Category: Motorola

Introduction

Motorola lost its No.1 position as mobile handset marketer in 2008 . The financial figures for Motorola have not been grim for the company since 2008. The performance of the company has been continually deteriorating. According to analysts, the company faced a loss of 11 cents per share, and its sales figures fell by 28 percent in 2009 .

Its sales were far behind the sales of closest competitors like Nokia, Samsung, and LG. The grim financial and sales figures indicate the ailing situation of the company and the with a highly fragmented handset worldwide market, Motorola faces dire challenge to regain its lost status.

Given the current bleak situation of Motorola, it is necessary to find ways to alter the current situation of the company. This paper is a case study on Motorola. The aim of the paper is to understand the present problems Motorola faces and the strategy it has taken to cater to its global market. The case will categorically try to identify areas where Motorola falls short to achieve growth. The paper will try to ascertain the reason why Motorola has been facing continual losses and will try bringing out ways it could recover from it.

The paper is divided into three parts. First, the paper will deal with the current situation of Motorola. The second section will analyse the current situation of Motorola. Based on this analysis strategic and tactical recommendations will be drawn for the company in the third section of the paper.

Current Situation

This section will demonstrate the current situation of Motorola. This section will begin with a brief background of Motorola Inc. and then describe the current situation. This will discuss the company’s financial situation and the steps the company has taken to revamp its present situation.

Business Background

Motorola provides mobile solution for a large range of technology based product and services. Their business divisions are divided into three segments – “mobile devices”, “home and network mobility”, and enterprise mobility solutions” . The mobile devices segment manufactures and sells wireless mobile handsets and smartphones.

The mobile business segment is the second largest segment of the company comprising of 32 percent of the total revenue in 2009 (see figure 1). The largest segment is enterprise mobility and third is home and network mobility with 36 percent of net sales. This segment “designs, manufactures, sells, installs and services digital media products and wireless access systems” .

The network business takes care of end-to-end cellular network, radio bases stations, and allied software and services. The target customers for this segment are mobile phone operators, television operators, etc.

Financial Situation

The financial condition of Motorola has been in doldrums since 2007. The company faced growth until 2006 but started to fall since 2007. The negative growth has become larger and larger every year as the revenue growth rate continued to fall further down.

Financial Analysis of Business Segments

Figure 3 shows the segment wise revenue earned by Motorola from 2007 through 2009. The mobile device segment posted revenue of $18988 million in 2007, which comprised of 52 percent of the total revenue earned by the company. However, in 2008 it fell to $12099 million, and a share of 40 percent.

It slipped further in 2009 with a share of just 32 percent and overall revenue of $7146 million. The home and network mobility segment saw marginal growth in 2008 when it grew from $10014 million to $10086 million. However, it too fell to $7963 million in 2009. Similar trend has been observed by the enterprise mobility solution that increased its revenue in 2008, however fell by 4.5 percent. Therefore, Motorola’s segment wise revenue earnings have fallen for all segments in 2009.

However, the largest fall has been faced in the mobile devices segment. Figure 4 shows the segment wise operating profit (loss) from 2007 through 2009. The data demonstrates that the mobile devices segment of Motorola has constantly posted operating losses from 2007 through 2009, and the magnitude of the loss has been increasing constantly.

Financial Analysis of Geographic Segments

Motorola has its operations in various countries like the US, UK, China, Brazil, Israel, and others. According to the geographical division of the business of Motorola, it has the largest market in the US (54 percent) as in 2009. The net sales growth in all the geographic regions has been negative in 2008 and 2009 (see table 1). The largest fall in sales revenue has been in Brazil, China, UK, and in other nations. The sales figures have marginally improved in the US with decline in sales becoming less from 20.7 percent to 19.54 percent.

Table 1: Geographic division and financial analysis.

The asset turnover ratio of the geographic division for 2009 and 2008 shows that the highest asset turnover ratio is for the other nations in 2009 with the ratio being 60.4, which increased from 9.1 in 2008. The lowest turnover ratio has been reported for the US, China, the UK, Israel, and Singapore. Low asset turnover in the regions mentioned may indicate that there is obsolescence and inefficiency in the regions. Thus, overall, a low asset turnover ratio indicates lower efficiency.

The share regional sales to net sales according to geographic areas of operation are presented in the following figure. The figure shows that the largest market for Motorola is the US. Europe, Asia, and Latin America form the second largest market for the company. This shows that the operations of Motorola are concentrated in one region i.e. the US.

The second largest market for the US becomes Asia (including China) forming 17 percent of the total sales. Therefore, the company may try to concentrate more on this region as Asian countries are developing very fast.

Performance Analysis

Figure 6 presents the performance ratio analysis of Motorola for the year 2005 through 2009. The analysis shows there has been a constant fall in the growth of revenue, and ultimately in 2007, the revenue started falling, as revenue growth became negative. This shows that the revenue performance of the company has been declining.

The return on sales ratio measures the amount of profit generated per unit of revenue. This shows that the company’s profit to revenue return has been declining since 2005. The return on sales was 12.97 percent in 2005 that decreased to -0.13 percent in 2007 that declined to -0.23 percent in 2009.

Actually, the situation improved in 2009 as the ratio fell to -14.08 percent in 2008. This indicates that the company had been facing adverse environmental conditions and had failed to withstand it. The financial crisis of 2008 had created a crunch in overall market and increased costs all over the world. This condition led to a decline in the profit to revenue ratio of the company.

The cost of sales and net sales of the company has declined. This actually indicates that overall production has declined, which may have been due to the adverse market conditions. The overall performance of the company has declined over the period. This is evident from the lowering of the performance ratios – return on sales and return on asset ratios.

Therefore, there are evident that internally Motorola was not strong enough to handle the flux in the market conditions that led to a rapid decline in the performance of the company. In the next section, the reason for the bad performance of Motorola is dealt with elaborately. The overall performance of the company has been bad and some reasons for it has been discussed in the next section.

Related marketing problems

Internal Problems

The main problem faced by the company is due to a weak product portfolio, especially for mobile devices. There was a slump in demand for Motorola phones in 2007 and 2008 due to inadequate model or product offering in emerging mobile segments like 3G and Smartphone segment.

With the new Android software platform introduced by Motorola, it has just 8 phones that have web browsing facility and 7 of them have been recently launched on Android platform . Further, a lack of focus on smartphones had led to lower demand of Motorola phones. Though the Smartphone market is expected to grow from 1.2 billion units in 2009 to 1.5 billion units in 2012 . However, Motorola stresses more on featured phones than on Smartphones.

External Problems

Uncertain economic and political conditions globally have increased the problems for Motorola. The financial crisis that crippled the western world and shrunk the US unemployment level had adverse effect on product demand for Motorola. Further the uncertain political condition in the Middle East. The manufacturing and engineering setup that the company has in Israel may be disrupted due to the political extremism in the region.

The global financial crisis led to a credit crunch resulting in reduced business from 2008 through 2009. Due to unavailability of credit, the Motorola customers could not obtain finance to run their business, and therefore, there was a lowering of the product demand. Therefore, global economic conditions had an adverse effect on the company performance. Telecommunication industry has faced a slowdown in 2009, which had an adverse effect on the financial performance of Motorola.

Another external problem observable is due to the convergence of the telecom, data, and broadband industry that was driven to advancement of new IP-based technology . This led to changes in the market, and Motorola, unable to understand the market developments, had negative impact on their business.

Strategic marketing solution

Industry Analysis

The marketing for Motorola and its business segments are divided into three business areas, facing different industry structure. However, the mobile market can be analysed using porter’s five forces model (see figure 8). The industry analysis shows that mobile industry has a high degree of competition within the industry, as there are a number of mobile device makers.

The bargaining power of the customers is high, as there are a large number of mobile brands, and customers get a large number of options to choose from. As there are few suppliers supplying key technology and raw material, the bargaining power of suppliers is high . For instance, Google supplies Android software platform to Motorola.

Google being the sole supplier of the software has a high bargaining power. This increases the bargaining power of the suppliers. Further, the threat of new entrants is high as there are new players who are entering the mobile market like Apple, Microsoft, HP, etc. the attractiveness of the mobile market is in its expected growth and the possibilities of mobile commerce.

