Second Presentation —HTC Analysis Professor：黃光渠 Group members：許祥哲、陳佩澤、顏瑜、曾彥瑜

Outline Porter five forces analysis(許祥哲) Internal factor evaluation(顏瑜) External factor evaluation(陳佩澤) Competitive Profile Matrix(曾彥瑜)

Porter Five Forces Analysis

Porter Five Forces Analysis Threat of new entrants Bargaining power of suppliers Bargaining power of buyers Intensity of competitive rivalry Threat of substitute

Bargaining power of suppliers Porter Five Forces Analysis HTC started from ODM, so they have made a good relationship with many components suppliers. With the advance of technology, there are many companies have ability to make mobile components, so HTC have many choices. Generally speaking, there is a long-term contract between HTC and suppliers in mobile industry. So we think the bargaining power of suppliers is low. Bargaining power of suppliers Bargaining power of buyers Threat of new entrants Threat of substitute Intensity of competitive rivalry Bargaining power of suppliers

Bargaining power of buyers Porter Five Forces Analysis There are many mobile companies in the market, so buyers have many choices. With free flow of information in the market, buyers can follow market prices easily. So we think buyers have bargaining power to HTC. Bargaining power of buyers

Porter Five Forces Analysis Threat of new entrants Mobile industry is a big market. There are more and more company entering to the market. Many company which in other industry started to produce smart phone. Such as Google, Lenovo, Microsoft. As we mention above, we think the threat of new entrants is high.

Porter Five Forces Analysis Threat of substitute The substitute of smartphone is tablet. Although tablet can make a phone call by Skype, Facebook, but smartphone’s characteristic is easy to bring. In many country, the popularity rates of smartphone are still rising The CEO of BlackBerry even said “In five years I don't think there'll be a reason to have a tablet anymore”. So We think smartphone have low threat of substitute products.

Intensity of competitive rivalry Porter Five Forces Analysis Intensity of competitive rivalry There have had so many mobile companies in the world. In Europe and America： In South Korea and Japan：

Porter Five Forces Analysis In China：

Intensity of competitive rivalry Porter Five Forces Analysis Intensity of competitive rivalry There have had so many mobile companies in the world. So we think mobile industry is a highly competitive market.

Internal Factor Analysis

Strength

1. Right partner 2. Loyal customers HTC cooperated with Google and released new tablet Nexus 9. Weighted:7% Rate:4 Weighting score:0.28 2. Loyal customers Weighted:6% Rate:3 Weighting score:0.18

4. International presences 3. High quality products HTC released high quality smart phones, such as HTC M8 with metal case. Weighted:10% Rate:4 Weighting score:0.4 4. International presences HTC sets up maintenance, service and market development stores in Europe, America, Japan, Hong Kong, Shanghai and other places. Weighted:8% Rate:3 Weighting score:0.24

5. Convenient user operating interface HTC’s user operating interface—HTC Sense is popular with its customers. Weighted:11% Rate:4 Weighting score:0.44 6. Good warranty service HTC provides at-home services and lives on-line customer services. Weighted:7% Rate:3 Weighting score:0.21

Weakness

1. Less product patents 2. Poor marketing plans Compared with Samsung applied 4683 patents, Sony applied 2100, and Apple applied 1501 patents, HTC only applied 215 patents in 2013. Weighted:5% Rate:2 Weighting score:0.10 2. Poor marketing plans Comparing the costs in marketing, in 2013, Samsung cost 363 million US dollars in America, and Apple cost 351 million dollars. However, HTC just cost 75.8 million dollars in marketing in 2013. Weighted:10% Rate:1 Weighting score:0.1

Weighted:7% Rate:1 Weighting score:0.07 3. Weak brand image According to “BrandZ Top 100 Most Valuable Global Brands 2014”, Apple is rank 2, Samsung is rank 29, but HTC is out of rank 100. Weighted:7% Rate:1 Weighting score:0.07

4. Lack of product characteristics Although the strategy “Market Saturation” can earn from different customer groups, it also separates HTC’s resources to different products. Weighted:11% Rate:1 Weighting score:0.11 5. Low market share The global market share ranking in 2013： Rank 1：Samsung(31.6%) Rank 2：Apple(15.5%) Rank 3~5：Huawei, LG, Lenovo(4.5~5%) Rank11 ：HTC(2%) Weighted:9% Rate:1 Weighting score:0.09

Weighted:9% Rate:1 Weighting score:0.09 6. Too rely on operators in China (Low ability to bargain with operators) It let HTC can’t communicate with customers directly. Otherwise, although operators can sell many products to HTC, they also reduce the gross profit of HTC. Weighted:9% Rate:1 Weighting score:0.09

IFE Matrix for HTC Key Internal Factors (Strengths) Weight Rate Weight Score 1. right partner 7% 4 0.28 2. loyal customers 6% 3 0.18 3. high quality product 10% 0.40 4. international presences 8% 0.24 5. convenient user operating interface 11% 0.44 6. good warranty service 0.21 Key Internal Factors (Weakness) 1. less product patents 5% 2 0.1 2. poor marketing plan 1 3. weak brand image 0.07 4. lack of product characteristic 0.11 5. low market share 9% 0.09 6. too rely on operators in China Total weighted score：2.31

External Factor Analysis

Opportunities

Weighted:17% Rate:4 Weighting score:0.68 1. More and more people use smart phones. There may be more people consider in HTC productions. By the rising number of smart phone users, there may be more people consider in HTC productions. Weighted:17% Rate:4 Weighting score:0.68

