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2015 Global Smart TV Competitive Strategy Innovation and Leadership Award

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Hisense is the proud winner of the 2015 Global Smart TV Competitive Strategy Innovation and Leadership Award

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2015 Global Smart TV Competitive Strategy Innovation and Leadership Award

  1. 1. 2015 2015 Global Smart TV Competitive Strategy Innovation and Leadership Award
  2. 2. BEST PRACTICES RESEARCH 2 © Frost & Sullivan 2015 "We Accelerate Growth" Contents Background and Company Performance ...................................................................... 3  Industry Challenges............................................................................................ 3  Strategy Innovation and Customer Impact............................................................. 3  Conclusion ........................................................................................................ 5  Significance of Competitive Strategy Innovation and Leadership ..................................... 7  Understanding Competitive Strategy Innovation and Leadership ..................................... 7  Key Benchmarking Criteria .................................................................................. 8  Best Practice Award Analysis for Hisense ..................................................................... 8  Decision Support Scorecard ................................................................................. 8  Strategy Innovation ........................................................................................... 9  Customer Impact ............................................................................................... 9  Decision Support Matrix .................................................................................... 10  The Intersection between 360-Degree Research and Best Practices Awards.................... 11  Research Methodology ...................................................................................... 11  Best Practices Recognition: 10 Steps to Researching, Identifying, and Recognizing Best Practices............................................................................................................... 12  About Frost & Sullivan ............................................................................................ 13 
  3. 3. BEST PRACTICES RESEARCH 3 © Frost & Sullivan 2015 "We Accelerate Growth" Background and Company Performance Industry Challenges Frost & Sullivan observes that while the total Smart TV market has reached a certain level of maturity, new technological advances and declining prices will keep consumers investing in the newest generation of products. Smart TVs are rapidly joining the mainstream as manufacturers refine their products to add new features and to make them easier to use. Further, Ultra HD is seemingly set to become the new standard resolution for virtually all large screen TVs in the next 5 years. As manufacturing and supply chain efficiencies improve further, UHD TVs will witness penetration in the smaller screen sizes as well. The erosion of prices of Smart TVs has fuelled the growth of the overall industry. However, this growth has come at the cost of dipping profit margins for manufacturers. Smart TV displays consist mainly of LCD, plasma and LED technologies. Overall, LCD technology currently commands a greater share of shipments over plasma displays and is poised to remain the dominant flat panel display technology over the next few years. LCD and plasma display screens are selling for much less than they were a decade ago. The prices of large format Smart TVs in particular have been steadily reducing – at the rate of 4-5% annually - as supply side production efficiencies drive prices down further. Competition and technology advances will further drive the cost of Smart TVs lower (along with profit margins) posing a significant challenge for vendors in this space. Other restraints to the Smart TV market are the five to eight year hardware lifespan, competition from alternative technologies, and the short-life cycle of a software-based product. Vendors are expected to introduce remote software updates and differentiating features to address direct and indirect competition. Depending on how vendors address the price and life-span issue of a software-based TV, it could play an important role in the connected home-experience, rendering devices such as Blu-rays or maybe even STBs irrelevant. However, at present, the majority of customers purchasing Smart TVs are utilizing very few of their smart capabilities. Even leading vendors have found it challenging to transform Smart TVs into app portals (like tablets and smartphones are currently) and generate recurring revenue through that means. In that context, this award is highly valuable as it is based on research across multiple segments and highlights the various factors that have contributed to Hisense’s success in gaining market share over competitors.
