Huawei PESTEL Analysis
Info: 883 words (4 pages) PESTEL Example
Published: 2nd Nov 2020
One of the main characteristics of the Chinese political environment, which constitutes of Huawei's largest market, is that the ruling party exerts a lot of influence on the country's economic environment (Piotroski, Wong & Zhang, 2015). Therefore, any occurrence that influences the Chinese politics has a heavy impact on Huawei's profitability. For example, Piotroski, Wong & Zhang (2015) suggest that during political promotions and National Congress meetings, the stock prices of most Chinese firms fall. Globally, the organisation's profitability is subject to the political climate in the respective countries. In the case of instability in its global markets, the largest being Europe, Huawei is unable to make sales (Ba, Zehou & Qing, 2016). On the other hand, according to Ba, Zehou & Qing (2016), international and local politics may affect Huawei operations positively. For example, the Chinese government strongly supports the telecommunications sector by ensuring sufficient training of engineering students, which increases the competitiveness of the domestic labour force and this makes domestic labour force highly competitive. Secondly, the Chinese government provides loans and incentives to promote local manufacturers (Xuesong, 2016), which gives these local companies an edge over their foreign counterparts.
Internationally, Huawei relies majorly on European markets and is, therefore, greatly affected when there is an economic downturn in Europe (Lopez & Zhang, 2017). When there is an economic downturn, consumers prefer to purchase necessities only. Additionally, Huawei's competitors, for instance, Apple have vast resource reservoirs while Huawei is struggling to increase its capital (Cao, 2017). Furthermore, value added tax in the telecommunications sector increases the operating cost, which diminishes their profitability margins (Lu, 2016). Nevertheless, the Chinese domestic economy is growing fast, which increases disposable income, and, therefore, demand for luxury products such as high-quality mobile phones (Arora, 2015). Given Huawei's current placing as a premium phone manufacturer, the organisation can tap into the growing Chinese middle-class local market that is increasingly concerned with quality.
Lu (2016) asserts that China markets are growing daily since the country is densely populated with around 1.3 billion people. High population provides a wide market for Huawei products. Besides, a large population creates a steep demand for products since the number of buyers keeps increasing. Currently, smart phones are trending, whereby their market penetration has grown tremendously (Lopez, 2017). This changing trend ensures that unlike in the recent past, where mobile devices were a preserve of the elite class, everyone can own a smartphone. This trend is expected to continue, which ensures sustainability for Huawei, which has invested heavily in smartphones manufacturing.
The modernisation rate in China is currently high, and almost everyone is going digital (Lu, 2016). People want to be connected to the internet, and this leads to better sales. Furthermore, the Chinese Government wants to ensure that there are innovations especially in ICT (Information and Communication Technology), by providing high-quality education and training programs (Lopez & Zhang, 2017). Innovative minds will ensure quality products are manufactured. Quality goods that are competent enough can fight stiff competition in the market by international brands such as Samsung or Lenovo.
Arora (2015) notes that The Green pipe of Huawei has environmental policies that must be adhered to by company in conserving the environment. Wastes from the company are reused to cut on possible wastages and to maximise available materials. Huawei wants to be the leading distributor of green energy products. Additionally, Huawei is trying to come up with effective ways to minimise the emission of carbon substances (Lopez, 2017).
According to Arora (2015), Huawei must abide by legal laws such as patent acts, tax rates, labour laws and environmental laws. Huawei deals with many employees in various countries, and it should comply with the wages and labour laws for all its jurisdictions of operation. Abiding by the rules will ensure positive business performance as the company will have an easy time with the Government. Violating the rules of strict countries could lead to business closure, expensive fines or sanctions.
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