INTRODUCTION
In this fiercely aggressive business world, the goal of most firms is to establish distinctive or unique capabilities to gain a competitive advantage in the marketplace through utilising the most of their core competencies. Competencies refer to the fundamental knowledge owned by the firm (knowledge, know-how, experience, innovation and unique information), and to be distinctive they are not confined to functional domains but cut across the firm and its organisational boundaries (Lowson, 2002; pp. 56-61). Today, business enterprises in developed countries operate in a more complicated, and more regulated, environment. The strategic task, then, is to create a distinctive way ahead, using whatever core competencies and resources at its disposal, against the background and influence of the environment. Through these distinctive capabilities the organisation seeks sustainable competitive advantage. Competition in many domestic and international markets appears to be entering a new phase, in which product quality and performance are becoming more important to customers than price. In such markets, the effective management of the new product development process is the essence of competitive advantage. Due to such changes, a review of the organisations’ strategic capabilities is a must if they are to keep up with the demands of the changing times. This paper analyses the strategic capabilities of Motorola Inc. in face of the ever-stiffening competition in the telecommunication industry, as a potential tool to further strengthen Motorola’s position in the telecommunication market.
In addition, strategic changes are adjustments an organisation makes to better align itself with its environment, improving the likelihood of successful strategy implementation. With this regard this paper will be conducting SWOT Analysis, Resource Audit, Value Chain and Core Competencies Analysis to Motorola in order to evaluate the current stance and the possible future of the company.
BRIEF MOTOROLA INC. BACKGROUND[1]
Few companies are as closely identified with the history and development of industry and society throughout the 20th century as Motorola. Currently, Motorola Inc. is one of a global communications leader powered by a passion to create and an increasing dedication to enhance the way the world connects. The company’s communication solutions allow stakeholders to be more associated and more mobile. As part of their development, Motorola has been leader of communication developments and innovations for almost 80 years. The company attained communicative actions along the means – such as creating the tools that carried the first words from the moon and becoming a leader in the revolution of cellular communication with the growth of the world’s first handheld cellular phone, the DynaTAC. The company is first to get Push-to-Talk over Cellular to marketplace. With regards to latest innovation, Motorola distributed the first all–digital high–definition television (HDTV) technical standard and demonstrated the world’s first WiMAX 802.16e mobile handoff. Currently, the company expands a selection of technologies, solutions and services – including, wireless accessories, wireless handsets, digital entertainment application, voice and data communications systems, wireless access systems, and enterprise mobility solutions. With the fast union of fixed and mobile broadband Internet and the mounting demand for next-generation mobile communication solutions, the company’s mission is to pilot the next wield of innovative products that gather the increasing needs of their customers globally.
SWOT ANALYSIS
Strengths. One of Motorola’s most potent strength is that they are one of the world’s best known brands. As they have been in the business for almost years now, the experience that they have in manufacturing cannot be overemphasised (Motorola Annual Report 2007). They already have built a solid reputation for being a dependable mobile phone maker. Additionally, they have the strength of being diverse with respect to their product lines. They are also known to be supportive of societal causes, in particular the company is the first member of the Chicago Climate Exchange. It is a voluntary emissions-reduction program which is committed to absolute greenhouse gas reductions globally (Motorola Annual Report 2007; p. 2). Motorola is also the first major mobile phone manufacturer to achieve the U.S. Environmental Protection Agency’s Energy Star qualification for all of their chargers (Motorola Annual Report 2007; p. 2). With regards to the changes of climate globally, the removal of carbon from supply chain, operations and product use is an ongoing challenge for the company. Basically, Motorola has many strength factors; one is its distinctive product and its remarkable upbringing; its numerous strategic moves; and the Motorola’s indisputable inclusion and diversity (Motorola Annual Report 2007; p. 2). But the strongest factor for Motorola, probably its strongest link is the loyalty of their customers because of its unique services (Businessweek 2008). Motorola seeks to find ways on how to improve their products and services. Its strategic elements are its keys to achieving their goals. In addition to that, its commitment to effective governance is one step to achieving the standard for excellence in corporate responsibility. Employees on the other hand give their entire participation to the company as they are always recognised for their contributions.
Weaknesses. The company’s organisational structure has become inefficient as the company became more complex. This hindered Motorola’s ability to manage its international network of subsidiaries, branches, and companies. While the company has its set of strengths, Motorola has its weaknesses. For instance, its tough competitor, like Verizon Wireless, Sony Ericsson, Nokia, and Samsung has produced the same line of product i.e. development of 3G mobile phones (Motorola Annual Report 2007; p.2). Their line of services and product innovations should be enhanced to achieve their goals. Finally, because of the increasing competition, the company has witnessed a decline in overall sales, a weakness on their part as they have somehow failed to overcome the challenges that additional competition brings.
