CS3251: Technology Strategy and Management

Term Project Specimen Report

 

MOTOROLA IN THE MOBILE PHONE INDUSTRY

 

1. INTRODUCTION

Telecommunications and computer technology are important parts of the growing area of information technology. Telecommunications make possible the building of widespread distributed computer systems and is the underlying technology that the Internet builds upon. It is has experienced explosive growth in all parts of the world and has impact in many facets of our lives.

2. MOBILE PHONE INDUSTRY ANALYSIS

2.1 Overview of Mobile Telecommunications Industry

    The evolution of mobile communications has major impact on the telecommunications industry. The introduction of mobility means that for the first time in the history of telephony, subscribers are not tied to any particular location to make and receive calls. Today, the segment of mobile communications is the fastest growing segment within the industry. There are main three reasons why the mobile communication market has exploded with such gusto. Firstly, improvements in technology had made it possible to provide mobile communication at an affordable price. The price difference between mobile communications and traditional wireline communication is almost negligible. The second reason is the deregulation of the telecommunication market in many parts of the world. This liberalization allows the influx of many private companies into the industry to challenge traditional monopolies. In any industry, an increase in the intensity of competition or rivalry tends to increase the speed of product innovation. The last reason is that there was a real need for mobile communication in the world due to globalization. With an increasing number of people being on the move every year, the concept of a personal communication tool carried on the person became desirable. The strength of mobile communications lies in the almost infinite flexibility in freeing the consumer from the constraints of the wireline network and its ability to provide rapid overlay networks in areas under-served by traditional infrastructure. With the impending age of digital convergence of computer, media and telecommunications industries, the growth of the telecommunications industry will be even more vibrant [Yoffie, 1997].

2.2 Key Technologies for Mobile Communications

    Mobile communications can be either analogue or digital. The current trend is towards digital and satellite communications. The communication technology is the underlying principle of mobile communications operation. Another essential technology is the smart chip technology that is used to store vast amount of information.

2.2.1 Digital Cellular Communications

    The technology required for cellular communications was known as early as 1940 but it only became widely applied in the late eighties and the nineties. Cellular networks use low-powered equipment over small areas. The resulting radio waves are known as cells and because radio propagation is limited in area, a frequency being used in one cell can be re-used by another customer a couple of cells away and so on. The cellular concept is the original innovation of mobile communication.

2.    Satellite Mobile Communications

    Even though satellite technology can support a variety of mobile communications, it is at present too expensive and specialized to be used in a wide domain. Most of the proposals being studied in this field are mainly for future use. Perhaps the most promising of these projects is the $4 billion plan by Motorola called Iridium. It proposes to place 66 low-earth-orbit satellites. However, there are certain stumbling blocks to be overcome. Experts predict that when the system is implemented the call tariffs would be around $3 per minute, which is way too high to be feasible for the general public.

2.2.3 Smart Chip Technology

    Smart chip is already an essential component of cellular phone today. It provides authentication and identification of the user through the SIM card. Telephone numbers and other information can also stored on the smart chip. With the rapid advancement in this technology, more extensive uses of smart chip in the near future will prevail.

2.3 Industry Life Cycle

    The first standard of mobile communications evolved in 1981 with the Nordic Mobile Telephony (NMT) system. It provided cordless analog mobile telephone communications between subscribers in Denmark, Finland, Norway and Sweden. A number of analog mobile telephony systems have also been developed subsequently. The two most widespread are Advanced Mobile Phone System (AMPS), used among other places in the North America, and Total Access Communications Systems (TACS), which is operational in countries such as the UK and Italy. These analog systems are based upon different principles and thus required particular telephones for each standard. In order to set up a uniform standard for mobile telephony in Europe using the digital technique, 18 European countries signed a MOU in 1988 which commit themselves to fulfil a Global System for Mobile Communications (GSM) standard specification which was commercialized in July 1991. By 1994, there existed a further 2 digital mobile telephony systems: American Digital Cellular (ADC), which has been developed in the USA as a continuation of the analog AMPS, and Japan Digital Cellular (JDC). The evolution of the mobile communications industry life is rapid. New standards are constantly been developed to meet the requirements of consumers for better quality communications.

