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Motorola Mobility Firm AuditStrategic Organizational AnalysisWyatt Chartrand and Justin WongSUNY Binghamton University Global Strategic Management Professor Londo 12/15/2015
Table of Contents
Executive Summary.................................................................................................................................................
Background and History.........................................................................................................................................
Issues to be Analyzed...............................................................................................................................................
Internal Analysys.....................................................................................................................................................
External Analysis.................................................................................................................................................
Alternatives………………………………………………………………………………………..4
Recommendations………………………………………………………………………………4, 5
Implementations
Concluding Analysis………………………………………………………………………………8
Appendix………………………………………………………………………………9, 10, 11, 12
Sources………………………………………………………………………………………13, 14
Executive Summary:
This report will analyze Motorola Mobility through the use of an in-depth internal analysis and a
briefer, external analysis. It will highlight three key issues within the industry, present feasible
alternatives to each, and underscore some implementations for the recommendations chosen
from the alternatives. Deriving information from the company’s finances and a variety of key
industry sources, this report will attempt to determine Motorola Mobility’s strategic vision and
mission for the short-term, mid-term, and long-term future with an emphasis on developing key
competitive advantages for the firm over its primary competitors.
Background and History:
Motorola Mobility is an American mobile device technology company, headquartered in
Chicago, Illinois. The company was formed on January 4th, 2011 when the separation of
Motorola Inc. was split into two organizations, Motorola Mobility and Motorola Solutions.
Motorola Mobility received the company's consumer-oriented product lines, which included its
mobile phone business and services for digital cable and satellite. Motorola Mobility’s primary
focus is on smartphones which run on the Android operating system developed by Google Inc.
In August 2011, Google Inc. acquired Motorola Mobility for $12.5 billion. This acquisition did
not last long, however, as they sold most of the company, except its patent, to Lenovo. Motorola
Mobility is now a subsidiary of Lenovo, a Chinese personal computer and mobile device maker.
Appendix Graphic 1 summarizes some key points in the company’s history.
Issues to be Analyzed:
Lack of profitability to date, along with a lack of returns for its parent company, Lenovo.
Highly fragmented product line with numerous different SKUs, leading to a perceived
lack of software support for each one.
Technical defects out of the box causing issues for different devices, most recently with
the Nexus 6, as well as manufacturing and quality control issues.
External Analysis:
Opportunities.
o Lenovo’s resources could be used to build competitive advantages.
o Untapped markets, particularly in developing countries.
o New acquisitions.
Threats.
o Competitors have larger market share.
o Lower priced represent intense competition, especially within the Chinese market.
o Government regulations.
Internal Analysis:
Strengths.
o Strong brand name.
o Product offerings are at relatively competitive prices.
o Lenovo, the parent company, is used to working with lower cost products.
o Skilled workforce.
Weaknesses.
o Lost some cell phone market share in recent years.
o Products are not user-friendly.
o Reputational damage due to defects with recent phones (Nexus 6).
Customer Analysis.
o Motorola customers are worldwide and growing.
o Top five are the U.S., United Kingdom, China, Japan, and South Korea.
o Demographics and purchasing habits.
Budget consumers.
Young, lower- and middle-class.
18-24 age range.
Younger consumers are multitaskers.
Emphasis on features.
Older consumers have much more functional view.
Alternatives:
Lack of Profitability:
Pursue newer, more modernized marketing strategies.
More aggressively compete on quality alongside competitors such as Samsung and
Apple, Inc., in addition to keeping costs as low as possible.
Fragmentation and Lack of Support:
Consolidate the number of devices.
Invest in better aftermarket support and software updates.
Product defects:
Invest in better quality control, manufacturing processes, software development.
Product redesign/streamlining.
Recommendations:
For Motorola Mobility’s lack of profitability, we recommend that they implement a two-
pronged strategy focused on quality and cost leadership.
o They should compete better with competitors such as Apple, Inc. and Samsung on
quality. Even though they have strong brand loyalty among many customers,
many others see the products as not quite as good as Apple’s or Samsung’s
flagship devices. We do not feel that a strategy solely consisting of a marketing
facelift for the company will yield long-term profitability.
o They should also develop cost leadership in regards to manufacturing the cellular
devices themselves. This will help boost their margins, and, by extension, their
profitability. Our third recommendation (resolving product defects) also doubles
as a strategy to reduce costs in the longer run, which will be addressed later.
