Comparative Brand Analysis: Cisco & Huawei
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Comparative Brand Analysis: Cisco & Huawei

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Comparative study and analysis of two internationally competing brands: Cisco & Huawei, including examinations of brand creation, positioning, building, measurements, branding strategies, brand ...

Comparative study and analysis of two internationally competing brands: Cisco & Huawei, including examinations of brand creation, positioning, building, measurements, branding strategies, brand architecture and hierarchy, extending, sustaining and expanding strategies for the brand. I also conducted SWOT analysis, discussion of overall brand competitiveness and strategy recommendations.

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Comparative Brand Analysis: Cisco & Huawei Comparative Brand Analysis: Cisco & Huawei Document Transcript

  • ComparativeBrand AuditCisco Systems, Inc. andHuawei TechnologiesCo. Ltd.Erika L. Friedmeyer
  • Executive Summary Comparative Brand Audit: Cisco and Huawei The following comparative brand audit studies Cisco Systems, Inc. and Huawei Technologies Co.Ltd.’s respective brands, Cisco and Huawei. The two brands, Cisco from San Francisco, Huawei fromShenzhen, compete in the US, China and around the world as leading providers of informationtechnology solutions, including wireless networking, security systems and telecommunicationtechnologies. Both brands are known for innovative technology solutions, while Huawei is also known formobile devices and Cisco also for services and program certifications. Cisco has established a strongcustomer loyalty base, while Huawei is developing this internationally. While Cisco provides a moreservice-oriented brand, supported by its brand mantra, “built for the human network,” Huawei offers abroader range of competitively priced products, while Cisco is only now moving out of a premium pricingstrategy. Cisco boasts a descriptive, meaningful logo, symbolizing the brand’s city of originand industry(Golden Gate Bridge and bandwidth bars). Huawei also adapted its logo over time, but lacks descriptorsor meaningfulness. Both firms adapt with changing technology, investing heavily in R&D, with strongtransferability due to the nature of the product, shown by the brands’ presence in over 100 countries. Both firms employing pull strategies, Huawei has established itself in part because of itscompetitive pricing strategy, while employed a premium pricing strategy until the past few years, inwhich it is attempting to adopt a competitive pricing strategy. Cisco has maintained its association withSan Francisco and Huawei with China and both establishing brand alliances through joint ventures andduel-branded products, such as Cisco’s Intel-powered Unified Computing System. Using the freeassociation method, brand asset valuator and the income approach, the brands are measured andevaluated. By examining the brand value stages and brand equity management, Cisco is stronger thanHuawei on effectively all counts. Next examining branding strategies, Huawei and Cisco’s brand architecture and hierarchy areeffectively identical, with the excepting of Huawei’s mobile devices product line. Examining the brands’extending, sustaining and expanding strategies, both Cisco and Huawei employ similar strategies,advancing into new technologies as they develop so as not to be left behind by the competition,expanding into worldwide markets through both acquisitions and geo-expansion. Despite Huawei’spolitical problems which have hindered its growth, it has still managed to grow in international markets. Finally, I offer recommendations that Huawei strive towards transparency and Cisco move out ofself-competition with its subsidiary, Linksys, and embrace a competitive pricing strategy.
  • Comparative Brand Audit: Cisco Systems, Inc. and Huawei Technologies Co. Ltd. Cisco Systems, Inc. and Huawei Technologies Co. Ltd., are competitors in the global informationtechnology market. Because of their frequent interactions across multiple markets, similar age, focus andgoals, they are interesting brands to compare and contrast. This audit will include the following contents:brand background, brand creation and position, including customer-based brand equity and competitiveframe of reference, brand building, including brand elements and tactical contributions, marketingstrategies and secondary brand associations, brand measurement using the free association method,brand asset valuator and the income approach, brand value stages, branding strategies, including brandarchitecture and hierarchy, extending, sustaining and expanding strategies, and conclusions andrecommendations for future branding success.Article I. Background Information Cisco, founded in 1984, is just a few years younger than its Chinese competitor, Huawei. AsNASDAQ traded company with 63,870 worldwide employees, Cisco is a ground-breaking and innovativefirm, establishing itself as a worldwide leader in networking with the invention of the multi-protocolrouter.1 Cisco’s market share leadership in each of its product markets range from 23.3% in homenetwork (lagging behind Linksys’ approximate 50%) to 69.6% in switching, leading the competition in sixof nine markets.2 Cisco also witnesses double digit growth across all geographic markets, including 11%growth in Asia with second quarter revenues exceeding $1.7b in 2012. With over 475 offices in over 165countries, Cisco entered China in 1994, just ten years after its founding, employing 3,400 people in Chinaas of 2010, establishing branch offices and a large R&D center in Shanghai. Cisco has also invested infostering innovation in the local market, including building 300 Cisco Networking Academies in highervocational institutes to build talent.3 Huawei was founded in Shenzhen in 1987, employing nearly twice as many employees as Ciscoworldwide.4 For its first twelve years, Huawei expanded domestically and then expanded internationally,1 Cisco Systems, Inc. (2012). Cisco overview. Retrieved from http://newsroom.cisco.com/overview2 Cisco Systems, Inc. (2012). Corporate overview: Q2FY12. Retrieved from http://newsroom.cisco.com/documents/10157/0/Corporate+Overview+-+Q2FY12.pdf3 Cisco Systems, Inc. (2012). Cisco China Backgrounder. Retrieved from http://www.cisco.com/web/CN/expo/en/pdf/cisco_china_backgrounder.pdf4 Huawei Technologies Co. Ltd. (2012). Milestones. Retrieved fromhttp://www.huawei.com/en/about- huawei/corporate-info/milestone/index.htm
