Summary: Nokia vs. Motorola
However a few days before Thanksgiving, the turkey is killed and ends up as part of the feast for Thanksgiving. Tale explains that the turkey has ‘consistently learned from the past that life is good, but extrapolating from the past into the future can give the turkey a very wrong feeling of safety and knowledge about the future (Tale, 007). However, it should be noted that strategic planning doesn’t attempt to ‘predict the unpredictable’ it aims to ‘consider plausible alternative futures’ Monsoons, et al. 2009, p. 29). In relation to the case study, the theories of Tale and Miniature surrounding the inability to make strategic plans for the futures are strongly reflected. Particularly with regards to Motorola’s misguided investment into technology that was rejected by its end-users (satellite phones) and resulted in staggering costs, both monetarily ($2. 6 Billion) and physically/operationally (10 years velveteen) Cain ; Mathew, 2007, p. 5).
Strategy Strategy is the direction and scope of an organization over the long term, which achieves advantage in a changing environment through its configuration of resources and competence with the aim of fulfilling stakeholder expectations’ Monsoons, et al. , 2009). However, there are two problems with this definition; firstly that it doesn’t take into account the factor that strategy is ‘multidimensional’ (Humpback, 1980), for instance, Humpback points out that there are two levels of strategy that must be brought forward; corporate strategy and business strategy.
The corporate level looks at What business shall we be in? And business level looks at how we shall compete in each business’ (Chaffed, 1985). Secondly, the fact that Johnny’s definition is somewhat bias to the Resource Based View of strategy, in the sense that it deals more so with the internal resources and core competences, rather than looking at the market needs. Despite the differences in scholarly debate surrounding the definitive meaning of strategy, it is a necessity that a firm constantly evaluates its position in terms of reaching its objectives, both at corporate and business level.
Firstly because of the different levels of consumer demands, particularly in fast-paced technological driven industries such as that of mobile telecommunications terminals (MET) and secondly because if one remains myopic, such as Motorola in 1996 Cain ; Mathew, 2007, p. 5) by not having MET devices that supported digital services, the result will clearly be a loss in market share and damage to the brand.
Positioning School One of the most popular classical strategic theories is that of the Positioning school, which was a result of the amalgamation of the design school and the hat it is an outside-in approach rather than an inside-out approach as it seeks to understand the structure of an industry then restructuring its resources to fit’ into the industry. However, to form a better understanding of the Positioning School, it is necessary to comprehend both the design and planning schools. Design School Miniature and Lempel explained that the Design School was the dominant strategy in the sass’s (Miniature ; Lempel, 1999, p. 2) (Kay, et al. , 2000). This model of strategy ‘sees strategy formation as achieving the essential fit between internal strengths and weaknesses and external threats and opportunities’ (ibid), also known as a SOOT Analysis (Figure 2), whereby the senior management will frame ‘clear, simple and unique strategies in a deliberate process of conscious thought – which is neither formally analytical nor informally intuitive’ (ibid) so that all members of staff have the ability to employ the strategies.
Planning School Miniature and Lempel also explain that Design School grew in parallel with the Planning School, which explained that strategy means planning for the future, by using models such as Nations Matrix (Figure 3). Nations Matrix suggests that an origination, in attempt to grow, has to decide whether to introduce new or existing products into new or existing markets. This is where the Positioning School comes in, takes and pieces together, if you will, the better aspects of the Design and Planning School, resulting in an analysis of the external environment, followed by an internal analysis.
The organization would then restructure internally in order to market a product/service, therefore a fitting strategy. Models that support the Positioning school include Porter’s Five Forces (Figure 4), PEST Analysis (Figure 5) and the Boston Matrix (Figure 6). The first two models concentrate on the external environment of the business, whereas the Boston Matrix takes snap shots of the organization at specific times. Therefore the first two models would be used first, followed by the Boston Matrix as it would show a business where to harvest finances from and where to internally invest.
