Strategic Management - Situation in HTC Company - Case Study Example

?Strategic Management Analysis of Strategic Situation of HTC and the Smartphone Industry Table of Contents Introduction 3 Strategic Situation 4 Analysis 6 Industry Life Cycle 6 Porter’s Five Forces 7 Threat of New Entrants 7 Supplier Power 8 Buyer Power 8 Threat of Substitutes 8 Competitive Rivalry 9 Value Chain 10 Scale and Scope 11 Conclusion 13 References 14 Bibliography 17 Introduction The smartphone industry can be regarded to be a rapidly growing industry in the present day context. This industry is likely to continue with the growing trend because of the increasing popularity of smartphones among the customers. Furthermore, the smartphone industrial sector can be characterised as a highly competitive market which is almost occupied by the giant players of this sector (Ko & et. al., 2009). HTC Corporation, which is a Taiwan based company, is quite a prominent brand in the industrial segment of smartphones. HTC attempts to provide personalised user experience to the users and renders significant importance to user opinions and retailers’ recommendations (HTC Corporation, 2012). In the highly competitive smartphone industrial sector, the involved companies are significantly required to form effective strategic plans and for this purpose it is quite essential to identify the strategic position of the company, HTC. This allows the companies to prepare for the future and facilitates them to adapt to frequent changes that generally seem to take place in the smartphone market (Evans, n.d.). Strategic Situation During the recent years, HTC has gained a significant reputation in terms of engineering. HTC has developed a research lab known as the MAGIC labs for innovating and developing new and advanced ideas. The company faces an aggressive competition from Apple and Samsung. However, it has experienced a significant growth after introducing Android, the mobile operating system from Google into its mobiles (Taoyuan, 2012). The figure below illustrates the revenue and the net income earned by HTC during the year 2007-11: Source: (Taoyuan, 2012) The above figure demonstrates the fact that HTC has experienced a growth in income during the recent years. However, it can also be noticed that the company has witnessed a downfall in its earnings or income during the last year i.e. 2011. The reason behind this may be the limited success of the smartphones like Desire and Sensation of HTC due to the aggressive competition from the iPhones of Apple and the smartphones which come under Samsung’s Galaxy line (Standing & Jim, 2011). Analysis Industry Life Cycle Industry life cycle refer to the span of time which starts with the introduction of a company in the market and extends until the company discontinues its business operations. There are essentially four phases in the life cycle of an industry which are the introductory stage, the growth stage, the maturity stage and the decline stage (Komninos, 2002). HTC’s smartphone segment is likely to be in its declining stage. However, the smartphone industry life cycle has noticed a dramatic change after the implementation of Android operating system in the smartphones. This fact can be better identified in the figure below: Source: (Woyke, 2012). Since, HTC is likely to be in the declining stage of life cycle, hence it can be mentioned that the company should attempt to undergo certain significant changes in order to remain competitive according to the market requirements. These changes may include the restructuring of the cost structure and changing the operating system among others. HTC has experienced a significant growth in the earlier phases of its life cycle. However, it is worth mentioning in this context that the company witnessed a sudden downfall in its sales and revenue earnings after its maturity stage. Certain reports state that the revenue earned by the company during the first two months of 2012 was almost 45% less than that of the same period of the previous year i.e. 2011. This aspect indicates that the company is in its declining stage and should implement certain corrective measures in order to adapt to the market environment (Taoyuan, 2012). Porter’s Five Forces Threat of New Entrants HTC, being a prominent name in the smartphone industry, is not likely to face significant threat of losing its customers to the new entrants. There are certain significant barriers which restrict the entrance of new players in the smartphone industry. These barriers may include the amount of capital which is required for the research and development purposes by the new entrants to enter the smartphone market. Moreover, the smartphone market is already occupied by the giant players of this sector which act significantly in preventing the entrance of new competitors. It has been noticed in several cases that the smartphone users often hesitate to switch brands as it can be quite time as well as resource consuming. Hence, HTC would not like to experience the risk of losing its present customers to the new entrants (CAPS, 2010; Ko & et. al., 2009). Supplier Power HTC, being operating in a highly competitive industrial sector, is likely to have insignificant bargaining powers. A considerable cause of the limited bargaining power of HTC can be the elasticity of demand for the smartphones. Moreover, it is quite difficult for the smartphone companies to differentiate from its competitors, which in addition reduces the bargaining power of HTC (CAPS, 2010; Ko & et. al., 2009). Buyer Power The users of smartphones possess a greater extent of bargaining power than the suppliers because of the numerous consumption options that are available to the customers (CAPS, 2010; Ko & et. al., 2009). Threat of Substitutes Similar to other smartphone companies, HTC is also faced with the threat of substitutes. There are quite a numbers of substitutes of smartphones which include cellular phones, Tablets and Laptops among others. These substitutes seem to provide certain facilities to the customers that they expect from a smartphone (CAPS, 2010; Ko & et. al., 2009). Competitive Rivalry It can be stated that the smartphone industry is likely to consist of a moderate rate of rivalry. However, HTC may face sharp competitions from the major players of the smartphone industry such as Samsung and Apple (CAPS, 2010; Ko & et. al., 2009). Value Chain According to the conventional view, the value chain of a company essentially includes two kinds of activities known as the