You are on page 1of 5


Case Study I: Reinventing Ericsson

Tutor: Dr. Ike Janita Dewi, MBA

By: A Ademulia Djufri Marchel Tito Endang Karismawati Siti Mufattahah



Ericsson , one of the biggest telecommunication vendor , founded on 1876 by Lars Magnus Ericsson , start his business area on handset and fixed line network. Ericsson business ran well and became a leader in fixed line network. Good research and innovation , by started manufacturing new types of equipment, such as base stations, which carried the first portion of telephone traffic by radio waves instead of wires kept Ericson as leader. Being an end-to-end provider meant that Ericsson also started manufacturing mobile handsets, the companys first move into consumer products. In 1990s where telecom industry were booming decade specially for GSM systems, Ericsson kept as leader and help 40% of GSM market share. Led by Lars Ramqvist, Ericsson booked nine times revenues in 1998 compare from 1990. Frequent executive changes and lag in the mobile handset business after Ramqvist step down 1998 , but still good in product that produced by good R&D bright forcast new technology in GSM , called 3G , keep made Ericsson growth well. Organization size also growing and bigger as it business by employed almost 107.000.


In 2001 ,over-investment that did telecommunication operator , economic downturn, and dot-com-bubble , made the Ericssons customer halt their investment. This situation stroke Ericsson with telecom business went from dependable growth to rapid decline and the high fixed cost. It hit Ericssons revenue , the cash flow turn in negative. To keep alive ,Ericsson should make some programs to keep survive and do recovery .

What Ericsson did It forced Ericsson to restructure it organization , and reduced the operating expenses, by chopping the big number of employees, do tight budget saving , closed , sold and divestment

some unprofitable business unit. Ericson

sold its stake in Juniper Networks, selling off

distribution operations within Enterprise Systems and real estate assets Ericsson also released rights issue and divest 50% mobile handset business by made joint venture with Sony, and more efficiency still booked operating loss of SEK 21.3 billion in end 2003. In early 2003, another changes in executive been approached by Ericsson, but some of them came from outside, where didnt have telecommunication experiences. An outsider was presented as Ericssons new CEO and President: Carl-Henric Svanberg, head of lock maker Assa Abloy and Swedish Businessman of the Year 1998 . Proponents supported the idea that an outsider would be able to break up Ericssons technical culture and make it more market-oriented from more product-oriented. One of his first measures was to launch another cost-cutting program. Reaching breakeven was not enough, he thought, a company had to be profitable. He has to reorganize the recovering company in late 2003 after a major industry downturn. He is convinced that only a more market-orientated and customer-focused organization will be able to remain competitive in this maturing, high-technology focused industry. Under Svanberg lead , Ericsson segmented it market . Different segment will be approached with differently. Ericsson approach in developed markets, mature markets ,emerging markets. Another market segment for Ericsson was professional services such as managing operators networks and helping them integrate their systems. He decide this segment as one of Ericsons target segment because this division touch directly to customer. Svanberg also made some changes in organization , by bring young , energetic and have good communication managements in his organization mixed with another management from external as independent consultant. This new organization gave a new energies to Ericsson for recovery process. He knew that one of Ericsson weak point was organize workflows. He and his new organization also that process simply and be clearer and always bringing operational excellence as the most value that Ericsson should give to their customer. He realized that by give operational excellence as value added that provided by Ericsson , the company can compete and lead again the competitor. Organization restructure also followed by divide based on products complicity so it can be treat in the same work process, event there were some resistant from internal. He also simplify

and only bring successful product from outside mobile systems business , fixed line and CMDA, as their core business to make that business units much healthier. He also keep The joint venture with Sony in Ericsson business even some analysts suggested to disposed it. In sales area , he changed the organization and make it more centralizing sales and placed a leader that very people oriented, cost-conscious and unafraid of taking decisions. In a tightening marketplace, Svanberg also felt that an efficient sales force was a fundamental building block. Various projects could be considered to help the sales staff, such as providing clearer job descriptions, automatic quotation tools, a corporate training program, sales competitions, regular sales meetings and business reviews, and a corporate sales information program. In Marketing area, he forced do more efficiency and complete centralization, in order to send one streamlined message out to the markets. Svanberg had also ordered a brand health survey of Ericsson and its main competitors to see how they were perceived by existing and potential customers and what the clients key selection criteriawere. Ericsson should listen more closely and become more customer than technology focused. R&D as creative heads also one of the focus from him. He forced certain kind of discipline, a more focused approach and more standardized processes could lead towards operational excellence in that area. He also ask R&D to cut development times that two thirds of the processes were not lead time dependant and wanted to cut these lead times into half.


A good profitable organization and business should able to adapt to any changes quickly. How fast a company can change quickly , depend on how big the size of the organization. More bigger a company , bit harder a company can change. So keep the size of organization or company in optimal size is one of a key for a company to success in long period. Today , market condition and situation is the most factor that forced company should make changes to keep survive. Product orientation and sales orientation were the most marketing method that used by mostly technology companies. As the market growth and learn ,

it forced the company to change their approach of their marketing to market orientation. Market oriented is a method that used in marketing by learning analyze what market expect. Dividing the market in to several groups based on several criteria is the best approach , called segmented market. Using segmented market can also avoiding the economic of scale losses. Segmented market can understand customer expectation more details. With this segmented market , company can evaluate their product based on market segment , can define which product more acceptable for specific segment and wanted by customer. This approach also can define which product can be eliminated avoid and reduce losses. Service excellence which mean serve and give value added to the customer also new method that keep customer loyalty. To know what is the competitor looks like and tried to minimize their advantages and keep company advantages is the important thing. The good company also should prepare the strategies how to face the competitor in the competitive market In telecommunication company , since technologies are their main core, R&D should be kept sharp on how to innovate in technology and combine with customer behavior and culture. They should bear in their mind that , event you have most sophisticate technology , but not expected by customer and market also not suitable with culture , company will not able to sell his product and will cause another losses.