International Business: Motorola's Strategic Positioning - Case Study Example

ABSTRACT Motorola were the pioneers in the cell phone handset industry and even today despite competition from all over the world, they rank the third in terms of number of sales of handsets. Their core ideology in developed in each of the employees across the world through learning and teaching. They continuously innovate and spend on research and development. They did have a slight backslide in 2004 due to a wrong strategy but have since recovered and committed to the industry through technological advancements. They enter a new market through strategic alliance which differs across industry and nations. It promptly responded to China’s reform policies. They have developed comprehensive mechanisms for analyzing corporate global responsibility. They do not speculate in financial instruments for profit on the exchange rate price fluctuation. Even in developed markets it has formed an alliance with Verizon which gives it a strategic advantage. Introduction Motorola is a worldwide leader in wireless communications and has a broad array of products including automotive and broadband communications. Motorola possesses world class technologies in global procurement rules and channel which it applied globally. Since 1928, the company has been committed to excellence and innovation. They pioneered mobile communications in 1930 with car radios and public safety networks. They made the equipment that carried the first words from moon in 1969. Motorola also has to its credit the communications revolution when it introduced the first cellular handset phones in 1983. They were also the first on introduce the all-digital high-definition television (HDTV) technical standard in 1990. In 1986 they invented the Six Sigma quality improvement process that provided a common worldwide language to measure quality. The company has also pioneered world’s first GPRS cellular system and the cable modem gateway. They are also global leaders in developing broadband systems that deliver entertainment, communications and information into homes. In 2007 Motorola demonstrated the world's first WiMAX 802.16e mobile handoffs, which live Web browsing and video streaming sessions on wireless computers. The board of directors comprises of business leaders from different companies like P&G and JP Morgan Chase & Co. The sales of the company have grown by 22% in 2006 to reach a record of $42.9 billion. They have a strong balance sheet and generated a cash flow of $3.5 billion (Zander, 2006). They believe in investing which drives the growth of the company. Motorola operates in highly competitive markets with respect to pricing, product and service. It is difficult to estimate the level of growth of the world economy due to instability in several countries. Their success lies in their ability to adapt new technology and in forming strategic alliances. It goes in for mergers, acquisition and alliances as the situation demands. For instance, as Japan’s keiretsu system favors the domestic companies, it entered Japan through joint ventures (Mockler, 2001). Thus Motorola had a joint venture with Toshiba where they shared investment as well as technology. It established joint committee with the government Electronics Department. Culture of the organization – values and norms The companies that enjoy enduring success have core values and a core purpose which remains fixed (Collins & Porras, 19096). The strategy and practices have to keep adapting to the changing demands of the business environment. Motorola is one such company that knows what should never change and where they should be open to change. The company has a customer focused approach, informal coordination and integration of functions, which helped it to dismantle the debilitating bureaucracy and end a culture of rivalry among the different product divisions who appeared to be at war with each other ((Day, n.d.). Motorola is built on economic models that help capture critical assumptions about the company, its environment, and its strategies for succeeding in that environment (CUR, 1997). Motorola understands that knowledge and learning are important for developing new products. If the core ideology is meaningful to its people, they will easily adopt it. At Motorola, each employee around the world, in their day-to-day business activities, applies the core ideology of the company – respect for the individual and uncompromising integrity (Post, 2000). This keeps each employee alert in all their dealings and the company’s image remains undaunted. Ethics in international dealings Post (2000) contends that an organization’s global corporate citizenship and ethical dealings is shaped by internal and external factors. Motorola came to know through a television documentary aired in Britain that it was being criticized for being involved in the land mine business. The company’s logo was used on a land mine used in Pakistan. Semi conductor chips manufactured by Motorola were sold to a European dealer who in turn sold them to a third party assembler of land mine. A soon as Motorola became aware of it they not only withdrew from that relationship but also instituted new market controls. The consequence of vigilant oversight is a lesson even today for the company. Organizational learning includes how to identify, monitor and engage issues in a timely and effective manner. The way Motorola handled this issue demonstrates that it has developed comprehensive mechanisms for analyzing corporate global responsibility on a worldwide basis. Cultural diversity Despite organizations becoming global in their outlook barriers are becoming insignificant as information technology reduces the physical distance. Under these circumstances, national culture has a significant role to play in determining the practices and operations that should be applied. Hofstede believes that the culture in which an individual is immersed since birth is likely to have a much stronger effect on him than the organizational culture (Hope & Mühlemann, 2001). Thus, national cultures would have no impact upon the way organization operate across boundaries. To meet the demands of the right people globally, Motorola undertook a firm-wide training and corporate training investment through its corporate university, ‘Motorola University’. This requires employees to complete 40 hours of training each year. Its operation extends to over 100 sites in 24 countries in six continents (Shaw, 2005). There was a fundamental strategic shift in the role of the university within the organization. All the training and development functions including manufacturing and operator training were provided at this university. It also included studies and training in leadership and trans- cultural studies, technology and emerging markets. This enabled each employee to be a part of the value chain, an agent of chain within the corporation and protector of ethics, values and history of Motorola. Foreign Direct Investment and entry into foreign markets FDI in a country can be through various means – alliances, joint ventures, wholly owned subsidiaries or licensing. This is demonstrated through the chart below: Source: Mockler, 2001 Motorola went into licensing agreement with NEC and Hitachi to build low-end microprocessors using Motorola’s technology (Mockler, 2001). This gave the company entry into the microprocessor market in Japan without capital investment at a time