Htc Business Model Essay

Executive summaryUsing Googles Andriod platform has given HTC a boost, but now the Taiwanese handset maker are vulnerable to underwhelming sales in the States and Europe. Their hope? mainland chinaware.HTC that entered chinaware in early 2010, much(prenominal) later than its established peers. It is performing catching up with international premium faults, much(prenominal) as orchard apple tree, Samsung and LG, where HTC is currently aiming to get a slice of the pie. However, the partnership is too facing stiff disputation from topical anaesthetic disgraces who operate at the impoverisheder scathe market.In this Global Marketing proposal, we propose some(prenominal) initiatives for HTC to grow its current 1% market serving in the china wide awake call in market, including new products for HTC to tap into the lower price market as well as localized promotion reasons to sell ph ones in unpolished areas.It is time for HTC to s itinerary away from satisfied with being quietly brilliant.Context analysisCompany BackgroundHTC Corporate, founded in 1997, was a relatively flurry Taiwanese original design manufacturer (ODM). Incorporated as High Technology Computer, HTC focused on manufacturing of computer notebooks. The attach to created the worlds starting line pocket size PC in collaboration with Microsoft in 19981 it later developed the iPAQ, one of the earliest PDA for Compaq in 2000.HTCs close lot with Microsoft led them to develop XDA2 in 2002, starting time ever smartphone operated on Windows. The company remained true to ODM principles when it produced smartphones by efficiently catering for carriers specifications and requests. HTCs ODM smartphones continued to generate advantage margin as high as 20% compared to industry average of 5%3. According to Harvard Business canvass, HTC shipped more than 70% of the worlds Windows smartphones in 2006 at its peak.HTC won a reputation for excellent smartphones. But it wanted more, and began to i nvest more in innovation before eventually creating its own score in 2007. HTC set up a unit called Magic Labs4, where engineers from various disciplines come up with lots of ideas, even if most were quickly discarded. From this unit bred several(prenominal) ground breaking ideas, including HTC touch, a touch screen device that appeared few weeks before Apples first iPhone and first ever mechanical man phone in collaboration with Google.Reaping from the Androids high penetration rate, the company experienced unprecedented ontogeny from 2008 onwards and became the top seller of smartphones in America in 3Q of 2011, according to Canalys Research. HTC has recently eclipsed Nokia in market capacity and has climbed up to the no.3 spot for smartphones sold worldwide, behind Apple and Samsung. In terms of brand equity, the company has invested heavily in developing its own brand and broke into Interbrands top 100 Brands 20115 (no. 98) .China Macro-environmental FactorsPoliticsChina rema ined a single company directed republic since the founding of Peoples Republic of China in October 1949. Putting political ideologies differences aside, efficient decision-making is widely seen as a trace of Chinas political system. The profound changes that have taken place in various fields of this nation from Deng Xiapings Special Economic geographical zone in the 80s to the economic leaps in the turn of the century.Inefficiencies in the political system much(prenominal) as corruption still exist today, but Chinas communist party has taken bold steps for reform. The party has embraced market socialist economy to lead China out of poverty and soar to one of the most powerful nations in the world.EconomicDespite China has mounted new heights in her economy, outshining Japan as the second largest economy in the world, the slowdown in economic growth has not abated. The housing boom in the past decade is now over, implying that growth now weigh on heavy industry and local consump tion. In the past, China has finish offered massive infrastructure stimulus, as it did to prop up growth following SARS and the global financial crisis. However, local governments have learned not to overheat the economy, as evidenced by the late 2011 credit crunch in Wenzhou6. Central government is expecting a moderate GDP growth of 6%, but China is due for correction in its property and possibly stock market.SocialChinas Communist Party maintained its starchy foothold in the nation, as the country enjoyed a period of unprecedented prosperity in the past decade. As Chinas economy take flight, the number of local billionaires and millionaires grew by leaps and bounds. The wealth cattle farm, at the same time, widened drastically. As a consequence, there have been several localized pro-democracy campaigns