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Analysis of Motorola's Personal Communications Segment

Term Paper (Advanced seminar) 2004 34 Pages

Business economics - Business Management, Corporate Governance

Excerpt

Inhaltsverzeichnis

1. Introduction

2. An analysis of the relevant business environment of Motorola and its major competitors
2.1 Industry Environment-PEST-Analysis
2.2 Key factors for success and market structure
2.3 Position of major competitors
2.3.1 Nokia
2.3.2 Samsung Electronics
2.3.3 Siemens
2.4 Opportunities and Threats
2.4.1 Opportunities
2.4.2 Threats

3.1 The value chain analysis
3.1.1 Marketing
3.1.2 Production
3.1.3 Research and Development
3.1.4 Financial Resources
3.1.5 Human Resources
3.2 Strengths and Weaknesses
3.2.1 Strengths
3.2.2 Weaknesses

4. Assessment of Motorola’s performance in terms of efficiency, effectiveness and return to investors
4.1 The Balanced Scorecard
4.1.1 The customer perspective
4.1.2 The internal business process perspective
4.1.3 The learning and growth perspective
4.1.4 The financial perspective

5. A review of the options available to Motorola’s PCS and recommendations for future strategic direction
5.1 Analysis of strategic options
5.1.1 Ansoff’s options matrix
Existing Products
New Products
Market Penetration
Product Development
New
5.2 Recommendations for future strategies

6. Recommendations for structures, systems and policies to implement these strategies successfully

7.1 PEST-Analysis
7.2 Porter’s value chain analysis
7.3 The Balanced Scorecard
7.4 Ansoff’s market options matrix

8. Conclusion
Appendix A
Appendix B
Appendix C
Motorola
Nokia
Appendix D
Bibliography:
Internet sources:

1. Introduction

In 1928 Paul Galvin founded the company as the “Galvin Manufacturing Corporation” in Chicago, Illinois. The first product launch, called a “battery eliminator” allowed radio consumers to operate directly from household current instead of the batteries supplied with earlier models. But the company’s name was soon displaced through its main product, “Motorola” radios, figurehead that conjures up the historical symbiosis of a mobile radio and a car (Agar, 2003). Under the leadership of Paul Galvin, Motorola became leader in military, space and commercial communications, grew as a manufacturer of consumer electronics and built its first semiconductor facility. The company founder died in 1959.

As his successor Robert W. Galvin, P. Galvin’s son, was introduced. Within his leadership Motorola expanded into the international markets, and their object of view was shifted away from consumer electronics. As a fact of this challenge, the colour-TV receiver business was sold in the mid 70’s, so that they could concentrate their abilities on high-technology markets in commercial, industrial and government fields. With the 80’s ending, Motorola had become the doyen supplier of cellular phones. (www.motorola.com)

You could say, that Motorola, Inc. is a global provider of wireless, broadband, automotive communications technologies and embedded electronic products. Further on the company provides software-enhanced wireless telephone and messaging, two-way radio products and systems, as well as networking and Internet-access products, for consumers, network operators and commercial, government and industrial customers. Motorola also provides end-to-end systems for the delivery of interactive digital video, voice and high-speed data solutions for broadband operators, and embedded semiconductor solutions for customers in wireless communications, networking and transportation markets. In addition, the company offers integrated electronic systems for the automotive, telematics, industrial, telecommunications, computing and portable energy systems markets. The last reported count of employees was 88.000. (www.yahoo.com)

In most parts of my strategic analysis, I will focus on the Personal Communications Segment (PCS) of Motorola, the business group of Motorola’s cellular phones. Following Nokia, Motorola is the 2nd largest mobile phone producer worldwide.

2. An analysis of the relevant business environment of Motorola and its major competitors

2.1 Industry Environment-PEST-Analysis

Political Factors

At this juncture I will focus on the two major markets involving Motorola’s Personal Communications Segment – the United States and China.

A political factor influencing Motorola’s PCS is government regulation. The company’s products are subject to various Federal Communications Commission (FCC) regulations in the United States. The growth of the wireless industry may be affected if adequate frequencies are not allocated or, if new technologies are not developed to better utilize the frequencies currently allocated for such use. Industry growth may also be affected by the cost of the new licenses required to use frequencies and the related frequency relocation costs.

