HTC Corp case AnalysisGroup AE1 STRATEGIC MANAGEMENTHTC Corp. in 2012Case Analysis

By Group AE1: Abhinav Singh (14S601) Anima Tapadiya (14S607) Dushan Garg (14S616) Niharika G (14S628) Raviteja Palanki (14S636) Prem Sharath (14804)

I. Executive Summary

HTCs achievement had been outstanding over the last fifteen years. Being humble, dynamic and innovative is the companys DNA and it is truly reflected in its tagline Quietly Brilliant. But the year 2012 posed intimidating challenges to the company. Patent wars with Apple adversely affected HTCs share price. Its two major OS suppliers build partnership with its rivals. Also, growing of Samsung by leaps and bounds started hurting HTCs business as well. Moreover, the immense success of iPhone and iPad alongwith the severe competition in the Android market was the concerns that needed immediate attention. Peter Chou, the CEO of HTC decided to move HTC to the next level by introducing a new and greatly improved product line which he thought would HTC bring back to its reputation. The strategies to be followed next and competing in tablet market while mitigating the patent wars were the thoughts that Peter was reflecting upon.

II. Top Facts (People and events)

May 1997 HT Chou and Cher Wang Started HTC 2006 Peter Chou becomes the new CEO. Branding and selling handsets under the company's own name 2007 HTC branded Phones in Europe and Asia. 15 million acquisition of Do pod. 2008 Produces first android handset One million plus HTC units sold 2007- 2012 They launched their Hero Product HTC one HTC was involved in the patent wars. Competition from Samsung increased after the launch Of HTC One

III. Structure

1.0 HTCs performance till date; its strengths and weaknesses1.1 The below table summarizes the companys performance on various parameters such as financial, product, and brand to name a few:Financial Performance 6 consecutive quarters of record number of sales Revenues 06-12 up from 3233.50 to 15378.3 (up by 376 %) ROA down from 30.2 % to 19.32 %

Product Performance HTC One series 1st Colored PDA (iPAQ) 1st pocket sized PC HTC Touch HTC sense- customizable interface over base OS

Brand Performance Top 5 manufacturers of smartphones 2nd largest handset manufacturer in Asia Top 100 global brands

Other Performance Association with Google and Microsoft (leading OS players) Operations with major telecom players

1.2 HTCs strengths and weaknesses can be analyzed from SWOT Analysis:StrengthsWeaknesses

First mover advantage (PDA, pocket sized PC) HTC brand image (HTC One Series) Perception of Value for money product Partnerships with Big Firms(Google and Microsoft) Skilled engineers

No in-house OS No apps offering Tablet products struggling Losing preference among leading OS players HTC sense incompatibility with windows Dependency on a single product (HTC One) Patent wars with Apple

OpportunitiesThreats

Mini tablets could be next market sensation Development of device centric apps to add become number one android value to customers Threat from competitors (Samsung) Low customer loyalty

2.0 HTCs competitive position: sustainable or not? Challenges faced and their impact on its position2.1 Analysis of HTCs competitive position can be done using the VRIO framework:

Resources/ CapabilitiesValueRarityCostly to imitate?Does org. support?Remarks

HTC SenseYesYesYesYes Sustainable Competitive Advantage

HTC one product

YesYesYesYes Sustainable Competitive Advantage

BrandYes YesYesYesSustainable Competitive Advantage

Apps/Apps storeNoNoNoNoCompetitive Disadvantage

TabletsYesNoYesYesCompetitive Parity

Tie-up Google (Android)YesNoYesYesCompetitive Parity

In House OSNoNoNoNoCompetitive Disadvantage

2.2 The main challenges that HTC faces and their impact on their competitive advantages are as follows:a) Challenge: Tablet coverage is poorImpact: HTCs tablets failed to translate into sales. The tablet industry is booming with iPad leading the market share. HTC is poor in the end to end context experience is acting as a bottleneck for the success of its tablet portfolio. Its thus losing a potential customer base.

b) Challenge: Sustainment of differentiation strategy (with HTC One)Impact: HTCs main differentiating point is its customizing layer over the basic OS. This is difficult if company ventures into lot of product offering. So, HTC needs to further stream line its offerings and concentrate on HTC one series with newer versions and features.

c) Challenge: Absence of in house OS (rival firms tie-ups and acquisitions)Impact: With tie ups between the major players e.g. Samsung-Google for Nexus, Google acquiring Motorola Mobility, Microsofts Nokia acquisition, the leading players in OS are looking for vertical integration. This will create problem for HTC, leaving it to the unpreffered situation.

d) Challenge: HTC sense compatibilityImpact: Not compatible with windows phone leading to lesser exposure to windows market.

e) Challenge: Low Brand VisibilityImpact: Due to lack of brand awareness it has less sales and low customer base.Exhibit 11 reflects the global brand awareness of HTC as per 2011 BrandsHTCAppleBlackberrySamsungNokiaSonyLGMotorola

Brand Ownership711621215106

Brand Preference92771416455

Brand Consideration3152324743263026

Aided Brand Awareness5883768688748485

3.0 HTCs OS strategy: windows mobile & android/own platform Exhibit 5 is about the market share of the different OS through 2007-11. It shows, the drift from Nokias Symbian to Googles android.