The industry faces a high threat from substitutes, as there are many substitute products for mobile phones such as traditional telephones, or the internet that provides possibilities of Internet telephones, etc. therefore, the mobile industry is highly competitive, and operation in the industry would involve constant up gradation of technology and new product development.

SWOT Analysis

Figure 9 presents the SWOT analysis for Motorola. They are discussed in detail in the next paragraph.

Research and Development

Research and development (R&D) is a strong point for Motorola. It has significant capability in developing R&D and transforming them into new product, nurturing product innovation. There is constant interaction and exchange of innovation and ideas between its business segments that helps in constant development .

The R&D expenditure of the company was 14.4 percent of net sales in 2009, which increased from 13.6 percent of net sales in 2008 . However, due to cost reduction strategy the absolute R&D expenditure was reduced. Further, the company owns almost 9907 patents in the US, which are used in its operations.

The high stress on R&D has helped Motorola to develop new products and achieve excellence in developing new products. For instance, the company has developed WiMAX that helps users to transfer at fraction of the cost of transferring multimedia file in 3G . Further with Motorola’s new contract with Google to use its Android-OS platform for its Smartphones .

This is expected to change Motorola’s position in the Smartphone segment of the mobile device market. Further, Motorola also developed the new TETRA portfolio for its enterprise segment, in order to provide greater safety, security, and efficiency to its users. New features that have been included in this are “over-the-air programming”, voice, and TEDs .

Motorola is expected to launch tablet TV that would increase its offering in the home mobility segment . Therefore, Motorola’s strong position in developing new products through research in new technology and innovation will help it to enhance its competitive position in the market.

Strong Brand

The brand image of Motorola is very strong . Motorola has launched many marketing campaigns to enhance its brand equity. Motorola has recently launched its advertising campaign for Motorola DEXT with MOTOBLUR campaign . Therefore, in order to remain competitive at all price points and maintain brand awareness to all customer segments, Motorola develops mobile devices available at all price points.

In order to create greater degree of brand equity, Motorola does direct to consumer promotion in order to emphasize on Motorola brand. The advertising expenditure of the company amounted to $412 million, $790 million, and $1.1 billion in 2009, 2008, and 2007 respectively . Further customer targeted advertising helps the company to achieve greater brand recall and creates a more positive and strong brand image.

Strong Liquidity

The company has a strong liquidity and balance sheet. As stated in it Annual Report, 2009: “We remain very focused on the strength of our balance sheet and our overall liquidity position. We believe we have more than sufficient liquidity to operate our business.” In 2009 cash and cash equivalent, that the company held was $2.9 billion.

Recent Acquisitions

The home and network mobility segment acquired assets of “Zhejiang Dahua Digital Technology Co, Ltd. And Hangzhou Image Silicon” . this acquisition would help the company to develop and strengthen its position in the cable market, especially in China. Further, in 2008, Motorola acquired interests in vertex Standards Co. Ltd. and AirDefense Inc. for their radio and security solutions.

Motorola acquired Symbol Technologies, Good Technology, Netopia, and Terayon Communication Systems in 2007. These acquisitions are expected to help and enhance marketing and product development in their particular segments.

Weaknesses

Weak Product Portfolio

Even though Motorola is one of the largest players in the mobile device market, it has a very weak portfolio of mobile devices. In 2007 and 2008, there was a significant decline in the demand for Motorola phones due to weak portfolio. Until 2009, there was no mention of smartphones in the product portfolio of Motorola, despite the growing demand for Motorola phones.

Motorola has stressed more on feature phones, while the market trend was moving towards smart phones. Further, Motorola was late to anticipate the shift in the demand from voice centric devices to data centric devices due to the increased demand for 3G and smartphones. However, in 2008, Motorola tried to revive its product portfolio with increased devices like CDMA and iDEN handsets.

There was a slump in demand for Motorola phones in 2007 and 2008 due to inadequate model or product offering in emerging mobile segments like 3G and Smartphone segment. With the new Android software platform introduced by Motorola, it has just 8 phones that have web browsing facility and 7 of them have been recently launched on Android platform . Further, a lack of focus on smartphones had led to lower demand of Motorola phones.

Further, Motorola phones were heavy on features, whereas lower on longevity. The mobile devices faced this problem. Further, there was a brand diminution as Motorola’s brand depleted.

They also made smartphones on Android and Microsoft platform . However, they failed to prevent revenue fall due to increased market presence and acceptance of non-traditional competitors like Apple, HC, Palm, etc. in higher end Smartphone market and South Korean players like LG and Samsung in lower-end market. This resulted in weak financial performance of the mobile device segment.

Negative Credit Rating

The credit rating of Motorola, both in short-term and long-term has been downgraded in 2009. Therefore, the company has faced problems in getting finance from third party due to low credit rating. The credit rating has been very low. This has created problems for the company.

Standard and Poor (S&P) has rated Motorola in non-investment grade for long-term debt . Rating given by Fitch and Moody’s Investor Research rated the long-term debt gave the lowest rating for investment and F-3 for short-term debt. This limited the access of Motorola to generate long-term debt. Further, this also limited the ability to generate performance bonds, bids, surety bonds, etc.

Opportunities

Next generation technology solutions

Technology convergence has provides greater ability to increase the ease of innovation. The company has entered into the next generation technology, with telecom providers stepping into the data services with increased broadband. Therefore, there is a convergence of the mobile devices from voice based to data based features. Therefore, growth in next generation mobile technology will ensure steady revenue.

Market Growth in Developing Countries

Developing markets like china and India have started to their expand their 3G infrastructure therefore providing new avenue for the mobile device industry.

New technology and 3G enabled devices are expected to become more in demand in these regions, thus, providing opportunities for investment in these regions. Growth opportunity that is offered in developing countries of Asia and Latin America will provide the vehicle of growth for Motorola.

Threats

High competition in mobile market

Industry competition is high in the mobile device industry, as there are many non-traditional players like Apple, HTC, Palm, etc. who have entered the higher end market, while others like LG and Samsung have captured a substantial market share in the lower-end price point.

Competitors in the higher end or Smartphone segment are Nokia, Apple, HTC, Palm, RIM, and Samsung. In the lower-end segment, the competitors are Nokia, Samsung, LG, and Sony Ericsson. Further, many mobile phone operators provide mobile phones under their own brand name like Alcatel, Virgin, Huawei, etc. therefore the market is highly competitive for Motorola.

Economic Slowdown

Economic slowdown in North America and Europe has crippled many industries. Sluggish growth in most developed countries in 2009 led to a lower product demand in both 2008 and 2009. Economic slowdown is expected to continue to reduce demand for products and services in near future.

Uncertain political condition in Middle East

Middle East comprises of 6 percent of the net sales of Motorola. Further, it has a plant in Israel. However, political and terrorist problems in the region may lead to disruption of production, as well as reduce demand in the region. This is expected to reduce the demand for Motorola products largely.

Competitor Analysis

Competition in the wireless mobile handset market is very high with competition from non-traditional players increasing. Competitors in the higher end or Smartphone segment are Nokia, Apple, HTC, Palm, RIM, and Samsung. In the lower-end segment, the competitors are Nokia, Samsung, LG, and Sony Ericsson.

Further, many mobile phone operators provide mobile phones under their own brand name like Alcatel, Virgin, Huawei, etc. therefore the market is highly competitive for Motorola. In 2009, Motorola remained the fifth largest market shareholder. In 2009, the market share of Nokia was 7 percent in Smartphone segment . Motorola currently has a market share of 6 percent . The market condition in the mobile device market is highly competitive.

Recommendations

Marketing strategic recommendation

This section provides recommendations for Motorola based on the above analysis of the company. The strategic marketing recommendations that are derived are –

Motorola must develop Smartphones and invest more in R&D in order to enhance its product portfolio. Further, companies like Apple, HTC, and Palm have gained market share using touch-based smartphones. As the mobile device technology are moving to next generation technology based on data, new technology like HD programming and VoIP must be adopted by the company to remain competitive.

This technology has allowed operators to optimize their bandwidth. In mobile technology, the industry has shifted to UMTS and WiMAX technology. Therefore, Motorola must be ahead of them in order to gain a greater market share.

