Operations, Strategic and International Management - Free Essay Example

Sample details Pages: 11 Words: 3277 Downloads: 9 Date added: 2017/06/26 Category Management Essay Type Narrative essay Did you like this example? Operations, Strategic and International Management 1 How would you assess Motorola’s recent (last 5 years) global performance? Since January 1 2005, Motorola has operated through four divisions: mobile devices, government and enterprise mobility solutions, networks and connected home solutions. The mobile devices division forms the core of the business, and was responsible for 58% of net sales in 2005, while the other three divisions accounted for 18%, 17% and 8% respectively, therefore the focus of this analysis will be the mobile division. Motorola’s performance since 2001 is best described as erratic, with some considerable successes and some difficult trading periods. At least some of this can be attributed to the macroenvironment, with economic trends in the US particularly affecting many of Motorola’s competitors, some to a worse degree than Motorola. Don’t waste time! Our writers will create an original "Operations, Strategic and International Management" essay for you Create order However, Motorola’s main competitor, Nokia, has perhaps suffered less, suggesting that Motorola’s performance could have been improved, had it adopted the right strategy. To understand Motorola’s performance in the last 5 years, it is important to place it in context by looking at how the business was operating in the period two to three years before this. The late 1990s saw difficult trading conditions due to the Asian economic downturn, with many Asian companies cutting prices. With many technological items produced in Asia, this proved highly competitive for Motorola, so the company embarked on a restructuring programme, shedding jobs to cut costs (news.bbc.co.uk/1/hi/business/the_company_file/187392.stm). Motorola quickly began to reinvest. The years 1999-2000 were a boom time for companies dealing with emerging technologies, particularly relating to mobile communcations and the internet, and Motorola was very much part of this, teaming up with Cisco in 1999 to develop wireless internet technology, in which Motorola planned to invest $1bn over a five year period. (news.bbc.co.uk/1/hi/business/the_company_file/274739.stm). In the same year, it embarked on a  £60m expansion of its semiconductor production in Scotland (news.bbc.co.uk/1/hi/scotland/436744.stm) and bought General Instrument, a US cable TV set-top box producer for $11bn (news.bbc.co.uk/1/hi/business/the_company_file/448608.stm). The following year saw a deal with Psion, a competitor in the handheld technology market (news.bbc.co.uk/1/hi/business/625682.stm), and Motorola was already involved with Psion through the Symbian group. The Symbian group supported the use of the Epoc operating system, which was in competition wit h Microsoft’s operating system. The group was formed to ensure that Microsoft’s dominant position could be challenged, which an organisation acting alone would have found difficult to do. The following year saw more expansion of operations, and a pattern becomes evident: Motorola were keen to be part of whatever might develop as the next major technology, and the strategy to achieve this was to spread business interests across a range of possibilities. The General Instrument purchase, for example, was made in the hope that cable technology would become the dominant force in communications, although wireless investment was undertaken alongside this. In 2001, macroeconomic factors had a major effect on the markets in which Motorola operated, and the company was hit. An economic downturn in the US reduced demand for computer equipment and the semiconductor market, a large part of Motorola’s business, declined rapidly. The company embarked on cost-cutting measures, and there were widespread redundancies. While much of this can be attributed to trading conditions, it is significant that, simultaneously, Motorola was losing mobile phone market share to the market leader, Nokia. Its strategy of investing in a broad-ranging portfolio was not effective insurance against the whole technology market facing difficulties. While Motorola had worked hard to anticipate new trends, it had been less active in its market research, with the result that Nokia was designing phones with a far greater awareness of cultural trends (news.bbc.co.uk/1/hi/business/1287560.stm). Although the customer ultimately chooses their preferred model of phone, mobile networks control the range available, and are more likely to stock and subsidise purchase of phones with revenue-earning features: the more the consumer likes and uses the mobile phone, the more revenue for the network operator. Nokia phones were more successful in achieving this than Motorola phones. 2002 was a year of losses for Motorola, although it returned to profit in the final quarter. It was also gaining mobile phone market share, mostly from Ericsson. Trading conditions were still challenging, with depressed markets affecting both Motorola and its competitors. Coupled with this was a demand for new 3G technologies much lower than anticipated. Motorola had invested heavily in developing 3G products, and would have to wait longer than expected to recoup its costs. During 2003, Motorola was still struggling to become profitable again, blaming the Sars outbreak in East Asia, an excess of stock in Asia and earthquake damage to a semiconductor plant in Japan (news.bbc.co.uk/1/hi/business/2975796.stm). In October, the CEO, Christopher Galvin, resigned over differences in opinion over strategy. Shortly afterwards, Motorola announced that its semiconductor business was to be separated and eventually floated independently, resulting in a significant climb in Motorola’s share price as investors saw the narrowing of interests as potentially leading to a more focused operation (Teather 2003). Edward Zander took over as CEO, identifying time-to-market as a key weakness in Motorola’s strategy (Brown 2003). During 2004, Motorola won market share which was attributed to design and features of new phones (news.bbc.co.uk/1/hi/business/3758196.stm). The company’s recovery continued in 2005, partly due to sales of its Razr phone, a slimline model that helped Motorola’s brand image compete more successfully with Nokia’s. The phone was subsequently made available in pink, with Carphone Warehouse ordering the first shipment and selling 400,000 in the three months to Christmas 2005 (Parkinson 2006). However, Motorola’s success with mobile phones has been mixed. The Rokr phone, the result of a collaboration with Apple and the first iTunes-compatible phone on the market, received a negative response from critics, as other MP3-playing phones on the market had better features, and the phone does not have elements of the iPod’s design. It is possible that Apple imposed design and functionality restrictions to avoid compromising sales of iPods, and the end product struggled to compete in an already crowded market. Although Motorola operates in a large number of markets worldwide, its strongest market is in the US, for all its divisions. The US accounts for 40% of mobile sales and 69% of Government and enterprise mobility solutions sales. Sprint Nextel, a US communications company, accounts for 25% of sales of the Networks division (library.corporate-ir.net/library/90/908/90829/items/186361/MOT200510Ka.pdf). A focus on the domestic market has affected Motorola’s success elsewhere: its slowness to pick up on European mobile phone trends enabled Nokia to gain ground, and any US economic downturn impacts on Motorola particularly heavily. It attributes a decline in the performance of the automotive sector of its Government and enterprise mobility division to the slump in the US automobile market. While the share price has more than recovered since its 2002-3 trough (see Fig. 1), there are still strategic issues that Motorola should address that could improve its performance, particularly from a global perspective. Fig. 1 (see appendix for table of share prices from April 2001-6) To summarise, Motorola’s performance in the past five years has seen it maintain its second place in the market (Nokia is the leader): however, some of its strategy has been flawed, and its global performance could have been significantly better. 2.Evaluate the resources possessed/controlled by Motorola. Which, if any, can be considered strategic? Establishing which of Motorola’s resources are strategic first demands an overview of the business’s strategy. Its approach is to have a strategy for each of the four core areas of the business: these are summarised in its Annual Report (library.corporate-ir.net/library/90/908/90829/items/186361/MOT200510Ka.pdf). For mobile phones, the company’s strategy is three-fold: a focus on seamless mobility, differentiation through design and richness of consumer experience. The most important resources for this are research and development into technologies which can improve convenience and ease of seamless mobility, design resources to utilise aesthetic and functional potential of the phones and partnerships, such as those with Apple and Google, to maximise the satisfaction derived from delivery of the phone’s functionality. Together, these can help boost Motorola’s position by differentiating it from its competition: differentiation, rather than an ‘all things to all people’ approach, is advocated by Michael Porter (Hammonds K 2001): Motorola have tended towards the latter. The strategies for the three other areas of the business are comparatively vague, and better described as goals than strategies. For Government and Enterprise mobility, Motorola wants to provide all the Government’s purchases, but anticipates â€Å"widespread competition† (ibid: 2). There is no indication of how this might be tackled, although the company believes its portfolio of compatible products is unique. Competitors could develop their own products to fulfil the same functions as Motorola’s portfolio. If the portfolio is to be an effective strategic resource, uniqueness must be maintained through ongoing research and development and patenting to limit competitor’s options to develop similar technologies. Motorola’s Networks strategy is investment in technologies, including 3G’s successors. Again, research and development is core to delivery here. However, the factors particularly influencing the markets are identified as time to market and price: the supply chain, manufacture and distribution would therefore appear to be important resources, although not strictly strategic in that they are more relevant to post-development operations. Motorola’s aim with Home Solutions is to be global leader (ibid: 13), which it intends to achieve partly by developing more cost-effective products so that families buy more than one set-top box. Supply chains and operational analysis to increase efficiency and minimise costs are key resources, and research and development may be able to identify possible product improvements. Technological research, marketing research and product development require financial investment prior to reaching market, with no guarantee of recouping costs. Motorola’s position can be analysed in relation to the Boston Consulting Group matrix. The matrix identifies products as falling into different quartiles according to the level of market growth and market share. With Motorola depending on maintaining their position through innovation, and the relatively short lifespan of products such as mobile phones, there can be limited reliance on the ‘cash cow’ with low market growth but strong market share: products will quickly become ‘dogs’ with low growth and low market share. This means there must be even more emphasis on ‘stars’ with high market growth and high market share, but which