HTC

THE STRATEGY-FORMULATION ANALYTICAL

FRAMEWORK

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HTC

STAGE 1: THE INPUT STAGE

Stages 1 summarize the basic input information needed to formulate strategies. The
information derived from these three matrices provides basic input information for
the matching and decision stage matrices.

1. INDUSTRY ANALYSIS: THE EXTERNAL FACTOR

EVALUTION (EFE) MATRIX:
An EFE Matrix allows strategies to summarize and evaluate economic, social,
cultural, demographic, environmental, political, government, legal, technological,
and competitive information

2.THE COMPETITIVE PROFILE MATRIX (CPM):

The CPM identifies a firms major competitors and its particular strengths and
weakness in relation to a sample firms strategic position.

3.THE INTERNAL FACTOR EVALUTION (IFE) MATRIX:

IFE Matrix provides strategy formulation tool summarizes and evaluates
the major strengths and weakness in the functional areas of a business, and it also
provides a basis for identifying and evaluating relationships among those areas.

HTC

EFE MATRIX FOR HTC

KEY EXTERNAL FACTORS

OPPORTUNITIES:
1. HTC collaborated with Google and launched
their cell phones with Google Android OS install
in it.
2. Strategic partnership with Beat Electronics
by acquiring 51% shares.
3. Patent agreements.

WEIG RATI
HT
NG

0.12

0.11

0.05

4. Industrial growth rate is high for HTC.

0.10

5. Increasing demand for Touch screen phones

with 3G technology.
6. Manufacturing units in Brazil.

0.07

0.02

7. As BlackBerry is an executive phone, HTC

should also try to reach the executive level.
THREATS:

0.08

1. Rapid technological change.

0.13

2. Intense competition.

0.08

3. Stringent regulation.

0.02

4. Difficult to make HTC phones customer first

preference when Apple, Nokia and BlackBerry
phones are in the market (customer loyalty).
5.Numbers of products are less as compared to
the competitors

0.11

0.11

WEIGH
TED
SCORE

0.36
0.33
0.10
0.30
0.28
0.04
0.08

0.39
0.24
0.02
0.03
0.33

HTC
TOTAL

1.00
2.8

ANALYSIS OF EFE MATRIX:

The total weighted score of 2.8 is above the average of 2.5, so the
telecommunication business (HTC) is doing pretty well, taking advantage of the
external opportunities and avoiding the threats facing the corporation but still there
is a great room for improvement as HTC is competing with the great players of
mobile market they need to continue producing new mobile models to cope up
with the competition. The corporation should take advantage when their competitor
make some mistake like blackberry have to called their phone sets from the market
due to some defect, in this situation HTC should try to win the customers of
blackberry. Striking out the opportunities at the right time and eliminating threats
at the right time will definitely help HTC to become the giant of the market.

HTC

CPM MATRIX FOR HTC

APPLE
CRITICAL
SUCCESS
FACTORS

WEIG RATI
HT
NG

HTC

WEIGH RATI
TED
NG
SCORE

NOKIA
WEIGH
TED
SCORE

RATI
NG

WEIGH
TED
SCORE

Market share

0.1

0.3

0.2

0.3

Price

0.1

0.2

0.2

0.3

Financial position

0.15

0.45

0.45

0.3

Product quality

0.15

0.45

0.45

0.3

Consumer loyalty

0.15

0.6

0.30

0.45

Advertising

0.05

0.1

0.05

0.15

Management

0.07

0.28

0.28

0.14

Global expansion

0.08

0.24

0.24

0.24

Innovation

0.15

0.6

0.6

0.45

TOTAL

1.00

3.22

2.77

2.63

HTC

ANALYSIS OF CPM MATRIX:

Apple is on the top position as compared to HTC and Nokia. Apple is using an
effective technique that has been able to create a brand image, which helps in
achieving high market share as compared to other brands. Apple is much popular
and highly in demand brand which is the major threat to HTC. It is a big hindrance
in the demand of HTC cell phones. Apart from that, the financial crush could also
be the threat for the company. Thats because HTC smart phones are expensive and
are not affordable for many of the smart phones users. On the other side NOKIAs
smart phones are way cheaper. So lots of people prefer Nokia on HTC. However,
through effective advertising HTC can differentiate its smart phones and can get
maximum advantage of its new ANDROID phones.