  • establishing R&D facilities, into India in 1999 and then Sweden the following year. In 2001, Huaweiestablished Huawei North America in Dallas, Texas, with international market sales reaching $552m in2002. By 2005, international contract orders exceeded domestic sales and, by 2007, Huawei hadestablished joint ventures with Symantec and Global Marine. As of 2008, Huawei ranks third inworldwide market share in mobile network equipment and first in mobile broadband devices and in2010, Huawei was awarded the"2010 Corporate Use of Innovation Award" by The Economist.AlthoughHuawei’s geographic reach is a fair bit smaller than Cisco’s, its products and solutions serve one third ofthe world’s population, reaching just over 100 countries. However, Huawei’s experience in the US hasnot been without many rough patches, including altercations with the US legal system and Congress.With at least four bids to acquire US technology companies and mobile supply contracts, including firmslike 3Leaf, it was rebuffed on national security grounds. Huawei is also under investigation by the StateDepartment for selling equipment that could be used for monitoring mobile phone users in Iran, whichcould be a breach of US sanctions, leading to Huawei’s exclusion from all US government procurement.5Article II. Brand Creation and Positioning Both Cisco and Huawei are monolithic brands, although both maintain a few independent orpartner brands in addition to the corporate, family brand. For more information on the brandrelationship and hierarchy, please see Section 6.02.Section 2.01 Customer-Based Brand Equity Cisco Huawei Global networking and security Leading global ICT solutions Identity systems leader provider based in China6 Advanced hardware and China’s first real global brand, Meaning software in information innovative technologies and technology and networking devices High-quality, innovative, end-to- Innovative and advanced, ease- Response end services of-use Relationship Loyal customer base Engaged customer base Both Cisco and Huawei hold identities as global leaders in information technology, althoughHuawei has a clearer geographic identity, for better or worse, giving it meaning as China’s first real globalbrand, producing advanced and innovative technology and mobile devices, such as smart-phones and5 Potter, B. (2012, March 28). Huawei’s growing us image problem. Retrieved from http://afr.com/p/technology/huawei_growing_us_image_problem_2XddJasU5LkEIs8ZPn7CNP6 Forbes.com Staff. (Producer). (2012). Will huawei be the first global brand from china?.[Web Video]. Retrieved from http://video.forbes.com/fvn/forbes-asia/rare-look-inside-huawei
  • tablets. Cisco’s meaning is much the same, as a firm producing advanced hardware and software ininformation technology, networking and security systems. In response to Cisco, consumers have foundthe brand to be one of high-quality, innovative end-to-end and comprehensive services, while Huawei’sresponse is that of innovative, advance and ease-of-use regarding consumer mobile devices. Cisco has established a loyal customer base, committed to the company’s products and identityover the past 35 years. Huawei, however, has struggled to establish such a clear customer base,especially overseas. Despite these struggles, it has attracted much attention through its competitivepricing, quality equipment and diversity of offerings, giving Huawei a good foundation to build a loyalcustomer base, something it has consistently striven to achieve.Section 2.02 Competitive Frame of Reference Direct Brand Target Segment POPs PODs Competitors Mantra Businesses Huawei, Dell, D- (small and large), Link Corp. Supply More service- middle-class Ericsson, F5 hardware oriented, industry Built for the families, networks, HP, and Cisco and market human professionals, Microsoft, software, development7, network governments Motorola, security home networking and service NETGEAR, systems providers Symantec Businesses (primarily large), Supply young hardware Broader product adults/mobile Ericsson, Lucent, and scope, including Huawei device users, None Cisco software, telecommunications professionals, security and mobile devices governments systems and service providers Cisco and Huawei both target very similar market segments, marketing to businesses (althoughCisco more actively targets small businesses than does Huawei, likely due to America’s abundance ofsmall businesses), professionals, governments (primarily security systems) and communications serviceproviders. The only significant difference is when it comes to private individuals: Cisco targets middle-class families installing wireless networks in their homes for internet and information sharing purposes,7Chambers, J. (2008). Interview by P. Burrows [Personal Interview]. Cisco: the best company for the world. Bloomberg Businessweek, New York City, New York. , Retrieved from http://www.businessweek.com/magazine/content/08_47/b4109068391138.htm
