AFRICAN MOBILE/CELL PHONE SERVICES MARKET
HTC was founded in May 1997 by H.T. Cho and Cher Wang. It is a Taiwanese multinational manufacturer of smartphones and tablets headquartered in New Taipei City, Taiwan. They Manufactured devices like smartphones, touch phones, and PDAs based on Windows OS. Because of the mobile telecommunication market with smartphones and wireless PDAs. The company is credited with creating the first Android smartphone, the first Microsoft-powered smartphone (2002), and the first Microsoft 3G phone (2005). Their first major product, one of the world’s first touch-screen smartphones, appeared in 2000. As an ODM for HP and Palm, HTC built the HP iPAQ and the Palm Treo 650.
The mobile phone industry has two strategic groups. The first group consists of Nokia, Apple, Palm, and Research in Motion(RIM), which adopt the vertical model and they control both the hardware and software of their devices and sometimes services as well. The second group comprises Samsung, LG, Motorola, and HTC, which use the horizontal model and control the hardware but adopt the software and operating systems of strategic partners.
Nokia had dominated the mobile handset market for over a decade by 2010. Over 50 percent of its sales came from a diversified customer base from Asia, the Middle East, And Africa.
On the other hand, Samsung Electronics has a diversified business empire that includes semiconductors, liquid crystal displays(LCDs), computers, television sets, consumer appliances, and mobile phones.
Finally, Apple has revolutionized the smartphone market by creating user-friendly software, a strong user interface, and a complete suite of applications.
Strength: Abeyant resources through which they strengthen their market position are:
Branding: When the concept of an idea or an image is marked by the organization so that it can easily be sighted by more and more people and also identifies the variable products and services which they are offering. In the case of HTC, it is HTC quietly brilliant. This logo allows people to understand easily that this is an HTC product.
Innovation: HTC keeps on enhancing its research and development capabilities and bringing in new technology to be used and creating new wings for its process (Ireland et al., 2011).
Differentiation: HTC is unique which is not only engaged in developing mobile but also in tablets, PC, and laptops.
Retail Strategy: It has a strong relationship with its vendor, which enables it to address changing customers’ needs effectively.
Ease of Use: HTC products are so familiar to every people that it can be used even by a new purchaser without any guidance or help from others. No user ever complained about operating their products, and this makes their strength to dominate the market (Ferrell and Hartline, 2010).
Superior Quality: HTC phones are expensive, but with this cost, they are providing us the new features and extremely high-quality features in them, which satisfy their customer against the resources that they have spent.
Diversified Areas: HTC has diversified business areas through which it gathers revenue resources which reduces business risk and enhance operating performance (Handlechner, 2008).
Now talking about the weaknesses of HTC following drawbacks come to mind and are shared below:
High Price: HTC products are very high in range due to that each person cannot afford their phone. It normally starts from 15K, which seems to high priced product for middle-level customers. This high-price proprietary system is one of the weaknesses of HTC.
Less Penetration: HTC is just limited to its high-level segment. This means the phones they are producing targeting only high-class people or status-quo people. They are not trying to capture the segment of the upper middle class or middle class (Cheverton, 2005).
Niche Market: A niche market is defined as a narrow market where a company focuses on a specific product or specific market. As explained above that they are focusing only on the higher-level segment.
Cannibalization: HTC is too much related to Microsoft’s platform, which was not mainstream in the smartphone system market. Thus people demanded other features on their phones, which was not fulfilled.
1. Why do companies like HTC go into foreign markets? What factors affect their decisions on which foreign markets to go into?
HTC was founded in May 1997 by H.T. Cho and Cher Wang. It is a Taiwanese multinational manufacturer of smartphones and tablets headquartered in New Taipei City, Taiwan. They Manufactured devices like smartphones, touch phones, and PDAs based on Windows OS. Because of the mobile telecommunication market with smartphones and wireless PDAs. The target market is North America, China, Europe Asia. HTC partnered with Qualcomm to use its mobile phone chips and formed an alliance with Texas Instrument for its mobile phone processors. With the collaboration of Microsoft, HTC released the XDA—the first Windows-based smartphone in 2002—for European carrier O2. And the major breakthrough came in 2000 when they produced a PDA to be sold under Compaq’s brand name—the Ipaq.
There have two factors that affect their decisions on which foreign markets to go into. The first one is as an original design manufacturer for branded handset manufacturers. The second one is as a customized conceptualizer, designer, and supplier of handsets for mobile service providers such as T-Mobile, British Telecom, Orange, and Vodafone.
2. What are the issues and challenges HTC faces when going into foreign markets? How can HTC deal with these issues and challenges?
