Motorola is one of the world's foremost providers of wireless communications, semiconductors and sophisticated electronic systems, mechanism and services. Major equipment businesses include cellular telephone, two-way radio, paging and data communications, personal communications, automotive, defense and space electronics and computers. Motorola semiconductors power communication devices, computers and millions of other products. However, in the early 1980s, the onslaught of Japanese firms penetrating the U.S. market with low-priced, high-quality mobile telecommunication devices shook Motorola from its complacency in being "the No. 1." Faced with aggressive Japanese companies, Motorola began a serious effort to address the competition and reinvent itself from top to bottom.
This study had identified Total Customer Satisfaction at the forefront of Motorola's goals. Specific objectives are: 1) to achieve Competitive Advantage by becoming Best in its class, 2) to regain lost market share and expand globally, and 3) to achieve Superior Financial Bottomlines and improve Shareholder Value.
The study focused on satisfying the customer satisfaction by meeting the specific objectives. Foremost was to modify the organizational direction of Motorola towards a Quality Path. "A product with superior quality makes a satisfied customer." Hence, the study aimed to establish a Total Quality Improvement for Motorola. Methods employed in developing a Quality Improvement Program were: 1) an appropriate Training and Education Mix, 2) Benchmarking and Best-Practices Modeling, and 3) setting attaining a new standard of quality known as the Six Sigma Quality. Six Sigma is a quality measure of near perfection: 3.4 Defective Parts Per Million (DPPM). Motorola achieved Six Sigma quality excellence and was awarded the Malcolm Baldrige Quality Award in 1988.
Other initiatives undertaken to deliver quality and customer satisfaction were: 1) Total Cycle Time Reduction, 2) Product, Manufacturing and Environmental Leadership, 3) Profit Improvement, and 4) Empowerment for Members of the Organization. Finally, the study recommended a global cost leadership strategy attained primarily through Motorola's quality achievements and continuing quality improvement program, and thereby effectively throwing the challenge at the feet of its Japanese competitors.
I. PROBLEM STATEMENT
The problem identified for this particular case study can be stated as follows:
"How should Motorola respond pro-actively to the competitive pressure initiated by aggressive Japanese firms that flooded the U.S. market with low-priced, high-quality consumer electronics and wireless communication devices(cell phones?)?"
Although Motorola has first-mover advantage in the emerging U.S. market for mobile communication technology in the 1980s, the company, like many of its contemporaries in the electronics industry, became complacent in its market position and did not assert leadership over foreign products that have just penetrated U.S. shores. When Japanese firms like NEC, Toshiba and Hitachi struck out, the onslaught caught Motorola unaware. Before the company knew it, Japan-made cellular telephones and pagers were overtaking the Motorola-made devices.
Reacting instinctively, Motorola cried foul on the Japanese manufacturers, launched a public campaign against "unfair" competition, and even went as far as to call for political protection. But in the end, executives at Motorola had to admit that the Japanese supplied products that are far more superior than their own, and they simply had to say "our quality stinks."
Motorola's top management then realized that they had to take the competition seriously in order to stay in the game, become pro-active instead of being reactive, and set out to changing the way they do their processes and procedures at the shop-level.
II. OBJECTIVES AND SCOPE
Motorola's fundamental objective, then and now, is Customer Satisfaction. Hence, the same main objective is adopted for this case study:
- To attain Total Customer Satisfaction
The case study affirms as specific objectives as well the following key goals of Motorola:
- To achieve Competitive Advantage by becoming the best in its class in terms of People, Marketing, Technology, Product, Manufacturing, and Service
- To increase Global Market Share
- To achieve Superior Financial Results and improve Shareholder Value
The case study focuses on attaining total customer satisfaction, and satisfying this primary criteria would also meet the specific objectives. Foremost towards meeting the fundamental objective is changing the direction of Motorola towards a quality path. A product with superior quality makes a satisfied customer. Thus, this study is limited to establishing a Total Quality Improvement initiative for Motorola.
The largest market share in the communications industry is, held by Nokia, with Motorola trailing in second place. In general economic conditions in most global industries have hit a point of stagnant or declining sales. In today's world, businesses need to somewhat accurately forecast the future outlook for global economies and then make investments and decisions accordingly. The communications industry is dependent on vendor financing and has taken a big hit because of it. "Vendor financing is an important part of the purchase decision for buyers. Vendor financing helps equipment makers capture large contracts even when capital is scarce while allocating carriers to build out their networks more quickly and cheaply". (www.activemedia-guide.com/telecos_equipment.htm)
Due to main reliance on vendors, this industry has substantial risks. "The biggest threat to telecommunication hardware vendors may be the growing clout that cable companies have with high speed Internet access using cable modems" (www.activemediaguide.com/telecos_equipment.htm). If Nokia and Motorola do not stay ahead of the cable companies in technology, their position in the market will be highly threatened.
Communication hardware companies are benefiting from "worldwide deregulation in telecommunication services and intense competition among industry players" (www.activemedia-guide.com/telecos_equipment.htm). By deregulating the industry, companies will have more freedom in their decision-making processes.
In addition, there is intense pressure on demand for changing technologies. Communications hardware companies need to ensure that their products are compatible with the newest features. Many are trying their best to differentiate their product from their competitors. Examples include features such as voice mail, two way text messaging, e-mail capability, and Internet access. The competitive advantages in this industry include making versions of the features superior to that of the competition. With that in mind, the industry will experience a transition from copper wire to fiber optic transmission. Due to the high costs of installing fiber optic cables it will take years for the global markets to become saturated. This change in the industry includes benefits such as "voice, data, video, and text over the same line"...and "fiber optic cable does not suffer from signal distortion and degeneration" which "copper wire suffers from" (www.activemedia-guide.com/telecos_equipment.htm).
