Motorola: China Experience Nathan Bentley, Sultan Alkhuzam, Qiaotian Li, and Chenlin.
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Transcript of Motorola: China Experience Nathan Bentley, Sultan Alkhuzam, Qiaotian Li, and Chenlin.
Motorola: China Experience
Nathan Bentley, Sultan Alkhuzam, Qiaotian Li, and Chenlin
Outline• Company Background • Cultural Background• Industry Analysis• Marketing Strategy• Customer Analysis• Competitors • SWOTT Analysis • Discussion Questions
Company Background• In 1928, Motorola
was founded by Paul V. Galvin in Chicago, Illinois
• Portable radio transceiver model SCR-300
Company Background, contd.• In 1958, Motorola started to provide radio
equipment for most NASA space flights • In 1974, Motorola sold its color television receiver
business• In 1999, Motorola merged with General Instrument
Corporation• In 2000, Motorola offered the world’s first
commercial GPRS cellular network
Company Background, contd.• Motorola has continued to grow (2004 sales in
US were $31.3 billion)• Ranked 200 on the Fortune 500 in 2008 with
sales of $36.622 billion
China• In 1987, Motorola entered China when it opened its
first office in Beijing• In 1992, Motorola set up Motorola Electronics Ltd. in
Tianjin• Motorola has 1 wholly-owned factory, 1 holding
company, 8 joint ventures, 18 R&D facilities, and 26 sales offices in China
Company Background, contd.
Product Line of Motorola in China• Beeper-Pagers (BP machine/Call machine)• Mobile Phones (DaGeDa/Brick)
Company Background, contd.
Company Background, contd.
• Two-Way Radios • Wireless Communications Facilities • Semiconductors • Automobile Electronics
Development Strategy• ‘‘Win-win or two + three + three” strategy• ‘Two’-- a global production base and a R&D base • ‘Three’-- three times US $10 billion• ‘Three’-- digital trunking and iDEN / semiconductors /
broadband and wireless communications
Company Background, contd.
Cultural Background
Chinese Think of Cellphones As:
• Fashion Accessories• Part of a Digital
Outfit
• Send text messages• Access the internet • Listen to music• Take pictures• Show personality
Chinese Use Cellphones To:
Considered When Purchasing:
• The number of pixels of the camera• The acoustics of the mp3• The internal memory capacity• The design• The ring tone
Industry Analysis
• Overall Market Analysis– Market structure– Market characteristics
• Brand Attention Analysis– Overall market– Segmented markets – Price structure– Pixel structure
• Wireless Service Providers: • Only two mobile operators in China: China Mobile
(69%) and China United Telecommunications Corporation--UNICOM (31%)
Market Structure
Market Structure, contd.
Investigated manufacturer
Best sold Area
36.84% South
21.05% East
15.79% North & Middle
5.26% East north & South west
Source: ZDC
• Distribution: Major department stores and retail outlets provide key locations for distribution
Market Structure, contd.
Market Characteristics
• High pixel camera phones continue to heat up • Smart phones have become mainstream
Brand Attention AnalysisOverview• Overall Market -Nokia is the industry leader. Sony E and Samsung have been in the fight of the
No.2. Motorola is the No.4 brand.
• Market Segments -Smart phones, music phones, and camera phones have become popular.
• Price Structure -The price range of 1000-2000 is still the mainstream. Samsung and Nokia are
competitive in this price range.
• Pixel Structure -Two million pixel mobile phones is the mainstream. High-megapixel phones will
be a trend.
