Analysis of the Strategic Situation of HTC, the Mobile Phone Handset Firm - Report Example

Analysis of the Strategic Situation of HTC, the Mobile Phone Handset Firm Table of Contents Introduction 3 Porter’s Five Forces Model 4 SWOT Analysis6 PESTEL Analysis 7 Value Chain Analysis 9 Industry Life Cycle 11 Scale and Scope 11 Conclusion 12 References 14 Introduction HTC Corporation was established in the year 1997 and was initiated as one of Taiwanese firms that creates and makes goods sold under other umbrella brands. HTC prepares products sold under other brands that belong to mobile phone operators and computer-designers. It is recognised as a manufacturer of a number of preferred OEM-branded devices of mobile phone. HTC is guided towards attaining excellence in its provided products/services by keeping in focus the requirements of the customers as its topmost precedence (HTC, 2012). The main objective of the paper is to undergo strategic situational analysis of HTC which is a mobile phone handset firm. It will attempt at preparing a SWOT analysis of the company. The study will also focus upon Porter’s five forces model as well as industry life cycle analysis. In order to comprehend the resources held with the company, the study will make use of the value chain analysis. PESTEL analysis will be conducted in order to comprehend the macro environmental factors affecting the products and the services of the company. Porter’s Five Forces Model In order to recognise the competitive scenario of the smartphone industry in which HTC operates, the Porter’s five forces analysis can be quite applicable. Entry Barriers There are several barriers that prevent companies from entering into the smartphone industry. A few of the barriers that may work in favour of HTC need to be determined. High fixed cost, which is required for research and development, is considered to be one of the biggest barriers to entry into the industry. High brand recognition of the established companies is considered to be other barrier to entry for the new firms since people prefer to purchase goods from those companies that they trust (Scribd, 2012). Bargaining Power of Buyer It has been observed that the bargaining power of the buyers of smartphone is quite high. There are innumerable substitutes available in the smartphone industry. The product differentiation is quite low in comparison to the competitors. The demand for smartphones is generally elastic because of the fact that they are not indispensable products (Scribd, 2012). Threat of Substitutes Products There are various substitutes available for smartphones which are generally utilised for mobile phone’s admittance to information. There are a few substitute products available in the market, which include laptops, cell phones, pagers and organisers. The cellular phones as well as laptops offer the services that are needed by most of the customers in terms of access to information for the consumers. The different complements that the consumers can use for the smartphones are e-mails along with maps, internet applications as well as software that are available over the phones (Scribd, 2012). Rivalry There is high competition in the smartphone industry and even though there are few strong competitors, the industry does not endorse numerous organisations. This is because of differentiation. Although there is greater differentiation between the casual as well as the professional users for smartphones there is limited capability to differentiate it. There is negligible scalability in order to generate more number of software by not directing the market to a small number of firms (Scribd, 2012). When customers purchase a regularly utilised product, they tend to put greater emphasis upon quality instead of price. There is minimum differentiation for price and the companies with recognized low quality as well as fewer budgets for research and development will face difficulties in competing within the market. Bargaining Power of the Suppliers The phones are normally assembled making use of the components from numerous suppliers. Original Equipment Manufacturer (OEM) has the intellectual property for the components of HTC. The company is capable of switching among distinct suppliers because of this arrangement (Scribd, 2012). SWOT Analysis Strengths The major asset of the company, HTC has been its focus upon the research and development. The company has employed nearly one quarter of its employees in research and development activities. It possesses multiple state of the art innovation centres. The brand is well recognised by the end users. The company chooses the right partners to cooperate with in order to penetrate into the market with low risks (Scribd, 2012). Weaknesses Owing to the customisation requested by the operators in the past few years, it has been recognised that the cost of the products escalated and thus minimised the profit margin of HTC. Many customers are not well aware of the brand and thus HTC lacks brand image in comparison to its competitors such as Apple, Samsung and Nokia among others. The Android applications domain is not controlled properly because it is an open source. This is likely to put at risk the security of the system by permitting the malicious suppliers to inject viruses as well as malware in the system (Scribd, 2012). Opportunities The demand for smartphone in most of the emerging countries is surmounting which can be