The communications industry does not show a strong sense of ethical values. Most companies use a generic template. Communication corporations do not make any of their own additions to the documents, nor do they elaborate on the topics, as Motorola has always done. Motorola has a training program that gives their employees "what if" scenarios. These scenarios are a way that Motorola tries to make their employees aware of situations and guides them through the ethical way of handling each. Devoting all the time and money that Motorola does to their ethical training proves that their focus is on conducting business in an ethical way, but by putting so much focus on ethics they are have not been able to catch up to the rest of the industry.
Motorola is a main supplier of wireless infrastructure products - the support equipment that make pagers, two-way radio systems, and cellular phones operate. The main source of revenue is typically from major telephone companies that place large orders to update or expand their network infrastructure. These customers seek cutting edge technologies that require significant investment in R&D. Economies of scale provide the bigger equipment manufacturers with a competitive edge in pricing when filling such large orders. Motorola also receives a significant amount of business from individual or personal subscribers.
Motorola's main competitors in the wireless infrastructure sector are Nokia and Ericcson, along with Lucent and Nortel. The competitive environment for communications equipment require that vendors offer attractive financing terms to their customers as an important part of their sales packages. Motorola leads the cable modem market with a 41% share, followed by Toshiba Corp. at 18%, and Thomson Multimedia at 13%. With intense pricing competition, pricing pressure was as strong as ever in 2001 in such markets as wireless handsets. New competitors in the field, such as Samsung and Siemens, have helped to speed up the pace of innovation by pressuring established companies such as Motorola to protect their market share.
Rapid technology gains and product innovations by Motorola's rivals in wireless communications, combined with a downturn in demand for semiconductors and pagers, and an economic slowdown in parts of Asia hurt the revenue and profitability of Motorola. Lack of a competitive digital product also hurt Motorola in the Asian market. For example their digital phones didn't work on GSM (global standard for mobile communications). Motorola lost a number of contracts and customers due to poor switching capabilities of its digital equipment. Motorola made poor management decisions and focused on the wrong products.
To improve market share and revenue earnings, Motorola was organized into three major enterprises to reduce interdivisional competition, encourage sharing of ideas, reduce development costs, and coordinate actions between Motorola's business units. A major problem Motorola had was a decentralized approach to running its different businesses and divisions. Motorola has approximately 90,000 employees that speak more than 50 different home languages and belong to as many or more cultures. These employees must be educated on other culture's beliefs, customs, and ways of life. Unfortunately, Motorola, along with many other companies in their industry, are forced to make workforce reductions. Motorola cut 32,000 employees in 2001, equaling 22% of their entire workforce.
Most of the major communications infrastructure manufacturers maintain significant operations overseas. Motorola, along with other companies, are subject to foreign economy and currency risk. Firms based in the United States, overseas sales are translated from local currencies into dollars: a strong dollar hurts reported earnings and a weaker dollar helps. Motorola must also keep a careful watch on other company specific risks such as effects of protectionism, fluctuations in economic growth, and political instability when investing in foreign countries. The Foreign Corrupt Practices Act is another concrete law that must be followed by Motorola to its fullest extent and knowledge because what's considered unacceptable business practices in the United States is considered acceptable elsewhere.
Crisis in MotorolaEven though Motorola have the number one Headset on the market there are still a few issues that they are experiencing. Motorola Blue tooth headset has caused a few problems for giant cellular phone makers. In deed Bluetooth Headsets are nice for an individual to have, just because it is hand free. But over the years there have been some issues with other phones that Motorola has and not being able to have access the Bluetooth. Not all cellular phones a Bluetooth ready. That became a crisis and issue to customers who could not afford the Bluetooth ready phones.
At this point Motorola is experiencing an identity crisis with the model phone v1150. Now they have turned it into the Razor v3x. The Razor v3x is just the v1150 with two way radio, two cameras, and a front facing VGA for video caller ID. It still has the same style the slim line high class shell phone. Customers are having a problem with buying the same only to get different features.
TasksFuture options for Motorola is currently being put in place through the companies research and development areas. The time period in which will be needed to fully market, produce and bring the customer base both businesses and customers on board with any new development and product introduced is currently on a two year track to match the current updating to electronics devices and to keep steam-lining networks already in place that will need to be updated. The company's reorganization has continued after the highly publicized spin off of its semiconductor unit. Its remaining operations have been focused in four business segments: connected home solutions; government and enterprise mobility solutions; mobile devices; and networks. Lastly, Motorola will need to start a campaign to regain lost respect and start trying to publicly repair its reputation of aggressive market seizing that it has been doing for the last five years. This effort of merging, buying out and using its resources to acquire companies with new technologies in the areas Motorola currently domatinates has harmed and even brought in question the Motorola Corp mission statement and ethical standing in business world both domestic and Foreign.
Ergonomic and functional - the mobile phone is of a convenient size and is easy to use, allowing for consumers to easily operate the phone seeing as most will be first time users. This will help reduce inertia to operating the phone and being able to easily see the benefits of owning one.
-For the consumers to easily see the benefits that it can offer them, the prospect of it being a sustainable product to market to the bottom of pyramid consumers seems relatively high. The cultural barrier may seem only minor as mobile products are already selling to those of the same cultural background but in more affluent demographics.