Using these models, the Positioning School helps a business decide where to fit in the future, however, a common problem with using these models is that in deciding to move forward, data can only be extrapolated from the past and somewhat of the present. This is problematic as the future doesn’t mean that it will be a continuation of the past and present, and can quite often lead a business down wrong paths, as explained earlier by the Tale’s example of a turkey.
There are three main objectives that derive from the positioning school, for which the firm, when adopting a positioning school approach will work towards; Cost Leadership, Innovator and Niche. In becoming a cost leader, the theory is that as a business is able to have the lowest costing items, thusly having the ability to drive competitors out of the market Acquire, 2010), more so when the ‘order-winner’ is based on price. Where the organization aims to be the market innovator, they drive the market forward by introducing new technologies, products, services etc. Insight LLC, 2011) In this case, the price for such innovative services/products tends to be higher than that of the industry average (Neurotransmitter. Com, 2009). When the organization’s objective is to therefore are able to charge higher prices, up until the point where the niche becomes more mass market and competitors grow. The Resource Based View The Resource Based View (REV), occasionally referred to as Strategic Capability Monsoons, et al. , 2009, p. 60) (Essen, et al. 2009) was coined by Berger Heartfelt (Heartfelt, 1984) and further developed by Jay Barney (Barney, 1991).
The central belief is that the basis for a sustainable competitive advantage (SAC) of an organization rests predominantly within the core competencies of the organization application of a group of resources that are at their disposal (Heartfelt, 1995). The VIRGIN Framework However, in order for a resource to be considered to be one that can gain SAC for an organization, it needs to fit into the VIRGIN framework (Figure 7). VIRGIN is an Acronym for Valuable, Rare, Imperfectly Imitable and Non-Substitutable.
The resource, whether it be tangible or intangible, must be all four in order gain SAC for the organization in deployment, meaning that each VIRGIN resource will have to tick all the boxes as can be seen in Figure 7. Within the VIRGIN framework, Valuable means that they must be a source of greater value in terms of relative costs and benefits. Rareness implies that they must be rare in the sense that they are scarce relative to demand for their service’ (Hellcat, 2007, p. 45) (Barney & Petered, 2003). However, this doesn’t Just depend on rareness within the realms of abilities and processes, but also depends n their functionality.
Imperfect immutability is achieved either through unique historical conditions, casual ambiguity and or social complexity (Barney, 1991). Lastly, in order for a resource of competency to fall within the bracket of being non- substitutable, it would have to show that there isn’t another product/service that could replace it in the foreseen future. Monika Monika, a Finnish based multinational organization predominantly operating within the telecommunications industry, which was said to be the 1 lath most valuable global brand with an operating profit hovering around $3. Billion in 1999 (Interbrain, 1999). However, as it explains in the case study, Monika hasn’t always operated within this industry, in fact, the organization operated within the Rubber boots, Cables Lavatory and Television markets. Through what some modern strategic theorists, such as Jay Barney, have presented, with regard to the types of lenses that businesses should be looked at through, it would be fair to say that Monika diversified by means of the Resource Based View of strategy.
Meaning that by ‘stretching’ their internal resources, Monika was able to diversify and become a technological based business. On the other hand, some classical strategists such as Mary Lou Shinned would argue the case that Monika was an opportunist and took a risk by restructuring the business to fit’ into the technological industry in the early ass’s. In debating as to whether Monika became what it is today (2005) through either the REV or Position School of strategy, another viewpoint would be that it wasn’t one option in particular that they used, in fact it was an amalgamation of both.
One can assume that Monika had seen a new market opening, restructured the business but kept its intellectual competencies and then stretched into the telecommunications industry. Of the three options, the likeliest would be the latter as it is the most practical and is somewhat unlikely that an organization would subject themselves to merely one strategic Monika at Present Monika, once moving into the telecommunications industry, it seems somewhat viable to say that they used more of an REV approach in venturing into the MET Industry, by stretching their internal competencies, namely manufacturing and telecommunications.
