Strategy Development and Initiatives

1 Strategy Development and Initiatives Introduction Motorola has for far too long remained the global leader in the manufacture of communication devices since its inception in 1928. One of the greatest foundations of Motorola’s success was attributable to its vigorous research and development in the field of communication. Indeed, the company merged with almost anyone that mattered in the industry.

These efforts saw Motorola remain patched up the manufacturers’ list by the time competition in the mobile phone industry hit a crescendo in the 1990’s. However, the dynamic nature of the technological together with other contributing factors has seen the competition loose out on its long term outstanding market leadership. This paper seeks to carry out an explorative analysis of the Motorola Company, studying its overall business strategy and establishing weaknesses which have so far seen the company perform dismally.

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2 Current strategy at Motorola Owing to the poor returns by the company, the immediate strategy that Motorola is pursuing is to spin off or separate its Mobile Devices division. This would allow the division to stand alone and remain independent from the other two divisions. The management anticipates that this action will allow a more focused attention and also improve the overall flexibility of the company. As competition in the communication sector and generally in the technological world intensifies, consumers have increasingly become aware of what they want and seek to do business with companies that promise to address these objectives. As such, Motorola has put in effort to try and understand consumers and their specific wants. In this regard, plans are underway to try and execute product upgrade cycle so as to constantly meet the current consumer expectations.

The period between 2006 and today has seen the company progressively registering losses in its annual operations. The company intends to cut down on its operations costs by reducing its workforce by 3,000 workers. The mobile device division which has been worst hit will contribute the hugest chunk of 2000 workers. The European market which has registered very poor returns will see much of the company’s emphasis reduced and instead, attention focused on other promising markets.

Technologically, Motorola seeks to explore more on the capability of WiMax as the wireless technology of the next generation. Already, heavy investments by the company on this innovation have been undertaken where trial networks were done in 2008 in Vietnam. As consumers desire to have fast networks grow, Motorola’s strategy banks on the hope of exploiting this area and benefiting out of it. Additionally, the company has limited the number of operating systems it supports currently to only 2 following the adoption of its P2K legacy

3 concerning low-end devices. The Android operating system which shall be supported by Motorola devices features applications for social networking, like Facebook and MySpace.

Consumer trends are expected to shift along these lines particularly for users between 16 and 34 years old, comprising about 24 percent of the total market.

Strategic Factor Analysis SWOT analysis Strengths Motorola has a wide portfolio of communication devices which range from household electronics, mobile telephones, car radios, two-way radio, as well as wireless broadband systems together with private networks for use both by government and enterprises. These shows the extent at which the company has invested heavily in technology. Most of Motorola’s competitors in this industry do not boast of such an elaborate portfolio. This, coupled with its pioneer research and establishment back in the days, gives Motorola an edge over a majority of its competitors. Most mobile communication devices manufacturers have only ventured into the market while Motorola has existed for 84 years (Sodhi & Tang, 2008).

Motorola also boasts of some of the largest single corporate consumers, including Sprint Nextel, AT&T, China Mobile, American Movil and Verizon. These are huge companies whose total revenue is immense to enable Motorola gain a strong market position. Indeed, Motorola’s overall sales constitute 42 percent from sales to these companies. One of the strongest ability of Motorola is in its research and development efficiency which has seen it become a pioneer in almost all new innovations. For instance, Motorola’s entry into the digital arena saw it manufacture the first prototype of a first cellular phone. The Integrated Digital Enhanced Network radio, abbreviated as iDEN was also pioneered by Motorola following its successful

4 combination of paging, data, cellular, as well as voice dispatch and communications in a single handset and radio network. The First General Packet Radio Packet, GPRS mobile telephone network was also developed by Motorola in 2000 in collaboration with Cisco Systems.

Other significant innovations by the company that have also pioneered the technological communication world include the introduction of wireless modem for computer networking and a mobile PDA handset that incorporated Java and Linux technologies. The first WiMAX based mobile hand-offs were also manufactured by Motorola. The RAZR model and its exemplary performance that saw a record 750,000 models sold in 90 days underlines the reasons why competitors and customers alike regard Motorola with very high esteem (Rudzki, 1995).

Weaknesses Motorola’s main undoing has been its limited concentration on the various market categories particularly in the mobile telecommunication sector. While Nokia released a total of 26 different phones for the different market categories, Motorola did very little in that same aspect. The company has also not been active in the development of premium products so as to target the high demand currently being witnessed in the ever growing smartphone sector. Other manufacturers, such as Samsung, have been able to successfully exploit this area emerging the best in the USA, France, and Russia.

Although the company has pioneered in so many technological innovations in the communication front, Motorola has of late failed to produce products that directly satisfy customer demands. Rather than produce more specific handsets into the market, the phones had only focused on innovation advance while companies like Apple Inc. spend a lot of fortune in studying consumer trends and demand. This weakness has seen consumers shift their loyalty to other companies that seem to be keen on customisation. Eventually, the mobile

5 telecommunications device segment at Motorola has turned out to be of little value. There is little creation of market awareness of brands by the company (Barney, 2005).

Opportunities As the world recovers from a financial crunch that has seen multiple economies crippled, there is hope that Motorola could also emerge and claim its lost market leadership. Many individuals are bound to rediscover their purchasing power which has been quite low for the last three to four years. Governments, which form part of Motorola’s target markets, have been worst hit by the credit crunch and therefore the easing up offers a ray of hope.

Technologically, Motorola is set to gain from its immense investment in the WiMax technology. The capability of WiMax to support super fast data transmission speeds makes it the probable technology of choice in the very near future. The company is already ahead of the pack on this technology following its network trials that were conducted in Vietnam in November 2008. The product upgrade cycle that the company has been so keen on pursuing is likely to boost its re-emergence. This means some of the substantial innovations that were pioneered into the market by the firm are going to be reinvented, only that this time, they will be fashioned to reflect on the specific market desires and demand.

The social media scene is similarly more likely to boost the chances of Motorola regaining its strong market position. The company is working closely with Android, one of the biggest global manufacturers of operating systems, to embed the same on its mobile devices.

With the rising popularity in the use of social sites, such as Facebook, twitter, MySpace, and You Tube among many others, Motorola is set to increase its market presence. The Android operating system supports all the leading social websites. Apart from Android, the brand’s devices also support Windows Mobile operating system.

6 As a way of sustaining more growth in the market, Motorola should seek to invent portable music and video players which are in high demand, particularly among the youth.

Companies like Apple Inc. and Nokia have timely exploited this front and that has been part of the reason as to why their market growth is phenomenal. Additionally, Motorola should develop its own operating systems that will more accurately match the specifications of its customers.

Already, Nokia and Apple have succeeded in developing their own operating systems and so far, the market performance of these two brands has been exceptional (Ng, 1993).

Threats The highly dynamic nature of the information technology continues to pose a huge threat to Motorola’s re-emergence plans. Researching on this front is very expensive yet some innovations fail to withstand the market demand. In such instances, the company stands a high risk of loosing out on all the resources utilised during the entire research period.

The global credit crisis that has been witnessed since 2008 is still persisting and is more likely to injure the company’s future prospects. Most economies of the world, including some established ones in Europe, have extensively been affected by it. Many potential consumers of mobile telephones are currently grappling with the aftermath of the crisis. This means the market potential has shrunk a great deal and can hardly reach its previous levels. The issue of suppliers of the company also remain a challenge to the company’s future plans. The over reliance on a single supplier means the company’s capabilities are also limited. Supply shortages are likely to cause delays in production which will only mean customers will have to wait for longer periods as they await their preferred brands. The supplier is also faced with the ongoing economic crisis which could hamper his performance (Dyson, 2000).

7 The extensive performance of Motorola’s competitors in the field of research and development is placing the company at a more precarious position. Nokia, for instance, was able to release 26 different models of mobile phones in one year in 2008. These models catered for almost all the market segments of individual consumers that exist. On the other hand, Samsung Mobile has also initiated and developed various devices, such as portable music and video players, all of which form part of an emerging market that targets the youthful populations (Ghemawat, 2002).

Value Added Systems The integration of numerous information technology systems capabilities has been part of Motorola’s traditional marketing strategy. This is aimed at building competitive advantage as well as exploring new areas that have remained unexploited in the past. In 1946, the company entered into a pact with Bell Telephone Company to introduce the radio-telephone services for cars within Chicago. In the 1990’s, Motorola intended to venture into the digital sector by acquiring General Instrument Corporation which, at the time, developed all-digital highdefinition television, also known as the HDTV technical standard. Out of the merger, the first digital mobile phone was produced. Benefits of the merger continued to bear fruits as the company yet again pioneered in the manufacture of Integrated Digital Enhanced Network digital radio, known in short as iDEN. This value added system integrated the capabilities of paging data, mobile telephone communications, as well as voice dispatch, all in a single handset and radio network.

Further integration of the value added systems saw the company explore the possibilities of inventing a General Packet Radio Service mobile phone network. This project became successful following cooperation between Motorola and Cisco Systems. The same working

8 relation also enabled Motorola to produce wireless cable modem, which was the first of its kind.

