Mobile Handset Competitor Profile: Motorola: Confidential

010417SHELM038JL_RAJv5i
CONFIDENTIAL
Mobile Handset Competitor Profile:

Motorola
SAMSUNG ELECTRONICS CHINA

(SEC China)
August 20, 2001
This report is solely for the use of client personnel. No part of it may be
circulated, quoted, or reproduced for distribution outside the client
organization without prior written approval from McKinsey &
Company. This material was used by McKinsey & Company during an
oral presentation; it is not a complete record of the discussion.
OVERVIEW OF COMPETITOR ANALYSIS FRAMEWORK
1. Background information 4. Value chain strategy

• Location • Starting year Focus on
• Registered • Number of • Marketing,
capital employees advertising and
• Management • Era analysis promotion
team • Distribution (channel
• Equity and sales force)
structure
2. Strategy 5. Organization and ownership

• Mission • Organization structure
• Vision • Ownership structure
• Corporate strategy
• Market position
3. Product/market 6. Financial performance

• Key product offerings • Sales
• Key customers • Profit
• Value proposition
• Geographic focus
• Pricing
2
BACKGROUND INFORMATION

• Location • Starting year • Focus on
• Registered • Number of – Marketing,
team – Distribution (channel
structure

• Market position

• Pricing
3
MOTOROLA HAS HIGH ASPIRATIONS FOR ITS CHINA BUSINESS
• Targeting sales of US$ 10 billion in China by 2002/2003
• Focusing production operations in China, as production

there is about 15-20% cheaper than in Singapore and
30-40% cheaper than in Europe
Source: Analyst reports 4

MOTOROLA’S CHINA BUSINESS SPANS SIX PRODUCT CATEGORIES
Wireless
communications
Motorola China
Auto
Mobile Network Two-way Semi-
Pagers electronics and
handsets equipment radios conductors
accessories
Mobile Fixed line • Set up representative office in 1987

network network • Operations include:
equipment equipment – 1 holding company
– 1 WOFE
– 8 joint ventures
– 26 subsidiaries
• 12,000 employees
• US$ 3.4 billion total investment to date
Source: Motorola website 5
STRATEGY

structure

• Market position
3. Product /market 6. Financial performance

• Pricing
6
MOTOROLA’S HANDSET STRATEGY COMBINES AN ATTRACTIVE

PRODUCT RANGE WITH SUPERB VALUE CHAIN MANAGEMENT
• Developed a wide product range which covers all key

Product range price points and offers a wide range of functionality
• Invested heavily in product localization through China-

Value chain based R&D team
• Expanded local manufacturing in order to reduce costs

and improve time-to-market
• Closely managed first-tier group of nine resellers in

order to minimize price competition and facilitate order
tracking
Core • Committed handset promotion

competencies • Speedy roll-out of new releases
• Provision of high-quality after-sales services
• Advanced technology
7
PRODUCT/MARKET

structure

• Market position

• Pricing
8
KEY MESSAGES - PRODUCT/MARKET
• Motorola has entered the low-end of the mobile handset market

since 1999. Its products are more function-driven compared with
Nokia’s products, which are more fashion-driven
• Motorola takes more than 50% of the share in the high-end and
high-mid-end of the mobile handset market, and more than 20% of
the share in the low-end and mid-low-end. Its low-end handsets
represent more then 50% of its product offerings
• Motorola’s market share is relatively consistent across tier-cities

and geographies, taking approximately 30% everywhere
9
MOTOROLA HAS RECENTLY FOCUSED ON BUILDING OUT ITS LOW-END

PRODUCT PORTFOLIO
Product positioning Jun 2000 Product positioning Dec 2000
Business/professional Personal Business/professional Personal
V8088 (1.6%) A6188 (1.4%) V8088 (3.9%)

High High
V998 (5.6%)
V998++ (7.0%)
High- High-
medium medium
LF2000 (2.9%) 368C (3.1%) P7689 (1.8%)

Medium- 338C (0.6%) Medium-
low LF2000 (4%) low
T2688 (4.8%)
368C (2.3%)
V2188 (3.8%) L2000 (2.2%) 366C (0.5%)
CD928 (1.1%) T2688 (6.2%)
Low Low LF2000 (1.7%) T2288 (0.3%)
V2088 (2.0%) T360 (0.3%)
V2188 (1.3%)
V2088 (1.0%)
Source: Interviews, McKinsey analysis 10

MOTOROLA MODELS ARE MORE FUNCTION-DRIVEN THAN NOKIA

Fashion Classic
8210 V998++ 6210 P7689 L2000WWW
Fashion
• Changeable cover  Key
differences
• Sub-100g  
Business
• Voice-dial     
• Recording    
• Vibration     
• Tri-band  
• WAP    
• Built-in modem   
• IR-port   
Basic
    