    The change of mobile phone from status symbols available only to business professionals to a widespread necessity for the general consumers has accelerated the growth and extension of the industry life cycle of mobile phones. The industry strives to constantly produce mobile phones that are getting smaller in size, cheaper in price and greater in variety. The life cycle curve is still at its vibrant growth stage and will not likely to reach the mature or decline stage in the near future.

Cellular Standard	Modulation	Frequency (Mhz)	Originating Region
AMPS	Analogue/Digital	1900	America
TACS/ETACS	Analogue	900	Europe
GSM	Digital	900	Europe
PCN/GSM 1800	Digital	1800	Europe

Table 1: Cellular Systems Standards

2.4 Industry Players

    The parties involved in the telecommunications industry include the government, supplier, manufacturers, service providers, retailers and consumers. The government of any country plays an important role in shaping the future of the telecommunications industry. They stipulate the regulations and standards that companies must conform to. The suppliers include those that provide raw materials such as semiconductor and electronics components for telecommunications equipment, examples of these are Lucent and Siemens. Manufacturers are equipment makers supplying products to providers and consumers, examples include Nokia, Ericsson and Motorola. Service providers are those who provide the network infrastructure to support the usage of the equipment, for example AT&T. Retailers function as the middleman to promote the manufacturer’s products to the consumers. Consumers are those who actually created the demand for telecommunications services and products.

2.5 Markets of Mobile Phones

Source: ITU World Telecommunication Indicators Database

Figure 1: Regional share of world market, 1994

North America

    North America remains the world’s largest market for mobile phones at this moment. This is due to the established infrastructure and high spending power of the consumers in this region. As the hub of global economic activities, the mobile phone has become an indispensable tool for the U.S. business professionals. Due to the vast geographical distances in the countries, mobile communications is highly regarded as being essential for consumers in the USA and Canada. This high demand has driven the prices of mobile phones down making the prices in this region the cheapest compared to other parts of the world. Before the opening up of the telecommunications market in the USA, the market was dominated by home-grown Motorola. With the liberalization of the industry, big players from Europe and Japan has taken a significant share of the market from Motorola.

Europe

    The normal place to look for leadership in any technological wizardry is America. The mobile phone industry however, has its Silicon Valley, in Scandinavia. The countries of Northern Europe, Sweden and Finland particularly, boast the fastest growing markets in the world. The market for mobile telephones in these two countries is going at warp speed. Given this, it is hardly surprising that two of the giants of the mobile communications industry, Nokia and Ericsson come from Finland and Sweden respectively. The only player outside this region who can compete with these giants is the American Motorola. Ericsson claims to be the world’s largest supplier of telephone equipment. Nokia ranks number two behind Motorola in overall mobile handset sales. Sweden has the largest percentage of mobile phone users in the world. Many analysts believe that the reason why these two Nordic countries dominate the mobile market is that they allowed competition right from the beginning by opening up the market to outsiders. In the telecommunication industry, most other countries stifle competition in a bid to protect their big local companies.

Asia

    The region that shows the most promising growth figures is Asia. Already, this market accounts for one-fifths of the overall cellular phone sales in the world and it is expected to continue to grow for some time to come. The handset prices vary widely throughout this region. The country with the cheapest price for mobile phone in this region is Singapore, but the prices in Singapore are still several times higher than the prices in America and Europe. The opening up of the world’s two most populous countries, China and India are widely regarded as the most profitable markets to conquer. It is expected that as the intensity of competition increases in this region, the prices will fall and this region will become the hotbed for cellular phone sales.

2.6 Competitive Forces in the Industry

2.6.1 Rivalry among competitive firms

    Motorola’s competitors in the mobile phone industry include Alcatel of France, NEC of Japan, Northern Telecom of Canada, Siemens of Germany and Philips of Netherlands. Its two largest competitors are Nokia from Finland and Ericsson of Sweden. The switching cost in cellular phone is rather low, consumers can simply switch to another brand of phone if they find the product unsatisfactory. In fact, in the Singapore context, the switching cost is higher for service provider since user will need to think twice when switching provider because they have to pay extra charges for number portability.