since 2011. Termed Jasmine revolution, citizens used social network site such(prenominal) as microblogs to organize public protests demanding fairness, housing and food social issues that are a good deal overlooked during economic boom. Such unrests were quickly put to rest as Beijing aims to mitigate any form of dissidents since learning the hard lessons from Tiananmen protests in 1989. otherwise than localized protests and occasional controversy in human rights, Chinas social order have been maintained.TechnologyChina has sparked its technological boom since it gained put down to the world trade organization in 2001. Internally, China has developed a matured internet market which now boost one of the largest internet users in the world. In unsettled phones, the market evidenced a dynamic growth due to the rapid development of mobile subscriptions and growing third-generation (3G) networks.China Smartphone Market constancy analysis later Chinas telecommunications operators acquired 3G licenses, they formed several strategical alliances with mobile phone brands. For example, China Unicom has established alliances with Apples iPhone and Lenovos LePhon e, whilst Motorola and HTC and strategic partners with China Telecom.Customer analysisAccording to government statistics in 2012, China has become to first country to top 1 billionThe cell phone users, a soar from 2010s 787 million users. The number of users is equivalent to 74% of Chinas population. That being said, only 14% of users are 3G users. Mobile phones are seen as a necessity, as customers regularly use phones for texting and micro-blogging.Competitor analysisMobile phones are relatively consolidated in China, with the top five brands deriving well-nigh 72% of total retail volume stales in 20107. Top five brands are Nokia (34.2%) , Samsung (18.1%), LG (6.8%), ZTE (6.3%) and Huawei (6.3%). Apple (1.4%) and HTC (0.7%) are late boomers in the market, with both companies having entered China in 2009 and 2010 respectively.According to market research by Canalys8, international brands such as Samsung, Apple and HTC should continue to dominate in the space above RMB2,500 (US$400) . Leading local tier-one brands, such as Huawei and ZTE, are diversifying beyond the entry level by launching a number of high-profile, flagship smart phones. As of late, Lenovo has made efforts to penetrate the low cost, rural market by introducing models starting from RMB700 (US$158).Company AnalysisHTC in ChinaHTC only entered China in 2009 and occupied a market share below 1% as of figures in 2010. Its strategy is to challenge Samsung and Apple as the biggest smartphone players in Mainland, but it to a fault faces stiff competition from local brands such as Tianyu and ZTEDespite its geographic proximity in Taiwan, HTC started off late in China than in richer parts of the world largely because the countrys 3G structure was not as matured in 2009 as today.Targeting & PositioningHTCs mission statement is to become the leading innovative supplier of mobile information and communication devices by providing value-added design, world class manufacturing and logistic and service capabi lities. Whilst this may have been a successful formula over the past 10 years in geographic location, HTC is in danger of falling behind competitors in China.HTC currently has 10% of the market for smartphones costing more than RMB2,000 (US$320). Its strategy is to print those high-end customers who utilizes 3G network and appreciates international brand. As if HTCs Magic Lab works tirelessly to come up with numerous innovative products, HTC currently bears a correspondent volume approach in its phones. HTC regularly pushes forward phones in the market. In 2011, when Apple had launched one new iPhone, HTC introduced fifteen new models.HTCs ChallengeAfter a meteoric fig up which placed it briefly atop the U.S. smartphone sales charts, HTC revenue as a whole in the first two months of 2012 was a staggering 45% down on last year. HTC has run afoul of punitive legal juggernaut Apple, which delayed the availability of HTCs handsets. Determined to reduce the fate looming over trouble d rivals like Research in Motion, HTC saw a big revitalization push in China, championed by several flagship phones such as HTC One X and Evo 4G Lite. Sales in Europe have been dropping but HTC saw better than expected revenue in China.The rise of HTC in China despite its late entry could be partially attributed to their advanced operating systems with Android and excellent hardware, such as dual join processing units and friendly features where the phone rings louder when in a bag. But with competitors catching up hardware specifications overnight these days, can HTC sustain its China growth?The challenge of HTC faces is not neither simply in hardware nor software. HTC needs to formulate a marketing and branding strategy for China, as to fend off the fierce challenge by international brands (Apple, Samsung) and local players.Proposed Marketing CampaignFor the proposed marketing campaign, we propose a bi-polar approach to target existing high-end customers of HTCs and also tap into the basal customers specturum, an area HTC has not entered so far.High-end customersHTC is currently focusing on high-end customers who are tech savvy, able and willing to pay for premium mobile phones. These high-end customers are currently up and coming professionals, live a fast moving lifestyle and mostly reside or work in first or second tier cities, such as Beijing, Shanghai and Xi Chuan. All of these customers have subscribed or are going to subscribe 3G network, in order to make the most of out HTCs smartphones.In addition to product quality and operating system, high-end customers nowadays also care about brand reputation and image. The proposed marketing campaign for HTCs high-end customers is therefore to enrich the brand experience and differentiate HTCs personality.Basic customersAs mentioned earlier, 3G users accounts to less than 20% of Chinas mobile phones market. According to market analysis, local players, best represented by ZTE and Huawei, are more popular amon gst price sensitive mass and lower-end customers. These basic customers reside in third tier cities or rural areas, demand basic functions for their phones and also aspires to own a smartphone one day.ProductDesigners collaborations are slide fastener new. Indeed, they are now a well-established marketing tool as well as source of income. Standard Hotel Group in America has joined forces with the likes of surfwear brand Quiksilver to provide exclusive trunks and bikinis that guests can purchase in the groups resorts. H&M, the Swedish fashion behemoth, took rise after asking Karl Lagerfeld, author for Chanel and owner of Fendi, to come up with a special collection back in 2004.For mobile phones,it is no different story. RIM collaborated with Porsche design and launched a high-end grand blackberry in 2011. LG and Prada started working together in 20069 and continued to attract fashionistas for their crossover phones.For high-end customers, HTC should leverage connection with a ren owned brand within the Chinese community and produce collaborate products. Nike would deem to be an appropriate choice, given the brand is held in high regards among Chinese and its innovative brand image aligns with that of HTCs. Nevertheless, Nike has strong connection with Apple as Nike currently produces Nike+ a tracking device that connects an athletes performance data with iPhones, iPods etc.If there is a brand for up-and-coming professionals which matches HTCs pricing and targeting strategy, Adidas would be a great fit. Rather than choosing a luxury brand such as LVMH or Gucci, a partnership with Adidas could not only appeal to the sports lovers, but also be perceived as socially acceptable. Partnering with luxurious goods might risk further alienation as the wealth gap widens in China.Adidas is actively investing on its mi adidas platform that rivals Nike+. The sports company enjoys a good reputation in China after sponsoring Team China in Beijing Olympics, and its innovati ve roots in products and designs could enrich the HTC brand experience.For basic customers, HTC could build 2G or even very basic 3G phones to attract the mass. With much reduced functionality and a lower price point, HTC could attract the 80% users who have not yet subscribe to 3G network. While the simpler handsets should have less fancy functions, embodying the HTC call mean that that the phones should still be innovative. HTC could be more localize with these phones by having local functions such as Chinese keyboard and improved durability that adapts to environment in rural areas. Perhaps basic phones could have a brighter screen for users to view the screen easily in open rural areas, or made in anti-sand materials as desertification is common in northwest China.Aside from hardware reengineering, HTC needs to redesign its software capabilities. HTC is relatively weak in content when compared to rivals such as Apple. It has no plans to launch its own app store, preferring inst ead to reply on Android marketplace and its apps. HTC acquired French content provider Abaxia in June 201010 to develop innovative apps for its devices. Recently, it has installed digital map apps in HTC Sense interface. Currently, there is a market gap in smartphone manufacturer originated apps in China. Almost all of the apps available on Android/iPhone system are developed by individual software company. HTC could potentially develop operating system with apps linked to popular Chinese social media sites, such as QQ and Sinas Microblog.PriceHTC should continue to target upper tier price points for its high end customers. Its currently price point closely resembles Apples and Samsungs, averaging around RMB2,500 (US$400). The high price setting strategy further illustrates HTCs ambition to compete with the international brands but the company could consider undercutting its price by a fraction, say less than 10%, than the leaders so as to gain stronger market share. Price reduction should not be publicize aggressively, as it might signal a loss in quality.For products in the lower end market, HTC should try to be a price leader in the arena. Lenovo markets its cheaper line of phones around RMB700, and HTC should try to undercut Lenovo. It is important to capture the basic customers first, with the hope that HTC could persuade basic users to switch to more expensive phones over time. dwellingAccording to Economists, HTC now as 2,300 classical retailers in China. Apple has 3,500 not withstanding its flagship Apple store and website while Nokia and Samsung have 9,000 each. HTC could open more shops by granting authorized retailers license, but it is easier said than done as brands jostle retailers for shelf spaces.Rather than investing heavily in opening its own shop, HTC could form a strategic partnership with popular online shop Taobao or Alibaba to reach customers in the second or third tier cities to compliment its e-shop. Further place promotion could b een referred in HTC ambassador campaign in People section.In first tier cities, HTC could theoretically leverage on Adidass store presence and distribution network. Nonetheless, HTC should adopt a selective approach by opening flagship store that can illustrates its customer experience.PromotionIn HTCs incumbent global marketing campaign, the company slogan is quietly brilliant. HTC commercializeds do not focus on the precise functionality of their handsets but the way large number use them. The concept itself is intuitive, but the campaign is not as much advertised in China as other places the slogan does not even has a Chinese translation. As a result, HTCs promotion in China is product focused. HTC One X advertisements were filmed where a photographer takes pictures with HTC phone while skydiving stressing the superior photographic camera quality of the handset.To revamp the promotion campaign, HTC should first come up with a better slogan for China or even for its global ca mpaign. Stressing on the way people interact with HTC cell phones is a good idea, but conceptually the slogan could be more straight forward Nokias connecting people or LGs life is good are good examples.For China specifically, HTC needs to build on build on enriching users experience. Yan Siqing, chief operating officer of China Telecom said HTC grew rapidly despite its late start because it provided a good user experience. Nationwide promotion campaign should focuses on how HTC helps people to capture their moments in life. Whether is at work, in sporting moments or vacation, a user-friendly HTC handset is always there to make things happen.PeopleSimliar to Unilevers Shakti rotary motion to help women in rural India to become entrepreneurs11, HTC could foster partnership with non governmental organisations, banks and local counties, to promote handsets at rural areas through employing HTC ambassadors. Ambassadors are underpriviledged residents in country sides and they are invit ed to become direct-to-consumer sales distributors for HTCs basic handsets for second or third tier cities. Contrary to normal mom-and-pop shops, HTC should provide training in selling, commercial knowledge and bookkeeping to help ambassadors become micro-entrepreneurs. This proposal could not only expand HTCs reach in the lower tier markets, but also been seen as a socially responsible act of goodwill.1Kim R. & Yoffie D., HTC Corp. in 1999, 8th Dec 2009, Harvard Business Review 2Sourced online http//xda.o2.co.uk/3Kim R. & Yoffie D., HTC Corp. in 1999, 8th Dec 2009, Harvard Business Review 4HTC The brand from no where The Economist, 7th Apr 2012, sourced online from 5http//www.interbrand.com/en/best-global-brands/best-global-brands-2008/best-global-brands-2011.aspx 6Wolfe A, Gurushina N & Gassambe I, China Outlook The Tao of Hard Landing, 28 May 2012, Roubini Global Economics Report 7Mobile Phones in China, year Briefing, 19 Sep 2011 Passport GMID 8http//www.digitimes.com/news/a201 20619PR203.html9http//www.gizmag.com/lg-prada-collaborative-phone/20862/ 10http//www.ubergizmo.com/2010/06/htc-acquires-abaxia-to-strengthen-its-software-capabilities/ 11http//www.unilever.com.au/sustainability/casestudies/economic-development/creating-rural-entrepreneurs.aspx