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Jump to: Motorola’s Current Situation | Motorola’s Competition and Customer Loyalty | SWOT Analysis | Porter’s 5 Forces | Case Study Findings | Recommendations and Conclusion
MOTOROLA CASE STUDY
This study aims to analyze and critically discuss the marketing strategy of Motorola with perspective of the UK mobile phone market. The study will analyse and focus on Motorola’s SWOT analysis, market segmentation, marketing strategy; Porter Five force Model and Competition analysis. The study will explaining each of the above mentioned terms in detail and will compare Motorola’s marketing strategy with that of its biggest competitor i.e. Nokia. Finally the study will conclude with recommendations as to how marketing will help Motorola to compete with its competitors (primarily Nokia) and how they can increase their market share in the UK mobile market.
Motorola rapidly became the largest mobile phone seller in UK. In 2006, its asset was more than £32.74 billion and it had 100 million subscribers. Until 2007, these figures have grown to over £38.8 billion and more than 138 million subscribers (Motorola Company Profile, 2009, p1). However, the continued good performance of Motorola is threatened by a number of factors.
These threats come from a number of places, the most important of these being the fierce competition with the three other state-owned companies. However, this competition will be increased in 2007 when the British Telecom (BT) Telecommunications Agreement comes into effect, allowing foreign companies access to UK’s telecommunications market (Crane, 2008, p3). This pressure is reflected in the fact that the Mobile Phone Revenue per User has dropped 50% in the past three years (Crane, 2008, p3) to a figure of £100 Yuan (Reuters, 2009, p1). Another major threat faced by Motorola comes from Nokia, which has gained significant strategic advantages through its security of exclusive rights to use the new CDMA network technology (Crane, 2008, p3).
Purpose of the Study
All of these mean that Motorola’s marketing strategies, especially its advertising strategies, will become the most important element of its sustained and successful growth. The challenge for Motorola is to gain and maintain market share, and continue to seek future growth.
“Winning clients is one thing; keeping them an entirely different challenge… companies have to adopt proactive strategies to retain hard-won customers.” (How to maintain loyalty among ‘risk’ customers, 2009, p1)
Therefore, the application of successful advertising strategies is a critical factor for attracting new customers and keeping existing ones. Marketing research suggests that advertising is about attitudes, the attitudes of consumers towards products. Boyd, Ray and Strong (2007) propose that there are five strategies which marketing managers can pursue in relation to basing their advertising campaigns on attitudinal change.
Aims & Objectives
The objectives of this research are consequently:
1) To identify the current attitude of both existing and prospective customers towards Motorola’s service.
2) To examine to what degree Motorola’s current advertising campaigns are related to the five marketing strategies mentioned above, which are based on changing customers’ attitude towards one brand.
3) To suggest tentative recommendations to Motorola on how attitudinal strategies could be better incorporated into its future advertising campaigns. This objective is based on the findings of the current study and suggests various ways, in which Motorola can effectively influence the attitudinal ‘sets’ of customers (see Chapter 2.0, p7), i.e. their attitude to products.
This dissertation consists of five chapters including Chapter One, the Introduction, which deals with background information, as well as giving a brief introduction to marketing strategies. In addition, the research objectives are presented here. Chapter Two provides the reader with an overview of the literature review, which first covers the background of the global and British telecommunications market and second looks at some specific advertising strategies in order to construct a basis for conducting the research. Chapter Three refers to the methodology used, and discusses the limitations to the research carried out. Chapter Four presents the findings of the research together with the discussion of the conclusions reached. Chapter Five, the conclusion, discusses the possible implications of this research for future studies. This chapter has provided readers with a brief introduction of the research background, as well as has identified the objectives that this study aimed to achieve. The next chapter begins a literature review, in which a comprehensive background concerning this study and some mainstream marketing theories will be presented.
