Case: Motorola in China

- Sulav

1. Assess the viability of Motorola’s long-term strategy in China.

Chinese economy is the world’s 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 1980’s. 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 MNC’s 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 its
understanding of market and people and because of the strategy it adopted time and again to cope
the changing market scenario.
 Case: Motorola in China
- Sulav

2. 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 the
case 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 mover
advantage as it was the first company to set its operation in china.
 Case: Motorola in China
- Sulav

3. 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 in
china 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 growing
economy 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 good

political 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 of

its booming economy and its capability to attract the world market. Taking this as an
advantage, Motorola can produce its product in large scale so that average cost will be
low and can therefore sell the product in low price.
 Case: Motorola in China
- Sulav

 The other factors could be low cost production , first mover advantage to the Motorola
company, 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.