Strategic Mgmt Assignment.docx

NAME: DARSHAN DEDHIA ROLL NO. : 12 COURSE: PGDM 2017 – 2019 SUBJECT: STRATEGIC MANAGEMENT TOPIC: ASSIGNMENT ON ONEPLUS (Marketing Strategy, Marketing Mix & Porter’s Five Forces)

Company History OnePlus is a private smartphone manufacturer in China. It has been established in December 2013 by Pete Lau, who is former Vice President of Oppo Electronics. The company has two headquarters, one in Hong Kong and the other one in Shenzhen. The company stated that “OnePlus is a technology startup committed to bringing the best possible technology to users around the world. Created around the mantra Never Settle, OnePlus creates beautifully designed devices with premium build quality” (https://oneplus.net/about-us). “Dreamers” is the concept of its inspiration as they are high and they want to be big. Besides, they want to build the best and respected products. They also want to see all users around the world enjoy using their devices. OnePlus’ first product is named the “OnePlus One” under the slogan of “2014 Flagship Killer, Never Settle”. It has recently launched in May 2014 at the prices of $299 and $349 for 16 GB and 64 GB models respectively. To adding up its own value, the phone is not available for the public to purchase. Therefore, it is called “Phone of Dreams – It is hard to imagine a better phone for Andriod geeks” by TIME Magazine. Nevertheless, the customers who want the phone have to get it through an invitation system or compete the contest, which arranged by the company. There were only 10,000 invites given out for a contest at the end of August 2014. They sold OnePlus over 500,000 units now. Nevertheless, there are some confusion between OnePlus’ and Oppo’ relationship. The companies stated that despite sharing some of their investors they do run separate and individual operations.

Competitors Main Competitors are:

1. Apple The Iphone is considered to be the world’s leading smart phone. Price range is from $199 for 16GB with 2 year contract up to $949 with no contract for Iphone 6plus 128 GB 2. Samsung South Korean multinational conglomerate company comprises numerous subsidiaries and affiliated businesses, most of them united under the Samsungbrand.

3. LG Mobile LG Electronics manufactures a wide range of smartphones and tablet devices. Other than the G3, LG officially unveiled the first curved smartphone, G Flex. 4. TCL Alcatel TCL Corporation is a Chinese multinational electronics company headquartered in Huizhou, Guangdong, China. It designs, develops, manufactures and sells products including televisions, mobile phones, air conditioners, washing machines, refrigerators and small electrical appliances. In 2010 it was the world’s 25th-largest consumer electronics producer and third-largest television producer (after Samsung and LG). The Alcatel One Touch Fire is one of the first generation of smartphones preinstalled with Firefox OS, an open-source mobile operating system developed by Mozilla. 5. HTC HTC Corporation is asmartphone and tablets and other electronic based equpiment manufacturer with headquartered in New Taipei City, Taiwan. Founded in 1997, HTC began as an original design manufacturer and original equipment manufacturer, for mobile phones, touchscreen phones, and PDAs based on Windows Mobile OS and Brew MP as a manufacurer contractor The HTC One (M8) (also known as the second generation HTC One or the allnew HTC One) is an Android smartphone manufactured and marketed by HTC. Following a number of leaks which occurred during the months prior, the secondgeneration One was officially unveiled in a press conference on March 25, 2014, and released the same day by Verizon Wireless at retail, and by other Canadian and United States carriers for online orders prior to its wider retail availability in mid-April. 6. Motorola Motorola, Inc. was a multinational telecommunications company based United States. After having lost big loss in 2009, company was divided into two independent public companies, Motorola Mobility and Motorola Solutions on January 4, 2011. Motorola Solutions is generally considered to be the direct successor to Motorola, Inc., as the reorganization was structured with Motorola Mobility being spun off. Moto X is an Android smartphone developed and manufactured by Motorola Mobility. Released in August 2013, it was among the company’s first new products after its acquisition by Google in 2012. Initially developed as the “X Phone”, Moto X was primarily aimed at mainstream consumers, distinguished by features taking advantage of voice recognition and contextual awareness, the ability for users to