Types of Advertisment
Offline advertising (or traditional advertising) is a diverse arena. In short, I consider offline advertising as communicating through the mass media that is to say TV (local, national…), radio (local, national), print (local, national newspapers, directories, magazines…) outdoors (billboards, bus shelter…) and cinema. These are known as ‘above the line’ advertising. According to me, direct response (without the use of the internet off course) could be included in the above definition as it utilises some of the components of mass media.
The primary reason why a company should combine online and offline advertising is because of the general advantages these two methods provide. Online advertising enables to one to target an audience with accuracy, and enables efficient focus on specific segments. With this method, a company can track how the different users interact with a brand and in what they are interested. The different ads on the web can be quickly delivered and are really flexible with few additional costs and is easily accessible anytime. Online advertising also enables interactivity. The users can quickly and easily have information about the products, its benefits and characteristics, simply by clicking on a link. Finally, this method is quick, inexpensive and sometimes free as in the case of submitting articles to some websites which enables efficient time and resources management.
Offline advertising also provide advantages. It enables to reach a wider customer base. It has the power to inform, educate, persuade, reinforce an image and remind people of a product, a company… What makes it effective is the repetition in the time, wherever people are. Direct response tries to be more interactive, people are able to respond as telephone number or websites are mentioned but it is not always convenient for them to do so due to where they are when they get the information. Even if it can be expensive according to the type of different media used (national TV vs regional TV), offline advertising is still low cost according to the number of people reached. There are inexpensive advertising (such as printing on cars) or even free advertising (such as public announcements on TV, newspapers) however for the last one, your product has to be really innovative. Mass media also has the advantages of being an ‘old media’, having proved its efficiency. Media such as TV is also considered as a prestige media.
According to Nielsen Media Research on advertising spending in UK, Motorola spent 1.3 billion advertising in 2007 (British brands dominate ads in local market, 2008, p1). Thus this is both a demanding time for Motorola and an interesting time for anyone who wishes to research a young and dynamic company in a period of rapid change for its marketing strategies.
- EFFECTIVE COMMUNICATION AMONG STAKEHOLDERS –
In order to consistently evaluate the company, Motorola created an Internet based information network. This network informs internal and external customers of Motorola’s activities at the present time and its projected future. Employees in business segments of Motorola report to the Internet frequently. Peers and management are able to respond to business strategies and offer suggestions as to how the various strategies can be improved and/or affected.
- LOW COST CAPABILITIES –
Due to the its low-cost manufacturing capabilities, Motorola has been able to offer high quality products at competitive prices. The investment in globalization, first mover advantages, vertical integration, joint ventures, and acquisitions has also helped Motorola to keep its costs low. Furthermore, Motorola’s relationships with partners and suppliers have enabled it to obtain raw material at a low-cost.
- EARNED OVERALL SUPERIOR RATINGS –
Motorola earned outstanding ratings in employee health and safety, environment protection programs, and community development. These ratings help Motorola’s business because people want to buy products from companies that care deeply about these issues.
- QUALITY PRODUCTS –
Motorola’s goal has been to achieve Six-Sigma quality of 3.4 defects per million, which was achieved. Motorola is currently aiming to double the quality of improvement every 2 years. Motorola’s commitment to quality has earned it the Malcolm Baldrige Quality Award.
- SUCCESSFUL MASS PRODUCTION/ECONOMIES OF SCALE –
In 2001, Motorola shipped its five billionth micro controller, its eighteen millionth digital TV set-top terminal, and its five millionth cable modem. Motorola is the world’s leading producer of embedded processors and the first company to ship such large quantities of a single product line. Motorola has experienced positive learning curve affects through this successful production. This will help it in the future because costs can be reduced when producing large quantities of products.
- STRONG PARTICIPATIVE MANAGEMENT PROGRAMS –
The main focus of Motorola’s management program is on employee empowerment, thus having the employees be responsible for their own performance. This strong program has increased productivity of the workers.