will not maintain their star position long-term. The income from stars and cash cows is needed to fund ‘question marks’, new products with the potential to become stars with the right investment. With Motorola’s research and development core to its strategies in all its divisions, stars such as the Razr, which is expanding its market share through being available in different colours, are vital to generate funds for investment. While extending a product through variation of design features may at the moment ensure its popularity, it can be expected that other manufacturers will follow suit. Motorola is in a strong position to invest. Its net earnings for 2005 were almost $4.6bn, up form $1.5bn in 2004. In the Company’s Annual Report for 2004, Edward Zander highlighted $5bn net cash assets,which could be used for investment before less liquid assets are utilised. However, another key strategic resource is Motorola’s workforce. In the expanding technological markets, retaining skilled workers is paramount to success and there are many opportunities for them to move. Additionally, with investment followed by redundancy programmes in recent years, many employees may experience a sense of job insecurity or have decreased loyalty. Investment in ensuring employment conditions are superior to competitors’ could be key to maintaining a competitive edge. A final strategic resource is Generation HERE, a survey undertaken in 2005 to collect qualitative data globally to see how mobiles affected people’s lives. This will hopefully provide the insight that has been lacking in some of the company’s decision-making in recent years. 3.On a visit to the Motorola offices in London, you find yourself stuck in the lift with Motorola’s Chairman and Chief Executive Officer, Edward Zander. The engineer says that you will have to wait 10 minutes before they can get the lift working again. Based on your earlier analysis of the above two questions what would your comments be to the Chairman? Your objective is to be offered a highly paid consultancy role. Ten minutes are equivalent to one side of A4 – ensure you do not exceed this limit. Overall, the strategy of Motorola could be made more focused. Past performance has suffered when the organisation has tried to compete in too many areas and has lost focus. The mobile phone strategy seems to concentrate on high-end models, yet the company is moving into emerging markets where lower specification, cheaper phones are required, and the strategy seems inconsistent. Previously, Motorola has tended to spread risk by investing in a range of technologies, but with more research into which technologies consumers are likely to take up, the range could be cut down, with more money invested in each new technology, and hence more likelihood that Motorola would develop as leader in that technology. Because the mobile phone division accounts for more than three times the sales of any of the other three divisions, the company’s focus seems to be on mobiles, and the performance of other divisions is comparatively weak. Additionally, the three smaller divisions have markets which are more concentrated in the US. For all the divisions to benefit each other, a more global focus is required, and this would also limit the effect of economic downturn in one market. The usefulness and performance of the three smaller divisions should be thoroughly assessed. If they can offer benefits to other areas of the business, they should be retained and developed. If not, they should be disposed of so that the business can be more focused, and can provide funds for further investment in the core business activities. Global expansion requires a better understanding of consumers and cultures in different countries. Success is not always a given: while the design of the Razr made it hugely successful, the Rokr’s design is relatively uninspiring. The partnership with Apple has not fulfilled its potential. The Rokr seems to have suffered through lack of research into consumer’s preference for iPods, which is partly due to design. It could be argued that the Rokr failed to meet expectations because of lack of utilisation of the iBrand. This needs to be exploited for success, otherwise Motorola might be better focusing on standard MP3s. There is the danger that combining the Motorola and Apple iPod/iTunes brands could lead to brand dilution and weaken Motorola. Motorola appears to have focused on innovation and technology at the expense of market research. The Generation HERE project has been a useful exercise in reversing this trend and needs to be continued, along with practical application of its findings to business decisions. This should help boost competitive advantage in an area which has held Motorola back in the past. APPENDIX Motorola share price in $, quarterly, April 2001-April 2006 Date Open High Low Close Avg Vol Adj Close Apr-06 23.17 24.24 22.93 24.02 18,280,111 24.02 Jan-06 22.89 24.67 22.13 22.71 22,289,180 22.67 Oct-05 22.21 22.76 19.45 22.16 22,691,428 22.08 Jul-05 18.31 21.49 18.05 21.18 24,783,610 21.07 Apr-05 15.12 15.98 14.48 15.34 13,440,509 15.22 Jan-05 17.26 17.52 15.15 15.74 18,924,755 15.58 Oct-04 18.20 19.47 16.46 17.26 14,280,023 15.26 Jul-04 18.38 18.39 14.79 15.93 17,733,700 14.05 Apr-04 17.95 20.89 16.18 18.25 23,010,633 16.06 Jan-04 14.25 17.50 14.19 16.58 18,939,885 14.56 Oct-03 11.97 14.40 11.83 13.53 16,272,334 11.84 Jul-03 9.25 11.00 8.68 9.04 13,556,927 7.88 Apr-03 8.26 8.77 7.58 7.91 15,294,004 6.87 Jan-03 8.92 10.08 7.93 7.98 13,063,914 6.89 Oct-02 10.31 10.90 7.30 9.17 20,334,665 7.89 Jul-02 14.75 16.05 10.49 11.60 17,267,572 9.94 Apr-02 14.06 16.33 13.15 15.40 12,444,772 13.17 Jan-02 15.09 16.24 12.78 13.31 13,322,819 11.35 Oct-01 15.40 18.00 14.25 16.37 13,248,308 13.92 Jul-01 16.50 19.45 14.25 18.69 13,476,904 15.90 Apr-01 13.17 16.40 12.77 15.55 14,935,309 13.19 Report generated at uk.finance.yahoo.com. 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