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Motorola in China

Neda Nahid

Neda Nahid

on 29 December 2011

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Transcript of Motorola in China

Soheil Soleimani 1091200817
Arash Shakibaeian 1101600927
Industrial Analysis
The Industry:
Mobile Phone Industry

Porter’s 5 Forces :
Threat of New Entrants -
Low to Moderate
Porter's Five Forces Analysis
Bargaining Power of Buyers -
Business level strategy
Integrated Cost Leadership / Differentiation Strategy
Competitive Strategy
Corporate Level Strategy
Core Competencies
Financial resources -
Physical Resources -
Technological Resources-

Reputational Resources -
Human Resources

Value Chain
Question 2
Question 3
They understand their customer precisely

LV providing high quality products which made it distinctive when comparing to its competitors thus fulfill the need of the Japanese consumers.
Question 4
Question 5
A. General External Environment
Situational Analysis
Dimensions of National Cultures
China has Collectivist culture

Motorola Inc. is one company that has taken the lead in introducing teamwork in China

Localization Strategy
Knowing consumer preference in the Chinese market

Adapting of its models to meet the specific demand from local markets

Developing a software to show the menu in Chinese and to input Chinese characters

Using local Chinese engineers to develop different products
Intensity of Rivalry-
(cc) photo by theaucitron on Flickr
D. Environmental Trends
E. Summary: Attractiveness of External Environment
Problem statement(s)
Soheil Soleimani 1091200817
Arash shakibaeian 1101600927
Hamed Rahmani 1101600007
Amin Kahyaei 1101600224
Navid Behravan 1091200788
Behnood Hamedani 1091200813
Narangerel Norovjav 1101600753
Increase the quality of products in compare to other compatitors.

Investment in building the brand recognition of four sub brands.

Increased demand of mobile phone in China(1.2 billion population and growing every year.

Big potential market in rural area.
Neda Nahid
Negin Bekheirnia
Armin Shamsollahi
Ali Kamkar
Case Profile
Founded by Paul V. Galvin in Chicago, in 1928

Expanded into international markets in the 1960s

Produced car radios and television receivers

Invented Cellular phone technology

Became the leading supplier of Cellular phones by the end to 1980s

Became a leader in cable models and set-top terminals
Motorola in China
Motorola in China (Cont’d)
Strategic Focus and Plan
* Vision: 願景
To become the leading and the best mobile and other communication and technological product and service provider in the world. 的使命

Make everything mobile.
Government’s policy :
Promoting local companies over their international counterparts

Motorola’s political strategy:

A ‘‘win-win or two + three + three’’ development strategy to make China Motorola’s local home and development base in Asia

Established a strong infrastructure and developed relationship with the government of China
High - technology research and development centre

It is the first company to offer wireless always-on access to the Internet through its use of General Packet Radio Service (GPRS) protocol technology.
Population Size:
China; the second largest nation by population after India.
Age Structure:
Heavy users :
Over 30 years
Technology enthusiast :
Between 25 and 45
Fashion seekers:
Young female aged 20- 40
Social- life lovers:
Men & Women without age limit
Geographic Distribution:
Access to 21 Chinese provinces of which 14 have contracts to deploy Motorola’s systems including Beijing, Tianjin, Zhejiang, Sichuan, Hunan, Jiangxi, and Liaoning.
Income Distribution :
Heavy users :
High income
Technology enthusiast :
High income
Fashion seekers:
High income
Social- life lovers:
Low income

Low investment risk in China.
China reopened its economy to foreign investors in 1979.

Investment stimulus and infrastructure supports in Special Economic Zones and open cities motivate foreign firms to adopt high-control equity-based entry modes.

High Market potential in terms of the country’s huge population and increasing consumer purchasing power, especially in cities along the coast.
Distributors of Motorola :

The state-funded network, a government network sponsored by China Mobile.

A strong channel made up of companies like CellStar and Bright Point, which are the world’s leading global providers of innovative, value enhancing logistics services to the wireless communications industry.

Global strategy of Motorola:

Motorola’s eight joint ventures allow it to focus on its expertise in developing and distributing cell phone technology and products.

International cooperative strategy.
Threat of Substitutes -
Competitive Environment Analysis

Slogan :
“Connecting People”

Nokia founded in Finland.
First office in Beijing , established in 1985.
Having 22 local offices, 8 joint ventures and a research centre, with 5,500 employees.
By the end of 2004, it had overtaken Motorola as the leading handset provider.

Nokia’s core competence:
High economies of scale in design and R&D .

Company’s brand reputation Reasons:
Flexible product strategy.
Considerate after-sales service.
“Imagine the Possibilities“

* Samsung’s Core competence :
Research and development (R&D)
Sales marketing

Product leadership is established through vertical integration and strategic alliances.