For areas that do not have any reception, Motorola can install its own reception towers based on the numbers that it will benefit and the percentage of users they prospect in purchasing the product. This will determine if it will be beneficial in terms of being cost-effective and profitable in the future. The cost can be shared between service providers and Motorola where beneficial to both parties as they can satisfy their existing customers with greater reception range as well as gain prospective customers.
This expansion into the bottom of the pyramid market base can receive negative media attention, which can drastically effect the market share and profitability of Motorola in the future. This, for example, was seen in 1998 after human rights groups publicized Nike's use of child labour in manufacturing plants in China and Cambodia, creating a loss of market share (Golden J. 1999). To combat this, Motorola should sponsor a humanitarian project based on improving the quality of life for people in these regional areas from donating part of their profits gained from expanding their operations to this market segment. This will not only prevent any bad press being placed upon Motorola but will boost its image of being a socially ethical company.
In terms of the costs involved for having mobile phone service, Motorola could distribute the phone with low priced prepaid simcards, as those who live in rural areas and out of urban environments may not have postal addresses, bank accounts or a suitable credit history that can satisfy requirements to meeting post-paid service contracts. This will also allow users to pay as they go, therefore restricting usage to the amounts they can afford and abolishing any need for contracts. Having a prepaid simcard will also remove the inertia and cultural barrier associated with marketing post-paid contracts.
The future of emerging markets may find a trend of people within the bottom of the pyramid shifting towards the middle class. Motorola will have to monitor and continue marketing to middle class consumers, maitaining market share through return salesConclusion and recommendations: The most effective course of action within 1 year of product release that Motorola should take in marketing low-cost mobile phone products the bottom of the pyramid consumer demographic should be as follows:-Delivering the low-cost mobile phone product that carries the features mentioned above in densely populated areas where majority of sales will most likely be made-Providing prepaid simcards with the product to allow users to ‘pay as they go', thus removing the barriers of entry mentioned above with marketing post-paid contracts to this group.
V. External/Competitive Impact (where is the 1,2,3,4. there is 1,2 in introduction but introduction can be combined with literature review) I don't understand it.
The basic concepts and architecture of the cell phone has reached the Paradigmatic Stage. However, with the number of additional features being added to the cell phone and the underlying technology required to implement those features, the industry as a whole is in the Preparadigmatic Stage. As more and more people use cell phones on a regular basis, companies are looking to add new features to the cell phone to both encourage customers of their competitors to become their customers and to encourage those holdouts who are not yet using a cell phone to give it a try. Motorola and its semiconductor are right on the forefront of these changes and innovations, but their competitors are not exactly standing still, and of course there are other factors to consider
One such "other factor" is the economy as a whole. Ever since 9/11 a great debate has been going on as to the state of the economy. Jobs have been lost, companies have downsized, and some would say that hard times are on the are on the horizon for cell phone manufacturers. USA Today reported that "Wall Street frets that, to boost sales, cell phone makers might be cutting prices too much" (Backover). Motorola, it appears, does not agree with this assessment. "Calling a telecom rebound imminent, Motorola Computer Group will unveil a hardware and software platform for next-generation telecommunications equipment." This was reported by the EE Times on March, 29th. However, "some skeptics argue that equipment makers remain too cash-poor to afford the technology" (Murray)
Motorola needs to pursue some of these new innovations to remain successful since the company saw its 4th quarter market share slip in 2003. This is particularly troubling considering that Nokia, despite a loss of market share of its own, has now passed Motorola and become the new leader in the "North American cell phone handset industry." This was reported on compoundsemiconductor.net who said the reason for this is "[t]he market share appears to have swung towards the Asian manufacturers Samsung (10.5%) and LG (5%), as sales of phones in this region, particularly China, have shown strong growth" (COMPOUNDSEMICONDUCTOR.NET ). Samsung was even named "the best CDMA cellular phone sold in the US" by the February issue of Consumer Reports (www.samsung.com/PressCenter/FeatureArticles/FeatureArticles.asp). Motorola's rivals are busy with innovations of their own. Samsung is joining with IBM and several other companies to work on the semiconductor logic process (www.samsung.com/PressCenter/PressRelease/PressRelease.asp). Samsung has also "completed development of the world's first satellite digital multimedia broadcasting (DMB) chip for mobile phones." (SAMSUNG ) Nokia, on the other hand, is pushing forward with 3G technology and has partnered with TRW to develop base stations for this promising technology. (press.nokia.com/PR/200005/781616_5.html ). 3G is really just "a collection of standards and technologies which will be used in the near future to enhance performance." (www.3g-cell-phones.com/) It has been touted as the future of cell phones but it has yet to be accepted. Perhaps that is about to change with the push that Nokia is making.
One path that the industry, as a whole, is taking is integrating a more common implementation of Java on cell phones. As cell phones are becoming more and more PDA like, the ability to run Java applications is becoming more and more important. Currently, however, there is a large difference between the different manufacturers' implementations. This makes it hard for application developers who try to write the Java applications for the phones. Now, thanks to the Jazelle instruction-set extensions by ARM Ltd., manufacturers can now add hardware acceleration for the Java applications. This not only allows for greater standardization, but also allows the Java apps to run much more efficiently. Along with the hardware acceleration the Mobile Information Device Profile 2.0 (MIDP) has been released which will also encourage greater standardization. Motorola has unveiled three phones that utilize the new MIDP profile that they plan to ship by the end of the year, 2004. In addition Siemens Mobile Phones has plans in the works to release similar products as well as Nokia. Nokia has released a beta testing version of its Development Suite for lava, to encourage programmers to write applications for their phones. Neither Motorola, Siemens, and Nokia have produced phones with the hardware acceleration, but all three say the plan to in the near future (Merritt).
