Introduction
Businesses are developing in accordance to the needs of the society. Possibly, most business organisation not only in the mobile phone industry wants to initiate a strategy that could maintain the organisation’s strength, capability and competitiveness. It is important that the organisation as whole should always open their mind for changes that they might encounter in order to cope and adapt to the latest development that are happening within and outside their environment. Recently, Oliver (1997) suggested integrating the resource-based view of the firm with institutional theory in order to better understand the “context and process of resource selections” (1997: 697). It is believed that these insights can be extended and applied to the ongoing organisational change debate. In particular, we suggest that institutional forces guide strategic change.
Strategic change is defined as actions that “enable the organisation to take advantage of important opportunities or to cope with consequential environmental threats” (Gioia and Chittipeddi, 1991: 433). This definition exposes the change process to both internal and external situations, which is consistent with the attempt at identifying strategic change options suitable under varying circumstances. 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 PESTLE Analysis and Five Forces Analysis to Motorola in order to evaluate the current stance and the possible future of the company.
The Company[1]
Motorola Inc. is one of the top companies in terms of mobile phones manufacturing. Motorola Inc. is an American telecommunications company based in Schaumburg, Illinois, a Chicago suburb (Motorola Website 2008). The company is actually listed in Fortune 100. As previously stated, Motorola is a manufacturer of wireless telephone handsets. However, aside from this line of business, Motorola was also engaged in selling and designing of wireless network infrastructure equipment i.e. cellular transmission base stations and signal amplifiers (Motorola Website 2008). In addition to this products and services, Motorola’s products include digital video recorders, set-top boxes and network equipment used to enable computer telephony, video broadcasting, and high-definition television. From the presentation, we can deviate that the main products and services offered by Motorola is more on wireless voice (i.e. through mobile phones) and broadband systems used to build private networks and public safety communications systems.
Despite of the extensive marketing and business eagerness of the company, Motorola was still experiencing a major crisis with its handset business. Actually, it is recorded that almost .2 billion loss occurs in Q4 2007 (Bartash, 2008). The findings of Bartash, J (2008) highlighted that the global market share of Motorola has been incessantly declining i.e. from 18.4% of the market in 2007 and now 9.7% by 2008. On the contrary, Motorola’s competitors boomed and by July 2007, their competitors like Samsung Electronics surpassed them as the new world’s 2nd largest handset manufacturer – with an extensive market share in Q1 2008 of 16.4%. Motorola is currently on the stage of losing its weak 3rd place spot to the rapid growing South Korean multinational LG Electronics, which also surpass Sony Ericsson in Q1 2008 with a tough boost in market share to 8.6% (Smith, 2008). With this development and tough competition emerging in mobile phone businesses, can Motorola survive in this crisis?
PESTLE Analysis
With respect to the current stance of Motorola in mobile phone industry, the different strategies they imposed in different markets helped the company to have an initial feel of the different markets which might be the possible reason of declining market share. Actually, the different strategies may also help the company to have a better understanding of how the market works. The different markets may help in introducing to the company the cultures and characteristics of the markets thus it became educated with how to adjust in the different setting. Lastly the different strategies helped in making sure that the company encounters lesser problems while starting up a new market. By using different strategies the company has not committed anything that will give it more problems. In developed countries it is somewhat easier to enter because they usually have fully developed communications, distribution and transportation systems, to name but a few facilitating factors. In contrast, developing countries require a more flexible approach, since they tend to be more jealous of their national prerogatives and less advanced in their infrastructure. But their sales potential is, nevertheless, quite substantial. It can be tapped successfully, if businesses, let say, Motorola is willing to adapt. With regards to this, the following discussion will illustrate the PESTLE analysis of Motorola.
Political- With regards to the political factors of Motorola, observers will see a continuing progression in the ruinous steps which have forced the industry into a socio-politico-economic corner (‘Motorola, 2008’). Whether this is related to flat demand or to the industry’s creation of an ever-wider range of vehicles that many buyers seem to care little about, there is a problem. The industry is likewise linked closely to the policies of governments, the earnings of communication business (‘Motorola, 2008’). Little wonder then that so many emerging countries are keen to develop a communication sector or that there is such a political pressure to protect it in the developed countries (‘Motorola, 2008’). The world’s communication industry is currently dominated by little more than a handful of firms, each wielding colossal financial, emotional and political power. The industry’s approach to dealing with political institutions has not always been brilliant. It tends to be good on technical issues, although it has not always fully presented the longer-term options, in order to make the choices and their implications clear (‘Motorola, 2008’).
Economic- For much of the developed world, and increasingly fro the developing world, the communication industry is a pillar industry, a flag of economic progress. Without the communication industry, it is impossible to develop an efficient telephone business, a network industry or a computer business – other central foundations of economic progress. The communication industry in which Motorola is attached has been a core industry, a unique economic phenomenon, which has dominated the twentieth century. However, the industry now suffers from a series of structural schisms and has become riddled with contradictions and economic discontinuities. For the capital markets and the finance sector, it has lost a lot of its significance, as a result of ever declining profits and stagnant sales.
