Ericsson in the New Millennium

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Case Details:

Case Code : BSTR128
Case Length : 13 Pages
Period : 1990 - 2004
Organization : Ericsson
Pub Date : 2004
Teaching Note : Available
Countries : Global
Industry : Telecom

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Please note:

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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1990s: Beaten by the Competition

Ericsson was highly successful in the early 1990s - the boom time for the telecom industry. But towards the end of the 1990s, the telecom market in the developed countries started stagnating. At this point, the telecom industry shifted its focus from the developed markets to the developing markets of Asia and Eastern Europe - both of which offered a great opportunity.

Consumers in these emerging telecom markets also took easily to the mobile revolution. Ericsson took immense pride in providing advanced telecom technology and making technologically sound handsets. The company invested huge amounts annually on its research and development projects, and its handsets were very popular with mobile phone users during the early days of mobile telephony. But what Ericsson failed to see was the shift in consumer tastes. The purchasing decisions of consumers in developing countries were influenced by a different set of factors compared to the factors that influenced the purchasing decisions of consumers in developed countries. Ericsson's handsets were technologically advanced but overpriced for customers in developing countries...

Slow to Change

In the late 1990s, Ericsson appeared to be definitely in trouble. But, many analysts believed that it could have coped with the slowdown in the economy in general and in the telecom sector in particular, had its management acted decisively.

Initially the company had a problem with the sales of its handset business - and it should have realized at a very early stage that mobile phones were no longer considered an engineering feat but were simply consumer products, and so they should be made and marketed accordingly. Ericsson had excellent products in its range; Ericsson's R380 mobile phone had won a trade show prize in March 1999. But the problem was that Ericsson was too slow in capitalizing on the opportunities that presented themselves. The R380 handset, a promising product was not commercially introduced in the market until a year later, and by then better alternatives were already available to consumers...

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