Huawei’s exceptional growth over the past years in the telco manufacturing sector has been impressive, with consistent (if slightly slowing) double-digit increases in both revenue and profit, plus a breakthrough in the Forbes top 100 of the 500 largest global companies in 2017.
More importantly, the Chinese smartphone maker just surged past Apple to assume a new top 2 phone sales rank behind market leader Samsung. Estimated second-quarter sales for Huawei exceeded those of Apple by 31%, or roughly 13 million units, while still trailing market leader Samsung.
Despite the sustained growth, Huawei’s sales expansion has been hampered mainly by regulatory roadblocks around perceived national security and privacy concerns in the US, UK, Germany, Australia, and Canada. These setbacks have had the biggest impact on Huawei’s US operations, which have effectively ceased following (a) federal agencies’ and legislators’ efforts to discourage businesses from purchasing their equipment; (b) potential trade tariffs and (c) failures to secure partnerships with any major cell phone carrier.
Huawei’s recent business successes notwithstanding, the hurdles described above point to a broader issue that needs to be top of mind for Huawei: its reputation and trust among stakeholders – including both existing and potential customers. It is well established that companies with stronger reputations garner more stakeholder support, including license to operate. Reputable businesses are more likely to receive the benefit of the doubt in times of crisis or uncertainty and their leaders are more trusted to do the right thing.
As a fairly new player in the global cell phone industry, how does Huawei’s reputation compare to that of its direct competitors, Apple and Samsung? What does the company need to focus on to increase its reputation – and ultimately rise to the top? To answer this question, we used data from the Reputation Institute’s annual Global RepTrak® study, measuring the reputation of the largest and most visible global companies in 15 industrialized countries among the informed general public. The following findings reveal the overall reputation and performance of Huawei, Apple, and Samsung in early 2018.
How reputable is Huawei and how does it compare to key competitors?
From a global perspective, Huawei still significantly trails both Apple and Samsung in 2018. Figure 1 shows each company’s reputation score and its change from 2017 for Huawei’s competitors (Huawei is a new entrant this year).
Figure 1: 2018 Reputation Scores and YOY Change for Competitors
Huawei’s reputation – or emotional connection – is average at 64.4 points, and both Samsung and Apple scores are in the strong range, but with opposite trends over time.
While Huawei’s reputation is average globally, a keen understanding of between-country differences will be key to further expanding the company’s business. Figure 2 illustrates Huawei’s variation in reputation scores across the 15 countries measured in our Global RepTrak study.
Figure 2: Huawei’s Reputation Score by Country
Our findings show that Huawei has a strong reputation in six out of 15 countries – with the highest in Russia (where Huawei opened its first out of country office) and, not surprisingly, China. On the lower end, South Korea presents a formidable challenge – largely driven by a home country advantage for Samsung. Countries that deem Huawei a potential threat to national security include Germany, Australia, the UK, the US, and Canada. The latter two require more reputational-building efforts from a general public perspective as Huawei’s scores are barely average. In short, a country-specific, targeted reputation-building and management strategy will go a long way in Huawei’s quest for market leadership.
What drives reputation in the technology industry and how does Huawei fare?
Our RepTrak model allows us to evaluate a company’s perceived performance on seven dimensions of reputation as well as each dimension’s relative importance in driving reputation within a given industry. As shown on the right-hand side of Figure 3, the Tech industry’s reputation is predominantly driven by performance in Products and Services, followed by Governance (transparency, ethics, and fairness), and Citizenship (societal/environmental contributions). On the positive side, Huawei gets a strong rating on its Products and Services – but severely underperforms son the remaining two drivers of reputation, with weak to low-average scores.
Figure 3: Huawei Reputation Dimension Scores and Weights for the Tech Industry
Table 1 illustrates how Huawei’s performance compares to both Samsung and Apple across dimensions of reputation and why the company currently trails both competitors from a reputation perspective. Samsung’s overall reputation lead is driven by higher performance assessments on all the three key dimensions of Products/Services, Governance, and Citizenship while Apple gets the highest scores on (financial) Performance and Innovation. Huawei consistently receives the lowest ratings but stays within striking distance of Apple from a Products/Services and Governance perspective. Additional analyses of the attributes underlying reputation dimensions reveal that Huawei’s best score is related to its value proposition – on par with that of Samsung and far outpacing Apple.
