HTC Corp. in 2012 free essay sample

Problem: Unsuccessful differentiation. Although HTC created different kinds of brands for their smartphones it failed to differentiate itself from competitors. It could not market the brand as a unique one in order to conquer customer loyalty as other companies did, such as Apple and Samsung. Hence, the failure of creating brand recognition set them apart from the differentiation strategy they were pursuing. External Analysis General Environment Two factors best describe the general environment: technological and sociocultural. Technological (Technologies are in continuous development, being competitive requires investing in RD and staying up-to-date with the new trends in the industry; it became a need to perform different tasks apart from just making phone calls; innovation, leadership and ability to forecast are key factors in order to be successful in this industry. ) Sociocultural (change in the lifestyle, the need to stay connected any time and any place, the virtual characteristic of the social life (Facebook, Instagram); technology became a component part of people’s lives. All these social trends have shortened the product life cycle and imposed companies to innovate at a faster pace. ) Industry Analysis Porter’s five forces were used to analyze the industry: Barriers to entry – high (Oligopolistic industry few players in the market, probability of success is low, manufacturing process is hardly to imitate) Threat of new entrants – low (High competition, very expensive to run such a business, very risky to enter to. ) Bargaining power of suppliers – high to moderate (Some of the industry players are heavily relying on suppliers while others who are vertically integrated depend less on their suppliers. Industry players rely more on software suppliers than on hardware suppliers; hardware can be replaced and switching cost is low, while the switching cost for software is high because it requires royalty payments. ) Bargaining power of buyers – high to moderate (The distribution channel is composed of mobile phone service providers and mobile devices retail stores. A well known brand it is easy to sell, while a less known one has to be advertised and discounts have to be offered. ) Threat of substitute products – low (No device can totally substitute all of the smartphone’s functions. Even if some devices such as tablets can substitute some of the features, for example the ones regarding multimedia, they cannot substitute all of the features that make the smartphone unique and practical. ) Rivalry – high (legal suits, revenues have increased while profit margins have decreased. ) Based on Porter’s five forces the industry is not attractive, it is already saturated and most of the customers have already demonstrated brand loyalty. Entering the industry is possible only for big companies operating in a related type of business or through mergers or acquisitions. Competitor analysis CompetitorCapabilitiesCurrent Strategy SamsungRD, marketing, global brandDifferentiation AppleReputation, global brand, large number of applications, marketing, OSDifferentiation NokiaGlobal recognition, quality, low cost structure, standardizationIntegrated GoogleGlobal brand, OSDifferentiation ZTE, HuaweiLow cost structureCost Leadership Industry success factors: RD, marketing, branding. Opportunities: growth through business acquisitions, leverage partnership with industry big players, targeting other geographic regions with lower competition and customer loyalty to a certain brand. Threats: fragmentation (automatic updating of different versions of android might be problematic as it was the case before Ice-Cream Sandwich Soft was created, so, such a threat might still occur), change in brand loyalty. Internal Analysis Resources Intangibles – Knowledge, relationship with distributors, human resources, capacity to innovate, synergy through business acquisitions. Tangibles Patents, property plant and equipment, handsets components (chips). Capabilities – manufacturing, management, quality, hardware. Core competencies – ability to manufacture highly customized hardware devices. Value Chain Analysis Regarding HTC’s value chain it is imperative to underline that HTC has a very good relationship with its suppliers and distributors that helped them to enter successfully the mobile devices market. This valuable relationship also helped them to use partners distribution channel to deliver its products timely and at a lower cost. Hence, HTC has excelled only at supply chain management and distribution. Regarding operations the company has increased their production cost due to the large spectrum of handsets they are producing that require the use of different production lines. That’s why the firm should reduce its production lines and focus on certain products that create value for the company, and by doing this it will succeed to achieve specialization and economies of scale. Since the company is among the smallest in the industry, they should marketing and follow-up service would not be their strength due to limited financial resources compared to their competitors. They could use their carriers to do the marketing for them. HTC business level strategy is differentiation, the same as its main competitors: Samsung and Apple. Although they all pursue the same business level strategy, each one of them try to differentiate in their own way: Apple by making use of its OS, Samsung by display, data transfer and connectivity features while HTC is trying to differentiate itself by creating distinct customized handset and by having a different UI (user interface) that have received good reviews by specialists. HTC was always trying to be one step ahead of competitors by continuously innovating their products. HTC are using internal as well as external growth. HTC corporate level strategy is related diversification. Along their history, HTC has proven to pursue this strategy: they have started the business by producing computers, than they switched to PDA, smartphones and lately to tablets, a new trend in mobile devices industry. Also they have acquired different businesses in the related industry to support their business level strategy and corporate level strategy (for example Beats by Dr. Dre, Dashwire and Saffron Digital). HTC is facing serious problems that question the way the company should pursue further in order to survive the competitive battle. Company’s sales have decreased, their differentiation strategy has to be remodeled, decisions have to be taken regarding the tablets market and development of their own Operating System. Also, it has to mitigate problems regarding intellectual property wars. HTC has to address all these problems before preceding any further. Alternatives Several courses of action could be taken by HTC: A possible alternative for HTC is to develop their own OS that will help them to differentiate themselves from competitors and to become independent from the software providers the company does business with, such as Microsoft or Google. A second alternative would be to specialize only in producing tablets and to relinquish the production of smartphones and other devices (downscoping). A third alternative is related to diversification beside manufacturing smartphones they could produce tablets with double operating system – for example (Windows and Android) that will allow the company to offer a tablet with the most available applications and at the same time it will satisfy both types of customers that are accustomed to use one or the other operating system. A forth alternative for HTC would be to focus on their core competency â€Å"the ability to manufacture highly customized hardware devices† and to manufacture handsets for mobile operators under operators brands that will help the company regain their partner’s loyalty by creating superior value for them, offering exclusive products. Evaluation of Alternatives 1. HTC OS – developing their own OS is first of all very costly, it requires significant financial resources to be spent on RD; also, it is risky because customers are very reluctant regarding new operating systems. A new operating system by itself will not bring any value to the company, a significant number of applications have to be developed in order to make the OS attractive for the potential users. 2. HTC Tablets (downscoping) – this would be a great opportunity for the company to become a first mover in this type of mobile devices by creating a solid brand that will acquire customer loyalty and will eventually translate into increased revenues for the company. The risk that lies behind this alternative is uncertainty regarding the market acceptance of the product and brand recognition. Also the alternative is costly to implement. 3. HTC Tablets with double operating system (diversification) – This alternative could be very attractive and generate considerable profits for HTC, double operating system feature will reduce competition and will help HTC achieve comparative advantage. The only problem with this alternative is that it is technologically difficult to implement. The risks related to this type of product should be considered before proceeding with this alternative; new products require long periods of testing and sometimes costumer acceptance is not the same as market predicts. 4. Customized products for telecommunication companies (core competency) – this alternative proposes for HTC to exploit its core capability that made them so successful a few years ago. By customizing products for their partners, HTC will regain the competitive advantage it used to have before. Their business will rely on their capability to manufacture unique devices as well as on building a strong relationship with partners that will help them reduce their costs and increase their profit margins. This alternative will give HTC access to the distribution channel of their partners and it will leave the marketing to their partners. These strategic moves will help HTC to focus on operations and RD, and could take the company ahead of their competitors. Recommendation Taking into account all the proposed alternatives, the best solution for HTC is to proceed with the manufacturing of customized devices for their partners, this alternative already has proven to be successful and differentiated the company from its competitors. In terms of financing and implementation it is the most achievable one.