Motorola China Experience Case Answers Essay Example

Motorola China Experience Case Answers Essay Case Study-Motorola China Experience 1. How should Motorola appropriately react to the emerging local brands, head-to-head competing or cooperating in some fields? Due to the large size of the Chinese cell phone market and its potential for long-term continual growth, competition for access to China’s consumer markets is intense. Competitive threats from Nokia, Siemens, Samsung, and local producers like TCL are a cause for concern within Motorola. However, eighty-four percent of Chinese consumers prefer foreign mobile phones to local models, with Motorola, Nokia and Ericsson being their favorite makers, according to a nation-wide survey conducted by the China Telecommunications Association and Eaglewings Public Relations. For this reason, Motorola’s biggest competition for cell phone supremacy would likely appear to come from foreign companies outside of China. China’s aforementioned government structure plays an interesting role in the assumption that foreign companies will maintain dominance. As is traditional, the socialist government hierarchy prefers for a majority of any industry to have local majority control. The government, which controls the operations of the service provider sector and is a dominant player in distribution channels as well, has the means to make this goal a reality – quickly. For this reason, Motorola must not only utilize shorter-term strategies to find a way to grow market share, but long-term change strategies to find a way to compete with government powered locally owned firms. The Ministry of Information Industry showed that Motorola had a leading market share of 28. % in the mobile phone industry as of April 2002. Competition Local Chinese Brands ? 3% Nokia ? 5% Siemens ? 47% Motorola ? 13 % Samsung ? 22% Others ? 10% Market Share of Chinese Cell Phone Market (as of 1st Quarter 2005) The cellular phone industry in China is going through the growth stage of the industry life cycle. As the countries market continues to grow rapidly, bar riers to entry are being lessened, as the government and its people want to assure the advancement of the industry. Overall the market is currently at around 180 million subscribers, number one in the world, with expectations of 300 million subscribers by 2003. We will write a custom essay sample on Motorola China Experience Case Answers specifically for you for only $16.38 $13.9/page Order now We will write a custom essay sample on Motorola China Experience Case Answers specifically for you FOR ONLY $16.38 $13.9/page Hire Writer We will write a custom essay sample on Motorola China Experience Case Answers specifically for you FOR ONLY $16.38 $13.9/page Hire Writer This is currently only a 13. 9% penetration rate, which is lower than average, as compared with all other major cell phone markets. This early industry life cycle stage’s strong growth potential is what makes China such an attractive market for expansion. Emerging local brands Joint ventures and cooperation projects Motorola has 9 joint ventures in China, which produce cell phones, CDMA equipment, semiconductors and other high-tech products. ? Guangzhou Jinpeng Cellular System Co. , Ltd. ? Shanghai Motorola Telecom Products Co. ,Ltd. ? Beijing Huamin Smartcard System Manufacturing Co. ,Ltd. ? Hangzhou Eastcom Cellular Phone Co. Ltd. ? Leshan-Phoenix Semiconductor Co. ,Ltd. ? Huamin Smartcard System Co. ,Ltd. ? Hangzhou Eastcom Cellular Equipment Co. , Ltd. ? Shanghai Zhongmei Automotive Electronics Co. , Ltd. ? Motorola Qiangxin (Tianjin) IC Design Co. , Ltd.. Despite the increasing number of Chinese phones, foreign brands — Nokia (NYSE: NOK), Motorola (NYSE: MOT), Sams ung and Sony Ericsson (NYSE: SNE) — still dominate the mobile phone market in the world’s fastest growing economy. According to CCID Consulting, the mentioned four handset maker’s account for more than 70% of all mobile phones sold in the first half of this year. During the first six months, around 248 million mobile phones have been produced in China, and the figure is expected to exceed half a billion till the year’s end. Speaking of numbers, it’s also important to repeat that there were over 480 million mobile phone users in China at the end of Q1 2007. If the growth continues with the expected rate — and every indicator goes in that direction — there will be more than 500 million mobile phone subscribers until the end of 2007. Market analysts attribute this success to the company’s brand reputation, flexible product strategy, and considerate after sales service. Motorola has positioned itself as a desired local product brand that provides optimal value throughout its relationship with customers. According to company sources, Motorola was successful in China due to its understanding of the market and the people and because of the strategies it adopted. However, analysts were skeptical about Motorolas success in China in the future on account of increasing competition from both local and foreign players in the mobile handset market, which was an important product segment for the company. Over the years, Motorola expanded its business in China to various segments, such as Personal Communication Sector (PCS), Global Telecom Solutions Sector (GTSS), Semiconductor Products Sector (SPS), Commercial, Government and Industrial Solutions Sector (CGISS), Broadcast Communications Sector (BCS) and Integrated Electronics Systems Sector (IESS) (Refer Table I for segment information). Along with expanding into a wide range of products, Motorola also focused on improving quality in its Chinese manufacturing units. In 1995, Motorola manufacturing plants got ISO9002,7 ISO140018 and QS9000 quality certification. 