In regards to Motorola Mobility’s highly fragmented and therefore weakly supported
product line, we recommend primarily investment into better aftermarket support
services.
o Instead of only releasing one minor update for a major phone before discontinuing
support for it, similar to the Moto E, they should continuously support products
until that line is completely discontinued and strategically removed from support.
Support in the form of software updates should be extended greatly for
moderately older phones to build customer satisfaction and ceased only when
necessary.
o Other support infrastructures should be extended beyond software updates, such
as customer support services for previously released phones and accessories
support (such as for protective cases).
o Given that there are different markets attached to each different product line, we
do not recommend heavy consolidation of different product lines, as they each
service different target market (low-end to high-end). Some narrowing may be
necessary, however.
For the product defects and technical issues Motorola Mobility’s phones frequently
suffer, we believe that they should pursue better product control.
o They should implement more stringent quality control measures over their
products to ensure technical reliability.
o Maintain tighter control over its manufacturing processes.
o Develop and maintain better control systems on its software development to avoid
bugs.
Please refer to the Economic Logic Model on the following page for our ultimate
rationale behind these recommendations and their financial feasibility.
Implementations:
Lack of Profitability
o Invest into R&D to develop products of comparable or better quality.
o Obtain financing from short-term and mid-term bonds and loans.
o Acquire existing companies that provide the raw materials to lower product costs.
Vertically integrate to ensure future success as raw materials continue to
go up in price.
Fragmentation and Lack of Support
o First Year.
Narrow the product line somewhat to model that of Apple’s and
Samsung’s.
Create new product lines less frequently to avoid brand dilution.
Create a new division that focuses solely on post sale support.
Split that division into software and hardware segments.
o Third Year.
Focus on top-selling products and continue to provide more resources to
further fuel this success.
o Product defects.
Develop a team that will monitor quality control periodically and
incentivize manufacturers for high quality output, and provide
disincentives for lower quality output.
First Year.
Start by monitoring the factories that are producing the material.
Put policies into place that would incentivize factory managers to
promote quality.
Third Year.
Develop better strategic partnerships with the factories producing
high quality material.
o Please refer to Appendix Graphic 4 for a brief timeline summary of our
implementations.
Expected Financial Results:
Because Motorola Mobility is a subsidiary of Lenovo, no currently released financial
documents have been released separately apart from Lenovo. The following figures are
based on 2011 information from Google Finance, as no current 10K forms or other
official financial documentation is available. An income statement, balance sheet, and
statement of cash flows from Google Finance are attached to the end of this document.
All figures are in millions USD. Based on Motorola Mobility’s 2011 financial
information, we found the following:
o Total revenue was $13,064.00 and the cost of revenue was $9,747.00.
o The growth rate for their revenue between 2010 and 2011 was 12.28%.
o Using this growth rate plus a conservative 5% premium assumed for our
recommendations, the growth rate becomes 17.28%.
o Thus, the projected revenue is $15,321.00.
o Building in a 5% reduction in cost of revenues based on our recommendations,
the cost of revenues becomes $9,259.00.
o The firm is thus profitable at $6,062.00.
Concluding Analysis:
Ultimately, we believe there are three key issues facing Motorola Mobility that necessitate
greater attention than any others—lack of profitability to date, fragmented product line leading to
a lack of support, software and otherwise, and product and technical defects. Our
recommendations for these, respectively, are competing on quality and controlling costs,
extending product support infrastructures, and investment and development of better quality
control measures. These should be achieved using a mix of debt financing, vertical integration
strategies, and improved hiring strategies similar to those of Amazon’s to build up a leading
quality control team. We project a 5% increase in revenue and a 5% decrease in the cost of
revenues as a result of these implementations. Please see Appendix Graphic 3 for a summary of
this text.
Appendix:
Graphic 1: Background and History Summary
Graphic 2: Economic Logic Model
Graphic 3: Summary Graphic
Compete on Quality and
Reduce Costs
Implement Improved Quality Control Measures
Develop Better Aftermarket
Support Infrastructures
Graphic 4: Implementations Summary
*Financial information from Google Finance attached separately on the
next page. They are not included in the Table of Content’s pagination.
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