  4. 4. BEST PRACTICES RESEARCH 4 © Frost & Sullivan 2015 "We Accelerate Growth" Strategy Innovation and Customer Impact Strategy Effectiveness and Execution This factor is very significant for this comparison as it highlights the key steps taken by the nominees to increase revenue and as a consequence, market share. A carefully devised growth strategy is at the core of a company’s success, accompanied by its faithful execution. In a market with limited number of turnkey solution providers, many customers prefer Hisense due to its complete product portfolio, value for price and global support. Hisense has managed to fend away fierce competition from the global vendors like Samsung and LG to maintain its leadership position in China for the last 3-4 years. Currently, China is the fastest growing market for Smart TVs in the world where Hisense is the market leader with over 15% share. It is also a key global player (among the top 5) and is already overtaking traditional Japanese powerhouses like Sony and Panasonic. The company has clear ambitions to expand beyond China and has demonstrated its willingness to invest accordingly in R&D, global talent recruitment, synergistic partnerships and strategic acquisitions in the last 2 years. In this period, Hisense has acquired the Flextronics business in Canada, Archcom Chip in the USA, Huaya TV Chip, and Taiwan Laser TV Development. It has also absorbed key technology personnel from North America, Japan and South Korea into its growing R&D team. Most importantly, the company announced in 2015 that it is purchasing all equity and assets of Sharp's TV factory in Mexico for $23.7 million with rights to use the "Sharp" brand name and all its channel resources in every market in the Americas. Sharp, a pioneer in the LCD TV business, has been an iconic brand in this space but struggling to keep up with competition from the likes Hisense in recent years. The acquisition will help Hisense become a top tier challenger in the Americas, and is a serious show of intent by the company to grab a bigger piece of the consumer market in the region. Being a reputed manufacturer in the flat panel industry since early 2000s, Hisense is ideally positioned to capitalize on potential growth from emerging 4K and OLED TV technologies. More importantly, it is placing itself as the first choice for consumers in developed markets looking for an established Smart TV brand without a hefty premium. Hisense reported overseas sales revenue of nearly $2.6 billion in 2014 for its overall appliance business and is now actively selling in over 130 countries globally. These strategic advances are likely to spur the company to even better growth in the next 4-5 years. Competitive Differentiation The Smart TV space is evolving constantly and manufacturers need to keep abreast of these changes in customer preferences to retain their competitiveness. Unlike the tier 2 and tier 3 vendors, Hisense possesses adequate infrastructure, financial resources, and global distribution networks to provide the hardware, parts, and service for customers in every region. This offers Hisense the opportunity to target customers of all tiers, regardless of their budgetary constraints. The products and services offered by Hisense fall under the following categories: 1) The entry level / value-priced LCD/LED TVs and 3D TVs 2) Smart
  5. 5. BEST PRACTICES RESEARCH 5 © Frost & Sullivan 2015 "We Accelerate Growth" TVs ranging from 16inch-75inches 3) High-end LCD/LED TVs andindustry-leading UltraHD 4K TVs, ULED TVs and Curved TVs with superior picture quality, uniform brightness, energy- efficiency, narrow bezels, eco-friendly, ultra-slim etc. From a consumer perspective, the TV is becoming the central component bringing together the multiple screens currently present in their homes. The sharing of content between TVs and portable devices with Wi-Fi, Bluetooth, NFC is exploding alongside the parallel usage of an interactive second screen while watching TV. Hisense has been at the center of this transition driving it through advances in OS and streaming technology. Its over-100 strong US R&D team has developed Android OS-powered Smart TVs that can deliver broadcast content as well as streaming video effortlessly. It has also differentiated itself from competitors by partnering with streaming media giant Roku in 2014 and producing a line of Smart TVs that have Roku support built-in. It also enhanced its profile at CES 2015 by showing off its Vidaa Max product, a 100-inch laser “cinema TV” projector. In late 2015, Hisense launched its latest innovation – the 4K ULED H10 Series Curved 65-inch Smart TV – which features a powerful CPU and offers great picture quality and streaming capabilities. Price/Performance Value Hisense products offer the ideal mix of price and value in the market. For instance, the company has announced a new line of 4K TVs in 2015 (the H7 Series) which are priced under $600. These TVs sport a 3840 x 2160 resolution, offer 4K up-conversion and are HDCP 2.2 compliant. Other features include dual-band Wi-Fi, one-touch hot keys for launching On-Demand content, and Total Technology from dbx-tv sound, which boosts the TVs audio for a more immersive listening experience. Further, the model is a “Netflix Recommended TV”, which assures a great user experience while streaming HD content. The company has partnered with Wal-mart to launch it exclusively via the retailer. Additionally, the company’s ULED Smart TVs are backed by a four-year warranty for parts and labor and in-home service—which is (on average) three years longer than almost all other TV vendors offer. Hisense has also traditionally developed and maintained strong working partnerships with the reseller and distributor community that gives it a definite competitive edge. Brand Equity Hisense, which began as a radio factory in China in 1969, has gradually evolved over the years to become a global conglomerate with over 65,000 global employees. With operations in more than 130 countries, Hisense also has R&D centers in Qingdao, Shenzhen, Shunde and Beijing, as well as in Suwanee and Europe. Its non-Chinese manufacturing operations are in South Africa, Algeria and Egypt, with sales offices in the United States, Europe, Australia, the Middle East and Southeast Asia. By investing heavily in R&D (8 percent of its $18 billion in revenue) and developing cutting-edge innovative technology, the company has broken the stereotype of being just another Chinese vendor. Hisense has been increasing its profile across the globe through various marketing strategies - it sponsors an Australian Open tennis arena and a pro soccer team in
  6. 6. BEST PRACTICES RESEARCH 6 © Frost & Sullivan 2015 "We Accelerate Growth" Germany. The company has struck exclusive deals with major retailers like Wal-mart, Best Buy, Costco and Sam’s Club. It also took over prestigious real estate at the 2015 Consumer Electronics Show in Las Vegas to show off its latest products. The acquisition of the iconic Sharp brand name in the USA will further solidify the company’s presence in the market. Conclusion Hisense is a leading innovator in the highly competitive Smart TVs market. A carefully devised growth strategy is at the core of a company’s success, resulting in a year-on-year growth rate that’s much higher than the industry overall. This is a direct consequence of its ability to bring “game changing” technology to its Smart TVs and its continuing efforts for vertical and global expansion. In a challenging global economic climate faced with diminishing profit margins and lowered consumer demand, Hisense has consistently continued to thrive due to its superior product line strategy. In recognition of its strong product offerings, aggressive expansion strategies, global client base and continued investment in research and development, Frost and Sullivan recognizes Hisense with the 2015 Global Competitive Strategy and Innovation Leadership Award in Smart TVs.
  7. 7. BEST PRACTICES RESEARCH 7 © Frost & Sullivan 2015 "We Accelerate Growth" Significance of Competitive Strategy Innovation and Leadership Any successful approach to achieving top-line growth must (1) take into account what competitors are, and are not, doing; (2) meet customer demand with a comprehensive, value-driven product or service portfolio; and (3) establish a brand that resonates deeply with customers and stands apart from other providers. Companies must succeed at these three things—brand, demand, and positioning—to achieve best-practice levels in competitive strategy. Understanding Competitive Strategy Innovation and Leadership As discussed above, driving demand, brand strength, and competitive differentiation all play a critical role in delivering unique value to customers. This three-fold focus, however,
  8. 8. BEST PRACTICES RESEARCH 8 © Frost & Sullivan 2015 "We Accelerate Growth" must ideally be complemented by an equally rigorous focus on strategy innovation and customer impact. Key Benchmarking Criteria For the Competitive Strategy Innovation and Leadership Award, Frost & Sullivan analysts independently evaluated two key factors—Strategy Innovation and Customer Impact— according to the criteria identified below. Strategy Innovation Criterion 1: Strategy Effectiveness Criterion 2: Strategy Execution Criterion 3: Competitive Differentiation Criterion 4: Executive Team Alignment Criterion 5: Stakeholder Integration Customer Impact Criterion 1: Price/Performance Value Criterion 2: Customer Purchase Experience Criterion 3: Customer Ownership Experience Criterion 4: Customer Service Experience Criterion 5: Brand Equity Best Practice Award Analysis for Hisense Decision Support Scorecard To support its evaluation of best practices across multiple business performance categories, Frost & Sullivan employs a customized Decision Support Scorecard. This tool allows our research and consulting teams to objectively analyze performance, according to the key benchmarking criteria listed in the previous section, and to assign ratings on that basis. The tool follows a 10-point scale that allows for nuances in performance evaluation; ratings guidelines are illustrated below. RATINGS GUIDELINES The Decision Support Scorecard is organized by Strategy Innovation and Customer Impact (i.e., the overarching categories for all 10 benchmarking criteria; the definitions for each criteria are provided beneath the scorecard). The research team confirms the veracity of
  9. 9. BEST PRACTICES RESEARCH 9 © Frost & Sullivan 2015 "We Accelerate Growth" this weighted scorecard through sensitivity analysis, which confirms that small changes to the ratings for a specific criterion do not lead to a significant change in the overall relative rankings of the companies. The results of this analysis are shown below. To remain unbiased and to protect the interests of all organizations reviewed, we have chosen to refer to the other key players as Competitor 2 and Competitor 3. Measurement of 1–10 (1 = poor; 10 = excellent) Competitive Strategy Innovation and Leadership Strategy Innovation Customer Impact Average Rating Hisense 9 9 9 Competitor 2 8 7 7.5 Competitor 3 7 7 7 Strategy Innovation Criterion 1: Strategy Effectiveness Requirement: Strategy effectively balances short term performance needs with long-term aspirations and vision for the company Criterion 2: Strategy Execution Requirement: Adoption of best-in-class processes to support the efficient and consistent implementation of business strategy Criterion 3: Competitive Differentiation Requirement: Unique competitive advantages with regard to solution or product are clearly articulated and well accepted within the industry Criterion 4: Executive Team Alignment Requirement: The executive team is aligned on the organization’s mission, vision, strategy and execution Criterion 5: Stakeholder Integration Requirement: Strategy reflects the needs or circumstances of all industry stakeholders, including competitors, customers, investors, and employees Customer Impact Criterion 1: Price/Performance Value Requirement: Products or services offer the best value for the price, compared to similar offerings in the market Criterion 2: Customer Purchase Experience Requirement: Customers feel like they are buying the most optimal solution that addresses both their unique needs and their unique constraints
  10. 10. BEST PRACTICES RESEARCH 10 © Frost & Sullivan 2015 "We Accelerate Growth" Criterion 3: Customer Ownership Experience Requirement: Customers are proud to own the company’s product or service, and have a positive experience throughout the life of the product or service Criterion 4: Customer Service Experience Requirement: Customer service is accessible, fast, stress-free, and of high quality Criterion 5: Brand Equity Requirement: Customers have a positive view of the brand and exhibit high brand loyalty Decision Support Matrix Once all companies have been evaluated according to the Decision Support Scorecard, analysts can then position the candidates on the matrix shown below, enabling them to visualize which companies are truly breakthrough and which ones are not yet operating at best-in-class levels. High Low Low High CustomerImpact Strategy Innovation Hisense Competitor 2 Competitor 3
  11. 11. BEST PRACTICES RESEARCH 11 © Frost & Sullivan 2015 "We Accelerate Growth" The Intersection between 360-Degree Research and Best Practices Awards Research Methodology Frost & Sullivan’s 360-degree research methodology represents the analytical rigor of our research process. It offers a 360-degree-view of industry challenges, trends, and issues by integrating all 7 of Frost & Sullivan's research methodologies. Too often, companies make important growth decisions based on a narrow understanding of their environment, leading to errors of both omission and commission. Successful growth strategies are founded on a thorough understanding of market, technical, economic, financial, customer, best practices, and demographic analyses. The integration of these research disciplines into the 360-degree research methodology provides an evaluation platform for benchmarking industry players and for identifying those performing at best- in-class levels. 360-DEGREE RESEARCH: SEEING ORDER IN THE CHAOS Technology Obsolescence Disruptive Technologies New Applications CEO Demographics Needs and Perceptions Segmentation Buying Behavior Branding and Positioning Competitive Benchmarking Emerging Competition Competitive Strategy Capital Investments Availability of Capital Country Risk Economic Trends Crowd Sourcing Growth Strategies Career Development Growth Implementation Industry Evolution New Vertical Markets Industry Expansion Industry Convergence Emerging Technologies Smart Cities Sustainability New Business Cultures GeoPolitical Stability
  12. 12. BEST PRACTICES RESEARCH 12 © Frost & Sullivan 2015 "We Accelerate Growth" Best Practices Recognition: 10 Steps to Researching, Identifying, and Recognizing Best Practices Frost & Sullivan Awards follow a 10-step process to evaluate award candidates and assess their fit with select best practice criteria. The reputation and integrity of the Awards are based on close adherence to this process. STEP OBJECTIVE KEY ACTIVITIES OUTPUT 1 Monitor, target, and screen Identify award recipient candidates from around the globe  Conduct in-depth industry research  Identify emerging sectors  Scan multiple geographies Pipeline of candidates who potentially meet all best- practice criteria 2 Perform 360-degree research Perform comprehensive, 360-degree research on all candidates in the pipeline  Interview thought leaders and industry practitioners  Assess candidates’ fit with best-practice criteria  Rank all candidates Matrix positioning all candidates’ performance relative to one another 3 Invite thought leadership in best practices Perform in-depth examination of all candidates  Confirm best-practice criteria  Examine eligibility of all candidates  Identify any information gaps Detailed profiles of all ranked candidates 4 Initiate research director review Conduct an unbiased evaluation of all candidate profiles  Brainstorm ranking options  Invite multiple perspectives on candidates’ performance  Update candidate profiles Final prioritization of all eligible candidates and companion best-practice positioning paper 5 Assemble panel of industry experts Present findings to an expert panel of industry thought leaders  Share findings  Strengthen cases for candidate eligibility  Prioritize candidates Refined list of prioritized award candidates 6 Conduct global industry review Build consensus on award candidates’ eligibility  Hold global team meeting to review all candidates  Pressure-test fit with criteria  Confirm inclusion of all eligible candidates Final list of eligible award candidates, representing success stories worldwide 7 Perform quality check Develop official award consideration materials  Perform final performance benchmarking activities  Write nominations  Perform quality review High-quality, accurate, and creative presentation of nominees’ successes 8 Reconnect with panel of industry experts Finalize the selection of the best-practice award recipient  Review analysis with panel  Build consensus  Select winner Decision on which company performs best against all best-practice criteria 9 Communicate recognition Inform award recipient of award recognition  Present award to the CEO  Inspire the organization for continued success  Celebrate the recipient’s performance Announcement of award and plan for how recipient can use the award to enhance the brand 10 Take strategic action Upon licensing, company may share award news with stakeholders and customers  Coordinate media outreach  Design a marketing plan  Assess award’s role in future strategic planning Widespread awareness of recipient’s award status among investors, media personnel, and employees
  13. 13. BEST PRACTICES RESEARCH 13 © Frost & Sullivan 2015 "We Accelerate Growth" About Frost & Sullivan Frost & Sullivan, the Growth Partnership Company, enables clients to accelerate growth and achieve best in class positions in growth, innovation and leadership. The company's Growth Partnership Service provides the CEO and the CEO's Growth Team with disciplined research and best practice models to drive the generation, evaluation and implementation of powerful growth strategies. Frost & Sullivan leverages almost 50 years of experience in partnering with Global 1000 companies, emerging businesses and the investment community from 31 offices on six continents. To join our Growth Partnership, please visit http://www.frost.com.

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