customer

loyalty, they design their phones “in house”, and this gives them the opportunity to

differentiate themselves from competitors, making them more unique in customer’s eyes.

Additionally, they designed their chipset for their smartphones called Kirin, giving them more

control over their phones. Since the chip is one of the most expensive parts of a phone, they

gain the ability to be less reliant on suppliers and keeping their profit margins higher by

cutting down the length of the value chain (Androidcentral, 2017).

Annual Growth Rate

Being one of the leading global players in the smartphone market, the company has built up

quite a reputation. They have undertaken a transformation the past decade by only supplying

low-end phones, to providing medium to high-end phones. This has resulted in the company

attracting more business from customers, offering diverse products with high quality for a low

price. Consequently, acquiring a strong financial foundation per their annual yearly reports

(Huawei, 2017). The company went through a steep growth in margins the past five years,

from USD3,098,7 million in 2012 to USD6,867,9 million in 2015, and the operating margin

went from 9,4% in 2012 to 11,6 in 2015. The advance is directly connected to the upsurge for

the company’s services and products. The growing profit margins of Huawei reflects an

efficient cost management, and decision making management at the enterprise, and this high

profitability lets the business fund growth plans.

Market Share

As you can clearly see in the diagrams Huawei’s market share is within top 5 both globally

and in China. Huawei operates on a global scale, and you can find their services and products

in more than 170 countries. The revenue distribution is balanced across geographical regions,

but China remains their largest contributor towards their income stream contributing with an

impressive 42,5% in 2015 while Asia Pacific and America accounted for 32,4% respectively

(IDC, 2017), (Horwitz, 2016).

21 %

13 %

10 %

5 %6 %

45 %

Global smartphone market share, 2016Q3

Samsung Apple Huawei

OPPO ViVo Others

6 %8 %

15 %

17 %

16 %

27 %

11 %

China smartphone market share, 2016Q3

Samsung Apple Huawei OPPO

ViVo Others Xiaomi

Being a major global player reduces the company’s risk related to fluctuating currencies and

geopolitical developments. Huawei is actively represented in Asia, America, Africa, Middle

East and these areas are stated to expand in the coming years. Unlike the more mature markets

such as USA and Western-Europe, meaning, Huawei’s position in especially the emerging

markets enhance revenue and scale potential (Huawei, 2017).

Bargaining Power

Being one of the largest smartphone developer and provider in the world, Huawei has great

bargaining power when it comes to the suppliers. The cost structure is strong not only because

of economies of scale but also because of the low wage cost in China, providing Huawei with

higher profit margins (Chinaabout, 2017). Technology companies are typically against price

increases since customer’s rebel against it. Huawei has positioned itself in a way that

undercuts the competitors pricing while keeping the quality high. This provides a chance to

increase prices co-along as the brand value increases, further growing their overall profit

margin.

6.1.2 Weakness

Low Market Share

Even though Huawei is a large company, they still have weaknesses. One of the most notable

weakness is that they have low market share in two strategic markets (Statista, 2017). Those

markets are North-Europe and North-America, and one great contributor is the lack of

competence and experience in these markets. The reasons for this may vary, but some of the

factors include the spyware accusations and involvement with the Chinese Government,

which is poorly perceived in the West. The West cares more about their phone, buying brands

that they know are good, such as Samsung and Apples high-end phones, and this is because

Huawei lacks an established, popular flagship phone. Huawei also has trouble with

westerner’s preconceptions concerning the “made in China label” which can be perceived as

products with reduced quality, underdeveloped CSR and not be environmentally friendly

(Lee, 2017).

Reliant on Competitors

Whether they like it or not, Huawei is to some extent reliant on two of their largest

competitors, being Apple and Samsung. Huawei smartphones do not run on their software

such as Apple, but on Android which is developed by Google. This means updates and fixes

regarding the software need to go through a 3rd party, implying it is not efficient, nor cost

effective, and this is a weakness. Since Huawei does not produce much of the key components

for their smartphones, they are highly dependent on others, especially Samsung which

produce most of their components. This can create a lack of overview that may lead to a PR

disaster just like Samsung and its battery in the Note smartphones, where some of the phones

exploded due to the battery overheating (Kovach, 2017).