Issues and challenges include own brand name, competition, and locked.
HTC was founded by Cher Wang, HT Cho, and Peter Chou in 1997 and initially specialized in designing and manufacturing smartphones and PDAs, along with other similar gadgets for other companies. It was only starting from 2006 that HTC started to design and manufacture smartphones and PDAs under its own brand name (Hi, we’re HTC, 2010).
Intense competition is considered to be the biggest challenge HTC as any other company, faces as a result of market expansion. This challenge is dealt with by the company in the most efficient manner by differentiating HTC smartphones and PDAs to make them more innovative as compared to the products offered by the competition.
3. Conduct a global environmental scan for the mobiles and smartphone market. What opportunities and threats can be identified?
The global environmental scan is in North American, European, and Asian mobile and smartphone markets.
The mobile and smartphone markets in North America, Europe, and Asia are all included in the global environmental scan.
A primate city is the largest city in the urban hierarchy and the most important in its nation or region.
Penetrate additional international markets (2011). Huawei’s innovation partnership poses risks to the Apple sector. The North American market
4. What strategies are available to HTC for foreign market entry? What strategies are used by HTC for entry into the North American, European, and Asian markets? How can HTC’s strategies be improved?
North America has a “locked” Mobile phone market; HTC created unbranded phones for other manufacturers and established strong distribution and reputation for great technology. Created a “pull” strategy and generated brand preferences and loyalty among end-users. Partnership with carrier China Mobile and through this, they are able to sell products in China.
Pull marketing is any method a company uses to generate demand for a product. This is contrasted with “push” marketing, which is a strategy intended to sell out an existing supply of a product.
Improve HTC’s strategies: Sustainable source of competitive advantage‒ Strong research and development capabilities‒ Superior product and customer support‒ Economic factors – Manufacturing & Operating in Taiwan‒ Strong marketing strategy “An organization’s ability to learn and translate that learning into action rapidly is the ultimate competitive advantage.”
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AFRICAN MOBILE/CELL PHONE SERVICES MARKET Introduction The mobile/cell phone services market in Africa, especially southern Africa, can be defined as a latent market with huge growth potential.
However, there are huge challenges in terms of the lack of infrastructure and the ability of many in the market to pay, which means it is a highly challenging market. Anyone entering the market needs to develop a thorough understanding of the complexities of the African marketing environment in which they are competing and decide how to segment the market, which segment to target, and how to develop a positioning strategy to achieve competitive leverage. Market information Penetration across the continent will reach 50 % of subscribers by 2020 from 2 % in the late 2000s. Africa is in the grip of a mobile/cell phone revolution. In the past 15 years, subscribers in sub-Saharan Africa have risen from 72,000 to 329 million (GSMA 2014). While many rural villagers huddle around paraffin lamps as darkness falls, neon lights come to life as they illuminate the mobile/cell phone masts proliferating across the African landscape. According to Mobile Africa, the number of mobile/cell phone subscriptions far exceeds fixed-line subscriptions. The International Telecommunication Union reckons that more Africans have begun using phones since the late 2000s than in the whole of the previous century! The use of mobile/cell phones is increasing at an annual rate of 7 %, more than twice the global average. Thanks to rising living standards, the middle class in Africa has tripled since the late 1980s, and the continent’s working-age population will double from 500 million today to 1.1 billion in 2040. Africa’s annual output is growing by approximately 5 % (adjusted for purchasing power parity), twice as fast as in the period from the mid-2000s and faster than the global average. Foreign direct investment to the region increased from US$10 billion to US$88 billion – more than India (US$42 billion) and, even more remarkably, catching up with China (US$108 billion). The Boston Consulting Group notes that the revenues of Africa’s 500 largest companies (excluding banks) have grown at an average of 8.3 % a year since the late 2000s. Consumer goods companies ranging from Western giants such as Procter & Gamble to emerging market cars companies such as China’s Great Wall and India’s Tata Motors are pouring into Africa. Foreign firms are starting to use Africa as a base for manufacturing as well, as labor costs in India and China rise. The mobile/cell phone market has been an integral part of this growth. In Africa, the average penetration of mobile/cell phones stands at nearly half the population, and in North Africa, it is almost two-thirds. Gabon, Seychelles, and South Africa now boast almost 100 % penetration. Only five African countries – Burundi, Djibouti, Eritrea, Ethiopia- pia, and Somalia – still have a penetration rate of less than 25 per 100 inhabitants. Uganda, the first African country to have more mobiles/ cells than fixed telephones, is cited as an example of cultural and economic transformation. Penetration has risen from 0.2 % in the late 2000s to 30 % now, with operators making huge investments in infrastructure, particularly in rural areas. Given their low incomes, only about a quarter of Ugandans have a mobile/cell subscription, but street vendors offer mobile/cell