Answer

• Background to the Industry

Huawei Technologies is a multinational company that operates in the technology industry where it specialized in designing, developing, and selling consumer electronics and telecommunications equipment (Huawei, 2020a). The company is based in China, and headquartered at Shenzhen, Guangdong. This section of the paper provides a background of the technology industry.

• Brief History

The technology industry is in the growth stage of the industry life cycle. As a result, it is considered young. The industry begun in 1904 with the invention of a two-element electron tube. The development was followed by the discovery of transistors and integrated circuits in 1950s. These technologies enabled the creation of analog devices in the 1960s. Most of the developments were a result of research activities by the military. In the 1970s, companies begun producing microprocessors and integrated circuit boards (Global Edge, 2020). These developments allowed for the invention of personal computers in the subsequent years. Despite these advancements, consumption of these technologies was not popular until when the internet was conceived. After the introduction of the internet in the 1990s, there was an explosion in the demand and use of personal computers. Steve Jobs and Bill Gates seized the opportunities and developed the Apple and Microsoft brands respectively.

Other companies emerged producing specialized technology equipment such as telephones, networking equipment, and other consumer electronics to complement the computers. Unlike early 2000 when people cared less about performance, the year 2004 registered a renewed interest in computers and devices with multi-tasking capabilities. These technologies had to be embedded with video, photo, and audio applications. Since then, these technologies have been compressed and adopted into tablets, feature phones, and smartphones, which have capabilities to offer functions similar to those of computers (Global Edge, 2020). The industry has been transformed further by new technologies such as artificial intelligence, machine learning, internet of things, and cloud computing which has necessitated further growth and advancement of the industry. A common trend is that devices are getting smaller, more advanced, and with intelligent features and functionalities.

• Evolution of the Products and Services Offered by the Technology Industry since its Founding

The technology industry is composed of organizations that design, manufacture and sell their electronic products and devices. The products offered include computer hardware and software, scientific instruments, electronic components, telecommunications equipment, computer-related equipment, and consumer electronics. These products have played an essential role in the modernization and digitalization of human life. The industry is characterized by overinvestment in research and development (R&D). The workforce of the technology industry is composed of a higher percentage of extremely skilled technical workers and engineers, unlike the other industries. Most processes and activities in the industry require precision, expertise, and creativity. The industry also invests in sales, marketing, and promotions to increase the visibility and acceptance of new products. Whereas most of the production processes are done in emerging economies because of lower production costs, the products are mostly sold in developed countries.

Additionally, the technology industry is noted to be rapidly evolving. This trend is enabled by aggressive corporate strategies such as mergers and acquisitions. This strategy enables integration of telecommunication and consumer electronics sub-industries to produce multifunctional devices. Another trend that has resulted with the evolution of the industry is increased internationalization (Deng, Zou, & Mao, 2018). Companies have to sell their products abroad to increase their market share and grow revenues. Some prefer offshoring and subcontracting to reduce operation costs. This phenomenon has made the technology industry to be labelled as a ‘borderless industry’. Internationalization has exposed the industry to hazards and risks such as the complexity of sustaining a global supply chain, government policies, and challenges in managing cross-cultural workforces. On the other hand, the industry has benefits such as increased demand for devices in international markets namely; China, India, USA, and European markets. Tsilikas (2017) reports that an emerging trend that is raising questions on the ethical standing of the technology industry is their arbitrary data collection and analytics practices. In the future, the industry is expected to contribute to the emergence of disruptive innovations as demonstrated by the rise of the sharing economy model which uses cloud computing and artificial intelligence.

Utility of the Product (material, time, possession, psychological)

Possessing technological products such as smartphones and other consumer electronics enhances the utility derived by the owner. For instance, the person benefits from mobile communication. Secondly, there is the psychological satisfaction of owning a phone. Some use their phones as a symbol of social class while others, derive pleasure in being connected through different technologies.

