Motorola
Motorola mission is to provide integrated communications and embedded electronic solutions to the customer. This includes two-way radio, messaging, satellite products systems, networking and Internet-access products, semiconductor applications, and cellular communication products and systems. Motorola also manufactures and sells automotive and industrial electronics, printed circuit boards, energy storage systems, and ceramic/quartz electronic components (Multex.com, 2000, p. 1). Motorola strives to be the global leader in all aspects of telecommunication applications.
Maintaining the lead in the telecommunications industry requires innovation, motivation, and discipline to stay focused on the mission. Accomplishing the mission is extremely important to Motorola and its shareholders. Motorola has set four main objectives to keep the company focused as the industry leader in the new millennium.
The first objective is global leadership in core businesses. Motorola shifted from “product to market organizations” to putting the customers first. In addition, Motorola employed external leadership talent to key positions, and reassigned thousands of engineers to higher-growth businesses. The realignment of personnel increased the digital wireless telephone unit sales by 85 percent (Motorola, 2000, p. 16).
The second objective is total solutions through alliances. Many of these key business alliances are enabling Motorola to bring the Internet to the wireless arena. Motorola led the development of the Wireless Application Protocol (WAP), which standardized the way wireless telephones access and displays Internet content. WAP is supported by more than 175 of the world’s leading telecommunications and software companies.
Motorola has merged with General Instrument Corporation, which integrates broadband technologies to deliver the vast potential of video, voice and data networking to the home. The merger was valued at $17 billion dollars, and was completed on January 5, 2000. The merger also acquired the majority ownership of Next Level Communications, which provides digital subscriber line (DSL) technology. With the formation of SpectraPoint Wireless, Motorola and Cisco Systems has entered the market for broadband access through Local Multipoint Distribution Service (LMDS), which uses point-to-point microwave systems (Motorola, 2000, p. 17).
The third objective is platforms for future growth. This means building expandable telecommunications architectures upon which other companies can build and add value. This feature is extremely vital due to the fast pace of technological innovations. Some of these platforms include Aspiraä that deals with third-generation wireless systems to DigitalDNAä platforms designed to make Motorola a leader in the embedded electronics market place. Motorola has also teamed up with Lucent Technologies with the platform application of StarCore ä concerning digital signal processing (Motorola, 2000, p. 17-18).
The fourth objective is performance excellence. This is measured by providing first class service to customers and financial results. Customer complaints have decreased by 22 percent by implementing a customer-care training program to the sales staff. Financial results for 1999 are also in positive territory. Sales in 1999 rose five percent to $30.9 billon and net earnings were 817 million dollars compared to a one billion dollar loss in 1998. Motorola’s debt-to-equity ratio is improved to 10.1% in 1999 from 26.8% in 1998 (Motorola, 2000, p. 18-19). Performance excellence balances Motorola’s financial results with measures of customer and employee satisfaction, and market share.
Motorola has many strengths, the first and foremost is brand recognition. The name Motorola is known worldwide for quality products. Another strength is the P/E ratio, which is calculated by taking the price per share and dividing it by the earnings per share. The ratio for Motorola is at 68 times, compared to Motorola’s peer group at 62 times (Multex.com, 2000, p. 3). The higher the number shows the confidence shareholders have in the company.
Logistics is another asset that Motorola has in its favor. Motorola owns 126 facilities (manufacturing, sales, service and office), 65 of which are located in the United States, and 61 located in other countries. Motorola also leases 756 such facilities, 385 are located in the United States, and 371 in other countries. In Scotland, Motorola has three manufacturing plants, which employee over 6500 workers, and an additional 3500 workers employed elsewhere in the United Kingdom (Meares, 2000). Motorola has a strong foothold in the United States and overseas to produce and distribute products quickly and efficiently. .
Motorola has been on top of the telecommunications industry for many years. Being on top for a long time can lead to complacency. New innovations and equipment designs by other competitors have reduced Motorola’s market share. For Motorola to stay competitive they must employ the best personnel available and empower them to innovate and create new products and systems.
Another weakness is investing in questionable ventures. This happened to Motorola on the Iridium project. Iridium is company that provided satellite phone service for customers covering the entire globe. The Iridium system consisted of 66 satellites in orbit providing phone coverage no matter where a customer was located. This service is very appealing, but the down side to having this service was the price of the phone, which ranged from three to ten thousand dollars and the usage fee per minute was a little over ten dollars. For some customers this was the perfect service, but Iridium could not generate enough customers to stay solvent. The explosion of the wireless industry and low cellular coverage rates was the downfall of Iridium. Motorola had an 18 percent stake in Iridium and lost over two billion dollars. The Iridium satellite service was turned-off in April of 2000 and Motorola will gradually let the 66 satellites burn up in the earth’s atmosphere. Neither iridium nor Motorola could find a buyer for the Iridium system (Kaiser, 2000).