There is one area in which some cell phone designers are making significant innovations that Motorola has yet to enter is EDGE networks. EDGE, or Enhanced Data Rates for GSM Evolution networks "offer faster data rates than current Global System for Mobile Communications/General Packet Radio Service networks, but fall short of the data rates promised by the oft-delayed 3G networks" (Krazit). Edge networks are starting to be built in the United States, but it will likely be a couple of years before they start to gain major acceptance (Evers). Chip makers Intel and Texas Instruments are currently leading the way in the development of this technology. Both companies have released chip sets that will allow cell phones to take advantage of the EDGE networks. Nokia however has unveiled plans for phones that will run on EDGE networks (Blau). Motorola has been quiet about these developments but that may be because it is waiting for the spin off of its semiconductor division to be complete (Krazit).
VI. Innovative Capacity and Capability
Research and Development
Motorola has always taken pride in being a leader in innovation in the Semiconductor industry. They continue to do so in their many labs in Austin, TX, Temple, AZ, Europe and China. The labs are forerunners in a various range of technology that are critical in order to achieve a true system-integration and the system-on-chip solution. This team works toward technology that is 3-15 years in the future.
The research and development ends at Motorola's final manufacturing technology centers located in various places around the world. These facilities are designed in order to effectively implement the new technologies in all manufacturing areas. These manufacturing areas are responsible for the electronic packaging processes, materials, layouts, designs, and final tests of the product. The following are examples that will show where Motorola is heading in the future and why they will continue to be an industry leader within their field.
Until recently there has not been any major technical advancement in the mobile phone over the last 3 years. Due to poor technical specifications and inflated expectations (due to the promotional strategies undertaken), WAP (Wireless Application Protocol) enabled handsets and other internet based communications devices were commercial failures which was reflected in the poor unit sales s for the period. With the prospect of the 3rd generation of mobile phones coming onto the market between 2003 & 2006, the industry has started to become more lucrative. Worldwide mobile phone sales in the 3rd quarter of 2002 totalled 104.3 million units (a 7.8% increase from the same time 1 yr prior. Information source: Dataquest Inc)
Nokia expects the market to grow to between 440 million- 460 million units in 2003 overall. However business analysts generally think to be around 435 million in the 2003 financial year. Nokia believe that Europe is the major market where consumers are looking to upgrade their handset in 2003. Mobile phone subscribers will be looking to replace their old phones with the new breed of mobiles available at the moment with digital camera/ colour screen capabilities. Confirmation of this trend in the industry is by the sheer volume of people signing up for the new MMS (Multimedia Messaging Services), 20,000 for T-Mobile in Germany alone, and 30,000 in the UK for Vodafone, all in a 6 month period. The popularity of the SMS (Short Message Service) has been the main contributor to this new breed of messaging. When 3G is introduced it will have all the capability that these new phones have and more. However, by the time 3G is incorporated into the market place, MMS will be widely accepted and the cost of the service will have decreased.
Producers of mobile communications such as Nokia & Sony Ericcson, along with the network providers T-Mobile, Orange, Vodafone & O2 are expecting that the introduction of the new MMS services will enable them to achieve the growth objectives & provide a new untapped resource of revenue from increased unit sales. Although this new MMS service will most definitely cause an upturn in a currently flagging market, it should not be relied on too heavily as a main source of revenue or selling point. Sending of MMS messages is still very expensive in comparison to SMS texting. Also, the handsets which have the capability to do so are still particularly expensive & may be out of reach (financially) to those who send most messages (88% of all messages are sent buy under 22 year olds and most of them in the teen market). The current market trend of SMS messaging should not be neglected as it currently accounts for 12% of the total revenue generated for network providers.
Political and Legal Factors
Political factors have increased in toughness for mobile phone operators as phones become more advanced. In particular the way in which billing information is handled in the future will be affected by new anti-terrorist legislation imposed by the government.
The 3G mobile phones are expected to obtain data pinpointing the whereabouts of the mobile phone user to within a couple of meters. It is proposed this information is retained in the future for longer periods than mobile operators have done so in the past in order to attempt to locate criminal movement.
The government have invested in independent research into health affects of mobile phones. The outcomes have been inconclusive, however scientists have stated the use of mobile phones does affect brain activity. This is not proof of damage, however the government are keen to have an answer and this could affect the use of future mobile phones.
The intervention of government noticing the escalating crimes focused on or around mobile phones has an impact on their development. The phones have to be less appealing to thieves by some form of internal security as phone thieves begin to target children equipped with a mobile phone by parents or guardians for safety reasons.
Copyright and Patents of new developed technology has to be conformed by for ourselves and others.
The current economy in the UK is very strong, boasting high employment and a high average age. In such situations the public have increased disposable income enabling a trend to spend money on luxury items. Should the economy begin to slow down and many of the population fearing recession, sales of 3G mobile phones would suffer. Businesses and individuals unsure of their financial standing would begin to spend less on items not deemed necesscary.
The way of avoiding such dramatic affects of economic change is to perceive the goods as 'must have' products. Marketable to businesses as a return on investment due to increased efficiency could be argued. This is less likely to be adopted by individual users.