considered as a strategic window that needs to be leveraged by HTC. The professional segment of users remains indefinable for the smartphone companies. HTC can profitably create differential advantage in this segment (Scribd, 2012). Threats Like numerous players in the marketplace, HTC is not protected from competition. More investments in technology and innovation are required which becomes a major threat for HTC. The product life cycle of smartphones is getting relatively shorter because of the introduction of new models of devices at short span of time. Therefore, it can result in increasing the need for making sustained and fast transitions within mobile phone handset devices to keep up with the competitors’ developments (Scribd, 2012). PESTEL Analysis Political Factors The smartphone industry is quite dependent upon the rules and regulations set by the telecom industry. Smartphone companies are required to abide by the governmental policies to ensure that the infrastructure of the telecom sector is created actively (Scribd, 2012). Economic Factors It can be mentioned that the mobile phone companies are impacted by the economic situation in a country. It is because of the economic downturn in recent years, there has been decline in the sales of smartphones since people are likely to keep making use of their existing phones or might purchase phones with less features in view of the fact that the smart phones are quite expensive. Social Factors Smartphones are considered as a fashion icon by most of the users. The demographic analysis of the smartphone companies demonstrates the fact that most of the smartphone users are male belonging to the age group 30-45. The smartphone is generally famous among the college educated as well as wealthy people (Scribd, 2012). Technological Factors In smartphone industry, innovation helps in differentiating the product. In the near future, most of the companies are likely to patent their technology which will escalate barriers to entry of the firms. Furthermore, Android, which is open source operating system, has facilitated in creating a rush in applications for creation for smartphones (Shen & Shen, 2012). Legal Factors The regulatory bodies held in different countries might limit the usage of few products that constraints the growth of market. However, the countries possessing patent protection can be quite healthy for market competition. A few countries such as China confront complexities in enforcing laws thereby making it difficult for recognised brands to grow their markets (Trefis, 2012). Environmental Factors In the European Union, the manufacturers of smartphones need to comply with the Waste Electric and Electronic Equipment (WEEE) Legislation. Such law forces them to create environmentally friendly manufacturing practices. This has led most of the companies to create green image. Consumers are focusing more on the green aspects and thus desire to select the brand that they believe as being environmentally friendly or concerned towards ensuring environment friendly products (Jain & Jain, 2012). Value Chain Analysis By conducting an analysis of the status of the value chain of the HTC, the effect of globalisation upon the value chain can be identified. The value chain can be divided into two groups namely the primary activities and the secondary activities. The primary as well as the secondary activities related to HTC has been transformed because of globalisation phenomenon. It can be analysed that because of the globalisation related attempts, the company receives the raw materials from numerous countries of the world. It offers HTC to attain high quality raw materials at relatively low costs. The company operates in more than forty countries of the world and is looking for opportunities to expand further. The effects of globalisation on the marketing as well as the sales of HTC as its most significant component of value chain consist of the fact that the marketing executives need to devise integrated marketing communication strategies in all the countries that it operates while considering the cultural differences as well as divergences in the perception in each one of them (Yoffie & Kim, 2009). The group of employees at HTC encompasses people of numerous nationalities from distinct countries of the world who have been recruited in order to attain the objectives of the organisation. They are supposed to create value for the company irrespective of the department of the company in which they work. This scenario is highly advantageous for HTC in relation to the situation where it had to select the candidate only among the local applicants in Taiwan (Standing & Jim, 2011). It is to be noted that HTC has been the foremost company in order to create phones that are based upon Google’s Android mobile operating system. It was in the year 2010, when the company launched the EVO, which is the inaugural phone in the globe to obtain benefit of 4G network technology (Technology Review, 2012). The management of HTC stated the fact that the shipment of its goods in the near future will be inspected by customs because of the order that has been issued by the International Trade Commission (ITC). In order to preserve the brand image, HTC sells its products through first-party establishments or by means of authorised retailers (Scribd, 2012). Within the periphery of provided services, it can be analysed that the HTC repair department is