How can the Micro Environment Affect Huawei?

Introduction:

The assignment will have two parts. The first part will discuss a Chinese company called HUAWEI. The uncontrollable variables (Microenvironment and Macroenvironment) have affected the controllable variables (Marketing Mix) in HUAWEI. There are two factors affect the effectiveness of companies’ marketing activities: one is the company cannot control, such as political, legal, economic, cultural, geography and other environmental factors, known as uncontrollable factors, which is the external environment faced by the company; One is the company can control, such as product, price, place, promotions and other marketing factors, be known as controllable factors. The essence of markting activities is using internal controllable factors, so that external uncontrollable environment adapt to the controllable factors, and to meet the individual and the organization’s goals. Kotler’s said, “If the company produce the appropriate product, set an appropriate price, the use of appropriate place and supported by an adequate promotion, then the the company will be successful “(Kotler, 2001).

The second part will discuss three main learning points of the Marketing Game.

Part 1

1.1 About HUAWEI:

Huawei is a leading global telecommunications solutions provider with long-term partnerships with operators around the world.. Huawei’s products and solutions is about wireless products (LTE/HSPA/WCDMA/EDGE/GPRS/GSM, CDMA20001xEV-DO/CDMA2000 1X, TD-SCDMA and WiMAX), core network products ( IMS, Mobile Softswitch, NGN ), network products(FTTx, xDSL, Optical, Routers, LAN Switch) , applications and software(IN, mobile data service, BOSS), as well as terminals(UMTS/CDMA). Major products are designed based on Huawei’s ASIC chipset and utilize shared platforms to provide quality and cost-effective products. Huawei’s products and solutions are deployed in over 100 countries and serve 36 of the world’s top 50 operators.

Huawei’s R&D centers is built in many countries, such as Silicon Valley and Dallas in USA, Stockholm in Sweden,Moscow in Russia, Bangalore in India, and Beijing, Shanghai, Nanjing, Shenzhen, Hangzhou, Guangzhou in china.(1)

1.2 The Controllable Variables of Huawei

The controllable variables in a company mean the Marketing Mix. In 1953, Neil • Borden in the American Marketing Association’s inaugural speech created a term called “marketing mix” and its meaning is more or less in market demand, to some extent on by the so-called “marketing variable” or “market factor” the impact, in order to find a certain market response, companies want to be an effective combination of these elements to meet the market demand, to obtain maximum profit. In fact there are dozens of marketing mix elements, Boden proposed marketing mix consists of 12 elements, known as the 12-factor “marketing mix” strategy, namely, “product plans, pricing, brand, supply routes, personal selling, advertising, promotion , packaging, display, support, physical distribution and market research. ” This combination of strategies to enable people to engage in marketing, operations can be more clarity from the start in these areas, and scope of the study of marketing has done a better defined.

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4Ps came along with the theory of “marketing mix”. These elements were summed up as four categories: Product, Price, Place, Promotion, also known as the 4Ps.by a Professor of the University of Michigan Jerome McCarthy in 1960 in his book «Basic Marketing».

In 1967, Philip Kotler in his best-selling book “Marketing Management: Analysis, Planning and Control” further confirmed by 4Ps of the marketing mix as the core method. 4Ps marketing strategy since its introduction, on the theory and practice of marketing, had a great impact, was regarded as a classic marketing theory by marketing managers. Almost all managers when they plan theirs’ marketing activities consciously and unconsciously consider from the 4Ps theory.

1.2.1 Product of Huawei

The company must follow the needs of customers, and design their products and services. The product has a large areas, it contains product features, quality, appearance, packaging, brand, service, support.

Huawei offers the most complete telecom product portfolio, covering mobile, broadband, core network, transmission network, data communication, value-added services, terminals and services.(3)

Huawei’s corporate culture is a kind of wolf culture. The CEO of Huawei who called Zhengfei Ren has been promoting “the wolf culture” in the early years. “sharp, aggressive, selfless teamwork” are the true meaning of “the wolf culture”. Zhengfei Ren ueses the militarization way to management companies such as powerful labor intensity, strict management system, and ruthless survival of the fittest.

