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Globalisation and the role of its HR strategy: Case

study of a leading Chinese telecom corporation –


Huawei

Overview of the session


¾ Motives of Chinese firms investing abroad
¾ Research questions
¾ Case study of a leading Chinese IT MNC – Huawei Technologies
Ltd (HW)
¾ Findings and analysis
¾ Conclusions

Fang Lee Cooke, Manchester 1


Business School, UK
Four major motives for FDI (Dunning and Narula, 2004):
¾ Marketing-seeking
¾ Resource-seeking
¾ Asset-seeking
¾ 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 2


Business School, UK
Motives of Chinese firms investing abroad

¾ Pull strategies by foreign governments – tax incentives and


other favourite conditions

¾ Push strategy by the Chinese government – ‘Go global’, tax


incentives, subsidies, national bank loans with preferential terms

¾ Energy resource seeking – oil, gas, mining

¾ 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 3


Business School, UK
Motives of Chinese firms investing abroad (cont…)

¾ Knowledge and know-how seeking – to acquire technology and


management know-how through M&As and JVs in R&D centres
¾ Brand name product building – to form strategic alliance (often
through acquisitions) with well-known western firms to overcome
poor image of Chinese products
¾ Market access – to gain access to well-connected distribution
networks (often through partnership with reputable firms in the
West)

Fang Lee Cooke, Manchester 4


Business School, UK
Motives of Chinese firms investing abroad (cont…)

¾ Aspiration to be international players, e.g. SAIC, Haier


¾ Increased competition or reduced demands at home – need to
seek overseas market (e.g. bicycles, cars, household electronic
goods)
¾ Expansion and support of export – setting up branch offices and
services centres, establishing a presence in the market
¾ Foreign exchange reserves – if the company makes a profit

Fang Lee Cooke, Manchester 5


Business School, UK
Research questions

¾ What type of HR strategy do Chinese MNCs in the high-tech


sector adopt to support its global business strategy?
¾ What may be the incentives and pressures for Chinese MNCs
to deploy local workforce in different parts of the world?
¾ How do, if at all, Chinese MNCs adopt HR practices
strategically to create social capital to enhance organizational
competitiveness?
¾ 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 6


Business School, UK
Case study of a leading Chinese IT MNC – Huawei
Technologies Ltd

¾ Established in 1988 as an IT product trading firm in Shenzhen

¾ Internationalization drive since 2001, now serving ¾ of the top 50 IT


operators in the world

¾ HW has rep offices in over 100 countries and over 1 billion users

¾ Now employing over 60,000 employees, 48% of whom working in


R&D

Fang Lee Cooke, Manchester 7


Business School, UK
Case study of a leading Chinese IT MNC – Huawei
Technologies Ltd (cont…)

¾ Business strategy: innovation, high quality, low cost, and excellent


customer service

¾ Globalization strategy: less developed countries first, then


developed countries; occupy market first (loss-making) then make
profit through maintenance and upgrades

¾ Motives of overseas expansion: marketing and asset seeking

Fang Lee Cooke, Manchester 8


Business School, UK
Huawei Headquarters 总部风光

Fang Lee Cooke, Manchester 9


Business School, UK
Huawei R&D Centre

Fang Lee Cooke, Manchester 10


Business School, UK
Huawei HQ Staff Condominium 员工公寓百草园

Fang Lee Cooke, Manchester 11


Business School, UK
HW’s global HR strategy and challenges in people
management

HR strategy:

¾ Deployment of Chinese expatriate to set up operations first

¾ 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 12


Business School, UK
HW’s global HR strategy and challenges in people
management (cont…)

HR challenges:
¾ Retention problem due to lower pay than western MNCs
¾ Low competence of local employees in poor countries (low PC
literacy and project management skills)
¾ Cultural differences in work values
¾ Cross-cultural issues between Chinese expat & local employees
¾ Lack of identification of local employees with HW’s corporate
culture or HW as their employer

Fang Lee Cooke, Manchester 13


Business School, UK
HW’s global HR strategy and challenges in people
management (cont…)

HR responses:

¾ Promote local employees to ranks which they will not get in


western MNCs

¾ Introducing local practices to suit local employees (e.g. bank


loan guarantee letters)

¾ Cross-cultural team building through social events

¾ Sending key local employees to HW’s HQ for training and


development

Fang Lee Cooke, Manchester 14


Business School, UK
HW’s global HR strategy and challenges in people
management (cont…)

HR responses:
¾ Deployment of locals as deputy managers to look after
personnel issues
¾ Learning by doing in developing HR practices to suit local
needs, e.g. borrow western MNCs’ good HR practices
¾ Deployment of emotional intelligence in understanding local
employees needs and provide support

Fang Lee Cooke, Manchester 15


Business School, UK
Conclusions

¾ HW’s HR strategy is characterised with high-performance work


system and paternalism typical of oriental culture

¾ Creation and mobilization of social capital of employees plays


an important role in supporting HW’s global business strategy

¾ Mobilizing political capital is crucial for Chinese MNCs to


develop international markets, esp. in emerging economies

Fang Lee Cooke, Manchester 16


Business School, UK
Limitations and research implications

Limitations:
¾ Snap shot single case study
¾ 12 interviews with Chinese managers (8) and employees (4),
but no interviews with host country local employees
Research implications:
¾ The role of political capital and social capital in helping Chinese
MNCs to develop market and gain competitive advantages
¾ HR initiatives to gain identification and commitment from local
employees with Chinese firms, esp. those from developed
countries

Fang Lee Cooke, Manchester 17


Business School, UK