Understanding Discord NSFW Servers A Guide for Responsible Users.pdf
Â
MS&E274 - Motorola BTO
1. 1
Motorola: A Latecomer Strategy using BTO model
How did the company that pioneered the mobile communication revolution and produced the
worldâs first commercial portable cellular device begin to slip? Unfortunately, a multitude of poor
strategic decisions and failure to recognize the direction of the consumer market has led Motorolaâs
Mobile Device Division to their current position.
Looking back on the companyâs history, we see that the company competitively held onto their
first mover strategy until the end of 2006, when it owned ~25% of the market share. Ironically, the
RAZR, one of Motorolaâs biggest successes, assisted the companyâs downfall. The RAZR introduced
the idea of highly desirable fashion phones but it didnât take long for consumers to realize that the
RAZR was really only a pretty piece of equipment housing mediocre software. Motorola continued
with their old strategy of trying to push out mass amounts of phones with great hardware while
ignoring the importance of stable software. The company attempted to mess around with a couple
different software platforms while their competitors were successfully developing their own. This,
unfortunately, caused them to miss out on both the feature phone and Smartphone waves.
This leads us to the current position of the company; unstable and desperately in need of a new
sustainable dynamic latecomer strategy that will once again allow the company to be in a competitive
position. The rest of this paper discusses a proposal for a new strategy for Motorola to help them
regain their balance. First of all, the company has been bouncing around the idea of a spin-off for the
Mobile Device Division. The first part of the strategy is to acknowledge that this spin-off should
definitely take place. Over the years, Motorola has grown into such a huge company when in fact they
should be much smaller to promote focus and collaboration. In order to help focus more specifically on
the cellular device problems while maintaining other divisions it is important for the Mobile Device
Division to separate itself. It is also extremely important for the spin-off to maintain the Motorola
brand name, which has a very powerful and stable hardware backbone that is key to future success.
2. 2
While this proposed strategy will help them create a new vision and re-brand themselves, the current
brand name of Motorola has an attached ecosystem necessary to keep the company competitive and
visible. The company has also announced that the Set-Top Box division will be included in the spin-
off, which can also play an important role in our proposed strategy.
Secondly, we propose a complete internal restructuring of the company. The internal
communication gap between the different departments is very evident in all of the mistakes the
company has made. The history of the company clearly shows that the hardware division and
marketing team focused mainly on releasing RAZR like phones one after the other, completely missing
the shift in market trend. On the other hand, the software group continuously added different platforms
to their already abundant pile of unsuccessful endeavors, while its competitors were starting to develop
stable platforms of their own. Both groups failed to work together to come up with one stable and
successful Smartphone, which in turn led the company to produce products that actually compete with
one another and lack an overall brand cohesion. After the Mobile Device Division spins off, the new
company needs to completely restructure itself to have better communication channels.
Along with the spin-off and restructuring, the main strategy that we propose is for Motorola to
create a new image for themselves while redesigning their current brand name. Since the company is
essentially a latecomer in the 2-sided Smartphone game, they need to come up with a new niche that
will set them apart from the rest of the players. Using the Invasiveness matrix (exhibit II), Motorola
should disrupt the value chain using the BTO (Build to Order) model. The new vision, called
MyMOTO (exhibit III), embraces the idea of a customizable communication solution for your
Smartphone. We suggest that Motorola slowly begin to introduce BTO customizable Smartphones that
allows the customer to decide what he/she wants on it. The idea needs to be tested out to see the
consumer reaction, which is why we propose that the company slowly begin to introduce it, starting
with 30% of their focus and increasing their percentage of BTO Smartphones as the market starts to
warm up, similar to the strategy that Dell Computers used. With their strong holder infrastructure,
3. 3
Motorola has an opportunity to transition from the lower left corner of the matrix to the lower right
corner. If this strategy is successful, Motorola can further expand its portfolio of BTO based phones
thereby making a direct sales impact on competing incumbents (the top right corner of the invasiveness
matrix).
Customization options include 1) choosing 2G (CDMA or GSM), 3G (UMTS) or 4G (LTE), 2)
Memory size (8GB, 16GB and 32GB), 3) Carrier customization, 4) Camera qualities, 5) Ornaments
and screen-type, 6) Customized themes, apps, games, etc., 7) OS (Windows Mobile 7 and Android) 8)
the option to have a LTE Set-Top box connection for multimedia streaming, which would leverage on
Motorolaâs Set-Top box technology and 9) Option for financing for users who canât afford the price.