9 Over the years, Motorola concentrated on three product categories mobile phones, telecom network equipment and semiconductors 2. How would licensing manufacturing technology to Chinese manufacturers weaken Motorola’s core competency? Motorola’s Long-term Manufacturing Strategy in China 1. Motorola is firmly committed to investing, transferring technologies, and building local manufacturing and R capabilities in China, which will provide China with advanced communications solutions. 2. Motorola will continue its long-term plan to localize management in China and to develop and train outstanding local management. 3. Motorola will continue to work with local partners to create a comprehensive local supply chain. 4. Motorola will continue to promote joint ventures and cooperative projects with local partners to probe China’s new market opportunities as China is increasing integrate into the world market. In the near term, Motorola’s China strategy is to build China into world-class production and R bases, realize Seamless Mobility in China first and proactively carry out CSR. Motorola has been demonstrating its firm commitment to China through the years, which can be best reflected by the awards the company has received in recent years. The following are the major awards Motorola has won in China in 2006: The Success Recipe When Motorola entered China in the early 1990s, analysts were not very sure about its success due to increasing inflation and the unstable political environment. However, they did feel that China offered a vast market and was an attractive destination for MNCs. According to Motorola sources, Chinas vast market and low manufacturing costs were the factors that influenced their investment decision. Initially Motorola was wary about setting up manufacturing facilities in China and put up a makeshift plant in Tianjin to manufacture paging devices. However by 2003, Motorola was regarded as the most successful foreign company in China. There are two service providers for wireless access in the Chinese market: China Mobile, which provides 69% of service; China Unicom, which provides the remaining 31% of service. China United Telecommunications Co. , Ltd. was formed in 1994 under a government directive to break up the monopoly held by China Mobile. In May 2002, the old China Mobile was ordered by the government to break into two operating entities, where China mobile will retain the original corporate identity and operate in 21 provinces and municipalities in south China. Despite this apparent attempt by the government to strengthen competition in the market, both have strong government ties. These ties, and the duopoly created by this situation has caused for a lack of competition to lead to severe price imbalances for consumers. Because of their dominant positions it is imperative that cell phone distributors form alliance with these providers to enhance the distribution of their products. The retail distribution for the cell phone is severely fragmented, but consolidating with industry growth and expansion. As mentioned previously, because of its dominant position, China Mobile serves as a major distributor for cell phone technology producers. Major department stores and retail outlets (ex. Tristar) provide another key outlets for distribution. There is no one way to get products to consumers, as no one company has access to all of the markets in the nation, so providers must develop relationships with many types of outlets to gain market advantage. This is changing as the larger outlets and suppliers are buying up smaller retailers to consolidate their retail capabilities. Growth in China may not be huge in dollar terms, but it helps counter sales declines elsewhere, says Claudia D’Arpizio, a Bain partner in Milan. According to D’Arpizio, China’s luxury market is still modest when compared to Europe’s (which accounts for 38 percent of worldwide spending on luxury goods), South and North America’s (which accounts for 33 percent) and Japan’s (which accounts for 12 percent). Michael Ouyang, CEO of the World Luxury Association China Office,  said luxury brands have become an essential part of life for many Chinese and  estimates China will become the biggest consumer of luxury goods by 2015, accounting for at least 32 percent of the