HTC P4550 Smartphone

Market Introduction of the HTC P4550 Smartphone to the German Market

1. Executive Summary

In June 2008, HTC will introduce its latest model of innovative smartphones; the HTC P4550, to the German smartphone and PDA market. HTC will have to compete against a number of multinational smartphone manufacturers who have already established themselves in the German marketplace. The HTC P4550 is a new generation of smartphones that will have a significant competitive advantage based on the multitude of available features which will combine the benefits of a mobile phone, personal computer, GPS, media player, and camera in one mobile device. A large variety of new innovative features that are unmatched by our competition will provide additional value to our customers.

With the new P4550 smartphone we are targeting the middle-and upper-income consumers in the business and private sector. The P4550 reacts to market trends and customer needs and will enter the German market during a phase of economic growth and an increasing demand for multifunctional mobile devices such as cell-phones, PDAs, or smartphones. Despite heavy competition we will be able to differentiate our product on the basis of innovative design, world-class manufacturing, high quality and reliability, convenience, status,and outstanding customer service.

Throughout the first year we will focus our marketing activities on the creation of product- and brand awareness and on the establishment ofstrong channel relations with upscale retailers and service providers. Supported by a skimming pricing strategy, which will emphasize high quality, we will reach specific sales levels that enable us to break even during the second half of the second year after our initial product launch.

2. Situation Analysis

HTC (High Tech Computers) was founded in 1997 in Taiwan. HTC is principally engaged in the research, development, and manufacture of PDAs, Smartphones, and related components, as well as the provision of related technologies and after services. In 2006 the company generated 99% of its total annual revenue from its PDAs and Smartphones. HTC is one of the global leaders in Microsoft Windows based mobile technology and one of the fastest growing companies in the mobile communication sector. The company distributes its products to domestic and overseas markets, including the Americas, Europe, and Asia. Since June 2006, HTC is operating on the European market with its European Headquarters in Slough, UK. HTC entered the German market for the first time in early 2007. Due to the relatively recent market introduction in Germany, HTC's main communication objectives still focus on the creation of brand awareness and the communication of product information and benefits.

The HTC P4550 is HTC's latest model of Smartphones which will be introduced to the US and Asian markets in early 2008 and to the European market in mid-2008. The P4550 is a quad-band equipped with a 2.8" TFT Touch Screen, a 2.8 MP digicam, a640 x 480 VGA camera, WLAN, Bluetooth 2.0, USB 2 client, a TransFlash slot, 64 MB RAM, 20GB hard drive, a 32 bit Samsung SC32442 CPU, and a GPS navigation system. The smartphone measures only 58mm x 110mm x 18mm and weighs 160grams (battery included), is powered by Windows Mobil 6 Professional, and it features HTC's new TouchFlo™ screen-technology and the Direct Push Outlook E-mail management. Further features include a voice-activated control function, an extendable full-keyboard, live webcam video capability, and all features of traditional MP3 players (Video/Audio/Photo recording, up- and downloading, storing, and playing). The P4550 is designed to be light and user-friendly, with a touch-screen handset and an expandable full-keyboard. The handset will work with any cell phone carrier or plan. As a result the P4550's functions and features deliver more benefits than current web-enables cell phones, PDAs, or Smartphones on the market.

This marketing plan is solely purposed for the market introduction of the HTC P4550 to the German market in June 2008.

HTC will face similar strong competition in Germany as in the global market. Currently five manufacturers account for over 70% of the units sold in the global Smartphone market, and the situation is almost equivalent in the German market. The five major competitors in Germany are: Nokia (Market leader with over 40% M/S), Panasonic, NEC, Research in Motion, and Sharp. Nevertheless,HTC's leadership in Microsoft Windows based mobile technology, and its core competencies in innovation, production, and technology has the potential to provide HTC with an important competitive advantage. As described in the following sections; the product launch of the P4550 in Germany will be based on favorable market trends for Smartphones, advanced HTC technology, a skimming pricing strategy, an exclusive distribution, marketing communication focused on the creation of basic awareness and the communication of product benefits and information, and on a good knowledge of the market, the target customers, and the main competitors.

2.1. Market Needs

The HTC P4550 Smartphone will meet a large variety of customer needs. The P4550 is a quad-band equipped with a 2.8" TFT Touch Screen, a 2.8 MP digicam, a640 x 480 VGA camera, WLAN, Bluetooth 2.0, USB 2 client, a TransFlash slot, 64 MB RAM, 20GB hard drive, a 32 bit Samsung SC32442 CPU, and a GPS navigation system. The smartphone measures only 58mm x 110mm x 18mm and weighs 160grams (battery included), is powered by Windows Mobil 6 Professional, and it features HTC's new TouchFlo™ screen-technology and the Direct Push Outlook E-mail management. Further features include a voice-activated control function, an extendable full-keyboard, live webcam video capability, and all features of traditional MP3 players (Video/Audio/Photo recording, up- and downloading, storing, and playing).

