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With the rapid growth of China economy, telecommunication industry has also developed dramatically for the past twenty years, the industrial scale jumped to the no.2 position all over the world. Till Aug. 2008, in China total number of telephone subscriber reached 970 million, in which, mobile user is 610 million and fixed phone user is 354 million. Meanwhile, 79 million customers subscribed for broadband internet access. Going with it, the industry of telecom equipment was favored to have a significant development as well. But now, the network construction and communication technology evolution becomes stable, especially with the reform of telecom operators going deeper, the re-organization led by government progressed well continuously, it brings the new opportunity to telecom equipment suppliers, at the same time, also makes them face the challenges never met before. For the intensifying competition, suppliers are facing to the new situation, actively looking for new development ways in order to take the full advantages of themselves and get the new development room.In this thesis, the theory and methods of Michael E.Porter’s five forces model, three fundamental competition strategy(overall cost leadership, differentiation, market focus) and SWOT matrix analysis was adopted, started from the macro environment of telecom equipment industry, an in-depth analysis was made to understand the industry’s outlook and direction. Through Alcatel Shanghai Bell as the example, discussed and researched that after combining a global telecom equipment supplier with local competence, how to present its unique value and comprehensive capability during the competition with local vendors and foreign competitors, then pointed out the importance and necessity of a differentiation strategy to it, also proposed the way and found the key factors to guarantee the successful implementation of that strategy. The result has practical value and makes realistic sense.
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