Internationalization Strategy of Chinese Privately-owned MNEs: the Case of Huawei and ZTE

Abstract

The goal of this paper is to investigate the internationalization strategies of two Chinese privately-owned companies from telecommunications industry, Huawei and ZTE, which compete successfully within the global market. In order to achieve this goal, three steps were taken: 1) identifying the competitive advantages of these two companies; 2) analyzing their entry modes and describing the decision-making process. In the end, 3) by combining the previous findings, we were able to identify crucial elements that contribute to effective internationalization strategies, and then to generalize and apply the strategies to companies that share similar characteristics and interests. Regarding the competitive advantages, there are two key findings: 1) Chinese privately-owned MNEs do not have comparative advantages as prerequisite of their engagement in FDI. They may use the inherent low-cost advantage to penetrate foreign markets with low barriers in the beginning, and then to further acquire and enhance their ownership advantages through a learning process. 2) Chinese privately-owned MNEs are seen to be more interested in transaction value improvement rather than transaction cost cut, especially while they invest in developed economies. Regarding the internationalization process, Chinese privately-owned MNEs always started from less-developed countries to avoid risk and to acquire low wage labor and big potential market of these countries, and then to developed countries for high-tech talents, excellent R&D infrastructure, world-leading research techniques and favorable research environment. Some crucial factors that contribute to a successful internationalization strategy are heavy R&D investment, which is especially important for a company form high-tech industry; partnerships with foreign companies, which is a quick and efficient way to gain industry-specific knowledge, management skills and global brand building.