The P 4550 replaces the need for multiple electronic devices (Phone, Laptop, Media Player, Camera, Organizer, etc)and enables customers and business people to carry only one single device with multiple gadgets. Based on the above features the P4550 can fulfill the following customer needs:

Convenience: The P4550 combines the features of multiple electronic devices in a pocket-sized handset. The handset is easy to use due to its touch screen, keyboard, and voice recognition software.

Communication: The P4550 opens multiple communication channels (Phone, Email, Live Webcam, Multi-media messaging, SMS, photo and video images, and file exchange) All communication functions are voice activated and due to the latest Bluetooth and WI-FI technology absolutely reliable. Furthermore, the phone is sold without a plan affiliation and therefore compatible with almost every phone and wireless providerin themarket.

Management and Storage of Information: The device can receive, download, and upload documents and files. The system can be connected to a relevant home or office system. Consequently, data can be transmitted or accessed from external systems. Data can be recorded, changed, and stored. Data input or data request is easily managed through voice commands, touch screen, or extendable keyboard. 64 MB RAM and 20 GB hard drive provide adequatestorage and blazing fast CPU speeds. The Direct Push Outlook management system provides additional ease in the management of tasks, files, and e-mails.

Entertainment: The P4550 features MP3 capabilities (storage and playback of movies andmusic), picture storage and display, file sharing, downloading and uploading of media files, gaming, ringtones, and full internet capability. Furthermore, the integrated Webcam and VGAcameraallow for interactive communication and a permanent handiness of a picture taking device.

Navigation: The voice-commanded GPS system enables the user to obtain driving directions and traffic information.

Reliability: The device is robust and resistant to spray-water and extreme temperatures. An extended antenna in the expandable keyboard allows for an incremental 20% in reception performance compared to other Smartphones and PDA's currently on the market. Due to its high quality components and production standards the P4550 became highly durable and reliable. HTC is confident about its high quality standards and provides a 2 year warranty with free home pick-up service.

2.2. The Market

The global market for mobile phones is growing. The number of global cell phone subscribers grew by over 30% in the last two years. The German market experiences similar growth and especially the demand for PDAs and smartphones is predicted to steadily increase until 2009. Various market trends such as increasing globalization, changes in employment and lifestyle, an increasingly complex business environment, time poverty, a need for mobility, low adaptation barriers towards technical innovations, and an increasing need for instant news and information positively impact the cell phone market and drives the demand for smartphones and PDAs.

2.2.1. Market Trends

The increasing globalization and a more and more international business environment create a need and a trend towards multifunctional communication devises among business customers. As the global business environment gets increasingly divers and complex, the demand for PDAs and Smartphones is increasing due to the business segments need to manage, organize, and communicate nationally and internationally with a multifunctional mobile device.

A trend in the business and non-business segment, towards an increasing need for communication and instant information access, can be observed globally and in the German market. This trend drives the demand for cell-phones, Smartphones, PDAs, and media messaging devices. Starting at very young age segments, the market developed a need forpermanent accessibilityand universal access to the latest news and information. This trend drives the sales of multifunctional andmobile communication devices not justin the business segment but also in the private user segment. Moreover, changes in lifestyle and employment structures drive the need for mobility which impacts the demand for mobile devices.

Furthermore, an ever growing technical understanding and technical curiosityof the general public combined with an increased level of comfort in the use of technical gadgets are reasons for high adaptation rates in regards to nouveau electronic devices such as computers, entertainment systems, and communication devices.

According to the Germanelectronics trade journal Digital World; a market research study conducted by Mummert Consulting found a strong trend towards smartphones and PDA's in the German consumer market. According to this study, over 40% of all German cell-phone owners will own a PDA or a Smartphone by 2009. This is an astonishing trend taking into account that Germany is one of the leading nations in regards to cell phone usage and cell phone ownership rates (on a total and on a per capita base). According to Infoplease.com over 79 million cell phones were owned by Germans in 2005 (this number was only toped by China, USA, Russia, Japan, and Brazil; -all of these countries have significantly higher population s).

Another favorable trend that impacts cell phone usage and ownership rates is the continuous decrease in rates and fees for telephone calls. According to Heist.online, the world-wide average in cell phone rates has dropped by 12% and is now at 22 cents per minute. These dropping prices will ultimately have an effect on global cell phone sales.

Lastly, longer working hours, and increasing professional, private, and social responsibilities create a growing level of time poverty which also drives the demand for mobile multifunctional communication and management devices.

2.2.2. Market Growth

The global cell phone market is promising. As discussed in the "Market Trends" section, various trends and evolving needs drive the growth of the mobile phone industry. According to an article published by BBC News; the global sales trends for cell phones show steady growth over the long term; mobile handset sales increased by 31% from 2005 to 2007. Projected global unit sales amount to over 1 billion handsets in 2009. Furthermore, by the end of 2007 over 2.6 billion consumers worldwide were cell phone subscribers. This represents a 13% increase since 2006. These massive growth numbers are partially due to the new opportunities for cell-phone manufacturers in developing countries such as China and India. However, industrialized countries such as the USA and Germany also experience a constant growth within their respective cell phone markets.