At present day, Monika, a vertically integrated organization, still manufactures the majority of their products in-house, allowing for better quality management and shorter lead times. This allows them to enjoy more flexibility with regard to research and design as well as suppliers not having greater bargaining powers. On the other hand, as Monika is manufacturing their products in-house, one can assume that their costs are higher than that of their competitors who outsource their manufacturing to organizations based in areas such as China and India.
However, the generic strategy for which they are working towards is being the market innovator as they are producing Mats with ‘novel materials, such as velvet and rubber’ Cain & Mathew, 2007, p. 4). However, at the same time, in a separate rake (low-end), Monika outsourced this production, allowing them ability to order large volumes at low prices (economies of scale), which resulted in rivals having difficulties in competing in the low-end market (ibid). Motorola Motorola Inc. The American based technology and telecommunications organization has always operated within the realms of telecommunications, but not necessarily Mats, as it can be seen in the case study Cain & Mathew, 2007). Motorola ‘pioneered mobile technology in the sass’s with car radios’ and went onto to be the market leader for ‘public safety radio networks’ and ‘space to earth communication or the Apollo programmer’. The organization, from what it seems, strategically used their internal resources and then stretched into Mats in 1983 with Dynasty.
Once Motorola moved into the MET industry with regard to mobile telephones, they dominated the market. Through REV it remained at the forefront of mobile telephony up until the mid-sass’s, whereby what can only be explained as myopia settling in. The reason for piecing together REV and myopia is due to the REV being an inside- out approach rather than an outside-in approach, meaning that there is little to zero rake research taking place, whereby there is only deployment of the organization’s VIRGIN resources into the chosen markets.
Motorola failed to move forward with the markets on more than one account, which damaged both cash flow and brand image; In the mid-sass’s Motorola failed to provide digital services, and when they did, the process was seen to be somewhat ‘painstakingly slow, by which time their rivals Monika and Ericson had flooded the market. Another account was the misjudgment of predicting the future of mobile telephony, whereby Motorola perceived that the industry would move towards mobile satellite telephones, which cost them ’10-plus years and $2. Billion’ Cain ; Mathew, 2007). Moreover, in early 2000, clearly misunderstood the European market’s wants, needs and desires when they launched poorly designed phones and completely ‘bombed’ in Europe. Motorola at Present After restructuring the business in 2004 into four separate business units, Motorola were able to ‘simplify their market focus and moved towards the innovator of the industry rather than their previous attempts of being the industry cost leader. Heir suppliers inability to reduce lead times, however, when the majority of manufacturing is outsourced, one should expect that the bargaining power of the supplier increases. This resulted in Motorola’s brand becoming severely damaged, which in turn further reduced their market share in the MET industry. What Differentiates Monika and Motorola? Both Monika and Motorola, more so Motorola, recognized that the MET industry would flourish at a very early point, they therefore were able to benefit from first- mover advantages and were well renowned and respected within the industry by both the retailers and the end-consumers.
In effect, from a very early point, the charity of MET technology laid in the hands of Motorola and Monika, which allowed them to control the market. However, much similar to any other market, it has grown and new competitors have entered the market over time, which has, in effect reduced both organizations’ market share and control over the market. Monika, in more recent times has Judged the market correctly, through more of a positioning school perspective as they have managed to understand the direction in which the industry is moving.
In doing so, it has then in turn allowed Monika to provide the retailers and in effect, the end consumers, with what they want. On the other and, despite Motorola’s misjudgment of the future MET industry, which in turn has lead to a drastic drop in market share, and damaged branding, due to the market still being quite young at this particular point in time, Motorola is still well respected within the industry by both the retailers and their competitors as a result of their technological intellect.
