Ren Zhengfei: Huawei's Global Expansion

A few days ago, you had just witnessed the legendary global wealth of a Chinese company, Alibaba, Sesame. Today I would like to share with you the story of the globalization expansion of another Chinese company. This company was founded in 1988 with only 3 employees and 3,000 US dollars of founding capital. 26 years later, in 2013, sales revenue reached US$38.9 billion, 67% came from markets outside China, and there were 150,000 employees, including more than 40,000 foreign employees and products serving more than 3 billion people worldwide. This company is Huawei Group. His founder and CEO is Ren Zhengfei.

Why does Huawei need to expand globally? To use Ren Zhengfei's words to express is to live. If Huawei did not step out of the country 17 years ago and repeatedly suffered defeats and repeated failures, and eventually became the world's top 500 global communications industry leader among the top 500 companies, then Huawei is likely to encounter a huge ideological dilemma; Huawei It is a privately-owned private company with more than 80,000 shareholders. The founder Ren Zhengfei owns only 1.3% of the shares; there is no external capital shareholder; in the past 26 years, Huawei has been criticized by some as "a sprout of capitalism in China. "In the eyes of some Westerners, it is also a "representative of socialism." In this world, there are very few Huawei companies that carry out so-called "identification" at each stage.

The success of Huawei's globalization expansion is gradually clearing its original image.

Huawei's global expansion model is mainly a trade expansion. Huawei has branch offices or representative offices in 168 countries around the world. At the same time, it has built 16 research institutes, 28 innovation centers, and 45 innovation centers in the United States, Europe, Japan, India, and Singapore according to the capabilities of different countries or regions. Product Service Center. Huawei has more than 70,000 people in the world's largest R&D team, with annual sales of 10% invested in R&D, and a total of 36,511 patents. In the past 10 years, Huawei accumulatively invested 25 billion U.S. dollars in R&D.

In such a global market network and R&D platform, product development needs come from Huawei, the architecture is designed by leading experts from Europe and the United States, hardware is completed by Huawei China team, the software is mainly undertaken by Indian technology personnel, manufacturing is mainly done by Foxconn, and finally Then sell in Huawei's global market network.

In the past 26 years, Huawei has not conducted any large-scale capital mergers and acquisitions. Huawei's understanding is that buying a scale is to buy a problem, which will bring about cultural conflicts and values, as well as possible financial traps. However, while focusing on the growth of its own capabilities, Huawei also conducted some point-based mergers and acquisitions. The main targets of mergers and acquisitions are some cutting-edge small R&D companies.

Huawei's global expansion has three core features. The first is to actively embrace and integrate the global business order dominated by Westerners, and to “fully westernize” management systems and processes. Since 1996, Huawei has hired more than a dozen consulting companies from IBM and the United States, including the United States, to conduct management changes in Huawei's R&D, supply chain, human resources, finance, and market systems. The cost of managing changes has reached more than 50 years in 17 years. As a result, it has constructed a complete set of systems and processes that are similar to and even identical to those of Western companies. This is the fundamental element that enables Huawei to gain a foothold in the global market and achieve success.

The second feature of Huawei's global expansion is legal compliance. Complying with the laws of the United Nations and the laws of the United States, Huawei regards American law as international law because, in reality, the United States can use its own laws to crack down and sanction any business. In addition, it must also strictly abide by the laws of the country where it is located. Huawei's expansion in the Brazilian market has been nearly 20 years, with an accumulated loss of US$1.3 billion. The main reason for the loss is the lack of awareness of Brazil’s legal environment—many foreign companies have long-term losses in Brazil. In 2013, Huawei made a profit of 2 million U.S. dollars in Brazil for the first time. If we calculate the profit target of 60 million U.S. dollars per year in the future, it will take 23 years for the company to achieve a static turnaround.

Since 2009, I have used Huawei as an example to warn some “going out” Chinese companies on articles, lectures, and informal exchanges on multiple occasions: Internationalization and globalization are complex politics. The systematic engineering of the legal, cultural, and commercial ecology attempts to completely transplant some of the practices that have succeeded in the Chinese market to markets outside the homeland. Its frustration and even failure are basically doomed and inevitable.

The third core feature of Huawei's global expansion is cultural compliance. Huawei has a Ethics Compliance Committee. Its main function is to guide and regulate Huawei employees to adapt to and adapt to their country or region from the aspects of language, customs, religion, and even lifestyle habits.

The historical rules of human business have always been, and the strength determines the status. Huawei’s position in the Western Information Technology Club led by Westerners is based on its innovative ability, open courage, change determination, and sustained struggle and sacrifice spirit. Huawei has advocated the "Mikania spirit" in its internal corporate culture. Mikania micrantha is a kind of wild grass in South America. It can only require very few nutrients and moisture, and grows extremely fast at a speed of one minute and one mile. Cover all the plants and move them towards suffocation. This reflects the collective will and spiritual power of Huawei's global expansion.

However, when Huawei became one of the global industry leaders, several years ago, Huawei’s president Ren Zhengfei issued a warning: Huawei is not Genghis Khan and Hitler. When Huawei seeks to dominate the world, it is the day of Huawei’s destruction and collapse. Therefore, Huawei must advocate a compromise philosophy and be an adversary. Ren Zhengfei said, "I have surrendered for most of the past 20 years."

Huawei’s globalization philosophy is to adhere to non-alignedism and not to establish a so-called united front and exclusion system with any industry giant, because Huawei believes that the alliance is anti-opening and creates more opponents for itself; Ren Zhengfei’s view is that : Left hand to play Microsoft's umbrella, right hand to play Cisco's umbrella, there is no permanent enemy and eternal friend, Huawei must pursue cooperativeism; Huawei's guidelines in the company are respected: the development of European companies in the Chinese market represents Huawei's appeal; Huawei has the responsibility, willingness, and ability to establish a global business ecosystem balance with Western companies such as Ericsson and Nokia.

In the past 26 years, Huawei has consistently adhered to a high degree of focus on the main channel of the communications industry and opposed the diversification of the industry. In early 2014, it further proposed the "strategy." What is a "tip strategy"? That is to further shrink the strategic offensive and focus all resources and energy on Huawei's concept of a “small area with a pinpoint”, and then enter the “strategic unmanned area” of the ICT industry in about five years to establish Huawei’s The core area of ​​standard setting and pricing areas. As a result, competition will be differentiated on a substantive level, avoid conflicts of interest with Western companies, and achieve the complementarity of needs with rivals in high-value areas, and realize the peaceful rise of Huawei in globalization.

It is intriguing that Huawei’s intention to expand globally more than a decade ago was the choice forced out. Only by going abroad can we prove ourselves and we can partially avoid the conflicts with some domestic stakeholders. Today’s “strategy” is also To a certain extent, it is forced out of the competitiveness of China. Therefore, my conclusion is that fear and crisis are the fundamental reasons for any change. Focus, focus, and refocus have created the core competitiveness of Huawei, the Chinese company.