Recent policy changes in the USA may encourage deregulation of frequency allocation, allowing new wireless communications technologies to be developed. Such policy changes may spread to other countries, and the reduced barriers to entry for the development of new technologies may introduce new competition for Motorola. (www.motorola.com)

The telecom sector of China is one of the least liberalised in Asia and is relatively closed to foreign participation. One of the major aspects of China’s government is to provide the telecom-market not to be over supplied - which has a great effect on companies like Motorola or Nokia.

In order to stimulate consumer demand and sustain levels of private sector investment, the relaxation of controls and establishment of a clear regulatory framework is therefore increasingly unavoidable. Moreover, commitments made as part of China's pledge to join the World Trade Organization (WTO) in 2001 should engender significant revisions of the market, providing benefits for domestic and foreign interests alike. WTO reforms may take several years to filter through, while entrenched, conservative elements in the bureaucracy will continue to oppose any reforms that threaten to seriously undermine state control of a very highly lucrative industry. (www.worldmarketsanalysis.com)

Another factor that might influence the PCS of Motorola, in facts of negative implications for consumption and investment spending, might be the sill ongoing war in Iraq and its side effects. In detail you could look on several terrorist attacks, for example in Madrid (Spain) this year. There are no exact details available at that moment affecting consumer behaviour, but you could draw some conclusions from the fatal September 11, 2001. In the USA for example, a sustained shock to confidence had reduced growth by about 1% (www.imf.org).

Economic Factors

Demand for cellular phones depends on the state of the economies in which Motorola is selling its products. With the global recovery strengthening and broadening, the International Monetary Fund staff’s baseline forecast has been revised upward significantly, with global GDP growth in 2004 and 2005 now projected at about 4 1/2 percent. (www.imf.org)

As the USA and China are the most important markets for Motorola’s PCS this section will focus on these economies again.

A surge in consumption in the USA due to the short-term impact of tax cuts and mortgage refinancing has been shown by recent data, which suggests that global GDP growth has remained solid in early 2004. But the world’s economic recovery appears not in all regions in the same pace. To date, the upturn is most rapid in China and the United States.

In China the telecom revenues generated US$49.7bn in 2002, according to the Ministry of Information Industry. Key growth drivers were the immense potential market, economic growth and a population that is ready to adopt new technology. Weaknesses included purchasing power, a lack of regulatory clarity and a short-term phenomenon, such as the SARS outbreak. The GDP Growth in 2003 was estimated to be 9.1% according to 8% in 2002 and the inflation rate was expected to remain low, with 1.17% in 2003, a sign for a healthy up-growing economy.

(www.worldmarketanalysis.com)

In the USA, the telecom industry generated US$302bn revenues in 2001. The key growth drivers of the sector included a mobile workforce and high levels of foreign direct investment. Weaknesses included overcapacity, particularly in the long-haul market. The USA has been the economic pioneer for the world-recover again. Growth of real GDP in USA was 3.1% in 2003 and is expected to rise to 4.6% in 2004 and remaining high in 2005. Consumer prices in 2003 rose 2.3% and are estimated to remain stabile in 2004 and 2005. The unemployment rate rose from 5.8% in 2002 to 6.0% in 2003 and then is expected to fall to 5.5% in 2004 and 5.4% in 2005. (www.imf.org)

All in all these statistics generate a positive future outlook for these two economics, which should have a positive impact for the handset industry.

Social Factors

Advancing technology such as the Internet technology stimulated changes in the business environment. Mobility and convenience are the key arguments that today most consumers and business people consider mobile phones necessary for daily life. Mobile Phones have also become a fashion statement.

This fashion statement changed the manner of some people’s behaviour. Take for example Japan – in Japanese bookstores, the owner are sick and tired of female browsers who snap pictures of magazines with their camera-phones and want to put a stop to it. In Saudi Arabia, such phones are banned from the country altogether. (www.silicon.com)

But mobile phones are introduced in every part of our daily life. If you have a look on people driving with their cars through the streets you could hardly see anyone driving without a mobile phone in his/her hand. And if you take a look at the younger generation nowadays, they are talking or writing SMS (Short Message Service) to their friends living or staying next to them.