• Chinese input
• Li-Ion battery     
• SMS messaging    
Fun
  
• Games
• Composable/ downloadable   
ringer tone
Price in China (RMB) 2652 2878 2369 1800 1452
Equivalent features, Nokia Motorola offers lower price

more fun/fashion vs. models with similar features, tri-
Motorola more functions band and WAP
*Nov. 2000 price 11
MOTOROLA HAS HIGHER SHARES IN CHINA IN FASHION AND BUSINESS

SEGMENTS
Nokia
2000
Motorola
Models China Taiwan Hong Kong Indonesia Singapore
Flagship • 8850 2 2 6 1 5
• A6188 1 0 0 0 1
Fashion • 8210, 8250 4 6 17 7 14

-High • V8088, V998+ 8 11 15 5 8
Fashion • 3310 1 2 3 2 3
-Low • T360, T2988, 4 3 6 2 2
T2688
Busines • 6210, 7110 1 1 1 1 0

s -High • P7689 0 1 1 0 0
Business • 6150 2 5 2 1 2
-low • L2000 Series 7 8 2 0 2
Basic • 3210, 5110 21 12 8 26 18

• V2088/2188, 10 9 0 2 3
V2288, StarTac,
CD928/938
31 28 37 38 42
Total: 30 32 24 9 16
Source: GFK, Sino-MR 12

MOTOROLA HAS DRIVEN SALES INCREASES PARTICULARLY IN THE

LOW-END PRODUCTS
Product mix Market share by price point

Percent of units Percent
Dec 2000-April 2001

High
(>RMB 3500)
11 8
High 56
High-mid 17 22 (>RMB3500)
(RMB2500-
3500)
High-mid
25 18 (RMB2500-3500)
51
Mid-low
(RMB1500-
Mid
2500)
(RMB2000-2500)
7
46 52
Low Mid-low
23
(<RMB1500) (RMB1500-2000)
Low
(<RMB1500) 24
December April
2000 2001
Source: Interviews, Sino-MR (Dec 2000 - April 2001), McKinsey analysis 13

MOTOROLA’S MARKET SHARE IS RELATIVELY CONSISTENT ACROSS

TIER CITIES AND GEOGRAPHIES
Market share by tier cities Market share by geographic areas

Percent Percent
2000 April 2001 Dec 2000-April 2001
Northeast 36
Tier 1 29 30
West 33
North 31
Tier 2 30 30
Central 31
South 29
Tier 3 29 30
East 26
Source: Sino-MR, GfK 14

VALUE CHAIN STRATEGY

structure

• Market position

• Pricing
15
KEY MESSAGES - VALUE CHAIN STRATEGY
• Motorola’s value delivery system strategy has evolved since 1997.

Product development has been more customer oriented and new
releases are catering for needs by different customer segments.
• Localization of mobile handset manufacturing has been furthered

to a production capacity of 18 million units in Tianjin and 8 million
units in Hangzhou.
• With increasing investment in sales and marketing, Motorola is

now the strongest brand in China
• Motorola employs PTAC, CellStart, Heguang, Eastcom, SunYin,

Sinya, North Telecom, Hengxin, and Forte as its 9 first-tier
resellers. It intends to reduce the many tiers of resellers that has
become a disadvantage to Motorola’s channel efficiency
• Motorola’s key strength lies in advanced technology, committed

promotion, wide distribution network and quality after-sales service
16
MOTOROLA’S VALUE CHAIN HAS EVOLVED OVER THE PAST THREE

YEARS
From. . . (1997) To. . . (2000/2001)
Manufacturing • Production capacity in Tianjin (1.5 • Expanding production capacity at

million) and Hangzhou (200,000) Tianjin to 18 million units, and at
Hangzhou to 8 million units
Sales and • Strong brand awareness • Strongest brand awareness in China

marketing • Market share 34% • Developed needs-based customer
segmentation
• Market share 30%
Distribution • 50% reimport via Hong Kong • 50% reimport via Hong Kong
• Strong nationwide tiered dealer • Number of dealers limited to 9; shared
network (10-15 tier A dealers) exclusivity by product
• Close relations with PTT’s • Kept strong retail support (doubled
marketing and sales staff since ‘97)
Source: Interviews, McKinsey analysis 17

