Htc Assessment free essay sample

Internal Resources Looks at the internal resources of the company such as employees as well as the existence of tangible and intangible assets such as building and brand image as well as knowledge in the company in terms of tacit and explicit as well analyses the activities that adds value to HTC’s products such as HTC joining with firms such as Google to give them an better operating system through their Android system. Strategy Formation This section looks at the company’s available options to implement in the future. Strategies in business level as porter’s generic forces are used to see what are the possible options are HTC to survive in the market. It also offers strategies at corporate level such as the BCG growth share matrix which allows the firms to see where their products are in the market and also helps them decide what type of strategy to use on their products. Conclusion and Recommendation Recommendation has been made as to what strategy out of the ones offered that HTC should go for. The recommended strategy for HTC was a differentiation strategy that made their product different from its rivals through acquiring the technology and capabilities of some of the companies that HTC has acquired. HTC Corporation 1. 0 Company Overview HTC Corporation is a Taiwanese based company manufacturing smart phones. Founded in 1997 as a high tech consortium along with 37 other companies such as HP, IBM and Motorola, HTC has become one of the fastest growing companies in the mobile sector being ranked the 5rd in the world for best performing Technology Company. Best being known for its innovation, HTC offers a range of high tech products mainly in the Smartphone category and has also expanded into PC tablets. 2. 0 Mission and Vision HTC’s mission is to become the world’s leading supplier of communication devices by providing value-added design, world-class manufacturing and logistics and service capabilities with a keen focus on innovation (HTC Corp, 2011). With a powerful Ramp;D focus, HTC plan to come up with new innovative designs and products particularly focusing on the Smartphone category. 3. 0 External Environment It is important to analysis HTC’s external environment in order to analysis its strategic position in the market as well the opportunities and risks it faces. 3. 1 PESTEL Analysis The PESTEL analysis can be used to analysis the market environment in which HTC operates in, they include: Political Factors and Legal Factors * Due to the high tech nature of the industry, products from various companies are heavily patented and since similar technology is used between manufacturers, infringement of these patents can lead to very costly lawsuits against the company. In 2008 as well 2010, lawsuits were filed against HTC by companies such as Apple and IPCom claiming that HTC infringed upon their patents and demanded compensation such as to prevent the company from exporting their products into certain countries (Datamonitor, 2011). * Possible infringement of intellectual property in the future which if proven would result in large compensation in money as well as damaging the brand im age. Economic Factors * Since the company operates on the global scale and since most of their revenue comes from international markets, HTC would be positively or negative affected by fluctuation in the exchange rates. Due to high operating expenses overseas, such as high cost of labour and taxation, HTC’s operating margins have dropped from 19. 9% in 2008 to 15. 8% in 2010. However, these margins are considered low when compared to their competitors (Datamonitor, 2011). Social Factors * According to several report, the demand of smartphone have amount to 300 million units being sold by the end of 2010 and is expected to rise to 850 million units by 2013 (Datamonitor, 2011). * There is also a positive growth and demand towards the tablets market with an estimate of 7% of companies giving their employees tablets. Companies are estimated and be the main buyers of tablets and its total market is said to double by the end of 2011 (Datamonitor, 2011). * The tastes and preferences have seemed to change towards to smartphone explaining the rise in demand and the increasing global population would further promote demand. Technological Factors * There are vast technological factors with companies changing Operating systems of smartphones to more advanced ones each year. * The takeover of several firms by HTC has led to an increase in the technological knowledge of the company. Environmental Factors HTC faces heavily competition in the smartphone market facing against big companies such as Apple, Samsung, Sony Ericsson and LG. * Due to the intense competition, HTC had to reduce it prices of smartphones which decreased profitability. * Intense competition has led HTC to spend large amounts of money on Ramp;D to keep up to its competitors. 3. 2 Competitor Analysis There are several big companies in the market that are directly competing with HTC on the production and distribution on smartphones. The table below helps to identify some these competitors and their features. Competitor| Features| Apple Inc. | * One of the most popular and most widely used brands in the world. * Has a wide range of products including music players (itouch), pc tablets (ipad), smartphones (iphone) and computers (Apple Mac) * Has high brand awareness and social trend leader. * Has a robust financial performance with good margins * Has patented many of their technologies. * Keen focus on Ramp;D coming up with new products or updated versions every year. * Apple stores are located all around to world to provide services to the customer| | * One of the 2 South Korean giants in the field of lectronics and is recognised wide world. * Mainly operates in Asia, Europe and North America. * Has the most revenue from the other competitors, recording $112,803. 