Introduction and Company Overview
HTC Corporation is a smartphone manufacturer which was founded by Cher Wang, HT Cho, and Peter Chou in Taiwan in 1997. The company use HTC as its name behind many of the most famous operator-branded devices on the smarphone market. Since 2006, HTC promoted its HTC brand and brought its products to market through established unique partnerships with key mobile brands which include the leading four in the US, the top five operators in Europe, and many fast-growing Asian operators (HTC, 2011). HTC’s headquarter is located in Taiwan and key operation centers in Taiwan, USA, United Kingdom, and China. In addition, these centers not only ensure the ability to enhance relationship with customers and service clients, but also maintain a presence in 21 key markets, which include the United States, the United Kingdom, Germany, France, China, Japan, Italy, the Netherlands, Belgium, Poland, Denmark, Russia, Singapore, Thailand, the Philippines, Indonesia, India, Malaysia, Australia, the United Arab Emirates (UAE) and Brazil. Moreover, it holds distinct and strong competitive advantage in the smartphone industry in design, innovation, and development due to provide good experiences for its customers (HTC Corporation, 2009). Recently, HTC has been honored with the highest industry honor as “Device Manufacturer of the Year” by the GSM Association (GSMA) in February 2011 (GSMA, 2011).
If you need assistance with writing your essay, our professional essay writing service is here to help!Essay Writing Service
Strategic History of HTC
Since HTC was founded, it has gone through three comprehensive realignments which include Professional PDA Designer, Smart Phones, and Global HTC Brand. By 1997, HTC was authorized to develop products using Windows® CE and developed the world’s first handheld personal data assistant (PDA). Furthermore, this also represents HTC’s positive first step to establish an important strategic partner with the Microsoft Corporation and built the solid foundation for future growing and flourishing. Besides, HTC make the Compaq iPAQ for the Compaq Computer Corporation to reach huge market success in 2000. It means the initial growth and success of HTC in the PDA segment (HTC Corporation, 2009).
In 1999, the president of HTC Peter Chou perceived the mobile telecommunication products would play increasingly important role in daily life. And saw the GSM standard would form Europe to dominate the worldwide market. He made a decision to take the company rapidly into the telecommunications stage which became the second major realignment of HTC. He subsequently visited Europe’s largest telecommunications companies to discuss an innovative new approach for the wireless communication market. In 2002, through making the partnership with O2 (UK) and Orange (France), HTC launched two new mobile wireless devices, the O2 XDA and Orange SPV which based on Microsoft’s operating system and broke new ground for the mobile industry. These new mobile devices not only helped telecommunication service providers boost average revenue per user (ARPU) rates, but also earned worldwide attention. In this regard, HTC did effort to understand customers’ telecommunications service needs and developed “customized” mobile phones. Therefore, HTC built out critical support sales and service networks and strategic moved into the global telecommunications market (HTC Corporation, 2009).
The third major realignment of HTC is the formal launched the HTC brand in May 2007. Soon after, HTC launched the HTC Touch and the world’s first 3D touch screen interface mobile which placed HTC outstand over touch screen smartphone worldwide. In June 2009, HTC Sense which is a new mobile phone experience designed to met user’s needs, habits, and expectations at heart. HTC integrate this concept on the Google’s Android operating platform to develop the first model, HTC Hero which created new potentials and won the award “Best Mobile Handset or Device” for the company. In the same year, HTC launched the slogan “Quietly Brilliant” and a new full series of YOU campaign, in order to raise awareness for the HTC brand and enhance overall brand value. The promotion activities campaign worked successfully and not only allowed HTC to win the award “Device Manufacturer of the Year” in 2011, but also came from unknown zero to mainstream hero in the industry around the world (HTC Corporation, 2009).
Mission Statement and Strategic vision of HTC
HTC’s mission statement is to become the leading innovative supplier of mobile information and communication devices by providing value-added design, world-class manufacturing and logistics and service capabilities (HTC Web Mission, 2011). HTC’s strategic vision is to further reduce the distance between people, facilitate the management of information, and reinforce users’ communications and lives (HTC Corporation, 2009).