The German mobile phone industry is growing on an impressive rate. The demand for Smartphones and PDAs is higher then ever before. According to a market research study conducted by Mummert Consulting over 40% of all German cell-phone owners will own a PDA or a Smartphone by 2009. This is an astonishing trend taking into account that Germany is one of the leading nations in regards to cell phone usage and cell phone ownership rates (on a total and on a per capita base). According to Infoplease.com over 79 million cell phones were owned by Germans in 2005 (this number was only toped by China, USA, Russia, Japan, and Brazil – all of these countries have significantly higher population s).

Lastly, a growing economy and positive economic outlook for Germany will have an impact on consumer product sales. Germany had a growth rate of nearly 3% in 2006 and 2007 (the best levels in six year). Germany's GDP measured 2.6 trillion dollars in 2006 and grew by 2.9% in 2007, according to information from the US Department of State. The per capita income amounted to nearly 32,000 dollars (PPP) and the inflation rate (for consumer prices in 2006) was 1.7%. The positive economic outlook will result in higher income levels and more spending power among German consumers.

2.3. The Company

HTC (High Tech Computers) was founded in 1997 in Taiwan. HTC is principally engaged in the research, development, and manufacture of PDAs, Smartphones, and related components, as well as the provision of related technologies and after services. Since its establishment, HTC has developed strong R&D capabilities, pioneered many new designs and product innovations, and launched state-of-the-art PDA Phones and smartphones for mobile operators and distributors in Europe, the US, and Asia. These machines are available as HTC devices and as products individually customized for operator and device partners. In 2006 the company generated 99% of its total annual revenue its PDAs and smartphones. HTC is one of the global leaders in Microsoft Windows based mobile technology and one of the fastest growing companies in the mobile communication sector. The company distributes its products to domestic and overseas markets, including the Americas, Europe, and Asia. Since June 2006, HTC is operating on the European market with its European Headquarters in Slough, UK. HTC entered the German market for the first time in early 2007.

2.3.1. Mission

The HTC missionis to become the leading innovative supplier of mobile information and communication devices by providing value-added design, world-class manufacturing, and logistic and service capabilities.

2.3.2. Product Offering

HTC offers extensive lines of Touch phones, PDAs, Smartphones, and even mobile computers.

The HTC P4550 is the latest Smartphone model which emerged out of a synergy between HTC Touch phones and the HTC S-line of Smartphones. The HTC P4550 will be introduced to the US and Asian markets in early 2008 and to the European market in mid-2008. The P4550 is a quad-band equipped with a 2.8" TFT Touch Screen, a 2.8 MP digicam, a640 x 480 VGA camera, WLAN, Bluetooth 2.0, USB 2 client, a TransFlash slot, 64 MB RAM, 20GB hard drive, a 32 bit Samsung SC32442 CPU, and a GPS navigation system. The smartphone measures only 58mm x 110mm x 18mm and weighs 160grams (battery included), is powered by Windows Mobil 6 Professional, and it features HTC's new TouchFlo™ screen-technology and the Direct Push Outlook E-mail management. Further features include a voice-activated control function, an extendable full-keyboard, live webcam video capability, and all features of traditional MP3 players (Video/Audio/Photo recording, up- and downloading, storing, and playing). The P4550 is designed to be light and user-friendly, with a touch-screen handset and an expandable full-keyboard. The handset will work with any cell phone carrier or plan. As a result the P4550's functions and featured deliver more benefits than current web-enables cell phones, PDAs, and Smartphones on the market. Using a skimming pricing strategy, the phone will enter the German market with a premium price of € 499 (~ $ 650).

2.3.3. Positioning

In general, HTC products are positionedthroughinnovative design, world-class manufacturing, high quality and reliability, smart business solutions, and outstanding logistic and service. The HTC P4550 will be positioned as a state-of-the-art smartphonethat combines the benefits of amobile phone, personal computer, GPS, media player, and camera. Therefore, the P4550 will meet the needs of the business and consumer market by providing: convenience, communication, management and storagecapability, entertainment, navigation, and reliability. Due to such a complete portfolio, our leadership in MS Windows based technology, and ourcompatibility to most mobile service providers and wireless plans, we have a competitive advantage on our main competitors. Furthermore, our high quality indicated by a premium price implements a positioning on status.

2.3.4. SWOT Summary

In regards to the introduction of the P 4550 smartphone in Germany, HTC can build on the following major strengths: leadership in MS Windows technology, first-mover advantage with several technological innovations, high quality, manufacturing, and service standards, and an unprecedented multitude of features combined in one mobile device. HTC's major weakness is its lack of product awareness and image in the German market. Furthermore, the highly competitive environment and the dominant position of Nokia represent major threats. Also, the short product life-cycle in the smartphone industry forces a skimming strategy despite downwards pricing pressure from competitors. However, various favorable market trends provide great opportunities for the new HTC P4550.

A SWOT summary table can be found in the Appendix 2.

