Globalization strategies of Chinese companies : A study of China's largest telecommunications equipment companies

Abstract: There is a void in global strategy research on companies based in developing economies. This thesis aims to extend the knowledge within this particular field by focusing on Chinese companies with global aspirations. The results bear significant implications for the Chinese firms' partners and competitors in developed countries. The thesis encompasses two of the largest Chinese enterprises in the telecom equipment sector - Huawei and ZTE. Both companies are pioneers in terms of globalizing their sales and operations. A globalized underlying industry and market is an important precursor for the existence of truly global corporations implementing global strategies. Thus, a thorough investigation of the global telecom equipment industry was conducted, in order to provide a solid platform and deeper understanding prior to the study of the two Chinese companies' globalization process. Yip's 19 globalization forces framework was utilized to analyze the telecom equipment industry - the results indicated strong pressure for globalization within the industry. The large extent and degree of industry globalization facilitated the internationalization and globalization of the Chinese telecom companies Huawei and ZTE. Four distinctive features were identified after scrutinizing the corporate global strategies of the largest Chinese telecom equipment companies; (1) China-centrism - a considerable portion of Huawei and ZTE's revenue is generated from the domestic Chinese market. Half of the staff stationed at overseas offices are Chinese nationals dispatched from the headoffice in China, (2) R&D focus - Huawei and ZTE spend more than 10% of their annual revenue in research and development activities. R&D centers in strategic geographical areas worldwide have been set up in order to combine advanced research around the world with low-cost development in China, (3) Foreign partnership - Huawei and ZTE are actively engaged in cooperation with numerous well-known foreign companies. The Chinese firms are participants in several industry organizations and interest-groups. These associations boost the recognition and legitimacy of Huawei and ZTE in developed markets, and (4) Government influence - Huawei and ZTE's growth and successful international expansion would not be possible without the strong support and financial backing by the Chinese government. But not all government influence is positive, company executives of Huawei and ZTE are increasingly vocal about their displeasure in terms of how badly the Chinese government protects local firms in the domestic Chinese market. The globalization strategies adapted by the two Chinese firms resemble the "Total global strategy" framework, since both companies internationalized and globalized their core corporate values and strategies after developing and strengthening them initially. It is important for partners (enterprises as well as government agencies) and competitors in developed countries to acknowledge the existence and global competitiveness of companies based in developing countries. Partnership opportunities should be sought after actively, as globalizing companies in developed countries are still keen to seek cooperation that can strengthen their legitimacy and credibility in developed markets. A case study conducted for Invest in Sweden Agency (ISA) is also included in the study, which details a strategy and activities framework for the government agency's future work, by utilizing the knowledge and insight gained through the analysis sections of this thesis.