HTC’s Business Level Strategy
The business level strategy of HTC is focus differentiation strategy. HTC implement it through two main strategies which are brand strategies and competitive factors. Regarding to Brand Strategies, HTC focus on smartphone market, and wants to be the leaders in Microsoft operating system and Google’s Android platform. Besides, HTC tries to built up brand value through keeping launch innovative products and friendly user interface, and rapidly response to the market change due to deliver product diversification to meet market’s need (HTC Web Strategy, 2011).
The second strategy t is competitive factors which include the factors beneficial to HTC’s developmental vision, and negative factors for HTC’s developmental vision and countermeasures. HTC indicate that the factors beneficial to HTC’S developmental vision includes work closely with the industry leaders to facilitate change of trends, cooperative teamwork, good execution, implements of global operation and cost control, strategic partnerships with the world’s industrial leaders in telecommunications help understanding of customer’s needs, and continual market expansion, particularly in the 3G platform market which is beneficial to the demand of data transmission. Therefore, HTC will keep maintain these factors to create competitive advantages for the company. On the other hand, HTC would find out some countermeasures to deal with the negative factors for HTC’s developmental vision which includes more competitors jump into the smartphone market and global economic weakness (HTC Web Strategy, 2011).
Strategic History of the Smartphone Industry
Smartphones have already played an important role in people’s lives. They not only make a revolution in the mobile phone industry, but also change the method people use the computer. (Weber, 2009)Through the technology continually improve and several changes of environment, such as built up the internet infrastructure, establish mobile telecommunication standard, innovation of friendly interface, and so on; the mobile phone evolve to smartphone. Smartphone similar the personal computer and it provide information management, phone call, and surf the internet as a one stop solution (BusinessDictionary.com, 2011).Therefore, the evolution of telecommunication standard and the use of operating system in mobile devices affect the strategy made by those big players in the industry. There are several significant events present as follow: (GSM Association, 2011)
The evolution of telecommunication standard:
In 1989 the GSM standard is the internationally accepted digital cellular telephony standard.
In 1994 GSM Phase 2 data/fax bearer services launched
In 2000, First commercial GPRS services launched.
In 1995, Global GSM subscribers exceed 10 million Fax, data and SMS services started, video over GSM demonstrated.
In 1999, the first Release of the third generation specifications was essentially a consolidation of the underlying GSM specifications and the development of the new UTRAN radio access network.
In 2002, the first Multimedia Messaging Services go live. First mobile camera phones launched.
In 2005, the first HSDPA network goes live.
In 2007, the further HSDPA network launches and introduction of HSUPA.
Source from http://www.gsmworld.com/about-us/history.htm
The use of operating system in mobile devices: (HTC Corporation, 2009)
In 2002, HTC launched the first Microsoft powered Smartphone
In 2007, Apple launched the I-Phone with its owned operating system iOS.
In 2008, Google released the first open source mobile operating system, Android to smartphone manufacturers.
In 2009, HTC launch the HTC Dream which was the first cell phone to feature Google’s Android software operating system.
Implementation of Porter’s Five Force Model in Smartphone Industry
According to Hill and Jones (2008), Michael E. Porter’s Five Force Model could use as a tool to help HTC Corporation (HTC) identify the relative attractiveness of the Smartphone industry. In order to acquire competitive advantage over such five competitive forces, HTC has to provide additional values to its products. Thus, analyzing and constructing HTC’s value chain in term of Porter’s Five Forces Model is very important to evaluate activities that add value to its products and identify additional value to its products.
Risk of Entry
-Economies of Scale
Rivalry among Established Companies
-Apple, Nokia, and RIM
– Industry Competitive Structure
– Industry Demand
The Bargaining Power of Suppliers
-Many hardware vendors
-Software can be developed by itself or provided by 3rd party
The Bargaining Power of Buyers
-Many Brands for choice
Risk of Entry by Potential Competitors
Risk of entry by potential competitors comes from offering more functional and personal products with low cost and better networking service in Smartphone industry. However, Risk of entry by potential competitors in this industry is low because numerous barriers prevent entrance into the industry which is created by existing players through their strategy and extremely investment. These barriers are shows as follow.