Private Ownership

The company is privately held which is a disadvantage if you compare it to its publicly owned

competitors when it comes to raising capital. Since Huawei is not a publicly held company, it

has lower economic elasticity when it comes to funding inorganic and organic initiatives. This

is because public companies have better access to capital markets and can fund acquisitions

by using stock transactions, and this directly restrict financing options (McGregor, 2010).

6.1.3 Opportunities

Market Growth

The market growth potential for the smartphone industry is massive, and it is expected to

grow from 1,4 billion units shipped in 2014 to an estimated 2,1 billion units in 2020

(Scarsella, 2017).

1,57

2,1

2,532,87

2014 2016 2018 2020

Predicted smartphone users worldwide (In billions)

These new markets allow Huawei to expand their smartphone business and diversify their

portfolio of services and products. International markets offer Huawei new opportunities to

increase the sales, not only in its home market. The market who buys the most expensive

smartphones on average (USA) is expected to have a significant increase in new smartphone

users by the year 2019 (Statista, 2017). This growth in the smartphone market is poised to

benefit Huawei, growing demand for their phones, thus enhancing market share.

Innovation

As mentioned in the strengths, Huawei is market leading when it comes to research and

development. Greater innovation can help Huawei to produce services and products that meet

their customers’ demands. Innovation also contributes to building competitive advantage by

creating barriers against rivals. Further investment in R&D will increase the chance of

becoming less reliant on competitors for smartphone parts and inevitably increase the

organisation's profit margin (Huawei, 2017). This opens a new opportunity for Huawei by

being able to sell the technology to other smartphone manufacturers, directly competing

against Samsung. By narrowing down vertical integration, they will have more control of the

value chain, which is an opportunity.

Marketing and Sales

There are still progress to be made, even though Huawei is one of the leading companies in

the smartphone industry. Their current global market share is 10%, and one of the best ways

to increase that number is to position themselves in markets such as North-America and

Europe better (IDC, 2017). Building competence and cultural know-how will result in an

increase in market share, and this is going to benefit Huawei in the long run.

Procurement Costs

When a company expand and becomes a market leader, it receives the ability to pressure its

suppliers like never before. A company like Huawei has a large influence on their suppliers,

providing them with more significant purchasing power, giving them lower production cost

(PPC, 2017). It is like the economy of scale, but directly related to the vendors, and this is an

opportunity for Huawei. This concept applies to everything from; transport, electricity, raw

materials, and even pencils (O'Sullivan, ET AL 2003)

6.1.4 Threats

Strong competition

The major threat to Huawei’s smartphone division is the intense competition in the

marketplace. This threat is especially prominent by the giants, being Samsung and Apple in

the global market, while in China Huawei’s largest competitors are Xiaomi, Vivo, and OPPO

(Horwitz, 2016). Intense competition can lower Huawei’s profits because competitors can

entice customers away with superior products. The availability of substitute products can

potentially hurt Huawei’s ability to raise prices because it makes it easier for the consumer to

switch to a different brand. A way to stay ahead is to continuing concentrating on research

and development.

Political Scrutiny

We live in a world where political issues have become a part of our daily lives. One of the

main reasons why Huawei have not been able to branch out to the US and other countries is

because of political concerns concerning the company (Simonite, 2017). The US demanded

Huawei to submit all information regarding their exports to Iran, North-Korea, and other

sanctioned countries. Additionally, the US has been suspicious regarding Huawei’s ties with

the Chinese government and espionage (Riley, 2013), and this is the main reason why the

company has not been able to venture into the US. This shows that the government can deny

companies access, by using laws and regulations, and this hurts Huawei.