2.3.4.1. Strengths

HTC identified the following strengths for the introduction of the HTC P4550 in the German market:

* leadership position in Microsoft Windows mobile technology

* new HTC TouchFlow™ technology

* product that includes more features than any competitor in the PDA/Smartphone industry

* high quality product standards

* efficient logistics and existing distribution channels

* first-mover advantage on voice-recognition for large variety of product features

* first-mover advantage on web-cam capability

* outstanding service

* world-class manufacturing due to low labor costs in Taiwan

* touch screen and expandable keyboard for easymaneuvering and quick data entry

* huge storage capability

2.3.4.2. Weaknesses

HTC identified the followingweaknesses for the introduction of the HTC P4550 in the German market:

* many competitors

* strong market leader (Nokia over 40% M/S)

* limited product- and brand awareness in German market

* lack of image

* high price (more expensive then most competing products)

* heavier and taller then many competing productsdue to expandable keyboard and large multitude of features

* shorter battery life then many competing due to large multitude of features

2.3.4.3. Opportunities

HTC identified the followingopportunities for the introduction of the HTC P4550 in the German market:

* increasing demand for multifunctional and mobile communication devices

* increasing need for instant information access

* increasing global and mobile lifestyle

* growing technical understanding among consumers à more early adapters

* trend towards smartphones and PDAs in the German market

* positive economic outlook for Germany à rising incomes and increasing buying power

* global drop in cell-phone rates makes ownership and use more affordable

2.3.4.4. Threats

HTC identified the followingthreats for the introduction of the HTC P4550 in the German market:

* high level of cell-phone ownership in German market à limited room for growth

* price pressure from intense competition

* fast product life-cycles and future obsolescence of existing technologies

* intense domestic and international competition

* competitors catch up with HTC features and technology

2.4. Competition

The German market features all major smartphone manufacturers and models. Therefore, HTC will compete with nearly all smartphone models that are available in the global market. The main competitors havehigh levels ofresources, high brand recognition, and extensive experience in product development and management.

The global (and German) smartphone market is dominated by Finland's Nokia with over 40% in market share. Nokia is followed by the Japanese manufacturer Panasonic and NEC with roughly 10% of the market. Canada's Research in Motion (Blackberry) comes in fourth with over 7%, followed by Sharp, Motorola, T-Mobil, Palm, and Apple with the popular iPhone.

Most competitors' products feature either touch screen or a keyboard but not both. Furthermore, the voice-recognition technology has only been utilized for certain functions such as instant calling by most competitors. Only few competitors feature a GPS navigation unit and a live webcam. HTC introduces its trademarked TouchFlow™ function which is similar to the iPhone's iTouch technology. Most importantly, no competingsmartphone or PDAhas such a broad portfolio of features and such a unique mix of benefits as offered by the P4550.

Most competitors are priced significant below the P4550 (most competitors are in the € 200-300 price range). However, the later and most advanced models all sell above the € 400 mark.

A comprehensive competitive analysis table that evaluates the major players in the German smartphone market based on 16 critical factors can be found in the appendix section: Appendix 3, of this plan.

3. Marketing Strategy

The P4550 will be positioned on superior innovations, quality, reliability, and status. The product will target two market segments: the business market and the consumer market. Income, occupation, lifestyle, and benefits sought will be the primary factors used for segmentation. HTC will use all of the four traditional elements of the marketing-mix (4-Ps) plus the service component to educate our target market about the features and benefits of the P4550 smartphone. Various communication media will be used to increase brand awareness in the German market. Furthermore, our skimming pricing strategy will reflect our positioning and create the high-end brand image that we pursue.

3.1. Value Proposition

The P4550's value is determined by the benefits that it can provide to its owner minus its price. Despite our skimming pricing approach we are confident that the multitude of benefits provided by the P4550 out-shadow the premium price.Superiorinnovations indesignand technology,world-class manufacturing, and high quality in product and service provide various benefits that are highly valued by our select target market. Value is created due to the combined benefits of amobile phone, personal computer, GPS, media player, and camera.No competingsmartphone or PDAhas such a broad portfolio of features and such a unique mix of benefits as offered by the P4550.

3.2. Critical Issues

The most critical issue to the successful launch of the P4550 in the German market will be the communication of its unique benefits based on its superior innovations, high quality, and status. Creating product and brand awareness will be the major focus for our first-year marketing communication. HTC has to reflect the image of a high-end phone manufacturer that offers innovative business solutions to the business and private segment.

3.3. Financial Objectives

Due to the lack of brand awareness in the German market, aggressive advertising spending, and high development costs we anticipate a loss of $18.9 million within the first year. The goal will be to reach the break-even point within 21 months of introduction. We expect a minimum of 15% of annual ROI within the first 4 years.

3.4. Marketing Objectives

The primary marketing goal is toincrease HTC's brand awareness to 65% in the consumer segment and 70% in the business segment until 2009. The first year sales volume goal would be 100,000 units (15,000 units in ‘08/Q3, 20,000 units in ‘08/Q4, 30,000 units in ‘09/Q1, and 35,000 units in ‘09/Q4). For the second year we expect a unit sales increase of 50%. Furthermore, we want to establish strong relations with upscale channels and serviceproviders within five months.

3.5. Target Market Strategy

We divide our target market into two main segments: the business market and the consumer market.

Within the business market, our primary target segment consists of executive level business professionals, entrepreneurs, and small business owners. Their demands focuses on mobile technology (due to frequent travel), a needfor constantaccess to information (www or company files), a need for basic software on a mobile device, management ofco-workers and customer relations.