available all round the day. A customer is supposed to fill up the online form in order to notify the company regarding the problems that he/she are facing (HTC INC, 2012). HTC outsources its production to the third party OEM partners so that they can effectively make use of their economies of scale and minimise the burden related to production management from HTC (Macworld, 2012). Industry Life Cycle The smartphones segment of HTC can be stated to be at a declining phase in the industry life cycle parlance because the strategies implemented by the company lacked certain aspects in terms of drawing consumers towards its product. The sales and the revenues of the company have been declining in the present times and thus it is significant for the company to prepare its strategies in order to maintain its sales as well as revenues and thus remain competitive in the market. It needs to make its product more standardised (Scott Taylor, 2012). It has been noted that the net profit of HTC has declined in the first three months of the year 2012 by 70% which demonstrates a significant downfall in terms of profitability of the company (Phys, 2012). It needs to revise its strategies that have been quite ineffective for the company and thus prepare new ones to escalate the sales and revenues (Ferreira, 2011). Scale and Scope The smartphones are becoming an alternative to laptops as well as Personal Digital Assistants (PDAs) offering numerous features to the customers. By the end of the year 2015, it has been expected that the smartphone revenues will be approximately 75.8% of the total mobile handset revenues at nearly US$258.9 billions on a global basis (Markets & Markets, 2012). In the present times, the smartphones are experiencing high growth because of numerous reasons such as lower product cost, expansion related to international mobile email as well as browsing services, introduction of the 3G as well as 4G network technologies along with the standardisation along with improvement of operating system. Hence, it can be stated that there is huge growth potential in the smartphone market. HTC needs to prepare its strategies cautiously and astutely so that it can take the opportunity to escalate its growth in the market (The Economist, 2012). Conclusion In order to remain competitive in the marketplace, it becomes quite essential for the companies to prepare their strategies that can assist in maintaining competitive advantage. It is quite significant for HTC to concretise its brand by creating a service oriented model in relation to its products so that the customers’ receive a unique customer experience. It must also create a security layer so that it can make use of the Android system so that the products become quite vigorous. In order to maintain the competitive advantage, it is quite important for the company to focus upon the creation of its own applications so that it can improve the experience of the customers. It needs to tap those markets where there is high growth prospective and must create good relation with the suppliers. By promoting its products at local as well as global levels, the company can enhance the brand awareness among the customers. The company needs to position its product as offering affordable phones to the customers which will assist in escalating the sales and the revenues of the company because people from all income groups would be capable of purchasing it effectively. These recommendations will assist HTC at maintaining long-term sustainability in the market. References Ferreira, A., 2011. Android OS Changes Smartphone Life Cycle. Home. [Online] Available at: http://www.theusdvista.com/business/android-os-changes-smartphone-life-cycle-1.2000033#.T-hG8RecCIU [Accessed June 25, 2012]. HTC, 2012. HTC Company Origins and Point of View. Smartphones. [Online] Available at: http://www.htc.com/in/about/ [Accessed June 25, 2012]. HTC INC, 2012. HTC Repair. Home Delivery. [Online] Available at: http://www.htcinc.net/contact-repair.cfm [Accessed June 25, 2012]. Jain, N. & Jain, P. K., 2012. Mobile Applications Stores. HTC. [Online] Available at: http://www.scribd.com/doc/53125031/Mobile-Application-Store [Accessed June 25, 2012]. Macworld, 2012. Apple Lawsuit Doesnt Slow HTC Smartphone Sales. IOS Central. [Online] Available at: http://www.macworld.com/article/1150905/htc_sales.html [Accessed June 25, 2012]. Markets & Markets, 2012. Mobile Phone & Smartphone Market Global Forecast (2010-2015). News. [Online] Available at: http://www.marketsandmarkets.com/Market-Reports/smartphone-market-219.html [Accessed June 25, 2012]. Phys, 2012. Taiwans HTC Says First Quarter Profit Down 70%. Business. [Online] Available at: http://phys.org/news/2012-04-taiwan-htc-quarter-profit.html [Accessed June 25, 2012]. Standing, J. & Jim, C., 2011. HTC to Tough Out Slowdown as Strategy Doubts Grow. Articles. [Online] Available at: http://www.reuters.com/article/2011/11/28/us-htc-idUSTRE7AN00S20111128 [Accessed June 25, 2012]. Scott Taylor, 2012. Strategic Analysis. Analysis. 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[Online] Available at: http://www.trefis.com/stock/nvda/articles/125657/htcs-exclusion-from-windows-8-launch-has-little-impact-on-nvidias-tegra-sales/2012-06-11 [Accessed June 25, 2012]. Yoffie, D. B. & Kim, R., 2009. HTC Corp in 2009. Product. [Online] Available at: http://hbr.org/product/htc-corp-in-2009/an/709466-PDF-ENG [Accessed June 25, 2012]. Read More