In command

Why Huawei’s Ren Zhengfei is arguably China’s most successful CEO

In command

Huawei: networking beautifully

Dale Carnegie’s best selling book, How to Win Friends and Influence People is probably not at the top of Ren Zhengfei’s reading list.  The reclusive founder and CEO of Huawei Technologies, China’s largest telecom equipment maker, is a man of few words, but undoubted business acumen.

Ren is something of an enigma in the Chinese business community.  He largely disregards the niceties of corporate schmoozing. He has never even given a media interview. But, nevertheless, he still ranked first in Forbes’ top 25 most influential Chinese business leaders for 2008.

Despite its size (the company employs over 87,000 people), Huawei is still privately-held and its finances remain opaque.

Ren, a former officer in the People’s Liberation Army (PLA), founded the company as a third-party reseller of telecom devices in Shenzhen in 1998.

He has since overseen its expansion into one of the world’s largest telecommunication equipment manufacturers, spanning fixed and mobile networks and data communications.

Huawei now competes with heavyweights like Alcatel-Lucent, Cisco and Ericsson Telephone, as well as low-cost Chinese competitors such as ZTE Corp.

The little that is known about Ren and the internal workings of Huawei just adds to the allure.

According to the New York Times, Ren’s management philosophy is lifted straight from a military training manual. Huawei is famous for a management structure modelled on collective discipline and strict hierarchy.

But despite Ren’s communist roots, he has also used Western management practices to transform the company into a global player, including the hiring of IBM for management consulting services. International standards in research and development, as well as supply chain management, have also been encouraged.

As a result, Huawei has developed a reputation for competitively-priced but high quality networks. And not just in China. It is also the first non-state owned firm to expand successfully overseas, with profitable operations in Europe and Africa. The company is also making headway in North America, although local competition and US concerns about national security make it a tougher marketplace. Huawei says 75% of its sales revenue now comes from overseas markets, and reckons on signing contracts worth $30 billion this year.

The company’s 2008 global sales reached $18.3 billion, a leap of 43% year-on-year. Net income last year was $1.15 billion, up 20% from a year prior. This robust growth is in sharp contrast to a number of other global telecom equipment makers, many of whom are reporting losses in the current economic climate. Ericsson’s profit fell by 48% from 2007, while Alcatel-Lucent posted a €5.3 billion loss in 2008.

While its rivals are bracing for continuing difficulties, Huawei believes it can sustain its momentum: “In 2009, we believe that Huawei will maintain its pace of steady growth and this will be driven mainly by 3G network deployments in emerging markets, including the Asia-Pacific region, and particularly in China,” the company said in a statement.

Industry experts think that the global financial crisis may even provide Huawei with fresh opportunities too. “Huawei may stand to gain more market share this year, especially in Europe and US, as operators there will take the cost factor more seriously,” says Duncan Clark, chairman of BDA China, a leading consulting and market research firm that focuses on telecom, media, and technology.

There are other reasons for Huawei to be optimistic. The Chinese government finally issued the much-anticipated 3G licenses to the mainland’s three telecom operators (see WiC10) early this year.

According to industry experts, the new 3G infrastructure will require at least Rmb200 billion ($29 billion) in investment. And Huawei will most likely get the bulk of the order for the new 3G equipment.

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