Your SlideShare is downloading. ×
M A R K E T I N S I G H T
HTC: One Last Chance
By Lawrence Lundy - Consultant ICT
Frost & Sullivan | Market Insight
Frost.com
2
HTC INTROUBLE
In a smartphone market that grew over 40% last year, HTC’s tot...
Frost.com
3
Frost & Sullivan | Market Insight
The concept was sound; unfortunately, the adverts were poorly received. It i...
Frost & Sullivan | Market Insight
Frost.com
4
If HTC is able to persuade developers to use BlinkFeed, it will have an extr...
SILICONVALLEY
331 E. Evelyn Ave. Suite 100
MountainView, CA 94041
Tel 650.475.4500
Fax 650.475.1570
SAN ANTONIO
7550 West ...
Upcoming SlideShare
Loading in...5
×

Frost & Sullivan HTC: One Last Chance

357

Published on

Frost & Sullivan new Market Insight on HTC In a smartphone market that grew over 40% last year, HTC’s total shipments fell. In October, HTC
announced the first ever loss in the company’s history, and its market capital fell to $4 billion from
$33 billion. Apple and Samsung dominate the high-end and developed markets, while Huawei, ZTE, and
Lenovo are winning in the low-end and growth markets. HTC is struggling to react.

Published in: Business
0 Comments
1 Like
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total Views
357
On Slideshare
0
From Embeds
0
Number of Embeds
1
Actions
Shares
0
Downloads
7
Comments
0
Likes
1
Embeds 0
No embeds

No notes for slide

Transcript of "Frost & Sullivan HTC: One Last Chance "