2.6.1.1 Generic Strategies of Mobile Phones Manufacturers

    The generic strategies employed by these manufacturers include innovation in technical and ergonomics design, ensuring short time to market and product life cycle, continuously adding new features to existing products, providing a variety of choices and wide selection in terms of prices. The more specific strategies of two of Motorola’s competitors will be highlighted below:

Nokia

    Nokia was once a conglomerate that manufactures a diverse range of products. However, in recent years, it has concentrated on its telecommunications business and sold off much of the other operations. Today, it is the second largest mobile phone manufacturer in the world with global market share over 21 percent. With early experience in NMT (Nordic Mobile Telephone System), Nokia has gained much of the experience needed when GSM was launched in 1992. It has pursued a high-risk, high-payoff strategy by betting bigger on fewer technologies. Besides technology, Nokia has created a solid brand name with catchy marketing and stylish phones. Nokia handsets are treated not as electronic gadgets but fashion accessories. With continuous marketing and brand building, Nokia enable greater economies of scale. To address the growing wireless data market, Nokia introduced a mobile phone with Internet browsing e-mail access and telefax transmission. It sees a shift towards 3^rd generation wireless communication and hopes to be among the first companies to introduce new 3^rd generation digital solutions and products.

Ericsson

    Ericsson which made its first telephone in 1878, is still a major supplier of fixed-wire switches to telephone companies around the world. As with Nokia, Ericsson used its NMT know-how to plunge into the huge U.S. market during the 1980s. An early entry to the digital market and strong commitment to R&D spending gave Ericsson the lead in the digital mobile market. Ericsson currently has the largest market shares in digital handsets worldwide. It continues to compete on technological leadership and hopes to develop the standard for 3^rd generation system.

2.6.2 Potential entry of new entrants

    A few big players currently dominate the mobile phone industry. This is because the barriers of entry are rather high. It is a high technology and thus the investment in R&D and manufacturing needs to be significant. Potential entrants must ensure that their products are of high quality and differentiated in order to compete with the existing players. To achieve competitive pricing, they must have economies of scale, this is difficult for companies starting small.

2.6.3 Potential development of substitute products

    At the present moment, the only close substitute product of mobile phone is the cordless telephony (CT2). It provides a cheaper alternative to more expensive cellular phones but has the limitations of lower coverage and poorer quality. The users can only make a call within close proximity of 100-200 metres within a base station. With the falling prices of cellular phone handsets, CT2 are fast being phased out in many countries, including Singapore. In areas where the density of public telephone is high, paging can offer a viable, low-cost alternative to mobile phones to a certain extent [Kelly, 1996]. As for the development of future substitutes, it is unlikely that any radical technology developments will replace cellular communications technology completely. More likely, new products will emerge which built upon existing ones and provide better quality and features. In the near future, we might expect to see more mobile phones that are based on wireless satellite communications when the technology matures and become cheaper for the public.

2.6.4 Bargaining power of suppliers

    The main components of mobile phones are the semiconductors, processors, casings, LCD panels and other accessories. Major semiconductors suppliers include Philips, Lucent, Siemens and NEC, supply is abundant and these suppliers have to compete in terms of price and quality with other manufacturers, especially those from Taiwan. As such, they have rather low bargaining power over the mobile phone manufacturers. A noteworthy point is that Motorola has an advantage over Ericsson and Nokia in that it is self-sufficient since it also manufactures semiconductor components and processor chips. As for other more specialized components such as the Digital Signal Processor (DSP) chip, there are only a small number of manufacturers, the major supplier being Lucent Technologies and Texas Instruments. These suppliers of specialized components thus have a higher bargaining power.

2.6.5 Bargaining power of buyers

    We classified buyers as those end consumers who actually purchased the mobile phones for use and exclude the intermediate purchasers such as distributors and retailers. Consumers have a wide variety of mobile phones to choose from. They can choose according to their needs in terms of features and prices. As such, they have a very high bargaining power over the seller.

2.7 Emerging Technological Trends and its Impact on Industry

    One of the most important emerging trends of mobile phone industry is the convergence of the computer, media and telecommunications industries. This has great impacts on mobile phone manufacturers since they need to reformulate their business and technology strategies in order to compete with new entrants from other industries, especially computer giants like Microsoft and IBM. New features such as data and multimedia capabilities have to be designed into future mobile phones. This requires significant changes to R&D strategy and manufacturing process. Another evolving trend in the industry is the constant changes in the communications standard. At the present moment, European countries led by Ericsson and Nokia are pushing for a new standard of Wideband Code Division Multiple Access (W-CDMA). On the other hand, Motorola formed another alliance to introduce a new competing standard. This scenario essentially creates a European versus American situation. As for the rest of the world such as Asia, the pervasiveness of whichever new standard will have impact on the balance of power in the industry.