access on a per-call basis. They also invite those without access to electricity to charge their phones using car batteries. Popular mobile services include money transfers, allowing people without bank accounts to send money by text message. Many farmers use mobiles/cells to trade and check market prices. Internet technologies Mobile Internet technologies play a very important role in making Internet services available to many in Africa. Africans are using them for more than calling their friends and family. Many are using them to do their banking. About half a million South Africans now use their mobile/cell phones as a bank. For these new banking customers, both the mobile/cell phone and the whole system of banking are new to them. Traditional banks offer mobile banking as an added service to existing customers, most of whom are quite well off. Wizzit, and to some extent, First National Bank (FNB) and MTN Banking, are chasing another market: the 16 million South Africans, over half of the adult population, with no bank account. Significantly, 30% of these people do have mobile/cell phones. Previously ignored as the bottom of the pyramid and of little commercial importance to large corporations, such customers are now being courted. Wizzit hired and trained over 2000 unemployed people, known as Wizzkids, to drum up business. It worked: eight out of ten Wizzit customers previously had no bank account and had never used an ATM. A simplified kind of account called Mzansi has been launched to reach non-banking customers, and portable banks and ATMs have been rolled out in townships and in the countryside. In most of Africa, only a fraction of people have bank accounts – but there is a huge demand for cheap and convenient ways to send money and buy prepaid services such as airtime. In Kenya, a pilot scheme called M-Pesa is being used to disburse and pay micro-loans by phone. Meanwhile, Celpay is offering platforms for banks and phone companies in Zambia and Congo. By clicking a few keys on a mobile/cell phone, money can be zapped from one part of Kenya to another in seconds. For urban migrants sending money home to their villages and for people used to queuing at banks for hours to pay bills or school fees, the M-Pesa money-transfer service, operated by Safaricom, Kenya’s largest mobile/cell operator, is a godsend. It is used by 17 million people, or over half the population, and transfers the equivalent of almost 50 % of Kenya’s GDP each year. The most ambitious is Africa’s biggest operator, MTN, which is rolling out mobile-money schemes in several African countries. Together with five other providers, it has opened up the Ugandan market, where users of the service have increased from 10,000 in the late 2000s to 19 million now. Market challenges There are many difficulties on the way. Not all potential consumers are ready to make the leap. Many think banking is too expensive and complicated, and helping new customers become financially literate takes time. The technology remains a problem in some cases, with downloads requiring dozens of text messages. Several rival platforms are still in the fight. But so far, those that emphasize simplicity and ease of use over state-of-the-art technology and security have made the greatest strides. A lot also hangs on putting the right laws and regulations in place. They need to be tight enough to protect vulnerable users and discourage money laundering but open enough to allow innovative mobile banking to grow. However, the main barrier to further expansion remains the cumbersome regulatory frameworks. Countries with similar economic circumstances but with a liberalized market generally show higher penetration rates. Taxes can also act as a barrier, particularly import duties on handsets or special mobile communications surcharges. The mobile industry has been seen as a cash cow by governments in some countries that have used its popularity to generate tax revenues but have not invested in the infrastructure for its growth. To expand coverage into rural and remote areas, government support will be required. Rural areas in some countries are also often economically unattractive for operators to invest in. This is usually not due to a lack of demand but rather to a lack of basic infrastructure. The cost of making calls and sending texts in Africa is also relatively high, and many of its countries are poor. In South Africa and Kenya, running a mobile/cell phone costs the average user 5 % of a monthly income. Yet in countries such as Malawi and Central African Republic, average monthly mobile/cell costs are as much as 50 % of average monthly earnings. Big chunks of some markets remain unreachable because of this. A ‘digital divide’ also persists in terms of Internet access, but this is changing, too, as Internet penetration has passed 20 % in Africa. Because of the lack of availability of fixed lines, mobile broadband accounts for 90% of Internet subscriptions and so Internet access in Africa is much more dependent on the penetration of smartphones. The task
1. Analyze and evaluate the major environmental influences that will impact the growth of the mobile/cell phone services market.
2. Building on the results of your analysis from Question 1, and with reference to a company of your choice, draw up a market profile analysis for the area.
3. Propose and justify an effective segmentation strategy for the African market that will form the basis on which a company of your choice can build a regional marketing strategy. This should form the basis on which the company you have chosen can enter and develop the market.
4. For the company referred to in Question 2, show how the company should develop some of the segments identified. What are the challenges and problems they will face, and how should they respond to these challenges?
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