Our academic experts are ready and waiting to assist with any writing project you may have. From simple essay plans, through to full dissertations, you can guarantee we have a service perfectly matched to your needs.View our services
Economies of Scale
The fixed cost and the investment of the necessary research and development in Smartphone industry are very high. For instance, HTC invested $280 million in its research and development in 2009. In addition HTC regularly invests its research and development around 5% to 7% of total revenue annually (HTC Corporation, 2009). Thus, economies of scale foe new entry has to be achieved a large volume for spreading the costs to make profit (Hill & Jones, 2008).
It is difficult for new entrants to expand market share from established companies which have significant brand loyalty (Hill & Jones, 2008). According to the new research report form YouGov’s Technology and Telecoms Consulting Team, it shows that 81% of Apple owners would stick with the Apple brand and 50% of BlackBerry Smartphone owners and 44% of HTC owners were likely to make repeat purchases (Atkinson, 2010). In this regard, establishing the reputation of firms to enhance its brand loyalty and take away market share from existing own-brand companies is very difficult for new entrant in this industry.
Rivalry among Established Companies
The competitive force of rivalry among established companies in the Smartphone industry is very high. For instance, Apple’s legal strategy tried to blunt HTC’s rise through the lawsuit (Einhorn, 2010). In this regard, Apple’s aggressive offensive actions and HTC’s defensive countermoves illustrate the strength of rivalry of the Smartphone industry. Here are some factors to explain the rivalry among established companies and present as follow.
Industry Competitive Structure
Currently, the primary players of the Smartphone industry consisting of Nokia, Research In Motion (Blackberry), Apple, HTC, Samsung, and Motorola. According to IDC, a market research firm, has announced the market share of Smartphone vendors separately are Nokia (32.7%), Apple (17.4%), RIM (15.3%), Samsung (8.9%), HTC (7.2%), and others (18.6%) during the third quarter of 2010 (IDC, 2010). Therefore, similarity market share of these company results in high competitive structure in Smartphone industry.
The level of industry also determines the intensity of rivalry among established companies. Growing demand of the industry makes the competition of existing companies tend to moderate (Hill & Jones, 2008). According to the IDC report, it indicates the Smartphone market has grown up to nearly ninety percent from 2009 (IDC, 2010). Due to industry demand keep growing, we can say the intensity of rivalry in the Smartphone industry is tending to moderate
The Bargaining Power of Buyers
Smartphone’s buyers include carriers, retailers, and end individuals. The buyer power is moderately high because its customers have many other choices like Apple, RIM, HTC, Samsung, Motorola, Nokia, and so on. Consumers will stop using HTC’s handsets if their quality, service and feature are less attractive than others. Besides, we list several factors relative power of buyers as below.
There are limited differentiations of Smartphone products. Many Smartphone manufacturers use different operating system to produce similar interface of their products (Costello, 2010). Moreover, more choice of products and limited differentiation result in high bargaining power of buyers
Due to the transparent information of Smartphone, buyers can easily research capabilities of Smartphone products and gain the information, such as price, speciation, and feedback from others for purchasing comparison.
Switching costs should depend on the different partnership between the carriers and manufacturers and what type of mobile plan they provide. Take Apple and AT&T as example. If a customer wants to switch to the latest IPhone 4, he only needs to pay $199 USD for the device with 2 years AT&T’s contract (AT&T, 2011). It is easy to save time and price to low the switching costs. Thus, switching costs are low.
The Bargaining Power of Suppliers
The primary suppliers of Smartphone industry can be classified into two major groups which are hardware providers and software providers. The hardware suppliers include display, camera, housing, memory, battery, GPS/Wi-Fi/Bluetooth, and so on. Thus, there are so many venders for hardware components. However, the Smartphone processors are manufactured by a few companies, such as Qualcomm. Besides, all of processors’ CPU design is licensed from the ARM- the CPU design company in UK (Gillooly, 2009). Hence, we do believe the bargaining power of the hardware suppliers is moderate.
On the other hand, most of Smartphone’s operating systems are open source platform, like Nokia’s Symbian, Google’s Android, Apple’s IOS, Blackberry’s RIM, Windows Mobile, and Linux (Shah, 2010). These open source platform not only make Smartphone manufacturers develop their own software or application in its products to reduce cost, but also allow third party software company to design specialist application for these operating system to increase its function and value. For example, HTC designs and produce phone using Google and Microsoft software as its operating system to reduce its reliance on outside developers (Culpan, 2010).