3. COMPANY ANALYSIS

3.1    A Brief Introduction of Motorola Inc.

    Motorola started in 1928 as a company making battery eliminators. Today, it is a diversified electronics company and one of the world’s largest maker of semiconductors, computer products, cellphones, pagers and other telecommunications equipment. It is made up of the following business units: Semiconductor Products Sector, Cellular Subscriber Sector, Cellular Networks and Space Sector, Land Mobile Products Sector, Messaging, Information and Media Sector, Automobile, Energy and Components Sector and Motorola Computer Group. It is ranked 24^th position in the 1997 Fortune 500 list of companies with revenue of $27,973 million. Motorola prided itself in terms of quality, in fact it is the first winner of the prestigious "Malcolm Baldrige Quality Excellence Award" in 1988. It is highly regarded as one of America’s most admired firm for its emphasis on quality and employee training

3.2 Motorola Culture and Mission

3.2.1 Key Objectives

1. To provide total customer satisfaction and conduct business with uncompromising integrity and constant respect for people
2. To develop "Best in Class" people, marketing, technology, manufacturing, services and products; increase market share and provide superior financial results

3.2.2 Key Goals and Initiatives

1. To produce products and services to Six Sigma standard (99.9997% defect-free)
2. To reduce total cycle time in all activities
3. To lead in areas of product, manufacturing and the environment
4. To improve profitability, and provide a creative, cooperative workplace with empowerment for all

3.3 SWOT Analysis of Motorola

3.3.1 Strengths

    Motorola’s main strengths lie in its strong culture of continuous improvement and adhering to the highest quality standards in all its products. Motorola has the technology depth to provide products for a wide range of industry standards. For the case for mobile phones, all major wireless system formats are supported and Motorola also manufactures a full line of mobile phones. Another strength of Motorola is their global perspective. This allows them to be very adaptive to global changes in regulations and market trends. Motorola places great emphasis in employee training and development, this has been a strong enabler in their quality improvement progress.

3.3.1.1 Core Competencies

    We followed Prahalad and Hamel (1990) criteria to identify the core competencies of Motorola. First, core competency must provide potential access to a wide variety of markets. In the case of Motorola, its technical competence is the key to the markets of mobile telephony. Second, a core competence should make a significant contribution to the perceived customer benefits of the end product. The complete solutions from before-sales design to after-sales support that Motorola offers in the area of communications primarily imply that Motorola takes a total responsibility for the systems they delivers to ensure a total customer satisfaction. This give an obvious advantage to the customer in that it means Motorola will take care of all the communications problems. Finally, a core competence is the kind of competence that is difficult for competitors to imitate. When it comes to the telecommunications systems, the complexity of the harmonization procedures for individual technologies makes imitation very difficult. Even though the major manufacturers (Alcatel, Ericsson, Nokia, NEC, Northern Telecom and Siemens) keep a close watch on each other, and a rival company may happen to have some of the technologies that comprise a core competence of an adversary, it will still be difficult to duplicate the intricate pattern of internal coordination and learning. As such, many of Motorla’s technologies remain propriety to them.

3.3.2 Weakness

    The main weakness of Motorola is their marketing strategy. It tends to be conservative compared to its competitors. For example, Ericsson & Nokia have come out with phones in bold colors to add "individuality" to their products. However, Motorola chose to market only products in traditional black. Motorola’s marketing is also not as aggressive in terms of pricing and variety. Furthermore, Motorola’s traditional strength in quality is losing out to some Japanese companies who have in fact exceeded Motorola in quality. Since the USA telecommunications infrastructure has long been established as the analogue system, as such, Motorola tended to be lagging in the field of digital technology. They are more of a follower of its European competitors in terms of digital technology such as GSM. Even though Motorola is still the overall volume leader in terms of both analogue and digital mobile phones, it’s market share as at March 1998 has dropped from 50% to 30% [Schonfeld, 1998]. This decline is mainly due to their inability to cater to the digital market rapidly. In fact, the U.S. digital market is now dominated by Ericsson with 55.7% share, followed by Nokia with 33%, Motorola only claim a dismaying 8% [McHale, 1997].