market. China has an estimated 300,000 millionaires and a 250-million strong middle class. When combined, these groups spend 40 billion yuan a year on luxuries, according to figures from accounting firm Ernst Young. As China grows, the consumption of luxury goods will not only be found in stores and in person – they’ll be found online and through mobile devices. Luxury brands need to develop long-term digital strategies that focus on e-commerce and m-commerce. And those strategies need to coincide with the brand’s long-term strategy for expansion and growth of retail locations in the cities’ brick and mortar stores. Licensing With the growing demand for cell phones and saturating markets for other consumer appliances, many Chinese consumer appliance companies also entered the mobile handset business thus increasing the competition for multinational companies such as Motorola. Motorola started feeling the heat by the early 2000s, when it saw its market share declining due to fierce competition in the Chinese mobile handset market. In order to increase its sales and market share, Motorola announced a new strategy in June 2002. Despite this, Motorola continued to lose its market share and analysts were skeptical about its continued dominance in the Chinese market The China telecom sector is witnessing plenty of competition nowadays, where excellent IT services management is becoming a critical advantage in the close competition, said Frank Zhou, General Manager of FrontRange China. Before deployment of our GoldMine solution, we analyzed the specific requirements and processes of the most successful enterprises like Motorola China, and finalized key elements in IT service management of these enterprises. We are sure the latest version of FrontRanges GoldMine can best manage customer relations with minimal operation costs, and help our customers in highly competitive markets. 3. Facing the expanding low-priced segment, how should Motorola, traditionally known as a brand for high-end mobile phones, position itself? By the end of October 2002, China became the largest cellular market in the world with a total number of 180 million cell phones in use. The number reached 220 million by the end of 2002. According to the data from China Mobile and China Unicom, the cumulative number of subscribers has increased by an annual rate of more than 50% from 1998 through 2002. The stereotyped image of cell phone owner â€Å"affluent boss† – has long faded. While this may describe one of the segments still targeted by cell phone manufacturers, today’s user symbolizes the blending of tastes, preferences and meanings associated with products crossing several demographics and psychographics boundaries. A discussion of the 4 market segments that defines today’s cell phone user follows. Heavy Users: They are successful entrepreneurs, businessmen/women, or professionals aged older than 30, with higher income. People in this segment view cell phones as a necessary tool for their jobs. Most of them are early adopters of mobile phone. It’s easy for them to stick to one brand because they are unwilling to spend time in getting used to new menus. Therefore, this segment is much more loyal in certain brands with reliable quality, compared to the other three segments. They are willing to pay extra money for high quality. Technology Enthusiasts: This segment is male dominated, highly educated, aged between 25 and 45. They are eager to try every hi-tech gadget, and always seek new cell phones with either cutting-edge technology embedded or unique functions. Consumers falling into this category are more likely to try some fantastic accessories connecting cell phone and other personal digital devices, such as laptop and PDA, as well as make advantage of the wide usage of cell phone like wireless access to the Internet. Fashion Seekers: Most consumers in this segment are young female aged 20 to 40 who love and can afford trendy apparel. They care more about the appearance of cell phone, such shape, size and color, than diversified functions. TV commercials featuring appropriate celebrities usually have a significant influence on the purchase behavior of this segment. Both this segment and Technology Enthusiasts have the propensity of changing their phones frequently. Therefore, products targeting these two segments have a relatively shorter life cycle. Social-Life Lovers: This is not a â€Å"richer† segment. Regarding demographics, these people are consumers with average income, either man or woman, without age limit. They like to make friends and care about their families. Cell phone is a perfect tool for them to keep in touch with both friends and family members. However, they may not be attracted to cell phones with comprehensive and sophisticated functions at relatively higher prices. People in these segments are much more price-sensitive than those in the above three segments. They’re usually patient to wait for sales promotions in order to get good deals. From this point of view, the profit margin of cell