Change Management

Posted: December 22nd, 2022

Change Management

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Change Management

Businesses encounter a myriad of challenges when venturing into the international market. For instance Huawei Technologies Co. Ltd, a Chinese multinational telecommunications and electronics company had to alter its operational strategies to cope with the legal and regulatory challenges in the American market. Moreover, the escalating trade war between the United States and China presents new operational and regulatory restrictions for Chinese technology firms operating in the US market such as Huawei. Against the backdrop of the trade war and corresponding trade sanctions, US President Trump banned the distribution of Huawei products around the U.S, leading to a significant decline in the firm’s revenues. Proactive change management strategies would help Huawei to enhance its presence in other foreign markets and recover the revenues lost from the American market and mitigate significant revenue losses in future.

Background Information – Huawei’s Challenges

Huawei Technologies is one of the leading Chinese telecommunications and electronics firms with its headquarters in Shenzhen, Guangdong province. The company manufactures and sells variety telecommunication equipment and assorted electronic devices, including smartphones. Huawei started its operations in 1987 and continues to expand its operations in diverse global markets. The company currently employs more than 76,000 workers and is focused on enhancing its organic growth supported by innovation and extensive investments in research and development (Huawei Technologies, 2019). Huawei is the number one manufacturer of telecommunication products globally, and the second largest maker of smartphones after Samsung. Huawei recorded a 21% increase in its revenue in 2018 when it attained $108.7 billion and produced nearly 49.8 million units compared to Apple’s 44.7 million (Huawei Technologies, 2019). The chart below clarifies the number of units produced by the leading smartphone manufacturers in 2018 and 2019;

Richter, 2019

Huawei’s international expansion into new markets will be impacted significantly by the escalating trade wars between the United States and China. Specifically, America’s dominance in supportive technologies through leading tech companies such as Google, Facebook and Microsoft is likely to limit the utility of Huawei’s smartphones as well as their attractiveness in the global market.  Additionally, the rising trade deficit between the United States and China portends a ripple effect on the global economy, which may lead a general decline in demand for Huawei’s products. Mosbergen (2019) informs that trade deficit between the United States and China stood at about $417 billion in 2018 with America’s exports to China only accounting for $120 billion while American imports from China standing at $539 billion. Moreover, trade deficit between the Western and Eastern nations has widened from $ 314 billion to $ 367 billion in 2015 (Mosbergen, 2019). The determination to tilt the deficit in favor of the Western countries is likely to hamper China’s exports, leading to a decline in revenues for firms such as Huawei.

The drastic effects of US-China trade war Chinese tech firms, including Huawei is beginning to take shape Sean Kennedy, the company’s founder and Ren Zhengfei CEO thinks that the company’s troubles in Americans emanate from the fear that Huawei’s introduction of the 5G technology could jeopardize America’s security as well as that of the entire world (Whalen, 2019). Americans argue that Huawei’s collaboration with the Chinese military in producing the technology underscores the underlying security risks. America’s response by banning any transactions between American firms and Huawei is likely to harm the company’s operations both in the United States and globally. For instance, Google suspended all any transactions with Huawei, including the exchange of software and hardware devices that were previously used in Huawei smartphones. Google further announced that it supports other companies in restricting Huawei’s operations, limiting the interactions between the firm and other commercial entities both in the United States and globally.

With a limited capacity to   develop cutting edge technology to compete with the American tech giants, Huawei may lag behind in the global competition as the customers will enjoy limited usability of its smartphone devices. As noted by Ken Hu, the Deputy Chairman at Huawei, the company might lose its huge investments in the U.S the tensions between the US and China escalates into the future (Kuo, 2019). Some analysts are skeptical about the defensive mechanism Huawei embraces with its leaders holding that they are not moved by America’s restrictions. Jeremy Thompson heads Huawei’s branch in the UK and is afraid the uncertainty could lead to devastating effects unless the warring sides reach an amicable solution (Kuo, 2019). For instance, Huawei’s founder is concerned the firm may lose up to $30 billion in anticipated revenue in the next two years if it does not resume full operations in the United States (Kuo, 2019). Other than reduced revenues and strained production, the trade wars have far reaching legal repercussions as witnessed in the arrest of some individuals working with Huawei in the U.S. and Canada. Despite the emerging challenges in the United States and global market, Huawei’s are optimistic that the firm shall continue on the path of international expansion and global technology leadership. The CEO (Ren) insists that the technological differences between China and the U.S. are not in the corporation’s interest, and the conflict shall lead both nations into adverse diplomatic and economic consequences.

