Huawei PESTEL Analysis Case Solution

1.Political

1.1.Government stability

Though the US has enjoyed peaceful political stability in the past, there have been turbulences in the recent times which indicate the region to be experiencing deteriorating political stability and deadlock – especially under Donald trump’s presidency. The country stands as the fourth most worsened country. With its fragile relation with china, Huawei should be wary and careful of the laws and regulations pertaining to operations and expansion in the US. At the same time, it should also proactive in determining the impact of the relation between the US and China – which could directly influence its business operations (The Global Economy, 2019).

1.2.Tax policy

The nominal federal corporate tax rate in the United States of America is a flat 21%. America is known to have one of the highest corporate tax rates in the world – however, the recent 21% tax rate is a reduced figure from the previous tax rate of 355. As a result of this change, Huawei must consider whether the stripping of prior earning as well as the transfer pricing strategies should be re-evaluated based on this change (Trading Economics, 2019).

1.3.Import restrictions

Though the US allows the import of goods, it is a tedious process which is heavily monitored and regulated with the needs of complete and proper registrations. Huawei must consider the costs of import – and should then decide whether it would be strategically suitable to import whole devices, or whether the company should import parts to the USA, and develop an assembling process in the region (USA GOV, 2019).

1.4.Trade blocks

Huawei is a Chinese origin company. It should look for any trade relations that America has with China, or any trade treaty – which could make its operations, sales, and distribution in china easy. However, the company should also keep in mind that any strained relation between the two countries will adversely impact the company and its sales. as well as create hurdles in its operations in America (Ezrati & Beston, 2019).

2.Economic

2.1.Inflation rate

The inflation rate for the USA, as of June 2019, is 1.8%. This was in line with market expectations and encouraged because of deflation of energy prices as well as because of a boost in the food prices. The inflation rate for the USA, while moderate, reflects on an increase in the food prices mostly, as well as other goods. As such, Huawei should observe consumer confidence and purchasing power before introducing new products in the market – as well as for costing and marketing purposes (Amadeo, 2019).

2.2.Interest rate

The interest rate in the USA is 2.50%. Amidst slow economic growth, the federal reserves of the state also do not plan on raising the interest rate further. This is because a higher interest rate will slow down consumer activity and lower their purchasing power – and will thereby risk a recession for the country. By maintaining the interest rate at 2.5%, the state hopes to keep the consumers engaged. Huawei can plan its expenditures accordingly as well as develop forecasts for sales and marketing using the interest rate and other economic indicators (Amadeo, 2019).

2.3.Disposable income

 The average household net adjusted disposable income per capita is USD 45 284 a year – which reflects on a high living standard and a quality lifestyle for most Americans. The high disposable income also highlights the ability of the consumers to purchase not only the necessities but also luxuries. Huawei as an ICT company, therefore, has a high probability of attracting consumers towards its products based on the features and benefits that the company may offer – and if they justify the price and are priced at competitive market rates (Amadeo, 2019).

2.4.Unemployment trends

 America has a low unemployment rate of 3.7%. This highlights that a large part of the population is engaged as labour, and is working. This also means that while this portion of the population is paid and has varying amounts of disposable income, they also have needs to stay connected and to communicate. Huawei, therefore, has high potential in the American market – where people not only have the purchasing power for its products but also display genuine needs for it (Amadeo, 2019).

3.Social

3.1.Demographic

The USA is the third-largest country of the world in terms of population. The country is 75% white in terms of population constitutes. African American constitute 12% of the total population, while Asians form 3.6% of the total population. The country has a large number of young adults – the largest population group 30.2% is of 25-45-year-olds. This highlights that USA has a large portion of working adults. For Huawei, this means not only higher sales but also access to qualified and skilled labour for its offshore operations (World Population Review, 2019). 

3.2.Education

70% of the population has at least a college degree, with high school graduation rate of 85% in America. This reflects on the fact that the country focused on education, and is adding to the skilled workforce by giving them basic literacy skills. For Huawei, this again translates into not only an educated and a more aware consumer base, which can be reached via multiple communication means but also a more skilled and empowered workforce (Harvard, 2019).

3.3.Attitudes towards green product consumption

Consumers in America are more aware of sustainability and its importance. They prefer products and purchases that are ecological, and environmentally sustainable in use as well as in disposal. Consumers have also become more reciprocate of green marketing, and the more sophisticated consumption patterns which work towards environmental reservation. Huawei can use these channels for marketing its products, and at the same time, ensure that it's business operations and processes are In line with sustainability to avoid any bad media scandal (Huawei, 2019c).

3.4.Attitude towards imported goods and services

 The American population comprises of multiples races and ethnicities, living in the same country and working together. As such, the population strives towards a better lifestyle and is open towards the consumption of imported products – directly as well as indirectly. The population is also inquisitive and will be excited to purchase foreign products and services to satisfy curiosity (Kumar, Teichman, & Timpernagel, 2012). Huawei can use this to its advantage for selling its ICT products to the population which will not discriminate against it for its origin. Instead, like other products and services, Huawei will be judged and purchased only for the features and merits it offers.