7 million by the end of 2008 (Datamonitor, 2011) * Has diversified business operations, producing a wide range of products from smartphones to refrigerators. * Deals in large scale operations * Recently entering markets where other competitors were un able to penetrate such as the Indian market. | | * A joint venture between Sony Corporation and LM Ericsson. Widely recognised and has a presence in 80 countries worldwide. * Has a strong financial position since it is backed up 2 companies as well as technical capabilities. * Specialises in camera phones and walkman phones. * Expanding in its service portfolio by offering users with application stores for their smartphones. * Has a wide range of smartphones such as the Xperia. | | * The other one of the 2 South Korean giants in the consumer electronics industry. * Like Samsung, LG is involved in large scale operations, a wide product portfolio and also a keen focus on Ramp;D. Widely known throughout the world as a result of many sponsorship agreements. * Have many strategic alliances with companies e. g. : Microsoft to enhance its smartphone by introducing new operating systems. * Records a revenue of $58. 9 billion by 2008 (Datamonitor, 2011)| 3. 3 5 Force Analysis Porters five fo rce analysis can be used to analysis the direct environment of the firms. * The Bargaining power of Suppliers The manufacturers of mobile phones such as HTC are heavily dependent on suppliers since they provide the software and equipment need to produce products. However, since most of the manufacturers are larger than the suppliers, they have to the ability to control negotiations. Suppliers also supply to a number of industries apart from the mobile phones industry, so manufacturers do not have much power as they think (Datamonitor, 2009). * The Bargaining power of Buyers The overall power of buyers is quite weak mainly due two reasons. There are 2 main buyers of mobile phones in the industry, network operators for example O2 and Vodafone in the UK as well as other independent buyers. The buyers do have some power in negotiations with the manufacturers due to the limited number of network operators however; this effect is off put by retailers having to stock all of the new products of manufacturers in order to stay competitive with amongst other network operators (Datamonitor, 2009) * The Threat of Substitutes The main threat of substitutes of smartphones would be the conventional 2G phone. The main reason consumers would choose a conventional mobile phone rather than smartphone would be due to financial reasons as smartphones are costly. However, some network operators are increasing diversifying into handset production which has manufacturers under some pressure. * Industry Competitors There is intense competition in the industry with a few large company dominate the market. Each one of the competitors holds their competitive advantage such as a high focus on innovative products from HTC. There are also several switching cost involved as well, for example apple’s sells complementary products with its smartphone such as their dock system which enables to insert the phone into the music system. Also due to competitive pressures there are also price wars that may erupt. * The threat of new entrants The threat of new entrants is quite moderate. It is quite difficult for a totally new firm to enter into the industry due to counter measures of existing firms as well the large capital investment needed to enter into a high technology industry. However, if the company is already producing electronic consumer goods, it would be quite easy for them to enter into the mobile phones industry (Datamonitor, 2009). Also legal issues such as patented technologies along with others make quite difficult for new firms to enter. 4. 0 Internal Resources HTC has many internal resources that adds value to its products as well as provides them with a competitive advantage. Some of these internal resources a company acquires may include: * Knowledge and Innovation Knowledge and innovation is a key internal resource to have especially in the mobile phones industry where specialist knowledge is needed to come up with innovative new products for consumers. HTC would have two type of knowledge, tacit and explicit. The tacit knowledge they would have would be the solutions to the problems they would have had in the past, since they experiences are hard to copy they provide HTC with an advantage over companies who had come across the problem yet. It also makes the employees who have experienced these events an important internal resource. However, this effect is nullified, if employees from HTC joins their rivals and prevent the problem from happening in the first place. Also explicit knowledge such as patents on products is very valuable since competitors cannot copy their products. However, most of the smartphone makers have similar technology and have their own patents, this scope is very limited. These both help in the innovation of new products but are very risky and expensive. * Value Chain The value chain is made up of primary activities which directly contribute to produce products and support activities which help with the production function and can also be classified as tangible and intangible assets. Value is added to HTC’s products through various ways. HTC had introduced its applications store after joining up with Google’s Android which has similar features to that of apple’s app store. Its introduction of the HTC Sense completely changed its smartphones into easy to use graphical interface system (HTC Corp, 2011). Apart from this, HTC’s many partnerships with companies such as Google, Intel and Qualcomm which provided them with user interfaces and equipment as well as its agreements with network operators such as O2, T-Mobile and Vodafone adds to their value chain. Other factors which add value to HTC would be its brand name and reputation. HTC is viewed as a specialist manufacturer of smartphones being the 5th largest manufacturer of smartphones in the world. Also its recent acquisition of companies such as Saffron Digital and OnLive will help it gain a better competitive advantage in the near future (Gray, 2011). However, since its rivals are also coming up with new strategies, so its overall competitive advantage will be lower. 5. 