Huawei’s SWOT Analysis

The strengths, weaknesses, opportunities and threats (SWOT) scrutiny method is an analytical tool that identifies factors within the internal and external business environment that has effect the organization’s prosperity and future sustainability. Knowing Huawei’s internal strengths, for example, may provide an understanding of how the company could utilize its internal synergies to take advantage of existing and emerging opportunities in the external environment. For instance, Huawei has developed a strong brand name with the adoption of effective marketing approaches. Furthermore, the company is growing so fast compared to other tech firms, giving it the financial strength to expand operations into other global markets. Huawei also enjoys significant economies of scale and cheaper costs of production, which enables it to sell its products at relatively lower prices than its major competitors such as Samsung and Apple Inc. Additionally, the company invests heavily on research and development, with established R7 D centers in several countries. This enhances innovation and quality of products and provides a better understanding of the changing market dynamics. The production of highly differentiated products also enables Huawei to meet the needs of its diverse client segments, which drives up its sales. An expansive domestic market supported by the high Chinese population also gives the company a competitive edge because it generates extensive domestic revenues that the firm can utilize to subsidize its overseas operations. Huawei’s global market has also increased over the years as detailed in the chart below;

Ritcher, 2019

Despite enjoying various operational and strategic strengths, Huawei manifests salient weaknesses that could prevent it from attaining the desired growth and sustainability, especially in face of escalating trade wars between China and the United States. For instance, the company’s cost leadership approach is likely to constrain its expansion into other global markets. Secondly, Huawei’s low pricing approach may be repulsive to the wealthy clientele who associate low prices with poor quality of products. This strategy may appear counterproductive in comparison to premium pricing model practiced by Apple Inc., which resonates with the quality conscious consumers across the globe.

Huawei must leverage on opportunities available within its internal and external environments to respond effectively to the emerging challenges in its international market. The company’s cost leadership strategy enables it to generate more profits without compromising the quality of products. Additionally, Huawei should effectively utilize the incentives companies receive from the Chinese government to develop products that are of better quality, and which can compete at the global market. Through its extensive investments in research and development, Huawei could significantly improve its product designs and quality, which will make it more competitive in the international market. Developing high quality products and creating a general perception of product superiority could appeal to other customers and help the company generate enough additional revenues. Moreover, the growth in e-commerce gives Huawei a better chance to interact with consumers from all over the world.

Developing a suitable change management plan requires the company to be fully cognizant of the emerging threats in its external environment. Despite enjoying a strong 15.9% global market coverage behind  Samsung’s 21.1%, it must constantly enhance its production, operational and marketing strategies to stay ahead of the stiff competition posed by companies such as Apple (12.1%) and Xiaomi (9.5%). Locally, ZTE is fast attracting a large share of the market through an aggressive price leadership strategy. As a market leader, Huawei must appeal to the quality sensitive consumers in China by dispelling the poor quality stereotype associated with Chinese products. The company must overcome the widespread fallacy that Chinese products are of low quality. Even though the perception does not apply to all Chinese products, the bad image has continued to strain the company’s effort to penetrate in the global markets. The company, therefore, should reestablish itself as a producer of quality products to ease its entry into emerging global market frontiers.  

SWOT factor	Situation
Strengths	Strong brand name.Growing so fast compared to other tech firms.significant economies of scale and cheaper costs of productionCompany invests heavily on research and developmentProduction of highly differentiated products.
Weaknesses	The company’s cost leadership approach may constrain expansion into other global markets.Some buyers associate low prices with poor quality.
Opportunities	Cost leadership strategy.Incentives companies receive from the Chinese government.Extensive investments in research and development.Growth in e-commerce.
Threats	Stiff competition.The poor quality stereotype.

PEST Analysis

Evaluation of Huawei using PEST analysis elaborates several other opportunities the company could utilize to expand operations into new global markets. Being a multinational company, Huawei is subject to diverse political, economic social and technological forces operating within the global market. The bilateral and multilateral relationships between the China and the EU for instance have significant influences on the trade between the two geopolitical regions. The heightened trade politics, and extensive trade regulations affect the volume of trade between China and the EU. Other than the problems Huawei currently experiences in the U.S. government, the company maintains a stable relationship with other governments, which could give it a good chance to venture into other markets. The company may also utilize its strong economic status to exploit other markets to supplement its revenues. The company’s economic prosperity is attributed to the stable Chinese economy and the economies of its target markets, mostly in the EU. However, the company, should formulate strategies to counter the high cost of labor in other countries to sustain its cost leadership strategy.

Other factors to consider when drafting a change plan are the sociocultural and technological factors. Many societies are witnessing an increase in smartphone use, a sociocultural phenomenon with far reaching economic consequences. The sociocultural factor that could derail the company’s attempt to explore new markets is the perception that Chinese products are of lower quality, especially in the Western nations. Technologically, the company has a better chance to explore other markets, especially with its innovation of the superior 5G network (Huawei Technologies, 2019). Even though 5G requires new hardware and more sophisticated components to implement, and even as the innovation continues to cause conflicts in the U.S., the company is dedicated to extending its technology to diverse global markets, which will enhance its  to penetrate other markets and sustain its long term growth.