  • while Huawei targets mobile device users, which are disproportionally young adults, particularly thosewith disposable income. Identifying each other as direct competitors, both Cisco and Huawei also directly compete withEricsson. Cisco clearly sees direct competition from other US computer technology producers such asDell and Microsoft, while Huawei does not seem to feel this pressure. Huawei has also removedSymantec from direct competition by teaming up with them for a joint venture: Huawei Symantec. Points of parity between the two brands focus around their products: hardware and software forsecurity and networking systems. Points of difference, however, include Cisco’s commitment to serviceand solution design, providing networking equipment for families in their homes, as well as industry andmarket development in foreign markets, seeking to transform countries that lack the skill sets to makefull use of the internet and information technology, manufacturing a market for its products where onedid not previous exist. Huawei, on the other hand, offers a broader product scope which includestelecommunications and mobile devices, such as smart-phones and tablet PCs, putting Huawei not inyour home, but in your pocket. While Huawei lacks a brand mantra to express the brand’s core values, Cisco uses the brandmantra, “Built for the human network,” highlighting the brand’s commitment to networking not onlyinformation, but also individuals.Article III. Branding BuildingSection 3.01 Brand Elements and Tactical Contributions The memorability of both Cisco and Huawei come from the proliferation of their products,producing brand recognition, while Cisco also adds to its memorability through its memorable andmeaningful logo and name. Huawei’s likeability is drawn from it dedication to innovation andadvancement as well as the ease-of-use of its devices such as smart-phones and tablets. Cisco, on theother hand, draws it from its dedication to customers and the ‘human network.’ Huawei’smeaningfulness is weak, coming only from its Chinese name denoting it as a high-technology firm,whereas Cisco draws it also from its logo, which resembles bandwidth bars and connectivity, andcustomer-oriented brand mantra. Both Huawei and Cisco move with changing technological needs, developing andentering into changing fields, such as Huawei developing cloud technology and consumer devices andCisco moving into virtualization technology. Both have undergone logo adaptation throughout the
  • Brand Elements Cisco Huawei Memorable logo and name, Proliferation of products, brand Memorability proliferation of products recognition ‘Human network’ connotes Likeability customer- and individual-based Innovation and ease-of-use service and products Logo resembles bandwidth bars Chinese name acknowledges high- Meaningfulness (connectivity), innovative and cutting technology and innovation edge, customer-oriented Moves with new technology needs: adapting to cloud and virtualization technology; logo has been adjusted Moves with new technology needs: over the last 35 years, reaching its developing cloud technology and new Adaptability current form in 20068. Logo elements devices; logo has undergone and colors have remained consistent, renovation but has a few different color options, depending on the background Detailed licensing process, maintains Name, logo, coding patent and Protectability hundreds of patents9 trademark protected Global services, deployed in over 165 Global services, deployed in over 100 Transferability countries countries lifespan of the brand, although Cisco’s has been more dramatic than Huawei’s, despite neither being particularly drastic.Cisco added its name to the logo and made the bars more reminiscent of connectivity bars than simply the Golden Gate Bridge and updated the font choice. Huawei adapted the shape of its logo, but the only significant change was to remove the Chinese characters and replace them with pinyin, making the brand more accessible to non-Chinese-speaking consumers. Protectability is a huge concern for both Cisco and Huawei, highlighted by the8Logo Addiction. (2010, November 20). Retrieved from http://logoaddiction.com/?p=559Cisco Systems, Inc. (2012). Corporate overview: Q2FY12. Retrieved from http://newsroom.cisco.com/documents/10157/0/Corporate+Overview+-+Q2FY12.pdf
  • copyright infringement lawsuit Cisco brought against Huawei in 2003 (for further discussion, see Section5.02), both of whom maintain countless patents and trademarks to protect their brand identity andtechnology coding. Transferability of the Huawei and Cisco brands is shown by their global presence, theneed for networking and security technology seen across national borders, bound not by language,culture or geographic needs. Huawei has expanded into over 100 countries while Cisco has entered over165. Tactics Cisco Huawei “思科” is meaningful and descriptive of Effectively meaningless in Name company’s primary purpose and identity English, “华为” not that while still maintaining semblance to English meaningful in Chinese, either name, ‘Cisco’ comes from ‘San Francisco’ Very informative corporate website, CSR Informative corporate website website, YouTube channel for with unique websites for marketing/news/company information, URLs different regions in local social media presence (Twitter, FB), unique language, not as easy to navigate websites for different regions in local or as informative as Cisco’s language, not just translated Simple, adaptable to different needs, although not translated across different geographical markets, descriptive Simple and adaptable, though Logo (reminiscent of networking, bandwidth bars not particularly meaningful as well as the Golden Gate Bridge in San Francisco) Character None None Slogan “Built for the human network” None Jingle None None Clean, modern, streamlined, similar to Clean, modern, streamlined, Packaging Huawei’s similar to Cisco’s Huawei and Cisco’s tactical contributions are also quite similar, with the exception of Huawei’soverarching lack of meaning in its brand identity. Cisco’s name is layered with meaning, ‘Cisco’ being aderivation of San Francisco, the city in which the brand was created which carries an identity oftechnological innovation. Cisco’s Chinese name, “思科,” is not only phonetically similar to the brand’sEnglish name, but is also meaningful and descriptive of the company’s primary purpose, roughlytranslating to ‘thinking science.’ Huawei’s name, however, lacks significant meaning in Chinese or English.Without an English name, ‘Huawei’ acts as nothing more than an indicator that the brand is a Chinesebrand, where “华为” can be translated as ‘magnificent doing’ or ‘China does,’ neither of which isparticularly meaningful or descriptive.