custom-order the device in their own choice of color options, and emphasizing the fact that the phone had final assembly completed in the United States. 7. Oppo OPPO Electronics Corp. is an electronics manufacturer based in Dongguan, Guangdong, China. Its major product lines include MP3 players, portable Media players, LCD-TVs, eBooks, DVD/Blu-ray Disc players and mobile phones. Some models of Oppo’s smartphones alre equiped with ColorOS softwere yet N1 is the first Android based, to offer an official version of the popular aftermarket Android distribution CyanogenMod 8. Microsoft Lumia Microsoft Lumia (previously Nokia Lumia Series) is a series of smartphones designed and marketed by Microsoft Mobile previously owned by Nokia. Was released in November 2011, and the series result long-term partnership between Microsoft and Nokia, like all Lumia smartphones had Windows Mobile software. Introduced in November 2011, the line was the result of a long-term partnership between Nokia and Microsoft—as such, all Lumia smartphones run the Windows Phone operating system. 9. Huawei Chinese multinational networking, telecommunication equipment and services company based in Shenzhen, Guangdong province. It is the largest telecommunications equipment maker in the world. Overtook Ericsson in 2012. 10. ZTE ZTE Corporation (formerly Zhongxing Telecommunication Equipment Corporation) is a Chinese multinational telecommunications equipment and systems company headquartered in Shenzhen, China. ZTE operates in three business units – Carrier Networks(54%)-Terminals(29%)Telecommunication(17%). ZTE’s core products are wireless, exchange, access, optical transmission, and data telecommunications gear; mobile phones; and telecommunications software. It also offers products that provide value-added ZTE Nubia Z7 Max VS OnePlus One, check it here. 11.Lenovo Lenovo Group Ltd. is a Chinese multinational computer technology company with headquarters in Beijing, China, and Morrisville, North Carolina, United States. It

designs, develops, manufactures and sells personal computers, tablet computers, smartphones, workstations, servers, electronic storage devices, IT management software and smart televisions. In 2013 Lenovo was the world’s largest personal computer vendor by unit sales. It markets the ThinkPad line of notebook computers and the ThinkCentre line of desktops. 12. Sony Xperia Sony Xperia is a family with Sony Smartphones and tablets. First released in 2008 followed by first Sony Ericsson tablet in 2012. Name Xperia, comes from “Experience” and was first use in advertisement tag line “I Xperia the best” 13.Meizu Meizu is a Chinese consumer electronics company based in Zhuhai and one of the top ten smartphone manufacturers in China. 14. Xiaomi Xiaomi is a privately owned Chinese electronics company headquartered in Beijing. It is the world’s 3rd largest smartphone distributer that designs, develops, and sells smartphones, mobile apps, and consumer electronics. Since the release of its first smartphone in August 2011, Xiaomi has gained market share in mainland China and expanded into developing a wider range of consumer electronics. The company’s founder and CEO is Lei Jun, China’s 23rd richest man according to Forbes.

Marketing Strategy Strategic Points: 1. Create a compelling product for tech enthusiasts 2. Avoid competing with the market leaders in marketing spendings 3. Generate consumers’ want for the phone through affordable, unconventional channels, and brand awareness. 4. Limit production to create demand 5. Sell it at a cut-throat price, making this possible by avoiding mainstream and conventional marketing tools Target Market:

The usual target age group of customers ranges from the 14-35 year olds, as long as the person has the ability to purchase and use the products that OnePlus has to offer in the market. Teenagers to early adults (age 14-25): This age group of OnePlus product consumers is mostly technology savvy. Teenagers can be considered one of the firm target markets that need the smartphone for entertainment. This group of target mostly use the smart phone for socialize with friends, listen to music and Facebook, Instagram, Twitter etc. Adults (age 26-35): This specific group of targets the largest portion of OnePlus’s target market as this is the group of consumers that have the most ability to purchase OnePlus One. OnePlus phone is beneficial to adults for their everyday needs such as phone calls, map directions, internet connection, documents and cameras. Carrying the smartphone makes adults lives much easier for communicating daily.

Marketing Mix Product

 One of the best hardware  One of the best looking hardware Price

 Half the price of its competitors  Low marketing costs help Place

 It is being sold only online  They deliver to 16 developed markets  One have to be lucky to get the phone Promotion

 The invite and signup system generates want  Online reviews Social media presence  Word of mouth

Porter’s Five Forces

Barriers to entry (High) Market entry in smartphone industry for phone manufacturer is getting extremely tough because of various reasons Proprietary learning curve: Mobile phone manufacturing requires patents and proprietary knowledge. Even leading mobile phone companies are currently engaged in battles over patent issues. Brand identity and brand switching costs: Brand value is very important for mobile phones sales. E.g. reports have suggested that HTC, which has produced very good devices with excellent hardware specs on top of Android mobile platform, are struggling to even maintain the market share. It has been established that it is because of its diminishing brand value. Brand switching is not very predominant in the industry, as a typical smartphone buyer tends to keep the phone for a considerable amount of time ranging from 1-3 years depending on many factors including country, age, profession, educational level etc. High capital requirements and Economies of Scale: Differentiation factors among mobile phone devices are getting fewer which is requiring companies investing heavily in R&D costs, marketing spend, PR costs etc. Also, mobile phone

