留学生essay代写-Why Hua Wei defeats other Chinese Technology Companies?

1.0 Introduction

Founded in 1987, Huawei has grown from an early telecommunications equipment company to a technology giant with annual revenue of more than $100 billion in nearly 30 years. Huawei's success is largely due to its strong R & D system and its constantly changing incentives. In the long-term process of R & D system management and project development, Huawei has accumulated rich experience in R & D organization and management.

 

 

2.0Literature Review

2.1Human capital theory

Definition

Schultz, Theodore W (12-31) proposes that human capital is a kind of capital embodied in laborers, which is expressed by the quantity and quality of laborers, including the knowledge level, technical level, working ability and health status of laborers, and is the sum of these values.

 

Content

Human capital is formed through investment. Like land, capital and other substantive elements, it plays an important role in social production. Schultz's main points include:

First: Capital includes human capital and material capital.

Second: Free people can take the initiative to participate in training, forming a certain amount of human capital, and then improving their welfare.

Third: Human capital investment can be divided into five categories, namely, education, training and so forth.

Forth: The main factor of economic growth is human capital. The return on human capital investment is much higher than the return on capital.

 

This theory is further developed by many economic scholars such as Edward F. Denison Gary S.Becker and so forth. Their main comments can be concluded that the content of human capital includes two aspects, one is capital, and the other is material form. From the perspective of capital, human capital refers to the capital formed by the expenditure on talent attraction, health care, education and training. From the material point of view, human capital refers to the general name of knowledge, skills, physical strength and other abilities that people have. The human capital theory thinks that human capital is the main factor that decides the economic growth.

 

Human capital theory in Modern enterprises

Compared with traditional enterprises, modern enterprises on the one hand are the separation of ownership and management rights, on the other hand, the specialization of operation and management. In the classical enterprise, because the owner and the manager of the enterprise belong to the same right subject, there is no principal-agent relationship, but only in the modern enterprise, in the case of separation of ownership and management, there is principal-agent phenomenon.

 

In modern enterprises, due to the decentralization of ownership and the specialization of management, shareholders do not directly operate and manage the property of the company, because it is not only costly but also unnecessary for individual shareholders with minority equity to directly participate in the management of the company. In this case, it is possible and inevitable to employ professional managers to manage the company. The high specialization and complication of management make managers' management experience, management ability, management order and method, and all kinds of skills inseparable from the operation of the company. If these human capitals are separated from the modern enterprise, only the general labor force is allowed to work in the modern enterprise, the modern enterprise will be paralyzed. This shows that the modern enterprise cannot be operated only by money capital without human capital, and human capital is the most essential factor of production as well as money capital. The money owner has the right of residual claim in the enterprise distribution, and the human capital owner should also have the right of residual claim, only in this way can it conform to the law of market economy. If the investment of human capital is not recognized in time, the owner of human capital will take speculative behavior.

 

2.2 The Two—Dimensional Theory

Definition

Carter, Debbie (59-68) proposes that through his investigation, Frederick Herzberg found that the working status of employees is basically not affected by the improvement of wages and benefits, the improvement of working environment and other conditions. After investigating and summarizing the influencing factors of this phenomenon, he put forward the Two—Dimensional Theory. He believes that health care factors and motivation factors are the main factors affecting people's working conditions. The improvement of health factors can reduce people's dissatisfaction. The improvement of incentive factors can stimulate people's enthusiasm for work, improving work efficiency and enhancing the overall performance of the company. 

 

Content

The Two—Dimensional Theory contains two different types of incentive mechanism, namely, health care incentive mechanism and incentive factor incentive mechanism. Health factors bring only external incentives, which are very short, and after a period of time, people will return to their original working conditions. Motivation factors bring about internal motivation, which can change people's views on work from the heart, and make the work meet people's inner requirements, thus fundamentally stimulating the enthusiasm of employees. Therefore, the enterprise chooses should choose incentive factor, so as to stimulate the enthusiasm of the virtuous circle of staff. 