Within the consumer market we focus on middle- and upper-income professionals who are in need for a portable device with a multitude of features (communication, media, camera, internet, etc.). Status will be an important motivation for this segment. The consumers of this segment tend to be well educated and have an annual household income of $60,000 or above. A second target segment within the consumer market would be young adults aged 18-30 who are early adaptors and "electronic fans". This segment will be more interested in the entertainment, communication, and image features of the P4550.

3.6. Messaging

The messaging is based on our positioning statement and will endorse the HTC P4550 as a state-of-the-art, premiumsmartphonethat combines the benefits of amobile phone, personal computer, GPS, media player, and camera. Furthermore, the messaging has to create awareness and promote HTC asa brandthat stands for innovative design, world-class manufacturing, high quality and reliable products, smart business solutions, and outstanding logistic and service.

4. Marketing Mix

The primary marketing goal is toincrease HTC's brand awareness to 65% in the consumer segment and to 70% in the business segment until 2009. The first year sales volume goal would be 100,000 units.Furthermore, we want to establish strong relations with upscale channels and service carriers within five months. We will use all four elements of the marketing-mix supported by a strong service component to reach our marketing objectives. It will be important to keep our positioning (superior innovations, quality, reliability, and status) and branding in mind when we implement our marketing-mix initiatives.

4.1. Product Marketing

As described in section 2.3.2., the HTC P4550 offersa multitude ofproduct features that combine the benefits of amobile phone, personal computer, GPS, media player, and camera. These features are highly valued by our customers, and many of these features are exclusive to the P4550. Although competitors might be able to mach some of our features within months, we have a clear competitive advantage with our TouchFlow™ technology, our full-voice recognition, and our leadership in MS Windows based mobile technology. Furthermore, our design that creates a synergy between the expandable keyboard and the TouchFlow™ display is unique in the market and we do not suspect any competitor to match this design within the near future.

We are partnering with a major accessories manufacturer in order to provide a full line of HTC branded accessories that are specifically geared towards the new P4550.A highlight of this line will be the HTC P4550 automobile kit. This set includes everything that is needed to use the P4550 as a GPS, Media Player, Computer, or Phone in a car. We provide connectors to the car stereo, a full headset, a battery charger, a device holder with suction cup that places the P4550 similar to a portable GPS on the windshield in the drivers view, and additional software that is tailored for product usage while driving (includes an advanced voice recognition program). Further accessories will include: exchange batteries, larger memory cards, battery chargers, headsets, various leather cases, and several connector cables (in order to connect to stereo, PC, TV). All products carrying our brandmust meet rigorous quality and technical standards (verified by an independent testing laboratory). All power-supply components will have to exceed the performance of competing models to underline our high quality, state-of-the art, premium position.

The HTC brand name and logo will bedisplayed in a discreet and elegant way on all of our products, accessories, store displays, websites, and other communicational tools. This brand consistency will be a key element in our brand awareness strategy. All brand elements will be carefully coordinated to contribute salience, distinctiveness, and image.

4.2. Pricing

Our financial objective isto reach the break-even point within 21 months of introduction. Due to the lack of brand awareness in the German market, aggressive advertising spending, and high development costs we anticipate a loss of $18.9 millionin the first year. However, we expect a minimum of 15% of annual ROI within the first 4 years.

We ill use a skimming pricing strategy to support our innovative and high quality image. The HTC will enter the German market with a premium retail price of € 499 (~ $ 650). Based on our unit sales goal of 100,000 units in the first year we project first-year retailer revenues to be 65 million dollars. The retailer margins would be 26% (in line with industry standards). This gives us amanufacturer's price of $ 480 which leaves us with a contribution margin of 37.5% due to variable costs of $ 300 per unit. Therefore, manufacturers' revenues would amount to 48 million dollars based on expected sales of 100,000 units.

Most of our competitors are priced in the $ 350 range, however, top-of the line products such as the Apple iPhoneare typically priced above $ 500 initially. Weposition the P4550 as a top model within the latest smartphone generation and therefore we feel obligated to symbolize this leadership position through a price that is above the price levels of our competitors. Research has shown that there is a 0.9 correlation between price and perceived quality. Our product is a high quality mobile device with a multitude of nouveau, and innovative feature. Therefore, we thing the premium price of $ 650 is appropriate to underline our image and positioning. Our customers perceive high value in the additional features and benefits that they will acquire through our product. Furthermore, our primary target segments are less price-sensitive in regards to leading-edge technology.

4.3. Promotion

The primary marketing goal is toincrease HTC's brand awareness to 65% in the consumer segment and to 70% in the business segment until 2009. To achieve this we will run a multi-media brand-building campaign that differentiates our product and our brand from competitors. We will include TV, radio, web, and print advertisements to reach a broad customer base and create awareness. We will mainly advertise in media with a high reach, a focus on high-income consumers, and technology related programs (prints). Cooperative advertising will put us in high-end catalogues and on the websites of exclusive retailers. Also, we will post product previewinformation on our website and on the website of our retailers.