Volatile Currencies

Like any other company that is global, you are exposed to fluctuations in foreign exchange

currencies, and this makes investing difficult since revenues and cost can change in the blink

of an eye, exposing the company to foreign exchange risks. The functional currency for

Huawei is CNY, and the company trade with different currencies daily, being mostly Euro

and USD (Krugman, 2010). If the CNY were to appreciate against the dollar or the euro, it

would have a negative net profit of the company,

Key Suppliers and Distribution Channels

Key suppliers may increase prices of their products, and this is because Huawei is reliant on

services and hardware provided by Google and Samsung. This could lead to decreased

profitability for Huawei, lowering the overall profit margin. Worse of, key suppliers might

even terminate contracts and end deliveries to Huawei indefinitely, the reason being Huawei

are becoming too much of a threat. This had happened before where Beats by Dr Dre ended

their partnership with HTC and bought back 25% of the shares (Warren, 2013). Back in 2013,

it was unclear why this happened, but now we know it was because Apple was going to buy

Beats. This shows us that a supplier can go bankrupt or become purchased by a competitor.

Huawei has little to none control over their key strategic distribution channels, which is

wholesalers and retailers. This makes the company highly reliant on having a good

relationship with these distribution channels. If one of the distributors become too large and

decides to eject Huawei’s business, it becomes a problem for the company.

6.2 FIVE FORCES ANALYSIS

1 = Low, 5 = High

The second analytical tool I am using is the Porter Five Forces, and this analysis will help me

analyse Huawei against the handset industry. The model consists of; Supplier power, Buyer

power, Competitive power, Threat of Substitution & Threats of new entries. This model will

benefit this research by identifying Huawei’s unique advantages and using these to form a

basis for the choice of strategy. The global handset industry is dominated by a small number

of large firms, and the competition between these companies is substantial. Byers tend to be

large and negotiates favourable contracts, but the necessity to always stock the latest high-end

handsets puts pressure on the buyers. In the diagram below you will see where I position

different factors, regarding threat level, and by doing this, it is easier to get an overview of the

situation. In this analysis, I got much inspiration from MarketLine Industry Profile and their

Porter analysis (MarketLine, 2016). The very first diagram is a basic summary, where I have

placed Huawei regarding the five features in a Porter Five Forces analysis.

0

1

2

3

4

5Buyer power

Competitive power

Threat of new entriesThreat of substitution

Supplier power

Summary

6.2.1 Buyer power

1 = Low, 5 = High

The handset industry is regarded as a mature market, where development has stagnated, and

the ability to differentiate yourself is becoming more and more challenging. Low pricing is

not necessarily a good thing because customers want to invest in the phones since it is a large

part of their daily lives implying premium quality is sought after. The overall market can be

divided into two categories of buyers. Firstly, we have large retailers such as Walmart, Sears

and the European Elkjop who purchase smartphones and sell them to its customers. The

second type of buyers are mobile network operations, such as Vodafone, China Mobile,

Telenor, and some of these phone companies have their retail stores. Huawei is one of the

major players in the handset market, but the brand loyalty is higher in the Asian market

compared to the global market (Survey findings). The bargaining power of the buyers is high,

especially in the handset market because of the economy of scale. We can see an increased

trend of customers switching to e-commerce. Retail over the internet is growing every year,

and pricing competition is especially prominent since it is easy to compare one retailer against

another. Pricewise Huawei has placed itself lower than its competitors in Western markets,

and their price elasticity is high. However, in the Chinese market, the price elasticity is less

because of more competition.

