HTC’s Performance: Competitive Advantages & Vulnerabilities
HTC was founded in Taiwan on May 1997 by H.T. Cho and Cher Wang. From the start HTC has been known for its high quality and technical innovation. The company initially focused on notebooks. It succeeded in creating the world’s first pocket-size PC with Microsoft, but their major success was the manufacturing of a PDA for Compaq Computer. From the beginning HTC created a close relationship with Microsoft, which has benefited them a lot in all the years. As original design manufacturer (ODM) HTC earned 80% of the revenues out of the PDAs, but Cho and Wang also decided to enter the mobile telecommunications market. Their new goal was to make smartphones and wireless PDAs.
HTC was operating in two segments: the ODM business and the mobile operator business. All these processes were done with little connection to end-users. But in 2006 competitors were rapidly catching up in the ODM market. The strategy of HTC had to be changed. An advantage of HTC is their strong organization. They have always had a high experienced management, a quick nimble organization and an open work environment which stimulates innovation. Especially the speed on which they can create new systems is appealing. Knowing these strengths, HTC started branding and selling handsets under the company’s own name. Although history did not speak for them, several ODMs have tried to build their own brands with little success; HTC officially started its brand strategy in 2007. In order to get better margins and to differentiate among ODMs, HTC invested in complementary business by offering mobile operators customized phones based on products conceptualized and designed by HTC. The advantages of this approach were that it was highly customized and it gave a lot of flexibility. Operators gained a greater sense of control over their product portfolio, which they appreciated a lot. Downsides were the high costs on R&D efforts and employees.
HTC focuses on the overlap of professionals and consumers, but this also has the disadvantage that consumers expect innovative designs with attractive designs and functions that would catch the operators’ attention. Because of the speed and excellent technical innovation in HTC they were able to lower the average product life cycles compared to competitors, but this also brings more costs with it. Because of the growing market for smart phones (exhibit 5a), HTC started its own internal research center “Magic Labs” to drive innovation for the launch of a new series of smartphones. The big advantage of HTC was that Apple launched its iPhone, just before HTC launched its first HTC Touch. The iPhone already educated the end-users to understand and accept what the technology could really bring to their lives. The Touch and its follow-up phone, were are success. HTC started working with Google, with the Android technology, which is also a company with a lot of competences.
Looking at brand awareness HTC still has a long way to go. An advantage of HTC is their customer satisfaction, if the customers buy a HTC product, the satisfaction is very high, but they are not familiar with the brand (Ex. 10a and 10b).
The prices of HTC products are relatively high compared to competitors (Ex. 11). They already downsized a lot of costs, but economies of scale are difficult because they are quite small compared to competitors like Nokia. Nokia had 30% component cost advantage over HTC due to economies of scale in purchasing. This strong competition also has a disadvantage for their strategy to spread and create the brand awareness for HTC. Among the big competitors they are forced to a global roll out, so try to introduce to all markets at the same time. But HTC does not have the abilities to do so. Next to this HTC is still quite dependent on others, they also have to pay a lot of different fees. This is a big part of their total costs, which is money they cannot spend on...
Please join StudyMode to read the full document