There are multiple reasons why this customization strategy is best suited for Motorola
and could successfully help the company stay competitive. First of all, the company already has a very
strong brand name that can be leveraged off of to create an even stronger more focused brand. Another
advantage is the companyâs strength and insights in hardware engineering, which is why the options
listed above are possible for the company to manufacture. Focusing on external software platforms is
another key to this strategy since Motorola has proven to have difficulties in software development.
This way they can focus more on developing great hardware, which is something they are more skilled
to accomplish. Also, maintaining some phones with carrier exclusivity holds onto the existing
ecosystem and supply chain, which can be leveraged on for the new customization ecosystem and
therefore preventing the rise in cost. Motorola can easily exploit the weakness of their incumbents with
the elimination of carrier exclusivity and the option to choose an OS, two things that are yet to be
jointly offered by one of its competitors. This proposed business model is also one that doesnât directly
make the incumbent feel threatened, which gives Motorola more time to plan and implement their
attack. More details about carrier exclusivity and their advantages are discussed in the 'Carrier
Exclusivity' section. The customization model also helps create a unique niche, one in which the
consumer can express their individuality, something that is very important in todayâs society. Overall,
4. 4
we want to transform Motorola into a company that provides customizable communications devices
and solutions, which gives people more options to communicate. In the past, the company has always
focused on maintaining their name in multiple different categories, but they have a chance at success if
they change their mindset to do less and do it well.
The Build-to-Order Model
BTO is defined as "a value chain that activates the processes of building the products based on
individual customer requirements and by leveraging information technology and strategic alliances
with partnering firms for required components and support services such as logistics. The aim in BTO
is to meet the demands of individual customers with a short lead time and minimum inventory and
production costs along the value chain" (Gunasekaran, 2005). DELL was a particularly prominent
proponent of this model. By selling to the customer directly, DELL was able to keep a tight watch over
its inventory and customer demand.
The Smartphone market currently does not have any BTO players. Smartphone companies
create phones with specific features and reach end customers invariably through carrier channels (with
the exception of Google Nexus-One). However, many features in Smartphones are customizable:
memory, processing power, camera specifications, radio hardware, operating system etc. The cell
phone faces the same problems as the computer industry did 20 years ago: lack of direct interaction,
inventory pile up etc. With its design expertise and experience with Motorola is in a unique position to
provide users the ability to "create" custom phones. By studying the DELL model and extrapolating it,
these are the apparent advantages of a BTO model:
ï· Better control of inventory and very little additional work in process. However, unless the
company migrates entirely to the BTO model, these benefits are minimal.
ï· The quick and direct feedback obtained from end customers provides Smartphone companies the
ability to shape customer demand and iterate over pricing.
5. 5
ï· Customization allows companies to access multiple market segments with the same device.
ï· This strategy allows Motorola to use multiple OSâs allowing consumers to select the most
suitable software. Instead of investing in a platform of its own in the already saturated platform
market, Motorola can rely on the best platforms based on consumer feedback.
ï· Developing a specific model for customers induces closer interaction with them. This leads to
better working relationship and the opportunity to gain loyal customers.
ï· It is possible to promote a healthy competition among suppliers of the customizable components
(i.e. OS companies), reduce costs of the phone and shape the pace of the industry. This strategy
offloads a major chunk of the R&D to competing suppliers. Hardware suppliers can also provide
repair services and warranty in some cases. Smartphone makers can then spend resources on
marketing, branding, product management, and supply chain coordination.
Motorolaâs Holder Structure
The customization model adapts one of the latecomerâs strategies â inducing segmentation in
the two-sided smart-phone market and a BTO infrastructure while gaining market share. Our plan is
to target all market segments and create cross-network effects among the suppliers and APP
developers on one side, while consumers on the other side. The scheme still incorporates 70%
production of the regular smart-phones to maintain constant revenue. âCustomized smart-phonesâ will
trigger a new trend in the smart-phone ecosystem and will create some affluent customers on one side
that will want to have feature loaded smart-phones while lower/middle class smart customers on the
other side that will buy only needed features on their smart-phones. This will incorporate a different
of way designing and building the internal circuitry of the phone.
The BTO model will require a Mother Board â Daughter Board Architecture. The mother board
will consist of all the peripherals and the baseband â audio circuitry and will be common among all
the smart-phones. However based on user pick, a 2G and/or 3G and/or 4G daughter card will be
6. 6
connected to the mother board using a mating connector. A higher MP camera causes more
radiation/interference issues on the phone. However, a more sophisticated and conservative PCB[3]
layout will take care of this issue. Work has already been done to incorporate this kind of design
topology at Motorola which definitely provides us an edge on our competitors, especially in terms of
implementation of our vision. The strategy involves keeping 3-4 resolutions of cameras. Sockets will
be used to accommodate different mechanical sizes of these cameras. This will allow a âmanual dropâ
of cameras on the production line based on userâs wish. On the other hand the option of customized
on-board memory will be done using memory adapters. Ornaments/housing and customized
themes/APPs/games for affluent customers can be added at the very end of the productions process.