  1. 1. M A R K E T I N S I G H T HTC: One Last Chance By Lawrence Lundy - Consultant ICT
  2. 2. Frost & Sullivan | Market Insight Frost.com 2 HTC INTROUBLE In a smartphone market that grew over 40% last year, HTC’s total shipments fell. In October, HTC announced the first ever loss in the company’s history, and its market capital fell to $4 billion from $33 billion. Apple and Samsung dominate the high-end and developed markets, while Huawei, ZTE, and Lenovo are winning in the low-end and growth markets. HTC is struggling to react. What is particularly troubling about HTC’s decline is that it is not a product problem. Such a precipitous decline can usually be attributed to a specific failure. Some instances include Blackberry (blinded by its focus on enterprise customers) failing to see the disruptive capabilities of the iPhone and the touch- interface and Nokia backing two losing operating systems. HTC,on the other hand,produced extremely high-quality devices, with the HTC One being crowned Smartphone of the Year at the Mobile World Congress in 2013. The company was never locked into a failing operating system,having produced hand- sets that run Android,Windows Phones, and even Facebook Home. With some of the best handsets on the market, offering all of the apps a customer could want, what is going wrong at HTC? Quite simply, HTC misread the market. The market commoditised quicker than the company anticipated, and there was a lack of brand differentiation at the high end. Apple has a portfolio of high- end products as well as a luxury brand,and at the low-end,Chinese competitors produced at scale and reduced price. HTC was left to compete with Samsung in the mid-to-high end with a non-differentiated operating system. Samsung was able to leverage other businesses to achieve supply chain and manufacturing scale, spend $14 billion on advertising in 2013, and pay huge commissions to its channel sales partners. Meanwhile,HTC has been unable to compete. There may be opportunity for HTC One (M8) to improve performance. No retreat downmarket There are only two sustainable positions/forms of product differentiation in the smartphone market— the high-end brand differentiation and the low-end cost leadership. When it comes to the low-end market,a successful smartphone business requires manufacturing and supply-chain scale to produce the handsets and a huge channel or retail presence to sell the handsets.The only way to achieve sustainable profitability is to scale and drive down unit cost. Unlike Samsung, Lenovo, Huawei, and ZTE, HTC does not have the internal capacity to retreat downmarket and beat the competition. HTC’s value proposition of innovation, design and build quality is suited to compete in the premium segment. As the smartphone market matures, a differentiation strategy through functionality becomes more difficult. Most smartphones have similar features and become good enough for most customers. Innovation around camera technology with Zoe and sound quality with BoomSound are not sufficient to get customers to switch smartphones. Differentiation by functionality is a successful strategy when a market is in a growth phase, but as the market matures and becomes saturated this is no longer effective. Brand differentiation is the more effective strategy during a saturation phase. HTC failed to adapt quickly enough. #HTChange Last year, HTC reportedly spent over $1 billion (USD) to launch a new “Here’s to Change” advertising campaign, featuring Robert Downey Jr. The campaign was designed to reinvent HTC and get people talking about the company as a brand rather than as a specific product.
  3. 3. Frost.com 3 Frost & Sullivan | Market Insight The concept was sound; unfortunately, the adverts were poorly received. It is clear that the company is committed to building its brand, and the campaigning around the HTC One (M8) proves this. The marketing campaign is focused around the design and feel of the device, rather than the functionality. Peter Frølund, the Vice President for the United Kingdom and Nordics, recently admitted that the company previously focused too much on features and functionality in marketing communications. HTC needs to more effectively communicate to the market its unique value. Design and build quality are simple and effective messages,which will differentiate the HTC One (M8) from the Samsung Galaxy range. HTC has the opportunity to win those customers that want a high-end device and are not in the Apple ecosystem. HTC should target Samsung in order to gain market share. At the lower ends of the market, HTC struggle to match the volumes that Samsung can achieve, but this is less of an issue at the high-end. As this market matures in the future and Lenovo, ZTE, and Huawei move upmarket, the only protection HTC will have will be its brand. Competitors will develop the capacity to produce premium devices and will catch up quickly; however, they too will face the challenge of developing a brand. Lenovo’s purchase of Motorola may be its solution to the challenge of brand building in the United States. Extending the product line Even if HTC is able to successfully win market share from Samsung with the HTC One (M8) and develop a strong brand to protect them in the future,the simple fact remains that in many markets smartphone growth is slowing. With only one product line,HTC has experience with a slowdown in the market. In such a scenario, the company must extend the product line to tablets and wearable devices to ensure future growth. The most obvious device for HTC would be a premium-end tablet to compete with the iPad Air, Microsoft Surface, and Samsung Galaxy Tab. Aside from R&D costs, there is no reason that HTC cannot extend the One brand into tablets much in the same way Samsung has with the Galaxy range. There is still a lot of growth to come from the tablet market,as the market is in an early majority stage. Beyond tablets, HTC should extend into is a wearable device, most likely a smartwatch. The trend towards intimate computing, from PC to laptop to smartphone to wearables, has slowly reduced the importance of specifications to customers, and put design front and centre. This macro-level shift in computing can help to explain Apple’s rise, with its design-centric products, and Dell or HP’s decline, with a focus on modularity and specifications. As devices become fashion items and jewellery,companies such as HTC and Apple that really focus on design will have the advantage. The service play: BlinkFeed as a platform With a strong brand and a broader portfolio,HTC can return to profitability and maintain a sustainable position as a premium hardware maker. There is, however, another possible strategy that HTC should pursue to position itself as a leader in the smartphone+ era, and that is to build a content aggregation and delivery platform. As more devices become smart, with microprocessors and built-in connectivity, there will be a role for platforms that can aggregate, manage, and add value with the data and content that is collected. BlinkFeed,a product started as the HTC Home Screen forAndroid,is the place where the user’s social network data and customised news is collected and displayed. The latest iteration of BlinkFeed allows third parties to use the standard developer kit (SDK) to plug their own content into BlinkFeed. Launch partners include Foursquare and Fitbit, meaning location and health-based content will be displayed in the BlinkFeed screen.
  4. 4. Frost & Sullivan | Market Insight Frost.com 4 If HTC is able to persuade developers to use BlinkFeed, it will have an extremely rich and valuable content aggregation platform. HTC can add value by providing this content in a visually appealing way and ensuring notifications are intelligent and anticipatory. This is the same space as Google is looking to occupy with Google Now,Apple is extending with Siri, and Facebook is building with its products. The difficulty for HTC is that all of these companies have huge reach for their products, and their platforms will collect far more data, enabling these companies to build much more sophisticated products. The only way HTC can achieve the necessary reach is to unbundle BlinkFeed from HTC devices, offering it as a standalone download on all platforms. Much in the same way Kik and WeChat are building platforms on top of Android to add value, HTC should pursue the same strategy. Premium brand for now, Blinkfeed for tomorrow The HTC One (M8) launch suggested that HTC learned from its previous marketing mistakes and understands the need to build its brand around design, not features. The company must continue to focus on the premium segment and resist the urge to retreat downmarket, where it does not have the competitive advantage. The device and a new marketing strategy may bring some short-term success, but for the company to grow in the medium term it will need to extend the product line into tablets and wearables. These are markets in which HTC has the internal capabilities to be successful. In order to truly compete in the long-term, HTC should pursue a services strategy developing BlinkFeed into a device and operating system-agnostic content aggregation and delivery platform. For more information on Frost & Sullivan’s Mobile research, please contact the author: Lawrence Lundy: lawrence.lundy@frost.com Join our LinkedIn group: Future Growth Opportunities in ICT Follow meon Twitter:@lawrencelundy Follow uso n slideshare: FrostandSullivan
  5. 5. SILICONVALLEY 331 E. Evelyn Ave. Suite 100 MountainView, CA 94041 Tel 650.475.4500 Fax 650.475.1570 SAN ANTONIO 7550 West Interstate 10, Suite 400, San Antonio,Texas 78229-5616 Tel 210.348.1000 Fax 210.348.1003 LONDON 4 Grosvenor Gardens London SW1W 0DH Tel +44 (0)20 7343 8383 Fax +44 (0)20 7730 3343 CONTAC T U S +44 (0) 20 7343 8383 • enquiries@frost.com • www.frost.com FROST & SULLIVAN Frost & Sullivan,the Growth Consulting Company,partners with clients to accelerate their growth.The company’s Growth Partnership Services, Growth Consulting and Career Best Practices empower clients to create a growth-focused culture that generates, evaluates and implements effective growth strategies. Frost & Sullivan employs more than 50 years of experience in partnering with Global 1000 companies, emerging businesses and the investment community from more than 40 offices on six continents. For more information about Frost & Sullivan’s Growth Partnerships.

×