Motorola Mobility Firm AuditStrategic Organizational AnalysisWyatt Chartrand and Justin WongSUNY Binghamton University Global Strategic Management Professor Londo 12/15/2015

Table of Contents

Executive Summary.................................................................................................................................................

Background and History.........................................................................................................................................

Issues to be Analyzed...............................................................................................................................................

Internal Analysys.....................................................................................................................................................

External Analysis.................................................................................................................................................

Alternatives………………………………………………………………………………………..4

Recommendations………………………………………………………………………………4, 5

Implementations

Concluding Analysis………………………………………………………………………………8

Appendix………………………………………………………………………………9, 10, 11, 12

Sources………………………………………………………………………………………13, 14

Executive Summary:

This report will analyze Motorola Mobility through the use of an in-depth internal analysis and a

briefer, external analysis. It will highlight three key issues within the industry, present feasible

alternatives to each, and underscore some implementations for the recommendations chosen

from the alternatives. Deriving information from the company’s finances and a variety of key

industry sources, this report will attempt to determine Motorola Mobility’s strategic vision and

mission for the short-term, mid-term, and long-term future with an emphasis on developing key

competitive advantages for the firm over its primary competitors.

Background and History:

Motorola Mobility is an American mobile device technology company, headquartered in

Chicago, Illinois. The company was formed on January 4th, 2011 when the separation of

Motorola Inc. was split into two organizations, Motorola Mobility and Motorola Solutions.

Motorola Mobility received the company's consumer-oriented product lines, which included its

mobile phone business and services for digital cable and satellite. Motorola Mobility’s primary

focus is on smartphones which run on the Android operating system developed by Google Inc.

In August 2011, Google Inc. acquired Motorola Mobility for $12.5 billion. This acquisition did

not last long, however, as they sold most of the company, except its patent, to Lenovo. Motorola

Mobility is now a subsidiary of Lenovo, a Chinese personal computer and mobile device maker.

Appendix Graphic 1 summarizes some key points in the company’s history.

Issues to be Analyzed:

Lack of profitability to date, along with a lack of returns for its parent company, Lenovo.

Highly fragmented product line with numerous different SKUs, leading to a perceived

lack of software support for each one.

Technical defects out of the box causing issues for different devices, most recently with

the Nexus 6, as well as manufacturing and quality control issues.

External Analysis:

Opportunities.

o Lenovo’s resources could be used to build competitive advantages.

o Untapped markets, particularly in developing countries.

o New acquisitions.

Threats.

o Competitors have larger market share.

o Lower priced represent intense competition, especially within the Chinese market.

o Government regulations.

Internal Analysis:

Strengths.

o Strong brand name.

o Product offerings are at relatively competitive prices.

o Lenovo, the parent company, is used to working with lower cost products.

o Skilled workforce.

Weaknesses.

o Lost some cell phone market share in recent years.

o Products are not user-friendly.

o Reputational damage due to defects with recent phones (Nexus 6).

Customer Analysis.

o Motorola customers are worldwide and growing.

o Top five are the U.S., United Kingdom, China, Japan, and South Korea.

o Demographics and purchasing habits.

Budget consumers.

Young, lower- and middle-class.

18-24 age range.

Younger consumers are multitaskers.

Emphasis on features.

Older consumers have much more functional view.

Alternatives:

Lack of Profitability:

Pursue newer, more modernized marketing strategies.

More aggressively compete on quality alongside competitors such as Samsung and

Apple, Inc., in addition to keeping costs as low as possible.

Fragmentation and Lack of Support:

Consolidate the number of devices.

Invest in better aftermarket support and software updates.

Product defects:

Invest in better quality control, manufacturing processes, software development.

Product redesign/streamlining.

Recommendations:

For Motorola Mobility’s lack of profitability, we recommend that they implement a two-

pronged strategy focused on quality and cost leadership.

o They should compete better with competitors such as Apple, Inc. and Samsung on

quality. Even though they have strong brand loyalty among many customers,

many others see the products as not quite as good as Apple’s or Samsung’s

flagship devices. We do not feel that a strategy solely consisting of a marketing

facelift for the company will yield long-term profitability.

o They should also develop cost leadership in regards to manufacturing the cellular

devices themselves. This will help boost their margins, and, by extension, their

profitability. Our third recommendation (resolving product defects) also doubles

as a strategy to reduce costs in the longer run, which will be addressed later.