The Industry and Markets Using the case study, it would be fair to say that the industry that both Monika and Motorola operate within is the MET industry, however, the market in which they compete differs for every product that they have as each product is aimed at a reticular segment, whether that be broken down by region; which can be seen in 1999 where Motorola targeted the European mobile phone market, class; which can be seen by the release of the Motorola RAZZ in the fourth quarter of 2004 retailed at $500 apiece, etc.
At this point, it would be wise to explain that when mobile phones were first launched, they were targeted at wealthier business individuals and through time became a mass product which was a consumer need rather than a simple consumer want. Over time, the mobile phone, through the development of technology and fickleness of end users, has become an every day fashion item, and wows why the Motorola ‘Shark was not accepted in the European market in 1999 due to the ‘bulky design Cain & Mathew, 2007, p. ). This was because the Europeans preferred the sleeker designs that were provided by Monika and Siemens, it wasn’t due to the lack of technology as Motorola were able to provide the Shark mobile phones in three different technological formats. Several models can be used to aid in defining the structure of the MET industry that provide information from a macro environment through to a micro environment, which are a PEST Analysis, Porter’s Five Forces and a SOOT Analysis respectively. PEST Analysts
In analyzing a business and its environment, the first step is to understand the external macro environment in which the business operates in via a PEST Analysis, Technological’ Monsoons, et al. , 2009, p. 25). These factors, as they are external, means that the organization would be unable to influence them, it would only be able to maneuver around/with them. From a ‘Political’ standpoint, as the industry is a global industry, the most obvious barriers of businesses such as Monika and Motorola would be gaining the licenses for the frequencies such as 1 G, 26 and 36 (end of 2004) etc. Room the respective countries’ governments. Another possible barrier, or action that would hinder competition in the global economy would be the increase of import taxes on Mats. Under the Economic factors, Monika, Motorola and their competitors should aim to expand their ventures into growing markets such as China, India and even parts of Africa that are developing. With the newly introduced 36, people all over the world will be able to access the Internet, providing they have signal.
Furthermore, with regard to developing economies such as China and India, more businesses are moving their operations there as the labor costs are far lower than hat of the westernizes worlds and materials are cheaper. A possible option for Monika would be to move their operations there, or even out-source their manufacturing there. However, in moving into these new markets, the MET providers need to make sure that they don’t Just ‘stretch’ into the markets, as they will not necessarily have the same tastes. Socio-cultural’, Monika and Motorola need to overcome threats/ opportunities such as the European market being frugal, yet still wanting sleek designs to the extent that it soon becomes a fashion accessory rather than a device solely for communication. Furthermore, as the industry is global, each market (region) will have different segments, whereby each segment will have different wants, desires and needs. The most important factor that the organizations operating within the MET industry need to consider are the ‘Technological’ factors as this industry is first and foremost based on technology.
The first technological factor is the transition from 1 G to 26 and then 36, whereby users are able to operate Mats completely differently, where the MET effectively becomes a PDA. In misjudging the transition to digital networks, Motorola, as explained earlier lost $2. Billion and 10 years of development. Furthermore, the MET industry will is to expand, whereby users will use their devices for actions such as high quality recordable and photographic cameras, high-speed internet, downloaded content, streaming multimedia, touch screen ability etc.
Porter’s Five Forces The second step in understanding the environment in which the business operates within can be done via the Five Forces Model. Porter explains that this model is designed to show the structure of the industry, whereby the model provides a breakdown that analyses the bargaining power of both the customers and the applier, the threat of new substitutes and the threat of new entrants, which then in turn amounts to the competitive rivalry within the industry Monsoons, et al. 2009, p. 30). Beginning with the ‘Bargaining Power of Customers’, it would be fair to say that customers tend to have the power resting in their hands as there is more than one MET provider, in fact, there are several, all of which having different functions, designs, usability etc. The ways in which an organization such as Monika or Motorola can prevent a customer moving from one MET provider to another, is by being a cost means of relationship marketing.