 

3.0 Motivation strategy of Hua Wei

3.1 Incentive measure in the initial stage of enterprise establishment

Amlie, Thomas (28-31) holds that phantom stock is a kind of incentive method that the amount of stock is distributed in the form of fictitious stock. The incentive object is not the real sense of the stock, but the amount of the stock figure. The same as holding stock, the holder has the right to share the stock dividend and share price appreciation gains. Unlike holding stock, what the holder owns is only the amount of stock but they don’t have the ownership, and cannot transform or sell their stocks. In addition, if employees leave the enterprise, then their original rights to stock dividends and appreciation income will also disappear.

 

In the early days of Huawei, in order to solve the financial problems of enterprises and find long-term incentive measures, Huawei implemented the simplest model of employee stock ownership. Employees can buy the company’s stocks. Through this way, Hua Wei got its original capitals. However, with the development of the company, this strategy was not adoptable for the larger company. So Hua Wei launched the phantom stock strategy. The stock incentive system stipulates that the incentive employees who obtain virtual restricted shares can obtain certain benefits through stock appreciation and dividends, but employees do not have voting rights and ownership. Shares may not be converted or sold during the employee's employment. After employees leave Huawei, their rights automatically disappear, and the amount of stock returns to zero. At the end of 2001, Huawei implemented the policy of virtual restricted stock equity incentive strategy. After the implementation of this incentive policy, by the end of 2002, Huawei achieved sales revenue of 23.4 billion yuan and net profit of more than 2.4 billion yuan, which was about 6 times the industry average in that year.

 

3.2 Huawei's Current Incentive Plan

Lipman, Frederick D (114-125) proposes that employee stock ownership plan is an implementation mode of equity incentive system. This model enables employees within the enterprise to obtain the right to hold the company's equity. The stock rights obtained by employees are entrusted to the company for unified management, thus forming a specific form of property rights organization. The mode of employee stock ownership realizes the real participation of employees in the distribution of enterprise ownership. In this mode, most employees become shareholders of the company, which reflects the unity of the identity of owners and workers. 

 

In 2013, Huawei implemented a large-scale overseas expansion. The whole company needs a lot of money, and at this time the previous phantom restricted stock equity incentive measure was suspended, so that Huawei employees could not continue to obtain company equity, some employees showed negative feelings, work enthusiasm is low. In order to make up for the gap of enterprise development funds and enhance the motivation of employees, Huawei has implemented the TUP plan.

 

Time Unit Plan (TUP) means that the company distributes a certain proportion of options to employees according to their positions, levels and performance. These options do not cost money to buy, and the cycle is generally five years. TUP eliminates the cash pressure for employees to buy stocks, and also enhances the expectation of employees for stock appreciation. So, in the long run, TUP plan converts stock into options, and employees begin to work hard in order to increase the value of stock. From the perspective of the distribution of equity incentive, the equity distribution system of Huawei Company fully reflects the fairness and efficiency. Huawei's equity allocation is mainly based on the performance appraisal of employees. Huawei uses quarterly assessment and annual comprehensive assessment to assess the performance of employees. The ability of employees, ethics, sustainable contribution to the department and the degree of risk can always be the main basis for the company to assess the performance of employees. Personal performance, the evaluation of superiors and the evaluation of colleagues in departments are the three main factors to evaluate individual performance within Huawei Company, which fully reflects the fairness of Huawei Company's equity incentive system. 

 

The distribution of Huawei's stock benefits includes cash dividends and stock appreciation. For the company, this way can turn the cash into net assets, the cash flow of the company increases, and this amount of cash can be used to expand reproduction, and thus the company will earn more profits for the next year. For employees, dividends are more attractive than stock appreciation, because stock prices are too high to enhance their own risk, and the value of stock appreciation can only be realized after leaving Huawei, so the value appreciation has little incentive effects. Based on this situation, Huawei has reformed the way of stock dividend, implementing a large proportion of cash dividend, and reduced the value-added part of the stock, so that employees can get equity dividend in time. 

 

4.0 Business strategy

4.1 R & D management system

At the beginning of its establishment, Huawei attached great importance to R & D investment. In 1999, Huawei invested 1.39 billion yuan in R & D, accounting for 11% of the total turnover. In 2012, Huawei invested more than 3 billion yuan in R & D, accounting for 13.7% of revenue. Huawei's R & D expenditure in recent ten years has exceeded 200 billion Yuan.