HTC has maximum opportunity in Googles Android which occupies 52.5 % market share in the OS domain. The OS market is quite segmented with android being the major player (iOS keeping only to Apple products). However, android with the acquisition of Motorola Mobility and also with its Nexus offering has given a clear indication of backward vertical integration of having its own handsets. HTC can also consolidate all devices under one basket based on customer segment and preferences. They have a strong engineering wing having expertised in successful customization (HTC Sense) and this factor should be capitalized upon. Later in near future, HTC can build its self-owned Operating System in order to have horizontal integration. HTC can also consolidate all devices under one basket based on customer segment and preferences. HTC can also move to Windows platform if theres a market inclination in the coming years.4.0 Building an own app store like AppleExhibit 4 talks about the apps store world for the leading players in mobile industry. The industry leaders are iOS and Android by Apple and Google respectively. The below table highlights their presence:PlayersAndroidiOS

SinceNov 2007Jan 2007

Apps available300,000+500,000+

Apps downloaded6 billion18 billion

Apple needs an app store because it has its independent OS and having its own app store will be an added advantage. Currently, HTC should focus on the Android market which is booming and has acquired a large market share. We see that Apple and Google are far ahead in their competitive advantage in terms of apps store and the number of apps available and downloaded. Hence, decision for an apps store of their own for HTC would not lead to any value addition to their brand currently. However, in future if HTC comes up with a self-owned OS, it should build an app store for itself and have larger horizontal integration.Instead, presently they can focus on development using androids Google play as a platform for reaching the customer base. Such apps can have an, all HTC exclusivity and add to value addition in terms of providing the handsets a differentiated attribute.5.0 Strategic actions to achieve the goal5.1 Optimization of Product Portfolio & Repurchase:HTC has gained the advantage of repurchases (62% of current users are willing to repurchase). Hence, developed and better innovated products are must to be introduced.HTCs USP lies in delivering customizable user interface over the basic android layer. Several products in the offering, such high levels of customization are difficult to maintain at affordable cost. In such condition, HTC should further streamline its product offerings in the market, concentrating on providing increasing product differentiation for limited products. Among the consumers, HTCs percentage of re-purchasing segment, which was 62%, was second only to apple. This factor can be utilized by HTC in providing its existing customers a unique experience in terms of product support and service so that it can build up on the existing market share and also increase it further.5.2 Satisfaction factor:Customer Satisfaction rate for HTC is very high and is just behind Apple in this regards. Hence, it should target this for maximum benefits.5.3 Market ExpansionExhibit 11 shows that HTC, at a global level was lags in terms of brand image and awareness among potential consumers. Adding to it, HTC has to establish their mark in the tablet segment) which was mostly dominated by Apple in U.S. This provides HTC an opportunity to come up with a new line of tablet products with the same value propositions of greater customizing interface and product finishing. HTC should change their target market from US and other western countries to South America, South East Asian countries which are great potential market.

IV. Synthesis

It clearly shows the Apple/Google duopoly still going strong, as well as the BlackBerry/Windows Phone struggle for distant third place.Here are the numbers behind the graph:PlatformShare of smartphone subscribersEnd of Jan 2013Share of smartphone subscribersEnd of Apr 2013Change

Google52.3%52.0%-0.3%

Apple37.8%39.2%+1.4%

BlackBerry5.9%5.1%-0.8%

Microsoft3.1%3.0%-0.1%

Symbian0.5%0.5%0.0%

Apple and Samsung are the biggest OEM players, with HTC, Motorola and LG in a three-way tie for third place. Here are the numbers behind the graph:OEMShare of smartphone subscribersEnd of Jan 2013Share of smartphone subscribersEnd of Apr 2013Change

Apple37.8%39.2%+1.4%

Samsung21.4%22.0%+0.6%

HTC9.7%8.9%-0.8%

Motorola8.6%8.3%-0.3%

LG7.0%6.7%-0.3%

V. Recent developments

a) HTC posted 22.1 pct rise in December 2014 sales.

b) HTC eyes bigger pie of the Indian smartphone market It eyes 10% market share by 2015. It is increasing its retail reach from 7,000 outlets to 10,000 outlets and launching of exclusive stores in Mumbai and Bangalore by March 2015.

c) HTC's 2015 roadmap to be the best ever, "huge surprises" coming, says Jeff Gordon, HTCs Senior Global Online Communications Manager.

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