  • The online presence of both Cisco and Huawei is substantial, maintaining informative corporatewebsites, providing information on brand history, financial information, product information andcompany news. Both are wise, hosting unique websites for different regions in the local language withinformation and news relevant to the brand’s presence in that region, not simply a translated version ofthe corporate website. Cisco, in particular, offers a wealth of information on its website, including uniquewebsites for corporate social responsibility and other such subjects, and a substantial social mediapresence on Facebook, Twitter and YouTube, where it broadcasts videos on industry and company news,marketing and executive interviews. While Huawei and Cisco both have simple and adaptable logos (Cisco, for example, converts thelogo to all white when placed on a dark background), Cisco’s is substantially more meaningful, asdiscussed above, reflecting the brand’s city of origin and primary function: connectivity. Neither Cisconor Huawei adapt their logos across different geographic or linguistic markets. Neither Huawei nor Cisco has a character or jingle, perhaps reflecting their minimal publicmarketing and desire to maintain a very professional appearance. Cisco does, however, maintain ‘builtfor the human network’ as both a brand mantra and slogan, as discussed in Section 3.02. Both firms’packaging is remarkably similar, primarily white with clean, modern and streamlined designs discreetlyfeaturing the brand logo, portraying a modern and stylish identity for the products.Section 3.02 Marketing strategies Both Huawei and Cisco use a pull strategy, with minimal active advertising and allowing theproducts to sell themselves. Products are sold online or at certified resellers. Recognizing the emergingrole of social networking over traditional advertising, Cisco focuses on creating buzz marketing throughsocial media, maintaining Facebook, Twitter and YouTube accounts.For both firms, formal advertising isfocused toward corporate customers, not private individuals. As for pricing strategies, Cisco has been moving more toward a competitive pricing strategyfollowing the 2008 recession, after which the brand struggled to recover with its premium pricingstrategy. Cisco strives to produce high quality-price ratio products, although given the changing economyand market, it is considering opting for lower price-point equipment.10 Huawei, on the other hand, has10 Investopedia. (2011). Cisco looks to get competitive. Retrieved fromhttp://www.investopedia.com/stock- analysis/2011/Cisco-Looks-To-Get-Competitive-CSCO-NTGR-BRCD-JNPR-HPQ0614.aspx#axzz1tjWwu6Gi
  • maintained a competitive pricing strategy, facilitated, in part, by low Chinese labor and R&D costs andgovernment subsidies.11Section 3.03 Secondary Branding Neither Cisco nor Huawei have chosen to engage in substantial secondary branding, perhapsattempting to maintain an undiluted brand image. Despite this, both have other brand allianceassociations as well as place associations and sport associations. Cisco’s current brand alliance is with Intel to create the Cisco Unified Computing System, a serversystem powered by the Intel Xeon processor, a data center solution for large enterprises12. Interestingly,Huawei has also teamed up with Intel this year to create an “interoperability test lab for theimplementation of long term evolution time-division duplexing (LTE TDD) networks”13 in China. Thisalliance benefits Huawei through marketing opportunities for its networking equipment, whereas Intelwill use it to grow its presence in China. Huawei has also formed brand alliances with Symantec andGlobal Marine Systems in joint ventures, creating Huawei Symantec and Huawei Marine Networks,respectively. Drawing its name from its city of origin, San Francisco, Cisco maintains its association with thecity as well as the United States as a whole. Cisco has also developed a ‘smart city project’ in Songdo,South Korea14, a city built from scratch from advanced technology encompassing green energy solutions,technological lifestyle and leisure improvements, transportation solutions, unparalleled lifestyleexperiences and other highly advanced and innovative solutions that could change the face of cities inthe future. Cisco has invested millions of dollars into the project. Huawei has not actively associateditself with particular geographic locations, but continues its association with China as a Chinese brand. Huawei associated itself with Atlético de Madrid15 football club to celebrate ten years in Spain,sponsoring the club for its April 11th, 2012 match against Real Madrid in attempts to connect itself withthe club’s history of achievement and to connect with Huawei consumers in Western Europe. Cisco has11 Sun, L. (2011, November 23). What do we really know about Huawei?. Retrieved from http://www.telecomstechnews.com/news/2011/nov/23/what-do-we-know-about-huawei/12 Cisco Systems, Inc. (2012). Cisco unified computing system. Retrieved from http://www.cisco.com/web/solutions/data_center/ucs_servers.html?CAMPAIGN=ucs_servers&COUNTRY _SITE=us&POSITION=sl&REFERRING_SITE=Cisco%2Ecom+homepage&CREATIVE=homepage+spotlight13 Latif, L. (2012, April 30). Intel teams up with Huawei to test LTE TDD in China. The Inquirer, Retrieved from http://www.theinquirer.net/inquirer/news/2171480/intel-teams-hauwei-test-lte-tdd-china14 Gale International, LLC. (2012). Songdo IBD. Retrieved fromhttp://www.songdo.com/15 Huawei Technologies Co. Ltd. (2012, April 09). Football sponsorship celebrates Huawei’s 10 years in Spain and the growth of its global consumer brand. Retrieved from http://www.huaweidevice.com/worldwide/newsIndex.do?method=view&newsId=182&directoryId=5024 &pageType=news