HTC

IFE MATRIX FOR HTC

KEY EXTERNAL FACTORS

WEIG RATI
HT
NG

WEIGH
TED
SCORE

STRENGHTS:
1. It is the leading maker of PDAs smart phones in the
world.
2. There is the strong setup of R&D in HTC.

0.04

0.16

0.14

0.56

3. HTC caters the customer national and internationally and

the numbers of customers.
4. HTC smart phones equipped with windows vista,
Android OS, HD video recording, multiple touch system.
5. Industry recognition and awards.

0.13

0.52

0.06

0.18

0.11

0.44

6. Financial performance.

0.03

0.09

7. Expending market share in sectors.

0.10

0.3

WEAKNESS:
1. HTC is not very much recognized brand in the market as
compare to the Apple, Nokia and Blackberry.
2. High manufacturing cost of HTC.

0.10

0.2

0.07

0.07

3. Declining liquidity ratio.

0.04

0.08

4. Patent infringement litigation.

0.01

0.02

5. Small range of cell phones model as compared to Nokia.

0.08

0.08

6.huge market share capture by Nokia, Apple and

BlackBerry etc.

0.09

0.09

HTC
TOTAL

1.00
2.79

ANALYSIS OF IFE MATRIX:

The IFE of HTC shows weight age average of 2.79 is above average which means
corporation is able to use is toped resources and focus on strength like updated
machinery, new technology used that is increased cost can be control through
revenue earned by HTC. However, it has small range of cell phones compared to
NOKIA and has very high manufacturing cost as well but still there is a great room
for improvement as HTC is competing with the great players of mobile market
they need to continue producing new mobile models to cope up with the
competition. As entering into new markets like CHINA and INDIA can bring
heavy cash inflow to the company but the need is to have heavy spending on
advertisement to that will not only give HTC brand recognition but will bring huge
profits that can strengthen its financial position and can improve its financial ratios
as well.

HTC

STAGE 2: THE MATCHING STAGE

Stage 2 focuses upon generating feasible alternative strategies by aligning key
external and internal factors. Strategy is sometimes defined as the match an
organization makes between its internal resources and skills and the opportunities
and risks created by its external factors.
1.

THE STRENGHT-WEAKNESS-OPPRTUNITIES-THREATS
(TOWS) MATRIX:

The SWOT Matrix is an important matching tool that helps managers develops
four types of strategies: SO Strategies use a firms internal strengths to tae
advantage of external opportunities, WO Strategies aim at improving internal
weakness by taking advantage of external opportunities, ST Strategies use a firms
strengths to avoid or reduce the impact of external threats, WT Strategies are
defensive strategies tactics directed at reducing internal weakness and avoiding
external threats.

2.THE STRATEGIC POSITION AND ACTION EVALUTION

(SPACE) MATRIX:
The SPACE Matrix indicates whether aggressive, conservative,
defensive, or competitive strategies are most appropriate for a
given organization. The axe of the SPACE Matrix represents
two internal dimensions (Financial strength [FS] and
competitive advantage [CA]) and two external dimensions
(environmental stability [ES] and industry strength [IS]).

3.THE BOSTON CONSULTING GROUP (BCG)

MATRIX:
BCG &IE Matrix are designed specifically to enhance a multi
divisional firms efforts to formulate strategies. The BCG
Matrix graphically portrays differences among divisions in terms of relative market
share position and industry growth rate.

4.The INTERNAL-EXTERNAL (IE) MARIX:

9

HTC
The Internal-External (IE) Matrix positions an organizations various divisions in a
nine-cell display.

5.THE GRAND STRATYEGY MATRIX:

In addition to the SWOT Matrix, SPACE Matrix, BCG Matrix, and IE Matrix, the
Grand Strategy Matrix has become a popular tool for formulating alternative
strategies. All organizations can be positioned in one of the Grand Strategy
Matrixs four strategy quadrants.

TOWS MATRIX OF HTC

SO STRATEGIES

WO - STRATEGIES

1. Produced innovative products with high

technology (S2, O1).

1. Purchase all legal rights (W4, O3).

2. Served national and globally with 3G

technology (S3, O5, O4).