To support our distribution strategy we will use some initial trade sales promotions. Also, we will run holiday sales and special event promotions in order to create some initial trial. Furthermore, we will hold high-profile launch events that will receive the attention of the media and the end-users. The main benefit of these events will come from a stimulated publicity and media coverage in various consumer media such as Tech-magazines and product testpublications. In order to receive further positive PR we will give our products to selected product reviewer, bloggers, opinion leaders, media representatives, and celebrities.

Building on our database we will deliver customized direct marketing initiatives to a highly targeted market. Furthermore, we will train our sales-force and dealers to explain product features and benefits. Exhibitions on various electronic trade shows provide further opportunities to communicate benefits and product features.

While the main objective for first-year promotions lies on the creation of awareness, we will still communicate performance and feature-based information in order to underline out innovative technology and our superiority in features and quality. In order to justify our premium pricing strategy we will have to create value for our customers. Therefore, it is essential to communicate our high quality,state-of-the-art technology, design, and product innovations.

4.4. Place (Channel Strategy)

To be in conformity with our skimming pricing strategy and our high-quality image we only use selective distribution channels to market and sell out HTC P4550. We will use upscale catalog/online/store retailers like MediaMarkt, Saturn, Altec, PDAMax, Quelle, Neckarmann, and Skymall. We will utilize the extensive customer databases of our retailers to leverage our customized direct marketing initiatives. These retailers are also known for good customer service and fast order fulfillment. Another channel will include cell-phone service providers such as T-Mobil, Verizon, Vodafone, and Verizon. These partnerships give us access to their stores in major markets and opportunities for co-branded promotions.

4.5. Service

We will offer two year warranties in the German market. Furthermore, we offer a 24/7 toll-free service hotline and an online help-center. Also, within the warranty period we offer a free-off-charge mail-in repair service. Furthermore, customer satisfaction will come from POP experienceswith our upscale retailers and selected partners. Hereby, customer relationship management will be a main focus. To ensure this quality level, we will provide comprehensive training and POP sales training for our channel partners. We will measure customer satisfaction by conducting quality- and satisfaction surveys. Because we are at the edge of establishing a new brand in the German market we pay high attention to service standards and customer satisfaction ratings.

5. Financials

In line with industry standards (an average of 25%), we grant a 26% margin to our retailers. The retail price will be $ 650 (€499) which willleave HTC with a manufacturer's price of $480. This gives us a 37.5% contribution margin ($ 180 unit contribution) due to COGS and other variable costs of $ 300 per unit.

Total HTC first-year revenues are expected to be 48 million dollars based on the manufacturer's price of $ 480 per unit and projected first-year unit sales of 100,000 units. We anticipate sales in `08/Q3 to be 15,000 units, `08/Q4 to be 20,000 units, `09/Q1 to be 30,000 units, and `09/Q2 to be 35,000 units. This will generate an income of $ 18 million based on our 37.5 % contribution margin. However, fixed costs (mainly for plant expenses, land payments, buildings, equipment, labor, marketing expenses, and cost of development, tooling, and launching) amount up to 36.9 million dollars. This will result in a first year loss of $ 18.9 million.

We expect our sales levels to rise by 50% in the second year (due to increased awareness) and ultimately reach 150,000 units in sales for 2009/10 (with `09/Q3 sales of 30,000 units, `09/Q4 sales of 35,000 units, `10/Q1 sales of 40,000 units, and `10/Q2 sales of 45,000 units). Based on this forecast, our contribution margin of $ 180 per unit,and on our fixed costs of $ 36.9 million we expect to break even after approximately 21 months of the product launch.

After the second year (after we broke even) we plan to lower the price for the P4550 (lower margins) in respect to the products life-cycle (product will probably enter maturity two years after launch). We hope to introduce a second generation of the P4550 within three years after the launch of the P$550.

Tables for fixed- and variable costs, contribution margins, sales forecasts, and pricing can be found in the appendix under the appendix section 4.

5.1. Break-even Analysis

Projected first-year unit salesare 100,000 units. We anticipate sales in `08/Q3 to be 15,000 units, `08/Q4 to be 20,000 units, `09/Q1 to be 30,000 units, and `09/Q2 to be 35,000 units. We expect our sales levels to rise by 50% in the second year (due to increased awareness) and ultimately reach 150,000 units in sales for 2009/10 (with `09/Q3 sales of 30,000 units, `09/Q4 sales of 35,000 units, `10/Q1 sales of 40,000 units, and `10/Q2 sales of 45,000 units). Based on this sales forecast, our contribution margin of $ 180 per unit,and on our fixed costs of $ 36.9 million we expect to break even after approximately 21 months of the initial product launch.

The appropriate tables with the financial breakdowns can be found in Appendix 4.

5.2. Sales Forecast

Projected first-year unit salesare 100,000 units. We anticipate sales in `08/Q3 to be 15,000 units, `08/Q4 to be 20,000 units, `09/Q1 to be 30,000 units, and `09/Q2 to be 35,000 units. We expect our sales levels to rise by 50% in the second year (due to increased awareness) and ultimately reach 150,000 units in sales for 2009/10 (with `09/Q3 sales of 30,000 units, `09/Q4 sales of 35,000 units, `10/Q1 sales of 40,000 units, and `10/Q2 sales of 45,000 units).