The proliferation of products means that it has become hopelessly wasteful of economic resources (‘Motorola, 2008’). While all these and more sound like a very gloomy assessment of such a vast economic phenomenon, the industry is not in the end despondent. A different future is possible for the industry, a highly desirable one.
Social- The world’s telecommunication industry let say Motorola, affects the society as a whole. It employs millions of people directly, tens of millions indirectly (‘Motorola, 2008’). Its products have transformed society, bringing undreamed-of levels of mobility, changing the ways people live and work (‘Motorola, 2008’). The social value of the additional mobility that this industry brings involves the value of the people being able to commute over longer distances easily, among many others. For most of its existence the communication and technology industry has been a model of social discipline and control and it is not just that the communication and technology sector offers a ‘pillar’ of something else. There are, on the other hand, particular social issues to address in many developing countries, often those that are the result of an undertone of religious faith. The telecommunication industry has the role to play in helping develop the mobility of such countries and it can be achieved at an acceptable social cost of the country is prepared to learn the necessary lessons from those who have travelled this route before it, and to make the necessary investments.
Technological- The Motorola works on a scale so awesome and has an influence so vast that it is often difficult to see (‘Motorola, 2008’). The level and diversity of technologies that it must deploy are increasing, which imposes both new investment burdens and new uncertainties and risks (‘Motorola, 2008’). Roughly a million mobile phones and other communication technology are built around the world each week – they are easily the most complex products of their kind to be mass-produced in such volumes. The company uses manufacturing technology that is the cutting edge of science. But still, the potential for developing coordination skills, intellectual capabilities and emotional sensitivities through electronic technologies remain far from fully exploited.
Legal- There are various legal implications in the conduct of the steel business which has repercussions for the environment, society and the government. Due to the nature of the work that the mobile phone business is in, there are potentially more hazards in the industry than in any other existing industry nowadays, particularly security in information. There is the antidumping law in the US, which could be possibly implemented in Europe or Asia given the right government initiative, in response to the various versions of a protectionist trade policy that exists in various countries.
Environmental- With regards to the global performance and environmental concern of the company, Motorola is quite expressive as compared to other communication and technology businesses. Other than the mobile phones and communication technologies themselves, the business is intricately tied to the manufacture of a wide range of components and the extraction of precious raw materials. The effect to the communication companies like Motorola are that they needed to establish R&D centres to take advantage of research infrastructure and human capital, so that they can develop communication products locally to satisfy the requirements of the global environmental and safety regulations more effectively (‘Motorola, 2008’).
Five Forces Analysis
The most dominant strategic management paradigm in recent years is known as the strategies model (Fredrickson 1991). Porter (1998) claims that the intensity of competition in an industry is neither a matter of coincidence or bad luck. Rather, competition in any business industry is rooted in its underlying economic structure and goes well beyond the behaviour of current competitors. The state of competition in an industry depends on five basic competitive forces.
The model of pure competition suggests that risk-adjusted rates of return should be stable across firms and industries. Nevertheless, a number of economic studies have asserted that different industries can sustain varied levels of profitability, through knowledge of the structure of the industry. With this, Porter’s 5-Forces Model is useful for understanding the context of the industry, in which the firm operates (‘Porter’s Five Forces’ 2006).
Figure 1 – The Five Factors or Forces Affecting Competition in an Industry[2]
Rivalry
In Motorola, this is caused by several factors, such as the presence of a larger number of firms that compete for the same customers and resources; low switching costs for a consumer can switch from one product to another; strategic stakes are high when a company is losing market position; a diversity of rivals with different histories, cultures, and philosophies; and industry shakeout (‘Porter’s Five Forces’ 2008).
Similarly, Motorola also faces this factor since they have a lot of competitors like Nokia, Sony Ericsson, Samsung and others. In order to gain an advantage the company has to do some competitive moves. As competition seems to be very high in the telecommunication and mobile phone industry, so does the fight for high-value, the customers in particular. Motorola is determined to gain more of these valued customers. Its strategic elements are a very effective way to compete with their rival companies.
Threat of Substitutes
Substitute products refer to products in other industries (‘Porter’s Five Forces’ 2008). The threat to Motorola is the price of the materials being used in order to sell products and render service to customers, which include cables, telephone lines, and many others.
In accordance to the threat of substitutes in Motorola, Motorola completely manage this factor to attain business success. Motorola, in its commitment to customers in the business world, demonstrates value and return on investment. The focus on key industries permits Motorola to locate customer needs. The price of substitute products is more expensive. This provides the industry a great following. Moreover, the quality, features and benefits of substitute products are generally lower.
Buyer Power
This refers to the impact that customers have on a producing industry (‘Porter’s Five Forces’ 2008). In Motorola’s customers, buyer power is strong, such that this could provide Motorola’s rivals with a strong and efficient business. In Motorola environment, the buyer power is the impact that customers have on a producing industry. As there are still only a few mobile phones and telecommunication technologies manufacturer who can compare to what the company has managed to achieve in this era, the bargaining power of buyers is not as great compared to the following epoch, and, coupled with the industry being a key supplying group for the buyers, which in this case, are large companies and several high end individual customers, the bargaining power of buyers have notably not budged.