2. Lower their cost by taking advantage of lower

labor cost and production unit (W2, O7).

3. Increasing market share by providing

innovative products to customers as compared
to rivals (S7, O7).

3. Overcome short term debt by strategic alliances

(W3, O2).

4.Bring out new products in collaboration with

experience partnership(S8,O2)

4. Take advantage of sponsorship to make space in

hearts of customers (W1, W6, and O6).

5.Acheived many rewards and recognition by

Beating electronic rivals(S5,O2)

ST- STRATEGIES

WT - STRATEGIES

1. Introduced new products to gain customer

trust (S4, T4, and T5).

1. Put attractive features to the product (W6, T5).

2. Compete with rival by focus on performance,

Technological advancement and brand
recognitions and awards (S5, S6, S7, T2, T1).

2. Keep cost low to attract customers (W5, T4).

3. Compete with rivals by providing services to

customers nationally and internationally (S3,

3. Compete with rivals with new techniques (T2,

W6, and W1).
10

HTC
T2).

4. Enlarge sales volume and market share with

more promotional activities as compared to
rivals (S7, T5).

4. Supported by technology launches and threaten by

popular and highly in demand brand because of high
cost (W2, T1, and T5).
5. Less brand awareness leads to lower
marketing/sales (W1, T5).

SPACE MATRIX OF HTC

FINANCIAL STRENGTH

RATING
3

1. Purchase all legal rights.

2. Overcome short term debt by strategic alliances.

3. It is the leading maker of PDAs smart phones in the world and there is strong setup of R&D in
HTC.

5
11

INDUSTRY STRENGTH
4
1. Compete with rivals by providing services to customers nationally and internationally.
4
2. Defect in BlackBerry sales decline product brings out HTC product.
6
3. Producing 3G technology in response to rapid technological change.
14

ENVRIONMENTAL STABILITY
-2
1.Compete with rivals with new techniques
2. Supported by technology launches and threaten by popular and highly in demand because of
high cost.
3. Less brand awareness leads to lower marketing sales.
4.Compete with rivals by focus on performance, technology etc.

-5
-6
-3
-16

COMPETITIVE ADVANTAGE
-3
1. HTC has long experience with network suppliers.
11

HTC
-2
2. Introduced new products to gain customer trust.
3. Enlarge sales volume by market share with more promotional activities as compared to rivals.

-5

4. Put attractive features to the products.

-2

5. Keep cost low to attract customers.

-4
-16

CONCLUSION:
ES= -16/4= -4

IS = 14/3 = 4.67

CA= -16/5= -3.2

FS = 11/3 = 3.667

Directional Vector coordinates: x-axis: -3.2 + 4.67 = 1.47

Y-axis: -4 + 3.67 = -0.33
FS
CONSERVATIVE

AGGRESSIVE
6
5
4
3
2
1

CA

IS
-7

-6

-5

-4 -3

-2

-1

-1
-2

12

HTC
-3
-4
-5
DEFENSIVE

COMPETITIVE
ES

ANALYSIS OF SPACE MATRIX:

Forward Integration
Backward Integration
Horizontal Integration
Market Penetration
Market Development
Product Development
Joint Venture
HTC is competing fairly in an unstable market. Organization lies in
COMPETITIVE quadrant. They should really go for market penetration, product
development.
The result of TOWS analysis is matching with space matrix .The decision
regarding market penetration, product development will be beneficial to move with
the overall performance is good, firms financial strength is a dominating factor in
the industry.

13

HTC
Stars

Question Marks
AMERICA
EUROPE

ASIA

Cash Cows

Dogs

BOSTON CONSULTING GROUP (BCG) MATRIX

RELATIVE MARKET SHARE
High 1.0
Medium 0.5
DIVISION REVENUE REVENUE PROFIT
High +20
Billion ($)
%
Billion ($)
ASIA
47.7
17.1
9.842
EUROPE

