Business model of Huawei Technologies

Customer Segments

Huawei is the largest manufacturer of telecommunications products and equipment in the world. It serves a diverse client base across multiple industries and business sectors. Its customers can be organised broadly into the following categories:

• General Consumers, comprising members of the general consumer public, to which the Company offers various devices, such as smartphones, tablets, wearables, and accessories via authorized distributors, resellers, and retailers;
• Commercial and Corporate Enterprises, comprising companies across multiple sectors, including public utilities providers, corporate enterprises, energy companies, power suppliers, transportation providers, and finance firms, to which the Company provides specialised commercial services; and
• Government and Public Institutions, comprising government bodies at all levels, as well as public institutions and organisations.

Huawei’s core market is its native China, which accounts for the largest portion of its sales. The Company, however, also serves an international customer base across the Americas, Asia Pacific, and Europe, Middle East and Africa.

Value Propositions

Huawei provides value to its customers in the following ways:

• Its size and industry standing, with the Company established as the largest manufacturer of telecommunications products in the world, having a reputation for developing high-quality, reliable, and effective products and solutions;
• Its broad portfolio of products and services, with the Company offering an extensive range of products and services to a diverse customer base, including consumer electronics products and accessories, commercial telecommunications networks, and specialist telecoms equipment;
• Its proprietary technologies, with the Company committed to developing new and innovative technologies which it utilises in its various products, making its offerings unique in the telecommunications industry; and
• Its international reach, with the Company serving a large domestic customer base in China, as well as reaching substantial customer bases across international markets in the Americas, Asia Pacific, and Europe, Middle East and Africa.

Channels

Huawei operates a website at www.huawei.com, through which it provides information on its various products, services, and other operations. The Company sells products directly to consumers through its online VMall platform, which allows customers across multiple markets to browse products, make purchases, and arrange deliveries. Huawei also operates and manages its own proprietary app store, through which customers can purchase mobile applications.

Huawei additionally reaches consumers through an extensive network of physical retail outlets, primarily located across Asian market, notably China. These outlets allow the Company to serve customers directly. The Company’s products are also sold through various third party physical retailers around the world, as well as through authorised online sellers.

Huawei operates dedicated in-house sales forces for its commercial, industrial, and institutional service offerings. These personnel operate out of the Company’s various international offices and deal directly with clients. Huawei also operates its own manufacturing and distribution infrastructure, with facilities around the world.

This enables the Company to distribute products to its stores quickly and efficiently, as well as effectively fulfil online orders.

Customer Relationships

Huawei sells a range of products to customers on a self-service basis through its various online stores. These platforms allow customers to browse products, make purchase, manage account details, and complete payments online without interacting directly with members of the Company’s sales personnel. The Company’s proprietary app store functions on a similarly self-service basis.

Huawei provides a tailored service to its commercial, industrial, and institutional clients, with which it consults directly in order to ensure that the individual requirements of each project are met effectively. The Company seeks to establish longstanding relationships with these clients. Huawei also provides a more personalised service to consumers through its network of retail stores.

Huawei provides ongoing support to its clients, with its larger enterprise clients having their own account management teams. The Company offers a range of support resources to customer, including FAQs, product guides, and downloadable documentation. Customers can also contact dedicated support personnel over the phone or online in order to access personalised assistance.

Huawei operates a community portal, which enables customers to interact with one another and collaborate on issues and ideas. It also operates social media accounts – including with Facebook, Twitter, LinkedIn, and YouTube – through which it can interact directly with customers.

Key Activities

Huawei is a multinational manufacturer and distributor of telecommunications and electronics products, as well as provider of related IT and communications services.

The Company aligns its operations into three reportable business segments: Carrier Network, which provides wireless network, fixed network, carrier software solutions, Enterprise, which offers a range of enterprise network infrastructure, cloud-based green data centres, and enterprise information security products; and Consumer, which manufactures and sells a range of consumer electronics products. Huawei also offers a range of business consulting, network integration, assurance, managed, learning, and global delivery services.

Key Partners

Huawei works in close conjunction with a broad network of partner organisations to ensure the quality of its products and the efficiency of its delivery. These partners can be organised broadly into the following categories:

• Supplier and Vendor Partners, comprising suppliers of materials, components, and equipment that are used in the Company’s manufacturing processes, as well as suppliers of services and technologies that are utilised more broadly across the business;
• Channel and Distribution Partners, comprising various distributors, resellers, and independent sales agents that help to extend the Company’s sales reach, notably in markets where the Company is not itself well represented;
• Solutions Partners, comprising technology companies, consulting firms, and various service providers that assist the Company in developing and implementing its products and solutions; and
• Strategic and Alliance Partners, comprising various market leading companies across multiple business sectors, with which the Company collaborates on joint marketing, branding, and other projects.

Huawei names a number of its partners on its website. This includes TechStrata, SYNNEX, SoftNet Solutions, Profulgent Technology, Saasfire, and PrimaSense.

Key Resources

Huawei’s key resources are its technologies and intellectual properties, its materials and supply chain network, its distribution and storage infrastructure, its physical retail chain, its website and online stores, its IT and communications infrastructure, its manufacturing facilities, its partnerships, and its personnel.

Huawei owns or licenses numerous patents and trademarks that are key to its operations. Searches of records published by the US Patent and Trademark Office identified numerous patent applications files in the name of Huawei or its subsidiaries, including applications entitled ‘Data transmission method, device, and system’, Wireless transmission method, access point, and station’ and ‘Method and device for transmitting data’.

Huawei additionally owns and or leases a large portfolio of physical properties around the world that are key to its activities. This notably includes it network of manufacturing, distribution, and storage facilities, its corporate offices, and its chain of retail outlets.

Cost Structure

Huawei incurs cost in relation to the development of its products, the procurement of materials and professional services, the operation of its storage and distribution facilities, the development of its online portals, the maintenance of its IT and communications infrastructure, the management of its partnerships, the implementation of marketing and advertising schemes, the operation of its physical retail network, and the retention of its personnel.

In 2015 Huawei recorded total operating expenses in the amount of CNY 118.91 billion (approximately $17.36 billion).

Revenue Streams

Huawei generates revenue through the manufacture and sale of consumer electronics devices, the provision of commercial network and communications services, and the provision of various consulting and other services. The Company derives its revenue in the form of sales and service fees.

In 2015 Huawei generated revenue for the year in the amount of CNY 395.01 billion (approximately $57.59 billion), up on the CNY 288.20 billion recorded by the Company in 2014. Almost 60% of this revenue was attributed to the Company’s Carrier Network segment, with the Consumer segment accounting for around 33%.