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Posted on October 2nd, 2012, by

Motorola is one of the leading telecommunications company based in the USA. The company operates internationally and, today, Motorola is one of the leaders of the telecommunications industry. In this respect, the company was traditionally focused on the development and manufacturing cell phones which constitute a larger part of the company’s production. At the same time, in recent years Motorola has started to diversify its production offering new products and services on the global market. Nevertheless, cell phones still remain one of the priorities of the company and Motorola is not going to give up cell phones production.

In stark contrast, the company focuses on the enlargement of its market share by means of international expansion and diversification of production is one of the tools which the company uses to promote its products and enter new markets eliminating high entering barriers.

In such a context, it is worth mentioning the fact that the development of cell phone industry also contributes to the strengthening of the position of the company. Being one of the world’s leaders in the cell phones manufacturing, Motorola is an advantageous competitive position compared to minor rivals. Nevertheless, it is obvious that the rivalry is strengthening, while the deterioration of the economic situation in global terms raises new challenges Motorola will have to surmount to maintain its leading position on the global market.

The industry analysis

Before analyzing the position of Motorola and its competitive power and potential, it is necessary to dwell upon the development of the cell phones industry because the company cannot develop in isolation from other companies and industry at large. Therefore, major trends that can be currently traced in the cell phones industry naturally influence the development of Motorola and the company needs to take them into consideration to adapt its marketing strategy to the changing business environment. In such a way, the company will be able to maintain or probably improve its position on the global market.

First of all, it should be said that the cell phones industry is developing steadily and it has made a considerable progress in recent years, especially within the last decade. Remarkably, it was Motorola, which was the company that started the development of the cell phones industry. To put it more precisely, a Motorola researcher, Martin Cooper, is considered to be an inventor of the first cell phone (Kavoori & Arceneaux, 2006). In such a way, Motorola contributed consistently to the emergence of the cell phones industry. At the same time, this fact proves the company’s orientation on the introduction of technological innovations, some of which could and revolutionize modern telecommunications.

In spite of the invention of the first cell phone in the 1980s, the cell phones industry has started booming since the mid-1990s and the rapid development of the industry keeps going today as well. In  fact, the cell phones industry is very prospective since cell phones replace the conventional phones. Moreover, today, when the competition is high, the buying power of customers decreases because of the current economic crisis which affects practically all countries of the world, including the most developed ones, which constitute the major target market for such companies as Motorola. In such a situation, cell phones manufacturers focus their attention not only on the production of new phones or a larger amount of phones, but they also need to focus on the development of multifunctionality of their products. What is meant here is the fact that modern cell phones are getting more and more functions. They are truly multifunctional devices which can substitute a PC or a laptop, while their small size makes them extremely popular.

Therefore, the modern cell phones industry keeps progressing but it is worth mentioning the shift from the routine production of cell phones to the production of multifunctional cell phones. Modern companies operating in this industry need to take this trend into consideration because the market of cell phones tends to be saturated. In fact, the number of people using cell phones cannot grow fast permanently. Hence, to stimulate customers buy new phones in the time of scarce financial resources, dropping spending and increasing savings, companies need to focus on innovations and multiple functions of cell phones.

Porter’s five forces analysis

a. Competitive rivalry within industry

The competition in the cell phones industry is high. At the same time, it is possible to distinguish major rivals and minor ones. The former occupy the larger share of the market, while the latter are poorly represented on the international market and often their share of the market is insignificant that forces minor cell phones manufacturers to adapt their strategies and policies to those implemented by the major cell phones manufacturers. In this respect, it is important to lay emphasis on the fact that Motorola is one of the major rivals in the cell phones industry. However, the company is not the number one cell phones manufacturer in the world.