The production model presents âone factory technician building a whole Smartphone with all
the customized partsâ. While the current model incorporates one technician dedicated to a specific
task, our model introduces the idea of "one technician" dedicated to assemble a whole phone. She/he
will be given, the mother-board, user demanded daughter-board, the chosen camera and memory, the
customized housing etc. Once the phone is assembled, it will be ported over to a programming station
where the right Operating System will be flashed on the phone. Finally, the phone will be loaded with
customized themes, APPS and games on based the customer desire! Our research shows that factories
in Vietnam are offering competitive rates compared to the facilities in China and Brazil. Part of our
strategy is to consider new manufacturing facilities in Vietnam to lower production costs.
Our model's initial plan is to begin with building 20-30% customizable Smartphones. Hence, it
won't require any significant inventory changes. We'll still be ordering the same quantities of
inventory but now we will need to work with the suppliers to be a little more flexible. This will allow
us to use the same inventory as of regular smart-phones and just increase or decrease the number
based on demand on the customized smart-phones side. This strategy will not only help in keeping the
same inventory costs, but will also let us make an efficient use of surplus inventory. For example,
offering the option to upgrade from 2MP to 3MP camera for a little money, just because we have a
7. 7
surplus of 3MP cameras in our inventory.
One of the cool features offered as a part of customization would be âsmart-phone to set-top
box connectionâ. Motorolaâs new division after the split will have both the âMobile Devicesâ section
and the âSet-top boxâ section. Our plan is to leverage on the set-top box technology and make the
contents stored on a Motorola Set-top box, available on a Motorola smart-phone at another location.
This will be done over the internet using carrierâs LTE[4] network by adding additional hardware
inside the set-top box and loading a program/APP on the smart-phone side. This way a user staying at
a friendâs place will be able to stream programs from a set-top box sitting at his place and play it on a
TV at his friendâs place. This idea will make a user avoid buying an additional piece of hardware (like
a Slingbox) and just use his Motorola set-top box/smart-phone combination to get a seamless
communication experience. Addition of DLAN[5] on the smart-phone can also enhance the
experience by allowing a wireless connection between the smart-phone at a DLAN friendly TV set.
Software
One of the main aspects of software customization entails giving a Motorola smart-phone buyer
an opportunity to pick an operating system of his choice. Our current strategy offers two operating
systems (Android and Windows Mobile 7). Not only it will let the user have multiple options for the
user interface, it will also allow choice between applications like Googleâs phonebook vs. BLUR[6]
etc. Another option is to offer customized themes, games and APPs.
Operating System choice requires an Application Processor that is capable of running different
operating systems without having to do any significant phone software changes. For example,
NVIDIAâs AP20 processor from the Tegra family of processors is capable of supporting all of these
platforms. NVIDIA Tegra is heterogeneous processor architecture with multiple processors, each
architected for a specific class of tasks â an 800 MHz CPU, a HD video processor, an imaging
processor, an audio processor, and an ultra-low power GPU[7]. However, flashing a different
8. 8
operating system on the phone might require different memory mapping of the different MAs[8] and
peripherals[9] on the phone. This can be achieved by loading a dedicated Flex[10]file for each
operating system.
Motorolaâs MOTODEV[11] platform is already in place which allows APP developers to write
competitive applications for Motorola Smartphones. We will make use of the same platform and
leverage on that to add sockets for the developers on a micro level. By doing this, we create a
competitive atmosphere among the APP developer community where they will be able to get access to
some of the hardware applications on the phone and hence there is more development opportunities
associated with customized Motorola Smartphones. Competitors like HTC that are using different
operating systems on different phones, currently do not have such a development platform (MotoDEV
Studio) in place. Hence, although they are able to produce dedicated phone software for different
phones based on different platforms, it will not be easy to have a fast âBTOâ kind of application
development infrastructure for customized smart-phones that we are proposing for Motorola.