Relationship marketing in the MET industry is often done through the retailers/service providers and it is therefore down to the MET providers to ensure that the retailers/services providers provide the customers with high quality service in order to retain and in turn, gain, customers. The problem is that, customers tend to be frugal’ Cain & Mathew, 2007, p. 5), especially the ‘Europeans’, yet they want to have the nicer things and then complain that they are too expensive.
With regard to the ‘Bargaining Power of the Supplier’, the power tends o lie within the hands of the customer where the customer is buying in very large quantities, as they have the ability to enjoy economies of scale. However, the smaller the order quantity, the larger the power of the supplier, and therefore prices are driven upwards per unit cost. In Ionians case, all production is done in house, and therefore there are no bargaining powers of suppliers.
This in turn allows for better quality management and quicker lead times, whereas if manufacturing is outsourced, such as Motorola, then quality is not, on average, as high as it would be if production was done in house. However, in outsourcing production, Motorola are able to benefit from reductions in cost and therefore become more of a cost leader than that of their competitors. However, as seen in the case study (p. ) it is evident that as Motorola have outsourced the majority of the manufacturing operations, it has, in turn resulted in Motorola having longer lead times, not being able to meet the fast- changing consumer needs and in turn causing severe damage to the brand. In In analyzing the ‘Threat of Substitutes’, it would be fair to say that the MET industry is constantly under threat from substitutable products, whether that be mobile loopholes with calendars, photographic and/or recordable cameras, MPH players, colored screens, internet accessibility, personal digital assistants (Pads), GAPS, Satellite Navigation etc.
The main reason for this is that the MET industry is driven first and foremost by technology and gadgetry. If an organization, operating within this industry, remains static, they will undoubtedly lose market share. As an assumption, the MET industry will move closer to multi-functional smart-phones where the end user will be able to pay, play, listen, text, call, surf the internet, unload and work. In effect, a device that was originally designed to allow one person to call another will completely change the way in which people live.
Another area that shows the structure of the industry under Porter’s Five Forces is the ‘Threat of New Entrants’. In order to compete successfully within this industry, large quantities of investment are required in both the hardware and the software. Additional barriers to entry that need to be considered are; technology needs to be either developed or licensed, which can be both time consuming and expensive, also, new entrants have to compete against the giants (Monika, Motorola, Samsung), where they have already developed ‘customer loyalty (Essen, et al. 2009, p. 15). However, Although the barriers to entry are high, it isn’t to say that entry is impossible: the like of LEG, an electronics organization has stretched through REV into the MET industry by using their core competencies. Similarly, Samsung has successfully entered the MET. The last force is ‘Competition’. Currently, the MET industry is highly concentrated between the top MET providers including Monika, Motorola, Samsung, LEG, Siemens, Sony Ericson, etc. Furthermore, the likes of market share.
Despite this market having high barriers to entry, due to the industry being driven by technology, it is likely that there will be newcomers entering the industry by means of innovation. SOOT Analysts In order to form recommendations to the businesses in question, the next step of analyzing the environment would be to look at the organization on more of a micro- environment by using models such as a SOOT analysis as it shows the organization’s internal strengths and weaknesses as well as the external opportunities and threats (Essen, et al. , 2009, p. 65).
However, as there has already been much discussion on Ionians and Motorola’s external environment, the SOOT will only analyses the Strengths and Weaknesses of both organizations. In analyzing Motorola, it is evident, from the case study, that their strengths lie within their technological intellect; they are respected amongst their competitors for their pioneering works within the MET industry, able to enjoy economies of scales as they purchase from suppliers in large bulk, their brand is globally recognized and that they are currently under new management, who seem to driving the business in the correct direction.
However, the weaknesses that come through are that they still don’t seem to have a clear understanding of the market, which direction it is moving in and the wants of customers due to employing too much of an REV approach, they outsource their production too much, which has caused several problems, especially with regard to lead times and the fact that their suppliers seem to have more bargaining power than they should.