phones targeting this segment is the lowest in the four categories. However, with the increasing number of people owning a cell phone, this segment is expanding rapidly and makes more and more contribution to the growth of the entire market size. Covering all levels in mobile phone products, Motorola’s smart phones cover low-class, middle-class and high-class, with products prices from several hundred Yuan to six thousand Yuan. The fall in average prices allow smart phones to become the market mainstream, so Motorola’s lays its solid dominant position in middle-and low-end market. The low-end market of 2,000 Yuan and under phones is almost occupied by Motorola market share has improved slightly in 2008Q3, with its new middle-end products becoming popular among users. Motorola fifth largest brand in Chinas smart phone market. Consumers Motorola’s primary consumers can be broken down into four primary segments: ? Busy professionals for whom cell phones are a Heavy Users absolute requirement (high income). ? Primarily males 25 – 45, highly educated and Enthusiasts fascinated by the latest technologies. Accompli Fashion ? Young females 20 – 40. They tend to keep up with the latest trends and are fairly affluent. Seekers Social-Life ? Average income consumers, who love to socialize and make new friends. Family tends to Lovers be very important. Motorola’s Strategy Originally pursued a global marketing strategy in China. This strategy quickly met resistance and Motorola adjusted by changing to a more localized strategy. Localized strategy included: Adapting models and software to meet specified local demands. Sourcing through local suppliers. International mobile phone giants have suffered big market share declines in China, because the countrys two mobile operators, China Mobile Ltd. and China Unicom Ltd. , have collectively purchased more cell phones for rural locations and other emerging markets since the first half of 2007. They have purchased mainly low-end and mid-range handsets in which local brands enjoy comparative advantages. This has helped domestic handset manufacturers win a larger collective market share of 37. 5 percent, up from 25 percent in 2007. At the same time, Nokia and Samsung, major competitors of Motorola in China, have been trying to secure larger market shares. Nokia, with its advantages in product diversity, sales channels, product promotions and packaged sales, saw its first-quarter sales continue to increase and its market share reach 37. 4 percent. Samsung has invested substantially in the Chinese market in the past year by introducing more products, adjusting its product portfolio and pricing and distribution strategies, strengthening its marketing efforts and expanding its cooperation with mobile operators in customized handsets. As a result, its share of the Chinese market outpaced Motorolas by 6 percentage points in the first quarter of 2008. By contrast, Motorolas product portfolio is thinner. The company failed to introduce more innovations after it started marketing its hot-selling RAZR series handsets in August 2004. This has prevented the company from winning more customers, said Yang. Motorola only introduced 13 new mobile phone models in China in 2007, while Nokia introduced 55, the majority of which were low-end handsets. With an 80-year history of technological innovation and branding behind it, all Motorola needs is a rejuvenation plan. The company will start by launching more diversified products designed for Chi nese customers, Ren told the Beijing Morning Post. Motorola also has failed to introduce more handsets to cater to the Chinese market since the rollout of its MING handsets, a Linux-based smartphone, Ren said. The company came to realize that this has been one of the reasons for its unsatisfactory performance in China in the past two years, he added. Motorola launched a new model in its ROKR handset series-the ROKR E8-as a music phone, on April 30 and is about to debut seven or eight new models in China in the coming three months. 4. Is the company’s current branding strategy effective in penetrating this segment? †¢ If not, what kind of marketing strategy should Motorola follow? Motorola wants to be a purely Chinese company. We want to be more Chinese than local companies. Lai Bingrong, Senior Vice President Motorola Inc. President Motorola (China) Electronic Co. , Ltd. in 2000. China is one of our most important crucial markets and we are still the first and largest US business in operation there. Fred Harburg, President, Motorola University, in June 2002. There is a lot of trust on the Chinese side because Motorola has put a lot of investment into the country. Crag W atts, Analyst Norson Telecom Consulting, in January 2003 Five Point plan for winning branding strategy 1. Winning People Persistent enhancement of the management team and work environment. 2. Winning Financials Aggressive focus on strengthening the balance sheet and cash flow. . Winning with Customers Relentless pursuit of cost competitiveness, quality and customer satisfaction. 