production require quite much capital in place for factory establishment with quite many raw materials, R&D budget, supply channels etc. Power of buyers (High) Increased price sensitivity: Price difference is getting smaller and lower as device manufacturers are facing fast changes in designs, technical and data capabilities leading the buyers to price sensitive in their buying decision. With lot of OnePlus competitors offering similar packages, the buyers are seeking out best value for their money. Low threat of backward integration: Some mobile operators have started building their own mobile phones under their brand (e.g. Videocon in India) but still have not been hugely popular. So the threat is still low. Most of the mobile phone manufacturers have their own stores to directly sell to consumers; OnePlus is still behind in this area too. Power of supplier (Moderate) Moderate impact of inputs on cost or differentiation: There is growing trend of differentiation based on hardware specifications (dual-core processors, physical memory, NFC support, wide-screen, screen glass etc.), which affects the final selling price and margins. But overall, mostly margins are dictated by software and application ecosystem. Moderate switching costs of firms in the industry: Most of OnePlus competitors are enhancing (not switching) the business model to Tablet space where they are reusing the software stack, operating system, applications portability, application store, design etc. among other things to enhance the competitive advantage and binding the users to their brand (and thereby enhancing brand value Threat of substitution (Low) Low Buyer inclination to substitute: Mobile phones have become necessity for everyday lives of people and its hard to replace with any substitute products especially when they are away from home. High switching costs: There exist multiple substitute products e.g. for contacting people, usage of social media, emails and VOIP systems are substitutes, digital cameras for photography, TV/radio/iPod for listening music, tablets for internet browsing, reading books, emailing etc. But potentially all the value from substitute products could be derived from a single smartphone, needless to say each substitute product might cost more than the mobile phone and need to be carried all the time.

High price-performance ration (value): No other substitute product has the ability to make phone calls, send messages, surf the web, reading a book, listening to music, use GPS services, communicating via social media and many more in one device. The idea of being in constant communication with someone at anytime and anywhere makes the mobile phone a very important device to people and the perceived value by user (price-performance) ratio is very high.

Rivalry between competitors (High) Industry growth: Intense competition is forcing many vendors and operators to drastically change their business models or risk dropping out of the market as economies of scale, segment leadership, brand power and distribution become key determinants of success. High margins: The smartphone segment offers the largest returns for many in the mobile value chain, and it has therefore become the most competitive – attracting all the major vendors competing across various operating systems and price tiers. Huawei has set an ambitious goal for itself: to ship 60 million smartphones in 2012, an increase of 200% year-on-year. Brand identity: Brand identity is vital for long-term success in mobile phones market. But there is still growing competition e.g. from Chinese ‘micro-brands’ and grey market (mainly in the emerging regions like India). Low-Medium Consumer’s churn ratio: Many of the consumers are tied into long term contracts so switching from one handset to another will be difficult and expensive for the consumer, as a result they may not want to change until the contract is finished.

Focus Group Outcome Objective for Focus Group:

What we wanted to get from focus group was opinion about our product and knowledge about American Smartphone market, to see possibility for OnePlus One. We interviewed Americans between 23 and 29 years old whom lived in China for more than one year. Brand Awareness:

None of focus group member heard about OnePlus before. We we’re first to introduce them to the product and tell them a bit of company’s history. Brand Preferences:

Most of our American’s believe that they should have an iPhone because it’s some kind of social status that has to be maintained. An most of them compared their iPhones to brands like Mercedes or Audi (meaning: its really good but have some space for improvement) Brand Loyalty:

Most of our focus group is dedicated IPhone users, with brand loyalty towards Apple, yet after presenting OnePlus, some of them find it very interesting and would consider changing for OnePlus One. Price:

For most of the group price was not that important, amount that they willing to pay for smartphone is between $500 -$1000. Buying Habits:

Our focus group was divided into 3 subcategory’s: -Whenever new model is coming out. -Whenever phone gets broken, lost etc. -Every 2 years (when carrier contract ends.) All group members buy their phone online. And they believe that easy online buying process and great customers support is a key for the future.

Phone Design, Features and Software.

All members believe that in current smartphones main feature that should be improved battery life. Current phones barely survives one day. There is strong focus on design, has to look nice, smooth, fit nicely in hand and be made from good materials. About software, only 2 members show strong attachment to IOS software. Mainly because of their brand loyalty. Conclusion:

After analysing insights given us by focus group meeting we believe that OnePlus have potential in American smartphone market. Only one member of focus group didn’t like the design, the rest was happy with possibilities of customizing phone’s body ( like changing back cover for wood or bamboo) as well as customizing software. Big advantage gives low price which is setteled between $299 and $349. One of main targets that OnePlus should focus on is creating brand awareness.