In regards to Motorola Mobility’s highly fragmented and therefore weakly supported

product line, we recommend primarily investment into better aftermarket support

services.

o Instead of only releasing one minor update for a major phone before discontinuing

support for it, similar to the Moto E, they should continuously support products

until that line is completely discontinued and strategically removed from support.

Support in the form of software updates should be extended greatly for

moderately older phones to build customer satisfaction and ceased only when

necessary.

o Other support infrastructures should be extended beyond software updates, such

as customer support services for previously released phones and accessories

support (such as for protective cases).

o Given that there are different markets attached to each different product line, we

do not recommend heavy consolidation of different product lines, as they each

service different target market (low-end to high-end). Some narrowing may be

necessary, however.

For the product defects and technical issues Motorola Mobility’s phones frequently

suffer, we believe that they should pursue better product control.

o They should implement more stringent quality control measures over their

products to ensure technical reliability.

o Maintain tighter control over its manufacturing processes.

o Develop and maintain better control systems on its software development to avoid

bugs.

Please refer to the Economic Logic Model on the following page for our ultimate

rationale behind these recommendations and their financial feasibility.

Implementations:

Lack of Profitability

o Invest into R&D to develop products of comparable or better quality.

o Obtain financing from short-term and mid-term bonds and loans.

o Acquire existing companies that provide the raw materials to lower product costs.

Vertically integrate to ensure future success as raw materials continue to

go up in price.

Fragmentation and Lack of Support

o First Year.

Narrow the product line somewhat to model that of Apple’s and

Samsung’s.

Create new product lines less frequently to avoid brand dilution.

Create a new division that focuses solely on post sale support.

Split that division into software and hardware segments.

o Third Year.

Focus on top-selling products and continue to provide more resources to

further fuel this success.

o Product defects.

Develop a team that will monitor quality control periodically and

incentivize manufacturers for high quality output, and provide

disincentives for lower quality output.

First Year.

Start by monitoring the factories that are producing the material.

Put policies into place that would incentivize factory managers to

promote quality.

Third Year.

Develop better strategic partnerships with the factories producing

high quality material.

o Please refer to Appendix Graphic 4 for a brief timeline summary of our

implementations.

Expected Financial Results:

Because Motorola Mobility is a subsidiary of Lenovo, no currently released financial

documents have been released separately apart from Lenovo. The following figures are

based on 2011 information from Google Finance, as no current 10K forms or other

official financial documentation is available. An income statement, balance sheet, and

statement of cash flows from Google Finance are attached to the end of this document.

All figures are in millions USD. Based on Motorola Mobility’s 2011 financial

information, we found the following:

o Total revenue was $13,064.00 and the cost of revenue was $9,747.00.

o The growth rate for their revenue between 2010 and 2011 was 12.28%.

o Using this growth rate plus a conservative 5% premium assumed for our

recommendations, the growth rate becomes 17.28%.

o Thus, the projected revenue is $15,321.00.

o Building in a 5% reduction in cost of revenues based on our recommendations,

the cost of revenues becomes $9,259.00.

o The firm is thus profitable at $6,062.00.

Concluding Analysis:

Ultimately, we believe there are three key issues facing Motorola Mobility that necessitate

greater attention than any others—lack of profitability to date, fragmented product line leading to

a lack of support, software and otherwise, and product and technical defects. Our

recommendations for these, respectively, are competing on quality and controlling costs,

extending product support infrastructures, and investment and development of better quality

control measures. These should be achieved using a mix of debt financing, vertical integration

strategies, and improved hiring strategies similar to those of Amazon’s to build up a leading

quality control team. We project a 5% increase in revenue and a 5% decrease in the cost of

revenues as a result of these implementations. Please see Appendix Graphic 3 for a summary of

this text.

Appendix:

Graphic 1: Background and History Summary

Graphic 2: Economic Logic Model

Graphic 3: Summary Graphic

Compete on Quality and

Reduce Costs

Implement Improved Quality Control Measures

Develop Better Aftermarket

Support Infrastructures

Graphic 4: Implementations Summary

*Financial information from Google Finance attached separately on the

next page. They are not included in the Table of Content’s pagination.

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