PROFIT
%
25

MARKET
SHARE
21.44

Low 0.0
GROWTH
RATE
+6

90.1

32.2

14.15

36

39.89

+9

AMERICA 141

50.6

15.338

39

45.60

+10

14
Medium 0

I
N
D
U
S
T
R
Y
G
R
O
W
T
H
R
A
T
E

HTC
TOTAL

278.8

100

39.33

100

ANALYSIS OF BCG:
All three regions i.e. Asia, Europe and America lie in the first quadrant that is
QUESTION MARK, means HTC needs to penetrate its market to bring these
regions in STAR. HTCs demand has been growing rapidly among upper-middle
and working class due to its introduction of ANDROID phones which are more
attractive and have more functions and features compared to NOKIA.
Although it has not been reached to the level of apple yet, but can easily target
executive class by reaching to the companies and having contract with them to give
their executive people HTC phones. According to the recent analysis it has been
observed that many people of top level management have started to prefer Android
phones due to their enhanced operating system. So, its a good time for HTC to
engage itself in good contracts with well renounced multinational companies and
to have a good advertising.
Low -20

15

HTC

The Internal-External (IE) Matrix

THE IFE TOTAL WEIGHTED

E
F
E
W
E
I
G
H
T
E
D

Strong
3.0 to 4.0
High
3.0 to
3.99
Medi
2.0
umto
2.99
Low
1.0 to
1.99

IV
VII

Averag
2.0e to
II
2.99

Weak
1.0
III
to
1.99

VI

VIII

IX

S
C
O
R
E

DIVISION
ASIA

REVENUE
Billion ($)
47.7

REVENUE %
17.1

PROFIT PROFIT %
Billion ($)
9.842
25

IFE

EFE

1.98

2.10

EUROPE

90.1

32.2

14.15

36

2.39

2.53

AMERICA

141

50.6

15.338

39

2.56

2.67

TOTAL

278.8

100

39.33

100

16

HTC

ANALYSIS OF IE:
Asia region lies in weak quadrant and HTC after entering into new market INDIA
need to put its huge money on advertising. They need to sow many HYV (high
yielding variety) seeds to harvest well, like showing effective ads that should
particularly focus executive class. They should not advertise their android phones
only, but their windows phones and tabs as well.
However, America and Europe lie in the medium quadrant means they are doing
little well, still they need to strength their position through the strategy of product
development to move to strong quadrant. As its rivals apple and Samsung have
already captured a huge market and Motorola is also coming up with new range of
android phones, so HTC needs to keep an eagle eye on its rival and must respond
to the public demand as both America and Europe are the high profit yielding areas
for HTC.

17

HTC

Grand Strategy Matrix

RAPID MARKET GROWTH

Quadrant I

Quadrant II

Concentric
Diversification
Conglomerate
Diversification

STRONG
COMPETITIV
E POSITION

WEAK
COMPETITIV
E POSITION

Horizontal
Diversification
Retrenchment

Quadrant III

Quadrant IV

HTC

Divestiture
Liquidation
SLOW MARKET GROWTH

Matrix Analysis Summary

18

HTC
Alternative Strategies

IE

SPACE

Forward Integration

Backward Integration

Horizontal Integration

Market Penetration

Market Development

Product Development

GRAND

Concentric Diversification

Conglomerate Diversification

Horizontal Diversification

Joint Venture

Retrenchment

Divestiture

Liquidation

STAGE 3: DECISION STAGE

Stage 3Analysis and intuition provide a basis for making strategy-formulation
decisions.
19

HTC
THE QUANTITATIVE STRATEGIC PLANNING MATRIX (QSPM)
This technique is the QUANTITATIVE STRATEGIC PLANNING MATRIX
(QSPM), which comprises stage 3 of the strategy-formulation analytical
framework. This technique objectively indicates which alternatives strategies are
best. The QSPM uses input from stage 1 analyses and matching results from stage
2 analyses to decide objectively among alternative strategies.

THE QUANTITATIVE STRATEGIC PLANNING MATRIX (QSPM)

DIVERTIFICATION IN EXPAND
PRODUCTS
MARKET IN
ASIA & CHIN
KEY EXTERNAL FACTORS

WEIGHT

AS

TAS

AS
20

TA

HTC
OPPORTUNITIES:
1. HTC collaborated with Google and
launched their cell phones with
Google Android OS install in it.
2. Strategic partnership with Beat
Electronics by acquiring 51% shares.
3. Patent agreements.

