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Htc Industry Analysis

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Industry Analysis (The Mobile Phone Industry)

---------For an Analysis of HTC Corp.


* Analyzing the Industry and Competitive Environment of the Mobile Phone Industry

Porter's Five Forces of Competition Framework (Total Mobile Industry)

* Key Challenges HTC Faces in Trying to Achieve a Sustainable Model and Long-term Success in the Industry

SWOT analysis

PEST analysis

* The Competitive and Strategic position of HTC Corp. (at the time of the case information)

* Assessment/Identification of Any Major Changes in the Competitive Situation for HTC (from the perspective of the fall of 2011)

Porter's Five Forces of Competition Framework (Total Mobile Industry)

1. Threat of New Entrants

While evidence suggests companies often find it difficult to identify new competitors, that is not the case in the mobile phone industry. Because the mobile phone operators must compete for spectrum licenses, they can easily identify their competitors in the individual markets. The threat of new entrants bringing additional production capacity should be downplayed in this industry, because technology should assumed to be similar and thus new entrants do not necessarily bring additional production capacity, nor does their entry hold consumer cost down. The fixed-line operators do however present a risk to mobile phone operators, because they will certainly provide extra production capacity and lower the consumer costs as a result of this competition.

2. Bargaining Power of Suppliers

Mobile phone manufacturers are the primary supplier to the mobile phone operator market. These manufacturers were dominated by Apple, Nokia, and RIM with 73 percent of the market. (See Exhibit 1.) Because the mobile phone manufacturing brands were more important to consumers than the mobile phone operators themselves, bargaining power of suppliers was high. Industry firms are not a significant customer for the supplier group because the suppliers operate in far more international locations and markets than the mobile phone operators. Suppliers' goods are critical to buyers' marketplace success. Mobile phone manufacturers could integrate forward into the industry. These suppliers were credible, having substantial resource and provide a highly differentiated product.

Exhibit 1. Worldwide Mobile Terminal Sales to End Users in 3Q09 (Thousands of Units)

Company 3Q09

Sales 3Q09 Market

Share (%) 3Q08

Sales 3Q08 Market

Share (%)

Nokia 113,466.2 36.7 117,978.9 38.2

Samsung 60,627.7 19.6 52,891.6 17.1

LG 31,901.4 10.3 24,069.9 7.8

Motorola 13,912.8 4.5 24,633.6 8.0

Sony Ericsson 13,409.5 4.3 24,847.7 8.1

Others 75,551.7 24.6 64,111.4 20.7

TOTAL 308,869.3 100.0 308,533.1 100.0

Note: This table includes iDEN shipments, but excludes ODM to OEM shipments.

Source: Gartner (November 2009)

3. Bargaining Power of Buyers

There was very little differentiation among mobile phone operators, and the switching costs are low. Accordingly, the industry firms battle for higher quality, greater levels of service, and lower prices than their competitors, and the consumers benefit.

Mobile phone customers purchase the entire portion of the mobile phone operator's industry output. The sales of the mobile phone service account for the entire amount of the seller's annual revenues. The mobile phone customers could switch to another mobile phone operator at little, if any, cost. The mobile phone industry's products are undifferentiated and standardized. The buyers do not pose a credible threat of backward integration because of the high capital requirements.

4. Threat of Substitute Products/Services

Substitute products for the mobile phone industry could be considered fixed-line phone products if convergence is not considered to exist. This substitute product's price is not lower, and its quality and performance capabilities are negligible compared to mobile phone products. Switching costs are low but the advantage goes to the mobile phone industry because there is a greater chance of switching to mobile phones from fixed-line phones than the other way around.

(See Exhibit 2.)

Exhibit 2.

5. Intensity of Rivalry among Competitors

(a) Numerous or Equally Balanced Competitors - High

There are many equally balanced competitors in the mobile phone industry, and industries with these characteristics tend to have strong rivalries.

(b) Slow Industry Growth - Low

Because the mobile phone market is undoubtedly growing, there is little pressure to take customers from competitors. (See Exhibit 3.)

Exhibit 3.

Note: Percentages represent year-over-year growth.

Source: IDC Worldwide Quarterly Mobile Phone Tracker, March 2009

(c) High Fixed Costs or High Storage Costs - High

Mobile phone operators have high fixed costs due to spectrum licensing and the establishment of wireless network points of access. As a result, these mobile phone companies try to maximize their productive capacity, which leads to excess capacity and intense rivalry.




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