Managing Country-Driven Corporate Crisis: Key Insights from US-Huawei Face-Off

Managing Country-Driven Corporate Crisis: Key Insights from US-Huawei Face-Off

As long as legal entities or individuals exists for the purpose of interacting or relating with others in a society, issues are bound to occur before crisis sets in. Many professionals and academic scholars have explained both the issues and crisis using a number of philosophies and approaches. According to PwC, a global management consulting company, crisis occurs due to significant internal and or external factors or escalation of smaller incident(s), which could have enterprise-wide, multi-functional consequences. It also has the propensity of disrupting normal business operations and harm or damage reputation.

In its 2019 global crisis survey, PwC says “nearly 7 in 10 (69%) leaders have experienced at least one corporate crisis in the last 5 years — with the average number of crises experienced being 3. According to the sampled Chief Executive Officers and other C-suite executives in more than 20 countries, ethical misconduct and product integrity were the most disruptive crises experienced in the last few years. In the People’s Republic of China, financial or liquidity, competitive or market place disruption and product failure or product liability were the top most disruptive crises experienced.

This piece intends to explicate these results in line with the meaning of crisis, according to the PwC and how we see it based on our experiences within the context of the United States of America and Huawei’s face-off. Huawei is a global telecom supplier and manufacturer of phones.

Since 2012, the company has not had it good with the US. Various sources reveal manifestation and downplaying of different issues from 2012 to 2019.  Sources [see for example] indicate that the US government felt that the Chinese company is having “coziness with the Chinese government and fears that its equipment could be used to spy on other countries and companies. It’s the reason why the US banned companies from using Huawei networking equipment in 2012 and why the company was added to the US Department of Commerce’s Bureau of Industry and Security Entity List in May 2019, following an executive order from President Donald Trump effectively banning Huawei from US communications networks.”

Based on the ban and strategic opportunities the company will lose in the country, the year 2020 has been predicted to be “difficult” Huawei. This is premised on the fact that the US government will continue to pressure other countries to avoid the Chinese company’s products and services, especially 5G wireless networks. Going by the PwC’s definition of crisis and its impacts, Huawei has been experiencing the consequences of the US’ action. But, one thing experts have let us realised is that issues emerged before the main crisis that is engulfing Huawei now. Our analyst examines this using computational and textual explication analyses.

The Emerging Opportunities and Issues

Our mining and analysis of the timeline of the crisis show that there are opportunities and issues for Huawei from January 9, 2018 to April 17, 2020. In a crisis, both evolve. Capturing value from the opportunities depends on how the concerned stakeholders in an organisation respond to the issues. In other words, key employees at the corporate and business levels, including those at functional level are expected to deploy internal and external resources in a coordinated manner towards issues mitigation and opportunities capturing.

From the textual explication, we learnt that lost, acquired, proposed or launched opportunities existed for Huawei from January 9, 2018 to April 17, 2020. These opportunities and issues emerged mostly in 2019. This is quite understandable considering the fact that the United States’ ban was tenser during the year than 2020. However, the Coronavirus outbreak couple with the 5G’s possible cause and expansion of the virus’ survival on human body has increased the issues more than the acquired opportunities. With this, our analyst believes that the ‘difficult’ revenue growth and eventual profit dip prediction is most likely to come to pass.

According to the data, some countries and businesses withdrawn their interest in the products and services of Huawei. We categorised this as lost opportunities. While this occurred, some clients and countries increased their interest in the company by signing new contracts or expressing future purchase of the company’s products or engaging it in installation of telecommunication equipment such as 5G network system. In our experience, this is acquired opportunities. While navigating the water of the crisis, the data indicate that company is not relenting in creating and launching new products, and assuring the public about its capabilities and abilities to deliver proposed value despite the country-driven crisis. This is explicitly captured as proposed or launched opportunities. Of course, the United States is not resuming into its shell and expecting its action to yield the expected results without constant communication and legal actions against the company. One of the actions was the house arrest of daughter of the founder, Ren Zhengfei, in Canada. In addition, the US government through the Parliament and Courts instituted a number of political and legal measures against the company.

Exhibit 1: Number of Opportunities and Issues 2018-2020

Source: CNet, 2020; Infoprations Analysis, 2020

In view of the measures, how did the public see the company along with the key issues thrown out by the US government and other countries? Our analyst finds answers to this question using real time data that aligns with the timeline of the crisis. Analysis shows that global audience using the Internet for information seeking had significant interest in Huawei along with the 5G network in 2018. We found 76.5% of the interest in the 5G network as association with the company. This indicates that public believe that the company is producing the product. Hence, the need to understand some needs and issues on it. Unfortunately, analysis establishes that the security issue narrative of the US government does not manifest in the public understanding of the network in relation with Huawei [see Exhibit 2].