1.2.2 Price of Huawei

According to different market, companies develop different pricing strategies, product pricing is based on corporate brand strategy, focusing on the brand’s gold content. The Price means products pricing, discounts, financing, financial leasing, limited supply.

The cost advantage of Chinese companies will continue to increase, because China has a lot of cheap labor. Under the premise of increasingly popular telecommunications products, the price factor is becoming more and more important to the operators. Huawei has not been satisfied with the low-price products profits, and Huawei want to get high profits from its brand.

1.2.3 Place of Huawei

Company does not directly to consumers, and it focuses on the cultivation of distributors and sales networking, enterprise and consumers. In a precise location and in a exact time, providing an accurate number of products and services.is very important to a company. Now the changing commercial environment also has an impact on the Place. The place includes location, logistics, market coverage, the Internet, mobile phones and so on.

Huawei’s Place can be divided into two kinds. The first channel is the sellers’ channels, such as in a number of target markets, set up an office directly for product sales. The second channel is a joint venture, such as joint venture with 3Com in China and Japan market, Huawei brand export products; while the Sino-Japanese outside the market, through the 3Com brand and channel marketing. Huawei uses joint venture to build the brand channel.

1.2.4 Promotion of Huawei

Companies utilize promotions to stimulate consumption growth, or to attract other brands’ consumers, or promotion of early consumption. All these promotions are used to promote consumption growth. Promotion includes advertising, public relations, news, marketing, media, budget.

Huawei’s promotions also include advertising. In the international market, Huawei has been employed a veteran British advertising company to guide its release strategy for advertising the various stages of development. Huawei active attend many exhibits, and it help Huawei be well-known. Lower price than the rival bid is also an important way of promotion,

1.3 The uncontrollable variables of Huawei and effect

The marketing environment is uncontrollable, and it can be divided into the microenvironment and the macroenvironment. All environments have good or bad effects to a company.

1.3.1 The microenvironment of Huawei and its effect

Microenvironment is closely linked with the company itself, which includes the internal environment, marketing channel firms, different types of markets, customers, competitors and publics.

The internal environment:

The internal environment consists mainly of staff, funds, equipment, raw materials, market.

Most Huawei’s high-quality employees are highly educated. They’re very care about to realize theirs’ value. Because they are highly educated employees with professional knowledge and ability, they can easily understand the customer’s actual ideas and know how to improve products. Through continuous improvement of products, companies can win more customers and profits.

The marketing channel firms:

The marketing channel firms contain suppliers, agents, marketing services agencies, banks.

Huawei’s marketing channel firms are constructed with sales, service partner, training partners and customers. It is a complete system. This distribution system includes first-class high-level distributors, as well as the subordinate regional agents, advanced authentication agents, the industry integrators, an agent, regional distributors, which are intended to provide customers with integrated solutions. There is no absolute affiliation among all the channel firms, and all the channel firms enjoy the same preferential policies. All the agents are relying on the products with Huaweis’ brand, performance, service, a comparable level of interest. Huawei has also announced the formal introduction of targeted agents sales staff “sunshine mileage club” recognition program, the program with Huawei in the channels of promotion of the implementation of an incentive mechanism, Huawei announced that all sales agents can participate in the club and become a club member. The sales staff sales to go through them to Huawei’s statistical summary of reported orders to score points. According to the number of points, members may be from the basic member to silver members, and even be gold membership. Huawei based on their performance carry out a variety of different levels of reward. Since implementation of “2002 Sunshine business plan”, Huawei partners received recognition and support of sales channels, has made great progress and future market development. Through these ways, Huawei’s products are well-known. They are good for Huawei’s products and promotion.

The types of market:

Market is divided by the purchaser and the purchase of market segmentation purposes, including: consumer markets, producers market, brokers market, government and international markets.