  • made no such formal associations with people or clubs, but has used the National Basketball Association(USA)’s experiences with Cisco technology to show the versatility and speed of its video contentnetwork.16Article IV. Brand MeasurementsSection 4.01 Brand Value Chain Value Stages Cisco Huawei17Marketing Investment Moderate Low, but growing (R&D investment) Customer Mindset Strong Struggling (security suspicion)Market Performance Very strong Weak, but determined Shareholder Value Healthy, strong and growing Private firm (a) Marketing Investment Both Cisco and Huawei have growing marketing investment, both in their home countries and abroad.Because of the nature of their products and marketing strategies, product marketing is minimal, butfocuses instead on providing quality products through R&D investment and consistent, helpful servicesand communications. At present, Cisco’s combination of strong R&D investment and communicationservices somewhat outweigh Huawei’s but both are growing. (b) Customer Mindset Cisco, both in the US and abroad, exhibits strong customer awareness, attitudes and attachment.Despite concerns about reputation damage from Cisco’s lawsuit against Huawei (see Section 5.02),Cisco’s continued strong performance and growing revenues in China as East Asia show a solid customermindset. Huawei, on the other hand, has starkly different performance in China compared to the US.While US customers have thorough awareness of Huawei, attitudes and attachment are both quitenegative due to security and intellectual property concerns (Section 5.02), dramatically damagingcustomer mindset. However, in China, Huawei is thought of quite highly and widely respected.16 Cisco Systems, Inc. (2012). Built for video management. Retrieved from http://gobuild.cisco.com/view/video_management?CAMPAIGN=hn+built+for&COUNTRY_SITE=us&POSITI ON=sl&REFERRING_SITE=Cisco%2Ecom+Home+Page+Spotlight&CREATIVE=spotlight+march+nba+video#/v iew/video_management17 Lev-Ram, M. (2012,February 23). Huawei is here to stay. CNN Money, Retrieved from http://tech.fortune.cnn.com/2012/02/23/huawei-is-here-to-stay/
  • (c) Market Performance Both Cisco and Huawei have very strong market performance worldwide, with market sharesexceeding 60 or 70% in some markets, both domestically and abroad. However, Huawei’s marketperformance has struggled in the United States and some global markets due to failed acquisitions andsecurity concerns. During the global economic slowdown, Huawei witnessed decreased revenues, butthese struggles seem to have somewhat recovered along with the global economy. However, despitethese challenges, Huawei is persistent in finding success in the US.18 (d) Shareholder Value Cisco’s shareholder equity is very high, measured at $47,226m and growing, with a healthy P/E ratioof approximately 15.5. Huawei’s shareholder equity, however, is very difficult to measure as it is aprivate, employee-owned company. Based on its performance across markets and particularly in China, itis safe to assume shareholder value is similar to Cisco’s.Section 4.02 Brand Equity Management Systems Both Cisco and Huawei have a solid view of brand equity, thoroughly detailed in both of theircorporate websites and annual reports, as well as the scope of key brands and products. Both Cisco andHuawei have brand measurement systems and management programs, Cisco’s are much moredeveloped or, at least, public. For over ten years, Cisco annually conducts customer satisfaction surveys,measured on a scale of 1 to 5, rising from 4.06 in 1997 to level out around 4.45 since 2008. Huawei,conversely, touts proactive consumer sensitivity and adaptation, but does not state its methods of doingso.19 Regarding treatment of the brand, Huawei, particularly, has run into some difficulties, whichhave come to define its experience in the US. As previously discussed, Huawei has struggled to separateitself from its founder’s ties to the Chinese military and People’s Liberation Army, which has elicitednational security concerns. Sale of equipment which could be used for monitoring mobile phone users inIran is currently under investigation by the State Department as a breach of US sanctions, potentiallyleading to Huawei’s exclusion from all US government procurement.20 They have also experienced issues18 Lev-Ram, M. (2012,February 23). Huawei is here to stay. CNN Money, Retrieved from http://tech.fortune.cnn.com/2012/02/23/huawei-is-here-to-stay/19 Huawei Technologies Co. Ltd. (2012). Quality &Customer Satisfaction. Retrieved from http://www.huawei.com/us/about-huawei/corporate-info/quality-policy/index.htm20 Potter, B. (2012, March 28). Huawei’s growing us image problem. Retrieved from http://afr.com/p/technology/huawei_growing_us_image_problem_2XddJasU5LkEIs8ZPn7CNP
