Motorola in China
Executive Summary In a prominent level of integration worldwide economy today, people are more concerned about the phenomenon of intermediary corporations and multinational companies renounce the traditional research and development form in the host country where they have set up research and development centers. In this report I will discuss about Motorola’s reasons to enter China and commit itself as a local company. Moreover, I will talk about the localization strategies in china and its market position.
Apart from that I will illustrate the PEST and SWOT analysis of Motorola’s localization strategy in China.
Furthermore, I will discuss the characteristics of Motorola as the big emerging market in China. Table of content Contents Executive Summary2 Table of content3 Abbreviations4 Introduction5 Main body6 Reasons for Motorola to enter China6 Strategies adopted by Motorola to enter China. 8 Operation strategy of Motorola9 Framework analysis of Motorola operations in China10 India and China Global Trends12 Conclusion13 References13 Abbreviations PEST – Political, Economical, Socio-cultural, Technological SWOT- Strengths, Weaknesses, Opportunities, Threats SEZ – Special Economic Zone
CAMP – China Accelerated Management Program R&D – Research and Development IDEN – Integrated Digital Enhanced Network SARS – Severe Acute Respiratory Syndrome MNC – Multi National Companies ITO – International Trade Organization BPO – Business Process Outsourcing BRIC – Brazil, Russia, India, China GDP – Gross Domestic Product USD – United States Dollar SMIC – Semiconductor Manufacturing Internal Corp Introduction In 1987 Motorola established a delegate office in Beijing. It was dealing with exportation of telecommunications gear and semiconductor to China.
Due to the increase of competitions from other companies, Motorola decided to move some of its industrialized activities to China. In 1992, Motorola China Ltd was established and opened an industry in Tianjin. Motorola was the leading worldwide market in manufacturing advanced electronic system, communications components and semiconductors. The company mainly dealt with cellular, personal communication, defense and space electronics’ and computers and other many more electronics products. According to Wen-Cheng et al. 2010) due to its expansion on business in six continents, Motorola employed more than 142,000 people and maintain production amenities globally. Motorola had a elementary objective of priotizing customers’ satisfaction through quality, speed, technology and team work. Motorola succeeded to fulfill its objective in China because it understood the market and the culture of the people. It also maintained uncompromising reliability and focusing on an idea of a world in which everyone can attain full potential. However, in 2000’s Motorola started to experience a huge competition from the Chinese mobile handset companies.
Motorola’s market started to fall due to the increasing competition in the market. This led Motorola to raise its sales and market shares by introducing new strategy in 2002 in order to maintain its market. The strategy did not help as the matter of fact Motorola went on losing its market in China (Gaur and Cateora 2006). Main body Reasons for Motorola to enter China The growth of Motorola in China went proportional with China’s economic development and China’s involvement in the world economy. Establishment of Special Economic Zone (SEZ) in 1979 which stimulated investors mainly those which engaged in light manufacturing industries.
The foreign companies that decided to confine at SEZ were privileged to special taxes treatment and particular services like infrastructure (Mack, L 2012). Chinese market size, China was the very momentous market for the company. Motorola thought that it was important to establish its manufacturing base and center for its company research in China (Hedley, M 2012). Despite China’s complicated social and political environment, Motorola was able to achieve tremendous success. It made it possible to make a way into Chinese market and became the leading company in the Chinese mobile market.
It is said that Motorola paved its success due to the strategies it implemented and put into consideration of the people’s culture and the market. However, wealth of Motorola rendered the significance of the company to join to the Chinese market. In 2003 Motorola mounted up investment of $3. 4 billion which enabled the company to be the first in the list of foreign investors in China. It was also one of the biggest exporters from China- exporting goods worth more than $3. 5 billion (Gaur and Cateora 2006). Moreover, setting up a corporate image was another reason for Motorola to enter China and commit itself.
Implementation of personnel, business culture, materials, and marketing localization can establish company’s public image. This is seen when Motorola decided to move its delegate office to China and expanded its business into various segments. In addition to that, in structuring its brand among the Chinese, Motorola mounted different signs and advertisements in busy market places and televisions in order to make people aware of what they are dealing with. It also opened big stores in the market areas such as Shanghai and Beijing offering the latest mobile andsets models. Also, Motorola came up with an innovative notion named Motorola Towns which specifically dealt with giving an exclusive retailing experience to consumers. In these towns consumers could walk in and see for themselves mobile handsets and make a try outs of other technological gadgets for free. This system helped customers to get the knowledge about the most modern technological trends and attach them expressively with the company. However, this system helped Motorola to get feedback from the customers about its products (Wen-Cheng et al. , 2010).