There is increasing concern with the number of masts being erected which form the networks supporting the mobile phones.
As the number of mobile phone users increase, and we move into 3G technology where a higher number of masts are required to support the technology; the public are becoming concerned of the impact masts are having upon their immediate environment. Although masts have reduced in height, this reduction has been accompanied with need for them to be closer to the user.
It is necessary to be sympathetic to these concerns and where possible disguising the masts will show an increased attention to the public.
Public users have a desire to request information and receive this immediately, this has become a priority in today's fast moving society. This means people have less patience to wait for the information desired and this is reflected in the culture of mobile phone use. 3G has the capability to transfer desired information that is up to date, directly to the handset being used
The increasing capability of electronics in continually smaller packages enables additional technology to be included with limited affect on the size of the product. This has had a great impact on the capability of mobile phones.
With ability to gain remote access to the internet it is possible to bring the internet information direct to a mobile phone user.
Development of 3G technology is expensive and time consuming
Forces Driving Industry Competition
Threat of new Entrants
A new company beginning to supply third generation mobile phones would have serious market considerations.
A high level of capital would be required for investment in the mobile phone product. The technology development would need to be supported as well as marketing expenditure to make consumers aware. A new entrant at this stage would be an extreme distance behind in development, and therefore product launch would be delayed.
A new brand would not carry the same reputations and confidence other companies have established whilst developing products over the past 10 years. This is felt an important commodity in today's highly technical mobile communications market.
Industry relies heavily on the development and performance of electronic components for a variety of technological products. Many manufacturers have the expertise and experience to produce the components for the mobile phones. The bargaining power of suppliers is not strong however it is common that the company will have preferred manufacturers through previous projects and reputation.
The industry is an important and rewarding industry for the component manufacturers due to the popularity of the final product (mobile phones). As a large number of phones will be produced this enables high value contracts for the supply of reliable components.
Further to component suppliers are the tariff operators the phone will eventually operate in conjunction with. At present there are five major tariff operators expected to support the 3G mobile phone. Although it is necessary to continue good relationships these companies do not have strong bargaining power. Their future 3G business somewhat relies on supporting mobile phones the public desire, as Nokia 3G will be the first launched tariff operators are not expected to be in a strong bargaining position.
The use of a landline is cheaper and in some cases clearer and BT have a begun to provide more public telephones specialising in cheap rate local calls to other landlines. Maybe a change in calling trends could be created however no additional threat to the trend of owning a mobile phone is expected from this development.
With access to a mailing service Email is efficient and in common use. However this does not have the same convenience as a mobile phone. In addition the 3G mobile phone will enable mobile internet connection whereas an installed terminal has to be used at present
Overall the trend for owning a mobile phone is not going to be affected by the outlined substitutes. It is possible the usage of these phones could be affected however this will not prevent purchases of the product.
The buyer population is strong and mobile phones are a desired commodity. As the attitude has moved towards owning mobile phones a high proportion of the UK population now own a mobile phone, it is understood 70% of adult population own or use a mobile phone. Therefore there are few new people to come into the market place.
With these factors the buyers have a lot of choice when purchasing a mobile phone that most suits their needs and taste. Any new mobile phone has severe competition from the market place.
Nokia's competitors are companies which are relatively equivalent in size, experience, financial backing and mostly with good reputations. These companies siemens,¡K¡K¡K¡K???. are also expected to be launching 3G mobile phones towards the end of 2003 and during 2004 creating intense rivalry in the market place.
As the mobile phone market is close to reaching saturation point industry growth has slowed considerably. The 3G mobile phone is a specialist and top of the range device; however this is still an addition to the mobile phone market.
All of these points build a strong rivalry within the market place.
Objectives and Issues
Nokia's business objective is to strengthen the position of leading systems and products provider. The strategic intent, as the trusted brand, is to create personalized communication technology that enables people to shape their own mobile world.
Technological innovation allows people to access Internet applications, devices and services instantly, irrespective of time and place. Achieving interoperability of network environments, terminals and mobile services is a key part of Nokia's objective.
Nokia must capitalize on the leadership role by continuing to target and enter segments of the communications market that will experience rapid growth or grow faster than the industry as a whole.
By expanding into these segments during the initial stages of the development process, Nokia has been established as one of the world's leading players in wireless communications and significantly influenced the way in which voice and other services have been transferred to a wireless, mobile environment.
As demand for wireless access to an increasing range of services accelerates, plans to lead the development and commercialisation of the higher capacity networks and systems are required to make wireless content more accessible and rewarding to the end user. In the process, Nokia plan to offer their customers unprecedented choice, speed and value.
Nokia has a history of contributing to the development of new technologies, products and systems for mobile communications.
To achieve Nokia's business objective, strategy focuses on being the preferred provider of solutions for mobile communications; creating personalized communication technology; driving open mobile architecture enabling a non-fragmented global mobile services market; strengthening and leveraging Nokia, the trusted brand; and expanding the business and market position on a global basis.
Nokia's aim is to gain the position of preferred provider of products and solutions for mobile communications by providing leading communications networks that enable end-to-end service delivery for both cellular and broadband networks. This includes the development of leading high-capacity cellular networks, platforms and user applications for the mobile Internet, end-to-end broadband access solutions and Professional Mobile Radio systems.
Nokia must build on the core competencies in various key areas, including design and product innovations, brand development, and effective demand/supply network management, to bring new product concepts and associated services to market. And to strengthen the leadership position by using the understanding of user needs and the ability to meet and exceed user expectations to provide user-friendly, highly functional personalized products and solutions.