4. Winning Innovations Growth through profitable innovative products, systems, software and customer relationships. 5. Winning Strategies Continuously reassess and improve our business strategies and portfolio. Motorola follow this market strategy to penetrate in the market With increasing competition and declining market share, Motorola announced a new five-year 2+3+3 strategy, in June 2002. The new strategy was announced by Tim Chen (Chen) who took over as president of Motorola China in 2002. +3+3 strategy – 2: to turn China into both a global production base and a R base of Motorola – 3: An annual output value of US$10B, a total investment of US$10B in China, and US$10B purchasing of accessories and services from China – 3: 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 products This strategy aimed at strengthening the companys position in China as it had become a strategically important market for Motorola. Analysts reported that while Motorola experienced declining sales in the other markets across the world, in China, its sales were on the rise. According to company sources, Chinas share in Motorolas global revenues was increasing over the years Growth in Subscriber: 350 million subscribers is only 13. 9% penetration! Motorola Optimistic about Chinas Market strategy Although Motorola, worlds second largest mobile phone supplier, reported US$206 million of deficits in first quarter, its China branch is still optimistic about Chinas market. Ning Suyong, manager of public affairs office of Motorola (China) Electronics said that Motorolas deficits in the first quarter were for a slowdown of American economy and global recession of mobile phone and semiconductor market, and high costs of Motorola mobile phones. Motorola is now undergoing business re adjustment, it is not very possible for it to see desired effect. Demand for mobile phone and semiconductors in China’s market are considerable which is quite different from that in America. Chinas market may boast 100 million mobile phones this year. Recently, Motorola developed T189 mobile phones; it will continue this year to tap GPRS (2. 5 G) market which will bring a great commercial opportunity. Motorola produces different types of mobile phones. So far, it has set up 18 R centers in China with total expenditure on research and development coming up to 1. 3 billion yuan. Its dedication to research and development in China has indicated the importance of Chinas market. Motorola still ranks No. 1 by its market share in China. Last year, Its China branchs sales volume topped US $ 4 billion. With exports up to US $ 1. 643 billion, it paid a total of 4. 6 billion yuan in taxes, topping all foreign investors in China. 5. What should Motorola do in order to effectively cut cost in developing a low-priced mobile phone? Motorola’s Strategy Originally pursued a global marketing strategy in China. This strategy quickly met resistance and Motorola adjusted by changing to a more localized strategy. Localized Low Priced strategy included: ? Adapting models and software to meet specified local demands. ? Sourcing through local suppliers. Motorola Introduces Dirt-Cheap Cell Phone For Developing Countries The handsets, wholesale-priced at under $30, are targeted for markets such as India, China, South Africa, Nigeria, Bangladesh, Thailand, the Philippines, and Yemen. Motorola introduced the new models at the 3GSM World Congress in Singapore when the GSM Association revealed the company had again won the tender to supply handsets to operators in emerging countries. The phones are targeted for markets as diverse as India, South Africa, Nigeria, Bangladesh, Thailand, the Philippines, and Yemen. To get below US$30 per handset is a milestone achievement,† said Craig Ehrlich, chairman of the GSM Association, the trade group for the world’s GSM mobile operators. â€Å"(This) cements the formation of a whole new market segment for the mobile industry and will bring the benefits of mobile communications to a huge swathe of people in developing countries. † The GSM Association fueled discussion about handsets for emerging markets earlier this year when it announced that the sub-$40 Motorola C114 phone had won its tender for an estimated 6 million ultra low-cost handsets from eight operators. At the time, the GSMA said it would have a follow-on bid in September in an effort to attract more handset makers and cover more emerging markets. Although other handset makers made bids, such as China’s TCL Alcatel (NYSE: ALU) Mobile Phones Ltd. , the GSM Association decided Motorola’s low-cost platform best fit the needs of difficult to reach emerging market users. Conway said important factors were after-sales support, local service, brand presence and a choice of low-cost handset models, including an exclusive product, the C113a. Motorola submitted two handsets in its proposal the C113 and the C113a, which was specifically designed for the Emerging Market Handset program. The C113a offers talk times of up to 450 minutes