Motorola must concentrate on developing countries for increasing its market as new technological advancement in the developing countries provides a greater market. Further, the North American market is the largest market for the company. The GDP growth of the US, which is Motorola’s largest geographic market, was just 1.1 percent in 2008 and 2.6 percent in 2009. That in Canada was just 0.4 percent in 2008 and 2.3 percent in 2009.

The Euro region grew by just 0.8 percent in 2008 and 4 percent in 2009. Slow growth rate led to weak consumer demand in the developed countries leading to reduced demand. Therefore, the company should concentrate on the market of the regions where the economic recession has not strongly affected consumer demand, and this is observable in developing countries like India and China.

The brand equity of Motorola has depleted considerably due to the lack of strong software base of its hit model Razr. Therefore, product development and targeted advertising must be done in order to regain brand equity. Strong brand equity will help in market penetration and product demand.

In order to remain competitive at all price points and maintain brand awareness to all customer segments, Motorola develops mobile devices available at all price points. Brand equity can be increased by increasing direct to target consumer promotion in order to emphasize on Motorola brand.

The customer targeted by Motorola should make different products for different targeted segments. For instance the young segment below 25are more interested in multimedia phones, and other data services like MMS, SMS, game, song download, etc.

Whereas, the people above 35 and below 60 may be interested in interested in smartphones, while older customer segment want voice based, basic mobile phones. Therefore, customer targeting must be done and products should be made based on the specific need of the target segment.

Marketing tactical recommendation

The tactical strategy that the company must undertake as follows:

1. Motorola targets both the lower and higher-end customer segment. Customer segmentation must be done such that the products are targeted t the right kind of customers. For instance, in the US, people over 65 are essentially looking for voice-based handsets, while the age group below 24 years used their phones only for voice. However, the age users within the age groups of 19-24 used mobile phones for multimedia services like MMS, music download, etc. the age group between 35 to 44 years used data services . Therefore, the products must be targeted according to the customer demand.
2. The marketing mix adopted by Motorola should be as follows:
   1. Price – differentially placed and targeted to the right customer segment. The Smartphone pricing is vital, as the largest competitors like Apple, Palm , HTC, and Blackberry have prices their product pretty high, however, Nokia’s smartphones are moderately priced. Therefore, a more moderate approach to pricing can target a larger segment of the market, which has not yet used the more expensive iPhone of Blackberries.
   2. Promotion – Targeted advertising and promotional activities will help in building brand image. In order to create greater degree of brand equity, direct to consumer promotion is necessary to emphasize on Motorola brand. This would help the company to achieve greater brand recall and creates a more positive and strong brand image.
   3. Product – Innovation and widening of the product offering will give customers greater options to choose from and concentration on new technological solution like Android based smartphones and cloud-based MOTOBLUR. Android-based smartphones can become the prize winner for Motorola as Android has gained more market share in the US than Apple’s iPhone in the US .
   4. Place – Motorola must concentrate on specific regions like the developing countries of Asia and the US. Manufacturing should be dispersed and shifted to areas where cost of production is low. This would increase the possibility of increasing the profit margin of the company.
3. The company must concentrate on one area rather than being widely separated. Therefore, restructuring of the business segments’ is essential in order to help in more compact business administration. This will help in development and distribution of the products by reducing unnecessary bureaucracy.

Conclusion

The case study demonstrates the problems and issues faced by Motorola due to internal and external constraints. The industry, company, and competitor level analysis demonstrates the strategically imperative that the company must undertake in order to become more successful. The paper also provides significant recommendations for the company. The case study provides greater understanding of the current situation of Motorola and provides recommendations to solve the issues.

References

CED, 2010. Game changing at Motorola. CED. p.6.

Datamonitor, 2009. Global Mobile Phones. Industry Profile. New York: Datamonitor.

Gardner, W.D., 2008. Motorola Expected To Lose No. 1 U.S. Handset Position. Web.

Gohring, N., 2005. Mobile data usage is on the rise. Web.

Heater, B., 2010. Motorola, Verizon Working on Android TV Tablet. Web.

Motorola , 2007. Annual Report. Annual Report. Motorola.

Motorola Inc., 2010. Motorola Expands Low Teledensity WiMAX Deployment Options for Small Operators. Web.

Motorola Inc., 2010. Motorola Launches Advertising Campaign for MOTOROLA DEXT™ with MOTOBLUR™ in Mexico. Web.

Motorola, Inc., 2010. Motorola Launches Next Generation of Mission Critical Terminals With the MTM5400 TETRA Radio. Web.

Motorola, 2008. Motorola Annual Report. Annual Report. Motorola.

Motorola, 2010. Mobile Device & Home. Web.

Motorola, 2010. Mobile Phones. Web.

Motorola, 2010. Motorola Inc. 10-K. Annual Report. Motorola.

New York Times, 2010. Motorola Inc. Web.

O’Brien, K.J., 2009. Nokia Tries to Undo Blunders in U.S. Web.

Palenchar, J., 2010. Motorola Debuts Android Plans. [Online] EBSCO. Web.

Paul, I., 2010. Motorola and Verizon To Launch TV Tablet, Report Says. Web.

Shankar, V., 2008. Motorola Credit Rating Is Downgraded to Junk by S&P. Web.

Svensson, P., 2009. Motorola Loss Widens; Analysts See Worrisome Signs. Web.

Voight, J., 2010. What the duel between Google and Apple’s operating system? means for brands. Adweek, Vol. 51, No. 26. pp.10-12.

Appendices

Table 2: Historical Financial highlight of Motorola, Source: Annual Report 2009.

Table 3: Segment-wise performance.

Table 4: Geographical segment wise performance of Motorola.

Introduction

Motorola lost its No.1 position as mobile handset marketer in 2008 . The financial figures for Motorola have not been grim for the company since 2008. The performance of the company has been continually deteriorating. According to analysts, the company faced a loss of 11 cents per share, and its sales figures fell by 28 percent in 2009 .

Its sales were far behind the sales of closest competitors like Nokia, Samsung, and LG. The grim financial and sales figures indicate the ailing situation of the company and the with a highly fragmented handset worldwide market, Motorola faces dire challenge to regain its lost status.

Given the current bleak situation of Motorola, it is necessary to find ways to alter the current situation of the company. This paper is a case study on Motorola. The aim of the paper is to understand the present problems Motorola faces and the strategy it has taken to cater to its global market. The case will categorically try to identify areas where Motorola falls short to achieve growth. The paper will try to ascertain the reason why Motorola has been facing continual losses and will try bringing out ways it could recover from it.

The paper is divided into three parts. First, the paper will deal with the current situation of Motorola. The second section will analyse the current situation of Motorola. Based on this analysis strategic and tactical recommendations will be drawn for the company in the third section of the paper.

Current Situation

This section will demonstrate the current situation of Motorola. This section will begin with a brief background of Motorola Inc. and then describe the current situation. This will discuss the company’s financial situation and the steps the company has taken to revamp its present situation.

Business Background

Motorola provides mobile solution for a large range of technology based product and services. Their business divisions are divided into three segments – “mobile devices”, “home and network mobility”, and enterprise mobility solutions” . The mobile devices segment manufactures and sells wireless mobile handsets and smartphones.

The mobile business segment is the second largest segment of the company comprising of 32 percent of the total revenue in 2009 (see figure 1). The largest segment is enterprise mobility and third is home and network mobility with 36 percent of net sales. This segment “designs, manufactures, sells, installs and services digital media products and wireless access systems” .

The network business takes care of end-to-end cellular network, radio bases stations, and allied software and services. The target customers for this segment are mobile phone operators, television operators, etc.

Financial Situation

The financial condition of Motorola has been in doldrums since 2007. The company faced growth until 2006 but started to fall since 2007. The negative growth has become larger and larger every year as the revenue growth rate continued to fall further down.

Financial Analysis of Business Segments

Figure 3 shows the segment wise revenue earned by Motorola from 2007 through 2009. The mobile device segment posted revenue of $18988 million in 2007, which comprised of 52 percent of the total revenue earned by the company. However, in 2008 it fell to $12099 million, and a share of 40 percent.

