PESTEL/PESTLE analysis of Huawei
Huawei has emerged as a leading player in the smartphone and technology industry in the recent years. The brand has surpassed Apple to become the number 2 in the smartphone industry. While its financial position has kept growing stronger over time, the brand is investing a lot in research and development to retain its leadership position and stay competitive. The technology industry is marked by intense competition and each major rival of Huawei invests aggressively in research and innovation to gain market share including Apple and Samsung. However, Huawei has also gained a leadership position in 5G. It has been researching 5G for more than decade and has managed to make significant advances in this area. However, the road ahead in the area of 5G is fraught with challenges. Huawei has faced several controversies and the US government particularly does not favor its growing global footprint. There are challenges ahead of Huawei but there are also significant opportunities awaiting in 5G and AI.
Being an international company, the business of Huawei is also affected by so many factors in the international environment which can be political, economic or technological in nature. Read how these forces affect Huawei and its position in the international market through this Pestel analysis.
Political factors have gained a lot of importance in the field of international business in the recent years. Particularly, in the technology industry, its impact is now more direct than ever. Apart from trade relationships between countries increased government control and oversight of international businesses is also affecting their productivity and profitability. Worldwide governments have grown their level of oversight and supervision of large businesses amid concerns related to user privacy and data security. In the IT and smartphone industry especially the level of government oversight is being seen as a major hindrance to international growth and expansion. Huawei is based in China and it has felt the impact of worsening relationships between America and China. A continuously intensifying trade war between America and China have led to higher pressure on China based firms trying to do business in USA and other Western nations. The arrest of Huawei’s CFO in Canada also showed that political factors must not be overlooked in the context of international business. Huawei has tried its best to gain a strong foothold in USA but due to political pressures, it has not been able to. Apart from that the company has also been accused of spying on behalf of the Chinese government using its handsets. While no concrete proof indicating its clear involvement has been found, its close relationships with the Chinese government have become a pain for the brand in the international market. Political pressure is clearly working and for brands like Huawei this is one of the most significant challenges in the way of international expansion. For Huawei while government support has proved favorable in the Chinese market, externally it has had a reverse effect.
Economic factors are also having a major and direct impact in the bottom line of the technology businesses. Huawei has become a leading smartphone brand since it rose very fast to the second position in the entire smartphone industry. Not just the world economy, but the health of the regional economies also has a direct impact on the bottomline of international businesses. The world has seen a major recession some years ago. While the world economy has returned on track since then, its effects remained there for quite some time. Competition in the technology industry has also grown quite intense. While Huawei’s financial position is strong, the brand has used a competitive pricing strategy to beat the effects of the economic fluctuations in the international market. It is a leading player in China and the Chinese economy has seen a lot of healthy growth during this decade. This has proved profitable for Huawei which has seen its profits grow very fast. In this way, economic factors play a central role in the context of international business. In a healthy economic environment, the level of employment and the purchasing power of the customers is high which is generally every good for technology brands. Higher economic activity means people have higher dispensable income and they can spend more on technology and lifestyle products like smartphones.
Sociocultural factors have also gained importance in the twenty first century and apart from consumers’ tastes, regional demand is also affected by social trends and local culture. It is why businesses are increasingly making sociocultural factors an integral part of their business and marketing strategies. There is no ‘one fits all formula’ to win in the international market. Business and marketing strategies have to be aligned with the local cultures and societies in different regions. Marketers are increasingly integrating cultural factors in their marketing strategies so as to understand their customers and connect with them better. It is also a reason that the demand for local products is generally higher in most regions of the world. Moreover, social trends also affect demand for certain products including lifestyle products. Growing use of internet and social media in most corners of the world are also affecting how businesses like Huawei market their brand and products.
The technology industry is the fastest growing industry worldwide and now a very large part of the international population uses internet and internet based services. The growth and proliferation of internet technology has aided the growth of international brands like Huawei. More and more people are buying smartphones to access online services like social media and email as well various forms of entertainment like games and movies. Huawei is a technology brand and places heavy focus on research and innovation. This is also a reason behind the fast growth of the brand. Its camera phones have been highly popular in several corners of the world. Moreover, it is ahead of most of its competitors in the area of 5G and it actively researching AI to bring new products and services for its customers. Its leading position in 5G and the smartphone industry is bound to benefit the brand in the coming years. The demand for technological products has steadily grown in the recent years and while internet has brought higher accessibility, smartphones have become an integral part of people’s lifestyle all over the world. Huawei has partnered several firms all over the world to grow its 5G network. However, there is also intense competition and several other forms of challenges in the internet and smartphone industry.
Environmental factors have also gained an important role in the international market and the technology industry. More and more technology brands are investing in sustainability to reduce their carbon footprint and minimize their environmental impact. Huawei has also focused on sustainability and invested in several areas for reducing its carbon footprint including improving resource utilization in its operations. By focusing on waste reduction and use of sustainable raw materials, it has been able to improve the energy efficiency of several of its products by around 20%. Apart from that the company is also investing in solar energy and partnering with its suppliers and other business partners to reduce its carbon footprint to make its products and processes more environment friendly.
Legal factors have also acquired a major role in international business and the technology industry. Amid concerns related to user privacy and data security legal agencies have grown their level of oversight of the smartphone and internet businesses. All over the world, the need for compliance has grown and businesses are especially focusing on this area in order to avoid hefty fines. The level of fines for any kind of violation has also grown a lot and a business may lose a significant part of its revenue for noncompliance. Apart from user, privacy, data security there are other areas like labor and product quality as well as environment too where compliance is essential. Huawei is already facing criminal charges in US related to espionage and stealing trade secrets which have proved it very costly. Moreover, apart from causing loss of revenue lawsuits can also prove detrimental for brand image. In the longer terms the legal tussle in US could cause significant loss for Huawei.
- Huawei Annual report 2018