3.3.3 Opportunities

    There are many opportunities for Motorola to form strategic alliances with other industries to develop new products to cater to the impending digital convergence market. They can also cooperate with their suppliers to streamline their business and manufacturing process to make their value chain more efficient.

3.3.4 Threats

    One of the most obvious threats that Motorola is facing today is the "isolation" it is facing from competition created by its European counterparts. The new W-CDMA standard proposed by Nokia and Ericsson is expected to be adopted by most of the European countries. Most parts of Asia especially Hongkong and Singapore (which has colonial connections with the UK) will most likely adopt the European standard. This is ominous to Motorola’s market position in Asia, the fastest growing market for telecommunications equipment. Furthermore, many of the electronics companies are diversifying into the area of mobile phones, some examples include Panasonic and Sony of Japan. Motorola is also facing threats from competitors in terms of the miniature design, in fact Philip’s new mobile phone, Philips Genie looks as good as Motorola’s StarTAC.

Has Motorola effectively addressed the various competitive forces and how it has exploited its core competencies?

    Motorola has effectively leveraged its technical competence and depth to deal with its various competitive forces. It continuously rejuvenates its products in terms of design and functionality to compete with its competitors. It also formed alliances with suppliers and work with them closely to improve the relationship [Steeples, 1995]. This will essentially reduce its suppliers’ bargaining power to a certain extent since they will also turn to be dependent on Motorola’s business to survive. By striving to provide an excellent quality product and total customer satisfaction, Motorola hopes to instill customer loyalty to its product, this will reduce the buyer’s bargaining power to a certain degree as well. To prevent themselves from being displaced by other newer substitute products such as smart phones incorporating data capability as well as satellite based phones, Motorola has already ventured into these areas.

3.4 Business and Technology Strategies of Motorola

In this section, we will discuss how Motorola accomplished its goals and the risk associated with each strategy.

3.4.1 Business Strategies

Motorla’s business strategies can be divided into external-oriented strategies of marketing and sales and internal-oriented ones pertaining to human resources and financial.

3.4.1.1 Marketing

    Motorola marketing strategy is formulated by scanning the global environment constantly and sensing the changing needs of consumers in various parts of the world. They are also receptive to any new system standards evolving and market products accordingly. Motorola’s marketing initiative so far has successfully created a strong brand name for its mobile phone as being innovative design, portable and of highest quality. One of Motorola’s main objectives is to provide a total customer service to their consumers. As such, Motorola ensures that it provides excellent after-sales support and service. Another marketing strategy that Motorola adopted is the creation of a strong customer loyalty to its brand. It is hoped that its pager users will affectionately choose to buy a Motorola mobile phone because of their loyalty and trust to the brand name.

    An obvious weakness of Motorola is its pricing strategy. Compared to its closest competitors Nokia and Ericsson, Motorola’s mobile phones do not offer as wide a price range as its competitors for the consumers to choose from.

3.4.1.2 Sales

    Recently, Motorola has made a decision to sell direct through telephone in the USA and promised shipment within 48 hours. It is an attempt to directly increase revenue and to come into direct contact with consumers. This sales strategy has far-reaching implications on its future. Essentially, what this strategy involves is a process of disintermediation of the distributors and resellers. Motorola runs the risks of souring their relationship with their traditional channel partners who might in turn chose to just promote competing brands.

3.4.1.3 Human Resources

    Motorola’s emphasis on its employee can be seen as a corporate strategy. Under the HR2000 programme, Motorola hire and train a new class of capable Latin American, Asian, Eastern European, Middle Eastern and African employees every year. Employees have the opportunity to attend courses and train at the Motorola University. All staffs undergo a series of rotational training assignments in primarily U.S. Groups or Sectors geared toward facilitating the accumulation of comprehensive functional and organizational knowledge. Motorola believed in providing a conducive working environment for all employees with respect and empowerment for them.