It slipped further in 2009 with a share of just 32 percent and overall revenue of $7146 million. The home and network mobility segment saw marginal growth in 2008 when it grew from $10014 million to $10086 million. However, it too fell to $7963 million in 2009. Similar trend has been observed by the enterprise mobility solution that increased its revenue in 2008, however fell by 4.5 percent. Therefore, Motorola’s segment wise revenue earnings have fallen for all segments in 2009.

However, the largest fall has been faced in the mobile devices segment. Figure 4 shows the segment wise operating profit (loss) from 2007 through 2009. The data demonstrates that the mobile devices segment of Motorola has constantly posted operating losses from 2007 through 2009, and the magnitude of the loss has been increasing constantly.

Financial Analysis of Geographic Segments

Motorola has its operations in various countries like the US, UK, China, Brazil, Israel, and others. According to the geographical division of the business of Motorola, it has the largest market in the US (54 percent) as in 2009. The net sales growth in all the geographic regions has been negative in 2008 and 2009 (see table 1). The largest fall in sales revenue has been in Brazil, China, UK, and in other nations. The sales figures have marginally improved in the US with decline in sales becoming less from 20.7 percent to 19.54 percent.

Table 1: Geographic division and financial analysis.

The asset turnover ratio of the geographic division for 2009 and 2008 shows that the highest asset turnover ratio is for the other nations in 2009 with the ratio being 60.4, which increased from 9.1 in 2008. The lowest turnover ratio has been reported for the US, China, the UK, Israel, and Singapore. Low asset turnover in the regions mentioned may indicate that there is obsolescence and inefficiency in the regions. Thus, overall, a low asset turnover ratio indicates lower efficiency.

The share regional sales to net sales according to geographic areas of operation are presented in the following figure. The figure shows that the largest market for Motorola is the US. Europe, Asia, and Latin America form the second largest market for the company. This shows that the operations of Motorola are concentrated in one region i.e. the US.

The second largest market for the US becomes Asia (including China) forming 17 percent of the total sales. Therefore, the company may try to concentrate more on this region as Asian countries are developing very fast.

Performance Analysis

Figure 6 presents the performance ratio analysis of Motorola for the year 2005 through 2009. The analysis shows there has been a constant fall in the growth of revenue, and ultimately in 2007, the revenue started falling, as revenue growth became negative. This shows that the revenue performance of the company has been declining.

The return on sales ratio measures the amount of profit generated per unit of revenue. This shows that the company’s profit to revenue return has been declining since 2005. The return on sales was 12.97 percent in 2005 that decreased to -0.13 percent in 2007 that declined to -0.23 percent in 2009.

Actually, the situation improved in 2009 as the ratio fell to -14.08 percent in 2008. This indicates that the company had been facing adverse environmental conditions and had failed to withstand it. The financial crisis of 2008 had created a crunch in overall market and increased costs all over the world. This condition led to a decline in the profit to revenue ratio of the company.

The cost of sales and net sales of the company has declined. This actually indicates that overall production has declined, which may have been due to the adverse market conditions. The overall performance of the company has declined over the period. This is evident from the lowering of the performance ratios – return on sales and return on asset ratios.

Therefore, there are evident that internally Motorola was not strong enough to handle the flux in the market conditions that led to a rapid decline in the performance of the company. In the next section, the reason for the bad performance of Motorola is dealt with elaborately. The overall performance of the company has been bad and some reasons for it has been discussed in the next section.

Related marketing problems

Internal Problems

The main problem faced by the company is due to a weak product portfolio, especially for mobile devices. There was a slump in demand for Motorola phones in 2007 and 2008 due to inadequate model or product offering in emerging mobile segments like 3G and Smartphone segment.

With the new Android software platform introduced by Motorola, it has just 8 phones that have web browsing facility and 7 of them have been recently launched on Android platform . Further, a lack of focus on smartphones had led to lower demand of Motorola phones. Though the Smartphone market is expected to grow from 1.2 billion units in 2009 to 1.5 billion units in 2012 . However, Motorola stresses more on featured phones than on Smartphones.

External Problems

Uncertain economic and political conditions globally have increased the problems for Motorola. The financial crisis that crippled the western world and shrunk the US unemployment level had adverse effect on product demand for Motorola. Further the uncertain political condition in the Middle East. The manufacturing and engineering setup that the company has in Israel may be disrupted due to the political extremism in the region.

The global financial crisis led to a credit crunch resulting in reduced business from 2008 through 2009. Due to unavailability of credit, the Motorola customers could not obtain finance to run their business, and therefore, there was a lowering of the product demand. Therefore, global economic conditions had an adverse effect on the company performance. Telecommunication industry has faced a slowdown in 2009, which had an adverse effect on the financial performance of Motorola.

Another external problem observable is due to the convergence of the telecom, data, and broadband industry that was driven to advancement of new IP-based technology . This led to changes in the market, and Motorola, unable to understand the market developments, had negative impact on their business.

Strategic marketing solution

Industry Analysis

The marketing for Motorola and its business segments are divided into three business areas, facing different industry structure. However, the mobile market can be analysed using porter’s five forces model (see figure 8). The industry analysis shows that mobile industry has a high degree of competition within the industry, as there are a number of mobile device makers.

The bargaining power of the customers is high, as there are a large number of mobile brands, and customers get a large number of options to choose from. As there are few suppliers supplying key technology and raw material, the bargaining power of suppliers is high . For instance, Google supplies Android software platform to Motorola.

Google being the sole supplier of the software has a high bargaining power. This increases the bargaining power of the suppliers. Further, the threat of new entrants is high as there are new players who are entering the mobile market like Apple, Microsoft, HP, etc. the attractiveness of the mobile market is in its expected growth and the possibilities of mobile commerce.

The industry faces a high threat from substitutes, as there are many substitute products for mobile phones such as traditional telephones, or the internet that provides possibilities of Internet telephones, etc. therefore, the mobile industry is highly competitive, and operation in the industry would involve constant up gradation of technology and new product development.

SWOT Analysis

Figure 9 presents the SWOT analysis for Motorola. They are discussed in detail in the next paragraph.

Research and Development

Research and development (R&D) is a strong point for Motorola. It has significant capability in developing R&D and transforming them into new product, nurturing product innovation. There is constant interaction and exchange of innovation and ideas between its business segments that helps in constant development .

The R&D expenditure of the company was 14.4 percent of net sales in 2009, which increased from 13.6 percent of net sales in 2008 . However, due to cost reduction strategy the absolute R&D expenditure was reduced. Further, the company owns almost 9907 patents in the US, which are used in its operations.

The high stress on R&D has helped Motorola to develop new products and achieve excellence in developing new products. For instance, the company has developed WiMAX that helps users to transfer at fraction of the cost of transferring multimedia file in 3G . Further with Motorola’s new contract with Google to use its Android-OS platform for its Smartphones .

This is expected to change Motorola’s position in the Smartphone segment of the mobile device market. Further, Motorola also developed the new TETRA portfolio for its enterprise segment, in order to provide greater safety, security, and efficiency to its users. New features that have been included in this are “over-the-air programming”, voice, and TEDs .

Motorola is expected to launch tablet TV that would increase its offering in the home mobility segment . Therefore, Motorola’s strong position in developing new products through research in new technology and innovation will help it to enhance its competitive position in the market.

Strong Brand

The brand image of Motorola is very strong . Motorola has launched many marketing campaigns to enhance its brand equity. Motorola has recently launched its advertising campaign for Motorola DEXT with MOTOBLUR campaign . Therefore, in order to remain competitive at all price points and maintain brand awareness to all customer segments, Motorola develops mobile devices available at all price points.

In order to create greater degree of brand equity, Motorola does direct to consumer promotion in order to emphasize on Motorola brand. The advertising expenditure of the company amounted to $412 million, $790 million, and $1.1 billion in 2009, 2008, and 2007 respectively . Further customer targeted advertising helps the company to achieve greater brand recall and creates a more positive and strong brand image.

Strong Liquidity

The company has a strong liquidity and balance sheet. As stated in it Annual Report, 2009: “We remain very focused on the strength of our balance sheet and our overall liquidity position. We believe we have more than sufficient liquidity to operate our business.” In 2009 cash and cash equivalent, that the company held was $2.9 billion.