primary activities and the support activities. Primary activities consist of inbound logistics, operations, outbound logistics, marketing and sales and other services. Similarly, the support activities include infrastructure, human resource management, technology development and procurement. This can be better understood by the figure below: Source: (Food and Agricultural Organisation of the United Nations, 2012) The value chain of the mobile phone industry essentially consists of certain major factors such as the operating system, the telecommunication provider and the brand firms. These few factors have the major capabilities making a company to be competitive in the market sector in terms of technology standards of the products (Chiou, 2010). HTC has been a prominent player in the smartphone industry and is widely recognised for its engineering. HTC has developed its own customised lab known as the MAGIC labs for its technological development. However, certain investors have stated that the company has not introduced significant changes in its design within the past two years and needs to bring about certain changes in order to remain competitive in the market (Standing & Jim, 2011). The company has introduced new marketing strategies recently for the promotion of its latest products such HTC One X and HTC One S. These strategies include advertisements with real people who are utilising the company’s products in real life situations. The company has been utilising several media such as social media and retail channels for its advertisement procedure (C Squared Holdings, 2012). HTC is likely to implement both push selling and pull selling as its sales strategies. HTC provides significant importance to the training of the sales force who communicates with the customers in the stores of HTC and for this reason it provides specialised training team to the stores (Kleinmann & et. al., 2012). Scale and Scope HTC has been noticed to provide considerable importance to the quantity of the products. Nevertheless, recent reports of the company state that in this year i.e. 2012, the company will attempt to emphasise more on the quality of the products rather than the variety of products. In this context, it is likely to reduce the scale in terms of the number of available smartphones. However, HTC has decided to increase its scale in terms of shipments. The company has announced to increase the number of shipments to 45 million units in 2012 whereas the in the previous year, i.e. 2011 it was 25 million units. It is worth mentioning that with the introduction of Android operating system into its smartphones, HTC is likely to have significant opportunities in the growing smartphone market. Certain researches have stated that the smartphone category will occupy about 30% of the total mobile phone market by 2012. This fact depicts the opportunities that are available to HTC in the present day context. The introductions of 3G as well as 4G technologies have also increased the opportunities that are available to the company. Conclusion The smartphone industry is a highly growing industrial sector in the present day context. HTC can be regarded to be among the major players of this sector. However, it has been noticed to demonstrate a declining trend in terms of its various business operations and can be considered to be in the declining stage of its life cycle. HTC is likely to operate in a highly competitive market and consequently faces a significant competition from the major players. As a result of the various options in terms of smartphones that are available to the customers, HTC is likely to face difficulty to differentiate from its competitors. Furthermore, the company has implemented various new marketing techniques which would increase the popularity of the brand in the smartphone market. References CAPS, 2010. Michael E. Porter's Five Forces of Competitive Position Model and Diagrams. Porter's Five Forces Model. [Online] Available at: http://www.caps.am/data.php/879.pdf [Accessed June 14, 2012]. Chiou, C., 2010. Dynamic Capabilities, Collaborative Network and Business Model: An Empirical Analysis of Taiwan HTC Corporation. Collaborative Network. [Online] Available at: http://www.academicjournals.org/AJBM/PDF/pdf2011/18Jan/Chiou.pdf [Accessed June 14, 2012]. C Squared Holdings, 2012. HTC Kicks Off New Marketing Strategy. News. [Online] Available at: http://www.mandmglobal.com/news/30-03-12/htc-kicks-off-new-marketing-strategy.aspx [Accessed June 14, 2012]. Evans, M. H., No Date. Preliminary Considerations. Strategic Planning. [Online] Available at: http://www.exinfm.com/training/pdfiles/course10.pdf [Accessed June 14, 2012]. Food and Agricultural Organisation of the United Nations, 2012. Value Chain. Dagmar Recklies. [Online] Available at: http://www.fao.org/fileadmin/user_upload/fisheries/docs/ValueChain.pdf [Accessed June 14, 2012]. HTC Corporation, 2012. HTC Company Origins and Point of View. Company Overview. [Online] Available at: http://www.htc.com/in/about/ [Accessed June 14, 2012]. Ko, A. & et. al., 2009. Industry Analysis. Google Phone Positioning Strategy. [Online] Available at: http://www.mcafee.cc/Classes/BEM106/Papers/2009/GooglePhone.pdf [Accessed June 14, 2012]. Komninos, I., 2002. Product Life Cycle Model Description. Product Life Cycle Management. [Online] Available at: http://www.urenio.org/tools/en/Product_Life_Cycle_Management.pdf [Accessed June 14, 2012]. Kleinmann, T. & et. al., 2012. HTC Marketing Plan. GRIN Verlag. Standing, J. & Jim, C., 2011. HTC To Tough Out Slowdown As Strategy Doubts Grow. Article. [Online] Available at: http://www.reuters.com/article/2011/11/28/us-htc-idUSTRE7AN00S20111128 [Accessed June 14, 2012]. Taoyuan, 2012. After A Swift Rise From Anonymity To Omnipresence, The Taiwanese Mobile-Phone Firm Has Stumbled. Time To Get Back On Track. The Brand From Nowhere. [Online] Available at: http://www.economist.com/node/21552206 [Accessed June 14, 2012]. Woyke, E., 2012. Apple And Google Seek To Defy 10-Year Smartphone OS Life Cycle. Forbes. [Online] Available at: http://www.forbes.com/sites/elizabethwoyke/2012/01/20/apple-and-google-seek-to-defy-10-year-smartphone-os-life-cycle/ [Accessed June 14, 2012]. Bibliography Books LIc, 2010. HTC Corporation: Touchflo 3d, Htc Touch Family, Htc Sense, Dopod. General Books. Dziri, R., 2011. Avoiding Strategic Drifts in a Hypercompetitive Market: Analysis of Nokia’s Position in the Mobile Phone Industry and Suggestions. 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