and up to 330 hours of standby, reducing the need for frequent recharging. Motorola recently developed plans to release the F3 model on the Local market, which sells for between US$30 and US$50. The product isn’t yet available on the Chinese market, mainly because Motorola isn’t sure if Chinese consumers will accept the super-slim handset. But at the same time, the Motorola â€Å"Ming† PDA Smart Phone, which was released by Motorola’s R center in China, has been very popular on the mainland, Taiwan, Hong Kong, Singapore and some other northern Asian regions. So popular, in fact, that it sold one million units in three months! Much of Motorola’s strength lies in the culture it has created. Technical innovations and open-mindedness are encouraged and, indeed, needed to ensure success. Motorola is willing to set up independent R institutions on the local market to support local demands. Like branches of other multinationals in China, Motorola’s facility is nothing special: employees compile programs in monotonous office blocks. Still, the company does have a few noticeable differences from other multinationals. One that immediately jumps out is its equal important status with the R center at Motorola’s headquarters. An exceedingly large number of multinational R institutions in China are focused on product localization based on their global platforms. Motorola, however, has taken a slightly different approach by unleashing its China R center and allowing it to operate independently. Knowing that consumer preference in the Chinese market is quite different from that in the U. S. market, Motorola started to localize its product development after the initial poor performance of pure â€Å"global† strategy. Now Motorola adapts its models to meet the specific demand from local markets rather than simply throw the current products into the market without any adjustment. The R center in China successfully developed software to show the menu in Chinese and input Chinese characters. In 1999, a combination PDA/phone, which was designed by Chinese engineers, was launched in China and spread to the US and European countries. Motorola’s localization strategy also includes local sourcing. The company takes initiative in establishing relationships with local suppliers. 7 years ago, 65% of components were imported, while 69% of components are purchased locally now. Local sourcing brings Motorola three major benefits: lowering manufacturing cost, reducing risks from currency fluctuation, and catering to Chinese government’s requirements. Motorola consists of three businesses low-priced model: Enterprise Mobility Solutions, Home Networks Mobility, and Mobile Devices. Enterprise Mobility Solutions This group includes the mission-critical communications offered by our government and public safety sectors and our enterprise mobility business. We design, manufacture, sell, install and service analog and digital two-way radio as well as voice and data communications products and systems. We deliver mobile computing, advanced data capture, wireless infrastructure and RFID solutions not only to clients in the public sector, but also to retail, manufacturing, wholesale distribution, healthcare, travel and transportation customers worldwide. Through innovative technology, we help people integrate, optimize and manage their networks to seamlessly stay connected as they move about their daily lives. Home Networks Mobility Operators today are being asked by their subscribers to deliver bandwidth-intensive, experience-based services — regardless of the network architecture. Motorola is uniquely positioned to capitalize on this trend, providing integrated, end-to-end systems that seamlessly and reliably enable uninterrupted access to digital entertainment, information and communications services over a variety of wired and wireless solutions. Motorola designs, manufactures, sells and services digital video system solutions and interactive set-top boxes; voice and data modems for digital subscriber line and cable networks; and, broadband access systems (including ellular infrastructure systems) for cable and satellite television operators, wireline carriers and wireless service providers. With these solutions, Motorola empowers consumers by connecting their homes — easily keeping contacts, content and services within reach. Mobile Devices As a pioneer in wireless communications, Motorola has transformed the cell phone into an icon of personal technology — an integral part of daily communications, data management and mobile entertainment. Motorola not only designs, manufactures, sells and services wireless handsets, but also licenses its vast portfolio of intellectual property. Our collection spans all cellular and wireless systems and includes integrated software applications as well as one a large complement of Bluetooth ®-enabled accessories. We offer customers innovative product designs that deliver must have experiences, such as mobile music and video — enabling seamless connectivity at work or at play.