Recent Acquisitions

The home and network mobility segment acquired assets of “Zhejiang Dahua Digital Technology Co, Ltd. And Hangzhou Image Silicon” . this acquisition would help the company to develop and strengthen its position in the cable market, especially in China. Further, in 2008, Motorola acquired interests in vertex Standards Co. Ltd. and AirDefense Inc. for their radio and security solutions.

Motorola acquired Symbol Technologies, Good Technology, Netopia, and Terayon Communication Systems in 2007. These acquisitions are expected to help and enhance marketing and product development in their particular segments.

Weaknesses

Weak Product Portfolio

Even though Motorola is one of the largest players in the mobile device market, it has a very weak portfolio of mobile devices. In 2007 and 2008, there was a significant decline in the demand for Motorola phones due to weak portfolio. Until 2009, there was no mention of smartphones in the product portfolio of Motorola, despite the growing demand for Motorola phones.

Motorola has stressed more on feature phones, while the market trend was moving towards smart phones. Further, Motorola was late to anticipate the shift in the demand from voice centric devices to data centric devices due to the increased demand for 3G and smartphones. However, in 2008, Motorola tried to revive its product portfolio with increased devices like CDMA and iDEN handsets.

There was a slump in demand for Motorola phones in 2007 and 2008 due to inadequate model or product offering in emerging mobile segments like 3G and Smartphone segment. With the new Android software platform introduced by Motorola, it has just 8 phones that have web browsing facility and 7 of them have been recently launched on Android platform . Further, a lack of focus on smartphones had led to lower demand of Motorola phones.

Further, Motorola phones were heavy on features, whereas lower on longevity. The mobile devices faced this problem. Further, there was a brand diminution as Motorola’s brand depleted.

They also made smartphones on Android and Microsoft platform . However, they failed to prevent revenue fall due to increased market presence and acceptance of non-traditional competitors like Apple, HC, Palm, etc. in higher end Smartphone market and South Korean players like LG and Samsung in lower-end market. This resulted in weak financial performance of the mobile device segment.

Negative Credit Rating

The credit rating of Motorola, both in short-term and long-term has been downgraded in 2009. Therefore, the company has faced problems in getting finance from third party due to low credit rating. The credit rating has been very low. This has created problems for the company.

Standard and Poor (S&P) has rated Motorola in non-investment grade for long-term debt . Rating given by Fitch and Moody’s Investor Research rated the long-term debt gave the lowest rating for investment and F-3 for short-term debt. This limited the access of Motorola to generate long-term debt. Further, this also limited the ability to generate performance bonds, bids, surety bonds, etc.

Opportunities

Next generation technology solutions

Technology convergence has provides greater ability to increase the ease of innovation. The company has entered into the next generation technology, with telecom providers stepping into the data services with increased broadband. Therefore, there is a convergence of the mobile devices from voice based to data based features. Therefore, growth in next generation mobile technology will ensure steady revenue.

Market Growth in Developing Countries

Developing markets like china and India have started to their expand their 3G infrastructure therefore providing new avenue for the mobile device industry.

New technology and 3G enabled devices are expected to become more in demand in these regions, thus, providing opportunities for investment in these regions. Growth opportunity that is offered in developing countries of Asia and Latin America will provide the vehicle of growth for Motorola.

Threats

High competition in mobile market

Industry competition is high in the mobile device industry, as there are many non-traditional players like Apple, HTC, Palm, etc. who have entered the higher end market, while others like LG and Samsung have captured a substantial market share in the lower-end price point.

Competitors in the higher end or Smartphone segment are Nokia, Apple, HTC, Palm, RIM, and Samsung. In the lower-end segment, the competitors are Nokia, Samsung, LG, and Sony Ericsson. Further, many mobile phone operators provide mobile phones under their own brand name like Alcatel, Virgin, Huawei, etc. therefore the market is highly competitive for Motorola.

Economic Slowdown

Economic slowdown in North America and Europe has crippled many industries. Sluggish growth in most developed countries in 2009 led to a lower product demand in both 2008 and 2009. Economic slowdown is expected to continue to reduce demand for products and services in near future.

Uncertain political condition in Middle East

Middle East comprises of 6 percent of the net sales of Motorola. Further, it has a plant in Israel. However, political and terrorist problems in the region may lead to disruption of production, as well as reduce demand in the region. This is expected to reduce the demand for Motorola products largely.

Competitor Analysis

Competition in the wireless mobile handset market is very high with competition from non-traditional players increasing. Competitors in the higher end or Smartphone segment are Nokia, Apple, HTC, Palm, RIM, and Samsung. In the lower-end segment, the competitors are Nokia, Samsung, LG, and Sony Ericsson.

Further, many mobile phone operators provide mobile phones under their own brand name like Alcatel, Virgin, Huawei, etc. therefore the market is highly competitive for Motorola. In 2009, Motorola remained the fifth largest market shareholder. In 2009, the market share of Nokia was 7 percent in Smartphone segment . Motorola currently has a market share of 6 percent . The market condition in the mobile device market is highly competitive.

Recommendations

Marketing strategic recommendation

This section provides recommendations for Motorola based on the above analysis of the company. The strategic marketing recommendations that are derived are –

Motorola must develop Smartphones and invest more in R&D in order to enhance its product portfolio. Further, companies like Apple, HTC, and Palm have gained market share using touch-based smartphones. As the mobile device technology are moving to next generation technology based on data, new technology like HD programming and VoIP must be adopted by the company to remain competitive.

This technology has allowed operators to optimize their bandwidth. In mobile technology, the industry has shifted to UMTS and WiMAX technology. Therefore, Motorola must be ahead of them in order to gain a greater market share.

Motorola must concentrate on developing countries for increasing its market as new technological advancement in the developing countries provides a greater market. Further, the North American market is the largest market for the company. The GDP growth of the US, which is Motorola’s largest geographic market, was just 1.1 percent in 2008 and 2.6 percent in 2009. That in Canada was just 0.4 percent in 2008 and 2.3 percent in 2009.

The Euro region grew by just 0.8 percent in 2008 and 4 percent in 2009. Slow growth rate led to weak consumer demand in the developed countries leading to reduced demand. Therefore, the company should concentrate on the market of the regions where the economic recession has not strongly affected consumer demand, and this is observable in developing countries like India and China.

The brand equity of Motorola has depleted considerably due to the lack of strong software base of its hit model Razr. Therefore, product development and targeted advertising must be done in order to regain brand equity. Strong brand equity will help in market penetration and product demand.

In order to remain competitive at all price points and maintain brand awareness to all customer segments, Motorola develops mobile devices available at all price points. Brand equity can be increased by increasing direct to target consumer promotion in order to emphasize on Motorola brand.

The customer targeted by Motorola should make different products for different targeted segments. For instance the young segment below 25are more interested in multimedia phones, and other data services like MMS, SMS, game, song download, etc.

Whereas, the people above 35 and below 60 may be interested in interested in smartphones, while older customer segment want voice based, basic mobile phones. Therefore, customer targeting must be done and products should be made based on the specific need of the target segment.

Marketing tactical recommendation

The tactical strategy that the company must undertake as follows:

1. Motorola targets both the lower and higher-end customer segment. Customer segmentation must be done such that the products are targeted t the right kind of customers. For instance, in the US, people over 65 are essentially looking for voice-based handsets, while the age group below 24 years used their phones only for voice. However, the age users within the age groups of 19-24 used mobile phones for multimedia services like MMS, music download, etc. the age group between 35 to 44 years used data services . Therefore, the products must be targeted according to the customer demand.
2. The marketing mix adopted by Motorola should be as follows:
   1. Price – differentially placed and targeted to the right customer segment. The Smartphone pricing is vital, as the largest competitors like Apple, Palm , HTC, and Blackberry have prices their product pretty high, however, Nokia’s smartphones are moderately priced. Therefore, a more moderate approach to pricing can target a larger segment of the market, which has not yet used the more expensive iPhone of Blackberries.
   2. Promotion – Targeted advertising and promotional activities will help in building brand image. In order to create greater degree of brand equity, direct to consumer promotion is necessary to emphasize on Motorola brand. This would help the company to achieve greater brand recall and creates a more positive and strong brand image.
   3. Product – Innovation and widening of the product offering will give customers greater options to choose from and concentration on new technological solution like Android based smartphones and cloud-based MOTOBLUR. Android-based smartphones can become the prize winner for Motorola as Android has gained more market share in the US than Apple’s iPhone in the US .
   4. Place – Motorola must concentrate on specific regions like the developing countries of Asia and the US. Manufacturing should be dispersed and shifted to areas where cost of production is low. This would increase the possibility of increasing the profit margin of the company.
3. The company must concentrate on one area rather than being widely separated. Therefore, restructuring of the business segments’ is essential in order to help in more compact business administration. This will help in development and distribution of the products by reducing unnecessary bureaucracy.