Stakeholders Analysis

Other than the opportunities available to Huawei based on its SWOT and PEST analysis, the various stakeholders have significant role in restructuring the company’s operations to meet the emerging market demands and overcome the challenges emanating from the US market. Jiagn Xiisheng (the Chief Secretary of the company’s board of directors) while addressing a group journalists said the firm is under the ownership of a labor union that gets donations from workers when their colleagues have health issues and other similar challenges (Zhong, 2019). The company has not sold any of its shares to members of the public in the last three years and the Chief Secretary holds that the company is entirely owned by its workers (Zhong, 2019).  As such, the company does not experience decision challenges or conflicting interests associated with publicly listed companies (Zhong, 2019). Additionally, the company’s ownership structure permits it to utilize shares to motivate workers while still remaining closely owned and managed. Huawei may also rely on such an ownership structure when exploring other markets, although it must maintain the trend where it makes its financial results public. Furthermore, the company should also allow reporters from all over the world to interrogate its leaders if it wants to maintain transparency that the new markets may demand.

Applying TROPICS Test

Huawei should make changes that would allow to it maintain its revenue despite the constraints caused by the trade war between China and the United States. The company’s team in charge of change management should utilize effective models to develop strategies that would yield the anticipated results. A suitable framework is Paton and McCalman’s TROPICS test, which determines the hard and soft issues that require transformation (McCalman, Paton & Sabina, 2016). A change manager or director uses the test to know the issues surrounding change scenarios and directs them in adopting appropriate choices and plans when implementing change (McCalman, Paton & Sabina, 2016). Understanding such a model allows the manager to create a conducive environment for the implementation of change and to appropriately execute alterations. McCalman, Paton and Sabina (2016) further advise that change managers should seek assistance from all stakeholders within the organization to employ such approaches in the appropriate manner. Applying models such as the TROPICS test may also be successful when the change manager knows the organization’s position at the moment and where the firm aspires to implement the necessary plans.

The TROPICS test requires the evaluator to analyze the solutions to the problem based on hard and soft solution methodologies. The initial component focuses on timescales, which according to Paton and McCalman would be solved using a hard solution methodology when the matter is clearly elaborated based on short to medium terms, but softly solved when the measures are defined on medium to long-term basis (McCalman, Paton & Sabina, 2016). The second factor is resources which Paton and McCalman think require hard solution methodologies when they are clearly elaborated and reasonably fixed, but a soft solution methodology when they are not clear and variable. Huawei does not have any problems managing its resources, and would be regarded as having clearly fixed information about its inventory. The third component is objectives, which are termed as hard solutions when they are quantifiable and objective, and soft when they are visionary and subjective (McCalman, Paton & Sabina, 2016). The company tries to be objective and quantifiable in developing its objectives and this is evident in its concern about advancing its activities. The fourth aspect is perceptions, which Paton and McCalman consider as being a strong solution when shared well by those affected and soft when the idea creates conflicts among stakeholders. Fortunately, Huawei shares the company’s perceptions with all those it feels are likely to be affected by beliefs such as Chinese products are of low quality.

The way Huawei handles its interests, control, and sources (TROPICS factors) may also help to understand the magnitude of the problem and how it impacts on the company. Fortunately, the company’s interest is limited and appropriately defined as stipulated in the hard solution methodology and not widespread and defined as outlined in the soft solution category. Concerning the company’s control, the company’s ownership by the employees’ union make the power to remain within the group as stipulated in the hard solution methodology and not shared out with the firm as outlined in the soft solution section (Zhong, 2019). Finally, the company obtains most of its resources internally as outlined in the hard solution section, even though it relies on some external sources which Paton and McCalman perceive as a soft solution methodology.

Applying Kotter’s Model

John Kotter carried out a study on 100 companies going through the processes of change and the findings led him to develop the 8 step model of change. Applying the approaches Kotter developed in his model may be of significant impact to Huawei as it seeks alternative sources of revenue to the expansive American market. The company may use its capability as a leader in technology to create a change management plan that would steer it towards sustainable growth. Using the opportunity, Huawei could create products that would appeal to more people outside the U.S. and generate desired profits.