 

Huawei establishes the integrated product development process system (IPD) for customer demand, which quickly and accurately incorporates customer demand into product version roadmap planning, and widely adopts component-based and standardized technology sharing, so as to realize the comprehensive advantages of speed, quality and cost in the process of product development, thus helping target customers to gain advantages in competition.

 

Huawei has more than 150000 R & D personnel in products and solutions, accounting for almost half of the company's total. Huawei is not only the most powerful R & D Company in China, but also one of the most powerful R & D companies in the world. At present, Huawei has developed from a single central R & D base to a multi-central R & D base, forming a pyramid system of R & D personnel and institutions relying on R & D personnel and R & D. 

 

In China, in addition to it’s headquarter in Shenzhen, Huawei has set up R & D centers in Beijing, Shanghai and Nanjing. Worldwide, Huawei has a software development base in India and a chip technology development base in the United States, and has established research institutes in Germany, France, Italy and other countries. Huawei insists on developing core technologies independently, while non-core technologies are developed through introduction and joint development. Huawei has established close cooperative relations with industry, academia and major research institutes in China, and has signed long-term strategic cooperation contracts with major operators.

 

Huawei has explored a good R & D organization management model in the long-term experience of R & D organization decision-making. In potential product development projects, employees with good performance in the medium and long-term evaluation of the company are used as project managers, responsible for all-round communication and coordination, and equipped with professionals from various departments. The product manager is fully empowered to coordinate the allocation of various resources and assign team members. In the early stages of research and development, the product manager will be assisted by experienced technical staff, marketing staff, and project directors who will advise the project engineering process. In the middle stage of the project, the R & D personnel carry out simulation experiments on the computer, the production department can put forward corresponding modification suggestions for the production process and the staff of the procurement department will follow up with the supplier to modify the procurement plan in real time. The legal staff prepares the sales contract, and the sales department makes the sales plan according to the development progress of the project. 

 

4.2 Brand management system

Huawei defines itself as the world's leading supplier of telecommunications solutions, focusing on building long-term partnerships with telecom operators. Huawei implements a customer-centered integrated pyramid marketing communication mode. After confirming the customer priority arrangement, Huawei strengthened the marketing of brand image through brochures, enterprise visits and new media platform advertising and so forth. It is the communication goal of Huawei to make customers’ awareness of the brand deepens gradually with the progress of customer relationship.

 

5.0 Recommendations

Based on Schultz, Theodore W’s Human capital theory, human capital can be said to be the key element of enterprise success. Huawei constantly adjusts the incentive policy according to the needs of enterprise development in the process of enterprise development. Appropriate incentive policies have made a successful Huawei. At present, Huawei has developed into a very large company with nearly one million employees. However, while constantly adjusting the incentive mechanism, Huawei should also update the personnel exit mechanism in time. The personnel capital dividend may cause an enterprise to move towards successfully, but too jumbled human resources similarly will also suppress the enterprise’s development.

 

In addition, when implementing the equity incentive system, Hua Wei should also fully consider the conditions of employees themselves. Enterprises should provide loan guarantee for employees with poor economic foundation, so as to enhance the implementation effect of equity incentive.

 

6.0 Conclusion

Huawei's equity incentive system has adopted employee stock ownership, virtual restricted stock ownership system and TUP plan, almost realizing all employees’ stock ownership, so that more employees can share the dividends brought by the development of the company. The equity incentive mechanism of Huawei Company fully embodies the proposition of human capital theory. The core of human capital theory is to emphasize the role of people, and Huawei's equity incentive system can well stimulate the enthusiasm of employees.

 

 

 

 

 

 

 

 

 

References

Amlie, Thomas. “Measurement of Incentive Stock Option Expense.” The CPA Journal, vol. 81, no. 7, 2011, pp. 28–31.

 

Carter, Debbie. “GREAT THINKERS: Frederick Herzberg (1923-2000).” Training Journal, 2006, p. 64.

 

Lipman, Frederick D. “Equity Incentive Choices.” Executive Compensation Best Practices, John Wiley & Sons, Inc., Hoboken, NJ, USA, 2015, pp. 113–127.

 

Schultz, Theodore W. Investing in People : the Economics of Population Quality. University of California Press, 1981.

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