Conclusion

The case study demonstrates the problems and issues faced by Motorola due to internal and external constraints. The industry, company, and competitor level analysis demonstrates the strategically imperative that the company must undertake in order to become more successful. The paper also provides significant recommendations for the company. The case study provides greater understanding of the current situation of Motorola and provides recommendations to solve the issues.

References

CED, 2010. Game changing at Motorola. CED. p.6.

Datamonitor, 2009. Global Mobile Phones. Industry Profile. New York: Datamonitor.

Gardner, W.D., 2008. Motorola Expected To Lose No. 1 U.S. Handset Position. Web.

Gohring, N., 2005. Mobile data usage is on the rise. Web.

Heater, B., 2010. Motorola, Verizon Working on Android TV Tablet. Web.

Motorola , 2007. Annual Report. Annual Report. Motorola.

Motorola Inc., 2010. Motorola Expands Low Teledensity WiMAX Deployment Options for Small Operators. Web.

Motorola Inc., 2010. Motorola Launches Advertising Campaign for MOTOROLA DEXT™ with MOTOBLUR™ in Mexico. Web.

Motorola, Inc., 2010. Motorola Launches Next Generation of Mission Critical Terminals With the MTM5400 TETRA Radio. Web.

Motorola, 2008. Motorola Annual Report. Annual Report. Motorola.

Motorola, 2010. Mobile Device & Home. Web.

Motorola, 2010. Mobile Phones. Web.

Motorola, 2010. Motorola Inc. 10-K. Annual Report. Motorola.

New York Times, 2010. Motorola Inc. Web.

O’Brien, K.J., 2009. Nokia Tries to Undo Blunders in U.S. Web.

Palenchar, J., 2010. Motorola Debuts Android Plans. [Online] EBSCO. Web.

Paul, I., 2010. Motorola and Verizon To Launch TV Tablet, Report Says. Web.

Shankar, V., 2008. Motorola Credit Rating Is Downgraded to Junk by S&P. Web.

Svensson, P., 2009. Motorola Loss Widens; Analysts See Worrisome Signs. Web.

Voight, J., 2010. What the duel between Google and Apple’s operating system? means for brands. Adweek, Vol. 51, No. 26. pp.10-12.

Appendices

Table 2: Historical Financial highlight of Motorola, Source: Annual Report 2009.

Table 3: Segment-wise performance.

Table 4: Geographical segment wise performance of Motorola.

Introduction

Motorola is a Chicago based firm that was started in 1928 as the Galvin Manufacturing Corporation. It is a top producer of handheld cell phones and markets wireless web devices. In 2003, phone gadgets contributed to 40% of the revenue and 60% of Motorola’s operating profits. Motorola is good in communication and technology creativity.

This has been possible through its strong branding and technological innovation. The firm strives to achieve breakthroughs in technology and to emerge at the top of its competitors (Hitt, Ireland, & Hoskisson, 2010). This paper seeks to explain the SWOT analyses of Motorola incorporation, as well as merits and demerits of Motorola’s strategies. Additionally, the essay identifies the levels of strategy in a firm and issues in business administration.

Salient opportunities and threats that exist in Motorola’s external environment

The external environment analysis helps an organization to know if its resources are enough to thrive among its competitors. Opportunities are favorable external environmental factors while threats are unfavorable external environmental factors. Brand is an important opportunity for Motorola.

Its brands are strategically located in the telecommunications market. This increases the chances of customers seeing and buying its products. Additionally, the firm has strong marketing and promotional tactics. It uses various marketing devices such as print media and TV. As a result, it is able to inform millions of customers about its products.

Another opportunity is strong ability and readiness to take risks. For instance, through creation of new products that enables Motorola to achieve a competitive advantage. The innovation of new products brings differentiation to Motorola therefore reducing the prices of its products. Some products like Telco TV have helped the firm to be better placed in the market.

The corporation has also been winning different contracts that enable it to supply its products in large volumes for a long period of time. This has also helped to boost its sales as well as performance. These opportunities have enabled the firm to grow and establish itself internationally. For instance, it has entered other markets like Taiwan and United Kingdom.

The main threat that Motorola faces is competition from new and foreign firms. For instance, in 2003, Japanese, Korean and Chinese businesses were entering the market to produce and supply cell phones. Their products were cheaper and of higher quality as compared to Motorola’s.

This threatened Motorola’s profit margins such that they were almost reaching one percent (Hitt et al., 2010). Additionally, the firm does not enjoy government protection against entry of foreign businesses in to the market. As a result, foreign market players have entered the market and are almost replacing Motorola.

Another threat is barrier to trade in some foreign markets. For instance, Motorola has been facing difficulties in penetrating Japan. Considering that Japan has already entered Motorola’s market, then blocking Motorola from entering Japan seems unfair. The other threat is from Sagem, which achieved the top most market position in France.

It has been difficult for Motorola to surpass Sagem’s performance as it is a very strong company. Its products are of high quality and affordable. Motorola also faces threat from environmental, health and safety rules. For instance, it is required to ensure that the environment is kept clean during its production process.

The costs associated with this are high and they affect the overall profits and performance of the firm. The credit ratings in the market are unfavorable to the company. High credit ratings mean that the company is charged more interest on loans. As a result, this cost is passed over to the consumer therefore reducing the competitive advantage over the other market players.

Motorola’s most prominent strengths and weaknesses

Strengths are internal favorable environmental factors while weaknesses are internal unfavorable factors of a business. Motorola’s strength is that it is a prominent company in provision of wireless handsets, communication devices and the single provider of iDEN network.

Motorola is a leading and strong market player. For example, it acquired and managed Kreaatel therefore gaining higher chances of entering European and North American markets. The other strength is the ability to manufacture large volumes of mobile handsets at a given time. This enables it to meet the market demand with ease. It is also able to enjoy economies of scale that come with large scale production. Additionally, it is able to surpass its competitors by ensuring that its products are readily available.

Motorola’s weakness is that the general quality of its business operations makes customers unsatisfied. This is because at times, the products happen to have defects which make them to function improperly. Therefore, the customers tend to opt for other technological devices which can function smoothly. Another weakness is that their employees are less skilled and trained. They also lack motivation.

They offer substandard services to the consumers because they may not know how to manufacture and operate the mobile handsets. This has reduced quality, customers and sales of Motorola’s products around the world. Another threat is weak profitability.

Motorola’s profits and market share have been dropping because of the weaknesses and threats it has been facing. This requires that the company adopts different strategies in order to regain its market position.

Advantages and disadvantages associated with each of Motorola’s strategic options

Motorola’s strategic plans have been made using intangible and tangible facilities. The intangible facilities are employees who aim at achieving the firm’s goals and experts who possess technological creativity. The tangible facilities are the products such as telephone handsets.

These intangible and tangible facilities enable the company to produce, market, sell and obtain income from its produce. However, this strategy is disadvantageous because there are many IT firms using it. Therefore, Motorola needs to identify and advance other tactics that will enable it to achieve competitive advantage.

Another Motorola’s strategy is the implementation of the new WiMaX expertise. This is an essential strategy for Motorola given that WiMaX has several advantages. It can take the place of many telecommunication facilities and cellular telephone networks. It can also provide internet facilities to Motorola products.

For instance, Motorola has installed WiMax in to its cell phones therefore making it an international performer in technological innovation. Introduction of WiMaX has made other big providers of communication devices to be on toes in order to offer similar facilities.