Lastly, the largest weakness of Motorola is the fact that ever since the misjudgment of the digital transition, they never really have been able to suppurate their losses in terms of market share, which has in turn damaged their brand image.
With regard to Monika, their strengths are being known for having a solid operations structure, having a better understanding of the direction of the market in comparison to their competitors, despite not being able to enjoy economies of scale through all of their purchases, they still have managed to remain the market leader since 1998 and lastly, their brand is again, similar to Motorola, in the sense that it is recognized worldwide. On the other hand, Ionians weaknesses are; as they do not outsource a large proportion of their MET production, they end up being in a position where they are a ‘Jack of all trades and a master of none’.
Recommendations In drawing the report to a close, a strategic recommendation follows, which is aimed at both Motorola and Monika. However, before diving into the individual recommendations, the recommendations first look at possibilities for the entire MET industry. It would be fair to say that every organization is aware of the fact that the industry as a whole will move further into a digital network and satellite Mats will become virtually non-existent.
With 36 already commercially available in 2001 (Underworlds, 2005), the next move must be towards 46, where by download and upload speeds exceed that of 36. Furthermore, with the introduction of Personal Digital Assistants, the industry as a whole will move towards the ‘Smart-Phone’, whereby end consumers will be able to communicate with others will completely change. One can assume that this ‘Smart-Phone’ will have the ability to: access the internet, communicate over online social networks, email, fax, print, download, play, navigation etc.
In effect, the list is endless. The faster an organization can develop ND market this product, the far greater their chance to enjoy the financial rewards of being the innovative first mover. Moreover, with the westernizes world becoming more service based than underdeveloped countries, the end-consumer is becoming more demanding in terms of the service received. This in turn, brings the recommendations on to the next point, which is ‘Service Dominant Logic’ (SD).
Service Dominant Logic SD is focused on the interaction of the producer and the consumer and other supply and value network partners as they co-create value through collaborative processes’ (Lush ; Fargo, 2008). This is predominantly based on relationship marketing, meaning that a sales is not a one-off action, it is to mark the beginning of a loyal relationship between buyer and seller. In order to for the industry as a whole to move forward with a SD mind-set, they need to employ services that encourages return business and increases customer satisfaction.
A possible idea to put forward would be a program similar to Anapest, whereby music can be downloaded and stored onto a ‘smart-phone’ and the consumer can listen to the music whenever they please. This concept could develop to the stage where the used can download games, ideas and other applications, which leads to constant return business. Moreover, suggestions for more long-term objectives, I. E. 10 years plus, competitors should be looking into stretching their VIRGIN resources into markets that they can reach.
Examples of such reachable markets could possibly include augmented reality devices, tablet computers operating on digital networks, possibly portable computers etc. The idea is that organization become more creative and in effect, thinks outside the box. With regards to forming individual recommendations, Monika, in order to move award in the fast-developing MET industry, they need to further outsource production, which will allow them to further concentrate on their core competencies and enjoy further economies of scale.
This will also allow them to master their core competencies and continue being the innovators, to some extent; this can be interpreted as moving away from the Positioning School approach and more towards and REV approach. On the other hand, Motorola need to cease to be myopic by straightening through REV and need to move more towards the positioning school as they seem to lack clarity in consumer knowledge.
Furthermore, they need to either change their suppliers, or they need to move away from having such a large percentage of their products being outsourced as they are clearly having supply problems, whereby they are unable to meet the necessary lead time from designing to selling. Lastly, in moving more towards a positioning school approach, they need to remember that strategy, 70-90% of the time is through emergence and therefore need to constantly re-evaluate their positioning in terms of meeting their business and corporate objectives. Bibliography Essen, M. V. , Berg, G. V. D. ; Potteries, P. , 2009. Say’s Distinctive Capabilities. In: