Htc Corp Analysis

The case finds HTC at an important junction in its growth within the mobile device industry. HTC is plagued with several challenges and faced with crucial decisions that could make or break the companys future. Performance In the years leading up to the launch of its own brand, HTC developed strong relationships with mobile phone brands and network providers around the world. These relationships became the foundation of its success during the first few years of the smartphone era as it dominated the market under the leadership of HT Cho and Cher Wang. Right from the time the company entered the notebook computer industry, the leadership always demonstrated a great amount of adaptability and foresight which, ironically, is what led the company to completely abandon the manufacturing of notebook computers. Upon realizing that the developments that were taking place at Microsoft aligned perfectly with its own vision of mobile computing, HTC leapt at the opportunity to become pioneers in this space. By using its first-mover advantage into the PDA space (and by extension the smartphone space), many branded handset companies and network providers went on to hire HTC to manufacture its devices. Lauded for its ability to customize products, the contract manufacturing business allowed HTC to establish itself as a leader in the eyes of handset companies and network providers. However, a key trade-off in this strategy was the lack of visibility the company was receiving in the eyes of the consumers. Peter Chou recognized this disadvantage that resulted from the companys current position in the mobile technology industry and decided that it was in the companys best interest to reposition itself vertically by branding and selling handsets under the companys own name. Despite dissension among the directors on the board and a very limited marketing budget, the HTC brand of handsets was launched into the world in 2007. Soon after the launch of the HTC brand, the acquisition of Magic Labs bore fruit and the company was on the brink of a ground-breaking entry into the world of touch-screen interfaces. However, the launch of Apples iPhone stole its thunder and experienced rapid adoption across multiple customer segments largely due to the companys existing brand recognition and loyalty. In addition to this,

HTC was placed at a disadvantage by being tied to the Windows Mobile operating system which was performing unfavorably when pegged against the one being used by the iPhone. Again demonstrating a talent for adapting to changing circumstances, HTC shifted its focus towards the new Android operating system that was being developed by Google. From manufacturing the first Android-based phone to being selected as the company to manufacture Googles first lead device, HTC experienced a very promising entry into the smartphone market. This upward thrust was short-lived and the company began to slip down the ranks of handset manufacturers as Apple and Samsung began to pull away from the competition. A significant portion of this mediocre performance can be attributed to a failure to tap into newer customer segments that were being attracted towards smartphones by the larger displays, higher screen quality and internet connectivity - the company could no longer rely solely on the prosumer market. The company recognized this need to expand and HTC One series was showing great promise among other segments as well. Following the launch of Apples iPad, several mobile device manufacturers entered the tablet space through the Android platform. The HTC Flyer and the HTC 4G Jetstream tablets performed very poorly compared to Apples iPad and Amazon.coms Kindle Fire. In keeping with HTCs mission to be leaders in innovation, the HTC tablets had state-of-the-art hardware and were consequently overpriced. Aside from being too expensive, the Android Market had very few apps designed specifically for tablets. The market was clearly being pulled in two directions: 1. The cheaper and less capable options: Kindle Fire. 2. The fashion accessory with an abundance of apps: Apple iPad. Competitive Assets Relationships: Over the years, the company has established strong relationships with hardware component manufacturers (Qualcomm and Texas Instruments), operating system developers (Google & Microsoft), and network carriers (T-mobile, Sprint & Verizon). These relationships give the company significant bargaining power and a considerable advantage over the competition. Leadership & Culture: The leadership within the company has proven repeatedly to be extremely proactive and has also demonstrated high levels of adaptability. In addition to having strong leaders, the company has also encouraged what has been termed a Silicon Valley atmosphere, which values innovation and free thinking among its employees. Pioneers: HTC has a proven track record of being innovators and early adopters of new technology. With such a strong past, HTC would be the ideal choice to partner with during introductions of new operating systems or some other form of new technology.

