International Marketing

Case Presentation
Founded in 1997 by Cher Wang, Chairwoman, HT Cho, Director of the Board &
Chairman of HTC Foundation, and Peter Chou, President and CEO, HTC made its
name as the company behind many of the most popular operator-branded devices
on the market
Starting out with PDAs, HTC became the world leading manufacturer in
smartphone category
In June 2006 HTC made the decision to brand phone under its own label, even
though a lot of Taiwanese Manufactures and tried and failed.
The HTC brand name has a long way to go
Introduction
Where should HTC participate in this expanding
value chain?
What should be done to make HTC unique
amongst all others?
What should they do become a powerful global
brand?
Challenges Ahead
The landscape for phone software is changing dramatically with Apple,
RIM, Google etc shocking the world with newer and improved products &
also services like app stores. Thus HTC faces the following challenges:
Shift to Android platform
Launch Apps Store with revenue model similar to
Apples
Technology Focus
Display Technologies
Mobile Web and Widgets
Better deals with service providers
Improve Utilization for Cost Reduction
Enter the mid-tier segment
Focus on Brand Enhancement

Recommendations
One of the founders of HTC, Cher Wang had a vision bring
the power of mobile computing into the hands of people
around the world.
Opportunity came in 1997 when Microsoft had developed
Windows CE, a new Windows based platform that could
operate on smaller PC devices and hence HTC was born
Initial focus was on notebooks due to dearth of engineers
skilled enough to make handheld devices.
Peter Chou, a talented engineer with his small team were
working on handheld devices and created the worlds
smallest PC with Microsoft in 1998
Wang invested additionally in the currently loss-making
notebook business on the condition that HTC would exit
notebook business and focus on handheld devices
HTC History
2002- manufactured a PDA, the iPAQ for Compaq. HTC was
commissioned ODM for Compaq. HTC maintained its relations
with Microsoft and released the XDA in 2002. The company
recorded its first profit that year.
With a new goal of making smartphones and wireless PDAs, HTC
partenered with Qualcomm to become the 1
st
Taiwanese
company with a 3G lisence
In 2006, HTC decided to step out from behind the curtain and
introduced HTC as a brand. The goal was to deliver an easy to
use, holistic smartphone experience by drawing on our know-
how in design and innovation.
In June 2007 HTC Touch was launched the first finger-friendly
touchscreen smartphone. Year after year, breakthrough touch-
based smartphones were launched like the Touch Diamond,
Hero, HD2, Legend, Desire, Mozart & Trophy.
HTC History
Original Design Manufacturer(ODM) Business

Manufactured smartphones for branded handset
companies
Little responsibility for sales, marketing or Inventor
Management


Mobile Operator Business

Complementary Business by offering
customized phones based on products
designed by HTC to service providers such as
T-Mobile
Increased Costs for HTC
R&D Costs (5% of Total Revenue)
Inventory Costs
Operators gained greater control on their
Product portfolio
Early Success through contract with Vodafone,
British Telecom and Orange
Made the Treo Smartphone in collaboration with
Handspring



Business Segments
ODM and Mobile Operator Business resulted in profit margins as high as 20%
Technological convergence became the key trend
influencing the mobile phone subsector, which saw the
introduction of many new models offering streaming
video, advanced camera features, MP3 capabilities and
global positioning systems (GPS). Global volume sales
reached nearly 886 million units in 2008.
Consumers' desire to listen to music, watch video, play
games and communicate anywhere and anytime is
transforming the global mobile phone sector. All-in-one
portable communication/ entertainment systems
complement to the growing consumer demand to be
connected and entertained on-the-go.
The heightened demand for mobile phones has been
stimulated in part by the continuing roll-out of advanced
telecommunications infrastructure, such as Wi-Fi and 3G
mobile phone technology.

The success of mobile phones continued to
be determined by the availability and
accessibility of online content, which in turn
depends of the sophistication of the
underlying telecommunications
infrastructure.