Substitute products of Smartphone are those technology productions, such as laptops, netbooks, PDAs, and tablet PCs. However, the power of the alternatives is low because those technology productions just have individual function in terms of substitute productions. Furthermore, Smartphone do wide variety functions, such as work everywhere via Wi-Fi network or GSM network, and Global Position system. Most importantly, people can access the company data anywhere and anytime via Smartphone without miss a beat wherever they are. Nowadays, all features and conveniences which Smartphone have could against the functions of the laptops, PDAs, and even GPS (Hill F. , 2008).
Driving forces for Smartphone industry
Growing use of the internet and emerging new internet technology applications
The mobile Internet is growing so fast. There is about 500 million people use the mobile internet worldwide in 2009. The Smartphone will be the most popular method to access the internet than PCs in the next few years. There are more and more people want to have Smartphone instead of desktop or laptop. “In Egypt and India this is 70 percent and 59 percent of mobile internet users are mobile-only. Even in the US it is 25 percent.” (MobiThinking 2010). Now there are about 150 million presently users log in Facebook from mobile devices. “People use Facebook on their mobile devices are twice more active on Facebook than non-mobile users.”(Mobithinking 2010) These make the reason of the Smartphone growth very fast recently.
Product innovation is always the important part of industry life. Customers always want to have the new and efficient products and industry always need to develop and innovate the products that meet the customers’ needs. In the mobile phone industry, People used to use the mobile phone as oral communication. After that people start to use the mobile phone to memory some of the data such as pictures, songs, phone book and address book. Mobile phone was becoming a small personal memory book. Now mobile phone is also called as Smartphone that combine with operating system and become very small PC in your pocket. Smartphone can be use as GPS, access the internet, download, games, and translate language. Therefore, the Smartphone industry should be always consider innovation as primary objective. (HTC Corporation, 2009)
Changes in who buys the product and how they use it
The target market of the Smartphone is young generation. There are two parts of the young generation that are college students and fresh graduates. College students want to have Smartphone. According to the researcher at Ball State University, there are 49 percent students own a Smartphone at college in 2010, compared with 38 percent in 2009. The 97 percent of students use text messages for their primary communication method and 30 percent of students will use email to communicate to each other. There are about 90 percent of Smartphone users that use their phone to surf the internet. About 97 percent of the users will take and upload photos and 87 percent of the owners will look at videos and upload videos by their Smartphone. (Kelly Truong). Fresh graduates need a Smartphone, too. Fresh graduates continue their habits from the college, but they use their Smartphone on the different way. They use their Smartphone for their work in order to have more efficient than others. The Smartphone can help them check their email anywhere, stay in touch with their office and update the news from office quickly.
Increasing globalization of Smartphone industry
The demand of the Smartphone is growing rapidly worldwide, because of mobile internet becomes more popular. “Gartner expects the worldwide touch-screen mobile device market to top 362.7 million units in 2010, an increase of 96.8 percent over 2009 sales of 184.3 million units.” (Michelle Maisto). More and more people start to buy a Smartphone, because of the trend market. Smartphone is going to instead of the traditional phone.
Changing societal concerns, attitudes, and lifestyles
Smartphone changes the way people used to be. First, the communication between the people is changing. People use social media to communicate to each other. “Facebook user base has risen to 430 million year-over-year, roughly the same increase as QQ in China. Twitter, while sporting only 58 million users experienced a 1238% year-over-year growth rate. Facebook now dominates in chat, messaging, video sharing, games, VoIP and more. “(MobileBeyond). People want to check the social media instead of text message and give a phone call. For example, Facebook shows a lot of information that people want to express for their days and also upload their photo to their friends. Smartphone can give people to see the latest news from the social media anywhere and anytime. Second, the lifestyle is going to change. People used to go to the bank to make transaction and deposit the check. After we have Smartphone and internet, we can just take a photo with check and upload to your bank. Finally, the attitude is going to change. People used to buy the products and compare the price in the different stores. It was not convenient and efficiency way to shop. Now you can easily to check the price of the product by using Smartphone that can help you make the right decision to shop. Smartphone is changing our lifestyles, attitudes and societal concerns.
