Abstract

HTC's success lies in its clear-cut product and marketing positioning strategies and its R&D competence. However, there are some challenges that HTC needs to solve before it becomes a first-tier brand.

Aiming at Window-based, High-end Models

Since its establishment, HTC has been focusing mainly on PDAs and Smartphones. Differing from other international brands with product layouts in the various operating systems, HTC put all its resources into Microsoft operating systems development. Unlike other makers which have developed a comprehensive product portfolio, ranging from feature phones to Smartphones, HTC has concentrated on Smartphones. As a result, HTC has accumulated strong competence in maintaining product quality and in software/hardware R&D in the Smartphone area compared with its competitors. With a clear-cut product positioning strategy, HTC has targeted the enterprise market in Europe and North America, and has adopted different business models based on each region' characteristics, such as offering ODM services for HP and Palm in North America, while supplying directly to telecoms in Western Europe. The strategy, which emphasizes providing customized models according to telecoms' need, helps HTC create new business opportunities in the intensely competitive mobile phone market.

Emphasis on R&D Competence

Having been working with Microsoft for a long time, HTC has better understanding of Microsoft's platform than other makers and is able to achieve shorter development cycles. Focusing on high-end models has also enabled HTC to secure support from chip design houses such as TI and Qualcomm. With the partnership between Microsoft and chip design houses, HTC has been able to constantly perform platform stability testing and develop related interfaces and multimedia applications. Overall, HTC has cultivated strong competence in platform and modular integration as well as software R&D, leading to development of unique product specifications. Owning to telecoms' demand for complex testing and system compatibility, HTC has led its competitors in technology control and integration. This has created a high entry barrier for makers planning to join in the Smartphone fray.

ODM for Telecoms Remaining Main Business Model

HTC announced plans to start its own-brand business in June 2006 in a bid to save its declined ODM business, to ensure sustained profit growth, to increase shipments to telecoms, and to improve control over the channel market and services. Despite the moves into own-brand business, HTC dose not give up ODM for telecoms, which has remained its focal operation. Besides the acquisition of Qtek and Dopod, HTC did not implement significant restructuring and strategic investment. HTC's current brand development strategy involves of improving consumers' satisfaction and brand awareness through its own-brand business. With the strategy, HTC hopes to enhance its deployment in telecoms' channels and its bargaining power with telecoms, thereby increasing the share of HTC brand Smartphones in the telecom market. In regions where telecoms pose a less significant position, such as China, Asia Pacific, the Middle East, and Africa, HTC has adopted a channel brand strategy, under which HTC will set up numerous direct sales stores and after-sales service sites.

Key Factors for Success in OBM

Telecoms account for 50% of HTC's total shipments, especially Western European telecoms that focusing on high-end models for the enterprise market. However, the success of own-brand business hinges more on the development of the consumer market. In addition to advanced functions, entertainment and multimedia applications play an even more important part in the consumer market. As Nokia and Sony Ericsson are currently the leaders in this market segment, it remains to be seen whether HTC can compete with the first-tier brands with its Windows-based products. The ELF, featuring TouchFLO technology and launched in the second quarter of 2006 by HTC, was designed for the consumer market, where HTC has put very little effort. HTC was planning to use this model to compete with Apple's iPhone and to signify its foray into the consumer market. If HTC hopes to lay a firm foundation for its own-brand business, it will have to develop some hot products similar to Motorola's Razr or LG's Chocolate.

HTC's marketing business has remained focused on offering ODM services and strengthening R&D capability. In stead of setting up a dedicated marketing division to implement marketing strategies, hold promotional events, and manage its agent or channel player profile, or a research unit to collect consumer behavior information, HTC has adopted a B2B sales model with telecoms or channel players. Due to concerns of competing with its existing customers, HTC's overseas offices and service centers only provide maintenance and after-sales services. Although Nokia and Samsung have set up many franchise chains and regular chains in the consumer market, and have founded an agency system by level according to the characteristics of regional markets, HTC has yet to follow suit. It is thus anticipated that HTC still has a long way to go before it actually makes some achievements in its own-brand business.

The development of own-brand business also counts on the enterprise's capability of technology innovation. Since the establishment of Magic Labs in 2003, HTC has made a great effort in developing innovative technology. As of July 2007, the number of patents that HTC registered in North America and Europe had reached 79 and 60 respectively, representing significant growth compared to 2006. However, these figures remained far behind that of Nokia and Ericsson, which have registered several thousand patents in these regions. The close strategic ties between HTC and Microsoft also have some negative impact on HTC's development of its own technology. With the arrival of the FMC (Fixed-Mobile Convergence) era, telecoms and brands have been aggressively developing next-generation technology, software, and services. HTC, which has been devoted to manufacturing models using a Windows operating system, has to go in line with Microsoft's product strategy. The inability to move towards Symbian or Linux systems featuring a higher level of flexibility has limited HTC's liberty to develop its own technology.

Emerging as an ODM maker with a high emphasis on R&D competence, HTC needs more than technology capability for the development of its own-brand business. Marketing strategies, control over product specifications, and cooperation with channel players are the indispensable factors behind the sustained growth of HTC's own-brand operation. With the example of BenQ's seeking to develop its own-brand business, HTC has tried to build its own-brand business on the foundation of its existing business models. It is anticipated that it will take HTC quite a long time to make some achievements in its own-brand operation.

Appendix

List of Companies