The appropriate tables with the financial breakdowns can be found in Appendix 4.

5.3. Contribution Margin

In line with industry standards (averaging 25%), we grant a 26% margin to our retailers. The retail price will be $ 650 (€499) which willleave HTC with a manufacturer's price of $480. This gives us a 37.5% contribution margin ($ 180 unit contribution) due to COGS and other variable costs of $ 300 per unit.

The appropriate tables with the financial breakdowns can be found in Appendix 4.

6. Controls

This plan is all about the implementation of the suggested marketing activities in order to reachour identified marketing objectives.Thissection will focus on implementation programs, the most critical keys to success, marketing research, and possible readjustments due to competitive pressure.

6.1. Implementation

The proper and timely implementation of the strategies and activities suggested in this plan is crucial.A consistent focus on implementation as well as measures and controls are necessary. Monthlyreview sessions in which objectives and milestone statusare reviewed and evaluated should be implemented. We also plan on strict control activities to monitor quality and customer service satisfaction.

Control and possible readjustment of the implementations should take place in the following steps:

Measurement of activities
Comparison of results to goals
Evaluation of activities
Readjustment if necessary

It will be critical to maintain a focus on the marketing and financial objectives and on the branding and positioning strategy. Furthermore,we will have toto be consistent in all our communication and marketing activities in order to create brand equity, trust, and awareness. A precise implementation is important for the success of this project. However, a certain degree of flexibility will be necessary to properly react to internal and external changes.

6.2. Keys to Success

Creating awareness about the HTC brand and the P4550 will be the key to success for our product launch in the German market. Competitors have already accomplished this objective and enjoy a wide-spreading brand recognition. In order to communicate our superiorities in terms of quality, features, reliability, and service, we first need to establish a high level of brand recognition and awareness.

6.3. Market Research

Our marketing research focuses on continuous product development, integrated marketing communication (IMC), and customer satisfaction:

Through ethnographical studies and large-scale quantitative research we try to detect market trends and try to identify the features and benefits that our target customers value and seek for. Continuous developmentwill be important due to short product life-cycles which requires us to release new models almost every two years.

In terms of IMC we will focus on our main objective of creating basic awareness. We will measure brand awareness before, during, and after our campaigns in order to assess the effectiveness of our marketing initiatives, the reach of certain media, and the customer responses.

Continuous surveys will help us to evaluate our service performance and the level of customer satisfaction. Furthermore, we will take complaints and feedback seriously and look at these issues as chances for improvement.

6.4. Contingency Planning

We have developed a contingency plan with which we are able to react on potential downward pricing pressure from our competitors. We realize that our product is among the most expensive smartphone on the market. If we experience pricing pressure from our competition, our contingency plan calls for a short-term price cut combined with certain promotions and discounts in order to stay competitive. A program to reimburse the customers who feel cheated because they purchased the smartphone to a significant higher initial price has also been developed and has to be implemented in case of a change in the pricing strategy.

7. Appendix

7.1. Appendix 1 - Sources

Apple. official website. Jan 24. 2008. <http://www.apple.com/de/>.

BBC News. Business. Mobil Phones – a growth Industry. Oct. 29, 2004. Jan. 14, 2008. <http://news.bbc.co.uk/1/hi/business/business_basics>.

Digital World. Smartphones im Trend. Mummert Consulting. Jun. 2006. Jan. 14, 2008 <http://www.digital-world.de/>.

Factiva. High Tech Computer Corp. Jan. 10, 2008. University of Cincinnati Libraries. <www.globalfactiva.com>.

Heist.Online. T-Mobil; the cell phone industry is headed for growth”. Jul. 17, 2007. Jan. 14, 2008. <http://www.heise.de/english/newsticker/news>.

HTC Homepage. About HTC. Company Information. Jan. 17, 2008. <http://www.htc.com/about/02-about-1.htm>.

HTC Homepage. About HTC. Mission Statement. Jan. 17, 2008. <http://www.htc.com/about/02-about-1.htm>.

Infoplease.com. cell phone usage world-wide, by country. Dez. 2005. Jan 14, 2008 <http://www.infoplease.com>.

International Herald Tribune. German Economic Outlook. Jan. 6, 2008. Jan 17, 2008 <http://www.iht.com/articles/2008/01/06/business/Gcon.php>.

Motorola Germany. official website. Jan 24. 2008. <http://www.motorola.com/de>.

NEC Deutschland. Official website. Jan 24. 2008. <http://www.nec.de/>.

Nokia Deutschland. Official website. Jan 24. 2008. <http://www.nokia.de>.

Palm Inc.. official website for Germany. Jan 24. 2008. <http://euro.palm.com/de/de/index.html>.

Panasonic. Official website. Jan 24. 2008. <http://www.panasonic.de/home/default.aspx>.

PDAshop.nl. HTC accessories. Jan 24, 2008. <http://www.pdashop.nl/accessoires/22108/e-ten-g500-gps-smartphone.html>.

Research in Motion. BlackBerry. official website for Germany. Jan 24. 2008. <http://www.blackberry.com/de/>.