- QUICK RESPONSE –
Motorola has the ability to quickly determine what customers want and need. It responds quickly to these needs and designs products to fit customers’ needs.
- EFFECTIVE AND EFFICIENT DISTRIBUTION CHANNELS –
Motorola’s investment in global markets allows it to identify customer needs and serves them through a worldwide network of distributors. This expansion into foreign markets has enabled Motorola to keep its fixed costs low and reduce variable costs such as transportation of goods. Motorola’s partnership with UPS has allowed it to be effective and efficient in distributing products to customers.
- GLOBAL CUSTOMER SOLUTIONS OPERATIONS –
Motorola has become the leader in customer care by directing systems interactions and developing customer support, service, software and content strategies. Through the delivery of complete customer solutions, Motorola has indeed strengthened its market position.
- RESEARCH AND DEVELOPMENT –
Motorola spent over $1,023,000,000 billion last year on Research and Development activities. Its corporate involvement in Research and Development is defined not only as ensuring a steady stream of development, but also one of imposing discipline.
An analysis of a product’s performance takes into account both surface indications and underlying problems facing the brand. In-depth situation analyses and strategy development can help determine the incentive needed, the type of promotion likely to have the greatest appeal, and the media required to reach the desired audience. But how do you raise your voice over the constant mass outcry of offers? How do you bring customers to your store? Your store -a supermarket, let us say- is filled with customers who are spending an average of 18 percent of their income on a vital necessity. How do you keep them coming back?
You don’t actually need to worry about the success or failure of the promotion. If you have properly planned the promotion including expensing its cost by doing a pro forma profit-and-loss estimate, you eventually would not have to be fearful of any adverse effect on your bottom line. Then, take aim and fire at your customers’ most vulnerable targets: their emotions, curiosity, greed, confidence or lack of confidence, pride, sloth, love.
- Customer Attitudes and Buying Behaviours
Determine who your customers are demographically and psycho graphically – personal characteristics, age group, location, ethnicity, income, etc. Establish what about your brand attracts them and how they make their buying decisions.
- – Brand Strategy
Consider your level of dominance in the product category. How will sales promotion factor into performance? What are the strengths and time period before returns are realized?
To do this, you must appeal personally and directly to your customers and use your own organisation. Does your store, which is the very foundation of the promotion, appeal directly and personally to the customer? There are three basic elements involved in bringing customers back to your store.
First, you must be completely convinced that what you are doing is right and that you are doing it in the right way. Secondly, you must be able to convince the people in both merchandising and operations that you can bring the customers in and help bring them back. In other words, you make them equal partners in your concept so that they will have the motive to make the store more appealing. Finally you must execute your plan down to the last detail by continuing to sell your own people, even if this requires pushing your boss to get it done. Never let up!
For a customer, shopping for food and merchandise week in and week out can be quite boring, so it can be made interesting, exciting, and rewarding. The sales promoters’ job is to keep it varied, topical and spice it up. You shouldn’t repeat yourself too frequently when there are millions of things to do. Remember that the customer is being wooed on all fronts. You must make sure that what you plan to do is fill a basic need. There is more to promoting than coupons, games, premiums, gadgets and tricks. If you want to bring your customers back, know what your real strength and use it, be it quality, price, convenience, variety, or even your personnel just like how the banks promote themselves with their smiling personnel. Whatever you promise must be evident and available to the customers. Do not disappoint them; you can’t get away with it. While everyone is trying to get customers’ attention, the sales promoters’ job is to show customers that they were right when they decided to shop with you.
3 – 1 – 2. Achieving Competitive Advantage in Motorola
You must be aggressive and unpredictable, and with a good timing. The first kid on the block with the new toy gets the most attention. When trading stamps were new in the food industry, they were phenomenally successful. Although the approximate cost was 1% of sales, the volume increases were so great that it was not necessary to raise prices to make enough money to cover the added expense. By the time, everyone started to adopt their own trading stamps, nobody was getting any benefit from them . But the first stores to use them usually retained some of their increases. It is far better to be on the offence than the defence, and usually less costly in the long run. As the old saying says: “Fight fire with fire!”. In the promotion business this is wrong! you should fight fire with water. To do this, be sure you have large supply of water on hand. That means keeping a file of tested sales promotions ready to go. “Planning ahead” is maybe the most used two words in any sales promotion job.