Huawei’s main objective is in the international market. New products to enter the international market, generally there are two kinds of methods: one is the first access to developed country markets, the latter access to developing country markets; the other is the first access to developing markets, then access to developed countries. Huawei is the adoption of the second way. Huawei first entered the Hong Kong market, and then into Russia, and South American markets. Huawei actively participated in the activities of major infrastructure projects, bidding for its high-quality products, low prices to win consecutive national large-scale Projects. The continuous development and changes in the market prompted the continuing reform of Huawei’s products and innovation.

The competitors:

Company marketing activities are often surrounded by various competitors, and constraints, therefore, companies must identify the variety of competitors, and take different competitive responses. The changes of competitor’s marketing strategy and marketing activities the changes directly affect the corporate marketing. The most obvious is the competitor’s product price, advertising, promotions, changes, and product development, sales and service.

Huawei’s competitive environment is very cruel, and it makes Huawei continually improve its product. In addition, Huawei also pays attention to advertising, personal selling, sales promotion, public relations. The main ways are: meet with key customers, all-round contact with clients, to establish and develop with the host country’s telecoms regulator contact, to discover and develop a strong local agent or partner, to participate in various exhibitions and telecommunications forum for professional, technical exchanges with customers

The publics:

The publics refer to the ability of companies achieve their marketing objectives with actual or potential interest and influence of groups or individuals. It is very important to a company to do well with the public.

Huawei’s do a very good job with the public, establish a good brand

1.3.2 The macroenvironment and its effect

Macroenvironment effects microenvironment with great social forces. It includes political, economic, social and technological. In many books, it is called PEST or STEP.

The political environment and its effect:

Political environment is the condition of the external political situation and national guidelines and policies in an enterprise marketing activities.

Huawei’s products are sold in more than 100 countries of the world. Different countries have different continental law, and they include common law, the specific laws, especially laws and regulations involved in international marketing vary widely. This makes Huawei to understand and adapt to different political environment.

The political and economic close link together, and more and more countries’ competition has been reflected in the economic competition. Huawei cannot develop the international market without the way of political.

In the early period of internationalization, Huawei complies with an unwritten rule: it is based on China’s diplomacy direction. Huawei set up offices of the principle that countries have diplomatic relations with China. The CEO of Huawei called Ren Zhengfei explicitly mentioned: “China’s foreign policy is successful in the world, it get more friends in the world. Huawei’s marketing is following with China’s diplomatic, I believe we will be successful … …”

The economic environment and its effect:

Economic environment means socio-economic conditions, the operational status and trends of economy in a company’s marketing activities. Economic environment analyzes the changes in consumer income, consumer spending patterns, consumer savings and credit conditions and other factors change.

The financial crisis in 2009, under the pressure and thrust, whether Europe and the United States market’s can be successful in this year is more important than sales of 30 billion U.S. dollars. Huawei put their business focus on the European and American markets, and it got great success. In the august of 2009, Huawei became one equipment supplier of the world’s biggest WiMax operator Clearwire in US, and Huawei became the main supplier.

The social and cultural environment and its effect:

Different countries and different areas have different social and cultural environment. So a new product get into a new market, the company must understand the customer’s cultural and hobbies.

Huawei’s staff before they going abroad must receive relevant training to understand the social and cultural in the training sector, such as the differences between cultures and related products and others. But another culture, values, religion and lifestyle is not suited to them. They meet many of the problems in another country. The first one is that local people do not know much of china. A huge different cultural gap between the country and china make the local people do not understand and trust Huawei’s product. This lack of understanding between cultures enables local coustomer even do not believe that China has capable of producing communications equipment. Through a variety of communication, foreign customers eliminate the misunderstanding of China. Similarly, respecting foreign cultures is also very important to win local customers. Huawei’s set up “Islamic prayer room” for Arab customer, and get respect from Arab.

The technological environment and its effect:

Science and technology are primary productive forces. Each of the new technology would give some businesses to create new market opportunities, which will produce new industries, and at the same time, it also makes old industries to be affected or even be eliminated.