In fact, the largest cell phones manufacturer is Nokia, which holds 40% of the world’s cell phones market (Glotz & Bertsch, 2005). As for Motorola, the company is one of the major cell phones manufacturers with 14% of the world market share, just like Samsung, which also has 14%of the world market share. Other major rivals of Motorola are Sony Ericsson with 9%, and LG with 7% of the world market share (Glotz & Bertsch, 2005). In general, the major cell phones manufacturers, i.e. Nokia, Motorola, Samsung, LG and Sony Ericsson control about 80% of the world market, while minor rivals have the rest. However, it is obvious that minor rivals play insignificant role in the world market and they are likely to disappear from the cell phones market, at least at the international level because they are unable to maintain the competition such giants as Nokia or Motorola. Consequently, Motorola has good chances to stay among the leaders of the world’s cell phones market.

On the other hand, it is important to remember about the strong rivalry from the part of other major competitors, which attempt to increase their share of the market. In this regard, the position of Nokia is particularly threatening because the company apparently tends to the domination on the world market and Motorola needs to accelerate its international market expansion to keep pace with Nokia.

Otherwise, Motorola will gradually lose its current position being unable to compete with Nokia or other major rivals which would prove to be more successful.

b. Threat of substitute products

At the moment, the threat of substitute products persists and it is relatively high. In fact, it is necessary to distinguish the threat of substitute products from the part of companies manufacturing conventional phones and the competition from the part of high tech companies producing laptops, for instance. Traditionally, the manufacturers of conventions phones and conventional phone lines were the main threat to Motorola as one of the cell phones manufacturers. However, gradually, cell phones manufacturers improved their position and, today, they outpace conventional phones manufacturers, though the threat from their part still persists.

On the other hand, the technology, which actually allowed cell phones manufacturers to outpace their rivals manufacturing conventional phones, evoked another threat, which is very serious today. This threat is the threat from the part of laptops manufacturers. In this respect, it should be said that consciously or not, cell phones and laptop manufacturers gradually arrive to the production of devices which tend to compete with each other and which may be viewed as substitutes. For instance, the development of multifunctional cell phones contributed to their growing popularity among customers. However, multifunctional cell phones have started to compete with laptops which are also portable and have similar set of functions, though with a higher productivity. But it is obvious that if the cell phone manufacturers will keep working on the introduction of new functions cell phones will be even more competitive compared to laptops than they are now. Similarly, laptop manufacturers attempt to make their products as convenient to users as cell phones. For this purpose, they decrease the size and weight of their products which makes them more competitive due to their current advantages due to higher productivity and functionality.

c. Bargaining power of customers

However, the growing threats and competition and not the only threats Motorola can face on the modern market. In fact, one of the major challenges to the position of the company at the moment is the decrease of the bargaining power of customers. The current economic crisis, which affects the entire world, provokes the decrease of sale rates of Motorola’s cell phones because customers are too concerned with savings and they spend their money on the most essential products only. As  a result, the company needs to focus on the reduction of production costs to decrease price of the product and maintain current sale rates. For this purpose, the company attempts to move the manufacturing facilities to developing countries, where the labor force is cheaper.

d. Bargaining power of suppliers

Another important factor that allows Motorola to maintain its current position and sale rates is the bargaining power of suppliers. Due to the development of the process of globalization, Motorola has expanded its production facilities worldwide and focused on suppliers who can offer products at the lower price but of the high quality. In this regard, developing countries are particularly perspective suppliers because the use of these suppliers allows Motorola to decrease the production costs substantially. In addition, the quality of products of these suppliers meets standards of the company.

Conclusion

Thus, taking into account all above mentioned, it is possible to conclude that Motorola is still one of the major cell phones manufacturers in the world. It holds 14% share of the world market and operates internationally. The company has an extensive experience of work in the cell phones industry, being the first company inventing the cell phone. At the same time, the leading position of the company is challenged by the high competition from the part of other major rivals, especially Nokia. In addition, there are threats of substitute products from the part of conventional phones manufactures and laptop manufacturers. Moreover, the current economic crisis threatens to decrease sale rates of the company substantially. In such a situation, the company can count for the decrease of the production costs and the use of the full potential of bargaining power of suppliers, especially in developing countries, where the company tends to move manufacturing facilities.

Therefore, Motorola still have good prospects and the company is likely to remain among the leaders of the cell phones industry.

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