Low cost of raw materials for production, Motorola provided technological support to its suppliers in order to get high quality raw materials for the production of their commodities. In doing so, it actively developed the suppliers from local areas to provide service to the company. Motorola made up a strong and reliable association with these suppliers so that they could produce raw materials which will enable Motorola to produce high standard commodities. Motorola got a full use of these suppliers as they came to establish their manufacturing base in China (Gaur and Cateora 2006).
Low cost of labor, Motorola Company made sure that it produces high quality of commodities with low costs. In doing so, it produced professionals from their own universities in order to comprehend the business and organization structure and rules and regulation. Chinese population, in the year 1987 the population of China was approximately to 1. 1 billion. Due to that fact, Motorola computed that it would get a huge opportunity for the market of its commodities as well as adequate manpower to manufacture the products for affordable and low cost (PubMed 1987). Strategies adopted by Motorola to enter China.
Motorola just like any other international company had its own strategies to enter Chinese market and make sure that it monopolizes it. And this is why at the start it set its industrialized facilities in China. For its success, Motorola adopted the five strategies which led to its remarkable achievements to conquer the Chinese market. The strategies are as follows:- a) Investment /Technology transfer. Technology transfer helped Motorola to constantly enhance the intensity of research and development in order to supply the country with the sophisticated communications solutions.
Motorola spent $120 million in Tianjin area for production of pagers, cellular phones and simple integrated circuits. Due to the expansion of its technology, Motorola established the second plant for the production of automotives electronics, advanced microprocessors, walkie-talkie systems and fabricated silicon wafers (Gaur and Cateora 2006). b) Management localization. Motorola came into sense that in order to minimize cost and increase its market’s share, it should employ more Chinese staff. The Chinese staff required managerial talents so that they could be competent in management.
To solve that problem, in 1993 Motorola established Motorola University to train the young staff about the international managerial situations. The University came to be the company’s training base as it dealt with communication technology and business management. At the end of the day, Motorola accomplished enormous success which led to its commitment to the people. It made sure that from seniors to the general staff were from local. As a result 90% of the staff was Chinese (Wen-Cheng et al. , 2010). c) Local sourcing.
Cost maximization was one big thing Motorola was trying to avoid; as a result it sourced from local firms. Training was important to the staff to develop their standard by broadening technological and managerial maintenance. Training enabled the local companies to raise their productivity and value of the commodities and even supported them to penetrate into the world markets (Gaur and Cateora 2006). d) Joint ventures/ co-operative projects. To expand its market in China, Motorola entered in 9 joint ventures with Chinese companies in order to increase its production capacity.
Joint venture helped Motorola to increase admittance into the Chinese market without launching more plants. In addition to that, Motorola was able to do some savings through joint ventures (Gaur and Cateora 2006). e) Brand localization strategy. Localization of the Motorola brand made it possible to hit the targeted groups. It localized the brand culturally so as to infiltrate the customers. The products with the cultural brand usually tend to integrate to achieve customers’ emotions of rejection from the elimination of foreign commodities (Wen-Cheng et al. 2010). Operation strategy of Motorola Motorola managed to defeat the Chinese market when it created and implemented the R&D strategy as their secret weapon in the Chinese market. The strategy was centered on technological advancement and innovations. Motorola carried out researches in the locale of communication software and semiconductors. The research conducted facilitated Motorola Company to create FLEX paging technology helped Motorola to come up with the highest quality of commodities which were durable and valuable.
Motorola also established labs for production procedure, analysis and software equipment on the increase of new technologies that would make China a high technology manufacturing hub. Furthermore, Motorola entered into research partnership with local universities whereby it could contribute equipments and give opportunities to college students to work as intern in the company. By doing this would enable Motorola to achieve the local country’s scientific and technological contribution and to respond to the host market demands and innovate near the production places (Wen-Cheng et al. , 2010).
To make their operations in the Chinese market better, Motorola instituted the Motorola University in 1993 in order to train the Chinese employees to become competent in the global managerial positions. The University had a training program called China Management Program (CAMP). The program was for the Chinese staff whereby they were trained on the job for 14 months which involved action learning, coaching and rotation of training of staff by using Motorola’s global facilities. The CAMP syllabus helped the Chinese to be trained about the market economy, value creation, business process design and benchmark.