  • in India with Taliban allegations21 and security concerns in Australia.22 Despite no evidence beinguncovered, Huawei has suffered significant, potentially irreparable damage to its image. Huawei has even suffered poor brand treatment at hand of Cisco itself. In February of 2003,Cisco sued Huawei for patent infringement and illegally copying router and switch source coding. A yearand a half later, Cisco dropped the suit after it became clear the “problem stemmed from some roguedevelopers at Huawei, not a company-wide mandate to rip off Ciscos intellectual property” and theoffending coding was removed.23 Interestingly, both firms saw this as a victory, Cisco viewing it as a“victory for the protection of intellectual property rights” and Huawei pleased that the case wasdismissed “with prejudice,” keeping Cisco from bringing another lawsuit with the same or similar claimsagainst Huawei. Unfortunately, both firms suffered damage to their images in the global market, as Ciscowas portrayed as “a bullying multi-national corporation trying to crush a local competitor” in the Chinesemedia.24 Cisco’s Chinese executives expressed regret, believing the benefits achieved through the lawsuitwas outweighed by the damage to Cisco’s reputation in China. Brand Equity Charter Cisco Huawei Firm view of brand equity ✔ ✔ Scope of key brands ✔ ✔ Actual & desired equity for the brand ✔ ✔ Brand measurement system ✔25 ✔ Brand management programs ✔ ✔ Poor treatment of the brand ✔ ✔ Brand Equity Report Annual customer satisfaction survey which is reported annually, tied to bonus plan, Cisco Cisco recognized as #13 Brand in the 2011 Interbrand Best Global Brand study (third-party equity) Huawei ???21 Satyamurty, K. (2001, December 11). Chinese firms dealings: police kept in the dark about probe The Hindu, Retrieved from http://www.hindu.com/2001/12/12/stories/2001121200721100.htm22 Winning, D. (2012, March 26). Canberra talks integrity after reportedly banning Huawei from NBN. Wall Street Journal, Retrieved from http://blogs.wsj.com/dealjournalaustralia/2012/03/26/canberra-talks-integrity- after-reportedly-banning-huawei-from-nbn/23 Harvey,P. (2004, July 28). Cisco drops Huawei Suit. Light Reading, Retrieved from http://www.lightreading.com/document.asp?doc_id=5693924 Wikileaks. (2010, February 19). Cablegate: 2010 Shanghai Ipr roundtable –Candid commentary. Retrieved from http://www.scoop.co.nz/stories/WL1002/S01773.htm25 Cisco Systems, Inc. (2012). Corporate overview: Q2FY12. Retrieved from http://newsroom.cisco.com/documents/10157/0/Corporate+Overview+-+Q2FY12.pdf
  • Brand Equity Responsibility Blair Christie, Senior VP and CMO, Government Affairs26 (also President for APJC, Cisco Exec VP of Worldwide Operations) Huawei ??? Cisco maintains an annual brand equity report which includes the findings from the annualcustomer satisfaction survey and third-party equity assessments and studies, such as the 2011Interbrand Best Global Brand study, which named Cisco the #13 Brand. These findings are reported toBlair Christie, the Senior Vice President and Chief Marketing Officer, Government Affairs as well as thePresident for the Asia Pacific-Japan-China region and Executive Vice President of Worldwide Operations.The findings of this report are tied in to employees’ bonus plans, building personal investment in brandequity. It is not apparent that Huawei prepares a formal brand equity report or maintains an advisoryposition for brand equity responsibility.Section 4.03 Measurement techniques In order to measure Huawei and Cisco’s brand equity, I have chosen to employ the FreeAssociation technique to identify consumers’ core images and associations with Cisco and Huawei. Ciscoitself uses this approach in customer research and brand equity measurement. To provide a big-pictureview for future development, I have also chosen to use the Brand Asset Valuator, plotting both US andChina market positions. Because Huawei is an entirely employee-owned private company, the marketapproach, which uses market capitalization to find brand value, is not very useful. Instead, I’ve chosen to examine the brand value by using the income approach, which views brand equity as the discounted future cash flow from the brand’s future earnings stream. (a) Free Association 27 Commonly associated with Cisco are words like ‘market26 Cisco Systems, Inc. (2012). Blair Christie. Retrieved from http://newsroom.cisco.com/blair- christie?articleId=3326927 Cisco Systems, Inc. (2012). Corporate overview: Q2FY12. Retrieved from http://newsroom.cisco.com/documents/10157/0/Corporate+Overview+-+Q2FY12.pdf
  • transitions’ and ‘innovation,’ identifying Cisco’s commitment to staying more than just up to date, but ahead of market changes in order to provide the best products and services available. Other associations include experiential associations like ‘open communication’ and ‘giving back’, symbolic and brand personality associations such as ‘fun,’ ‘empowerment’ and ‘inclusion’. Associated with National Huawei are similar brand Improvement Routers Security personality characteristics, Risk like ‘innovative’ and ‘improvement’. However, commonly associated with R&D Innovative Huawei are also characteristics with negative connotations, such as ‘national security Poor Mobile corporate risk’ and ‘poor corporateresponsibility Phones, Devices responsibility,’ reflecting Networking/ Chinese Huawei’s struggle to build Infrastructure brand equity in the US market due to politicaland intellectual property misadventures. Still, Huawei elicits product-related associations such as‘routers,’ ‘mobile phones, devices’and ‘networking/infrastructure.’ (b) Brand Asset Valuator (BAV) Displayed to the right is theBrand Asset Valuator, showing thebrand value of Cisco and Huaweiboth domestically and abroad.Cisco in the US is placed as apower leader, with high brandstrength and stature. Cisco in
