Responding to Aggressive Competition: Huawei's Entry in the Networking Equipment Industry

The global networking equipment market is grappling with the aggressive rise of Huawei Technologies Co. Ltd., a Chinese multinational company recognized for its competitive pricing and rapid technological advances. Historically dominated by firms such as Nokia, Ericsson, Lucent, Alcatel, and Siemens (the NELAS), the industry has been reshaped by Huawei's bold strategies, which pose significant challenges to the established players. This case first examines two near simultaneous shocks-regulatory and technological-that altered the attractiveness of the networking equipment industry and affected the historical incumbents (the NELAS) and the new incumbents (Cisco and Juniper), and how the industry subsequently evolved. The case then brings in the theme of disruptive innovation by exploring the entry of Huawei into this industry. Central to the case is the analysis of how the incumbents-both historical and new-should respond to Huawei's disruptive entry. In this, the case contrasts the plausible responses of the historical incumbents (the NELAS) with those of the new incumbents (Cisco and Juniper), given their different positions in the industry. The case explores the concept of corporate advantage versus business unit advantage, offering insights into how companies can leverage their strengths to navigate a rapidly changing competitive landscape.

Learning Objectives

1. External Analysis: Understand the industry structure, competitive forces, and the impact of regulatory and technological changes. Understand the evolution of an industry in response to external shocks.
2. Corporate Strategy: Explore strategic options from a corporate perspective, including mergers and acquisitions, alliances, and restructuring.
3. Internal Analysis: Examine strategic positioning and the competitive advantages of different firms.
4. Disruptive Innovation: Understand that disruptive innovation is innovation in business models rather than in products or technology.
5. Strategic Response: Evaluate short-term and long-term strategic responses to a competitive entry.