Moreover, Motorola had to interview the staff in order to get the best ones for the job. It was important for the employees to know English as they were going to face the global market of which English language is the unifying language (Gaur and Cateora 2006). Framework analysis of Motorola operations in China Furthermore, assessment of external and internal environment of any organization is essential for its strategic planning. PEST analysis provides information that is useful to equalize the company’s resources and potentials to the competitive environment in which it operates.
PEST stands for political, economical, socio-cultural and technological factors. Motorola used the PEST analysis to illustrate how it managed to operate its business activities in the Chinese market. Political factor, China had a difficulty and unstable social and political environment but Motorola managed to penetrate the Chinese market and paved its way to being the leading company in the Chinese mobile handset market. Economical factor, Motorola had its reasons to enter China and dominate the Chinese market. One of the major reasons is the huge population of China which is approximately to be 1. 1 billion.
This factor stimulated Motorola as they were acquainted with the market of their commodities and availability of cheap labor. Moreover, social-cultural factor administered Motorola to perform incredibly in the Chinese market as they understood the local market and the Chinese culture due to its strategies it adopted. It localized the brand of its commodities culturally so as to gain access to the customers. Finally, technological factor Motorola advanced in research and development center in China called Motorola China Research and Development Institute in Beijing where technological advancement and innovation was focused.
The institute was concerned with researches in the areas of communication software and semiconductors. The presence of manufacturing procedure, analytical, and software and equipment labs for expanding innovative technology made China a high-technology production hub (Gaur and Cateora 2006). Apart from PEST analysis, Motorola made sure that it has managed to use the SWOT analysis to show its weaknesses, strengths, opportunity and threats from the internal and external environment. Strength, Motorola was the leading provider of wireless handset communication and broadband system.
In addition to that it was the solitary supplier of iDEN network infrastructure. Because of all that it became known to be the strong and famous in the market. Weaknesses, Motorola could not satisfy its customers as it produced low quality of goods, insufficient employees, diseases like SARS, fierce competition and lost of its prestigious customers (Gaur and Cateora 2006). Opportunities, strong brand, promotion strategies and risk taking through product modernization made Motorola to be well positioned in the market.
The hybrid products which were produced by Motorola enabled them to get a huge market and expand to other countries like Japan, Taiwan, France, Italy, United Kingdom and Hong Kong. Threats, lack of government protection against the outside competitors, competition from Japan as it produced durable products and sold cheap and sharing market with the foreign competitors. SWOT ANALYSIS DIAGRAMPEST ANALYSIS DIAGRAM WEAKNESSES (W) STREGHTS (S) FIRM FIRM Technological Socio-Cultural Economical Political OPPORTUNITIES (O) THREATS (T) India and China Global Trends
China and India being part of BRIC were able to become heir to globalization. Since the year 1980, China’s economy has been growing fast globally. Its GDP was USD 305 billion which led to be seen as the leading economy in the world. In 1980-2000, India made a step forward to the growth of 6% GDP. Due to their population size, India and China were both positioned in the emerging markets whereby China with 1. 3 billion population and India with 1. 1 billion (Needle, 2010). Talking about outsourcing worldwide with BPO and ITO, India and China maintained their dominance in the multi-sourcing trend.
India manage to secure a good position in MNCs as its labour force was well skilled, sociable government policies for foreign investment, steady political condition and English language expertise. All this proved that India sustained its dominance to both ITO and BPO markets. China as well boosted its forces on the global sourcing. It was seen that, India led China in the dollar value of Chinese software industry as it was twice the India’s. The Chinese government supported the local software industry and this took a huge part in enhancing the growth of Chinese industry (Oshri et al. 2009). Conclusion Apart from all the success, Motorola faced down falls in the early 2003 which led the company to be sold to the Shanghaibased Semiconductor Manufacturing Internal Corp (SMIC). The said reasons for the fall of Motorola were SARS outbreak which caused the plant to be closed for the fear of the spread of the disease. Moreover, the increase of competition in the mobile market caused Motorola. As Motorola was losing its shares in the Chinese market, the competitors were raising.
Furthermore, the excessive inventory of beyond 30 million handsets caused the price battles and discounts in the market and caused Motorola to fall by 10% in 2003 (Gaur and Cateora 2006). References Pearson (2004) Motorola in China. Available at: http://www. pearsoned-asia. com/comp/chow/instructors/preview/BS-Ch33. pdf (Accessed: 18 March 2012) Needle, D (2010) An Introduction to Business and its Environment. Myilibrary [Online]. Available at: http://0-lib. myilibrary. com. brum. beds. ac. uk/SearchResults. aspx (Accessed: 10 March 2012) Ghauri, P and Cateora, P (2006) ‘International Marketing’, Motorola in China.
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