  • China (思科), however, is transitioning from unrealized potential into a leader position, growing brandstature and strength. Huawei in China (华为技术) is moving into a declining leader position, despitehaving strong brand stature in China due to its increased brand salience and loyalty within China.However, Huawei in America is an eroded brand whose brand stature includes unbalanced brandknowledge and esteem, due to its political and legal troubles. Its strength has also suffered due to itsstruggles to acquire local brands for brand building. (c) Income Approach To examine the brand value both quantitatively and also as function of future, expected income, Ihave used the income approach below, finding Cisco’s brand value28at $17.5b and Huawei’s29at $4.98b. These income values reflect earnings from all markets worldwide, exposing Cisco’s internationalbrand value to be over 3.5 times greater than Huawei’s. Also, knowing that Huawei’s internationalearnings have exceeded domestic earnings since 2005, this also reflects that Huawei is losing ground inits domestic market, perhaps reflecting China’s lower demand for high-technology products.Article V. Branding StrategiesSection 5.01 Brand Architecture Data Center Small Networks Collaboration and Home Services Business Virtualization Routers WebEx Routers Servers Switches TelePresence ūmitelepresence Switches Storage Security and Video and Home Technical Wireless Networking Surveillance Cisco Content Delivery Networking Advanced Security Data Center Voice and Voice and Cable TV Set- Developer Software Switches Conferencing Unified Tops Interfaces NX-OS Software Wireless Communications Network28 Cisco 2011 Annual Report, July 30,2011 income values29 Huawei 2011 Annual Report, 2011 values, converted into US dollars using December 31, 2011 closing rates
  • Storage Radio Fixed Core Transport Data Energy & Application & OSS Devices Access Access Network Network Communication Infrastructure & Software Network Security NE Routers CloudStor AR Routers Storage FBB Single WDM/OTN Carrier Class FTTx Metro Services Area O&M Mobile Single CORE Hybrid Power DSLAM Platform Network (product Phone BTS Single EPC MSTP Hybrid Power BSS Multi- Ethernet Switches Network series) Mobile Huawei Multi- Service Single SDB MSTP Network Security Mini-shelter Consumer Attached MBB Broadband mode SmartCare Microwave EasySite Enterprise Access Multi-Service Storage O&M Home BSC Marine Antenna and RF uniSite Control Gateway Application (product Devices Network ODN PTN Storage series) ATN SNS Switch Storage Above can be seen the brand architecture of both Cisco and Huawei, showing the product lines across the top and the categories within. Due to the nature of the product, it is difficult to compare the product lines and categories of Huawei and Cisco side-by-side, in part because Huawei primarily establishes product lines according to product characteristic and function, while Cisco creates product lines according to the market segment it is designed to serve (eg: Small Business, Home). When looking at these two brands, it can be seen easily that Huawei offers a more diverse and extensive product line offering while Cisco offers more service-based products. Section 5.02 Brand Hierarchy The chart below shows the brand hierarchies of Cisco and Huawei respectively, including selections from their individual brands (Huawei also includes Huawei-Intel and Huawei Marine Systems joint venture, Cisco including its joint venture with EMC) and modifiers (product lines and categories). Both companies sell very few products under brands other than the family brand. Corporate BrandFamily Brand Individual Brands Data Center Modifier Networks & Home Virtualization Enery & Data Center & Networks Infrastructure Storage
  • Section 5.03 Extending Strategies Cisco’s extending strategies center primarily on constantly introducing new products andimprovements on these products. In addition to these category extensions, Cisco also engages insporadic product line extensions when new technologies develop, such as the current product lineextensions into virtualization technology. Huawei has engaged more substantial extending strategies, introducing not only category andproduct line extensions into cloud and mobile device technology, but also brand extensions through itsjoint ventures with Symantec and Global Marine Systems, creating Huawei Symantec and Huawei-Marine Networks brands. Huawei current plans product line extensions into e-education and e-healthcare.Section 5.04 Sustaining Strategies (a) Reinforcement Both Cisco and Huawei’s reinforcement strategies focus around providing consistent and reliableproducts that are perpetually fine-tuned to provide the best possible equipment to consumers. Ciscoalso reinforces the brand through its customer satisfaction and brand equity monitoring, striving toprovide top-notch customer service. (b) Revitalization By updating their logos and packaging, Cisco and Huawei revitalize their brands simply and effectively,primarily relying on new technologies and renovated products to continuously revitalize the brand. (c) Adjustment Cisco, particularly, is constantly assessing customer needs and adjusting products offerings to reflectchanging market demands. Cisco has entered into home networking as part of its migration strategy,following the market demands, while Huawei has chosen to migrate into the handheld mobile devicesmarket. As years pass, both firms retire products or services as they are no longer relevant to currenttechnological needs. Cisco, who also offers certifications for professionals in IT fields, consistently retiresoutdated certifications and training programs.