Supplier Power
The power of suppliers over Motorola is also strong, as it also contributes to the decline of the business of the company. Due to the increase of prices in the market, prices of raw materials also increases, thus, give additional costs for the company. In this regard, some of Motorola’s suppliers of components can possibly control their business operation. Motorola is highly dependent on their supplier of mobile phone components (Krazit T 2003).
Barriers or Threat to Entry
The economies of scale play a significant role in the cost of produce the product and service. Companies in this industry have competitive fixed costs and spend relatively large on plant and equipment. Moreover, competitors in the industry are not likely to cut their price to defend their market position. In an industry experiencing fast market growth, patents, proprietary knowledge, and brand reputation are also considered as barriers for companies entering the industry.
Evaluation
From the given presentation, Motorola can be still successful and possibly surpass the current crisis in their business. 10 years from now, Motorola can still give excellent services and products if they continue to enhance their innovation and technological advantages. Meaning to say, competitors, technology and suppliers are factors that directly affect the business performance of the company. Actually, the company, Motorola, is too much relying on their suppliers as revealed in the report of Krazit T (2003). Thus, the company should have extensive or alternative plan regarding suppliers’ issues. The mobile phone industry is actually fact becoming a major contributor to the business sector. Over the next years, let say 10 years, consumers will see the launch of a new generation of mobile phones with enhanced features than what they have now. It is necessary for the maintenance of this high-profile industry to become visible in all the types of media that technology has to offer. Reports reveal striking evidence that a new ‘networked generation’ is turning away from television, radio and newspapers in favour of online services , including downloadable content – used on multiple devices such as iPods and mobile phones – and participation in online communities (‘Ofcom Communications Market Report reveals new industry trends and changes in consumer behaviour’ 2008). With respect to this needs in Motorola, online advertising i.e. internet marketing through websites continues to grow in importance as a mass marketing medium; attracting significant revenues away from other media. Thus these two shifts have large impacts in the marketing field. Motorola need to focus on how to best present their products and services to an increasingly diverse and more informed consumers, at the same time maximising the use of the Internet as a potent marketing tool. Additionally, globalisation calls for marketers to design strategies which will ensure that the largest scope of market is taken hold of. With these shifts come the important role that the Internet plays in marketing’s various aspects.
With consumers increasingly willingness to switch phone companies because of the wide variety of choice available, it is of paramount importance that the Internet be used to promote excellent marketing strategies. Using Internet presence to trigger interest for the product and/or the service, serves as a true marketing channel, whose function was to make potential users aware and interested in a new mobile application or product brand. Its importance as possibly a brand interface could also be exploited by the industry. As suggested, the wise use of a website could either attract or lose existing and potential customers. The strategies of the firm, therefore, need to be consistent with what was preset as objective of the firm and in an industry as mobile provision where innovations are an edge, this is very vital.
References:
Bartash, J 2008, Motorola profit sinks on mobile woes. MarketWatch. Accessed: May 12, 2008. Available at:http://www.marketwatch.com/news/story/motorolas-quarterly-profit-declines-84/story.aspx?guid=%7BCC01CF82%2DC434%2D4C1E%2D97B5%2DFBEF11D78E44%7D&siteid=yhoof
Gioia, DA & Chittipeddi, K 1991, “Sense making and sense giving in Strategic change initiation.” Strategic Management Journal 12: 433-448.
Krazit T 2003, Motorola blames phone shortages on camera components. Accessed: May 12, 2008. Available at:http://www.computerweekly.com/Articles/2003/12/08/199121/motorola-blames-phone-shortages-on-camera-components.htm
Motorola 2008, Motorola. Accessed: May 12, 2008, Available online: http://en.wikipedia.org/wiki/Motorola
Motorola Website 2008, Motorola, May 12, 2008, Available online: <www.motorola.com>.
Ofcom Communications Market Report reveals new industry trends and changes in consumer behavior 2008, Office of Communication, Accessed: May 12, 2008. Available at: <http://www.ofcom.org.uk/media/news/2006/08/nr_20060810>.
Oliver, C 1997, “Sustainable competitive advantage: Combining institutional And resource-based views.” Strategic Management Journal 18(9): 697-713.
Porter’s Five Forces 2006, Quick MBA, Accessed: May 12, 2008, Available at: <http://www.quickmba.com/strategy/porter.shtml>.
Porter’s Five Forces 2008, Porter 5 forces analysis, Accessed: May 12, 2008, Available at:<http://en.wikipedia.org/wiki/Five_forces>
Smith T 2008, Q1 post-Xmas lull reverses iPhone growth curve. Accessed: May 12, 2008. Available at:http://www.reghardware.co.uk/2008/04/25/q1_world_phone_sales/
[1] from www.motorola.com
[2] Adapted from Porter (2006).
Credit:ivythesis.typepad.com
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