Nokia continue to employ open standards in technology in order to promote open competition and interoperability. The key commitment is to create a global and open mobile software and services market, and aim to do this by achieving strong partnering with customers, suppliers and industry participants, and solid focus on end-to-end solutions in all the development activities. By driving open mobile architecture, the aim is to ensure the introduction of new, interoperable mobile Internet access and visual content downloading services worldwide, utilizing the GSM/GPRS evolution and coming 3G mobile communications networks adopting WCDMA technology. This is expected to boost innovation from independent software producers as well as provide consumers with a wide and varied selection of competitive, yet interoperable products and services.
Strengthening the Brand
According to a variety of consumer surveys, the Nokia brand is associated with well-designed, high quality and technologically advanced products and customer services that are also user-friendly. Considerable investments in establishing the Nokia name as the leading brand in mobile communication intends to sustain and enhance the Nokia brand through aggressive advertising, sponsorship and other marketing activities in all of the principal markets. Nokia believe that the leading market position provides significant opportunities to better understand and respond to the usage patterns of end users, and thus enhance the Nokia brand.
Expanding Our Business
For more than a decade, Nokia have actively expanded the business globally, and as a result, the network systems, equipment and wireless terminals produced are sold throughout the world. Benefits from strong economies of scale throughout the organization are apparent.
The Nokia strategy is to continue the focused pursuit of global business opportunities by cultivating a strong local presence in all growing markets and pursuing partnering and acquisition opportunities in order to obtain complementary technologies and market positions.
One of Nokia's top priorities is to continue to strengthen their leading market position in a profitable way, believing that further market share gains are key to expanding their customer base and growing their future business potential. The leading position also enhances the positive effects of economies of scale, which should strengthen the competitive position in the next generation of mobile communications.
The promotion mix elements are:
This area of the marketing mix is the most dependent on an accurate vision of who the target market/markets are. An awful lot of Nokia's resources could be unduly wasted promoting to the wrong market. Also a good promotional mix required in order to meet Nokia's marketing objectives. These would be to inform & sell to as many people, the new range of phones by Nokia.
As the price of the product will initially be comparatively high, this has to be reflected in the advertising campaign. This firstly involves choosing the right media. e.g. Broadsheet newspapers, men's magazines (i.e. FHM, Loaded, Men's Health) television and billboard advertisements. These will be aimed at the high earning business person who will most probably use the product for work just as much as personal use. The fact that these phones claim to introduce quick, real time video conferencing is a selling point which must be stressed. The initial adverts will be far more informative than persuasive. The vast majority of people will not be aware of the capability of these new products. Once the informative period is over, the prices drop and the market becomes less narrow, the advertising shall be far more persuasive & aggressive. The advertising will change throughout the different periods of the product life cycle.
The only form of personal selling that Nokia themselves will have to do is persuading the Wholesaler/Retailer to take on a large amount of there new products. However, Nokia are going to have to educate staff from the retail outlets on the features of these new products. These are the personnel who have most direct contact with the end user/ consumer. Ultimately, these are the people selling your product along with their own objectives. Offering special training schemes and fringe benefits to these personnel will be worth doing as these are the people that Nokia want on there side working as efficiently as possible.
Direct Marketing undertaken by Nokia at the beginning of the 3G products life cycle is not really appropriate for this kind of product. It would ultimately send out the wrong message to the consumer. However, when the market becomes saturated and market forces push the price of these products is pushed out of the prestige range and the product is possibly being given away with contracts, then direct marketing could be very effective. Such techniques as direct mail, internet spam and cold calling may be appropriate.
Motorola's two-fold strategy of competing head-to-head with their foreign competitors consist of: 1) learning from the Japanese, and 2) competing directly with them. The study first addresses the issue of learning valuable quality improvement lessons not only from the Japanese competitors, but also from other best-practice companies and quality training institutions, and applying these learnings to improve Motorola's own quality techniques.
Training and Education Mix
Learn how to compete better by sending Motorola's managers to study missions worldwide and specially to Japan (top-down education)
- Plant visit and study of successful Japanese firms such as Toshiba and Hitachi
- Study Motorola's own Japanese operations to learn more fully how it functioned
- Plant visit and study of U.S. best-practice companies such as General Electric
Adopt and invest in employee education and training
Motorola should not only send employees to limited quality-enhancement training, but must recognize that employees need a broader form of education to ensure that they can initiate and implement effective quality planning and design, and thereby meet company objectives. From a narrow emphasis on specific quality techniques, Motorola should focus on manufacturing-related education. Management should consider partnering with local schools and colleges in providing courses ranging from practical technical application, to business courses, to graduate work in computer-integrated manufacturing. .
Benchmarking and Best Practices
Implement a benchmarking program using American and Japanese best-practices
Motorola must know what levels of quality its products must achieve to top its competitors. Each of the firm's business units must implement benchmarking programs that analyze all aspects of a competitor's products to assess manufacturability, reliability, manufacturing cost, and performance. Motorola must also measure the products of other companies against its own standards to verify that whether its own products rank as best in their class.
The case study cites that one Motorola manager who visited a Hitachi plant in Tokyo soberly realized that while, his own company had adopted a goal of increasing productivity by 20%, the Hitachi plant had set its hopes on a 200% productivity increase. This signaled that Motorola must reinvent the firm from top to bottom.