 Customers: Despite appealing to a rather limited customer segment, HTC has established high levels of customer loyalty within this segment. Innovation: HTC Sense is a key aspect of the companys product differentiation. It has provided the company with a layer through which it can create what is almost a new operating system, thereby setting itself apart from other Android-based device manufacturers. Liabilities Marketing: The marketing department has proven to be very inconsistent on a global platform and has been a significant hindrance to the development of HTC as a global brand. Additionally, in areas where the marketing has succeeded in improving brand awareness, it has failed to drive growth in sales. Microsoft and Google Partnering with the Competition: With Microsoft and Google giving specific device manufacturers preferred access to their operating systems, HTC stands to be given the back seat and will not be in a position to continue to use these operating systems as a driver to being a leader in the technology used in the mobile industry. Motorola and Nokia are both far more recognized brands on the global scale and these partnerships will only enhance that position. Windows Phone: Aside from the new partnership between Microsoft and Nokia, the Windows Phone OS fails to allow HTC to showcase one of its most differentiating features HTC Sense. Multiple Operating Systems: By choosing to offer both Android and Windows Phone devices, HTC has placed itself in a position where it has diversified its risk at the cost of increasing the complexities within the company a great deal. Poor Brand Awareness: Despite having a strong connection with the prosumer market, the HTC brand is still fairly unknown in many other customer segments. This is a liability that could hinder the success of any new developments that may fail solely as a result of a lack of awareness among the consumers in the market. Patent Wars: HTC is involved in a two-way lawsuit with Apple and could stand to lose a very significant amount of money should the lawsuit against HTC be successful. This loss could result in a hike in prices and/or a shrinking of marketing and research and development budgets. Current Challenges & Competitive Position While the HTC One has been received very positively by the market, it is still uncertain as to whether or not this will be sufficient to revive the company and increase its market share up to the point

where it is actually considered a strong competitor to Apple or Samsung. If the company chooses to continue along its current trajectory, its competitive position within the mobile industry will further diminished by the market leaders and may also soon be challenged by the dark horses in the market: Motorola and Nokia. Changing its current trajectory would be an easier task for the company had it not been for the following three key challenges: Duopoly in the Mobile Industry: Between Apple and Samsung, there is a clear trend that for all practical purposes, the mobile device industry is transforming into a duopoly. The more prevalent this transformation is allowed to become, the harder it will be for HTC to carve out a significant share of the market. Poor Performance in the Tablet Market: HTC has failed to establish itself in the tablet market and if this continues, it could result in large losses due to the high bill of materials associated with the manufacture of the tablets. Lowest Aided Brand Awareness: Despite having once been a leader in the market and pioneers of new technology in the mobile industry, HTC saw most of its success during a period of a time when it operated silently behind the scenes. While this may have helped establish the company and drive its initial growth, the lack of brand recognition has resulted in losing out on significant portions of the consumer market purely as a result of a lack of awareness. If HTC fails to address and overcome these challenges, it is certain that it will lose its footing and begin to slip down the ranks of mobile device manufacturers in the world. While some of these challenges may be easier to deal with than others, HTC stands to alleviate the majority of the negative effects of these challenges by effectively leveraging its competitive assets. Recommendations Contract Manufacturing & Expansion Strategy HTCs advantage during its early years in the mobile device industry stemmed from its partnerships with branded device manufacturers and network carriers. Keeping that in mind along with the fact that Apples initial success with the iPhone in North America could be partly attributed to the promotion of the devices by carriers, HTC would do well to establish a partnership with one or more of the carriers to subsidize and heavily promote the companys flagship model. This synergistic relationship between carrier and manufacturer has proven to work in the past as it creates an opportunity for coordinated marketing strategies as it targets the consumer market through the carriers network of existing and potential subscribers.

