Motorola in Trouble

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Case Details:

Case Code : BSTR267
Case Length : 16 Pages
Period : 2004-2007
Pub Date : 2007
Teaching Note :Not Available
Organization : Motorola
Themes: Business Strategy
Industry : Consumer Electronics
Countries : US

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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The products that followed the Razr had been lackluster, and competitors had been quick to copy the Razr's best feature - its sleekness - in their own phones. In late 2006, Motorola cut the prices of its phones in a bid to increase sales and market share, but this only led to an erosion in margins and lower profitability for the company.

Motorola had warned in early 2007 that its performance in the first half of the year would be 'rocky'. It also echoed analysts' opinion that the mobile devices unit was unlikely to turn around until 2008. The company's poor performance increased the pressure on Motorola's CEO Edward Zander (Zander) and analysts speculated that the board might want to replace him in the near future. Zander, however, seemed confident about improving Motorola's performance. "I think we're doing the right things. The management team is working real hard. We have to start demonstrating that we're making progress,"he said soon after the second quarter results were announced.

Background

Motorola was set up in 1928 by brothers Paul and Joseph Galvin. The company was originally incorporated as the Galvin Manufacturing Corporation (GMC), and was headquartered in Chicago. GMC's first product was a 'battery eliminator', which allowed radios to operate on standard household electric current instead of batteries.

The competition in the battery eliminator business was intense, with manufacturers aggressively undercutting each other. Because of this, GMC diversified into making automobile radios, which was a relatively unexplored business at that time. GMC's first car radio was launched in 1930 under the name 'Motorola'¹².

The unit was successful as it was sold for $120, including accessories and installation, which was considered quite inexpensive. In comparison, the custom designed automobile radios available at that time cost anywhere between $200 and $300. In 1936, GMC introduced the Motorola Police Cruiser, a one-way car radio that could receive police broadcasts...

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12] 'Ola' was a popular suffix at that time adopted by manufacturers of audio equipment like phonograms and radios. The word Motorola combined Motor (as in motorcar) with Ola (implying sound). The name therefore, stood for 'sound in motion'.