Huawei leads the charge in EU quest

Chinese companies begin to shed burden of low expectations as they strive for innovation

Despite recent negative economic indicators across Europe, and the eurozone in particular, there is a ray of hope as China's high-tech companies expand across the continent.

Computer giant Lenovo and telecom equipment provider ZTE are among this clutch of Europe-focused Chinese high-tech giants apparently determined to establish a firm presence on the world stage and in Europe in particular.

Lenovo, for a while now the world's No 1 PC producer by shipments, has made significant progress with its smartphone business this year. Eastern Europe is a key target in its global expansion and related diversification plans. In the longer term, Lenovo's management has also made it clear that it regards Eastern Europe as a springboard into Western European markets.

Only last year, ZTE continued with its investment and expansion across Europe, setting up a center in Hungary. ZTE also appears to view Central and Eastern Europe as the ideal platform from which Western European markets can be conquered.

However, it is probably China's multinational networking and telecommunications equipment and services giant Huawei Technologies Ltd that blazes the brightest trail internationally, with what also appears to be European expansion at the heart of its strategy.

This summer, for example, Huawei announced further European expansion with plans to double its research and development team here within the next three years. This will take the total research and development staff number across Europe to just under 2,000 over the next three years. Recent announcements also include plans by Huawei to increase total staff based in Europe to just under 6,000 over the next five years.

Clearly, Huawei and others mean business when it comes to Europe. This is by no means small beer.

Huawei's recent announcements convey even more decisiveness, determination and intent when it comes to European markets, given that it is already the world's largest telecommunications manufacturer. This was achieved in 2012 when it overtook its European rival Ericsson. But there is no room for complacency in Huawei's ranks.

Obviously at a time of economic gloom and much political uncertainty, Huawei's and China's other high-tech firms provide an extremely welcome boost to the European economy. Europe now represents Huawei's largest investment destination, with two research and development centers in 14 European locations.

However, the increasing European presence should not be interpreted as a threat. It simultaneously provides an opportunity for European industry and businesses, and not just those whose business falls within the high-tech radius.

In the eyes of many, Chinese business culture continues to be characterized by a lack of innovation and creativity, more than anything else. This weakness in Chinese companies is also widely regarded as a key reason for the current slowdown in the country's economy.

Chinese management continues to be regarded in the West as obsessed only with short-term profit, low prices and, crucially, low or even no investment.

Clearly, the corporate cultures and management styles at Huawei and its fellow high-tech Chinese giants should now dispel this myth.

Furthermore, recent research findings of mine among China's increasingly internationally oriented small and medium-sized enterprises point to a significant shift toward a far more modern business culture, embracing long-term investment and innovation.

Such change represents extremely welcome news for European firms keen to do business with this new wave of modern, high-tech Chinese corporations.

These Chinese companies are ever keen to improve competitiveness at all stages of their value chains and beyond with opportunities aplenty for European involvement in forward and backward as well as horizontal value system integration.

Forward and backward integration possibilities are very much in the cards, with the Huawei-like modern-day Chinese corporation now committed to very long-term, lasting single-supplier relationships. It is probably only European suppliers, intermediaries and retailers that possess the vital market knowledge, experience and contacts to achieve maximum symbiotic benefit.

In addition, horizontal integration opportunities are very much on the table. Huawei and others also appreciate the importance of long-term partnerships with suitable European rivals. Hence the increasing number of Sino-European strategic alliances and joint ventures.

For example, Huawei's key European clients include the likes of Vodafone and BT.

And even when a European expansion strategy of growth via takeover is pursued, it is no longer the hostile, asset-stripping maneuver that used to characterize the mergers and acquisitions market. Instead, Chinese companies increasingly value the importance of careful post-acquisition integration with the maintenance of a suitable mix of employees and the preservation of a strong European corporate subculture.

Modern management inside Huawei and an increasing number of Chinese companies should now ensure that alliances with European firms, regardless of the stage of the value chain or value system, achieve smooth integration of employees and cultures and that a long-term sustainable market presence results.

However, recent research findings of mine indicate a definite need for a closer look at the issue of innovation and creativity inside Chinese companies, even the relatively successful, international firms such as Huawei.

Innovation across all areas of science, for example, technology and engineering, is now firmly embedded within most Chinese companies, as is the commitment to substantial, long-term financial and human capital investment in this area.

This is unsurprising given the significant bias toward science across all levels of the Chinese education system. Sadly, this strength in science has left all aspects of arts education lagging far behind.

Strong research and development centers that lead to high-quality and functionally innovative products and services are essential for modern-day business success, but they are not enough. It is only those firms, Chinese and European, that can match the scientific breakthrough with an equally inventive and artistic product name, design and appearance that will create sustainable competitive advantage.

Scientific breakthroughs are tangible and, therefore, easier for competitors to replicate. Artistic advances, such as, in the use of language, color, music and many more emotional forms of brand association, on the other hand, are far more intangible and, therefore, far more difficult for competitors to emulate.

It is precisely with this type of innovation that Chinese companies remain at a disadvantage and where European firms can help most.

Recent research into the Chinese corporate world also reveals a genuine desire to learn and employ others where skills and knowledge are clearly missing.

So European firms that offer help and advice in all areas of the creativity needed to build strong brands now have a golden market opportunity before them with the likes of Huawei and other Chinese high-tech firms keen to establish not just a company and product presence in European markets but a long-term brand footprint in the minds of its consumers.

Huawei's recent developments have also included exciting movements in Italy. Huawei has chosen Milan as the location for its microwave research and development center, employing more than 100 technical employees. In total, almost 1,000 of Huawei's European staff are based in Italy.

Hopefully this increasing Italian presence will also lead to a consequent increase in artistic creativity and innovation at Huawei. Italy and France have acquired extremely strong country images, both of which are often defined largely by "style", "chic" and "fashion".

These are precisely the characteristics or traits much needed for Chinese companies and their plethora of Sino-European tie-ups to succeed long term with effective, emotional brand-building.

The European art and design industry does not just reside in Italy and France but neither do the increasing number of Chinese firms now based firmly in Europe.

This lack of artistic, emotional creativity inside Chinese companies will not remain for long. European players in this industry take note.

The author is a visiting professor at the University of International Business and Economics in Beijing and a senior lecturer in marketing at Southampton Solent University's School of Business. The views do not necessarily reflect those of China Daily.