This study further goes to relate the case when a Japanese firm took over a Motorola factory that manufactured television sets in the United States, they promptly set about making drastic changes in the way the factory operated. Under Japanese management, the factory was soon producing TV sets with 1/20th the number of defects they had produced under Motorola management. This is clearly one benchmark Motorola must measure up to. From tallying per hundred or thousand parts, the Japanese was counting defects per million parts manufactured.
Adopt the Defective-Parts-Per-Million (DPPM) approach to determine product reliability
From the lessons learned from the Japanese, Motorola should institute the Defective-Parts-Per-Million, or DPPM product reliability standard. DPPM can be defined as the average number of defects in an average production run multiplied by one million. DPPM is a statistic that is given as an estimation of the entire production load:
Using a basic four-phase Quality Function Deployment (QFD) methodology as illustration, as shown in 1, DPPM can be measured at various stages within the production process but the standard measurement point is at the finish of the assembly process (red-outlined area in 1).
The finish of the assembly process is generally after the product has been packaged and shipped. With this in mind, there are several conditions that could negatively affect DPPM aside from actual production and/or assembly of the product, such as erroneous and/or deficient packaging, and incorrect shipment of materials.
After learning from competitors, the study proceeds to focus on determining how Motorola should accomplish its objectives. The company determines its key initiatives as follows :
- Six Sigma Quality
- Total Cycle Time Reduction
- Continuous Quality Improvement
- Product, Manufacturing and Environmental Leadership
- Profit Improvement
- Empowerment for all, in a Participative, Cooperative and Creative Workplace
The Six Sigma Quality Standard
The Six Sigma methodology, developed in 1986 by Motorola, is a company-wide technique to achieve breakthroughs in productivity gains, Parts-Per-Million, or PPM reduction, and in-cycle time reduction. Six Sigma is a measure of quality that strives for near perfection. The Six Sigma process uses data and rigorous statistical analysis to identify "defects" in a process or product, reduce variability, and achieve as close to zero defects as possible. Referring again to 1, the Six Sigma approach is performed in the blue-outlined area or the Process/Quality Control Phase. Using a universal measurement scale, Six Sigma defines and estimates the opportunities for error and calculates defects in the same way every time, thus offering a means for measuring improvement. In fact, Six Sigma takes its name from the Greek letter "sigma," which is used in statistics to indicate standard deviation. The methodology incorporates this data and statistical analysis into a project-based workflow that allows businesses to make intelligent decisions about where and how to incorporate improvements.
Six sigma, in statistical terms, refers to variance or the amount of standard deviations a production run is away from being perfect (the mean projection). Assuming a normal distribution, six sigma is essentially having only .002 parts defective out of one million produced or a 99.9999998 percent chance that the item being produced will be defect-free (see 2). These rates are extremely exceptional and may not appear possible to implement.
FINDINGS AND DISCUSSION
Areas of Consideration (SWOT Analysis)
Motorola is one of the world's leading providers of wireless communications, semiconductors and advanced electronic systems, components and services. The firm controls 45% of the worldwide market for these products, holds the Top 2 position in semiconductor sales, and continuously launching new and innovative products and services.
Motorola is an inventor of technology and has first-mover advantage. It pioneered commercial home and police radio communications. The brand name "Motorola" suggests "sound in motion." In the 1940s, the firm opened a research laboratory in Phoenix, Arizona, to explore solid-state electronics.
In the early 1980s, Motorola controlled the emerging U.S. market for wireless communication devices such as cellular telephones, pagers and high-frequency radios. In the early 1990s received its first orders as the prime contractor for the IRIDIUM® satellite-based, global personal communications system.
Presently, Motorola maintains sales, service and manufacturing facilities throughout the world, conducts business on six continents and employs more than 139,000 people worldwide.
Motorola is strongly committed to delivering customer satisfaction, continuous improvement, and setting new standards of quality.
Motorola maintained old strategies in doing business, was conservative and unambitious.
Motorola was complacent in its leadership position in the U.S. market, and failed to aggressively compete with the emerging Japanese firms.
Motorola can compete and expand globally.
Information and communications technology is fast-paced, with new discoveries happening every minute. Motorola can match this speed of discovery with new and innovative product and technology development.
Japanese electronics firms are heavy competitors in terms of cost and quality leadership.
Porter's Five Forces of the Industry Rivalry, i.e., Barriers to Entry, Supplier Power, Threats of Substitutes, Degree of Rivalry, and Buyer Power (see Michael Porter's The Competitive Advantage of Nations).
B. Evaluation of Motorola Initiatives (where is A)
1. Six Sigma Quality
Motorola's management set its target on the Six Sigma level of quality needed to achieve competitive advantage. Once implemented, it became a continuous program for improving quality in virtually everything Motorola does. Six Sigma has become the world standard for improving all kinds of product and service operations. The application of Six Sigma contributed to Motorola winning the Malcolm Baldrige National Quality award in 1988. After winning the Malcolm Baldrige National Quality Award, Motorola began asking their suppliers to begin using quality management principles and actually apply for the Baldrige award themselves in order to remain a Motorola supplier. The company continues to implement Six Sigma throughout its own enterprise, and extends the benefit of this expertise to other organizations worldwide through Motorola University.
2. Total Cycle Time Reduction
Reducing the "total cycle time"--the time from when a Motorola customer places an order until it is delivered--is another vital part of the company's quality initiatives. In fact, in the case of new products, Motorola's cycle-time reduction is even more ambitious; the clock starts ticking the moment the product is conceived. This calls for an examination of the total system, including design, manufacturing, marketing, and administration.