Weighted:18% Rate:4 Weighting score:0.72 2. Rising market share of Android. There will have more people choose smart phone with Android system like HTC, instead of Apple or Windows phone. The market shares of Android keep rising. it means there will have more people choose smart phone with Android system like HTC, instead of Apple or Windows phone. Weighted:18% Rate:4 Weighting score:0.72

3. Reaching a settlement with Nokia. Nokia and HTC have settled all pending patent litigation between them. For this reason, HTC cleaned the barrier on patents. Weighted:16% Rate:3 Weighting score:0.48 4. New technology. With new technology, HTC could develop better production. Nokia and HTC have settled all pending patent litigation between them, and entered into a patent and technology collaboration agreement. For this reason, HTC cleaned the barrier on patents. With new technology, HTC could develop better production or reduce the cost. With low loyalty on China production, China users may change their like easily. Weighted:12% Rate:2 Weighting score:0.24

Threats

Weighted:16% Rate:1 Weighting score:0.16 1. More and more China mobile manufacturers. HTC have to face more strong rivals. There are many China company starting to join the smart phone market likes Xiaomi, Lenovo, Huawei, ZTE. It means HTC have to face more strong rivals. In South Korea, government subsidized their companies much to support them compete with foreign company. Weighted:16% Rate:1 Weighting score:0.16

2. Less subsidies from government. In South Korea, government subsidized their companies much to support them compete with foreign company. Weighted:10% Rate:2 Weighting score:0.20 3. Samsung can produce component by itself Samsung can produce CPU and panel by itself, but HTC have to buy to other manufacture. If HTC want to use best quality component, they should cost much money; if HTC want to cost down, they only can use secondary component. That’s why Samsung can beat HTC. In China market, HTC rely on operators to sell their productions. However it let HTC can’t communicate with customers directly. Although operators can sell many productions for HTC, they also reduce HTC gross profit. Samsung can produce CPU and panel by itself, but HTC have to buy to other manufacture. If HTC want to use best quality component, they should cost much money; if HTC want to cost down, they only can use secondary component. That’s why Samsung can beat HTC. Weighted:11% Rate:2 Weighting score:0.22

EFE Matrix for HTC Key External Factors(opportunities) Weight Rate Weight Score 1. More and more people use smart phones. 17% 4 0.68 2. Rising market share of Android. 18% 0.72 3. Reaching a settlement with Nokia. 16% 3 0.48 4. New technology. 12% 2 0.24 Key External Factors(threats) 1. More and more China mobile manufacturers. 1 0.16 2. Less subsidies from government. 10% 0.20 3. Samsung can produce components by itself 11% 0.22 Total weighted score：2.70

Competitive Profile Matrix

Customer’s brand loyalty 11% 0.33 0.44 Market share 2 0.22 1 0.11 HTC Black Berry weight score Weight score Entry to china market 12% 4 0.48 3 0.24 Customer’s brand loyalty 11% 0.33 0.44 Market share 2 0.22 1 0.11 Price competiveness Technology patents 10% 0.10 0.30 Financial situation 0.20 Marketing plan Reputation and image 9% 0.18 0.27 Information security 8% 0.16 0.32 Product diversification 0.08

Customer’s brand loyalty 11% 0.33 0.44 Market share 2 0.22 1 0.11 HTC Black Berry weight score Weight score Entry to china market 12% 4 0.48 3 0.24 Customer’s brand loyalty 11% 0.33 0.44 Market share 2 0.22 1 0.11 Price competiveness Technology patents 10% 0.10 0.30 Financial situation 0.20 Marketing plan Reputation and image 9% 0.18 0.27 Information security 8% 0.16 0.32 Product diversification 0.08

215 5136 Up to 2013…. HTC Black Berry HTC Black Berry weight score Entry to china market 12% 4 0.48 3 0.24 Customer’s brand loyalty 11% 0.33 0.44 Market share 2 0.22 1 0.11 Price competiveness Technology patents 10% 0.10 0.30 Financial situation 0.20 Marketing plan Reputation and image 9% 0.18 0.27 Information security 8% 0.16 0.32 Product diversification 0.08 HTC Black Berry Up to 2013…. 215 5136

HTC’s product diversify from high price to low prices. Black Berry weight score Weight score Entry to china market 12% 4 0.48 3 0.24 Customer’s brand loyalty 11% 0.33 0.44 Market share 2 0.22 1 0.11 Price competiveness Technology patents 10% 0.10 0.30 Financial situation 0.20 Marketing plan Reputation and image 9% 0.18 0.27 Information security 8% 0.16 0.32 Product diversification 0.08 2013 cost in marketing (million US dollars) Samsung : 363 Apple :351 HTC : 75.8 HTC use Android as operating system, which has less constraints on their software, security system isn’t solid. BlackBerry put emphasis on consumer’s security and privacy. HTC’s product diversify from high price to low prices. BlackBerry only launched one or two products in one system generation.

2.39 2.44 HTC Black Berry weight score Weight score Entry to china market 12% 4 0.48 3 0.24 Customer’s brand loyalty 11% 0.33 0.44 Market share 2 0.22 1 0.11 Price competiveness Technology patents 10% 0.10 0.30 Financial situation 0.20 Marketing plan Reputation and image 9% 0.18 0.27 Information security 8% 0.16 0.32 Product diversification 0.08 2.44 2.39

Thank you

Q&A