 

• Key Players in the Industry by Market Share

The biggest technology firms in the world are identified as the ‘Big Five’. They include Amazon, Apple, Microsoft, Facebook, and Google. Huawei and Samsung are ranked among the best firms in smartphone and networking technologies. It rivals international brands such as Cisco, Juniper, and Ericsson. A representation of the market share for smartphones Huawei in financial years 2015 to 2019 is shown in image 1 below.

Image 1: Market Share for Smartphones (Srivastava, 2019)

A detailed representation of these dynamics is shown in image 2 where other international firm are ranked against the big five. The data shows that Samsung had the highest sales in financial years 2018 and 2019 followed by Huawei then Apple.

Image 2: Global market share for major international smartphone brands (Mishra, 2020)

Order winners (the attributes that differentiates the products or services from one key player from another)

Given the vastness of the technology industry, this paper narrows down to focus on information technology, of which the smartphone sub-industry is part. Firms in this industry, namely Huawei differentiates its products by considering two order winners; product features and target pricing.

Order qualifiers (what attributes make the dominant player more successful)

Product differentiation is the main attribute that determinants the success of key players. The second factor is pricing of the products. These two factors are mostly used by the dominant players ranging from Huawei, Samsung, and Apple.

Key success factors in this Information Technology Industry

According to Lysne et al. (2019, there are five main factors that determine success. These are; financial resources in form of equipment, facilities, and assets. The second factor is strategic focus. The leadership, planning, and management collectively determine the formulation of strategies that create sustainable competitive advantage. Third, people such as selection of skilled personnel, staffing, and knowledge management determine innovativeness and creativity of the firm. Fourth, the efficiency of operations influences ability to produce quality and reliable products (Antlova, 2010). Fifth, marketing plays an important role in increasing brand equity, fostering customer relations, and endearing the firm to the consumers.

• What metrics are used to measure successful operations in this industry? E.g. productivity, throughput, service level, capacity utilization)

Each industry has metrics that enable the management to measure the effectiveness and subsequent success of its operations. These metrics are elaborated in the following section.

• Break the measures into the following categories

These measures can be analyzed further under the following sub-topics; upstream measures, in-stream measures, and downstream measures.

Upstream measures

Upstream process describes the acquisition of raw materials and other resources required to create a product. It is also known as the extraction stage. Key metrics for measuring success include conducting economic performance analysis such as cost-benefit analysis, sustainability reports, environmental impact assessments, health and safety performance indicators, and social responsibility performance indicators.

In-stream measures

Instream refers to the actual manufacturing or production process. The key metrics for measuring success are; break-even point, net profit ratio, employee satisfaction, throughput, inventory levels, delivery schedule, productivity, and capacity utilization.

Downstream measures

The downstream denotes process involved in distributing and selling the final products to the consumers. The key metrics for measuring success include; rate of product returns, orders placed by end users, requires for repairs, customer feedback, and operating expenditures by the sales and marketing team.

• Compliance Issues facing the Key Players in Technology Industry

The key compliance issues in the ICT industry of which Huawei is part include environmental issues such as corporate social responsibility, data security namely intellectual property (IP) laws and cybersecurity, and international trade laws for instance, quotas and trade sanctions (Agarwal, 2019). These issues also affect the supply chain. Jaisal (2020) adds that the ICT industry has adversely been affected by globalization which has led to intensive regulatory requirements.

• Research and use the following dimensions:

This section provides a detailed analysis of some of the supply chain compliance issues.

Local, state or government regulations

Local, state, and government regulations across different markets is focused on ensuring data security, supplier relationship management, skills and talent management, servicing customer expectations, and managing global supply chain. Some of these regulations are; China has strict Environmental Protection laws enacted in 2015 to safeguard it against supply chain related pollution (Pang, 2020). The government encourages companies to introduce green supply chains as a compliance strategy. Similar policies are practiced in the USA by the Environment Protection Agency (EPA) which assesses the integrity of supply chain. Regulations on the
standard security features of the ICT products are summarized in image 3 below.

