A India where market is fragmented and congested with

A
telecommunications provider, Huawei shifted its focus to consumer devices
(smartphones) from 2003. Today Huawei, is the 3rd largest
manufacturer of smartphones with a market share of 10%. Huawei, is the first
Chinese conglomerate to break into the fortune 500 companies list on a global
scale.  Today Huawei operates in more
than 170 countries employing 180,000 with 40% employed in R&D and generates
more than half of the revenue from outside China. Huawei since 2012 has crossed
Apple when it comes to investment in R&D and also has significant market
share in emerging markets like Middle East, Latin America, and Africa apart
from being the second dominant player in Europe. However, there is still a big
gap between Huawei and the smartphone giants Apple and Samsung and if Huawei
needs to capture market share to become the top-selling manufacturer in the
world “it needs to find its feet first before rapid expansion” especially in
countries like United States and India. Huawei, has been successful in
implementing the dual brand strategy in its home country China but in India
where market is fragmented and congested with over 150 competing brands Huawei
has not been largely successful. With India becoming 2nd most users
of smartphone Huawei, needs to revamp its underlining dual-brand strategy and
partner with local retails chain, carriers and more importantly create a
significant distinction between its expensive and lower price phones. This
along with changes to manufacturing, human resources and smart marketing will
give the necessary advantage that Huawei was missing in the last 5 years.
Implementing such a strategy involves trade-offs, focusing on long-term goals
over short-term gains with the focus on future growth will drive Huawei to
becoming a global smartphone manufacturer.

 

 

External
Analysis

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The
competition to woo consumers was intensely fought between Apple and Samsung
over the last 5-8 years. They claimed a duopoly over the smartphone market.
Together they controlled two-thirds of the global market with other small
players like Nokia, LG, Blackberry occupying the remaining market. However, in recent
years with the launch of smartphones from Chinese manufacturers such as Huawei,
OPPO, Vivo the market is shifting towards more value based and clearly Apple
and Samsung’s strong foothold is no longer guaranteed 10 15. If
we look into the top five smartphone manufacturer’s w.r.t. worldwide shipment
in 2016 year of year growth (YoY) 3 Huawei and Xiaomi had a higher
growth when compared to Apple and Samsung i.e. 44.3% and 22.8% respectively.
Using Porters five forces I will summarize the current smartphone industry.
Apart from this I will also provide what is the current situation using PEST
analysis and a brief description of the major players in this highly
competitive industry.

 

Porter’s
five forces a:
The intensity of competition and the profit potential of the smartphone
industry are the functions or porters five forces. (1) The threat of new
entrants is low to medium considering the industry being capital intensive, intense
competition within existing manufacturers to gain market share and not to
forget most processes by smartphone manufacturers are patented. (2) Substitutes
for smartphones is low as there is no alternative available which can provide
the same functions as that of a smartphone. The only real substitute is
consumers switching to low cost phones over expensive premium phones. (3)
Consumers have the option to easily select from various available brands, easily
compare the pros and cons. Adding to all of this the switching cost is
relatively low thus the consumer (buyer) power in the smartphone industry is
relatively high. (4) Hardware and Software suppliers are the two required
suppliers within this industry. Software manufacturers are abundant and even
though only a few hardware suppliers are there the market is very price
sensitive that end-user (buyer) can easily switch to other alternatives leading
to moderate supplier power. Finally, (5) competitive rivalry is very high as competitors
can provide consumers with varied options. Manufacturers can differentiate products
in terms of applications and services offered.

 

PEST
Analysis:

            Political Analysis

Tax
breaks, labor policies, stringent corruption laws and policies for developing
infrastructure have been the core measures by the Chinese government over the
years. These have been instrumental in rise of smartphone manufacturing in
China. These political situations have played in strengths for Huawei to
establish business however, the tensions and turmoil between China and U.S has
caused Huawei not sign any deals with U.S carriers. This has become an
increasing concern for Huawei and a radical approach is necessary for long-term
success of the company especially in North American Markets.

            Economic Analysis

The
2016 year on year growth on the worldwide smartphones shipped increased only by
0.2% 4. This clearly shows that the smartphone market has gone
flat and the main reasons and how the current market scenario are. (1) Every
smartphone manufacturer is providing latest technology phones and the need for
an upgrade is declining. (2) Samsung and Huawei have adopted the strategy of
providing wide range of products which Apple is also trying to follow with the
launch of 5C. This clearly shows that the current market is split across
high-end consumers and low-end consumers. (3) Chinese manufacturers like OPPO,
Vivo, and Huawei are offering smartphones at $250 and $800 giving them a strong
position to compete in different segments of the market.

           

Socio-Cultural Analysis  

With increasing consumer demands the new smartphones are considered to
be low on innovation and no new features to offer. Smartphone manufacturers are
shifting towards customer differentiation by engaging customers through
social-media channels and promoting brand and product simultaneously. Millennial
users are demanding the need for continuous innovation and also product
differentiation. Manufacturers are providing multiple products, adopting
dual-brand strategy to meet changing customer requirements.