MOTOROLA’S KEY STRENGTHS LIES IN ADVANCED TECHNOLOGY,

COMMITTED PROMOTION, WIDE DISTRIBUTION NETWORKS AND
QUALITY AFTER-SALES SERVICES
Key strengths Recent development
Product • Advanced technology • High rate of new product
development • Highly localized products - strong local introduction (9 new products in
R&D (800 engineers, 18 research 2000)
centers, investment 13 b. RMB) • Ready for 3G
Sales and • Committed handset promotion • Pays more attention to market

marketing • Speedy roll-out of new releases needs
• Strong brand recognition • Continues to promote models with
free gifts
• Has nine first-tier resellers, the largest • Altered its strategy in 2000 to
Distribution number among vendors employ two authorized reseller
• Price competition among resellers is from every model
eliminated
• Can effectively manage the production
volume with close tracking of orders
from the channels
• Best vendor on channel support in
promotion, advertisement, service
centers and funding
After-sales • Provision of quality after-sales • Sets up Internet-based consumer

services services club and plans to double service
stations in 2001
Source: IDC 2000 18
MOTOROLA DISTRIBUTES EXCLUSIVELY THROUGH NINE FIRST-TIER

RESELLERS
Motorola Channel Structure
Rationales
Vendor
• Motorola employs PTAC, CellStart,
100% Heguang, Eastcom, SunYin, Sinya,
North Telecom, Hengxin, and Forte as
1st-tier resellers its 9 first-tier resellers.
76%
• Historically assigned one Motorola
model to each reseller
2nd -tier resellers – Eliminates price competition
– Enables Motorola to effectively
64% 21%
manage production volume with order
Retailers/retail chain stores tracking
• Recently shift strategy to have 2
12% 85% 3% authorized resellers for every model in
order to improve promotions and access
Consumers to customers
• Motorola is the best vendor on channel
support as promotion and advertisement
is provided. It also helps resellers to set
• Motorola’s well-built distribution network up service centers to handle repair and
plays an important role in its success in maintenance services.
China
• Too many tiers of resellers become a
• As the leading vendor in China,
Motorola’s channel strategy is of
disadvantage to Motorola’s channel
continued importance
efficiency
Source: IDC 19
ORGANIZATION AND OWNERSHIP

structure

• Market position

• Pricing
20
KEY MESSAGES - ORGANIZATION AND OWNERSHIP
• Motorola has 8 JVs, 1 WOFE and 1 holding company in China, among

which Hangzhou Eastcom Cellular Phone (8 million units production
capacity) and Motorola Tianjin (MCEL, 18 million units capacity) are
devoted to mobile handsets
• Motorola is mainly organized along product lines, however, its WOFE

in Tianjin has been reorganized to be more customer focused.
Motorola Tianjin is divided into 4 sectors, i.e. Personal Communication
for consumers, Commercial, Government and Industrial Solutions for
corporate and government, Global Telecommunication Solutions for
telecom operators, and Integrated Electronic Systems for assemblers
21
MOTOROLA HAS 8 JVs AND 1 WOFE IN CHINA, AMONG WHICH 1 JV

AND THE WOFE ARE DEVOTED TO MOBILE HANDSETS
Motorola
(China)
investment
With With Shanghai With Eastcom 42% With Shanghai With Sino- 100%
Ansenmei Radio and Putian With Eastcom GE overseas
and Leshan (SRCEM) and Putian construction
Radio information
Huamin
Hangzhou
Leshan - Shanghai Shanghai Smart card,
Motorola Hangzhou Motorola
Phoenix Motorola zhongmei Beijing
Mobile Eastcom Tianjin
semi- paging automotive Huamin smart
communi- cellular phone (MCEL)
conductor products electronics card system
cation
manufacturing
Established 1995 1995 2000 2000 1999 1998 1992

year
Product • Semiconductor • Pager • GSM and • Mobile • Automotive • Smart card • Mobile
offering CDMA handsets electronics system and handsets
network product • Mobile
infrastructure
• Semi-
conductors
• Two-way
radios
• Base stations
• Handset
accessories
Source: Motorola press release 22
MOTOROLA IS ORGANIZED ALONG PRODUCT LINES, HOWEVER ITS WOFE

IN TIANJIN HAS BEEN REGORGANIZED TO BE MORE CUSTOMER
FOCUSED
Motorola
China
Motorola
Tianjin
(MCEL)
Asia tele-
Hangzhou Commercial, communicatio
Hangzhou Personal Global Tele- Integrated
Motorola government n product
Marketing Eastcom communication communicatio Electronics manufacturing
mobile and industrial
cellular phone n solutions Systems site
communication solutions
(planned)
R&D
Hang Manu- Manu- Manu- Manu- Manu- Manu-
Sales Services Sales Services R&D R&D Sales R&D Sales R&D
Zhou/ facturing facturing facturing facturing facturing facturing
Shanghai
GSM, GSM, Mobile Mobile Two way GSM, Batteries

