Motorola China Experience Case Answers

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Case Study-Motorola China Experience

1. How should Motorola appropriately react to the emerging local brands, head-to-head competing or cooperating in some fields?

Due to the large size of the Chinese cell phone market and its potential for long-term continual growth, competition for access to China’s consumer markets is intense. Competitive threats from Nokia, Siemens, Samsung, and local producers like TCL are a cause for concern within Motorola. However, eighty-four percent of Chinese consumers prefer foreign mobile phones to local models, with Motorola, Nokia and Ericsson being their favorite makers, according to a nation-wide survey conducted by the China Telecommunications Association and Eaglewings Public Relations. For this reason, Motorola’s biggest competition for cell phone supremacy would likely appear to come from foreign companies outside of China.

China’s aforementioned government structure plays an interesting role in the assumption that foreign companies will maintain dominance. As is traditional, the socialist government hierarchy prefers for a majority of any industry to have local majority control. The government, which controls the operations of the service provider sector and is a dominant player in distribution channels as well, has the means to make this goal a reality – quickly. For this reason, Motorola must not only utilize shorter-term strategies to find a way to grow market share, but long-term change strategies to find a way to compete with government powered locally owned firms. The Ministry of Information Industry showed that Motorola had a leading market share of 28.7% in the mobile phone industry as of April 2002. Competition Local Chinese Brands

➢ 3% Nokia
➢ 5% Siemens
➢ 47% Motorola
➢ 13 % Samsung
➢ 22% Others
➢ 10% Market Share of Chinese Cell Phone Market (as of 1st Quarter 2005) The cellular phone industry in China is going through the growth stage of the industry life cycle. As the countries market continues to grow rapidly, barriers to entry are being lessened, as the government and its people want to assure the advancement of the industry. Overall the market is currently at around 180 million subscribers, number one in the world, with expectations of 300 million subscribers by 2003. This is currently only a 13.9% penetration rate, which is lower than average, as compared with all other major cell phone markets. This early industry life cycle stage’s strong growth potential is what makes China such an attractive market for expansion.

Emerging local brands Joint ventures and cooperation projects Motorola has 9 joint ventures in China, which produce cell phones, CDMA equipment, semiconductors and other high-tech products. ➢ Guangzhou Jinpeng Cellular System Co., Ltd.

➢ Shanghai Motorola Telecom Products Co.,Ltd.
➢ Beijing Huamin Smartcard System Manufacturing Co.,Ltd. ➢ Hangzhou Eastcom Cellular Phone Co., Ltd.
➢ Leshan-Phoenix Semiconductor Co.,Ltd.
➢ Huamin Smartcard System Co.,Ltd.
➢ Hangzhou Eastcom Cellular Equipment Co., Ltd.
➢ Shanghai Zhongmei Automotive Electronics Co., Ltd.
➢ Motorola Qiangxin (Tianjin) IC Design Co., Ltd..
Despite the increasing number of Chinese phones, foreign brands — Nokia (NYSE: NOK), Motorola (NYSE: MOT), Samsung and Sony Ericsson (NYSE: SNE) — still dominate the mobile phone market in the world’s fastest growing economy. According to CCID Consulting, the mentioned four handset maker’s account for more than 70% of all mobile phones sold in the first half of this year. During the first six months, around 248 million mobile phones have been produced in China, and the figure is expected to exceed half a billion till the year’s end. Speaking of numbers, it’s also important to repeat that there were over 480 million mobile phone users in China at the end of Q1 2007. If the growth continues with the expected rate — and every indicator goes in that direction — there...
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