  • Section 5.05 Expanding Strategies Both Cisco and Huawei practice standardization strategies, adjusting the software and packaginglanguage accordingly. Due to the nature of the product, not much customization is necessary as thedemands for equipment, software and services are effectively identical across geographical markets.Cisco plans to expand into the new markets of IP traffic and handheld devices, stating a need for morerobust architectures, equipment and services in these markets. It has formed alliances throughpartnerships across industries, including Intel, and for go-to-market investment strategies. Cisco hasworldwide geo-extension, including countless acquisitions for market acceleration, expansion and newmarket entry. In March of 2012, Cisco announced its intent to make its most recent acquisition, NDSGroup Ltd., a leading video software and content security solutions provider from London. Thisacquisition will broaden opportunities in the service provider market, expanding reach into emergingmarkets, such as China, India, where NDS has establish customer footprint.30 Huawei, however, has had no such success in its expanding strategies, facing resistance in manyof its geographic expansions in last decade. However, it has successful geo-expansion into over 100countries and greenfield R&D centers around the world, including four in the United States. Despite itsmultiple failed and blocked attempts to acquire US brands, it has successful formed alliances and jointventures, resulting in the multiple brand extensions discussed above.Article VI. Conclusions and RecommendationsSection 6.01 SWOT Analysis Both Cisco and Huawei’s strengths lie in their investments in R&D and patent ownership,growing their innovative and advanced technological products which have earned each of them theirglobal recognition. Their weaknesses, however, are fairly different. Cisco’s weaknesses lie in itsattachment to its premium pricing strategy, which has alienated some consumers, particularly during therecent global recession and recovery. In China, Cisco is also weakened by its appearance as a globaljuggernaut bullying smaller brands, particularly following its lawsuit against Huawei in 2003. Huawei’sweaknesses, however, are in its lack of transparency and image of secrecy, worrying companies andgovernments who might otherwise trust the brand to protect valuable security information. Huawei has30 Cisco Systems, Inc. (2012, March 15). Cisco announces intent to acquire NDS. Retrieved from http://newsroom.cisco.com/press-release-content?type=webcontent&articleId=712002
  • failed to understand the US legal system and market demands, as well as its image as a risk to nationalsecurity,31 which have resulted in its failed acquisitions. Opportunities for both brands involved continued innovation and technology advances. Thecontinued growth and expansion of technology usage and literacy offer both brands unlimited growthopportunities, so long as they stay ahead of the competition through continued improvement. BothCisco and Huawei face threats from competition as research and development take time and, if thecompetition provides solutions first, the brand will struggle to compete. Development in this industry issimply risky as the business relies upon continued growth of the internet and internet-based systems.Merger and acquisitions have no assurance and are inherently risky, particularly in this industry due tothe advanced, high-technology companies with particularly high overhead and sunk costs. Global politicsand exchange rates also pose a threat to international trade as a whole. Huawei, however, also facesthreats from the US government, with the House Intelligence Committee launching informal inquiries inlate 2010 as the campaign against Huawei’s involvement in a $5 billion bid to supply network equipmentto Sprint Nextel was coming to a head, particularly related to Huawei’s ‘reported relationship’ withPeople’s Liberation Army. While investigations turned up no evidence for concern, this is not an isolatedincident and Huawei needs to address the threat of political distrust which extends into the nation atlarge.Section 6.02 Overall Brand Competitiveness Huawei and Cisco are both extremely competitive overall, as demonstrated by their outstandingmarket shares (both exceeding 16%, placing them second and first, respectively) in the global marketand multi-billion dollar revenues. Both face trials and have plenty of room for improvement, which Idiscuss below.Section 6.03 Issues to be Resolved& Strategy Recommendations Huawei’s primary concern is its failure to understand and comply with local legal systems as itenters new geographic areas. Because of the sensitive nature of security and information systems, it isimperative that Huawei recognizes how its actions in one market affect demand in other markets.Huawei’s experience with its sales in Iran impacting its product and acquisition reception in the USrequire them to realize the importance of convincing both the US consumers and government thatHuawei’s interests are not inconsistent with US security, which may include establishing new leadershipwithout connections to the People’s Liberation Army. Huawei must actively and intensively work to31 Goldberg, A. &Galper, J. (2011, March 03). Where Huawei went wrong in America. Wall Street Journal, Retrieved from http://online.wsj.com/article/SB10001424052748703559604576175692598333556.html
  • dispel and correct ‘misinformation and misperceptions’ of intellectual property, security and espionageconcerns. Huawei also needs to consider developing a more formal and consistent measurement andreport of brand equity to help the brand adapt to meet the needs of its customers. Beyond this, it alsoneeds to become more transparent in its R&D and dealings, as its reputation abroad for being secretivewill cost it dearly as this is an industry which handles very sensitive and valuable information thatconsumers are not willing to entrust to companies they do not trust. As for Cisco, its acquisition and endorsed brand, Linksys, competes with the family brand’s fewhome products and is also not commonly identified with its parent company, despite its endorsed brandrelationship. As Cisco’s home products have not received the consumer recognition that Linksys has,Cisco should consider transitioning all its home product line to Linksys and invest in marketing Linksys asa part of Cisco. This could help decrease internal competition and increase Cisco’s brand stature in thehome product market. Huawei needs to take into consideration its behavior and struggles in foreign markets and theirimpact on other markets. Issues in the US have drawn suspicion of Huawei in other markets, such asAustralia. In order to control and minimize losses, Huawei should do one of two things: focus onrepairing damage done in overseas markets, making reparations as the community, culture, governmentand consumers see fit in order to prove itself as a reliable and secure brand before expanding into othercountries and other markets, or cut its losses in these countries and exit the market, investing in otherdeveloping markets in attempts to contain and move past the struggles in the West. Huawei also needs to bolster its domestic market by building up the industry as a whole.Domestic demand needs to grow through technological development in order for Huawei to continuebuilding as a global brand. Huawei should consider domestic investments similar to Cisco’s Songdo,South Korea project (Section 4.03) and may also benefit from Cisco’s investment in NetworkingAcademies to build up the domestic technology industry. Cisco needs to recognize the nature of its competition and embrace a competitive pricingstrategy, producing a competitively priced product line, if nothing else. The longer Cisco maintains apremium pricing strategy, the more customers they will lose to foreign competition, like Huawei, withlower costs of production, in both domestic and international markets.