0

1

2

3

4

5Undifferentiated products

Low price

Premium

Brand loyalty China

Brand loyalty WestPower of the buyer

Pricing

Price elasticity China

Price elasticity West

6.2.2 Supplier power

1 = Low, 5 = High

Manufacturers are characteristically considerably larger than the vendors, meaning they have

the high ground regarding supply contracts, over the provider’s low power level. Some

contracts are considered cut throat contracts because a supplier’s survival is based on that deal

and often live for that contract. The suppliers are often replaceable, and as a buyer, you have

much power. There is a high potential for backwards integration because Huawei can easily

buy its suppliers. However, providers of the handset industry have reached a higher power

level the last decade due to the smartphone needing rare earth resources for their

manufacturing, which is difficult to acquire. Manufacturers need to be careful about whom

they decide to cooperate with since unethical suppliers can result in negative views of their

brand name, one example is the wrong CSR related to factory workers at Foxconn. Since we

see a downward trend in global market barriers, it is likely that profitability is going to drift

away from the traditional telephone manufacturers. The profitability will move over to critical

performance enhancing components producers, both Software and Hardware like Samsung.

Samsung is one of the companies which enjoys a great degree of diversification compared to

its competitors. They manufacture a portion of Apples iPhone components, and this shows us

that the supply chain of the handset industry is complicated since some major companies act

as suppliers.

0

1

2

3

4

5Switching cost

Buyer power

Backwards integration

Traditional telephonemanufacturers

Components producers

Diversification

Substitute products

6.2.3 Competitive power

1 = Low, 5 = High

The handset market is primarily dominated by a small number of big, recognised companies.

This indicates a high competitive power and rivalry between these enterprises. The industry is

set to have a high growth rate, with a growing market and this is especially attractive for

competitors to try to steal market share. Blackberry used to one of the major players in the

phone industry before the smartphone was introduced, and their revenue has dropped

significantly the last decade since the customers have moved to competitor’s offerings. This is

because large companies like Apple and Samsung provide more attractive products and

services, and it is easy for a customer to choose among suppliers. Market saturation is high,

and if you take phones that are not under contract into consideration, the market penetration is

higher. This puts smartphone production companies under pressure, forcing them to develop

new technologies continually and investing in R&D to persuade existing customers to

upgrade their phone. The loyalty level of customers is relatively high, especially in the

premium phone industry. Companies heavy invest in technology that helps to keep the

customers loyal. Some examples are Apple and iCloud, that seamlessly integrate and connects

your devices across different platforms.

0

1

2

3

4

5Competitor size

Competitive power

High growth rate

Low switching costR&D investment

Easy to expand

Ablity to upgrade

6.2.4 Threat of Substitution

1 = Low, 5 = High

The threat of substitution products in the handset industry is small. One possible substitute for

the mobile handset is fixed land lines, but this risk has decreased the past years since cell

phones provide larger geographical reach due to wireless connectivity. In the last decade, cell

phones began to offer benefits, directly subsidising other products earlier not associated with

mobile phones. This includes cameras, MP3 players, laptops and television. Even though

laptops offer comparable benefits as a smartphone such as an internet access, GPS, video

calling, and portability, it is not a healthy substitute product. This is because mobile phones

have other benefits such as size and weight. A larger threat would be Tablets, but the phone

industry has conquered this problem by producing large screened phones, called “phablets”,

and this reduces the risk. We can conclude that the smartphone is a solid product and will

continue to stay strongly represented in the time to come. There will be significant upgrades

to the smartphones in the future, but they will pretty much stay the same, with added

functions to the software and hardware.

0

1

2

3

4

5Substitute products

Threat from tablets

Threat from laptop

Threat from landlinesSolidity of the smartphone

Cheaper alternative(Smartphone)

Beeficial alternative

6.2.5 Threats of new entries

1 = Low, 5 = High

Numerous newcomers have effectively entered the market in recent years, and this has made

an immense influence on the overall handset industry increasing the competition, giving the

large manufacturers such as Apple and Samsung a run for their money. Some examples of

newly established competitors are Huawei and OPPO. Entering a market as a minor company

can be problematic due to having limited market capital and resources. R&D and production

facilities are costly, and competing with larger brands becomes nearly impossible. However,

manufacturers such as Huawei has succeeded in entering new markets, directly competing

against the European giants such as Samsung and Apple with a noteworthy cost-benefit. We

are currently at the mid-growth stage in the industrial lifecycle of smartphones, and this

implies that new advancements in technology and research will happen, and this can be a

threat against Huawei since they might not be able to provide that type of technology quickly

enough. Brand identity often goes hand in hand with brand loyalty and is hard to replicate.