Advanced technology is the most important basis in the communications market. Huawei has invested heavily in technology and the benefit is obvious increased. Huawei pay a lot money on researching and developing in the early period. Even in the difficult period, more than 10% of Huawei’s sales revenue were used on the R & D investment. Huawei employs about 30,000 worldwide, of which 48% of employees engaged in R & D annual patent applications, and its break through 1000, and become the most patents company of China. Because of the thousands of patents, Huawei have ability to bargain with the world’s premier suppliers, and build laboratory to develop the most advanced products together. Huawei’s technical strategy is trying their best to meet the customers’ needs. Through new technology, increasing R & D investment in new technology, Huawei can get more market share.

Part 2

2.1 The rule and introduction of the marketing game

The marketing game can help us understand the market, our competitors. All the students are divided into 4 groups. Each group is a software company. All the companies make the same product which is word processing software. The potential customers can be divided into six main segments. The six segments are the modern students, the home scribblers, the harried typists, the professional writers, the high-tech managers and the concerned parents. Different segments have different requirements of the software. The market is growing every year, but some segments are growing faster than others. We also need to make advertising and make our product to meet customers’ needs..

Each company has a basic word processing software, and the NO. of special is 8, the error protection is 3, the Ease of learning is 3. We can pay money on modifying our product.

All the firms have two channels of distribution to reach customers. The middlemen in channel 1 serve customers with a limited line of computers and computer software. The middlemen in channel 2 offer more limited service and handle larger assortments of products, they also offer lower prices.

All the firms have three ways to make promotion: Personal selling, advertising and sales promotions. About advertising, there are five ways: pioneering- primary demand, direct competitive- own brand now, indirect competitive- own brand future, reminder-reinforces familiar brand and corporate.

Each firm has 700,000$ as its budget. The main cost include: Product Modification, Unit Production Cost, Sales Force salary& severance, Advertising, Sales Promotion, Marketing Research Reports and Interest on Loan from Bank.

All the firms have four years to compete with each other. (6)

2.2 The firm of Fourstars

2.2.1 Our idea and brand

First, we should think about our target market, and which segment to sale our product. We think we need to try our best to meet more and more customers’ needs. The other firms may choose one target market, but we can develop one mixed product. We can get more market share.

The six segments can be divided into two main parts:

The first part is Student, Home and parents. These three segments require the word processing software easier, and they do not need too many functions. The channels of the three segments are quite similar. The advantage is we do not need to spend much money on modifying our product, and the risk of our product is lower. The disadvantage is the price of these three segments is much lower. We cannot sure to get much profit.

The second part is Typists, Writers and managers. These three segments require the word processing software more professional. They need more functions. The channels of these three segments are also quite similar. The advantage to get into these markets is the price of the product is very high, we may get more profit. The disadvantage is that we need to pay a lot of money on modifying our product, we have high risk.

Finally, we decided to design a easier product, and chose the first part. We also think many brands about our product, such as fortunate stars, stars and fourstars. We choose fourstars to be our brand, because we are the fourth firms, and we want to be the sale star.

2.2.2 The four years of Fourstars

The first year:

We develop our new product, the new product have 10 special commands, 5 error protections and 8 functions in ease of learning. The retail price in channel 1 is $156.40 and in channel is $129.90. We also do marketing research and advertising. The channel 2 is more important to our product. We pay less money on modifying our product. We believe we will be successful.

All the members of our firms are very excited. We all wait for the result. But we fall in the first year. We make a big mistake, because we product too less product, we forget to ask the output. We also lose the marketing share. We have a cold winter, but we do not lose belief. The finally winner is the true winner.

The second year:

The first year, we are loser. We must find the reason and the disadvantage of our product. First, we modify our product. We modify the special commands to 11, and the function of error protecting to 4. We compare our product with other firms, and we find that our product is really very perfect. We believe that we can get more marketing share, and more profit this year. The price of our product in channel 1 is $168.50, and in channel 2 is $147.84.