 Following Kotter’s model may lead the company to develop a change management plan that would explore the benefits of technology leadership. Organizational change ranges from adopting minor alterations such as the use of new software to facilitate office work, to immense organizational transformations, encompassing the formulation of new operational areas and termination of old facilities or production processes (McCalman, Paton & Sabina, 2016). The management of Huawei should consider other options of preventing the company from recording huge loses by adopting progressive change initiatives. The leadership, however, must understand that unlike managing information, people, and finance, managing organizational change is not about the management of a specific set of organizational aspects or resources, or a specific function (McCalman, Paton & Sabina, 2016). Huawei’s change agents must focus on transforming the firm in its entirety to enhance interactions with its sub-divisions and the outside world.  

The initial step towards organizational change implementation at Huawei would be to create a sense of urgency by motivating everyone to consider the envisioned change as beneficial to the company and all stakeholders. The change manager can do this by highlighting the possible risks and threats the company faces by failing to venture into other markets, and by engaging stakeholders on the benefits of the pursuing the alternative plan (Jeston & Nelis, 2008). The change manager in this case could inform about the benefits of developing superior smartphones and introducing them in new markets. The second initiative would be to form an alliance by further persuading people that the modifications are necessary. The change manager may require support from the leadership who should show commitment to promote technological research and development.

The third step in the change implementation process would be to form a vision for change by determining the values that are essential for transformation and by creating a visionary image of the company after investing in its technology (Jeston & Nelis, 2008). The next step would be to communicate the vision in the most suitable manner. The best way to do this would be to talk often about the change and address the stakeholders’ anxieties and concerns in an open and honest manner. The fifth step would be to eradicate the possible constraints or barriers that could affect the attempts to improve technology (Jeston & Nelis, 2008). The firm may employ frameworks such as SWOT and PEST analysis to understand the barriers that could bar it from using its advanced technology to explore other markets apart from the U.S. The sixth step would be to form short-term wins by setting goals that the company can achieve in the short run to gain insights on whether to progress with implementation or not (Jeston & Nelis, 2008).The seventh step would be to build on the transformation by not declaring victory too early. The team should be patient until it is certain the plan and investment yield the desired outcomes. The final step would be to enforce the changes into the organizational culture to accustom all the stakeholders with the envisioned transformations.

Leaders’ Mindset

The leadership at Huawei believes it is in a good position to progress with its international expansion strategy despite the challenges experienced in the American market. Even though such a perception would be viewed as being overly optimistic, the leaders’ self- belief could help the company to establish its position in other markets apart from the U.S. where it currently witnesses some hurdles. The perception could facilitate the realization of the desired objectives with the feeling that nothing could stop the company from attaining its financial and strategic goals. Despite this positive mindset, Huawei’s leadership should continue to work closely with various stakeholders, including the employees to minimize potential resistance to change as it ventures into other foreign markets.

Conclusion

A firm that intends to compete effectively in the global market must follow clear vision of growth by adopting progressive and proactive change plans that ensure domestic market leadership, technological innovation and customer-focused research and development initiatives. Huawei should continue on its global growth and expansion trajectory through a proactive change plan that facilitates entry into new markets. The company understands the magnitude of the loss it would undergo if it does not replace the revenue it would acquire from the American market following trade fallout between China and the United States. Huawei should rely on its technological advantages to develop products of higher quality while maintaining its affordable prices to penetrate new markets with ease. The change manager should employ some of the suitable change management models such as the TROPICS test and Kotter’s model to head towards the right direction.

References

Huawei Technologies. (2019). Huawei. Retrieved from https://www.huawei.com/en/?ic_medium=direct&ic_source=surlent

Jeston, J., & Nelis, J. (2008). Business process management: Practical guidelines to successful implementations. Oxford, UK: Elsevier.

Kuo, L. (2019). There will be conflict: U>S. has underestimated Huawei, says founder. Retrieved from https://www.theguardian.com/technology/2019/may/21/there-will-be-conflict-huawei-founder-says-us-underestimates-companys-strength

McCalman, J., Paton, R., & Sabina, S. (2016). Change management: A guide to effective implementation. London, UK:  SAGE Publications Ltd.

Mosbergen, D. (2019). Chinese state media cautions U.S. as trade war heats up: “Don’t say we didn’t warn you. Retrieved from https://www.huffpost.com/entry/china-us-trade-war-warning_n_5cefa7c8e4b0888f89d16a62.

Ritcher, F. (2019). The rise of Huawei. Retrieved from https://www.statista.com/chart/18063/worldwide-smartphone-market-share-of-huawei/

Whalen, J. (2019). Huawei digs in for a long battle with the U.S. Retrieved from https://www.washingtonpost.com/business/2019/06/23/huawei-digs-long-battle-with-us/?noredirect=on

Zhong, R. (2019). Who owns Huawei? The company tried to explain. It got complicated. Retrieved from https://www.nytimes.com/2019/04/25/technology/who-owns-huawei.html