By the end of 2004, the market share for Samsung and Motorola was almost the same.
“ Be Inspired”

Siemens invested $250 million in 2002–2003 to expand R&D centers in Beijing, Shanghai and Singapore.

Siemens China has more than 40 manufacturing facilities and 28 local offices.

It has invested more than $500 million in China (total) and employs 21,000 people.

In 2004 and early 2005, Siemens was experiencing falling market share.
Sony Ericsson
“Taking You Forward”
Ericsson of Sweden began selling in China as early 1892.

Attain new sales by focusing its advertising on young females demographically.
Distributing products with more advanced specialized features.
Focusing on niche marketing for cell phones.
Competitive pressure coming from smaller local firms championed by the government.

With over 33 percent of the market in 2002 ,which soon increased to over 40 percent by the end of 2004.
Locals & Others
Interpreting Industry Analysis
Level of Industry Attractiveness:

The mobile industry has high entry barriers .

Low threat of product substitutes.

However, these attractive forces do not sufficiently neutralize the threats of strong bargaining position of suppliers and buyers in combinations with the intensity of rivalry .
Incorporate technology in Manufacturing

Cost Reduction :
- Low labor cost

- Low investment risk in China
- Distribution center in Asia Pacific

- Focus on core activities
- Reduced overhead costs
* Degree of attractiveness -

High market potential in terms of the huge population of China

Strong distribution channels

Low cost of labor

Low investment risks in China
Positionin as a desired local product brand

Creating optimal value throghout its relationship with customers

Strong market infrastructure

Developing strong bonds with local suppliers and distributors

Powerful in Research & Development

Being a first mover -->  First in wireless communication in China
F. Strategic Analysis
Key Success Factors:
Outsoursing of manufacturing operations.

Low cost firms

Low wage employees

Good design

High innovation
Motorola is a
first mover
because when mobile communications was still a novel idea and no one was selling it Motorola already used it as core competency
* Both operational and corporate relatedness

Operational relatedness:
- Most of the Motorola products are made from same raw materials

Corporate relatedness:

- Use of core competencies in producing
- Tangible: chip system–level
- Intangible: wireless system , R&D part of the company
Operating on a net profit of several hundreds of millions of dollars, allowing for plenty of acquisitions and money to be spent on R&D.

In 2004 the company had worldwide sales of US$31.3 billion.
Organisational Resources -
Motorola’s formal reporting structure and formal planning, controlling, and coordinating systems are strong.

As evidenced :
By the low cost base
High innovation
Numerous successful acquisitions and mergers
Motorola’s manufacturing plant in Tianjin, has become one of the major global production bases in the world for personal communication products.

It provides products to the Chinese market and other countries in Asia .

This factory has been one of the 10 companies with the largest exports and sales since 1994.
Human Resources-
Motorola China employs a total of 10,000 people 1,400 of whom are in research and development (R&D).

The company’s sales goals are driven by R&D centres, management training, and joint-venture partner assistance.

Managerial experience is great and led to numerous successful acquisitions and mergers.
The first company to offer wireless always-on access to the Internet through its use of General Packet Radio Service (GPRS) protocol technology.
Focusing on the development of digital trunking and iDEN, semiconductors, and broadband besides wireless communications.
Innovation Resources-
Motorola is a well-known brand specially in China

High quality overall

High durability and reliability

Efficient, effective, supportive and beneficial
Inbound Logistics
Technology Developent
Outbound Logistics
Marketing & Sales
Firm Infrastructure
Material handling:
using local sourcing

Inventory control
Motorola’s China operations consist of :

One wholly-owned factory
One holding company
Eight joint ventures
Eighteen R&D facilities
Twenty six sales offices
All operational activities will be provided locally inside China.
China Mobile is a key network as it sells and distributes other brands.

Another strong channel is made up of companies like CellStar and Bright Point.

The world’s leading global providers of innovative, value enhancing logistics services to the wireless communications industry.
Advertisings and promotions :
Print ads placed in upscale business magazines such as Business Week (Chinese edition).
Direct marketing such as sponsoring golf club.
Chinese supermodels and pop music singers.
TV commercial.
Print ads in fashion magazines such as Elle and Cosmopolitan.
Cooperating with wireless service providers to offer discounted initial fee.
Sales promotions offering extra accessories, such as one more battery, or gifts.
Motorola Support Associates are here to help you 24 hours a day, 7 days a week.

Product support
Online support
Establishing strong infrastructure, through the creation of complete locally sourced production and development

Developing a powerful relationships in China

Increasing R&D investment in China
Motorola China utilizes local sourcing.
All inputs to produce the firm’s products has been purchased from China including:
- Raw materials and supplies
Fixed assets:
- Purchasing of accessories and services from China in the coming five years.
Establishment of a software centre in Chengdu.
Plans of the Energy Systems Group to establish its Asian design .