This is an advantage because, as Huawei acquire loyal customers they can increase the prices

of their products, while still maintaining high-profit margins. Lastly, software companies like

Facebook, WeChat and Snapchat could develop hardware, and one example is HTC and their

Facebook phone line-up, which flopped (Beavis, 2011).

0

1

2

3

4

5Future competition

Minor companies

Huawei threatlevel

New technologyBrand identity

Brand loyalty

Software companies

7. Survey

7.1 Cluster Analysis

I decided to use 3 clusters because they turned out to have clear differences that are easy to

relate to. The variables used for clustering are linked towards my first sub-question, being

customers’ relationship towards Huawei as a brand. The variables are age, income,

nationality, design importance, price importance, feeling towards – value for money. My main

goal with the cluster was to visualise customer relationship towards Huawei as a brand,

finding out if age and nationality makes a difference concerning their feelings towards the

brand.

In the first cluster, the average age is 54, and most of them are from Europe with a high

monthly income. The design is important when they buy a smartphone, but the price is not

that significant, likely related to their high income. Their feeling towards Huawei as a brand is

neutral, on the verge of negative. Then the 3rd cluster we see a much younger audience,

averaging 19 years old. Their monthly income is 1/3 of cluster 1, and the majority are from

Asia. Price and design are important factors when choosing a new smartphone. Their feeling

towards Huawei and its value is high, almost doubling the first cluster. Lastly, we have the 2nd

cluster where the average age is 23 years old, mostly Europeans They have a modest income

placing them in between cluster 1 and 3and Design is somewhat important to them. However,

the price is not a major factor for when choosing a new smartphone. Their feelings towards

Huawei is stronger than cluster 1 but weaker than cluster 3.

The 3 different clusters

Cluster 1 Cluster 2 Cluster 3

Age Average 54 23 19

Monthly income Average USD5000+ Average USD2500 Average USD1700

Nationality European European Asian

Importance of

Design

Agree Somewhat agree Strongly agree

Importance of

Price

Between Neutral

and Agree

Neutral Agree

Feelings towards

Huawei – Value for

money

Neutral Between Neutral

and Strong

Strong

7.2 Hypotheses

7.2.1 Hypotheses-test

By using SAS JMP and Qualtrics, I have conducted a survey, analysing 217 respondents. By

looking at the data, I decided to perform two T-Tests. I will use the qualitative data to develop

my quantitative analysis. The outcome of these test will give a wider understanding regarding

the research questions.

A: There is a correlation between nationality and perceived value for money regarding

Huawei.

B: Men and women have different views regarding smartphone prices.

7.2.1.1 Hypothesis A:

H0: NC ≠ NE China (C) and Europe (E) Do NOT have the same perception of value

for money, and nationality (N)

H1: NC = NE China (C) and Europe (E) Have the same perception of value for money

and nationality (N)

By using a confidence interval of 95%, we have a significance level of 5%, meaning we allow

a 5% chance of a miscarriage of justice. The significance level is 0,0045*, that means the p-

value < 0,05, I then reject H1 because I have found significant proof that the perception of

value for money, is perceived differently between Europeans and Chinese. I can confirm this

by looking at the t-value – 2,87521 > Confidence quantile value 1,97132. This means that

people’s feelings towards Huawei, and the value for money aspect is perceived differently

compared to where you are from. Interesting find, but nothing revolutionary here, since

people will always be more loyal to their home brands, just like Swedish costumers prefer

Volvo and IKEA, of course, the Chinese favour Huawei.