Opportunities. In order to attain the goal of the company, there are several opportunities available for the company’s further growth and progress. An additional content area is an opportunity for Motorola to increase its market coverage. Rather than trying to imitate its competitors, Motorola concentrate on polishing and promoting its own unique product, the world’s first WiMAX 802.16e mobile handoff. Aside form this, the company also cater it’s product to those with blue-collar users like the manufacturers, construction workers, cab drivers. Motorola can increase its spectrum holdings to be able to expand its strategic alternatives.
Threats. As with any firm in the telecommunication industry, Motorola faces very tight competitive rivalry in the market. Competition is escalating, with the threat of new entrants continuously flowing into the market from Asia, China, Europe and United States (Businessweek 2008). Motorola is also exposed to the risk of movement in the price of raw materials such. The key economies in the US, Europe and the Pacific are also experiencing slow downs lately. These economic factors are latent threats for the company under analysis. While Motorola strategies responded to the local opportunities and competitive advantages that were built over time in different national markets, the competitiveness of foreign operations was also dependent upon the company’s management capabilities and its overall position in the industry worldwide. If such factors were to perform under expectation, their competitiveness in the international scene would suffer seriously. Basically, the primary threat of the company lies on its increasing competitors. Motorola encounter various competitors offering similar products or services or that which is founded on similar objectives. The strengths and weaknesses of these competitors should be identified and analysed so that Motorola can always counteract their moves. There are lots of competitors in communications services, so the company should spend more on advertising and enhance their marketing strategies to add and hold new subscribers and maintain a level of average revenue.
RESOURCE AUDIT
A resource is a basic element that a firm controls in order to best organise its operational processes. A resource, or set of resources, can be used to create competitive advantage (Lowson, 2002; pp. 56-21), that’s why an audit of the resources of a firm is a must if it is to utilise them to create the latter. The sustainability of a company’s competitive advantage depends upon the ease with which the resources can be imitated or substituted (Peteraf, 1993; pp. 37-46). When resources are combined they can lead to the formation of competencies and capabilities (Prahalad & Hamel, 1990; pp. 79-91).
Financial Resources. Although Motorola’s 2007 financial results showed revenues fell 14.53% from 42.85bn to 36.62bn, but this is along with an increase in selling, general and administrative costs has contributed to a reduction in net income from a gain of 3.66bn to a loss of 49.00m (Businessweek 2008). Basically, in 2007, Motorola Inc. did not generate a significant amount of cash. However, Cash Flow from Investing totaled 2.38bn, indicating this company earned more from the sale of existing assets than it spent on the purchase of new assets. In addition the company generated 710.00m in cash from operations while cash used for financing totalled 3.23bn (Businessweek 2008). To improve the business and its profitability, Motorola may consider reducing their costs through material cost actions, health care cost reductions and capacity and personnel reductions.
Human Resources. The approximate number of individuals employed by Motorola and their consolidated entities (including entities that they do not control) as of 2007 is at 66,000. In January 1, 2007, the Company had an accrual of 4 million for employee separation costs, representing the severance costs for approximately 2,300 employees. The 2007 additional charges of 1 million represent severance costs for approximately 6,700 employees, of which 2,400 were direct employees and 4,300 were indirect employees. During this period, approximately 5,300 employees, of which 1,700 were direct employees and 3,600 were indirect employees, were separated from the Company. The 8 million used in 2007 reflects cash payments to these separated employees. The remaining accrual of 3 million, which is included in Accrued liabilities in the Company’s consolidated balance sheets at December 31, 2007, is expected to be paid to approximately 2,800 employees to be separated in 2008.
Physical Resources. To date, they have 21 large main offices worldwide excluding service centres and mall franchise. They also have a computerised global communications network to facilitate the co-ordination between subsidiaries and affiliates (Motorola Annual Report 2007; p. 27). Today, this system allows Motorola stakeholders around the world to share information and communicate as they develop new products. Motorola did not choose to expand its manufacturing operations in low-cost production sites or rationalise its operations (closing more plants, downsizing the labour force further, or increasing the movement of parts and components between various locations) on a worldwide basis.
Intangible Resources. Finally, a discussion of Motorola’s global strategy would be incomplete if no reference were made to the strategic alliances and international joint ventures with other companies. The Company accounts for acquisitions using purchase accounting with the results of operations for each acquiree included in the Company’s consolidated financial statements for the period subsequent to the date of acquisition. The pro forma effects of these acquisitions on the Company’s consolidated financial statements were not significant individually nor in the aggregate (Motorola Annual Report 2007; p. 27).
The allocation of value to in-process research and development was determined using expected future cash flows discounted at average risk adjusted rates reflecting both technological and market risk as well as the time value of money. Historical pricing, margins and expense levels, where applicable, were used in the valuation of the in-process products. The in-process research and development acquired will have no alternative future uses if the products are not feasible.
