Reinventing Ericsson

Topics: Operating expense, Expense, Capital expenditure Pages: 4 (1023 words) Published: August 24, 2012

I. Background

Ericsson a Swedish telecommunication company told us on how the it’s survived in order to maintain sustainability the company to compete with other companies and also how to develop the technology to support company growing up.

Company still saw telecommunications as a long-term market business with reason most of the people around the world think that communications is not just important but a necessity.

As a long-term business Ericsson has to be more focused and market oriented company. In order to achieve sustained profitability, company must build efficiency and continuous improvements in all operations which are business unit configuration, reorganize or restructure the company and decide how far company should move into the enterprise segment by optimizing research and development (R&D) the most important resources which should be managed in a more rationalized way.

II. Problems

In 2001 the turmoil begins, started with frequent executive changes and setbacks in the mobile handset business. Continued with the order stock dropped, all the clients just stopped buying. Stock dropped dramatically. Off course it impacted to company’s revenue which was declining, in the other hand company had invested more capital expenditures

The turnaround program came as a shock to everybody in company. Nobody believe they could take out such big chunks of money which about SEK 20 billion or 23% of the operating expenses. The first impacts starting with reducing the number of external R&D consultants and temporary workers from 15 thousands to less than 7 thousands. Secondly cutting travel and other expenses.

The mobile handset business continued to make losses throughout 2001 and sales decreased. Unlike its competitor, company had failed to break through in the mass-market due to the phones were over-engineered and “ugly”, and launches were often late.

The impacts of cut-off operating expenses...
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