7.2.1.2 Hypothesis B:

H0: PM ≠ PW Men (M) and Women (W) do NOT have the same views (P)

H1: PM = PW Men (M) and Women (W) have the same views (P)

By using a confidence interval of 95%, we have a significance level of 5%, meaning we allow

a 5% chance of a miscarriage of justice. The significance level is 0,2245, that means the p-

value > 0,05, I then reject H0, because I have found significant proof of a correlation between

men and women’s views towards prices of smartphones. I can confirm this by looking at the t-

value 1,219113 < Confidence quantile value 1,97143. I can therefore presume men and

women use the same amount of money when buying a Smartphone. This was an interesting

find because my initial hypotheses were that girls believed the price was more important than

guys. This is based on observations made in my home country, where a clear majority of the

girls have iPhones, which is an expensive brand.

8. Conclusion

8.1 Sub-Question 1:

To begin with, I would like to respond to the first question in this dissertation, being; “what is

the costumer’s relationship towards Huawei as a brand?”

By looking at the cluster analysis, you can clearly see a trend in how demography alters your

perception and feelings toward Huawei as a brand. Older participants undoubtedly have

different views regarding Huawei, compared to the younger audiences. This gives an

indication that views regarding Huawei differ compared to demography and age. To increase

the validity of my conclusion I decided to test my hypothesis in SAS JMP, and I found out by

using statistical analysis that my hypothesis was true. I must remember to take into

consideration that my survey results are not perfect. My sample is small, consisting of a small

sample size, increasing the risk of biases. Reasoning of why Huawei is badly received in

Europe is not an easy task to find the correct answer to. As mentioned in my SWOT analysis

under external threats it could be linked to Huawei’s ties to the Chinese government and

Espionage accusations. Looking back to my literate review regarding branding, I can

conclude with my cluster analysis that Chinese young adults have high customer loyalty

regarding Huawei. Their gut feeling towards the brand is linked to something positive

showing that Huawei’s branding and e-marketing capabilities have paid off in China.

8.2 Sub-Question 2:

Secondly, I have tried to answer question 2 in my dissertation, being; “What are the strengths

and weaknesses of Huawei’s e-marketing capabilities?” My initial hypothesis before writing

this dissertation was that Chinese and Europeans wants different things, both when it comes to

e-marketing, and what features they want to have in their phones. For instance, I believed that

battery life and dual sim was something of importance in China because of VPN services

using a lot of the battery capacity, and people often having multiple sim cards. My survey

showed that there is no difference between nationality when it comes to preferred features of a

phone, meaning we want the same thing and features in our smartphones.

In my Literature review, I clearly emphasise e-marketing to reach out to the younger

audience. As seen in the survey and the five forces analysis, the younger audience should be

Huawei’s target group because of their already strong brand loyalty, and most likely being

more open to trying new things, compared to the older generations, also being the market of

tomorrow. Cluster 2 and 3, being a younger audience, we can presume they use social media

and the internet in general. Under Huawei and marketing communication I found that users

exposed to marketing by a blog gave a more positive attitude towards the brand, compared to

someone being exposed to an advertisement in a magazine. Huawei should therefore reach out

to new potential customers by using e-marketing on sites such as Facebook and WeChat.

It is also stated in my Literature review that Chinese and English brands differ in both visual

and verbal representation. What is written between the lines is more important for the

Chinese, while for Westerners the brand name is more important. I know from personal

experience that Huawei is hard to pronounce in Germanic languages like Norwegian and

Swedish. Even in the commercial for Huawei, the speaker pronounces the name wrong, and at

the beginning of this dissertation, I was unsure if this was on purpose or not. Now I know it is

mispronounced on purpose, making it more familiarised for the Europeans.