The state of the economy is in great shape and the technology industry is growing at a rapid pace. Motorola’s stock price has surged over a 150 dollars a share this year and is one of the most actively stocks traded on the NASDAQ (Multex.com, 2000). This insurgence of funds through the sale of stock is an excellent opportunity for Motorola to invest heavily in research and development and buyout smaller competitors. Motorola needs to show extreme caution when investing in research or buying out a competitor since they incurred a tremendous lost with Iridium.
Another opportunity Motorola can expand on is sales overseas. The European market makes up twenty-one percent of sales and Asia-Pacific region only makes up ten percent of Motorola’s sales (Motorola, 2000). These two regions are prime areas to increase market share, the technology boom in these areas are expanding rapidly just like the United States.
The booming economy has been favorable to Motorola, but many of Motorola’s competitors have also reaped the same rewards. Motorola’s four main competitors are Ericsson, Qualcomm, Nokia, and Advanced Micro Devices. Advanced Micro Devices primarily is a manufacturer of semiconductors. Ericsson, Qualcomm, and Nokia primarily deal with cellular phones and systems (Multex.com, p. 2). In fact, Nokia cell phones are taking the market share aware from Motorola due to the new modern designs and features. Qualcomm has developed and patented Code Division Multiple Access (CDMA) technology, which is what current cell phones use. Qualcomm receives royalties off this technology for every cell phone sold.
The government is also a threat to Motorola. The Federal Communication Commission (FCC) regulates and allocates bandwidth. Motorola and other firms must get permission to use certain frequencies. In other countries, the rules and regulations are more lax or they do not have any at all. That is why companies to include Motorola have many manufacturing plants overseas, so they do not have to deal with the stringent rules in the United States.
There are many strategies Motorola can implement to be more successful. Horizontal Integration is one strategy. Horizontal Integration seeks ownership or control over competitors. As stated earlier, Motorola has done this with the acquisition of General Instrument Corporation. This strategy can also backfire, as did the venture with Iridium. Extensive research must be done when a company is looking to expand.
Another strategy that can be implemented is the Join Venture strategy. This strategy involves two or more firms forming a separate organization. Motorola and Cisco Systems accomplished this by forming SpectraPoint Wireless. This strategy is good when risk is involved, losses or profits will be split between the two companies. However, if each firm can provide a unique service or product the other does not have, this alliance can be very powerful.
The Product Development strategy is another alternative Motorola can use to be successful. This strategy increases sales by improving or modifying existing products or services. Motorola has shown improvement with its customer service department and digital cell phone division, but Nokia and Qualcomm are gaining ground with their new products and ideas. Advances in technology happen everyday, if this strategy is not addressed, Motorola will be a follower instead of a leader.
For Motorola to maintain their position as a global leader in the telecommunications industry, the Product Development strategy needs to be implemented. Motorola’s main competitors are developing new products and systems, which are outperforming and selling Motorola products and systems. Money has to be allocated for research and development of new and existing products and systems. Once the quality and performance of the products and systems are improved, sales will increase and consumer and shareholder confidence will rise. This confidence will enable Motorola to focus on overseas sales, especially Europe and the Asia-Pacific region where sales figures are low. The Y2K bug has come and gone, Motorola needs to step up to the forefront of technology and not be the stereotypical brick and mortar company that got passed by in the new millennium.
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References
Kaiser K. (2000). Motorola still hopes to find a buyer for Iridium.
[On-line]. Available: http://biz.yahoo.com/rf/000501/ik.html
Meares R. (2000). Update2-Motorola spends $2 billion on Scottish chips.
[On-line]. Available: http://www.ameritrade.com/cgi-bin/login.cgi
Motorola. (2000). 1999 Summary Annual Report.
[On-line]. Available: http://www.mot.com/General/Finacial/Annual_Report/1999/99annual
Multex.com. (2000). Motorola, Inc. Stock Snapshot.
[On-line]. Available: http://www.multexinvestor.com/download.asp?docid=1346436&ticker
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Quicken. (2000). Motorola Inc. Company Profile.
[On-line]. Available: http//quicken.elogic.com/sec_key.asp?ticker=MOT