This gadget allowed the networking of computers without a physical tether or connection.

Additionally, the collaboration saw the invention of a mobile telephone PDA handset that integrated both Java and Linux technology. Still in the value addition area, Motorola introduced the WiMAX mobile hand-offs which had super-fast processing speeds as well as clear reception.

The RAZR performance in the market was as a result of the culmination of numerous value addition services that were employed by Motorola. The model was able to sell impressively, hitting the 750,000 mark in only 90 days. The performance by the RAZR model alone put Motorola’s market share at 16 per cent globally.

Competitor Analysis One reason why Motorola has not been able to continue with its previous market dominance is of the existence of the competitors in the same industry. Making reference to Porter’s five forces, this section analyses the competitors; Supplier power The main disadvantage for Motorola has been its limited choice when it comes to the potential and ability of its suppliers. Some raw materials used by the company are only sourced from a single supplier, subjecting Motorola to a more critical condition. This has led to occasional delays and shortages in the market which translates to lost opportunities. The suppliers are also comparatively unstable financially owing to the fact that Motorola has been in deep worries following the ongoing global financial crisis. Although the company also keeps other suppliers, only one supplies the essential materials of production.

The cost of Motorola switching from its current supplier of the most basic material seems difficult and exorbitant. The materials are in short supply and many suppliers seem to have

9 shunned away owing to the costs involved or difficulty of engaging in business. Thus, the company has been compelled by circumstances to stick with the same supplier even as business prospects continue to suffer due to delays and failed deliveries. The single supplier with ability to supply Motorola with the essential materials is powerful and could easily drive the costs of production up. In this regard, Motorola is in a weaker position as its costs of production remain largely tied up to the decisions of the supplier (Brandenburger, 2005).

Buyer power Motorola mainly depends on quite a number of corporate clients who, together, constitute a huge chunk of the company’s revenues. Some of the corporate buyers include AT&T, Verizion, American Movil, as well as China Mobile and Sprint Nextel. In the Mobile Device segment alone, revenue contribution from these five leading consumers alone added up to 42 percent. The remainder of the market is made up of individual buyers who are all over the world.

Any decision by Motorola to switch suppliers could easily harm business as it will be passed over to the consumers. The five powerful buyers of the company, AT&T, Verizion, China Mobile, American Movil, and Sprint Nextel, together can easily deny Motorola the ability to set prices or choice of switching between suppliers. This is because their revenue is a lot and any action by the manufacturer that does not consider their welfare could easily cause a boycott, further damaging their precarious position (Dess & Davis, 1984).

Competitive rivalry The mobile telephone manufacturing industry remains to be highly competitive in the global market. Several established players exist and include Nokia, Samsung Mobile, Apple Inc., LG, Research in Motion, RIM, as well as HELIO Inc. and other small industry players in the mobile internet devices manufacture, such as BenQ, Asus, HTC, Quanta, and Inventec. These

10 companies are highly competitive as they produce high quality products with great features that are customised. These great capabilities have seen Motorola dislodged as the world’s number one mobile phone manufacturer while other companies like Samsung Mobile, LG, and Apple Inc. maintain very close market share (Song, Calantone & Benedetto, 2002).

The overall market attractiveness has further been enhanced by the level of innovation that is witnessed. All the manufacturers are trying to out wit each other through exploration of new areas and features that directly target customer desires and specifications. Highly differentiated products have been released to the market, including smartphones, PDA’s, iPads, iPhones, iPods, as well as highly effective operating systems that support their functionalities.

The competitive state of the mobile telephone industry is set to continue to even greater heights mainly due to the dynamic nature of the information technology. In other words, the more innovations in information technology are realised, the greater the chances of innovations being integrated in mobile devices (Miller, 1988).

Threat of substitution Mobile telephones that are manufactured for a given range or market are highly substitutable. In this regard, Motorola customers can easily be persuaded to switch brands, particularly where such factors as price variation or quality issues are involved. Given the Motorola situation with its major supplier, its consumers could easily change manufacturers in case upwards price adjustments are effected. However, the easiness with which customers can change brands and manufacturers also reduces significantly the power of suppliers. If Motorola lost its consumers because of adjusting prices, the company will loose business and eventually the supplier will also lack market. Thus, the supplier and Motorola must maintain mutual understanding in order to continue enjoying on business opportunities (Powell, 1996).

