Analysis of Key Business Fundamentals of Huawei

Analysis of Key Business Fundamentals of Huawei

Finance

2003 2004 Comments

Net Profit Margin

(Profit after tax/Sales) 0.38/3.8= 10% 0.47/5.6 = 8.4% Although the profit margin dropped by a slight 1.6 per cent in 2004, the overall sales increase by nearly US$2 billion.

There were limited financial figures presented in the case to analyze the financial ratios of the company. However, as presented in the case, the company made healthy profits and it appeared that there was ample cashflow. The company received cash injection of US$10 billion from a state owned bank as well as US$160 million in its joint venture with 3Com.

Risk Management

Huawei adopted the Internal Risk Reduction method through diversification. The company produces more than one product/service and seeks opportunities in overseas market.

HRM

One unique characteristic of Huawei is that it has a good human resource management system in place. The company established a recruiting standard that offers their employees a very good pay package, by Chinese standards. An employee's first-year total compensation (inclusive of housing and other benefits) can add up to as much as US$12500, beating the highest pay in the industry with reference to the "2004 Average Annual Wage of Staff and Workers by Sector and Region" report. With such a system, it is no wonder that many hanker for a position in Huawei.

Marketing

Product

Huawei's product offerings include various networking devices such as wireless and fixed-line network. In terms of service offerings, it occupied 25 per cent of the market share in the mobile networks, and supplied 80 per cent of all short messaging services from China Mobile.