Sharp Deutschland. official website. Mobiltelefone. Jan 24. 2008. <http://www.sharp.de/produkte/teaser_mobiltelefone.php>.

T-Mobil. official website. Jan 14. 2008. <http://www.t-mobile.de/>.

US Department of State. Background Notes: Germany. Aug. 2007. Jan. 17, 2008. <http://www.state.gov/r/pa/ei/bgn/3997.htm>.

7.2. Appendix 2 – SWOT Summary Table

The following table summarizes the strengths, weaknesses, opportunities, and threats for the market entry of the HTC P4550 into the German smartphone market:

Strengths

Weaknesses

þ leadership position in Microsoft Windows mobile technology

ý many competitors

þ new HTC TouchFlow™ technology

ý strong market leader (Nokia over 40% M/S)

þ product that includes more features than any competitor in the PDA/Smartphone industry

ý limited brand awareness in German market

þ high quality standards

ý lack of image

þ efficient logistics and existing distribution channels

ý high price (more expensive then most competing products)

þ first-mover advantage on voice-recognition for large variety of product features

ý heavier and taller then many competing productsdue to expandable keyboard and large multitude of features

þ first-mover advantage on web-cam capability

ý shorter battery life then many competing due to large multitude of features

þ outstanding service

þ world-class manufacturing due to low labor costs in Taiwan

þ touch screen and expandable keyboard for easymaneuvering and quick data entry

þ huge storage capability

Opportunities

Threats

þ increasing demand for multifunctional and mobile communication devices

ý high level of cell-phone ownership in German market à limited room for growth

þ increasing need for instant information access

ý price pressure from intense competition

þ increasing global and mobile lifestyle

ý fast product life-cycles and future obsolescence of existing technologies

þ growing technical understanding among consumers à more early adapters

ý intense domestic and international competition

þ trend towards smartphones and PDAs in the German market

ý competitors catch up with HTC features and technology

þ positive economic outlook for Germany à rising incomes and increasing buying power

þ global drop in cell-phone rates makes ownership and use more affordable

7.3. Appendix 3 – Competitive Analysis Table

Comparison of each competitor's top-model in the smartphone category on a 1-10 scale
(1=strong competitive disadvantage / 10=strong competitive advantage)

Factor

HTC

Nokia

Panasonic

NEC

RIM

Sharp

Motorola

T-Mobil

Palm

Apple

Sales Level in German Market

1

10

7

6

5

5

4

4

3

2

Product and Brand Awareness

2

10

9

7

7

8

9

9

6

10

Product Line Depth

9

9

8

7

6

7

6

6

4

3

Price (affordability)

1

6

6

4

4

5

8

8

4

2

Quality

10

8

5

8

8

4

7

7

8

9

Service

8

8

6

5

5

6

8

9

5

8

Reliability/Durability

10

9

7

9

10

6

7

8

9

6

Battery Life

4

7

6

7

7

4

5

5

8

8

Product Features

10

6

5

8

8

5

4

6

8

9

Company Image/Reputation

2

8

5

6

6

4

8

8

8

10

Advertising Budget

3

10

8

6

5

6

7

6

6

10

Accessories

9

9

7

6

7

7

8

8

5

10

# of Service Providers

10

9

6

4

4

7

5

3

5

1

Perceived Value

5

8

5

8

8

6

7

7

8

6

Customer Loyalty

2

10

6

5

6

3

8

7

7

10

Channel Relations

6

10

8

5

4

6

8

9

5

9

The above table shows in which categories the HTC P4550 has a competitive advantage against its competitors and in which categories it has a disadvantage. One can see that the P4550's strengths lie in its quality, reliability, multitude of features, accessories, compatibility with multiple service providers, and service. The main problem of HTC and the P4550 is the limited customer awareness, the low advertising budget compared to most competitors, the low affordability (due to a very high price), and the overall customer loyalty (which is a result of the limited awareness):

7.4. Appendix 4 - Financials

The following tables summarize the relevant information for fixed- and variable costs, contribution margins, sales forecasts, break-even points, and retail and manufacturing prices.

Fixed Costs

in million $

Plant Expenses

2.1

Land Payments

0.7

Building

3.4

Equipment

3.5

Labor

3.3

Marketing Expenses

4.0

Cost of Development

10.1

Cost of Tooling

3.7

Cost of Launching

4.1

Other Expenses

2.0

Total

36.9

Variable Costs

$ unit VC

COGS

200

Other Variable Costs

100

Total

300

Pricing

$ unit Price

Retailer Price

650

Manufacturer Price

480

Margins

%

$ per unit

Retailer Margin

26

170

Manufacturer Margin

37.5

180

Break Even (units):

$ 36.9 million / $ 180 = 205,000 units à Break Even in Year 2, `10/Q1 (21 months after launch)

Sales Forecast

(* 1,000 units)

*Q3

Q4

Q1

Q2

Total

`08/`09 (Year 1)

15

20

30

35

100

`09/`10 (Year 2)

30

35

40

45

150

Total

250

*Table starts at Q3 because the product is launched in mid-year (June 2008).


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