0 Strategy Option for HTC There are two main strategic options that HTC can choose from, Business level strategy which focuses on the stakeholders in a single market or a corporate level strategy which aims at diversification into different markets. 5. 1 Business Level Strategies One business level strategies can HTC can consider is: * Porters Generic Strategies By looking at this model, we can identify two possible options available to HTC. Either aim for Cost Leadership or Differentiation since HTC exists in the global market. Due to the intense competition and increasing demand for smartphones, HTC could make its smartphones more affordable by lowering their price through producing at a lower cost. If HTC could lower their cost of production though low labour cost by relocation to low cost sites, achieve economies of scale or having superior management who are able to generate greater efficiency then HTC can have a considerable competitive advantage since the cost of a smartphone is quite high. This strategy could also help offset some factors of the 5 force analysis such as weaken the threat of substitutes and make it more difficult for new firms to enter the industry. However, this strategy could lead to price wars between firms and also people might have the perception of low quality associated with low cost and could ruin the high quality innovative image of HTC although this would depend on how low the prices are cut by. Another option they could go for is a differentiation strategy. This strategy would mean that HTC would have change or add functions to its smartphones that would make it different from its competitors. This is a suitable strategy for HTC since they have a strong research and development function. Since rival smartphones such as the iphone and galaxy tab offer similar feature to HTC’s, they got add new functions. Some options might be to make it a more business orientated or a gaming and music oriented phone. The purchase of OnLive, a gaming company (Datamonitor, 2011) and also its newly acquired partnership with Beats Audio (HTC Corp, 2011) would help HTC take up this strategy and make HTC’s perception different from the rest. However, the main problem is high cost in production. If consumers become price sensitive or fail to see the difference, HTC could end up with major losses. 5. 2 Corporate level strategy One corporate level strategy HTC can consider is: * BCG Growth Share Matrix The BCG matrix enables a company to position their products based on their growth rates and relative market share. It enables HTC to look at which products are performing well and gives them an idea of where their resources should be properly allocated to as well as to make important decisions such as keeping or withdrawing their product. HTC should be able to categorize their products according concept. Stars are the products that have relatively high market share and also have a high growth rate. A product that would match this criterion would be the HTC Sensation XL with Beats Audio. These products would need constant investment in order to maintain their current market share (Business Tools amp; Templates, 2009). Cash cows are products have being in the market for some time and acquired a high market share but now experiencing low demand. HTC’s Desire HD would be a named cash cow. HTC can use the steady revenue coming from these products to use in other areas. Question marks are products that have low market share but a high growth rate. This would often be the case if the company neglects a product due to being overshadowed by another popular product. Though growth is high, not enough resources are used on it to build it to become a star. HTC’s Titan would be seen as a question mark (HTC Corp, 2011). Dogs are products which are on the decline and have low share market and low growth due to new superior products introduced by the company. These products would be viewed as draining money where the company can use on question marks and stars. The company must decide whether it is beneficial to keep producing them or scrap them off. HTC’s Desire would be a Dog since many new and improved versions of the Desire has been launched into the market. After identifying where their products lie on the matrix, the company must choose a suitable strategy for the product (Drummond amp; Ensor, 2001). They could choose to: * Build – This is where the company might reduce its prices or offer better promotion in order to build its market share. This strategy might incur a loss in the short run but would give better profits in the long run. This strategy would be suitable for Question marks. * Hold – This strategy is good for Cash Cows where they try to maintain the current market share of the product possibly by offering product extensions. * Harvest – This strategy involves raising prices in order to get a profit in the short run. If the company sees that a product has a relatively limited lifespan, then they could try to bring in as much revenue as possible. This is a good strategy for question marks. * Divest – This is when the company might stop production of a product due to it being unprofitable. Products in the Dog category may have this strategy used on them. 6. 0 Conclusion and Recommendation The Taiwanese manufacturer through its mission to become the world’s leading supplier of communication devices by providing value-added design with powerful Ramp;D influence have laid its mark on the market becoming the 5th largest manufacturer of smartphones in the world. However, many external issues such as political influences, economic changes, changing tastes and preference and also the intense competition in the market have affected the business practices of HTC. Due to this they are in need of a new strategy options to follow in the future. Between the two strategies that were formed, we a strong feeling towards following a differentiation strategy from porter’s generic forces. Consumer tastes and preferences are always changing as they look for something new and innovative. Rather than fight amongst massive companies such as Samsung and Apple who offer similar products, HTC would benefit in the long run by making their smartphone much different than the rest.