Industry life cycle
There are five stages of the industry life cycle. In the embryonic stage, the industry starts to begin and develop the product to the public. In the growth stage, the company produces more products and increases the market share. In the shakeout stage, some of competitors start to see the opportunities in this market. In the maturity stage, the product price is stable and more competition comes to market. In the decline stage, the sale of the product decreases until the product innovation or discontinue in the market. The Smartphone industry is in the growth stage. The demand of the Smartphone industry is growing rapidly and there are only few competitors in this market. (Hill & Jones, 2008).
The value chain is that an organization creates value by performing a series of activities and it represents how each competitive advantage created via an organization adds value to the service or product for each customer. In the HTC Company, R&D, Production, Marketing & Sales, Customers Service and Human Resource are adding the value to their company. (Hill & Jones, 2008).
Research and Development
HTC extremely concerned about research and development department. In 2009, HTC has nearly one-third of R&D personnel which in total HTC personnel. They also invest in R & D development about 5% to 7% of the total revenues. HTC also pay attention on their innovation and design. HTC introduced the world’s first Android Smartphone in the Android operating system. After that, HTC also develop the new 4G high speed Smartphone that customer can download or upload their games, picture, video and mobile multimedia fast than before. (HTC Annual Report)
In 2010, HTC introduce the world’s first windows phone which is HTC HD2. HTC HD2 has a capacitive touch screen interface and 1 GHz processor. It allows consumers to enjoy the fast and smooth touch experience and quickly respond to every touch of the action which is a major breakthrough for Windows Mobile phones. It is the world’s first embedded HTC Sense for Windows Mobile; make the phone more intuitive operation. HTC Sense has three core principles for the design -Make it Mine, Stay Close, Discover the Unexpected. The ideal of the HTC Sense is easy to operate in order to attract more customers to buy their Smartphone. (HTC Annual Report)
HTC develops the product designs to meet china market with China Mobile. In China, TD-SCDMA is China’s telecommunications industry with independent intellectual property rights of international communications standards. Each of the phones needs to have TD- SCDMA in order to use in china. In 2008, HTC launched their first TD-SCDMA Smartphone in china in order to extend their market into China. (HTC Annual Report)
HTC is growing so fast. According to the annual report, “with worldwide demand for mobile phones expected to continue rising through 2010, we can expect the tight supply situation to continue as well.” HTC needs to make sure their suppliers to increase productivity in order to meet the demand of the market. HTC also needs more manufacturing plants and facilities to meet the increasing demand of HTC products. (HTC Annual Report)
As HTC is growing so fast in order to meet the demand of the market, they still focus on their quality control. HTC introduces their new HTC Hero to the market In June 2009. After that HTC Hero has win a lot of awards which are “Stuff Magazine’s “Gadget of the Year” award, Mobile Choice’s “Phone of the Year” and T3 Magazine’s “Phone of the Year”. During the world’s largest annual Telecommunications industry event, the 2010 Mobile World Congress, HTC Hero was further recognized with the 2010 Best Mobile Handset or Device Award.” (HTC Annual Report)
Marketing and Sales
HTC business is focus on European and North America markets in 2009. There are 48.8% of revenues from North American, 30.4% from European and 20.8% from Asia and other regions. Especially, the annual growth rate is 28.6% in North America which is the most potential markets. HTC development strategy is the current worldwide brand positioning HTC have a good development and increase HTC brand image in order to create long-term competitive advantage HTC. (HTC Annual Report)
HTC has different products to meet the different level of the markets. First, HTC’s HD2 is the luxury and high-end product. Second, they have mid-price products which are HTC Tattoo and HTC Touch2 in order to have competitively in their market segment. (HTC Annual Report)
HTC focus on the Smartphone industry, wireless communication technologies and become more sophisticated in this market. HTC Cooperate with Telecommunication Company to place their phone in the store in order to increase sale of their phones such as Verizon, Sprint and T-mobile. HTC mobile phone now, through Europe, America, Asia, sales of leading carriers and distributors, and has gradually penetrated into the Smartphone market in developing countries such as the Middle East, Central and South America and Russia. (HTC Annual Report)