Category Analysis
Mobile phones are now turned into
a handheld computer that can be
used as a media player, TV,
Internet browser, GPS navigator,
planner, digital camera
Nokia E75
0
200
400
600
800
1000
1200
2003 2004 2005 2006 2007 2008 2009
Demand for Mobile Phones
Millions of Units
Portable Electronics: Mobile Phones
Mobile Phones - Sales
Source: Mobile Devices -The iPhone Is Not The Only Game In Town, 2010, Gartner
Competitor Analysis
Buyers
Weak
Consumers
market
Corporate
market
Suppliers
Strong
Carriers -AT&T

OS providers -
Linux, WM
Hardware
makers Intel
Rivals
Strong
More
companies
enters
Strong brands
and finance
New Entrants
Threat
Establish
mobile
manufacture:
LG, Samsung
Software
giants: Google,
MSFT
Substitute
Products
Emerged
VoIP Skype
PDA phone
Palm
Nokia
Motorol
a
RIM
PALM
Samsung
Apple
HTC



1. Shift To Android Platform
12
iPhone OS
(Apple)
BlackBerry OS
(RIM)
Window Mobile
(Microsoft)
Android
(Google)
Symbian
(Nokia)
Platform Closed Closed Open Open Open
Source Code Closed Closed Closed Open Open
Pros Early momentum
Data hungry early
adopters
Powerful
distribution
channel
Strong reach
(particularly in US)
Manufacturer /
carrier agnostic
Manufacturer /
carrier agnostic
Open source
innovation
Massive global
reach
Open source
innovation
Issues Apple dependant BB dependent
Distribution
Distribution Late to market
Uncertain
consumer demand
Limited reach in
US
Distribution
Application
ecosystem
>3 lakh apps
(~20% free)
More than 7
billion download
Fewer free apps
BB Application
Center being
developed for
Storm
>18K apps
Windows
marketplace
launched
Android Market
launched
$3.8M awarded in
Developer
Challenge
10s of thousands
apps
>10K apps
Claims >90M
installs over last 2
years
Nokia OVI store
Notes: 1. Artificially low given the wait for the 3G iPhone (5.3% market share in Q1)
Smartphone OS Competitive Landscape
Company
3Q10
Units
3Q10 Market Share (%)
3Q09
Units
3Q09 Market Share (%)
Symbian 29,480.1 36.6 18,314.8 44.6
Android 20,500.0 25.5 1,424.5 3.5
iOS 13,484.4 16.7 7,040.4 17.1
Research In Motion 11,908.3 14.8 8,522.7 20.7
Microsoft Windows
Mobile
2,247.9 2.8 3,259.9 7.9
Linux 1,697.1 2.1 1,918.5 4.7
Other OS 1,214.8 1.5 612.5 1.5
Total 80,532.6 100.0 41,093.3 100.0
Source: Gartner (November 2010)
The market is growing rapidly at nearly 38%, but
Androids sales and share will explode while RIM and
Apple will lag Android and the market. Android is
expected to match the (current) BlackBerry numbers by
2013.
Worldwide Smartphone Sales to End Users by Operating
System in 3Q10 (Thousands of Units)
Year 2007 2008 2009 2010 2011
Wireless PDA 1% 1% 0% 0% 0%
Microsoft Platform 84% 89% 61% 53% 51%
Android Platform 0% 6% 36% 47% 49%
ODM 14% 5% 3% 0% 0%
HTC's Revenue by Product category (Exhibit 9)
Year 2007 2008 2009 2010 2011
Wireless PDA 0% -100% 0% 0%
Microsoft Platform 6% -31% -13% -4%
Android Platform 500% 31% 4%
ODM -64% -40% -100% 0%
Market Share Growth Rate by Maker
Handset Platforms
Transition to Android - Benefits
Smart Phone Sales 2009 = 250m
HTCs share 6% = 15m handsets
HTC sold 10m Windows based smart phones
License fees to Microsoft= $150 million
Switch to Android would save this cost
Operating Margin increases from 30% to 46%.
Nokia has a margin of 35% and Apple 34%



2. Launch Apps Store with revenue model
similar to Apples

OEM Application Stores Comparison
AppStore - Comparison








Apps Store Increasing Value Chain
Mobile Application Stores





Gartner Prediction for Mobile
Applications Paid up Mobile
Applications to reach 90% from current
82%
Mobile advertising down to 10% from
current 25%
Application stores becoming the focus
for several players in the value chain
More Consumers will experiment with
application downloads
Many Free Applications derive
Revenue from Advertising
The value chain of application Stores
will evolve to find the most profitable
business model
Proposed Revenue Sharing model:
70% of revenue goes to developer,
30% to HTC
0
5000
10000
15000
20000
25000
30000
35000
2009 2010 2013
Mobile Apps Store
Downloads (Million) Total Revenue ($ Million)
Ecosystems Apps much more than stores