If your competitor runs a game, you run a tape plan offering free merchandise. Your competitors are appealing to their customers’ emotions, their desire to get something for nothing. You are indeed giving your customers something for nothing, but you are doing this to appeal their acquisitiveness. The odds are in your favour in other words. All your customers can win and obtain something tangible. What you offer through your tape plan must be accepted as having a real value, however because your competitors’ games can be exciting. If your competitor runs a price promotion, you run a coupon promotion. You do not have to be a creative genius to do something different. You may just browse your tested promotional activities file and use or improve on present successful promotions. Of course a little creativity would help a lot. When using someone else’s idea, you must completely understand all the elements that went into and made that idea a success.
Advertising also can be used to create images and symbolic appeals for products and services, a capability that very important to companies selling products and services that are difficult to differentiate. Many customers cannot distinguish one brand of beer or cigarettes from another on the basis of taste. Thus, the image or psychological associations those consumers have of a brand become a very important part of their purchase decisions. Marlboro cigarettes is an example of a product that became a market leader as a result of an advertisement campaign that took a lackluster brand targeted toward women and repositioned it by creating a masculine image for the brand. Another advantage of advertising is its value in creating and maintaining brand equity. Brand equity can be thought of as a type of intangible asset of added value or goodwill that results from the favorable image, impressions of differentiation, and/or the strength of consumer attachment to a company name, brand name or trademark. The equity that results from a strong company or brand name is important because it allows a brand to earn greater sales volume and higher profit margins developing parallel with a competitive advantage. Many companies today enjoy the benefits of strong brand image developed with advertisement, such as Coca-Cola, Nike, Kodak and so on.
On the other hand, advertising has some disadvantages. The costs of production & placement of an advertisement can be very high. One study indicated the cost of producing a 30-second commercial for a national brand averages nearly $350,000 when all the costs are included. These statistics can be said even growing since the numbers show the cost of a similar advertising project was about $58,000 in 1980s and reached to $120,000 in 1990s . The nature of advertising also prohibits the company from determining how well the message was received and whether it was effective enough. Other disadvantages can be identified as is its credibility in the consumers’ eye and the ease of being ignored.
Additionally consumers’ usually approach ads with skepticism, considering the message as biased, and are concerned by its intent to “trick-into-purchase”. It is also relatively easy for customers to only process ads of their momentary interest and ignore others. Since there are mass numbers of ads on TV and published Media, grabbing the viewers interest has gotten incredibly hard.
Another issue with advertising efforts is that advertising in nature tends to wear off very easily. In other words, it takes little time for people to forget your product and message once you stop or even slow down bombarding them with your advertisement, which as we have mentioned before can get very costly. Hence, it becomes a tough challenge facing marketers to determine the most effective level of advertising exposure for a brand, while, maintaining a given budget. Conceptually, the media planner could choose continuous advertising or follow a strategy of pulsing (“on” for some months and “off” for others). The decision is important because the wrong one will considerably affect customer response. When advertisements are run at a low frequency (very few times), they run a risk of going unnoticed. The first time customers view an advertisement, a majority of the time, the message doesn’t even process in their minds. On the other hand, when an advertisement is run at a high frequency, advertising wear out may occur. Therefore, the task at hand is finding just the right frequency for a positive response.
Overly repetitive messages typically have a negative effect on customer attitudes as they relate to a brand. Advertising wear out occurs when, at some level of repetition, the customer’s affective response is either no longer positive or shows a significant decline. Advertising wear out is the result of excessive frequency causing viewers to perceive there’s nothing new to be gained from processing the advertisement, thereby withdrawing attention. That’s assuming all possible customers view every exposure, which is unrealistic. Not every customer will see every rotation. That’s why it becomes difficult to find the optimal level of exposure. Media planners must remember that not every rotation is seen by all customers.