CDMA CDMA handsets* handset* radio CDMA
Mobile Mobile *In 2001, pager systems,
network network 5 million units *In 2001, e.g., base
and production 18 million station
handsets 8 million units units
capacity capacity
23
FINANCIAL PERFORMANCE

structure

• Market position

• Pricing
24
KEY MESSAGES - FINANCIAL PERFORMANCE
• Motorola has been maintaining its market share of 30% in mobile

handset. Due to increasingly intensive competitions, its market
share is expected to drop to 20% in 2005.
• Motorola’s EBIT margin for mobile handset is 5%, which is very

low compared with Samsung’s EBIT at 15% and Nokia’s EBIT at
20%. The low EBIT margin is mainly due to its high cost of goods
sold.
25
MOTOROLA HAS GROWN WITH THE MARKET AND MAINTAINED ITS 30%
MARKET SHARE IN MOBILE HANDSET
Number of units
Millions
11.0
Total revenues
USD billions 5.0
3.0
98 99 00
2.7
2.0
Average price
1.3
USD
98 99 00 430 380
250
98 99 00
Source: IDC, Dresdner Kleinwort, Samsung, McKinsey analysis 26

Mobile Handset Competitor Profile: Motorola: Confidential

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Mobile Handset Competitor Profile: Motorola: Confidential

Uploaded by

Copyright:

Available Formats

010417SHELM038JL_RAJv5i

Mobile Handset Competitor Profile:

SAMSUNG ELECTRONICS CHINA

August 20, 2001

OVERVIEW OF COMPETITOR ANALYSIS FRAMEWORK

1. Background information 4. Value chain strategy

2. Strategy 5. Organization and ownership

3. Product/market 6. Financial performance

1. Background information 4. Value chain strategy

2. Strategy 5. Organization and ownership

3. Product/market 6. Financial performance

MOTOROLA HAS HIGH ASPIRATIONS FOR ITS CHINA BUSINESS

• Targeting sales of US$ 10 billion in China by 2002/2003

• Focusing production operations in China, as production

Source: Analyst reports 4

MOTOROLA’S CHINA BUSINESS SPANS SIX PRODUCT CATEGORIES

Mobile Fixed line • Set up representative office in 1987

1. Background information 4. Value chain strategy

2. Strategy 5. Organization and ownership

3. Product /market 6. Financial performance

MOTOROLA’S HANDSET STRATEGY COMBINES AN ATTRACTIVE

• Developed a wide product range which covers all key

• Invested heavily in product localization through China-

• Expanded local manufacturing in order to reduce costs

• Closely managed first-tier group of nine resellers in

Core • Committed handset promotion

1. Background information 4. Value chain strategy

2. Strategy 5. Organization and ownership

3. Product /market 6. Financial performance

KEY MESSAGES - PRODUCT/MARKET

• Motorola has entered the low-end of the mobile handset market

• Motorola’s market share is relatively consistent across tier-cities

MOTOROLA HAS RECENTLY FOCUSED ON BUILDING OUT ITS LOW-END

Product positioning Jun 2000 Product positioning Dec 2000

Business/professional Personal Business/professional Personal

V8088 (1.6%) A6188 (1.4%) V8088 (3.9%)

LF2000 (2.9%) 368C (3.1%) P7689 (1.8%)

Source: Interviews, McKinsey analysis 10

MOTOROLA MODELS ARE MORE FUNCTION-DRIVEN THAN NOKIA

Equivalent features, Nokia Motorola offers lower price

MOTOROLA HAS HIGHER SHARES IN CHINA IN FASHION AND BUSINESS

Models China Taiwan Hong Kong Indonesia Singapore

Fashion • 8210, 8250 4 6 17 7 14

Busines • 6210, 7110 1 1 1 1 0

Basic • 3210, 5110 21 12 8 26 18

Source: GFK, Sino-MR 12

MOTOROLA HAS DRIVEN SALES INCREASES PARTICULARLY IN THE

Product mix Market share by price point

Dec 2000-April 2001

Source: Interviews, Sino-MR (Dec 2000 - April 2001), McKinsey analysis 13

MOTOROLA’S MARKET SHARE IS RELATIVELY CONSISTENT ACROSS

Market share by tier cities Market share by geographic areas

2000 April 2001 Dec 2000-April 2001

Source: Sino-MR, GfK 14

VALUE CHAIN STRATEGY

1. Background information 4. Value chain strategy

2. Strategy 5. Organization and ownership

3. Product/market 6. Financial performance

KEY MESSAGES - VALUE CHAIN STRATEGY

• Motorola’s value delivery system strategy has evolved since 1997.

• Localization of mobile handset manufacturing has been furthered

• With increasing investment in sales and marketing, Motorola is

• Motorola employs PTAC, CellStart, Heguang, Eastcom, SunYin,