Morotola in China

8/8/2019 Morotola in China

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Case: Motorola in China

- Sulav1. Assess the viability of Motorolas long-term strategy in China.

Chinese economy is the worlds largest emerging economy and the preferred destination of

foreign direct investment. Technological advancement and highly skilled labor cost is the major

attraction for the multinational company to enter in the Chinese market.

Motorola entered in china since the mid 1980s. The company has invested nearly $35 billion in

china for manufacturing, research and development operation. Motorola employees more than

10,000 local workers and produces more than $10 billion in parts and service locally which is

greater advantage to the Chinese economy. The company is also able to maintain good relations

with the Chinese Government. Further the company strides to be a good corporate citizen by

involving actively in its corporate social responsibility.

Initially Motorola adopted four point strategies in china i.e., investment/ technology transfer,

management localization, local sourcing and joint-venture/co-operative projects. This four point

strategy was focused in making Motorola the largest foreign investor in china. But realizing the

competitive threat of other MNCs entering into the Chinese market, Motorola replaces its four

point strategy with its latest strategy i.e. 2+3+3 strategy for china. The 2 refers to building China

into a world-wide manufacturing and R&D base. The first 3 refers to three new growth areas

including semiconductor, broadband and digital trunking system. The second 3 refers to three$10 billion goals.

Overall the core of new strategy is the same as that of four point strategy i.e. win-win strategy for

Motorola and china. However with the increasing competition Motorola started experience threat

from the new comer in the mobile market in china. So the company should now focus on

unoccupied market share where competitors have not looked into. They should use counter party

strategy where they should enter different smaller cities as well as rural areas in order to gain

larger market share. Motorola should always remember that it was successful in China due to itsunderstanding of market and people and because of the strategy it adopted time and again to cope

the changing market scenario.


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- Sulav2. Is Motorola more vulnerable to attacks in the cell phone market from multinational

competitors or from local Chinese competitors?

The case portraits a clear scenario where Motorola faces more vulnerable to attacks in the cell

phone market from multinational competitors rather than the local Chinese competitors. It is

explained in the case that how the multinational companies like Nokia and Samsung had already

attempt to enter in the Chinese market. The popularity of Nokia and Samsung has led to capture

the market of china giving threat to Motorola.

China represents a largest market for mobile telephone because of its location advantage and low

cost labor. In addition, the technology in china is also advanced which attracts the multinational

companies to set its operation. Therefore most of the multinational companies are using

technologies and resources to china to compete and capture the market share. Multinational

companies including many companies are using an offensive strategy to attack the dominance of

Motorola market share. However there is also a small amount of competition from local Chinese

companies.

A lot of these multinational companies have planned and strategized their move into the market.

The strategies that these multinational companies could use to attack in the cell phone market of

Motorola are low-cost generic strategy & offensive competitive strategy. It is clear from thecase that most of the multinational companies have recognized the value and importance of the

cell phone market in china. They have used offensive competitive strategy. They have directly

entered competitors to cut prices and seek unoccupied market share where competitors have not

looked into. They have also used counter party strategy where they have entered major different

cities to gain market share.

Hence Motorola in order to deal with the competition should focus on maintaining the market

share by maximizing the value of their product. However the company has always first moveradvantage as it was the first company to set its operation in china.


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- Sulav3. How can Motorola use its manufacturing and R&D platforms in China to compete in

other world market such as the United States and the European Union?

The blooming Chinese economy is the major attraction to every multinational company around

the world. As like several other multinational companies, Motorola also sensed a higher benefit

in operating its business in China. Motorola can use its manufacturing and R& D platforms in

china to compete in other world markets such as the United States and the European Union

because china presents an environment which has cheaper labor as well as technological

advancement which can be a key success factor for the multinational companies such as

Motorola.

The factors which have supported Motorola to use its manufacturing and R & D platforms are as

follows:

Cheaper sources of highly skilled labor: The advantage for Motorola to operate inchina is the availability of highly skilled and low cost labor. Because of this, Motorola

can maintain its operating cost lower compared to other parts of the world. The

production cost will also get down which will certainly help to reduce its price. This can

be a better advantage for Motorola to operate in china.

Stable and growing economy: The other advantage includes stable and growingeconomy of china, where there is economic growth, skills are created and the

unemployment rate is low.

Favorable political environment: Motorola has been successful in maintaining goodpolitical relationship with the Chinese government; even it has made investment in CSR

to maintain their image as a good corporate citizen. This benefits the company to operate

smoothly in china in terms of R&D and manufacturing products.

Economies of scale: Chinese market is always considered as a wider market because ofits booming economy and its capability to attract the world market. Taking this as an


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- Sulavadvantage, Motorola can produce its product in large scale so that average cost will be

low and can therefore sell the product in low price.

The other factors could be low cost production , first mover advantage to the Motorolacompany, huge market (i.e. in terms of population) etc

When considering the entire factor, china presents a safe destination for the companies like

Motorola to invest than the markets in Europe and the United States. These attributes contributes

the success of Motorola. They can use the low cost generic strategy to achieve the economies of

scale and also with cheaper production cost they can compete in the world market.

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Morotola in China