3. Better deals with service providers
7
iPhone
4
Black
berry
Sony
X10
HTC
suround
$729 $500 $400 $350
$199 $99 $99 $199
27% 20% 25% 57%
iPhone - $99 to $199 729
Blackberry $99 621
Sony Xperia X10 $99 500
HTC(Win Based) $199+ 720




4. Enter the mid-tier segment
Aspirational Brand image to be
the BMW of Mobiles
Convergence of mid range
phones(feature phones) with
smart phones
Gross margin of Nokia 35%,
Samsung 26%, HTC 30%

Should HTC also enter Manufacture of Mid Range Phones?
Smart Phones - Forecasts
Source: Mobile Devices -The iPhone Is Not The Only Game In Town, 2010, Gartner
Year 2007 2008 Q1 2008 Q2 2008 Q3 2008 Q4 2009 Q1 2009 Q2 2009 Q3
Apple 2.70% 5.30% 2.80% 12.90% 10.70% 10.80% 13.30% 17.10%
Fujitsu na 4.10% 3.30% na na 3.80% 3% na
HTC 3% 4% 4.10% 4.50% 4.30% 5.40% 6% 6.50%
nokia 49.40% 45.10% 47.40% 42.30% 40.80% 41.20% 45% 39.30%
rim 9.60% 13.30% 17.30% 15.90% 19.50% 19.90% 18.70% 20.80%
samsung na na na 3% 4.20% na na 3.20%
others 35.20% 28.10% 25.10% 21.30% 20.50% 18.80% 13.90% 13.10%
Market Share by Maker (Exhibit 5 b)
Year 2007 2008 Q1 2008 Q2 2008 Q3 2008 Q4 2009 Q1 2009 Q2 2009 Q3
Apple 96.30% -47.17% 360.71% -17.05% 0.93% 23.15% 28.57%
HTC 33.3% 2.5% 9.8% -4.4% 25.6% 11.1% 8.3%
Nokia -8.7% 5.1% -10.8% -3.5% 1.0% 9.2% -12.7%
RIM 38.5% 30.1% -8.1% 22.6% 2.1% -6.0% 11.2%
Market Share Growth Rate by Maker



5. Improve Utilization for Cost Reduction
HTC Apple RIM Palm Inc Nokia Samsung
COGS/Sales 67.40% 68.50% 46.20% 66.50% 65.20% 77.20%
Net Income
Margin 13.4 7.9 15.6 7.2 10.9 9
SG&A/Sales 18.6 13 15.5 12 11.5 14
TATR 1.55 1.15 0.64 1.23 1.51 1.1
ROA 28.83 14.95 9.92 14.76 17.365 15.4
ROE 31.35 16.7 12.1 17.2 19.9 17.8
ROCE 32.55 17.5 17.9 18.6 19.6 18.8
Peer Comparison and Analysis
TATR suggest that there efficiency is good compared to peers however internal
operating efficiency has fallen over the years. This probably can be attributed to FA
investments.
Year TATR CA/TA
2004 1.6146 0.8608
2005 1.8230 0.9177
2006 1.5884 0.9368
2007 1.3757 0.9197
2008 1.3259 0.8788
2009 0.2796 0.8653
Average 0.896493
HTC's TATR Over the year
0.0000
0.2000
0.4000
0.6000
0.8000
1.0000
1.2000
1.4000
1.6000
1.8000
2.0000
2003 2004 2005 2006 2007 2008 2009 2010
TATR
TATR
Industry average of global telecom providers (i.e 5
companies considered) is in the range of 67% -80%
suggesting that it is well above the industry standards
which could be due to the high inventory reducing the
operating efficiency.
(Note: Data for competitors taken from their balance
sheet)



6. Focus on High-End Technology
Technologies HTC should focus on
Touch Screens will Dominate



7. Brand Enhancement
2006 - Peter Chou was appointed as the new CEO
Planned to enter the Brandwagon
Risks associated were:
Competition with the client
Scale and budget not available for Marketing
History of Failures of Taiwanese players
Strong Competitors like Nokia and Samsung
2007 Started its own brand operations by acquiring Dopod
Focused high end of "prosumer" market
Target "Build a reputation of making the BMW of phones"

The Road to Brand
36
HTC Current Strategy
Brand Strategy

Focus on Smartphone Markets
Build up brand value through innovative
products and friendly user interface
Fast Response to Market Change
Deliver Product Diversification to the Market

Brand Positioning
Using innovation to create a phone that fulfills
the customer's needs
Slogan
You dont need to get a phone. You need a
phone that gets you.