These handsets have become an important part in our daily life – and this is a great opportunity for mobile phone manufacturers to increase their output of cellular phones. And as it is a part of Motorola’s efforts to improve their brand, they are developing youth-driven brand partnerships in order to support a consumer-centric design philosophy and further to reinforce the brand strength generated by Motorola’s MOTO marketing activities. (www.motorola.com)

Technological Factors

New developments in the mobile phone industry are mobile phones, which are using the high-speed Internet technology called GPRS, (Global Packet Radio Service) the Bluetooth technology which enables short-range communication networks between consumer devices incorporating a Bluetooth interface, and the even more advanced 3G (3rd Generation) phones, which are expected to boost demand. (www.3g.co.uk).

The PCS of Motorola is focused on technology leadership and improving cost competitiveness. They are investing in the development of industry-leading GSM (Global System for Mobile Communications), CDMA (Code Division Multiple Access), iDEN®, and 3G UMTS products. Motorola is emphasising to win greater share of the market through blazing designs and more feature-rich phones, including phones with large colour displays and cameras.

Within the year 2003, Motorola has introduced the first handset with Windows Mobile™ operating systems from Microsoft. These advanced handsets feature Microsoft Pocket Outlook, Pocket Internet Explorer, Windows Media Player and other software applications familiar to users of Microsoft’s traditional computer software. Motorola has also introduced products that use Bluetooth® technology to support advanced wireless functions, including wireless headsets. (www.motorola.com)

2.2 Key factors for success and market structure

The general competitive factors and thus the key factors for success in the mobile phone industry include the timely development of new products, the brand awareness, the technology offered, the price, the product performance and the features of the product. Further on the design, the quality, the delivery and warranty, the quality and availability of service are as well important as the company image and the relationship with key customers. (Motorola Form, 10-K, 2004)

The market structure for mobile phones could be described as an oligopoly market. An oligopoly market is dominated through a few large companies.

According to the Gartner Group (www.gartner.com), the top five competitors generated a market share of about 73.2% of the overall market in 2003.

Abbildung in dieser Leseprobe nicht enthalten Source: Gartner Group

After a downturn in the mobile phone market in 2001, the market turned into a slightly grow of about 6% in 2002, following a dramatic upturn of about 20.3% in sales in 2003, reaching 510 millions of sold mobile phones. Even the numbers of wireless subscribers have become expanding enormous. With the introduction of 1G (1st Generation), the mobile market showed nearly 20 million subscribers in 1990, (www.galaxyphones.co.uk) according to 910.4 million mobile phone subscribers worldwide (www.tungmobiles.com) in 2003. (See Appendix A)

Comparing to studies of Strategic Analytics, Inc., the replacement market of mobile phones is becoming more and more relevant. This relevance will lead the replacement segment as the main driver for growth in the mobile phone sector within the next years. Comparing to 50% of sales in 2001, the replacement market is expected to be 80% in 2006. (See Appendix B)

2.3 Position of major competitors

2.3.1 Nokia

Nokia is the world's largest mobile phone manufacturer. For the fiscal year ended in December 2003, the company generated revenues of $37,031 million.

Along with mobile phones, the company's other global operations include TV set-top boxes and Internet software and services. Furthermore, it engages in home networking and cell phone displays for the global market. Nokia is headquartered in Espoo, Finland. (www.hoovers.com)

Nokia Mobile Phones (NMP) is one and its largest business group of the company. Nokia is the clear market leader in the mobile phone industry. NMP is No.1 in Europe, its largest market. In China, the fastest growing market, Nokia is No.2 and has been losing market share recently. In terms of standards, Nokia has a very strong position in GSM, and the company also addressed its weak position in CDMA products already by launching several new CDMA phones to gain market share. By focusing more on CDMA products, Nokia automatically addresses its problems in China, the USA and Japan, as these markets are CDMA dominated.

In the 1st quarter of 2004 the mobile phones net sales decreased 15% to EUR 4.3 billion (EUR 5.0 billion) with EUR 1.1 billion operating profit (EUR 1.4 billion) and operating margin of 25.6% (29.0%). (www.nokia.com)

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Details

Pages
34
Year
2004
ISBN (eBook)
9783638295314
File size
650 KB
Language
English
Catalog Number
v27493
Institution / College
University of Bradford – School of Management
Grade
1,7 (A-)
Tags
Motorola Applied Strategic Management

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Title: Analysis of Motorola's Personal Communications Segment