Carrier Exclusivity
Another major concern that must be addressed is that of carrier exclusivity agreements. As we
all know, the industry norm is for carriers to enter into exclusivity agreements with device
manufacturers and sell their smart phones with major subsidies, thereby luring customers into signing
two-year contracts with them. This issue has been the source of much controversy, even spurring a
Senate Commerce Committee hearing and a subsequent FCC investigation into the US wireless
industryâs potential antitrust problems. Critics have argued that carrier exclusivity limits consumer
choice by excluding rural customers from accessing the latest smart phone technology and also makes
it very difficult for smaller network operators to compete without such exclusive models. As part of
the overall strategy, Motorola should provide total customization of carriers and service plans to its
consumers and gradually move towards carrier agnosticism.
9. 9
By becoming carrier agnostic, Motorola risks losing price competitiveness for its products due
to the loss of carrier subsidies. Most high-end smart phones on the market carry a suggested retail
price of $400 to $600 dollars, but are usually discounted to about $200 after carrier subsidies.
Considering an average BOM cost of approximately $180 (based on iSuppliâs teardown analysis data)
for most of these models, the carriers are effectively subsidizing most of the gross margins to the
manufacturers in return for the exclusivity agreement. However, our research also shows that many
consumers also end up getting locked into more expensive plans in exchange for the phone discount.
The most obvious example of this phenomenon is T-Mobileâs Even More and Even More Plus plans â
one can sign a two-year contract for the Even More plan to purchase a smart phone at a discounted
price, but the monthly rate will be $10 more than the contract-free Even More Plus plan, which offers
no device discounts; aggregated over two years, this amounts to an extra $240 in monthly service fees!
This leads us to the conclusion that in order to perform a fair comparison between carrier options, one
must consider the Total Cost of Ownership.
Our proposal is to integrate carrier selection into the BTO modelâs customization process and
provide side-by-side comparisons of carrier options in terms of the total cost of ownership. For
example, a user may specify that he/she is looking to spend no more than $80 on the monthly plan,
needs to have texting and data, and will primarily use the device in the 94305 zip code. Then, based
on these criteria a cost comparison matrix can be presented to the user, summarizing the different
available options from various carriers that satisfy the requirements. A mockup of such a matrix is
provided in Figure 1 of the appendix. Using this comparison, consumers can easily see what they are
paying for and choose for him/herself the exact carrier and plan that suits their needs. In addition to
offering more choice to consumers, we believe that this is also an excellent way for Motorola to
communicate its value proposition and price advantage in terms of total cost of ownership.
To implement this strategy, we recommend that Motorola should initially maintain its existing
carrier exclusive agreements to mitigate risk and hold on to its current market share. This can
10. 10
potentially be done using an approach that is similar to what RIM has done with the BlackBerry Bold
on AT&T and the Blackberry Tour on Verizon â offer two similar phones with different baseband
configurations and minor cosmetic differences as exclusive models for different carriers. We believe
that this approach will allow more resource sharing between the exclusive and BTO products, and can
enable Motorola to experiment with the BTO model with more security and confidence. Also, we
expect that some users may initially be unfamiliar with the concept of total cost of ownership and
reluctant to pay $500 up front for a smart phone, thus Motorola should seriously consider offering the
option of low to zero interest financing. Finally, as the BTO model gains critical mass, Motorola may
even want to become a reseller of wireless service plans to generate revenue from consumers who
choose to subscribe through the BTO checkout process.
Conclusion
Overall, the 3-part proposed strategy for Motorola will help it regain its competitive position in
the market by redesigning its brand name and focusing more on what the consumer wants. With the
beachhead aimed at customers who prefer choice to exclusivity, this strategy aims at splitting segments
of the market. By providing a unique grabber 'More choice at the right price', Motorola can leverage its
existing holder infrastructure to play the latecomer strategy in the Smartphone market. As the market
continues to evolve and grow, we believe that Motorola can gain market share by becoming a volume
player. This way, Motorola can avoid playing the incumbent's game and stick to the game of the
switching customer preferences. Motorola already has the established holder in terms of infrastructure,
brand image and supplier relationships. Next by launching this model in the US, Motorola can learn
valuable lessons of disrupting the market by going the BTO route. After success in US, the global
markets should be targeted starting with UK, Germany and then emerging countries.
11. 11
Appendix
[1] Universal Mobile Telecommunications System
[2] Long Term Evolution (Enhancement of Wideband CDMA)
[3] Printed Circuit Board
[4] LTE technology is used to support high speed video streaming
[5] Digital Living Network Alliance
[6] Motorolaâs social networking integration suite
[7] Graphical Processing Unit
[8] Mode of Access (For example GSM, CDMA etc)
[9] WLAN, Bluetooth, FM , GPS etc
[10] A file that configures memory mapping on the phone
[11] Visit http://developer.motorola.com to learn more about MOTODEV
Figure 1 - Mockup of Carrier Selection Screen