when it had limited resources. Motorola also went into a consortium with DDI Corporation in the Iridium project. The consortium included Mitsubishi, Sony and Mitsui. This would not have been possible for Motorola to develop on its own because of the project size and complexity but what is important is that Motorola had the vision to understand and take advantage of the opportunities. It also went into a joint venture in the satellite communications area with fewer partners. Motorola also established in Japan a wholly owned subsidiary named Nippon Motorola Ltd. Motorola is setting up a global supply chain control tower in Singapore with an investment of about $60 million to enhance its enhance its manufacturing capabilities to include products across the core technologies of GSM, 3G and CDMA (FDI, 2006). How it converts currency As a multinational company, its transactions take place in several different currencies. Motorola uses financial instruments to reduce its overall exposure to the effects of currency fluctuations on cash flows. They do not speculate in financial instruments for profit on the exchange rate price fluctuation (Zander, 2006). Motorola offsets the gains or losses on the financial instruments against losses or gains on the underlying operational cash flows or investments based on the operating business units' assessment of risk. They enter into derivative contracts and use forward contracts and options to hedge these currency exposures. International strategy Motorola is admired as the role model for corporate excellence. According to the Fortune Magazine, Motorola is the titan of TQM, the epitome of empowerment, tribune of training, icon of innovation and prince of profits (Winston, 1996). Motorola has a decentralized decision-making process, breaks down organizational boundaries and promotes cooperation between labor and management. Because of this strategy, Motorola is able to keep itself abreast of the demands in any region. It promptly responded to China’s reform and liberalization policies and formulated strategies to target China’s domestic market. Before entering the market it determined certain investment fields and investment amounts with a clear vision from the beginning of the position it wanted to attain in China. Its clear-cut investment policy and insiderization efforts contributed to its success in China (Hara & Nakanishi, 2004). It established joint committee with the government Electronics Department. It set targets for local content, carried out philanthropic activities including construction of elementary schools. It concentrated on high-end users in mobile phones sector to handle local competition. It could capture the sophisticated, wealthy, and young users due to its innovative design. Motorola faced heavy competition from the local manufacturers but it was prepared for it. It went on the offensive in the semiconductor business with its development platforms which differentiated it from the local manufacturers and added value to its products. Motorola also set up research and development facilities in China and announced the launch of 3G development center in Beijing (Luo, 2006). Such strategies help the company to provide direct support for customers in China, which is the second largest economy in the world after USA. Strategic positioning & marketing tactics Motorola experienced a drop in sales and profits after the launch of RAZR V3 as it used the technology was duplicated and had a poor user interface (Mobile Gazette, 2007). Even their other phones experienced a slump in 2004 but since then the company has taken a strategic stand and brought about changes. Motorola products and services were very strategically positioned against its competitors. Its position in the high-end handsets and in emerging markets was very strong. By maintaining ongoing operational efficiencies it has been able to reduce the cost of the handsets which has ultimately pushed up its revenue (Forbes, 2005). In the IP set-top box market also Motorola had emerged as a strong and prominent player. Motorola has to realize that customers look for newer technology and the fashion conscious customers in mature markets are bored of RAZR (Mobile Gazette, 2007). Verizon will be the market driver in North America and Motorola has strategic alliance with Verizon, which means Motorola is very well positioned in a rapidly growing market (ABI, 2007). Motorola has some products that will enable it to have smoother entry into the market than its competitors. Motorola’s share of the global handset market is expected to be 13 percent ranking it number three behind Nokia and Samsung, both of which have experienced growing market share (Taylor, 2007). Motorola continues to lose market share in the Asia-Pacific region, especially India but it has regained its lead in Latin America and maintained it in North America. They are also now concentrating on 3G phones as the market demands. To add value to its services and the handsets, Motorola is developing new software which can scan customers' text messages and phone calls and give this information to advertisers (Esposito, 2007). The advertisers would then be able to contact the customers on the products talked about. Conclusion Motorola has been able to recover from the 2004 downslide simply due to its customer focused approach, informal coordination and integration of functions. They invest a lot in their people, in learning and environment. Each employee across the world is encouraged to apply the core ideology of the company. The company has developed comprehensive mechanisms for analyzing corporate global responsibility on a worldwide basis. To meet the cultural diversity and the demands of the right people globally Motorola undertakes a firm-wide training and corporate training investment through its corporate university. This enables each employee to be a part of the value chain. Motorola has been taking FDI to various developed and emerging economies by ay of joint ventures or alliances. Fortunately Motorola has the vision to understand and take advantage of the opportunities in the host country through which it has benefited immensely. Motorola has a decentralized decision-making process due to which it is able to break international barriers and promote harmony between labor and management. It experienced a slump in sales in 2004 but its strategy has again reversed the trend and Motorola is now showing signs of growth. They are once again well positioned and rank number three in the cell phone handsets market. References: ABI (2007), SWOT Analysis Reveals Motorola's Strong Positioning in the IP Set-Top Box Market, ABI Research, Retrieved January 12, 2008, from http://www.abiresearch.com/abiprdisplay.jsp?pressid=848 Collins, J. C., & Porras, J. I., (1996), Building your company's vision, Harvard Business Review, Retrieved January 12, 2008, from http://www.tecker.com/downloads/buildingvision.pdf CUR (1997), The Three Prototypes of Corporate Universities, Retrieved January 11, 2008, from http://www.ekw-hrd.com/pdf/3_Prototypes.pdf Day, G. S., (n.d.), Aligning the Organization with the Market, The Wharton School, Retrieved January 11, 2008, from http://knowledge.wharton.upenn.edu/papers/1315.pdf Esposito, M., (2007), Motorola develops ads triggered by text messages, Retrieved January 12, 2008, from http://www.brandrepublic.com/login/News/763172/ FDI (2006), Motorola picks Singapore as SCCT hub, Retrieved January 11, 2008, from Read More