Overall MarketThe Distribution of Brand Attention
Source: ZDC (Internet consumption research center)
Overall marketAttention comparison of different products
Music phone Smart phone 3G phone camera phone
Attention proportion
Source: ZDC
Market Segments Brand Ranking
Top 10 music mobile phone Top 10 smart mobile phone
Ranking
BrandAttention
proportionBrand
Attention proportion
1 Nokia 68.1% Nokia 69.3%
2 Sony Ericsson 10.2% Samsung 6.8%
3 Motorola 6.5% Motorola 6.6%
4 Samsung 5.9% Dopod 6.5%
5 Lenovo 2.7% Sony Ericsson 1.8%
6 Dopod 1.3% M8 1.7%
7 Oppo 1.2% HTC 1.6%
8 LG 1.1% Sharp 1.13%
9 Sharp 0.9% blackberry 1.08%
10 Blackberry 0.7% Lenovo 1.07%
Source: ZDC
Price StructureThe attention distribution of different price ranges
Below 1000 Yuan 21.4%
4001 to 5000 Yuan 4.3% Above 5000 Yuan
3.1%3001 to 4000 Yuan 7.8%
1000 to 2000 Yuan 37.1%
Source: ZDC
Price Structure Brand Ranking by Price Range 1000-2000 Yuan 2001-3000 Yuan
Ranking BrandAttention proportion
BrandAttention proportion
1 Nokia 44.4% Nokia 69.3%
2 Sony Ericsson 13.7% Samsung 6.8%
3 Samsung 10.4% Dopod 6.6%
4 Motorola 8.0% M8 6.5%
5 Lenovo 5.2% LG 1.8%
6 LG 5.0% Motorola 1.7%
7 Dopod 3.2% Sharp 1.6%
8 Jinli 1.7% Sony Ericsson 1.13%
9 Blackberry 1.3% HIC 1.08%
10 OPPO 1.1% Quot 1.07%
Source: ZDC
Pixel Structure
Above 5 million 19.00%
1 million 8.10%
Source: ZDC
Pixel Structure Brand Ranking By Pixels
2 Million pixel 3 Million pixel Above 5 Million pixel
Ranking BrandAttention proportion
BrandAttention proportion
BrandAttention proportion
1 Nokia 51.9% Nokia 59.5% Nokia 64.2%
2 Motorola 8.5% Samsung 11.2% Samsung 20.45
3 Sony E 7.4% Sony E 7.1% LG 3.8%
4 Dopod 6.0% LG 4.3% Sony E 3.7%
5 Lenovo 5.7% M8 3.2% Sharp 3.4%
6 Samsung 5.2% Motorola 3.0% Tianyu 1.7%
7 Apple 2.7% Dopod 2.6% Dopod 1.5%
8 Blackberry 2.3% Lenovo 2.4% HTC 0.73%
9 LG 2.2% HTC 2.0% Motorola 0.72%
10 Amoni 1.5%Blackberry
1.0%
Source: ZDC
Customer Analysis
• Population in China is 1.3 billion.- Average income is $6,000- Household Spending:
Lowest 10% account for 1.6% Highest 10% account for 34.9%
• In 2005 there were 353 million subscribers
Customer Analysis, contd.
• In 2007, 547 million subscribers– 42% penetration- 84% of Chinese consumers prefer foreign cellophanes
Customer Analysis, contd.
• Segments of the Chinese Market by Region– The eastern region:
• 53% market share• High purchasing power
– The central region:• 22.5% market share
– The western region:• 24% market share
Rapid growth
Customer Analysis, contd.
• In 2000, cellphones were only for “affluent bosses”
• Other segments came into the market• Due to differences in demographics,
psychographics, and lifestyles, Motorola classifies consumers into four groups
Customer Analysis, contd.
Customer Analysis, contd.
• Heavy Users:– Businessmen/women– Professionals over age 30– People with a high income– Those who need them for their job– Early adopters (mostly)– Willing to pay extra for high quality– Significantly more loyal to certain brands
• Early Adopters = 13%
Customer Analysis, contd.• Early Adopters = 13%
• Technology Enthusiasts:– Mostly men– Highly educated– Aged 25-45– Eager to try new hi-tech device– Willing to buy cellphone accessories– Attached to other devices such as laptops
Customer Analysis, contd.
• Fashion Seekers:– Women ages 20-40– Care about appearance more than function
• Colors and sizes
– Celebrities on TV have large influence on them– Shorter product life cycle (technological change)
Customer Analysis, contd.
Customer Analysis, contd.
• Social Life Lovers:– Average income– Love to socialize and make friends– Price sensitive– The lowest profit margin– Basic users (looking for basic features)– Rapidly growing
Competition
• High due to rapidly growing market and emerging local brands
• As China is a socialist government, it gives advantages to local companies
• Competition is divided into:– Local companies (Chinese)– Foreign companies
Competition, contd.
