Comparative Analysis On The Path Of Transnational Operation And Business Performance: Case Study Of Huawei And Cisco

As the development of the world economic integration, Chinese enterprises are facing a much broader market, while under more severe challenges. Large number of multinational companies flow into China, making the characteristics of internationalized competition in domestic market. Transnational business has become inevitable choice to Chinese enterprises to survive in Economic Globalization. First batch of Chinese companies which conducted transnational business have accumulated some experience, such as Lenovo, Haier, Huawei, TCL, etc. However, compared with foreign multinational companies, Chinese multinational enterprises still have a gap in operating transnational business.In this paper, Huawei and Cisco will be taken as examples. Basing on global value chain theory, the paper compares the path of transnational business of two multinational companies. Competitive strategy will be combined with the smiling curve to explain the difference of the path. On this basis, the paper applies analysis of financial indicators and model of grey incidence to compare two companies'performance from 2005 to 2008. Through the study found that there is a big difference in two enterprises'value-chain evolution. Huawei Technologies Co. applies low-cost strategy and market differentiation strategy open international market, then, transfers to innovation differentiation strategy gradually so that it develops from low valley and downstream to two ends and upstream of value chain. In contrast, Cisco develops from innovation differentiation strategy to market differentiation strategy, achieving the transference from upstream to downstream of value chain. Through the analysis of operating performance, we found that there are differences between Huawei and Cisco in terms of assets structure, repayment ability, activity ratio and profitability. Cash flow is the main driving factors of Huawei's profit growth, while reasonable structure and higher asset utilization efficiency is factors driving Cisco's profit. Compared with Cisco, Huawei's asset structure is irrational and is in low levels in transnational business. Therefore, Huawei should improve the asset structure and asset management in the process of value-chain evolution, gradually occupying the high value-added sectors.Huawei and Cisco's path of transnational business and operating performance have some inspiration to Chinese companies which prepare to conduct the transnational business. Compared with the advanced companies who have a technical advantage, China's multinational enterprises have a gap in technical level, production level and technological level that make Chinese company's products are initially serving the low-end market. Chinese enterprises can make the low-cost strategy as the starting point to conduct transnational business. Then, combined with market differentiation strategy to supply affordable high-quality products and comprehensive service, open the low-end products markets and developing markets. In the meanwhile, Chinese companies can make alliance with the well-known enterprises in developed countries and establish a joint laboratory to track high-end market demand, training research and development capabilities, gradually implement innovative differentiation strategy to occupy the high value-added sectors. In the process of the value-chain evolution enterprises should focus on improving asset structure and asset management, strengthening cost management, which provide internal power for enterprises transfer to high value-added part in global value chain.