3.4.1.4 Financial

    Motorola’s internal controls are designed to provide reasonable assurance as to the integrity and reliability of the financial statements. Such controls are implemented by trained skilled personnel with an appropriate segregation of duties and monitored through a comprehensive internal audit program. Motorola has implemented a reinvigorated process of discontinuing those development programs that have not lived up to their promise. In addition, Motorola also performed cost reductions in existing businesses that are not achieving adequate profitability

3.4.2 Technology Strategy

    Motorola adhered faithfully to their commitment of "six-sigma" quality standard. Quality begins in development, where computer-aided design is used extensively. Engineering and manufacturing work together to achieve optimal designs for high volume production and high reliability. Before shipping a new product, the design must undergo Accelerated Life Testing (ALT), in which years of usage are simulated using extreme environmental conditions. Products are subjected to a variety of tests including, stringent shock, temperature, humidity, dust and drop tests.

    The main characteristic of Motorola’s technology strategy is that their different business sectors have their own team of engineers and manufacturing plant. No doubt this allows specialization and ensures highest quality possible for each product, it possesses some risks and implications. First, there is little communication among different sectors, thus resulting from little synergy within the organization. Next, since most of Motorola’s products share the same underlying technology, sharing of knowledge across sectors will decrease the duplication of resources. With the imminent trend towards digital convergence, Motorola should ensure tighter sharing of knowledge and integration among its communications, computer and media sectors. In fact, Motorola has a definite edge over Nokia and Ericsson as both of these European companies are not strong in the computer and media arena.

3.5 Strategic Alliances

    The benefits of alliances may include access to new markets, technological know-how, the establishment of new contracts and the achievement of risk reduction. For firms that do not possess the many distinctive aspects of the necessary competence to compete successfully in their chosen sphere of business, a strategic alliance might strengthen that competence or diversify it. It can also reduce the time and the resources necessary for the acquisition of such competence. Motorola has formed many strategic alliances with suppliers and even competitors in the industry.

3.6 Motorola use of I.T. to gain strategic advantage

    Motorola has formed an alliance with Citibank to develop a global cash management system [Holland and Lockett, 1996]. The system reduces unnecessary cash flows and foreign exchange transactions via centrally controlled currency netting, thereby saving on bank and exchange charges, it is estimated to save some US$6.5 million per annum. Motorola has also made extensive use of Electronic Data Interchange (EDI) to streamline their business process value chain.

    Motorola’s Internet Web site is also a strategic investment in I.T. Besides being Motorola’s corporate Web site in disseminating information such as product news, press releases, annual reports, it is also being use as a tool for customer support. Motorola has provided Frequently Asked Questions (FAQ) about their various products on the Web site, electronic version of their product manuals are also available for download. All these have saved Motorola significantly on manpower to handle customer calls to support hotline and the printing cost of manuals. The Web site also list locations of service outlets and even allows consumers in North America region to check the status of their warranty.

4. PRODUCT ANALYSIS

    In 1989, Motorola introduced the smallest and lightest cellular phone. Dubbed the MicroTAC, its introduction put Motorola at least a year ahead of its competitors in one of the world’s fastest growing markets. The methods used in the creation of the cellular phone were actually borrowed from Motorola’s new strategies for its new pager, the Bravo. With the introduction of these new personal communication products - Bravo and MicroTAC, Motorola became the most formidable competitor in its global market and sealed its reputation for being customer oriented. Now in the 1990s, where consumers are spoilt for choice, Motorola seeks to maintain its position and they have done that with the introduction of its newest product, the StarTAC. We will focus our subsequent product analysis on Motorola hugely successful StarTAC series of mobile phones.

4.1 Product features and life cycle

    100% of the current Motorola GSM range was introduced in the last twelve months making its portfolio one of the most up to date and advanced on the market today. The latest series of Motorola’s cellular telephone is a new cellular category marketed as wearable phones. The StarTAC redefines the look of conventional cellular phones and is made to be literally "worn" by consumers. Similar to the MicroTAC in concept, the StarTAC is meant to revolutionize the market and change the look of handphones to come but that is where the similarity ends.