Analysis reveals 40.6% reduction in knowing the security issue associated with the network when the public had one percent interest in understanding the Chinese company. In 2019, we found that the interest in the company resonated with the 5G network by 30.8%, meaning that one percent of people’s interest in Huawei translated into 30.8% in the network. The non-connection of the company with 5G between January 1, 2020 and April, 17, 2020 could be viewed as a possible sign that the company might lose some revenue due to continuous political and legal measures from the US government, and possibility of other countries’ rejection of the product.

Our analyst further explores the current narrative that 5G network contributes to the spread or infection of Coronavirus, a novel virus recently discovered in Wuhan, China. Surprisingly, public is yet to have significant interest in the virus along with the company. Presently, it remains unclear whether people believe in the narrative in line with the company’s product.

Exhibit 2: Huawei and Main Issues in the Public Views

Source: Google Trends, 2020; Infoprations Analysis, 2020

Who is in Charge?

During crisis, strategic teams are needed. In most cases, communication and crisis management teams must be instituted by the leading person, the Chief Executive Officer or any other strategic leader. Many media sources indicate that Ren Zhengfei, the CEO and other key personnel in the Marketing and Communications, and Production Departments have been creating alternative and counter narratives on the crisis. Ren has spoken with a number of renowned media houses such as BBC News, CNBC News, Forbes and Bloomberg.

“This incident was not a surprise to any of our senior management. We are all of one mind. We need to change our employees’ mindset, as we are not in peace time anymore. We need to switch. For more than 30 years, our employees have been very well off, which is another way to say slacking off. We must take this opportunity to prevent our employees from slacking off. Secondly, during peace time, our products were advanced and superior, which allowed many mediocre employees to move into managerial positions,” Ren said during an interview with CNBC News.

Dominant Communication and Response Strategies

Our expectation is that the crisis and communication management teams of the company will use a number of strategies in their efforts of managing the crisis. Analysis of three interviews of the CEO, his press release and excerpts from the press conference held in December, 2019 reveals that reminder and attack the accuser were the dominant communication and response strategies employed by the leadership of the company. This has many implications.

Attack the accuser means that the company is confronting the US government and its society rather than addressing the issue. For instance, one of the excerpts from the press conference and credited to a key leader in the company says “Many people and small businesses in rural America do not have mobile network access. This decision will harm their interests. The FCC claims that Huawei is a security threat. But the FCC chairman, Ajit Pai, has not provided any evidence. This is a common trend in Washington these days.”

During one of his interviews, Ren Zhengfei equally says, “The U.S. has taken very extreme measures to target Huawei. The U.S. is so powerful, but why are they so scared of us? I think they overestimate Huawei. Such a small company, how come it’s been paid so much attention around the world? I’m excited that we have so much attention, but I think they exaggerate our role in the world. We haven’t done any promotion yet, but someone has already done such a great job of promoting us. I’m so grateful.”

The last sentence of the CEO’s statement reminds us about the place of reminder and justification communication and crisis response strategy. A number of views expressed by Ren through interviews contains these strategies. When these are adopted, a company in crisis time is conveying to the public information related to their previous achievements at the time before the crisis.

Ren, during his interview with Bloomberg, says “ 5G is not the atomic bomb. 5G is just a tool to transmit information. The content transmitted has nothing to do with the transmission tool. It’s just like a microphone — you can’t say a microphone is a dangerous tool because it can transmit voices. But the content of the voice, the person who speaks into the microphone, could be dangerous. How come the tool is considered dangerous?”

Through ingratiation and victimage strategies, the company praises businesses and countries that are supporting it and convinces the public that it is a victim of global market and political competitiveness.

Exhibit 3: Dominant Communication and Response Strategies

Source: Huawei’s Press Release, 2019; Bloomberg, 2019, BBC News, 2019; Computerworld, 2019; Infoprations Analysis, 2020

Strategic Options

The insights have indicated that the leadership of Huawei needs to modify its crisis communication and management plan as it hopes to gain more market traction and projected revenue for 2020. Communication teams need to deploy reminder and justification more and downplay the use of attack the accuser, excuse and victimage strategies. While reducing the use, attention should also be paid to elimination of messages capable of showing that the crisis is between the Chinese and the US government. This is imperative because the crisis is country-driven and the fact that US is more likely to get sympathy from its allies in the North America region and other continents outside the Asia.

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