The developmental products for the companies acquired have varying degrees of timing, technology, costs-to-complete and market risks throughout final development. If the products fail to become viable, the Company will unlikely be able to realise any value from the sale of incomplete technology to another party or through internal re-use (Businessweek 2008). The risks of market acceptance for the products under development and potential reductions in projected sales volumes and related profits in the event of delayed market availability for any of the products exist. Efforts to complete all developmental products continue and there are no known delays to forecasted plans except as disclosed.
Amortised intangible assets, excluding goodwill were comprised of the following:
Source: Motorola Annual Report (2007)
Amortisation expenditure on intangible assets, which is integrated within other and eliminations, was 9 million, 0 million and million for the years ended December 31, 2007, 2006 and 2005, respectively. As of December 31, 2007 future amortisation expense is estimated to be 8 million for 2008, 7 million in 2009, 8 million in 2010, 5 million in 2011, and million in 2012 (Motorola Annual Report 2007).
VALUE CHAIN ANALYSIS
Porter (1985) in his seminal work of value chain proposed it as a tool to identify and to analyse the origins of competitive advantages and suggested that the activities of the business could be grouped into two: primary and support activities. What activities a business undertakes is linked to achieving its competitive advantage, and Motorola seemed to be best prepared to implement a global strategy, because of the superior competitive advantages of its foreign operations compared with Samsung Electronics, LG Electronics and Sony Ericsson. Paradoxically, Motorola’s rivals showed a greater disposition to use resources from outside of the United States (Businessweek 2008). Thus, Motorola need to largely focus on building a strategy that would allow the company to recover its competitive position in its own home market, which was essential for survival (Businessweek 2008). An analysis of the structural and institutional factors that shaped Motorola’s strategic response both to the new industry rules and the short-term challenges posed by other industry competitors explains this paradox. A number of broad sustainability challenges set the context for all of the value chain activities. These issues apply across the value chain: (1) Population growth; (2) Urbanisation; (3) Child mortality; (4) Maternal health; (5) Infectious diseases; (6) Biodiversity; (7) Loss of ecosystem services; (8) Poverty; (9) Education; and (10) Gender Equality (Businessweek 2008). All these issues are attended to by the Motorola Inc. in alignment with their efforts to maintain sustainable competitive advantage through preserving the good public image that their clients expect from them.
CORE COMPETENCIES
Motorola has several core competencies which they could utilise to further gain advantage over their competitors, and if possible, overtake T-mobile and Verizon in its market leadership in the mobile phone industry. One core competency of the company is their brand management (Businessweek 2008). The strength of their telecommunication marketing has been such that their brand is known even in the parts of the world where mobile phones are not yet the common medium of communication (Businessweek 2008). Another core competency is their supply chain management, which links to their ability to maintain a steady stream of raw materials coming in for production because of their long-term good standing with their raw materials supplier (Businessweek 2008). Their highly coordinated logistics system handled by outsourced firms also form part of their core competencies, leading to excellent inventory management and always on schedule production activities (Motorola Annual Report 2007; p. 125). Another marked core competency is their ability at the moving assembly line. Being the pioneer of such mass production system, they were able to get ahead of the competitors manufacturing processes-wise and were also able to save on costs and time. Yet another core competency is Motorola’s focusing on its product development technology under a single product-information-management program through standardising and incorporating them. If sustainable development is to achieve its potential, it must be integrated into the planning and measurement systems of business enterprises. And for that to happen, the concept must be articulated in terms that are familiar to business leaders. Many observers believe that more stakeholders — investors, consumers, nongovernmental organisations and others — will insist that companies to take environmental and social costs as seriously as they take purely financial costs. In addition, investors are expected to increasingly seek out sustainable companies and avoid firms with poor environmental performance, judging the sustainable companies as better risks over the long term. Likewise, consumers are expected to search for products that perform well environmentally.
REFERENCES:
Businessweek (2008). Motorola (MOT:NYSE), Accessed: June 05, 2008, Available at: <http://investing.businessweek.com/research/stocks/earnings/earnings.asp?symbol=MOT>
Lowson, R. (2002). Strategic Operations Management: The New Competitive Advantage. New York: Routledge.
Motorola Annual Report (2007). Form 10-K. Accessed: June 05, 2008, Available at: < http://library.corporateir.net/library/90/908/90829/items/281770/2007_Motorola_Annual_Report_on_Form_10-K.pdf>
Peteraf, M. (1993). The Cornerstones of Competitive Advantage: The Resource-based View. Strategic Management Journal, 14(2), 37-46.
Porter, M. (1985). Competitive Advantage: Creating and Sustaining Superior Performance. New York: The Free Press.
Prahalad, C & Hamel, G. (1990). The Core Competency of the Corporation. Harvard Business Review, 68, 79-91.
[1] Taken from the company’s official website (www.motorola.com)
Credit:ivythesis.typepad.com
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