Globalisation and the role of its HR strategy: Case study of a leading Chinese telecom corporation – Huawei

1. Globalisation and the role of its HR strategy: Case study of a leading Chinese telecom corporation – Huawei Overview of the session • Motives of Chinese firms investing abroad • Research questions • Case study of a leading Chinese IT MNC – Huawei Technologies Ltd (HW) • Findings and analysis • Conclusions Fang Lee Cooke, Manchester Business School, UK

2. Four major motives for FDI (Dunning and Narula, 2004): • Marketing-seeking • Resource-seeking • Asset-seeking • Efficiency-seeking Exactly where firms can fulfil these motives are often location-specific Firms engage in FDI not only to transfer their resources to a host country (asset exploitation), but also to learn, or gain access to, the necessary strategic assets available in the host country (asset seeking). J. Dunning and R. Narula, Multinationals and Industrial Competitiveness: A New Agenda, (Cheltenham: Edward Elgar, 2004) Fang Lee Cooke, Manchester Business School, UK

3. Motives of Chinese firms investing abroad • Pull strategies by foreign governments – tax incentives and other favourite conditions • Push strategy by the Chinese government – ‘Go global’, tax incentives, subsidies, national bank loans with preferential terms • Energy resource seeking – oil, gas, mining • Financial factors – bankrupting firms sold at cheap price, access to international fund (with low interest), to avoid trade quotas, money laundering Fang Lee Cooke, Manchester Business School, UK

4. Motives of Chinese firms investing abroad (cont…) • Knowledge and know-how seeking – to acquire technology and management know-how through M&As and JVs in R&D centres • Brand name product building –to form strategic alliance (often through acquisitions) with well-known western firms to overcome poor image of Chinese products • Market access – to gain access to well-connected distribution networks (often through partnership with reputable firms in the West) Fang Lee Cooke, Manchester Business School, UK

5. Motives of Chinese firms investing abroad (cont…) • Aspiration to be international players, e.g. SAIC, Haier • Increased competition or reduced demandsat home – need to seek overseas market (e.g. bicycles, cars, household electronic goods) • Expansion and support of export – setting up branch offices and services centres, establishing a presence in the market • Foreign exchange reserves – if the company makes a profit Fang Lee Cooke, Manchester Business School, UK

6. Research questions • What type of HR strategy do Chinese MNCs in the high-tech sector adopt to support its global business strategy? • What may be the incentives and pressures for Chinese MNCs to deploy local workforce in different parts of the world? • How do, if at all, Chinese MNCs adopt HR practices strategically to create social capital to enhance organizational competitiveness? • How do Chinese MNCs mobilize political capital to leverage competitive advantage in the international market where their competitiveness is not evident? Fang Lee Cooke, Manchester Business School, UK

7. Case study of a leading Chinese IT MNC – Huawei Technologies Ltd • Established in 1988 as an IT product trading firm in Shenzhen • Internationalization drive since 2001, now serving ¾ of the top 50 IT operators in the world • HW has rep offices in over 100 countries and over 1 billion users • Now employing over 60,000 employees, 48% of whom working in R&D Fang Lee Cooke, Manchester Business School, UK

8. Case study of a leading Chinese IT MNC – Huawei Technologies Ltd (cont…) • Business strategy: innovation, high quality, low cost, and excellent customer service • Globalization strategy: less developed countries first, then developed countries; occupy market first (loss-making) then make profit through maintenance and upgrades • Motives of overseas expansion: marketing and asset seeking Fang Lee Cooke, Manchester Business School, UK

9. Huawei Headquarters 总部风光 Fang Lee Cooke, Manchester Business School, UK

10. Huawei R&D Centre Fang Lee Cooke, Manchester Business School, UK

11. Huawei HQ Staff Condominium 员工公寓百草园 Fang Lee Cooke, Manchester Business School, UK

12. HW’s global HR strategy and challenges in people management HR strategy: • Deployment of Chinese expatriate to set up operations first • Localization to overcome language and cultural problems, also to show commitment to local economy and observation to local labour law – deployment of social capital Fang Lee Cooke, Manchester Business School, UK

13. HW’s global HR strategy and challenges in people management (cont…) HR challenges: • Retention problem due to lower pay than western MNCs • Low competence of local employees in poor countries (low PC literacy and project management skills) • Cultural differences in work values • Cross-cultural issues between Chinese expat & local employees • Lack of identification of local employees with HW’s corporate culture or HW as their employer Fang Lee Cooke, Manchester Business School, UK

14. HW’s global HR strategy and challenges in people management (cont…) HR responses: • Promote local employees to ranks which they will not get in western MNCs • Introducing local practices to suit local employees (e.g. bank loan guarantee letters) • Cross-cultural team building through social events • Sending key local employees to HW’s HQ for training and development Fang Lee Cooke, Manchester Business School, UK

15. HW’s global HR strategy and challenges in people management (cont…) HR responses: • Deployment of locals as deputy managers to look after personnel issues • Learning by doing in developing HR practices to suit local needs, e.g. borrow western MNCs’ good HR practices • Deployment of emotional intelligence in understanding local employees needs and provide support Fang Lee Cooke, Manchester Business School, UK

16. Conclusions • HW’s HR strategy is characterised with high-performance work system and paternalism typical of oriental culture • Creation and mobilization of social capital of employees plays an important role in supporting HW’s global business strategy • Mobilizing political capital is crucial for Chinese MNCs to develop international markets, esp. in emerging economies Fang Lee Cooke, Manchester Business School, UK

17. Limitations and research implications Limitations: • Snap shot single case study • 12 interviews with Chinese managers (8) and employees (4), but no interviews with host country local employees Research implications: • The role of political capital and social capital in helping Chinese MNCs to develop market and gain competitive advantages • HR initiatives to gain identification and commitment from local employees with Chinese firms, esp. those from developed countries Fang Lee Cooke, Manchester Business School, UK