11 Threat of new entry Mobile telephone manufacture industry is strongly guarded and very few entrants can manage to enter. Although the industry’s profitability range is very high, all the players have collectively fortified it through the extensive investment which can hardly be penetrated by a new entrant. All the brands are patented and the manufacturers enjoy huge profitability because of the advantage of economies of scale. In other words, mass production of devices enables the players to mitigate on the limitations of costs incurred. Any new entrant targeting to enter the industry will therefore be expected to raise extensive capital in order to be able to break even.

Government policies also offer a barrier to entry into the market. Most governments require that mobile gadgets be certified as safe for both the environment and to the consumers.

Achieving some of these certifications is highly costly and it would force the manufacturers to pass the additional costs to consumers. In this regard, the brands will be less marketable as other manufacturers are able to access the same market at comparatively cheaper charges (Argyres & McGahan, 2005).

Strategic Leadership and Entrepreneurialism Only strategic leadership would be able to steer Motorola back to its previous success. As part of the strategic leadership, the management should ensure the following; Prepare minds The continued reminder and knowledge of the fact Motorola is currently underperforming can easily affect the psychological set up of workers. The leadership must, therefore, begin by preparing the minds of workers. Workers must be reminded of where their focus and attention should be so that they may concurrently help in conceptualising and sustaining the strategy forward. Numerous ways of thinking should be encouraged because

12 individuals in their own capacities could make positive suggestions that have the ability to ensure growth. Dialogue from management is especially helpful at this juncture so as to enable the entire team move together as one. It would also help the management team to integrate perfectly the human and analytical dimensions in order to attain the desired objectives (Elenkov, Judge & Wright, 2005).

Incorporating human and analytical dimensions The purpose of this activity is to derive a winning combination that would perfectly help in goal achievement. The managers should determine the skills that each worker posses and try to fit them in specific areas where their output would be more productive to the company. The leadership should begin by ensuring all technical words that have been used in the strategy are standardised such that workers may all understand what is required and expected of them.

The top level management at Motorola should also be strengthened and broadened. Each manager should know exactly what he or she should do and the extent of their jurisdictions also demarcated properly. A larger group of managers is particularly important especially given Motorola’s current state because it will incredibly energise the entire firm. The large team actually forms the basis of forming partnerships with the middle and upper levels of the organisation for a more elaborate and consolidated team (Maak, 2007).

Establishing strategy support teams All the group of workers that lie below the company manager would require a lot of support to ensure the strategy works out. This is because the workers could not be having the needed understanding as far as overall execution of strategy is concerned. A team that is very much aware of the mobile telephone industry behaviour and trends should e appointed in order to offer realistic directions. Their constant touch with the actual field situation and in-house

13 environment will help to achieve harmony which is much needed to secure the growth needed (Baum & Wally, 2003).

Future of Motorola It is possible for Motorola to regain its market leadership and out do all its competitors.

However, the company strategy for growth must be designed to directly address this concern.

Any continued delays in new strategy acquisition and integration would continue to place it at a dangerous position. The mobile telephone manufacturing industry is an expensive sector which can only be sustained by high revenue volumes. The period between 2007, when the company began posting losses, and now is long and the damage has already been suffered. It will require the company additional funds in order to be able to devise a new and working strategy that would compete with other major players, like Nokia, Samsung Mobile, LG, and Apple Inc. among many others.

Possible issues that face or which could face Motorola in its survival quest There are possibilities that Motorola could loose its highest ranked technical personnel as the company continues with its operations at these difficult times. The industry is already highly competitive and every player is seeking the best human resource to enable better performance.

The highly ranked technical team members at Motorola are likely to be lured away by competitors. Alternatively, if the company continues with its grim condition, the technical staff could easily loose hope and opt out on their own as they seek to build their future career.

Motorola could also be acquired by another mobile telephone manufacturer in a merger deal in order to salvage its fortune. If the turn around fails to record the desired growth results, then the shareholders could loose hope and decide to sell it to other willing buyers. Most

14 companies doing well in the market would not afford to snub such an offer especially given that the company has been in operations for so long and has a lot of assets.

Conclusion Motorola has witnessed a poor turn of events that has seen the company loose out on its market leadership to another company. Although the company pioneered a majority of innovations and inventions in the mobile telephone industry, events have turned around and the company has remained grappling with annual losses for the last 4 years in a row. Among the factors that occasioned the poor performance include stiff competition in the industry, the highly dynamic nature of the information technology, as a well as a poor strategy that gave little attention to customer desires and expectations. Motorola’s position remains precarious because of the power of the suppliers, as well as that of its corporate consumers who are responsible for 42 percent of the company’s total revenue. However, management’s decision to introduce a strategy that is more customer-centred could see the company’s re-emergence.

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