HTC opened the world’s first HTC Care Customer Service Center in Taiwan Taipei in 2007. Fred Liu, Chief Operating Officer of HTC said “HTC believes that providing superior after-sales support is important to our continuing success, which is why we place such a high degree of importance on HTC Care. In the future, a number of HTC Care centers will be launched in Taiwan and overseas, allowing our customers to enjoy their mobile lifestyles without missing a call,” Customer service center is very valuable for customers. Customer service center can save time and more efficient to solve the problems from customers. Customers can just walk into the center and get personalized consultations by HTC products, Warranty repairs and buy HTC’s products. HTC also provides a loaner phone during repair time. Customers do not need to worry about the alternative phone during that period. (HTC Annual Report)
The most valuable asset in HTC is employees. In recent years, HTC hires recruits outstanding talent to its ranks in the areas of product design, user interface, brand promotion and sales and marketing. HTC also hire the professionals’ employees from Europe and American that make HTC increases their diversity, challenging, vital and encouraging. “As of the close of March 2010, HTC employed 8,948 staff worldwide. The 169 non-Taiwanese staff employed by HTC filled 30% of all HTC managerial positions. Non-Taiwanese managerial and technical staff filled 8.3% of all HTC positions worldwide. Women hold 21.4 %of HTC’s 557 current managerial positions.” (HTC Annual Report)
In recent three years, HTC expands successfully to U.S. market by cooperating with main telecom companies such as Verizon and T-mobile. According to table 1, HTC increased its revenue from 2007 to 2008. It increased its revenues by 28%. Even though economic was in recession in 2009, it just decreased by 5%. It shows that HTC built up its U.S. market and had its customer loyalty.
In addition, because U.S. government establishes some policies to improve economic situation n 2009, economic seems to be recovered from recession. In 2010, HTC operates successfully its market. Compared to 2009, those financial results increase rapidly. For revenue aspects, HTC increases its revenues by 90%. In 2010, HTC promotes its smartphone and smartphone industry become larger. Those reasons cause HTC to increase its revenues. Finally, its net income in 2010 is NT 39 billion, which is the highest in recent years.
Ratio Analysis (HTC V.S. Competitors)
We can evaluate competitive of HTC through ratio analysis. Table 2 contains main competitors in U.S. market. We can know what the advantage of HTC is. First of all, for return on equity aspect, HTC is higher than other competitors. It shows that HTC can generate higher return for its shareholders. As managers of company, they should make decision from shareholders’ sides. In this case, HTC has better performances than other competitors. In addition, gross margin of HTC is lower than other competitors. In process of developing new market, managers always provide lower price and higher service to attract new customers. However, those actions can cause gross margin to decrease. If HTC owns customer loyalty, it can increase gradually to make higher profit.
For turnover aspect, HTC creates higher than other competitors. By attracting new customers, HTC can generate higher revenues based on total assets and total fixed assets. Even though HTC has lower in gross margin, it can also increase total profits by increasing turnover. The total fixed asset is 23.7, which means that HTC generates 23.7 times based on total fixed assets. In process of enlarging company size, company needs to issue debts or stocks to generate funds. In addition, current ratio means current asset is divided by current liability. If the current ratio is less than 1, it means that current liability is more than current assets. According to table 2, current ratio of HTC is 1.5. The reason is that HTC needs to issue debts to develop company size. For now, HTC can be eager to expand its business to U.S. market. For HTC, it can get funds from debts.
For its growth rate, U.S. market is an opportunity for HTC to expand its business. In recent years, it expands successfully to U.S. market. This market can support HTC to grow up rapidly. According to table 2, its growth rate of revenue is 92.92%. The result is higher than other competitors such as RIM and Moto. In its growth rate of profit, even though HTC needs to spend funds on promotion and research and development, it still increases its profits by 81.98%. However, HTC needs to decrease its receivable because its growth rate of accounting receivable is 127.16% which is higher than profit and revenues. It shows that HTC has much accounting receivable and it should solve this situation. The reason is that if bad debt increases, HTC can suffer from the situation and accumulate much bad debt.
We analyze HTC for three aspects: ROE, ROA, Gross Profit Margin, and current ratio. First of all, we analyze HTC for ROE. Due to higher net profit in 2009, HTC has higher ROE than previous years. The ROE in 2009 is 56%. Compared to 2008, HTC has already increased by 10% from 46%. In addition, the si
Cite This Work
To export a reference to this article please select a referencing stye below:
Related ServicesView all
DMCA / Removal Request
If you are the original writer of this essay and no longer wish to have your work published on UKEssays.com then please: