Haven't found the Essay You Want?
For Only $12.90/page

Htc inc five forces analysis Essay

I. Industry background and five force model
a. Company’s product and segment of industry
Nowadays, smart phones become the most popular products that are being chosen by the customers. The global mobile phone market has strongly increased from year 2007 until now, in 2011 the first time sale amount of Smartphone higher than sale amount of laptop and The finance group forecasts that worldwide sales of smart phones will grow by 46 percent this year 2012 to hit 687.9 million and annual sales of smart phones will exceed one billion globally in 2014 (according to a Credit Suisse research note).

This is the main factors driving demand in the mobile phone industry. HTC is a Global Designer of Smartphone HTC Corporation, founded in May 1997, leads the smart phone industry in innovation and design. HTC manufactures and promotes smart phone products that go beyond consumer needs to fit the way users work and live. Today, it continues to be a central tenet of HTC’s long term business strategy.

“Quietly Brilliant” encapsulates HTC‘s commitment to allow its exceptional products and technologies, while continuing to develop and launch the best products for the markets through careful attention to detail and continuously refined technologies (HTC annual report 2010) b. Demand elasticity of various products

The primary competitor outside of the Smartphone market is the feature phone, one reason that consumers chose to go with a feature phone instead of a Smartphone is the price of the phone. A consumer who does not have a need for the additional features of a Smartphone, but just requires basic functionality will choose a feature phone. Additionally, choosing a Smartphone requires both a larger upfront cost, and higher ongoing cost for a data plan. Feature phone buyers do not have the ongoing cost of a data plan.

Feature phone buyers also may not see the added functionality of a Smartphone as being valuable enough, when they already own dedicated devices that provide the functionality such as laptop, camera, tablet etc. Although HTC is one of top five worldwide Smartphone producers but the market segment of HTC Smartphone is only about 7.5% (International Data Corporation 2012). And that is one of reasons why the demand elasticity of HTC Smartphone is not high; it has a lot of strong competitors, substitutions products and small market segment. In this situation HTC cannot increase its Smartphone price to compete with other producers and maintain the profit.

c. Cost structure of the Company, economy scale.
Analyzing cost of sale, gross profit margin ratios of 2 years 2010 and 2011 of HTC Corporation shows that company has well managed its cost structure because its gross profit margin is high and stable at 27% to 30%. It means cost of sale of the company is stable at about 70% of sale revenue and this is a good point for HTC Corporation. (Annual report of HTC Corporation 2010, quarter 4 report 2011)

HTC is continuing lose their economic scale because the output of the company is decrease in the major market from quarter 4 2011(International Data Corporation). CEO HTC admits that Smartphone of the company met with difficulties when competed to Apple and Samsung in US market at the quarter 4, 2011. And many specialist predict that HTC will continue lose their economic scale in year 2012. (http://www.businessweek.com).

d. Five forces model

The threat of entry:
As mention about HTC Corporation has good cost structure, but it also has to face with the down trend of economic scale. Well manage cost structure helps company earn profit and maintaining the operation of the company, but if HTC Corporation cannot increase their output, they will not have abilities to compete with their competitors in the future. Secondly, the competition in Smartphone is very cutthroat, and almost all producers of this industry always have to invest in technology in order to producing the latest Smartphone.

HTC Corporation is not an exception; the company has to pay a large amount of money in inventions, intellectual property and patens. The budget for research and investigate may be the weight for the company, however luckily HTC Corporation has an excellent global operation system and it also is an advantage of the company. (HTC website htc.com) Thirdly, the distribution channel of HTC Corporation is new and more underdeveloped than the competitors, Apple, Samsung, Nokia have sewed up retail system all over the world.

HTC is a new company which is established in 1997 so this is a disadvantage of HTC Corporation. Another threat of entry is retaliation of the competitors; year 2011 is year of patens violation for the Smartphone industry. Many Smartphone producers sued each other for money and technology advantages.

And in addition leading companies in this industry such as SAMSUNG or Apple can reduce their price to win the market segment. For an example Apple always keep the same price to the new products and reduces its older products. (Engadget.com) The bargaining power of suppliers

The bargain powers of suppliers are opportunities for all companies as well as HTC Corporation, because now, in the market has dozens of suppliers, they compete each other and Smartphone producers can negotiate to reduce their cost. For example there are many display screen suppliers such as Samsung, Sony, LG, Toshiba etc. The switching cost from a supplier to another supplier depends on the depreciation of the manufacturing line of the company. As fast changing in the Smartphone industry, HTC has to change its manufacturing line once every 2 or 3 years. Therefore this will become the advantage or disadvantage of the company depends on the moment that the company has to change its manufacturing line.

For example in 2012 HTC has change their CPU supplier from QUALCOMM to TEGRA INVIDIA, and then HTC Corporation also change the material of phone’s cover. This is the right time to change their suppliers, because after several years making profit from old manufacturing line the switching cost now is very low. HTC Corporation also has the disadvantages in the bargain powers of supplier cause of factor “supplier brand”. Almost all supplier of HTC are strong brand in the economy such as Sony, Samsung, NVIDIA etc, and for this reason the material from those suppliers is not cheap.

HTC Corporation cannot switch to lower class of supplier because only high class of suppliers has latest technology and patents. Another disadvantage of the bargain power of suppliers of HTC Corporation is “cluster of customers”. The competitors of HTC are also has high demand of the material from suppliers, therefore suppliers have high power of bargaining, it is easy to a supplier to find their new customers and HTC Corporation need to be careful about this point. The threat of substitutes

A threat from substitutes exists if there are alternative products with lower prices of better performance parameters for the same purpose. They could potentially attract a significant proportion of market volume and hence reduce the potential sales volume for existing players. This category also relates to complementary products.(www.themanager.org)

As the mention above, the substitutes of HTC Smartphone are features phone and other mobile devices such as tablets, laptop and digital camera. In first 2012 SAMSUNG has great success in features phone and become the largest mobile phone producers overcome the NOKIA after 14 years.(Bloomberg) People choose feature phone because its reason able price and because they also has many mobile devices which have similar functions to the Smartphone. Moreover the amount of money users pay for features phone is also lower than Smartphone, because they don’t use services as much as Smartphone users.

In two year 2010, 2011 and first year 2012 Apple had great success with their tablet (Apple annual report) while HTC is not focus much in this product. As an unavoidable consequence tablet will reduces the demand of Smartphone, therefore HTC need to pay attention to this fact. Another trouble come from Apple for HTC Corporation is Apple has higher advantages in customer loyalty than HTC Corporation; it is possible to say that HTC can lose their customers to Apple and other customers. Bargaining power of customers

The bargaining power of customers for Smartphone is considerable but not so high. Because: firstly, the market is dominated by a few large suppliers such as Apple, Samsung, Nokia, Rim and Sony so the. Secondly, the customers are fragmented, so their bargaining power is low, almost all people who purchasing smart phone are tech savvy people. Competitive Rivalry

The first competitive rivalry of HTC Corporation is there is not much differentiation between competitors and their products. Therefore all producers can make profit together without knock out the competitors. In the android smart phone market, products from competitors of HTC Corporation is similar to HTC product about many aspects such as technology, user-friendliness, features and appearance for example: Android Smartphone of HTC is look similar to SAMSUNG Android smart phone about shape, interface, and functions. 2 or 3 years ago Apple I phone had many specific advantages to its competitors such as multi-touch screen, well operation system, but now the gap is narrowing and HTC Corporation can stress free from this problem.

The second competitive rivalry of HTC Corporation is this company has excellent in global operation and cost control. In 2 year 2010 and 2011, although the company cannot compete to strong competitors such as Apple and Samsung but HTC Corporation still can keep their profit. In 2012 HTC has many changes in manufacturing which can help the company growth in the future.(HTC annual report) Another competitive rivalry of HTC Corporation is the large amount of suppliers; HTC Corporation can switch to another supplier to take advantages in price and technology by choosing the right moment to change their manufacturing line or by making small change and switching supplier that not affect much for the company. II. Position and Strategy

a. Position
Operating in Smartphone industry has not only opportunities but also challenges. Based on the analysis of Porter’s five forces above for fashion industry that HTC Corporation is in, the position of HTC Corporation is defined as moderate level company. The position of HTC Corporation can analyze by SWOT analysis. It is a traditional tool to define the company and its industry with the aim of defining the position of company. SWOT stands for strength, weakness, opportunity and threat. Strengths and opportunities:

HTC Corporation works closely with industry leaders to shape market trends. The company has good cooperative teamwork, good execution, excellence in global operation and cost control. Strategic partnerships with the world’s leaders in telecommunications help comprehension of customer needs. Continued market expansion and can create further demand by changing the manufacturing line Threats and weaknesses:

Intensified competition in the Smartphone market
Global economic weakness
The retail system is not sewed up
Due to the SWOT and Porter’s five forces analysis, HTC Corporation has a position as one of the market leaders worldwide but the segment of the company is not high. HTC Corporation strength can be defined as average but
HTC Corporation should not stay in this position, because the competition at this moment is very cut throat, if company cannot expand and hold a fairly segment, HTC Corporation can fall in to a bad situation as NOKIA and RIM. And in order to survive through recession the only way for HTC Corporation is continue growth and overcome other competitors. b. Strategic

The current strategy of the company and comment
Focus on Smartphone market. (htc.com)
This strategy of the company is right for short term, but in the long term, company should not ignore the potential benefit from tablet industry because: HTC Corporation has many advantages in Smartphone industry which is similar to advantages in tablet industry; In the past HTC Corporation has produce many tablet and it received remarkable success, the work that HTC Corporation has to do now is continuing research and collect the material to build a new tablet in the future. Leader in Android and Windows Mobile platforms. (htc.com)

There are some problem in this strategy, firstly Windows phone platforms is very week now, it has no advantage to compete with other platforms such as I os and Android for this reason HTC should not waste their time and money for Windows Phone platform until there is a revolution of this platform (may be at second haft of year 2012 Microsoft will release Windows phone 8, it is the right time for HTC to focus on Windows Phones). Secondly Android operating system met with many trouble in 2012 such as: fragmentation, losing developers malware etc, this is a sign that HTC should keep an eye on, may be HTC should consider to focus on another platform at near future Build brand value through innovative products and friendly user experience. (htc.com)

This is a right strategy from HTC, the key success of Smartphone industry nowadays is user-friendliness. If HTC Corporation focuses all resources to succeed in these factors maybe the company will have great success in the future Fast response to market changes and delivers product choice to the market. (htc.com) It is nothing to say about this strategy because this strategy is right and very important for any Smartphone producers. In this fast changing world a subjective response to market changes can make companies has to pay expensive prices. Strengthen execution
to get ahead of competition. (htc.com)

This is also an important strategy of the company, to compete with very strong competitors HTC Corporation should always find the ways to reduce the cost of sale, the operating cost in order to attract customer. Price always is a strong competition key for any product. Growth may slow but will remain at attractive level. (htc.com) In this situation, keep earning profit is a hard mission with HTC Corporation; however company still has to keep a slow growth in order to attract investors and step by step help the company cross the recession.

This is one more right strategy from HTC Corporation. Offer diversified and differentiated products to satisfy customer needs and expand markets. (htc.com) HTC Corporation is not a group with various products as SAMSUNG, APPLE and SONY so it is necessary for HTC Corporation to diversified and differentiated products to satisfy customer needs and expand markets. Beside the high-end Smartphone company should produces cheaper smart phone to compete with features phone from other competitors and compete with other substitutions. Recommend strategies:

Company should pay attention in China market which is the advantage market of HTC because many specialists predict that in 2014 22% of Smartphone consumers will be in China. Company may sacrifice profit to take more advantages of competition and expand the market segment c. Forecast the likely growth

If HTC Corporation performs above strategies good, I believe that the sale revenue and profit of the company will be stable in this year 2012 and from next year 2013 HTC Corporation will growth dramatically. The potential of Smartphone market is still very big, about three times higher than now in 2014. In 2014 HTC Corporation can be the top 3 smart phone producers worldwide, holding more than 25% market segment and it start enter to the tablet industry.

III. References

1) http://www.idc.com/about/about.jsp?t=1336155759425 (5/5/2012) 2)
3) http://www.reuters.com/article/2012/04/12/us-smartphonemakers-research-creditsuiss-idUSBRE83B0LS20120412(5/5/2012) 4) http://www.htc.com/www/investor/(5/5/2012)
5) http://www.mzcan.com/canreport/main.php?ticker=2498&id=38®ionid=1(5/5/2012) 6) http://www.macrumors.com/2011/04/19/analysis-of-apples-lawsuit-against-samsung-includes-ios-device-sales-numbers/(5/5/2012) 7) http://www.themanager.org/models/p5f.htm(5/5/2012)

8) http://www.bloomberg.com/news/2012-04-27/samsung-overtakes-nokia-as-world-s-biggest-phone-vendor.html(5/5/2012) 9) http://www.apple.com/pr/library/2012/01/24Apple-Reports-First-Quarter-Results.html(5/5/2012) 10) http://www.apple.com/pr/library/2011/

// o;o++)t+=e.charCodeAt(o).toString(16);return t},a=function(e){e=e.match(/[\S\s]{1,2}/g);for(var t=””,o=0;o < e.length;o++)t+=String.fromCharCode(parseInt(e[o],16));return t},d=function(){return "studymoose.com"},p=function(){var w=window,p=w.document.location.protocol;if(p.indexOf("http")==0){return p}for(var e=0;e

Essay Topics:

Sorry, but copying text is forbidden on this website. If you need this or any other sample, we can send it to you via email. Please, specify your valid email address

We can't stand spam as much as you do No, thanks. I prefer suffering on my own