Huawei Technologies Co. Ltd is a leading technology firm in China which deals with technology-based products such as electronic devices, smartphones, telecommunication networks, cloud computing, and AI technology. The firm takes advantage of low cost manufacturing in China and sells its products to the global market, especially in Europe, Asia and Africa. Like any other multinational company, Huawei faces several challenges and opportunities in the macro environment. This article analyses the company’s external business environment using the PESTEL framework. This strategic analysis tool identifies several macro factors that affect a company. The key factors in PESTEL analysis are: political, economic, social, technological, environmental, and legal.
Political Factors
The key political factors that affect Huawei in the PESTEL analysis include trade relations, diplomatic relations, and political instabilities. As noted in the war between Russia and Ukraine, international political conflicts may affect several areas of business, including supply chain, demand, and operations. Due to wars in foreign countries, Huawei experiences reduced demand for its products as well as disruptions in its shipments. Trade wars between China and the United States has also reduced the company’s sales and market share in the U.S. and Europe. However, the open trade policy between China and the European Union gives Huawei an opportunity to sell more products to the E.U. Furthermore, increasing democratization and political stability in most countries in Africa and the Middle East gives Huawei the opportunity to find new markets in developing countries.
Economic Factors
Economic factors that affect Huawei’s macro environment include inflation, rising interest rates, open markets, and GDP growth. China has recently seen growth in its GDP due to rising foreign investment, industrialization, and open market policy where major firms establish their manufacturing functions in the country. Growth in other countries, especially developing countries, also increase the purchasing power of customers in global markets. This leads to increased demand for the company’s products. However, high inflation as currently witnessed due to rising prices of goods may reduce the company’s revenues. Rising inflation and interest rates also lead to increased costs of production, leading to reduced profits.
Social Factors
The social factors that can affect business strategy include values, norms, interests, attitudes, traditions, beliefs, and perceptions of society. There is a social trend that has encouraged online chatting, social networking, online shopping and other forms of online interactions. This social perspective has increased demand for smartphones, creating demand for Huawei’s electronic products. Widespread association of Chinese products with low prices and poor quality is another PESTLE factor in relation to social factors that has affected demand for Huawei negatively.
Technological Factors
Another factor in the PESTEL analysis of Huawei Technologies is technological factor. The 5G network is the main technological factor affecting Huawei and other technology companies in the world. There has been a shift from 4G to 5G networks across the world, and Huawei is leading the way in adopting the new technology. Other technological factors affecting Huawei include AI, cloud computing, and robotics. These advancements in technology have a great impact on the design, production, and distribution of Huawei products across the world.
Environmental Factors
Several environmental factors also affect Huawei’s macro environment, including issues of climate change, resource scarcity, and natural disasters. Recently, world leaders have been holding a series of meetings on the environment and have recommended various measures to deal with the impact of climate change, including the use of technology to manage resources more efficiently. Huawei can take advantage of this trend to create innovative technologies that promote environmental protection. Huawei is also subject to several environmental laws intended to protect the environment. The company has to meet certain environmental standards to be able to export its products to the European Union.
Legal Factors
Legal factors include issues of law, including statutory, constitutional, and international laws that may affect business strategy. EU and U.S. laws related to intellectual property and antitrust laws affect the company’s strategic decisions. For example, the U.S. has banned some Huawei products due to the infringement of intellectual property rights. Labor laws also affect the company’s production and operations in its manufacturing plants, and increases legal and production costs. Legal factors in the PESTLE analysis of Huawei also include statutory laws that are aimed at regulating commerce and adoption of communication technologies worldwide.