Position against competitors Through the advanced technologies and innovation, OnePlus as a new smartphone company is likely to grow and become well known in the future. OnePlus One, the company’s first phone, is designed to meet the demands of technology enthusiasts through high quality hardware and software, which is highly customizable. The most attractive feature is of course the price of the device. It is a unique feature that one can only buy the OnePlus One via online with an invitation. The first invitations were sent to the press members first who had a voice in the community and their reviews could make the phone popular. The next step is creating the demand for the phone with limited number of available devices, the invite system and different social media strategies that would make the users enter competitions for the phone. Value Propositions – OnePlus is a China-based smartphone manufacturer, but the company defines itself as a global start-up, which might be more accurate. OnePlus creates phones for the whole world based on the needs of tech enthusiasts. Identifying Competitors – OnePlus One is one of the best phones in 2014. The competition is of course everybody. The biggest question is how to compete against companies who spend millions and millions of advertising while OnePlus’ marketing department is less than 10 people. Customers’ Rating of Competitors on Key Success Factors

Customer Awareness

Product Quality

Price

Design

Performance & Specifications

iPhone

5

5

1

5

4

Samsu ng

5

4

2

3

5

Xiaomi

3

4

4

2

3

Nexus

3

5

5

2

5

Meizu

1

3

5

2

2

OnePlu s

1

5

5

4

5

Noted: Very Excellent = 5, Excellent = 4, Good = 3, Fair = 2, Poor = 1

Advertisement Affiliate Marketing Affiliate marketing is an online performance-based marketing that is commission based according to the number of sales or clicks achieved by the affiliate’s marketing efforts. One of the main advantages of using affiliate marketing is taking advantage of cookies that embed into the visitors of Oneplus.net’s computers that make OnePlus banners pop up on other visited pages once leaving official website. By using affiliate marketing we can increase our exposure and retargeting. Email Direct Marketing (EDM) EDM will be included in the advertising plan. As most purchases are made by email referrals, OnePlus would have a large database of contacts and emails to reach out. By sending out frequent emails to contact list OnePlus would be able to constantly remind the clients and potential users of any updates, promotions or recent news coming from the company. Sending out complimentary newsletters will also allow OnePlus to create involvement content that can attract potential buyer’s interest. Link building:

Link building is basically reaching out to different websites whether it is blogs, news channels or industry related websites that can publish a link back to OnePlus. The benefits of linkbuilding are not only to increase OnePlus Search Engine Optimization (SEO) value, but also rises brand recognition as well as larger targeted exposure. Blogs: Blog is a cost effective advertisement method, where blogger is reviewing the product and posting review on his website. Usually, bloggers are more trustful for customers in terms of reviewing and creating a product opinion that spreads quickly all around the web. Example of blogs that we want to reach out during advertisement process: http://www.phoneblog.com, officialandroid.blogspot.com and bgr.com/ Web: Industry related portals such as technology review sites; tech-maniacs websites that helps build brand awareness among users. Example of websites that we want to use during advertisement process: www.zdnet.com, http://www.phonedog.com, and http://www.mobileburn.com Press Releases & Journalists Writing a press release is the best way to generate some free publicity. Basically, most journalists do not have much time to write stories, so if you can provide them with easily written text it becomes quite easy for them to publish it. This will help to highlight the strength of OnePlus and share it with a mass audience. In addition, OnePlus could involve journalists into their advertisement strategy to make interview about OnePlus One or if they are familiar with smartphone industry to cover a hot topic and include OnePlus One in the story. Social Networks Constantly update social network websites to reach mass audience and target users at least for the time being offers the ability to build a free page. It is quick and simple to do. You can put up a page and start following people. Then the fans can “Like” the OnePlus’s page and any updates that the company make will appear in the timeline. In fact, social network offer less free stuff for businesses and start charging for it. For example, Facebook, Twitter, Youtube, Wechat, Line, What’s app, and Instagram.

Long-term Growth Strategy

The optimistic scenario is that OnePlus is going to develop into a company selling not just smartphones, but digital lifestyle solutions. The way to shape the market for the company is to create a new business model in which the device itself is as cheap as possible and users are able to decide what they are really need. For example, somebody wants to change wallpaper themes, download useful applications from OnePlus’ store, add customized cases and unique services, they can pay extra for it. With this kind of business model in the future OnePlus might be able to shift the industry in a direction where not necessarily the electric industry will be based on services rather than manufacturing. According to the pessimistic scenario, OnePlus is not going to able to keep the pace with the fast-changing environment and cannot come up with new ideas shaping the future. In this case, OnePlus should do whatever they are the best at the moment and what their core competences are. This means creating a highend smartphone every year for a price, which is significantly lower than their competitors’ and create profit by selling add-ons.