Motorola’s Promotional Mix
* Promotional samples to “cool” celebrities i.e. Paris Hilton, Mischa Barton, Kirsten Dunst, before release date
* Fashion Week/ Fashion Show sponsorships
* Target audience magazines : New Woman, In Style, Marie Claire
* Online Competitions
* Billboards and Bus Stops
* Hype created on fashion forums, and web blogs
* Fashion handset: whereby the consumers purchase decision is based largely on the aesthetics of the device.
The major appeal was that supply could not meet demand, i.e. if everybody had them, they would lose their cool and individuality. “IT” celebrities were photographed with the handset prior to its release. Web blogs and fashion forums proved that the target group was desperate to get their hands on the MVPR. They wanted to join the ranks of their favourite celebrities – Mischa Barton, Paris Hilton, Eva Longoria, and Kirsten Dunst. When this celebrity brat pack is seen with anything new and fashionable it is coveted by girls worldwide, and this strategy was very successful for Motorola.
Due to the success of the limited edition Pink RAZR V3, Motorola decided to launch another limited edition Pink RAZR V3- this time endorsed with Maria Sharapova’s signature. The phone was not as successful, and not perceived as “fashionable” as those indirectly endorsed by Hollywood celebrities. However the demand for the standard Pink RAZR V3 remained high and was soon available readily to the public, almost three months later. By December 2005 there were new entrants to the fashion handset market and the Pink RAZR was losing market share. The Pink RAZR V3’s price was reduced, just before the launch of the Pink RAZR V3i.
Product Life Cycle: Motorola RAZR
I believe that effective Life Cycle Thinking is a circular process that begins and ends with the use of raw materials in the most efficient way. My approach is aimed at reducing the adverse environmental impact of a product throughout its existence from raw material to end of life. On the way, components are manufactured to suit a Motorola design, which has the future firmly in mind. These are brought together to produce a product or to deliver a service that people use. Ultimately, the goal of my End-of-Life practices is that as much as possible can be salvaged and reused so that the process can begin all over again.
Life Cycle Thinking forms the basis of Motorola’s environmental activities according to their website. The goal is to reduce adverse environmental effects during their product life cycles by managing their own operations and supplier network and by incorporating Design for Environment principles into every stage. This embraces design, the environmental performance of their suppliers, decision-making within the company itself and responsible End-of-Life practices. Motorola plan to always rule the mobile phone market with such statements as the above ones, therefore I would have to base my strategy on them being successful and try to continue and benefit from their world wide success.
Motorola’s expansion into this market can provide both social and economic development for the consumers in the bottom of the pyramid demographic. The use of mobile technology to this market segment can provide for example, regional farmers in developing countries an ability to become more productive in farming by communicating with their suppliers and customers on a more efficient basis. This can increase profits for these farmers, removing dependence on face-to-face communication and poor transportation infrastructure in the areas they inhabit.
- Well established brand with close to 20% world market share in UK and £42.9 Million in sales in 2006 (Jaroudi, L. 2007)
- The world’s second largest Mobile phone manufacturer (Hunt, B. 2005)
- Large factory bases to take advantage of economies of scale to produce quality mobile phones at extremely low cost (Motorola.com 2008).
- Established deal with GSM Association that won the rights (out of 17 competitors) to supply low-cost mobile phone under the Emerging Markets Handset Program in 2005 to 700 million consumers in UK (Hunt, B. 2005)
- Lack of operation in regional areas where high percentage of target market is located
- Main focus of company is to be benchmark of innovative technology, therefore company not structured to focus on low-cost and basic technology to bottom of pyramid consumer base
- Company focus traditionally towards profit margins, not the low margin high volume sales which this product will drive
- Reliance on service providers to create service that will be supplement Motorola’s product, having an influence on sales-Marketing products to Bottom of Pyramid consumers may be considered unethical and can effect reputation of Motorola.