Table 1: Huawei Reputation Dimension Scores vs. Apple and Samsung
Part of Huawei’s challenge – and mixed performance ratings – is that even respondents who are sufficiently familiar with the company still lack sufficient/compelling information around what the company does – especially when it comes to corporate social responsibility (Workplace, Governance, and Citizenship). Table 2 shows the percent of respondents who are considered “fence-sitters” by reputation dimensions – those who are either not sure, or ambivalent about Huawei’s, Apple’s, and Samsung’s performance by reputation dimension. It is clear that Huawei has by far the highest percentage of respondents who – for better for worse – need to be converted to supporters of the company. In sum, Huawei will have to improve on all dimensions of reputation – and especially on Governance and Citizenship – along with creating more familiarity around these efforts to gain a reputational advantage over its competitors.
Table 2: Percentage of Fence-Sitters: Huawei vs. Apple and Samsung
Huawei has a data security/privacy perception challenge
Huawei’s perceived lack of addressing concerns over data security and privacy is clearly top of mind for regulators and legislators in multiple countries – and has been used as the main reason to prevent the company broader access to local markets. Does the general public share similar concerns? Figure 4 shows how the general informed public perceives Huawei, Samsung, and Apple when it comes to data privacy and security practices.
Figure 4: Public Perception of “Has Strong Data Privacy and Security Practices” by Company
What our findings show is that Apple is perceived to have the strongest safeguards in play, followed by Samsung, and finally Huawei. Here again, it is notable that the percentage of respondents who are “not sure” about Huawei’s data security and privacy practices is significantly higher for the Chinese smartphone maker. Clearly, Huawei has to address concerns across multiple stakeholders as part of a broader effort to improve perceptions around its Governance performance.
Reputation intelligence builds leaders in cell phone industry
Huawei has undeniably taken a big step in overtaking Apple in sales and is eyeing first place by late 2019 – with product value being a key factor in driving its success globally. But Product and Financial success is only part of the equation of what will enable Huawei to reach its full potential in the cell phone and telecommunications space. A major reason why Huawei has struggled to gain a foothold in several countries is due to a lack of trust that regulators and legislators have in the company – especially from a Governance perspective. The latter has also translated into how existing and prospective consumers view Huawei – ultimately putting the latter at a reputation disadvantage vs. its main competitors. How can Huawei take its business to the next level and maximize its chances to become the next cell phone king? Our findings provide clear strategic insights into how reputation intelligence can benefit Huawei – and companies at large:
Know your reputation and levels of support among key stakeholders – and, if yours is a global company, how the latter varies by country. A keen understanding of your reputation – derived support – among different stakeholder groups (customers, regulators, investors) will help you assess your capital of goodwill and develop targeted reputation-building strategies. Huawei’s wide range of reputation scores across existing and potential markets keenly illustrates the need for a segmented approach to reputation measurement and management.
Understand what drives your reputation. Performance in different key areas of your business (Workplace, Governance, Products/Services) may carry a different weight in building your reputation capital – and vary by industry and country. Being able to focus on the right content is the most efficient way to build your reputation. Clearly, all three players, particularly Huawei, struggle the most in two out of three key reputation dimensions: Citizenship and Governance. Addressing perceived shortcomings and taking on a leadership role in these two areas will be essential in improving business performance in the cell phone industry.
Communication is key. Achievements in key areas – such as Corporate Social Responsibility (CSR) – need to be actively socialized. Huawei is actively involved in CSR-specific initiatives – but lacks the recognition for its efforts among the general informed public. Leveraging its CEO Ren Shengfei and a multi-channel approach, combined with genuine, transparent and personally relevant communication will help align Huawei’sperception with reality among often-cited communication overload and ultimately help Huawei build its reputation.
Can anything prevent Huawei’s ascent to #1? The way in which the company builds and manages its reputation may well be the difference in a world where trust – or the lack thereof – can be the ultimate deciding factor in who rises to and stays at the top.
Sven Klingemann, Ph.D.
Global Research Manager