Strategies
Focus on Cusomer Service
HTC Customers complaints about their
high-end models like HTC EVO 4G but
they are majorly ignored
Quality
HTC is known for its innovative and
expertise hardware designing but with
the increase in Number of phones per
annum, quality is suffering badly
Focus on Customer Needs
Customers find HTC Phones to be
complex and difficult to use. Hence,
focus should be done on enhancing
user satisfaction




Branding Strategies
You are Different from you Campaign
HTC Sense
A quietly brilliant story
Tom Tom & HTC Best of Class Navigation Experience
HTC e Club, Providing value to Customers
HTC Tech Brand of the year (10)
Promoting strategies
DESIGN COMPETITIONS: Creating a strong brand community involving them in
designing of applications. Such activities will help achieve two main benefits:
1. it will reinforce HTCs strong connection to the brand community by hooking up
youngsters early on to the brand to create brand excitement.
2. HTC can reinforces its brand image of always being on the forefront of
innovation and design.
THINK GLOBAL, ACT LOCAL: A holistic approach to developing several strategies for
different regions, but guided by one unified HTC brand image building strategy.
Like sponsoring events most popular in that region such that they are in tune with
HTCs branding strategy based on YOU
PRE-LAUNCH STRATEGY TO BUILD ANTICIPATION AND GENERATE AWARENESS:
Devices like smartphones sell mostly through the hype that they create before
launch so much so that it is an event in itself. Premium prices can be used at the
outset to maximise profits and communicate exclusivity, and then later as the
reference price to discount in order to drive sales from less involved market
segments. But most importantly, nothing creates better publicity than running out
of product long before the initial launch ends.
Taiwan
one of the most vibrant and
dynamic economies in Asia.
known around the world
for its leadership in high-
technology- ranked 2
nd
on
The Economists 2008 IT
industry competitiveness
index
home to globally
recognized technology
brands including Acer, HTC
and AsusTek
Acer:
multinational computer technology and
electronics corporation that manufactures
desktop and laptop, PDAs, servers, storage
devices, displays, and peripherals. Acer
provides e-business services for business,
government, education, and home users.
Topping the 2010 Top Taiwan Global Brands
list for last 2 years
Worlds 2nd largest computer vendor, left
behind HP
Asus:
Multinational computer product
manufacturer
Business Week's "InfoTech 100" and "Asias
Top 10 IT Companies" rankings.
It led the IT Hardware category of the 2008
Taiwan Top 10 Global Brands survey with a
total brand value of US$1.324 billion
Can Taiwan ever be synonymous with HTC? Is HTC on
the right path?
HTC

Relatively new on the market as
a brand
Only into PDA and smartphone
manufacturing as against Acer &
Asus who are established players
in wider markets as well
+ Experience of selling high quality
unbranded phones for years
+ The only Taiwanese high-tech
vendor to have a license for
using Microsoft products
+ HTCs Magic has been powered
by Googles Android
+ In 2010 Top Taiwan Global
Brands, HTC climbed from #4 to
#2 closely behind Acer
HTCs comparative position
Currently Acer & Asus seem to have an upper hand over HTC in terms of brand value
but with Android coming in the picture, HTC has suddenly emerged a closer runner
in the list of top Taiwanese global brands. Though it might take some time Taiwan
becoming synonymous with HTC doesnt look like a far-fetched idea at all.
HTC

References
http://www.htc.com/history/

http://www.phonearena.com/news/Microsoft-trying-to-prevent-Acer-and-Asus-from-adopting-Android-through-
royalty-fees_id14177

http://www.fastcompany.com/1615647/htc-continues-to-assess-making-their-own-smartphone-os-or-buying-one-
from-palm

http://www.brandingstrategyinsider.com/2010/07/marketing-lessons-continue-to-flow-from-apple.html

http://moconews.net/article/419-htc-launches-multi-million-dollar-ad-campaign-about-you-to-become-house/

http://www.marketingminds.com.au/branding/apple_branding_strategy.html

http://buysample.taiwantrade.com.tw/ORG/accessibility/news.do?Method=news_detial&informationId=30061

http://blog.gsmarena.com/htc-makes-a-switch-in-brand-identity/

http://blog.dk.sg/2009/10/30/htc-unveils-new-brand-positioning-and-htc-tattoo/

http://reviews.cnet.com/smartphones/htc-droid-incredible-verizon/4852-6452_7-34064029.html

http://www.htc.com/www/product.aspx?type=1#navigation

http://www.xda-developers.com/feature/the-htc-aria-or-how-htcs-marketing-strategy-is-changing/



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