For instance, Nokia and Cisco Systems are aiming at providing WiMaX services to the mobile industry. However, the strategy of using WiMaX is disadvantageous. For example, there is increased competition since other mobile technology companies are starting to provide the same services.

Additionally, the costs required to use WiMaX are getting lower as more manufacturers turn up. This has increased supply and lowered selling price therefore affecting Motorola’s profits.

How the corporation’s strategy and organizational structure can be designed to solve the company’s strategic issues

There is stiff competition in the technology market. Therefore, Motorola is expected to fight for its place in order to endure and achieve competitive advantage above its competitors. It can do this by differentiation of its products and provision of competitive prices to its customers.

Since there are upcoming and innovative telecommunications providers, it is important that Motorola improves its strategies (Hitt et al., 2010). In order to remain competitive, Motorola can identify and implement different products that have not yet been launched by its competitors. Additionally, it can adopt bargaining power by purchasing its production materials at affordable price. For example, it can buy in large volumes in order to obtain discounts.

This way, it can be able to sell its mobile handsets at a price lower than its competitors. Motorola should also strive to create more products. Since the costs of producing digital products are reducing, customers and demand are also increasing. These customers aim at obtaining variety of products for comparison purposes. They also expect to buy quality products. This should motivate Motorola to increase its production capacity, create new products and advance its technology in order to take advantage of increasing demand.

How Motorola should proceed

In order to improve its strategic planning, Motorola should be highly innovative. This is in order to ensure that plans with the right procedures, mechanisms and technology are introduced. As a result, the future product needs of consumers can be met. The technological plans initiated by Motorola Corporation will need a mechanism of checks and balances which will remove market surprises and errors.

Road mapping is a strategic plan that Motorola can adopt because it can make the company to be different from its competitors. This road map offers a general procedure and database for every Motorola company to follow. This enables the companies to be in a position to advance, build and share their products, missions, visions and strategies with the whole corporation.

Additionally, it is possible to centrally solve issues that are facing various sections therefore reducing problem solving procedures and time. Road mapping can also provide strategic planning which creates a competitive advantage.

Various levels and types of strategy in a firm

Business level strategies are methods that firms use to carry out several operational roles. These strategies are used in order to assign duties and guidelines for proprietors, managers and employees. Some of these strategies are: coordination of unit functions, utilization of labor, development of competitive advantages, identification of market gaps and monitoring of product plans.

Issues in business administration

Human resource issues: These are matters or problems that face the employees. Some of them are: guaranteeing of open communications, balancing of stress and the labor force, setting up of responsibilities and conflict resolution (Bishop, 1991, p. 6).

Structural issues: These are basically the factors affecting the organizational structure. Some of them include competition, characteristics of customers and suppliers and the technological and regulatory environment. Although these issues can affect business, it is important to converse with the administration before changing the organizational structure (Bishop, 1991, p. 7).

Policy and Procedural Issues: This is mainly the authority that is either granted or earned by the employees or owners of a business. Authority entails application of control within a firm. For instance, there are procedures for approving and delegating of responsibilities and authority.

An organization can use Management by Objective (MBO) to coordinate and allocate authority and duties. Current Operating Reports should be made in order to give management and employees an updated schedule of expected goals and objectives (Bishop, 1991, p. 8-10).

Risk management issues: This involves identifying and solving uncertain factors that can affect the profitability or goals of an organization. It is the role of management to weigh the consequences of these concerns on the whole business. Some of these issues are: asset theft, computer offenses, scams and breach of laws (Bishop, 1991, p. 10).

Conclusion

Motorola Incorporation has various opportunities and strengths that allow it to establish a stable market position. Its opportunities are strong marketing and promotional tactics, strong brands which are strategically located, creative technological advances, different contract awards and strong ability and readiness to take risks. Its strengths are the ability to manufacture in large volumes and becoming a leading and strong market player.

On the other hand, Motorola faces threats from its competitors such as Japanese and Korean cell phone manufacturers. They sell related telecommunications devices and sell them at a lower-cost price. The other threat is barrier to trade in foreign markets as well as environmental, health and safety rules. High credit ratings deny Motorola the chance to borrow capital at an affordable rate.

As a result of these threats, Motorola has initiated competitive techniques such as WiMaX technology which has enabled it to attain a competitive advantage. There are various business level strategies that have been initiated in order to assign duties and guidelines for proprietors, managers and employees. There are also issues affecting business administration. These are human resource issues, structural issues, policy and procedural issues as well as risk management issues.

References

Bishop, J. (1991). Management Issues for the Growing Business: Emerging Business series. Web.

Hitt, M., Ireland, R., & Hoskisson, R. (2010). Competitiveness and Globalization, Concepts: Strategic Management Series.Concepts. Connecticut, U.S.: Cengage Learning.

Introduction

In the context of modern approaches to technology and improvement of the process of manufacturing, it is important that the practical managerial improvement tools have a firm theoretical basis. For that reason, there is a growing interest in a variety of different techniques used for improvement in industrial sectors in general and in Six Sigma, in particular. Alongside the successful implementation in the industrial and manufacturing practices of such world-leading companies as Motorola, it is especially significant to note that Six Sigma has a rather developed conceptual basis. Moreover, one of the important factors for its success in the industrial environment is that it relies on deliberated and precise set of steps and procedures.

Thus, considering consistency, theoretical background, and earlier practices of successful implementation of Six Sigma for the purposes of processes improvement, this set of tools remains an important object for research and investigation. The reason for that lies in the fact that researchers want to discover more opportunities for the application of Six Sigma in various environments and contexts.

Thus, the objective of this paper is to provide an exhaustive analysis of the application of Six Sigma techniques and DMAIC method. In particular, this paper is to describe the main framework of Six Sigma process, explore different organization that has successfully utilized the Six Sigma in their daily practices, identify how it can be used in the modern context, and discuss and analyze new techniques, tools, and methods accompanying the Six Sigma process.

The Six Sigma process

Despite the popularity of the Six Sigma process in industrial settings, the academic research concerning its elements and theoretical background began quite recently and gained a lot of adherents very quickly. The first important aspect of understanding Six Sigma and its process is to define its goals, role, and practical objectives. Thus, considering that Six Sigma is a system that was originally designed for industrial application, its main objective is to improve the production in various ways.

According to Linderman, Schroeder, Zaheer, and Choo (2003), in the case of Six Sigma, the main idea is that “improvement only occurs through incidental or implicit learning, that is, by chance events that are rarely understood” (p. 193). Although in some ways, such interpretation limits the theoretical basis of Six Sigma, it is also a key to its success in industrial settings. In other words, the methods and tools incorporated in the Six Sigma process adapt to the incidental structure of every particular setting and base the produced effect of improvement on the special features of a particular environment.

Linderman et al. (2003) also point out that, in the case of Six Sigma, “the creation of knowledge occurs through intentional or explicit learning that employs formal improvement methods, and intentional learning requires regulation of actions taken by organizational members” (p. 194). It means that specific goals of the company try to incorporate the human actions of the employees and everyone involved in the process.

In other words, the process of Six Sigma sets an objective of using human potential and specific human actions for the improvement of the industrial process by means of regulating and controlling it. It is equally important to note that Six Sigma relies on motivation as the main trigger of organizational improvement. The regulatory function, in this case, is an additional positive effect of the approach applied rather than a specific objective.

In such a way, the major role of the Six Sigma process is to develop the conditions for achieving organizational goals. The five major stages used by Six Sigma that include DMAIC method consider the controlling function as a final phase of the organizational structure in the working environment. However, only in the nurtured conditions of motivated employees and measured and analyzed industrial processes, it is possible to achieve particular organizational goals.

Five steps of a Six Sigma project

Alongside the goals and objectives of Six Sigma, it is paramount to describe and analyze its constituent parts, all the techniques and tools in the framework of the Six Sigma process. Particularly, the most commonly used by Six Sigma set of tools is the Define-Measure-Analyze-Improve-Control (DMAIC), which is mainly utilized for the purposes of improving certain products and services (Pyzdek & Keller, 2014, p. 237). This main principle refers to the 5-stage method with an underpinning conceptualization.