- Bottom of Pyramid market consists of around 4 billion people, to which 70 million consumers will be directly focused. Represents a buying power of £14 trillion and has potential to expand Motorola to becoming market share leader ahead of rival competitor Nokia, LG and Samsung.
- Opportunity to potentially satisfy market with other products in future of a low-cost fashion, where Motorola would serve as a recognizable brand and have edge over competitors.
- Increased profits by expansion into this new target market can provide for more capital for R&D to become market leader in technological innovations-Low cost phones can be additionally marketed for higher age bracket consumers who require a basic phone for sole purpose of voice calls.
- By lowering the price of the phone further to £20 many poorer countries would consider the product affordability increase by 43% and it would take less than a month’s average income for a person to buy a phone at a cost of £30, in comparison to 1.4 months of salary if the cost was £50 (Buckman, R. 2005)
- Mobile phones are not currently part of the bottom of pyramid demographics’ cultures and therefore may be some inertia to this product-Service providers may not be able provide affordable service costs for bottom of pyramid consumers in their regional areas which potentially can dramatically reduce sale numbers.
- Due to the threat above, service providers may not construct cellular towers to obtain reception in such areas-Governments impose taxes for example in both Turkey and Bangladesh where anyone who purchases a new mobile phone must pay a £15 connection tax which accounts for almost half the cost of the RAZR handset making this less affordable (Unknown, 2005)
- The developing-Distribution costs add a margin on top of the wholesale price of £40 for those countries where distribution channels are more developed which is evident in few developing countries (Buckman, R. 2005).
- In response to seeing Motorola’s growth story other phone markers are seeking to enter the market and take a share of the market (Buckman, R. 2005).
- Logistical issue in distributing product due to poor roads and transport infrastructure to consumers
Course of Action
Restructuring Motorola’s corporate policies so that they are not as strongly focused on ethics and are more focused on R&D, sustaining profitability, and improving market share. Committees would be constructed to sort through Motorola’s extensive code of ethics and restructure it so that it is more in line with company’s mission. Corporate policies dealing with R&D would be updated and promoted throughout the company. Financial strength and global marketing would be realized as corporate principles.
The strengths of this alternative are that restructuring the company’s policies would be a definitive solution to refocusing the company’s priorities. In addition, through this refocusing the company would see some added gain in market share and profitability. The weaknesses of this alternative are that Motorolians may not want to see drastic changes to their code of ethics and employee morale would be adversely affected by this change. In addition, a restructuring of corporate policy does not guarantee that all executives will comply with refocusing the company’s resources and energies.
Risk of entry by potential competitors
The entry barriers for this market are very high. This is because to set up a network and supporting infrastructure will require huge capital investment. As such there is no brand loyalty, however all the major players are known for their reliability and for a new entrant to establish the same will take a lot of time. There won’t be any cost advantage factor as the hub-and-spoke model, used in this market, can be implemented by new entrants. The market is also characterized by numerous price wars between Nokia and Motorola. Rest of the companies generally follow the trends set by these two firms or fall out. The exit barriers to this market are high. This is due to the investments in hubs, vans, jets and other capital extensive infrastructure. (Coe & Helpman, 2008, 859-87)
Bargaining power of buyers
Businesses and individuals all fall under the customer’s category for this market. Big customers do get volume discounts and can negotiate prices with sales representatives. However smaller customers have to take what is being offered to them. The only say they have is that they can switch between the players, but due to intense competition, the prices offered are generally the same across the service band. (Buckley & Casson, 2009, 849-75)
Bargaining Power of Suppliers
The inputs to this market are fuel, planes, vans, and customs & permits etc. the companies do liaison with relevant industries to prevent themselves from fuel hikes. Arrangem
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