    Weighing as light as only 3.1 ounces, it is packed with features that seemed to have come from the consumer’s wish list, Motorola has again come up with a winner. Exciting revolutionary features include a new authentication process to reduce cellular fraud and miniaturized batteries that allow the same amount of talk-time as batteries that are double the size. The batteries used are in itself another Motorola and industry breakthrough because the two batteries are removable and once one battery’s power is depleted the other will take over without any interruption to any conversation. But the features of the StarTac are not surprising considering that Motorola has gone back to the drawing board and designed the StarTAC phone from the inside out. >From the circuitry and the interface to the battery and the casing, Motorola has created the StarTAC cellular phone as an aspirational phone which is unlike anything else on the market. For its small size and mechanical design, the StarTAC phone has earned several awards throughout the world. StarTAC phones is now the most popular selling series among its cellular phones and is bringing Motorola into the new millenium. As can be seen from the table below, the product life cycle of StarTAC is very short with a new model being introduced every six months.

Model	Introduction Date	Features	Market
GSM	Nov 1995	98.5 grammes
6000 GSM	Sep 1996	2 removable batteries	Mid-tier
8600 GSM	Jan 1997	3.1 ounces, Caller-ID, VoiceAlert, VoiceNote	High-tier
3000 AMPS, NAMPS	Feb 1998	3.8 ounces	Low-end

Table 2: Life Cycle of StarTAC

4.2 Business Strategy for StarTAC

    The StarTAC phone was introduced in the late 1995 and the first models were based on analog technology. Although it is only five percent of Motorola’s cellular phone products, it represented 20 percent of sales in the dealer shops. Motorola is still coming up with different models that can meet as many consumers’ price and demands as possible, new models based on different standards are constantly being added to the product line Currently, there are different StarTAC models to meet the market demand for different segments:

• StarTac 6000: a mid-tier model incorporates the original design with increase affordability
• StarTac 8600: designer model, targeting at the high-end market
• StarTac 3000: target at lower end consumers who desire an affordable, compact and wearable phone
• StarTac GSM 1.9: targeting at the GSM 1900 market

    Motorola’s marketing strategy builds on the innovative design of the StarTAC phone. Its new clam shaped design is so distinctive and unique from the rest of the cellular phones that one look at it identifies it as a StarTAC. In Motorola’s advertisement, the phone is touted as the only wearable phone in the market. They also build an image of StarTAC owner as having a piece of elite status symbol.

    Another marketing strategy that Motorola employed is the Signature program to market its StarTAC series as a premium product. It requires its dealers to have a certain percentage of their total sales in Motorola products and to give those products preferential treatment in their promotional displays in order to qualify for the programme. Only those in the programme are eligible to sell latest Motorola products. The implication of this strategy is that it angered many retailers and many chose not to allocate shelf space to Motorola at all.

4.3 Technology Strategy for StarTAC

    The main distinctive feature of Motorola technology strategy for its StarTAC series is the adoption of mass customization in their product development. The extent to which customization and standardization should be applied is generally a problematic choice [Pehrsson, 1993]. If customization goes too far, scale effects will be difficult to obtain. On the other hand, pure standardization implies vulnerability to price competition. The balance between the customization of a system and its standardization in an effort to reach reproducibility is, in fact, the major problem of ‘systems’ companies. Motorola’s way of dealing with this problem is to adhere to the modularity principle of its systems. Customized and standardized components form modules that can be mixed together to fit the particular needs of different customers. Mass customization has great impacts on Motorola technology competitive advantage. First, it can maximize the number of standard components it uses in all forms of product, assemble those components in all forms of the product, assemble those components for all product options in the earlier stages of the assembly process, and postpone the addition of the components that differentiate the product until the later stages of the process. Second, Motorola is able to make the modules of the product separately by manufacturing different modules at the same time, which significantly shortens the total time required for production. Third, it allows Motorola to more easily diagnose production problems and isolate potential quality problems. In fact, the mass customization approach allows Motorola to create a family of products easily. Products such as pagers, mobile phones and modems all come in variations. With this, Motorola is able to reduce the time to market to the shortest time.

4.4 Mapping Consumer Needs with Technology Strategy

    Over the years, Motorola has commissioned the Gallup Organization to conduct the Cellular Impact Survey examining cellular phone usage in five different countries around the world: Canada, Great Britain, United States, Hong Kong and Mexico. This shows Motorola commitment in understanding consumers requirement and incorporating them in their product design. Surveys span different regions to ensure the design of a truly global product. The StarTAC series is a product of combining consumer demands with technical capabilities.

4.5 Technological Capabilities Deployed in StarTAC development

    Motorola has exploited its diverse expertise in fields of semiconductors, computer processors and communications in the development of StarTAC. The cellular telephone development has benefited greatly from the innovative products from its semiconductor division. Innovative microchip technology has been used to develop more integrated components resulting in fewer and smaller onboard devices with higher levels of intelligence. These devices are also substantially less "energy hungry". This means that it manages its power more effectively to give outstanding levels of talktime from a smaller and lighter battery. This innovation enables Motorola to pack high levels of performance in such a compact body for the StarTAC series. Semiconductor technology has also allowed Motorola to create product differentiation with the integration of ISD semiconductor into its cellular phones. The ISD chip records and plays back voice and serves as a built-in answering device for the cellular phone.

4.6 Future Technological Trends affecting StarTAC

    Voice telephony is becoming a less prominent feature of the latest generation of cellular phones. With the move to digital standards, data services are made possible. A mobile phone can also be a digital terminal and information-browsing tool now. Cellular phone vendors will continue to differentiation their products through value-added functions while phones become commodities. As such, it is likely that the StarTAC series will in include a new smart phone which include wider data capabilities the near future.

    It is part of a trend in the mobile industry towards smaller, wearable devices. Many cellular phone vendors are developing their own wearable devices. NTT, Japan’s largest telecommunications group, has plans to start production of a mobile phone that can be worn like a wristwatch later this year. Although this mobile phone is only usable in Japan (due to the different standards) its adaptation using the GSM standard is not inconceivable. With availability of smaller internal components with lower power consumption, and technology to carry signals from tiny portable devices such as wristphones, it is possible to develop a mobile phone that is as small as a wristwatch. With other manufacturers catching up with the miniature race, Motorola must ensure that their StarTAC series continue to become even smaller and lighter in order to compete in the market.

    A key issue in cellular telephones is the growing appeal for simplicity and ease of use. Motorola is already working to allow dialing and call related features to be accessed using speaker independent voice recognition, it will most likely incorporate these into the StarTAC series soon.

    In order for network provider to more efficiently utilize both their GSM 900 and GSM 1800 networks. There is a trend in the industry for phones that is able to support both standards. Motorola has been quick to meet this trend by being the first to introduce a GSM Dual Band phone. It is likely that when the product is more widely accepted, this technology will be incorporated into their StarTAC product line.

5.    Conclusions

On the whole, Motorola business and technology strategies are tightly linked. Motorola has explicitly linked the future product plans of the technology roadmap to the technology required to achieve them. Technology development was product and market driven as Motorola always attempt to solicit requirements from the consumers.

Considering Motorola’s strategies and its environmental factors, there are a few challenges that Motorola has to overcome to remain or strengthen its position in the industry:

1. Motorola should focus its strategy on its core competencies in activities where it can achieve and maintain "best in world" status, i.e. a significant long-term advantage [Quinn, 1996]. It should stop manufacturing products that are not tapping their core technical competencies in semiconductors and communications. Other non-critical activities should also be strategically outsourced.
2. Usually, companies which control the standards have a big economic advantage over companies that just follow the standard. Third generation cellular networks (such as W-CDMA), expected to enter service in 2002, represent a step forward from existing digital voice-based systems. They will offer expanded capabilities such as multimedia services. Motorola has formed alliance with Alcatel, Northern Telecom, Siemens and Sony to come out with a CDMA/TDMA hybrid technology which is intended to compete with W-CDMA. Motorola’s proposed third generation standard is currently lagging behind the W-CDMA standard. In fact, Motorola should get itself more involved in formulating global standards with its European counterparts instead of getting isolated by them.
3. A challenge for Motorola’s management to deal with in the near future is the gradual phasing out of the GSM standard by year 2000. As Motorola is already involved in formulating a new TDMA/CDMA standard, they must make a decision of whether to discontinue their GSM phones and migrate totally to the new standard. Managing such technological discontinuity requires careful reformulation of business and technology strategies.
4. Motorola should move towards a more integrated organization so that it can leverage on the strengths of its diversified technically competent business units to better design products for the digital convergence market.

To conclude, Motorola is an organization with undeniable depth in terms of technical excellence and a strong culture and belief based upon total commitment to quality. Even though it is currently facing a slip in market share, with some possible tactical shifts and changes to organizational polices and structure, it should be able to comfortably regain its leadership position in the mobile phone market by the turn of the millenium.

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