8.3 Sub-Question 3:

Lastly, I will try to the best of knowledge, answering question 3 which is; “What brand

position does Huawei have in the global IT market? To answer this question, I have used

material acquired from my survey, five forces analysis and my SWOT. By looking at my

Porter Five Forces analysis, we see that the competition in the smartphone market is tough,

dominated by a small number of big cooperations. This means that there are lots of rivalries,

and maintaining a strong position is both time-consuming and expensive. This provides

Huawei with an opportunity because of the company’s size combined with not only focusing

on smartphones but telecommunication equipment and research and development as well. By

not keeping all their eggs in one basket, Huawei’s smartphone division can be considered as

flexible, as it is 1/3 of the company’s overall profit. If the smartphone sales were to fluctuate,

they have other divisions to deal with a potential loss (Sherpard, 2017). This is a trend

amongst global smartphone manufacturers, not focusing on one thing, and one example is

Apple and their MacBook line-up.

By looking at the SWOT, we can by confidence say that Huawei is one of the top five

smartphone manufacturers, both in China and globally. Even though the smartphone market

in China is the world’s most lucrative smartphone market, Huawei wants to alter the company

focus and becoming global. The company intends to compete against market leaders such as

Samsung and Apple, being rank one and two in the world. Like I mentioned in the literature

review under e-marketing, this is related to newly established competitors like Xiaomi, which

threaten Huawei in their home market. By looking at my survey, we find that brand loyalty is

strong amongst young Chinese and young Europeans in general. This advantage must be

exploited by Huawei before other large Chinese companies decide to do the same thing.

Overall we can conclude with Huawei being one of the most influential and important

smartphone manufacturers in the world, with an audience with high to medium brand loyalty,

compared to demography, and this is displayed in both my survey and in my five forces

analysis. My survey consisted of 200 + participants, which is not a huge number meaning

even though the younger Chinese seem highly loyal to Huawei this might not be the case.

Many of the Chinese Participants were year one students, having a rich family background,

and this can produce biases within the survey.

8.4 Main question

By using information acquired from this dissertation project, I have increased my knowledge

regarding my research questions, in such a manner that I feel comfortable answering them.

After carefully investigated how Huawei’s e-marketing contribute to strengthening their

global brand, I have found some solutions on how this can be improved even further.

Customers under the age of 24, from both Asia and Europe, have a real relationship towards

Huawei according to my survey. Their thoughts towards Huawei and value for money is

perceived as strong, and this is an indication that they appreciate Huawei and their phones. I

must take into consideration that the participants taking my survey, especially the Chinese are

between the age of 18 – 21, They have a rich family background and might be biased towards

Huawei since it is a Chinese brand.

An interesting find during this dissertation was throughout the execution of the survey, which

gave me results contradicting my initial hypothesis, that Chinese and Europeans wants

different features with their smartphones. It turns out that Europeans and Chinese want the

same thing, whether it is an emphasis on the screen size, battery, camera, and dual sim. My

focus was the younger audience as I found they are more open towards trying new things, and

regarding e-marketing, the younger generation uses social media and internet in general. My

research shows that marketing through social media leaves a more positive feedback,

compared to commercialization in a more traditional form, such as printed media. It could be

problematic to advertise for Huawei in Western countries because Chinese emphasis on

reading between the lines, while Westerners prefer a more direct approach. Huawei must be

careful not to be lost in translation when marketing their products abroad and make sure that

the Westerners understands the content behind the marketing.

Huawei is one of the most influential companies and most prominent smartphone

manufacturers in the world. Huawei most take notice of this fact and use it to their advantage

in a smartphone market where the competition is tough. The rivalry in this market makes

keeping a strong position both time-consuming and expensive. Huawei’s smartphone division

accounts for 1/3 of the company’s profit, meaning 2/3 are provided from other activities.

These 2/3 can be used as a safety net for any loss of profit in the Smartphone division.

Western has a predetermined idea that Chinese products are something of lower quality,

cheap, fake and consisting of copied technology. Huawei is a company that has been

successful where other companies have failed, getting into the global marketplace. Huawei as

a new competitor increases competition against the other well-established manufacturers.

Huawei's success can be a contributor to changing the Western view of Chinese products by

giving a more positive approach to Chinese goods overall and paving the way for other

Chinese companies to enter the global market.

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10. Appendix

Online Survey Questions: