htc complete analysis

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ovember 21, 2011

THE STRATEGY-FORMULATION ANALYTICAL FRAMEWORK

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STAGE 1THE INPUT STAGE

EXTERNAL FACTOR EVALUTION (EFE) MATRIXCOMPETITIVE PROFILE MATRIX (CPM)INTERNAL FACTOR EVALUTION (IFE) MATRIX

STAGE 2THE MATCHING STAGE

STRENGHT-WEAKNESS-OPPORTUINITIES-THREATS(SWOT) MATRIXSTRATEGIC POSITION AND ACTION EVALUTION (SPACE) MATRIXBOSTON CONSULTING GROUP (BCG) MATRIXINTERNAL-EXTERNAL(IE)MATRIXGRANG STRATEGY MATRIX

STAGE 3THE DECISION STAGE

QUANTITATIVE STRATEGIC PLANNING MATRIX(QSPM)

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STAGE 1: THE INPUT STAGE

Stages 1 summarize the basic input information needed to formulate strategies. The information derived from these three matrices provides basic input information for the matching and decision stage matrices.

1.1. INDUSTRY ANALYSIS: THE EXTERNAL FACTOR EVALUTION (EFE) MATRIX:

An EFE Matrix allows strategies to summarize and evaluate economic, social, cultural, demographic, environmental, political, government, legal, technological, and competitive information

2.THE COMPETITIVE PROFILE MATRIX (CPM):

The CPM identifies a firm’s major competitors and its particular strengths and weakness in relation to a sample firm’s strategic position.

3.THE INTERNAL FACTOR EVALUTION (IFE) MATRIX:

IFE Matrix provides strategy formulation tool summarizes and evaluates the major strengths and weakness in the functional areas of a business, and it also provides a basis for identifying and evaluating relationships among those areas.

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EFE MATRIX FOR HTC

KEY EXTERNAL FACTORS WEIGHT

RATING

WEIGHTED SCORE

OPPORTUNITIES:1. HTC collaborated with Google and launched their cell phones with Google Android OS install in it.

0.12 3 0.36

2. Strategic partnership with Beat Electronics by acquiring 51% shares.

0.11 3 0.33

3. Patent agreements. 0.05 2 0.10

4. Industrial growth rate is high for HTC. 0.10 3 0.30

5. Increasing demand for Touch screen phones with 3G technology.

0.07 4 0.28

6. Manufacturing units in Brazil. 0.02 2 0.04

7. As BlackBerry is an executive phone, HTC should also try to reach the executive level.

0.08 1 0.08

THREATS:

1. Rapid technological change. 0.13 3 0.39

2. Intense competition. 0.08 3 0.24

3. Stringent regulation. 0.02 1 0.02

4. Difficult to make HTC phones customer first preference when Apple, Nokia and BlackBerry phones are in the market (customer loyalty).

0.11 3 0.03

5.Numbers of products are less as compared to the competitors

0.11 3 0.33

TOTAL 1.00 2.8

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ANALYSIS OF EFE MATRIX:

The total weighted score of 2.8 is above the average of 2.5, so the telecommunication business (HTC) is doing pretty well, taking advantage of the external opportunities and avoiding the threats facing the corporation but still there is a great room for improvement as HTC is competing with the great players of mobile market they need to continue producing new mobile models to cope up with the competition. The corporation should take advantage when their competitor make some mistake like blackberry have to called their phone sets from the market due to some defect, in this situation HTC should try to win the customers of blackberry. Striking out the opportunities at the right time and eliminating threats at the right time will definitely help HTC to become the giant of the market.

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CPM MATRIX FOR HTC

APPLE HTC NOKIA

CRITICAL SUCCESS FACTORS

WEIGHT

RATING

WEIGHTEDSCORE

RATING

WEIGHTEDSCORE

RATING

WEIGHTEDSCORE

Market share 0.1 3 0.3 2 0.2 3 0.3

Price 0.1 2 0.2 2 0.2 3 0.3

Financial position 0.15 3 0.45 3 0.45 2 0.3

Product quality 0.15 3 0.45 3 0.45 2 0.3

Consumer loyalty 0.15 4 0.6 2 0.30 3 0.45

Advertising 0.05 2 0.1 1 0.05 3 0.15

Management 0.07 4 0.28 4 0.28 2 0.14

Global expansion 0.08 3 0.24 3 0.24 3 0.24

Innovation 0.15 4 0.6 4 0.6 3 0.45

TOTAL 1.00 3.22 2.77 2.63

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ANALYSIS OF CPM MATRIX:

Apple is on the top position as compared to HTC and Nokia. Apple is using an effective technique that has been able to create a brand image, which helps in achieving high market share as compared to other brands. Apple is much popular and highly in demand brand which is the major threat to HTC. It is a big hindrance in the demand of HTC cell phones. Apart from that, the financial crush could also be the threat for the company. That’s because HTC smart phones are expensive and are not affordable for many of the smart phones users. On the other side NOKIA’s smart phones are way cheaper. So lots of people prefer Nokia on HTC. However, through effective advertising HTC can differentiate its smart phones and can get maximum advantage of its new ANDROID phones.

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IFE MATRIX FOR HTCKEY EXTERNAL FACTORS WEIG

HTRATING

WEIGHTED SCORE

STRENGHTS:1. It is the leading maker of PDA’s smart phones in the world.

0.04 4 0.16

2. There is the strong setup of R&D in HTC. 0.14 4 0.56

3. HTC caters the customer national and internationally and the numbers of customers.

0.13 4 0.52

4. HTC smart phones equipped with windows vista, Android OS, HD video recording, multiple touch system.

0.06 3 0.18

5. Industry recognition and awards. 0.11 4 0.44

6. Financial performance. 0.03 3 0.09

7. Expending market share in sectors. 0.10 3 0.3

WEAKNESS:1. HTC is not very much recognized brand in the market as compare to the Apple, Nokia and Blackberry.

0.10 2 0.2

2. High manufacturing cost of HTC. 0.07 1 0.07

3. Declining liquidity ratio. 0.04 2 0.08

4. Patent infringement litigation.

5. Small range of cell phones model as compared to Nokia.

0.01

0.08

2

1

0.02

0.08

6.huge market share capture by Nokia, Apple and BlackBerry etc.

0.09 1 0.09

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TOTAL 1.00 2.79

ANALYSIS OF IFE MATRIX: The IFE of HTC shows weight age average of 2.79 is above average which means corporation is able to use is toped resources and focus on strength like updated machinery, new technology used that is increased cost can be control through revenue earned by HTC. However, it has small range of cell phones compared to NOKIA and has very high manufacturing cost as well but still there is a great room for improvement as HTC is competing with the great players of mobile market they need to continue producing new mobile models to cope up with the competition. As entering into new markets like CHINA and INDIA can bring heavy cash inflow to the company but the need is to have heavy spending on advertisement to that will not only give HTC brand recognition but will bring huge profits that can strengthen its financial position and can improve its financial ratios as well.

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STAGE 2: THE MATCHING STAGE

Stage 2 focuses upon generating feasible alternative strategies by aligning key external and internal factors. Strategy is sometimes defined as the match an organization makes between its internal resources and skills and the opportunities and risks created by its external factors.

1. THE STRENGHT-WEAKNESS-OPPRTUNITIES-THREATS (TOWS) MATRIX:

The SWOT Matrix is an important matching tool that helps managers develops four types of strategies: SO Strategies use a firm’s internal strengths to tae advantage of external opportunities, WO Strategies aim at improving internal weakness by taking advantage of external opportunities, ST Strategies use a firm’s strengths to avoid or reduce the impact of external threats, WT Strategies are defensive strategies tactics directed at reducing internal weakness and avoiding external threats.

1.THE STRATEGIC POSITION AND ACTION EVALUTION (SPACE) MATRIX:

The SPACE Matrix indicates whether aggressive, conservative, defensive, or competitive strategies are most appropriate for a given organization. The axe of the SPACE Matrix represents two internal dimensions (Financial strength [FS] and competitive advantage [CA]) and two external dimensions (environmental stability [ES] and industry strength [IS]).

2.THE BOSTON CONSULTING GROUP (BCG) MATRIX:

BCG &IE Matrix are designed specifically to enhance a multi divisional firm’s efforts to formulate strategies. The BCG

Matrix graphically portrays differences among divisions in terms of relative market share position and industry growth rate.

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3.The INTERNAL-EXTERNAL (IE) MARIX:The Internal-External (IE) Matrix positions an organization’s various divisions in a nine-cell display.4.THE GRAND STRATYEGY MATRIX:

In addition to the SWOT Matrix, SPACE Matrix, BCG Matrix, and IE Matrix, the Grand Strategy Matrix has become a popular tool for formulating alternative strategies. All organizations can be positioned in one of the Grand Strategy Matrix’s four strategy quadrants.

TOWS MATRIX OF HTC

SO STRATEGIES WO - STRATEGIES

1. Produced innovative products with high technology (S2, O1).

1. Purchase all legal rights (W4, O3).

2. Served national and globally with 3G technology (S3, O5, O4).

2. Lower their cost by taking advantage of lower labor cost and production unit (W2, O7).

3. Increasing market share by providing innovative products to customers as compared to rivals (S7, O7).

3. Overcome short term debt by strategic alliances (W3, O2).

4.Bring out new products in collaboration with experience partnership(S8,O2)

4. Take advantage of sponsorship to make space in hearts of customers (W1, W6, and O6).

5.Acheived many rewards and recognition by Beating electronic rivals(S5,O2)

ST- STRATEGIES WT - STRATEGIES

1. Introduced new products to gain customer trust (S4, T4, and T5).

1. Put attractive features to the product (W6, T5).

2. Compete with rival by focus on performance, Technological advancement and brand recognitions and awards (S5, S6, S7, T2, T1).

2. Keep cost low to attract customers (W5, T4).

3. Compete with rivals by providing services to 3. Compete with rivals with new techniques (T2, W6, and

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customers nationally and internationally (S3, T2). W1).

4. Enlarge sales volume and market share with more promotional activities as compared to rivals (S7, T5).

4. Supported by technology launches and threaten by popular and highly in demand brand because of high cost (W2, T1, and T5).

5. Less brand awareness leads to lower marketing/sales (W1, T5).

SPACE MATRIX OF HTC

FINANCIAL STRENGTH RATINGS

1. Purchase all legal rights. 3

2. Overcome short term debt by strategic alliances. 3

3. It is the leading maker of PDA’s smart phones in the world and there is strong setup of R&D in HTC. 5

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INDUSTRY STRENGTH

1. Compete with rivals by providing services to customers nationally and internationally. 4

2. Defect in BlackBerry sales decline product brings out HTC product. 4

3. Producing 3G technology in response to rapid technological change. 6

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ENVRIONMENTAL STABILITY

1.Compete with rivals with new techniques -2

2. Supported by technology launches and threaten by popular and highly in demand because of high cost. -5

3. Less brand awareness leads to lower marketing sales. -6

4.Compete with rivals by focus on performance, technology etc. -3

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COMPETITIVE ADVANTAGE

1. HTC has long experience with network suppliers. -3

2. Introduced new products to gain customer trust. -2

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3. Enlarge sales volume by market share with more promotional activities as compared to rivals. -5

4. Put attractive features to the products. -2

5. Keep cost low to attract customers. -4

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CONCLUSION:

ES= -16/4= -4 IS = 14/3 = 4.67

CA= -16/5= -3.2 FS = 11/3 = 3.667

Directional Vector coordinates’: x-axis: -3.2 + 4.67 = 1.47

Y-axis: -4 + 3.67 = -0.33

FSCONSERVATIVE AGGRESSIVE 6

5

4

3

2

1

CA IS

-7 -6 -5 -4 -3 -2 -1 1 2 3 4 5 6 7

-1

-2 -3

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-4

-5

DEFENSIVE COMPETITIVE

ES

ANALYSIS OF SPACE MATRIX:

Forward Integration

Backward Integration

Horizontal Integration

Market Penetration

Market Development

Product Development

Joint Venture

HTC is competing fairly in an unstable market. Organization lies in “COMPETITIVE” quadrant. They should really go for market penetration, product development.The result of TOWS analysis is matching with space matrix .The decision regarding market penetration, product development will be beneficial to move with the overall performance is good, firms financial strength is a dominating factor in the industry.

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BOSTON CONSULTING GROUP (BCG) MATRIX

Stars Question Marks

Cash Cows Dogs

High 1.0 Medium 0.5 Low 0.0 DIVISION REVENUE

Billion ($)REVENUE %

PROFIT Billion ($)

PROFIT %

MARKET SHARE

GROWTH RATE

ASIA 47.7 17.1 9.842 25 21.44 +6

EUROPE 90.1 32.2 14.15 36 39.89 +9

AMERICA 141 50.6 15.338 39 45.60 +10

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RELATIVE MARKET SHARE

High +20

Medium 0

I NDUSTRY GRO

AMERICA

EUROPE

ASIA

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TOTAL 278.8 100 39.33 100

ANALYSIS OF BCG:

All three regions i.e. Asia, Europe and America lie in the first quadrant that is QUESTION MARK, means HTC needs to penetrate its market to bring these regions in STAR. HTC’s demand has been growing rapidly among upper-middle and working class due to its introduction of ANDROID phones which are more attractive and have more functions and features compared to NOKIA.Although it has not been reached to the level of apple yet, but can easily target executive class by reaching to the companies and having contract with them to give their executive people HTC phones. According to the recent analysis it has been observed that many people of top level management have started to prefer Android phones due to their enhanced operating system. So, it’s a good time for HTC to engage itself in good contracts with well renounced multinational companies and to have a good advertising.

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Medium 0

Low -20

I NDUSTRY GRO

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The Internal-External (IE) Matrix

DIVISION REVENUEBillion ($)

REVENUE % PROFIT Billion ($)

PROFIT % IFE EFE

ASIA 47.7 17.1 9.842 25 1.98 2.10

EUROPE 90.1 32.2 14.15 36 2.39 2.53

AMERICA 141 50.6 15.338 39 2.56 2.67

TOTAL 278.8 100 39.33 100

ANALYSIS OF IE:

Asia region lies in weak quadrant and HTC after entering into new market INDIA need to put its huge money on advertising. They need to sow many HYV (high yielding variety) seeds to harvest well, like showing effective ads that should particularly focus executive class. They should not advertise their android phones only, but their windows phones and tabs as well.However, America and Europe lie in the medium quadrant means they are doing little well, still they need to strength their position through the strategy of product development to move to strong quadrant. As its rivals apple and Samsung have already captured a huge market and Motorola is also coming up with new range of android phones, so HTC needs to keep an eagle eye on its rival and must respond to the public demand as both America and Europe are the high profit yielding areas for HTC.

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THE IFE TOTAL WEIGHTED

EFE WEIGHTED

SCORE

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Grand Strategy Matrix

HTC

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RAPID MARKET GROWTH

STRONG COMPETITIVE POSITION

WEAK COMPETITIVE POSITION

Quadrant II Quadrant I

Quadrant III Quadrant IV

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Concentric Diversification

Conglomerate Diversification

Horizontal Diversification

Retrenchment

Divestiture

Liquidation

SLOW MARKET GROWTH

Matrix Analysis SummaryAlternative Strategies IE SPACE GRAND

Forward Integration * *

Backward Integration * *

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Horizontal Integration * *

Market Penetration * *

Market Development * *

Product Development * *

Concentric Diversification *

Conglomerate Diversification *

Horizontal Diversification *

Joint Venture *

Retrenchment *

Divestiture *

Liquidation *

STAGE 3: DECISION STAGEStage 3Analysis and intuition provide a basis for making strategy-formulation decisions.

THE QUANTITATIVE STRATEGIC PLANNING MATRIX (QSPM)

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This technique is the QUANTITATIVE STRATEGIC PLANNING MATRIX (QSPM), which comprises stage 3 of the strategy-formulation analytical framework. This technique objectively indicates which alternatives strategies are best. The QSPM uses input from stage 1 analyses and matching results from stage 2 analyses to decide objectively among alternative strategies.

THE QUANTITATIVE STRATEGIC PLANNING MATRIX (QSPM)DIVERTIFICATION IN PRODUCTS

EXPAND MARKET IN ASIA & CHINA

KEY EXTERNAL FACTORS WEIGHT AS

TAS

AS

TAS

OPPORTUNITIES:1. HTC collaborated with Google and 0.12 4.00 0.48 2.00 0.24

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launched their cell phones with Google Android OS install in it.2. Strategic partnership with Beat Electronics by acquiring 51% shares.

0.11 3.00 0.33 3.00 0.33

3. Patent agreements. 0.05 - - - -

4. Industrial growth rate is high for HTC.

0.10 2.00 0.2 3.00 0.3

5. Increasing demand for Touch screen phones with 3G technology.

0.07 3.00 0.21 4.00 0.28

6. Manufacturing units in Brazil. 0.02 - - - -

7. As BlackBerry is an executive phone, HTC should also try to reach the executive level.

0.08 3.00 0.24 4.00 0.32

THREATS:1. Rapid technological change. 0.13 3.00 0.39 2.00 0.26

2. Intense competition. 0.08 4.00 0.32 3.00 0.24

3. Stringent regulation. 0.02 - - - -

4. Difficult to make HTC phones customer first preference when Apple, Nokia and BlackBerry phones are in the market (customer loyalty).

0.11 2.00 0.22 4.00 0.44

5.Numbers of products are less as compared to the competitors

0.11 1.00 0.11 2.00 0.22

SUBTOTAL 1.00 2.5 2.33DIVERSIFICATION IN PRODUCTS

EXPAND MARKET IN ASIA & CHINA

KEY INTERNA FACTORS WEIGHT AS TAS AS TAS

STRENGTH:

1. It is the leading maker of PDA’s 0.04 1.00 0.04 4.00 0.16

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smart phones in the world.2. There is the strong setup of R&D in HTC.

0.14 2.00 0.28 3.00 0.42

3. HTC caters the customer national and internationally and the numbers of customers.

0.13 3.00 0.39 1.00 0.13

4. HTC smart phones equipped with windows vista, Android OS, HD video recording, multiple touch system.

0.06 2.00 0.12 1.00 0.06

5. Industry recognition and awards. 0.11 - - - -

6. Financial performance. 0.03 - - - -

7. Expending market share in sectors. 0.10 1.00 0.1 4.00 0.4

WEAKNESSES:1. HTC is not very much recognized brand in the market as compare to the Apple, Nokia and Blackberry.

0.10 2.00 0.2 4.00 0.4

2. High manufacturing cost of HTC. 0.07 1.00 0.07 3.00 0.213. Declining liquidity ratio. 0.04 - - - -4. Patent infringement litigation.

5. Small range of cell phones model as compared to Nokia.

0.01

0.08

-

4.00

-

0.32

-

1.00

-

0.08

6.huge market share capture by Nokia, Apple and BlackBerry etc.

0.09 3.00 0.27 3.00 0.27

SUBTOTAL 1.00 1.79 2.13

SUM TOTAL ATTRACTIVENESS SCORE

4.29 4.46

ANALYSIS OF QSPM:

The two alternative strategies__ (1) DIVERSIFICATION IN PRODUCTS (2) EXPAND MARKET IN ASIA & CHINA___ are being considered for HTC , by sum total attractiveness scores of 4.29 and 4.46 that the analysis indicates that HTC should go for market development in ASIA and CHINA. As both CHINA and Asia’s largest territory holder INDIA fall under the category of coming up super power country, so its will prove to be a good strategy for HTC to expand but

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side by side they need to have a good marketing to have a brand recognition. Furthermore, they should try to reach to target executive level as their android phones can easily make their market in their segment due to their operating system.

RECOMMENDATIONS:

STRATEGY 1:

LOWER ITS MARKET PRICES:

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The fact that Apple's new phone isn't significantly cheaper than its previous iPhone 4 offering should allow HTC to increase market share in key emerging markets with its cheaper Smartphone models.

STRATEGY 2:

ADVERTISE EFFECTIVELY:

AS the Smartphone market has grown nearly ninety percent from last year and more than six times the overall mobile phone market indicates strong demand worldwide and vendors' collective ability to meet that demand. 

STRATEGY 3:

EXPAND MARKETS IN ASIA & CHINA:

As the Taiyuan-based company has increased market share in the U.S., Asia and Europe in recent years with its early adoption of Google Inc.'s Android software, becoming the fifth-largest producer of Smartphone globally by shipments in the second quarter. Over the past year it has acquired a variety of companies, including Beats, a headphone maker started by music producer Dr. Dre, to build out its service offerings and compete with Apple Inc.'s iPhone and Samsung Electronics Co.'s Smartphone’s

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