This PESTLE analysis of Huawei can help us understand why the smartphone manufacturer is performing at its current level, and how to change that.
Huawei is one of China's leading smartphone manufacturers. Like everyone, Huawei is subject to forces from all six of the PESTLE categories: Political, Economic, Sociocultural, Technological, Legal, and Environmental. Identifying the individual factors that affect Huawei's success can help us understand why Huawei is performing at its current level, and what could be done to change that. That's why today we're diving into a PESTLE analysis of Huawei — to see exactly what opportunities and threats it's facing!
Political
Huawei itself is operated out of China, where most of its manufacturing also takes places. However, Huawei smartphones are sold across the world. In particular, their smartphones are extremely popular in the European Union (relatively speaking). As a result, Huawei is subject to political forces from across the globe, especially those relating to China and the European Union.
The most notable area of politics is likely trade politics. Currently, trade policies are widespread and facilitate the export of good from China to the European Union. If the European Union were, for example, to place trade sanctions on China (for example, due to lack of regard for environmental concerns), this would have a huge effect on Huawei.
Economic
As above, Huawei smartphones are mostly built in China and sold abroad, which means they are subject to at least two geographies' macro environments. In particular, Huawei's economic success is a function of both the Chinese economy and the economy of its target market — mostly the European Union.
The relationship between these economic factors and Huawei's success is very simple. If Huawei's target markets perform well economically, Huawei is likely to sell more phones in that target market. Right now, the European economy is relatively stable, which gives Huawei a consistent amount of business regardless of economic conditions in other areas of the world.
China itself is also worth mentioning as a target market. Huawei doesn't just export their smartphones — they also sell them to local consumers. As such, China's rapidly growing economy has paved the way for growing numbers of smartphone sales — including sales of Huawei smartphones.
The Chinese economic landscape affects Huawei in a multitude of ways, beyond the growing number of smartphone purchases. Notably, labor costs in the country are quickly increasing, which is causing Huawei's overhead (in terms of production costs) to rise proportionally. This will eventually force the company to increase the end cost of its goods, or to absorb the additional costs itself and suffer from reduced net profit. Thankfully, China's economy is also a relatively liquid area of investment. This means that Huawei shouldn't struggle should it need more funds to support it.
Sociocultural
As touched on above, there is a growing demand for smartphones across the world, including China. This is mostly a sociocultural phenomenon, although its effects are economic. However, this growing need for smartphones is affecting the entire market, not just Huawei.
One unfortunate sociocultural factor affecting Huawei is the widespread association Chinese products have with poor quality. This belief is especially prominent in Western countries like the United States, where some consumers stay away from technology brands like Huawei just because of their origin.
Technological
The most interesting technological factor for smartphone manufacturers is the rise of 5G. The successor to 3G and 4G, 5G is the fifth generation mobile communications technology, which boasts improved speed, lower cost, and energy saving. However, 5G technology requires new hardware — a need which will have to be filled by component manufacturers somewhere in the world!
Huawei has been quick to develop its own 5G modems, which will allow it to adopt the technology as early as entire years before other major competitors. What's more, Huawei has extended an offer to sell its modems to smartphone pioneer Apple. All in all, Huawei appears to be riding the 5G wave, and it might seriously pay off!
Legal
Huawei is subject to all sorts of laws, across multiple jurisdictions. As a technology company, Huawei has to be especially careful with the area of patent law — ensuring it doesn't infringe on others' rights while protecting its own designs. Aside from that, Huawei has to manage the many consumer laws in its target markets, like the European Union. Typically, this has not been a problematic area for most smartphone manufacturers.
In China, Huawei is also subject to a range of labor and environmental laws. These laws often increase overheads by forcing manufacturers to treat laborers better and take environmental concerns more seriously, but there is simply no way around them.
Environmental
As mentioned above, Huawei is subject to a range of environmental laws. These mostly affect manufacturing processes within China, but — presumably — Huawei has to adhere to certain environmental standards to sell in markets such as the European Union.
Thankfully, Huawei has policies in place to reduce its waste products and carbon emissions. Although manufacturing companies typically have a hard time when balancing the massive need for new goods with environmental concerns, Huawei seems to be doing a reasonable job of managing this.
PESTLE Analysis of Huawei: Final Thoughts
Huawei itself is an excellent smartphone manufacturer. Throughout this PESTLE analysis, we've seen that Huawei is mostly affected by the country in which it operates: China. Ultimately, Huawei being Chinese has determined and will continue to determine crucial Political, Economic, Sociocultural (to an extent), Legal, and Environmental factors affecting the organization. Aside from this, Huawei sells its products on a global market — most notably including the European Union — where it has little power in influencing the decisions of regulators or circumventing them.
As a result, it seems that Huawei's best bet is to make do with the macro environment it has — closely adhering to Chinese regulations and adapting to local needs — and focus on building and optimizing new technologies. It's clear that Huawei wants to be at the forefront of mobile technological advances, especially with its early foray into the world of 5G, and it looks like that might greatly pay itself off.
Image "Huawei Mate 9" byAndri Koolme is licensed under CC-BY 2.0