0.12

4.00

0.48

2.00

0.2

0.11

3.00

0.33

3.00

0.3

0.05

4. Industrial growth rate is high for

0.10
HTC.
5. Increasing demand for Touch screen 0.07
phones with 3G technology.
6. Manufacturing units in Brazil.
0.02

2.00

0.2

3.00

0.3

3.00

0.21

4.00

0.2

7. As BlackBerry is an executive
phone, HTC should also try to reach
the executive level.

0.08

3.00

0.24

4.00

0.3

THREATS:
1. Rapid technological change.

0.13

3.00

0.39

2.00

0.2

2. Intense competition.

0.08

4.00

0.32

3.00

0.2

3. Stringent regulation.

0.02

4. Difficult to make HTC phones

customer first preference when Apple,
Nokia and BlackBerry phones are in
the market (customer loyalty).
5.Numbers of products are less as
compared to the competitors

0.11

2.00

0.22

4.00

0.4

0.11

1.00

0.11

2.00

0.2

SUBTOTAL

1.00

2.5
DIVERSIFICATION
IN PRODUCTS

KEY INTERNA FACTORS

WEIGHT

AS

2.3

EXPAND
MARKET IN
ASIA & CHIN

TAS

AS

STRENGTH:
21

TA

HTC
1. It is the leading maker of PDAs
smart phones in the world.
2. There is the strong setup of R&D in
HTC.
3. HTC caters the customer national
and internationally and the numbers of
customers.
4. HTC smart phones equipped with
windows vista, Android OS, HD video
recording, multiple touch system.
5. Industry recognition and awards.

0.04

1.00

0.04

4.00

0.16

0.14

2.00

0.28

3.00

0.42

0.13

3.00

0.39

1.00

0.13

0.06

2.00

0.12

1.00

0.06

0.11

6. Financial performance.

0.03

7. Expending market share in sectors.

0.10

1.00

0.1

4.00

0.4

0.10

2.00

0.2

4.00

0.4

0.07
0.04
0.01

1.00
-

0.07
-

3.00
-

0.21
-

4.00

0.32

1.00

0.08

3.00

0.27

3.00

0.27

WEAKNESSES:
1. HTC is not very much recognized
brand in the market as compare to the
Apple, Nokia and Blackberry.
2. High manufacturing cost of HTC.
3. Declining liquidity ratio.
4. Patent infringement litigation.

5. Small range of cell phones model as 0.08

compared to Nokia.
6.huge market share capture by Nokia, 0.09
Apple and BlackBerry etc.
SUBTOTAL
1.00
SUM TOTAL
ATTRACTIVENESS SCORE

1.79

2.1

4.29

4.4

ANALYSIS OF QSPM:
The two alternative strategies__ (1) DIVERSIFICATION IN PRODUCTS (2)
EXPAND MARKET IN ASIA & CHINA___ are being considered for HTC , by
sum total attractiveness scores of 4.29 and 4.46 that the analysis indicates that
HTC should go for market development in ASIA and CHINA. As both CHINA and
Asias largest territory holder INDIA fall under the category of coming up super
22

HTC
power country, so its will prove to be a good strategy for HTC to expand but side
by side they need to have a good marketing to have a brand recognition.
Furthermore, they should try to reach to target executive level as their android
phones can easily make their market in their segment due to their operating system.

RECOMMENDATIONS:
STRATEGY 1:
LOWER ITS MARKET PRICES:
23

HTC
The fact that Apple's new phone isn't significantly cheaper than its previous
iPhone 4 offering should allow HTC to increase market share in key emerging
markets with its cheaper Smartphone models.

STRATEGY 2:
ADVERTISE EFFECTIVELY:
AS the Smartphone market has grown nearly ninety percent from last year and
more than six times the overall mobile phone market indicates strong demand
worldwide and vendors' collective ability to meet that demand.

STRATEGY 3:
EXPAND MARKETS IN ASIA & CHINA:
As the Taiyuan-based company has increased market share in the U.S., Asia and
Europe in recent years with its early adoption of Google Inc.'s Android software,
becoming the fifth-largest producer of Smartphone globally by shipments in the
second quarter. Over the past year it has acquired a variety of companies, including
Beats, a headphone maker started by music producer Dr. Dre, to build out its
service offerings and compete with Apple Inc.'s iPhone and Samsung Electronics
Co.'s Smartphones

24