3. Product, Manufacturing and Environmental Leadership
Motorola management demonstrates its leadership in a variety of ways, including top-level meetings to review quality programs with results passed on through the organization. But all levels of the company are involved. Non-executive employees contribute directly through Motorola's Participative Management Program (PMP). Composed of employees who work in the same area or are assigned to achieve a specific aim, PMP teams meet often to assess progress toward meeting quality goals, to identify new initiatives, and to work on problems. To reward high-quality work, savings that stem from team recommendations are shared.
4. Profit Improvement
Cumulative manufacturing cost savings at Motorola, for the years 1987 through the second quarter of 1994 were over $5.5 billion. The company has been implementing Six Sigma throughout the organization for over 15 years, extending the practice beyond manufacturing into transactional, support, and service functions. As a result, Motorola has documented over $16 billion in savings.
5. Empowerment for all, in a Participative, Cooperative and Creative Workplace
According to an article in Fortune magazine , Motorola is the "gold standard of corporate training." Motorola sees training as critical to increasing quality and productivity. For every dollar spent on training, the company estimates a return of $30 in productivity gains within 3 years. William Wiggenhorn, president of Motorola University, commented, "When you buy a piece of equipment, you set aside a percentage for maintenance. Shouldn't you do the same for people?" Training is part of the team approach at Motorola, and the company has found that training is most effective when team members are trained together. Motorola employees are encouraged to use the information they gain in training to constructively comment on the way things are done, and to strive to find better ways of doing them.
C. Alternative Courses of Action
1. Cost Leadership Strategy
This strategy calls for Motorola to become the lowest cost producer in the wireless communications and advanced electronic systems industry and at the same time achieving a Six Sigma standard of quality. Using the cost advantages gained from 'almost-zero' defects and short-cycle times, Motorola can sell its products either at average industry prices to earn a profit higher than that of Japanese and other rivals, or below the average industry prices to regain lost market share and gain some more. As the industry matures and prices decline, provided that Motorola will continue to produce more cheaply, it will remain a leader and be profitable for a longer period of time.
2. Product Differentiation Strategy
In this strategy, Motorola needs to develop a product or service that offers unique attributes that are valued by customers and that customers perceive to be better than or different from the products of the competition. The value added by the uniqueness of the product may allow Motorola to charge a premium price. The firm then hopes that the higher price will more than cover the extra costs incurred in offering the unique product. Because of the product's unique attributes, if Motorola's distribution channels increase prices, the firm can then be able to pass along the costs to customers who cannot find substitute products easily.
3. Focus Strategy
The focus strategy concentrates on a narrow segment and within that segment attempts to achieve either a cost advantage or differentiation. In this case, Motorola can choose either of its business areas: mobile communications, semiconductors or advanced electronic systems. The premise is that the needs of the chosen industry or business area can be better serviced by focusing entirely on it. Using a focus strategy, Motorola hopes to enjoy a high degree of customer loyalty, and this entrenched loyalty discourages other firms from competing directly.
Considering all the factors and assumptions of this case study, the recommendation is for Motorola to implement a global cost-leadership strategy. Motorola already has all the advantages and internal strengths necessary to succeed with this kind of strategy:
* Access to the capital required to make a significant investment in production assets - Motorola boosts its budget for research and development and employee education.
* Skill in designing products for efficient manufacturing, for example, having a small component count to shorten the assembly process - Motorola invented and achieved the Six Sigma Quality Standard, and reduced total cycle time.
* High level of expertise in manufacturing process engineering - Proof to this is that Motorola has in fact established the Motorola University where knowledge management and sharing is the mission.
* Efficient distribution channels - Motorola maintains sales, service and manufacturing facilities throughout the world, and conducts business on six continents.
* Furthermore, Motorola attempted to use the corporate, business and functional strategies to achieve its goals and objectives:
* On the corporate level, Motorola focused on 45% of the total market for pagers and cellular telephones. In 1999, 56% of total revenues were expected to be generated from overseas markets, and by year 2002, this is targeted to reach 75%.
Motorola Inc. has faced many challenges in the past and due to various strategic decisions on the part of senior management has experienced a decline in revenue, market share and overall profitability. Some of these decisions include pursuing the "dot.com" industry, marketing strategies and their overall business structure. However, as our analysis of the company shows, Motorola has taken great strides in improving their innovation strategy with strategic alliances with Universities but because their research and development areas are so spread out and disconnected the sharing of information between groups is limited. Even with Motorola's development of the Six Sigma business process sharing information and innovations will allow Motorola to remain competitive in the future.
Motorola's use of Design Alliances and reducing their risk in marketing new products is another aspect of the company's strategy that is helping Motorola recover from financial disaster. They still face challenges with different cultures around the globe and acceptable business practices in some countries. Identifying and filling niche needs in foreign countries, in the past, has been an opportunity missed. Using their Six Sigma process and better integrating their different research areas as well as improving communication between research groups will help Motorola to overcome these particular obstacles.
Finally, Motorola has done a very good job in staying true to their Core Competencies and Core Product lines. They are experts in communication products and have continuously developed ways in which to improve the way that people communicate. However, the issue of internal communication, the sharing of ideas, research and information, is again an area that Motorola could address and in which they can improve.
Even though Motorola focuses on communication and has a vision of making communication better for all it seems that improving their own internal communication is what will provide Motorola with the needed push to again make them the leader in the communications industry as well as regain profitability. The areas in which internal communication can best be improved are Operating Environment, Organizational Aspects and Marketing.