As for the Asian and European markets, HTC should look to create and promote a new product line at a lower price point. The intention should be for this product line to include both mobile handsets and tablet devices. However, as in the approach that Nike chose for its expansions into different sports markets, the company must first launch its core product (mobile handsets) in these new markets. In addition to this, further discipline and patience must be demonstrated as they should limit the initial launch of these products to a few markets that are representative of certain regions. A key factor that will determine the success of these expansion-oriented recommendations will be the level of consistency in the messaging that surrounds the products across the globe. This will not only help establish a recognizable brand across borders, but also reduce duplication of efforts and in turn reduce the associated marketing costs. OS Strategy While HTC may have the capabilities to develop its own operating system, a key question to be asked is whether or not the world of app development is capable of handling a fourth major platform for development. As in the article Growth Outside the Core, most executives interviewed in the survey stated very clearly that expanding into an adjacent space is not worth the effort if there are low chances of becoming one of the top three in the market. HTC should learn from the failed vertical expansions of other companies in the industry, such as Samsung with its Bada operating system, and display the discipline to not enter into the operating system space. While developing a new operating system may prove to be a strong source of differentiation, a highly differentiated product with minimal adoption is worthless. Being the third significant entrant into the mobile operating system space, Windows Phone suffered greatly despite waiving its initial $99 developer fee to develop apps. There are two key aspects of a smartphone that a customer values the most: a technologically advanced hardware, and a slew of apps that meet the customers needs. With the lack of availability of Windows based phones in the market, there was a low demand for developers to invest in developing apps on that platform. HTC would face a similar challenge if it were to enter into this market a classic Catch-22 phenomenon in this industry you need the apps to get the customers and you need the customers to get the apps. HTC should also choose to discontinue the manufacture of products carrying the Windows Phone operating system. This choice would allow them to cut costs in several different departments - the first and most significant of which is the licensing fee that it is forced to pay Microsoft for each device that it manufactures on this platform. Secondly, this choice will remove the need for the hiring and training of employees who are solely dedicated to the design, production, and support of its Windows devices. This is a strategy that is similar to the strategy used by airlines such as Southwest Airlines and Ryannair which has led them to achieve operational excellence. This single change will

result in significant savings for the company and will allow the company to drive down the prices of its products. Product Differentiation With an increasing number of manufacturers taking advantage of the absence of a licensing fee to use the Android operating system, HTC has found itself appealing to only a small section of the market the prosumer segment. Through the past few product launches, HTC has shown signs of attempting to entice a younger segment of customers through its partnership with Beats by Dr. Dre and its emphasis on social media in its customized user interface. However, these attempts are often futile if the price does not match the affordability of the product in this new customer segment. While the discontinuation of the Windows-based devices will help significantly reduce the average selling prices of the devices, the company should also use these savings as an opportunity to further expand its HTC Sense user interface by acquiring more companies like Dashwire and Saffron Digital. These purchase-oriented vertical integrations in the mobile industry will allow HTC to reappropriate its research and development budget towards improvements to its HTC Sense user interface that have already been successfully developed, tested and preferred. Additionally HTC will allow use its parenting advantages to effectively roll out these new technologies by leveraging its wealth of management expertise and also its key linkages within the mobile technology industry. Tablet Strategy HTCs initial tablet product offerings were consistent with their handset range industry leading technology coupled with a highly customized interface. These design choices proved to be expensive ones and the company was forced to learn the hard way that the tablet market was a completely different beast. Going forward, HTC should abandon the previous approach it took by attacking the premium tablet market and instead take advantage of the increasing demand in the commoditized tablet segment, which is currently dominated by Amazon.coms Ki ndle Fire. HTC should introduce a new budget tablet product line that bears no resemblance to the mobile handsets in design, technology or price. HTCs mobile handsets are priced significantly higher than those of Samsung and the high bill of materials on the tablet line has also forced HTCs tablets to be overpriced. The company should couple the cost savings through the discontinuation of the Windows-based devices and the low costs involved in producing a basic tablet to deliver a strong competitor for the Kindle Fire.