– Nokia China– Nokia of Finland entered China in 1985– 22 local offices and 8 joint ventures and research
centers
Competition, contd.
Competition, contd.
– The largest player in the Chinese market
– Chinese market accounts for 15% of Nokia’s sales
• Nokia:– Chinese market is Target #1.
• 2005, 22% market share.• 3Q 2007, 35% market share.
Competition, contd.
Nokia Segmentation
• Korean Company
– In 1997 started in china– Three areas:
• R&D• Manufacturing• Sales and marketing
– Integration with the Samsung Group• Sharing internal resources
Competition, contd.
Competition, contd.
– Doesn't maintain clear focus on cellular phone products
– In 2005, 10% Market share– In 2007, 11.6% market share
• (Germany):– Started in China in1972 (manual telegraph reviser)– 28 local offices and 40 manufacturing plants– Invested more than 500 million in China– No longer in cell phone industry
Competition, contd.
• (Sweden& Japan):– 26 local offices, 10 Joint ventures, 4 wholly-
owned subsidiaries– Invested $600 million dollars in the Chinese
market– Chinese market is the largest market in the world
Competition, contd.
Competition, contd.
• :– In October 2001, a 50:50 joint venture began
between Sony Corporation and Ericsson– Targeted young women (niche marketing
strategy)– In 2007, the company had a 4% market share
• Segments the Market is Based On
Competition, contd.
• Local companies:– 25% of the overall market – The government strongly supports them– Large companies might buy them out– TLC has 6% of the market
Competition, contd.
Marketing Strategy• Known as “greenfield operation”• Began in 1987 when company entered Chinese
market• Its first goal was to set up a fully-functional,
wholly-owned subsidiary to give the company greater control and access to local markets
• This allowed for local production and global coordination
Marketing Strategy, contd.
• Investment and infrastructure support from the government in key economic zones also provided an incentive to locate there• Possibility of capturing large Chinese market
was also alluring • Since then, the company has tailored its
products to local markets • Motorola has also pursued local sourcing
Marketing Strategy, contd.
• In 1999, 65% of components were imported• By 2006, 69% of components were
purchased locally• Local sourcing provides Motorola with three
primary benefits:– Lower manufacturing costs– Less currency fluctuation risk– Ability to better cater to Chinese government
Marketing Strategy, contd.
• Company markets phones to four distinct segments:– Heavy Users– Technology Enthusiasts– Fashion Seekers– Social-Life Lovers
• Different ads are designed for each segment• Brand identification is not emphasized
SWOTT Analysis
Strengths
Expertise in developing cell phone technology
Extensive, locally sourced production facilities
Contracts with China Mobile, Cisco, and Nortel
Vast distribution networkReputation for quality, features, and designStrong brand recognition
WeaknessesNot proactive enough; complacentProduct quality, while good, is not as high as
Nokia, its biggest competitorCompany has developed advanced, highly-
differentiated products that may not be affordable to the fastest-growing segments of the burgeoning Chinese market
Ability to pay debt has diminished
OpportunitiesAccess rapidly growing market (China)Partner with greater number of distributors Capitalize on introduction of 3G data networksIncrease cooperation with governmentConsider buying smaller competitors if possibleCreate a cheaper phone for poorer areas of
China
ThreatsEmergence of numerous smaller competitorsLarger, stronger competitors such as Nokia and
SamsungChinese government rules and regulationsChinese government policy of promoting local
companies over their international counterpartsEvolving technology and product obsolescenceSlowing growth due to current economic
downturn
TrendsFull transition to 3G devices and networksEventual switch to 4G networks and devicesShift from “voice-centric” to “data-centric”
products (smartphones)Emergence of WiMAX, High-Speed Downlink
Packet Access, and Long-Term Evolution technologies
Better battery life and increased functionality
Question One
• Should Motorola react to the emergence of local brands by engaging them in head-to-head competition or through cooperation?
Question Two
• Faced with the expanding low-priced segment, how should Motorola, known as a high-end brand, position itself?
• Is the company's current branding strategy effective in penetrating this segment?
• If not, what kind of marketing strategy should the company follow?
Question Three
• What should Motorola do in order to effectively cut costs in developing a low-priced mobile phone?
The EndQuestions?