Image 3: Summary of the local and state regulations (EIU, 2019)

Company Promises of quality, performance, usefulness of the product of service offering

In response to these regulations, Huawei has invested the greening of its supply chain to promote towards cleaner business operations at all the levels of its operations. These initiatives are evident in the brands upstream, in-stream, and downstream activities. The company achieves quality by ensuring its suppliers are properly vetted using the IPC-1401 standards for CSR management system (Huawei, 2020c). The system is desired in adherence to the Supplier Sustainability Agreements which is based on Joint Audit Cooperation (JAC) and Responsible Business Alliance (RBA) Code of Conduct (Villas-Boas & Eadicicco, 2019). Using these best practices, Huawei not only produces quality products but offers a superior value proposition and useful products that compete against premium smartphone brands such as Apple.

International Commercial Terms (Incoterms) Used

The most common incoterms used by Huawei and the wider ICT industry are summarized in table below.

Incoterms
EXW	Ex works
FCA	Free Carrier
CPT	Carriage Paid To
CIP	Carriage and Insurance Paid To
DAT	Delivered at Terminal
DAP	Delivered at Place
DPU	Delivered at Place Unloaded
DDP	Delivered Duty Paid
FAS	Free Alongside Ship
FOB	Free on Board
CFR	Cost and Freight
CIF Cost	Cost Insurance and Freight
DES	Delivered Ex Ship
DDU	Delivered Duty Unpaid
DAT	Delivered at Terminal

Table 1: Incoterms in ICT Supply Chain

General actual customer experiences with:

Quality, performance, and usefulness of the product or service

Huawei produces quality and differentiated products ranging from phones to modems and other ICT equipment. The company does this using its 8,000 patented technologies. Its smartphones, MateBook X Pro laptop, Media Pad M5 tablets and Huawei Bands are famed for packing unique features. The Huawei line of phones have some of the best camera’s after the iPhones. Kee et al. (2019) add that they are high-end products with good features, and beautiful designs. The performance of Huawei products is determined by their category. For instance, premium smartphones have higher performance, than the midrange and budget telecommunication devices (Villas-Boas & Eadicicco, 2019). Despite the usefulness, these products have been banned in the USA over allegations of using backdoor codes to snoop on government and customers.

Delivery speed (make the product or deliver the service quickly)

According to Huawei’s delivery product, the company takes 1 to 2 working days to fulfil its orders. However, the standard delivery time could take longer depending on selected delivery address, availability of items, and payment confirmation by the client (Huawei, 2020b). The company delivers its products to the customers doorsteps in China (Kharpal, 2020).

Delivery reliability (deliver it when promised)

The company uses the Just-in-Time (JIT) to achieve super-fast delivery (Kharpal, 2020). This means that the firm acquires raw materials and delivers products when needed by consumers. Using this strategy, the firm fosters its delivery reliability to 92% (Kharpal, 2020).

Technical support, after sales support, customizability.

Firms in the ICT industry acknowledge the need for technical support. These are efforts are justified by the customer relationship management theory which emphasizes that customers access necessary technical support and after sale services. In response, Huawei has enterprise support and carrier support. Its rivals such as Samsung and Apple have similar support centers. Regarding customizability, the industry support recycling where the factory refurbished devices are against sold at discounted prices. This is a strategy for greening the environment as it reduces wastage of preowned devices.

Coping with changes in demand (change its volume)

The COVID-19 health pandemic has led to a decline in sales volume in financial year 2020 (Kharpal, 2020). The negative trend is coupled with a saturated market and unfavorable government policies especially in the USA banning Huawei’s products.

Flexibility and new product introduction speed (offer a wide range of products)

To deal with the issue of market saturation, ICT firms ensure to reduce their time to market and increase speed of introducing new products. This trend has been criticized for promoting consumerism. However, it is a favorable approach adopted by firms such as Huawei to sustain customers interest in the brand and to constantly renew their product lines.

• Select one key player in the industry (the one with the highest market share)

Huawei has the highest market share in the Chinese and Asian markets.

• Huawei’s business model

Huawei explores a number of business models. According to Hong, Zhang and Ding (2018); Huang (2019) the company explores the benefits of being a manufacturer, and distributor of its own products. It outsources retailing activities to third parties. The company sells via brick and mortar stores and e-commerce platforms globally. This illustration is seconded by Kee et al. (2019) who note that Huawei uses the manufacturing and selling business model to generate its revenue.

Evaluate whether it is B2B, B2G, B2C, etc. or a combination

Huawei explores a combination of options to maximize its market share and profitability. For instance, it sells directly to customers via its online platform. The company sells to other businesses who wholesale and retail its phones. Thirdly, the company supplies the Chinese government with telecommunication devices.

Existing Professional Service Automation (PSA)

Since Huawei is involved more in production and sale of telecommunication devices and consumer electronics, than it is involved in offering consultancy services, it does not use the (PSA) software.

• Apply what you have learned from the class to evaluate

Supply chain compliance is a major issue in the ICT industry since the industry deals with transmission of data. These issues are highlighted by the decisions by USA and UK to ban some of Huawei’s products for fear that it would be remotely sharing personal and private data of customers with the Chinese government.

The main compliance and security issues

This section evaluates the main security and compliance issues in Huawei’s supply chain.

What are the main compliance challenges still facing the company?

The main compliance challenges facing Huawei are; First, data security issues. Since 2018, the USA has accused Huawei of breaching IP rights of American ICT brands, and additionally, for sharing customers data with Chinese government (Agarwal, 2019). These issues have resulted into trade sanctions with countries such as USA and UK. Other challenges include laws by the Chinese government on cybersecurity.

The second challenge arises from corporate social responsibility. Firms such as Huawei are under obligation to operate sustainable supply chain. These requirements have necessitated higher operational costs to cater for the greening of different stages of the supply chain.

What measures does the company use to mitigate such issues?

Huawei has failed to mitigate the ban on its products by the USA. Instead, it has focused on developing products for the emerging markets especially in Africa were the national governments are not strict on data security (Agarwal, 2019). To mitigate the challenge on CSR and environmental management, Huawei has invested in leaner supply chain together with sustainable practices. This includes offering trade in option after which the old phones and devices are recycled and sold as preowned. Additionally, Huawei ensures that it selects sustainable upstream suppliers. It audited 57 potential suppliers in 2016 to determine their adherence to GHG emission control measures (Mach, Atlason & Gerstlberger, 2016). The company trains its employees on emission reduction and production of ethical and green products. Huawei has been working with Chinese regulators in enacting GHG emission standards for the Chinese ICT industry. In the future, the company plans to adopt greener techniques of production to reduce emissions. Currently, Huawei conducts sustainability audits annually.

What regulatory agencies do the company respond to?

Huawei’s operations along its supply chain are influenced by state, federal, consumer, private, and online consumer ratings.

Business and Human Rights Resource Center monitors violation of Human Rights by upstream suppliers such as mining of gold and other minerals used for microprocessors in Democratic Republic of Congo (Parsons, 2020). Another significant player is the World Trade Organization which has agencies for monitoring and ensuring sustainability of supply chains.

 

State or local government

The local regulators in China are the Cyberspace Administration of China (CAC) and General Administration of Customs (GAC).

Federal government

Huawei’s operations are impacted by policies by the Chinese Ministry of Commerce and State Administration for Market Regulation (SAMR).

Consumer agency

Consumer agencies protect consumers against unfair business practices. They include; Better Business Bureau in the USA and China Consumers Association (CCA) in China.

Private Evaluation Company

The internet has made it possible for customers to provide product reviews which further informs other customers on the quality of products provided by Huawei.

Online Customer Ratings

Customer reviews and ratings are equally important in dictating the supply chain changes to be made by an organization such as Huawei.

Existing ratings for the performance of this company, summarize the typical ratings noting (high =5; medium =3; low =1) ratings

As evident in image 4 below, the rating for Huawei’s product performance is strong. This is an equivalent of 3. This is based on assumption that vulnerable represents 1, competitive 2, strong, 3, very strong 4 and leader 5.

Provide a summary of such ratings on an excel chart

 

Image 4: Summary of Huawei’s Performance Rating

How do these ratings compare with the main competitor of the selected company?

These ratings compete fiercely against main rivals such as Samsung and Apple. Huawei exhibits strong performance while Apple stands out as the market leader in regard to product quality and performance.

What do you suggest they should do?

Huawei should invest more in improving its supply chain. For instance, it should direct more resources in acquiring competent, experienced and innovative employees who will contribute towards production of differentiated and unique products that rival Apple.

What are the security challenges facing the company?

Internally, Huawei has secured its supply chain by adopting a range of measures. First, it conducts security reviews of its facilities, audits its suppliers to ensure quality and compliance, the company further purchase insurance cover for its products while transporting to the final consumers (Park, Min & Min, 2016). Its premises are installed with high end surveillance systems, and access control systems. In the external environment, Huawei faces one major security challenge, namely, it is accused of sharing customer data with Chinese intelligence.

How does the company mitigate such risks?

Mitigating this risk is elusive for the company since it faces the dilemma of adhering to regulations by the Chinese government or international governments (Pal & Alam, 2017). For instance, it is feared that Huawei provides information to the government as part of complying with local laws on cybersecurity. This challenge is hard to mitigate.

Identify specific risk exposure the company has faced lately

The Covid-19 pandemic has halted operations in the upstream, in-stream and down stream of Huawei’s supply chain as firms are subjected to strict measures such as social distancing and work from home policies (Kharpal, 2020).

Discuss how the company successfully or unsuccessfully managed such incident

The company is yet to manage this challenge, even though it has put in place measures to safeguard its employees and other stakeholders from contracting the virus.

• Import/Export
  • Who are the main external suppliers (import/export) for this company?

Some of the primary exports include; HiSilicon, iFixit, Qorvo, Skyworks, Broadcom, and Murata. The market share of these firms is shown below. Other suppliers include Ericsson and Nokia who supply 5G equipment, and Advanced RISC Machine (ARM).

Figure 1: Main Suppliers of front-end microchip (Sheng, 2019)

• What regulatory compliance issues should they observe? Are they mandated by:

FDA?

Regulations by FDA are not applicable to the ICT industry.

• What is the future potential for companies in this industry?

The future potential of firms in ICT industry is determined by their ability to scout new underexploited markets in emerging economies, produce differentiated products at competitive prices, protect themselves against supply chain risks and ensure compliance to data security and environmental management laws through initiatives such as CSR and environmental sustainability audits.

• Potential for future growth

The domestic Chinese market, and global market are saturated. As a result, future growth in the industry is dependent on the ability of the firms to pursue integrated ICT technologies. According to Jaisal (2020) there exists opportunities in 5G technologies, augmented reality AR), artificial intelligence (AI), smart platforms such as vehicle operating systems, internet of things (IoT), smart cities, and virtual reality (VR). In addition, future growth could be realized by pursuing sustainability projects to attract environmental conscious consumers.

• Ethical issues affecting this industry?

The global supply chain of the ICT industry faces many ethical issues. They include data security, personal privacy, access rights, harmful actions by the companies, legal issues related to trade secrets, copyrights and patents, environmental degradation of used consumer electronics, and piracy.

• Sustainability and low carbon print

Electronic waste is a major threat to the global ecosystem. This sustainability issue relates to the mismanagement of end products by consumers and the other players in the downstream supply chain. The in-stream is equally affected as the manufacturers such as Huawei have been reported to produce greenhouse gases and carbon (Mach et al, 2016). In general, therefore, the supply chain used by the ICT industry contributes towards high carbon footprint. It is necessary that measures are taken to lean and green these supply chain to achieve sustainable processes and products that safeguard the environment.