Development of following telecommunication technologies:
- Digital trunking
- Integrated Digital Enhanced Network (iDEN)
- Semiconductors
- Broadband besides wireless communications
Motorola China employs a total of 10,000 people .

1,400 of whom are in research and development (R&D).

The company’s integration and sales goals are driven by R&D centres, management training,and joint-venture partner assistance.
Motorola was the sole provider of both network equipment and cell phones based on analogue technology.
Sustainable Competitive Advantage
The degree of sustainability:
Moderate to High

Competitive dynamics : Fast-cycle market

Criteria of sustainable competitive advantage:
- Motorola has positioned itself as a desired local product brand .
- It provides optimal value throughout its relationship with customers.

- Social complexity : develop strong bonds with local suppliers and distributors is its best bet to maintain a strong position in the country.
Using high technology in product development
Strong R&D
Low cost beacuse of outsourcing
Strong market infrastructure

Poor after-sale service

Weak positioning in other markets like europe

Lack of strong distribution channel in rural areas.
Fierce competition by industry and new players
Local and foreign competitors
Loss of market share due to unforeseen circumstances
Lack of government piracy legislation
Opened China office in 1987
Employee : 10,000
1 wholly- owned factory, 1 holding company, 8 joint venture, 18 R&D facilities, and 26 sales offices
Produced beeper-pagers, mobile phones, two-way radios etc. in 1992
The largest foreign electronic company in China
win-win or two + three+ three
’’ strategy

: To turn China into both a global production base and an R&D base of Motorola

: An annual output value of US$10 billion in China, and US$ 10 billion purchasing of accessories and services from China

: To lay emphasis on the development of digital trunking, semiconductors, and broadband

Utilized joint- venture partners to focus on its expertise in developing and distributing cell phone technology and product
* Barriers to Entry -

Moderate economies of scale in R&D, Production and Marketing
Moderate product differentiation
High capital requirements

* Technology should assumed to be similar
* Mobile phone operators must compete for spectrum licenses
Fixed-line phone products
- Substitute product’s price is higher
- Quality and performance capabilities are also insignificant compared to mobile phone products
The mobile phone industry's products are undifferentiated and standardized.
The industry firms battle for higher quality, greater levels of service, and lower prices.
Wealth plays a key role in the current distribution of sales.
Bargaining Power of Suppliers -
Mobile phone manufacturers could integrate forward into the industry.

Because product differentiation is low between the mobile phone operators, switching costs are bound to be low.

Suppliers having substantial resources.
Numerous or Equally Balanced Competitors

Slow Industry Growth

High Fixed Costs or High Storage Costs

Lack of Differentiation or Low Switching Costs
How should Motorola appropriately react to the emerging local brands, head-to-head competing or cooperating in some fields? Will licensing manufacturing technology to Chinese manufacturers weaken Motorola’s core competency?
Problem Statement (s)
Internal challenges:
Weakness in distribution
High inventory level ( pilling up huge amount of inventory due to lost market share)

External challenges:
Aggressively competitive environment of mobile phone sector (e.g. TCL, Nokia )
Governments strong support for local brands
Question 1
Question 2
Problem Statement (s)
Facing the expanding low-priced segment, how should Motorola, traditionally known as a brand for high-end mobile phone, position itself? Is the company’s current branding strategy effective in penetrating this segment? If not, what kind of marketing strategy should Motorola follow?
Question 3
What should Motorola do in order to effectively cut cost in developing a low-priced mobile phone?
Problem Statement (s)
Strategy Formulation / Recommendation
Motorola should reduce the cost and if it is not possible it should apply more outsourcing , contract manufacturing.

Apply more customization related to the culture of china.
- Using special designs and colors
Business Level Strategy
Strategy Formulation / Recommendation
Using market penetration strategies such as sales and promotion in order to increase its share of the market.

The best way to face with the local companies is cooperating in some fields instead of head-to-head competition.

Licensing manufacturing technology to Chinese manufacturers will weaken Motorola’s brand reputation due to the fact that,Chinese image of product is not pleasant.

Competitive Strategy
Strategy Formulation / Recommendation
Motorola should evaluate opportunities for joint ventures, mergers, or acquisitions with its suppliers and distributors firms.
The degree of sustainability:
Moderate to High
Competitive dynamics :
Fast-cycle market

Criteria of sustainable competitive advantage:
Valuable Capabilities :
- Motorola has positioned itself as a desired local product brand .
- It provides optimal value throughout its relationship with customers.
Costly to Imitate Capabilities:
- Social complexity : Strong bonds with local suppliers and distributors is its best bet to maintain a strong position in the country.
Sustainable Competitive Advantage
Full transcript