First of all, the stage of defining refers to the identification of precise goals set for improvement process. The most important goals that need to be considered refer to the needs of target customers, namely their expectations of a product or service, a set of features they would like to see in such product, as well as innovations that would increase their satisfaction with this product or service. Overall, it means that Six Sigma “advocates establishing goals based on customer requirements, not on internal considerations” (Linderman et al., 2003, p. 195).

The next goals to define are “the goals will be the strategic objectives of the organization, such as greater customer loyalty, a higher ROI or increased market share, or greater employee satisfaction” (Pyzdek & Keller, 2014, p. 238). Considering how highly the factor of motivation is estimated in the framework of Six Sigma, it is quite reasonable that the goals of employees and various aspects that improve their job satisfaction play an important role. The next step is the definition of a variety of goals related to the levels of operational and product research, design and development stages. In such a way, the goals of human actors of the process of production are prioritized over the operational and organizational objectives.

The next stage of DMAIC is measuring. According to Pyzdek and Keller (2014), the basic purpose of measuring is to find and establish “valid and reliable metrics to help monitor progress towards the goal” (p. 238). Among the tools that Six Sigma utilizes for creating their metrics, there are “process Sigma measurements, critical-to-quality metrics, defect measures and 10× improvement measures” (Linderman et al., 2003, p. 195). In particular, despite the attention to human factor and actions of both consumers and employees, there should be a reliable support of data, practical evidence underpinning plan for the improvement process.

The stage of analyzing in DMAIC is aimed at diminishing the possibility that there will be some crucial differences between the estimated goals and actual capacity of a certain product or project based on reliable metrics. At this stage of the application of Six Sigma, various means of data analysis and statistical research allow managers to evaluate how realistic the expectations of customers and employees, as well as project and operational goals are.

Following an exhaustive analysis, the most important stage of the process of Six Sigma is the stage of improvement. The system should be improved with consideration for finding better, more efficient, faster, or more convenient solutions. If a need for improvement is customer-related, new solutions and improved ways of dealing with a particular product or service should eliminate the problem.

In the situation, when a need for improvement concerns an operational or organizational level, the solution may require finding more efficient or cost-effective ways of producing a particular product, etc. However, it is also important to note that any change can only be justified with the use of analysis and data obtained at the previous stages.

Finally, the controlling stage of Six Sigma is, perhaps, the most complex in terms of fragility. Given the fact that new system should enhance motivation among employees or attend to emerging needs of target customers, there should be no imposition on human actions of the system. Control refers to the need of establishing some institutionalized model behind a new system. The changes may include “modifying compensation and incentive systems, policies, procedures, MRP, budgets, operating instructions and other management systems” (Pyzdek & Keller, 2014, p. 238). In other words, for the improvement that was achieved to stay stable, there should be a certain pattern or model behind the new system.

In such a way, with the implementation of DMAIC, it is possible, in the context of Six Sigma, to maintain the process of constant improvement. One of the most important features of Six Sigma is that it is unproblematic to utilize both at the level of entire organizations and at the level of single projects. Such approach also helps to minimize some of the risks associated with the adaptation of a new improvement strategy since it can be tested on single projects. Overall, the model of DMAIC provides a pattern for the continuous process of improvement that will allow managers to be more responsive to the needs of the systems at its different levels, with special consideration for human factors and their role in organizational improvement.

Successful utilization of the Six Sigma process

In the contemporary business environment, there is a growing demand for new tools and techniques for organizational improvement. One of the most significant specifics of the recently emerged systems and methods developed for organizational improvement is that they try to be more responsive to human factor rather than set industrial goals. In many ways, the success of Six Sigma in some of the major corporation relies on the fact that it was one of the first sets of improvement tools with such an agenda.

Among the companies that were the first to implement Six Sigma in their practices, there were “Motorola, General Electric, Boeing, DuPont, Toshiba, Seagate, Allied Signal, Kodak, Honeywell, Texas Instruments, Sony”, etc. (Kwak & Anbari, 2006, p. 711). In those companies, it showed results “beyond that what can be obtained through other means” (Antony & Banuelas, 2002, p. 21). In terms of cost-efficiency, one of the major nuances of the Six Sigma process is that “the return on investment for the improvement effort and the strategic importance of the process will determine whether the process should be improved and the appropriate target sigma level as a goal” (Linderman et al., 2003, p. 195).

In other words, the understanding of each part of Six Sigma as a level strategic importance should also include the element of cost-efficiency. Six Sigma attempts to rationalize the distribution of costs and benefits rather than cut the expenses for the development of a particular project or service because the latter approach does not result in the improvement of the quality. In such a way, different levels of Six Sigma denote variations in the strategic distribution of the company’s resources, cost and benefits analysis, and human factors.

Practical implementation of the Six Sigma process in Motorola

The very idea of Six Sigma originated in Motorola, Inc. The company conceptualized the theoretical basis of this system before utilizing some of the major tools and techniques of Six Sigma from 1987 until 1994. During the time of its active implementation, the areas, in which Six Sigma technologies were used included improvement in the management involvement and organizational commitment, smoothing and improving cultural change, refining organizational infrastructure, conducting tracings for an overall improvement of organizational culture and engagement, and project management skills (Antony & Banuelas, 2002, p. 21).

The major accomplishment associated with the step of defining is that Six Sigma allows managers to find a compromise between organizational needs and considerations for customer appeal and employees’ job satisfaction. In the case of Motorola, it was important for the company to stay compatible in the market of many rival electronics companies from Asia, and the advantage of Motorola was to enhance customer appeal by increasing the role of customers’ needs in the process of manufacturing (Schroeder, Linderman, Liedtke, & Choo, 2008).

Due to the stage of measuring, the assumptions obtained confirmation from reliable metrics. In such a way, the strategy of Motorola was based not on a hunch but statistical data. The stages of analyzing and improving were milestones for Motorola project because they are intermediately related to the quality of products. Those stages coordinated improvement with realistic expectations, and controlling stage of the project improved Motorola’s process control planning and strategy of monitoring all the systems.

Assessment of new techniques, tools, or methods

One of the key statements of Six Sigma is that “due to dynamic market demands, the critical-to-quality characteristics of today would not necessarily be meaningful tomorrow” (Antony, 2004, p. 304). In many ways, it means that the process of improvement needs to be continuous. One of the techniques of Six Sigma that can be used and developed is that final stage of controlling can eventually turn into the stage of defining.

Due to such possibility, the process of improvement can be more adaptive to a rapidly changing business environment. Another innovative technique that can be refined and implemented in various contemporary business models is the idea of finding consensus between consumer goals, operational goals, and estimated possibility of realizing both of them. A set of techniques used by Six Sigma for the stage analyzing can reduce various organizational risks associated with unrealistic expectations from the improvement process.

Conclusion

In the contemporary business environment, there is a growing demand for new tools and techniques for organizational improvement. Six Sigma improves the system by making it responsive to human factor rather than abstract operational goals. In many ways, the success of Six Sigma in corporations like Motorola relies on DMIAC technique, which can be useful in the modern context because it helps to reduce unrealistic expectation from the improvement process by taking into consideration statistical data and risks of human factors.

References

Antony, J., & Banuelas, R. (2002). Key Ingredients for the Effective Implementation of Six Sigma Program. Measuring Business Excellence, 6(4), 20-27.

Antony, J. (2004). Some Pros and Cons of Six Sigma: An Academic Perspective. The Total Quality Management Magazine, 16(4), 303-306.

Kwak, Y. H., & Anbari, F. T. (2006). Benefits, Obstacles, and Future of Six Sigma Approach. Technovation, 26(5), 708-715.

Linderman, K., Schroeder, R. G., Zaheer, S., & Choo, A. S. (2003). Six Sigma: A Goal-Theoretic Perspective. Journal of Operations Management, 21(2), 193-203.

Pyzdek, T., & Keller, P. A. (2014). The Six Sigma Handbook. New York City, New York: McGraw-Hill Education.

Schroeder, R. G., Linderman, K., Liedtke, C., & Choo, A. S. (2008). Six Sigma: Definition and Underlying Theory. Journal of Operations Management, 26(4), 536-554.