When we get the result of the second, we still lose in the second year, but we fell very strange. The unit sale of our product is the highest of 4 firms. We have the highest sale in 3 segments. Why we lose? The teacher say something to us, we need to get more profit from our product. How to get more profit is the main thing we need to do in the next year.

The third year:

One year past, though we lose, we get the belief. We believe our product is perfect, and we do nothing about modifying. The only thing we should do is how to get more profit. We increase our price, and the price in channel 1 is $239.67, and in channel 2 is $205.65. We do not increase our price too much, because we are afraid of losing customers.

We have 3 years experience, and we are very comfortable. We have prefect product and highest marketing share. Of course, we can be successful. The result is we lose again, but this year we are profitable. The unit sale of our product is still the highest, and we are the largest supplier in 4 segments. Because one of the firm called Micro Two’s product is suit for Students. Our customers are Home, Typists, Writer and parents. We need to make changes of our product. We still make a big mistake: we give too much commission. We also need more middlemen

The fourth year:

This is the last year, and it is the last chance. According to our customers, we develop a new product. Our new product has 12 in special commands, 5 in error protection and 8 functions of easy of learning. We hire more middlemen and we also increase the price of our new product. We are not foolish again, we reduce the commissions..

We think about every detail. Finally, in the last year, we get the most profit of all the firms. All the workers of our firm fell very happy. We learn a lot from the marketing game. We know how to get profit. Though we make many mistakes, I think we cannot make the mistake twice.

2.3 The learning points of the marketing game

According to the marketing game, all the group members learn a lot. Here are 3 main learning points of the marketing game.

2.3.1 Proper product to target market

Companies need to choose its target marketing and groups of consumers. Then they can produce the proper product. The product of a company is limited, but the customers’ demands are unlimited. Therefore, companies only choose less market to be their target market. Monopolistic market can help company to get more profit. The 3IZNESS’ product is made for Managers, though the price of their product is very high, they do not have competitors, they sale very well. The famous marketing master Philip Kotler said:” the target market is the part of the qualified available market (those with the interest, income, access, and qualifications for a particular offer) that the company decides to pursue.”(5 by Philip Kotler)

Customers are the god to the companies. Companies should have the proper, so that they can have their customers. We change our product for 3 times, the purpose of these changes is to meet the customers’ need. The target market is very important to a company. You have the target, then you can produce proper product.

2.3.2 The importance of Marketing research

Doing marketing research is very important to a company. Marketing research can help the company make right marketing decisions. Through market research, we can find a number of new market opportunities and may develop new products to meet customers’ needs. We can get information about our product in the market share, we also can know much about our competitors. All these information can help the company develop new product and change market stratagem.

During the marketing game, we all do well in marketing research. In the third year, our company find that the Micro Two’s product is quite similar with our product, and its price is lower than us. In the fourth year, we change our product immediately. That is one main reason we can win in the last year.

2.3.3 Profit is the first

The aim of a company is get more profit from the market. A company is successful or not, the sole criterion is the profit. In the marketing game, the first year and the second year, we do not get any profit in the market. It causes we have less budget in the next year. We cannot expand more market. We also learn how to gain more profit from the marketing game. Profit is an important factor for the development of the company.

Conclusion

Strategic marketing is the module which I studied in the university of warwick. Thank you for giving us great lectures and a interesting marketing game. I learned a lot from this module. I still remembered that the tutor of Caroline Bitch ask us questions every morning. It help me to remember what is marking, the marketing mix and so on. All the teachers can make the strategic marketing more lively and easy to understand.

Reference

1. http://www.huawei.com/corporate_information.do
2. http://www.quickmba.com/marketing/mix/
3. http://www.huawei.com/products_services.do
4. http://wiki.mbalib.com/wiki/%E5%B8%82%E5%9C%BA%E8%90%A5%E9%94%80%E7%8E%AF%E5%A2%83
5. by Philip Kotler
6. The marketing game