REVIEW REINVENTING ERICSSON Introduction
Ericsson is a Swedish multinational provider of communications technology services that offer communication core, IP Network and transport, provider for 2G/G/!G mo"ile network infrastructures# In 2$$%, Ericsson launched % &$/&$ 'oint venture with (apanese electronics, Sony for marketing mo"ile phone# Erricson e)perienced several challenges in run their "usiness as "usiness to "usiness supplier provider# *he challenges cover the inefficiency of operational e)penses, and less focused approach and standard in +esearch and evelopment -+. and the dropping of G network prices due to fierce competition# In this paper, we would like to e)plain and analy0e the case that Erricson faced and what approach that can "e done to overcome their challenges# Background
1or the past years Ericsson had "een largely overinvesting it can "e seen where cape) ware much higher than operatio operational nal growth# growth# *he dot3com dot3com3"u"" 3"u""le4 le4 was also "ursting "ursting and financia financiall markets markets worldwide worldwide "ecame "ecame cautious of any company linked with Internet, I* and telecom# *he new reality hit Ericsson in early 2$$% when the order stock dropped# Ericsson suffered inefficiency in operation e)penses# It can "e seen at 2$$%, Ericsson issued a first profit warning and announced a cost cutting program of SE5 2$ 6illion Swedish 5ronor# *here are three programs that all of them were aimed to increase the efficiency of operating e)penses# 1irst program, Ericsson applied low hanging fruits7 "y reducing e)ternal +., temporary worker, sold its stake in (uniper Networks, selling off distri"ution operations# Second program, Ericsson cut all costs for all organi0ational level, the massive lay3 offs was also occurred in program# *hird program, Ericsson decided to accelerate the saving program to improve improve the operatin operating g margin margin "y moving moving more production production to low3cost low3cost countries, countries, further further cuts in IS/I* operations as well as reductions of market units and local design centers# In third program, Erricson cut the small customer, stop local customi0ation and push glo"al products# 6eside the handset "usiness to Sony Ericsson, Erricson was a "usiness to "usiness supplier for large operators# Ericsson7s share was still weak among the world7s top three operators -N**, *38o"ile and 9range "ut remained strong among the rest of the# :owever, Ericsson was still market leader in mo"ile systems "ut the competition was tight and sales declining in 2$$# In the market, operators there so far preferred the less e)pensive 2G systems and only a few had "egun investing in G# 6esides, the plethora of local ;sian competitors drove prices down# In addition, worldwide prices for G networks had dropped "y a"out 2$< due to growing competition# 6y its own account, Ericsson had one of the largest +. programs in the industry, worth 2$< of net sales# Erricson has always allowed for wide research of technologies, it is =uite difference with Nokia that only invest in or ! technologies# In addition, +. activities lead time seemed too long "ecause >&< spending time were not go to the innovation time, they went to testing, redoing and testing#
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Analysis
6ased on the e)planation a"ove can "e seen that Erricson suffer inefficiency in operational e)penses# ?ithin its operation e)penses, +. activity is the largest share of it# It affected to the high capital e)penditures and the lowering the revenue margin considering the +. e)penses contri"ute large share of cost of sales# *he programs to overcome the inefficiency of operation e)penses "y lay3offs and cost cutting for all organi0ational level seems not good choice as long as the technologies invented "y Ericsson were not market oriented# Ericsson might allocate share of fund for +. "ut the approach to inventing technologies should consider the market needed and wants# So that the invention of technologies are really powerful in the market in case of ac=uire new market and maintain their foot in the market# It also referred the products that are categori0ed as unprofita"le commodity such as radio station# *he concept of the product developed must propose consumer favor products offering the most =uality performance, or innovative features -5otlet and 5eller, !$, 8arketing 8anagement %!e, 2$%2# :owever, company is sometimes caught in a love affair with their product# It is very important thing to ensure the product developed or invented are correspond with the consumer favor# Recommendation
*he main issue in this case is the inefficiency of operational e)penses# ;s e)plained a"ove, +. need to "e managed in order to ensure the technologies produced are accepted "y the market# It is very important not only to have technologies that are market oriented "ut also to perform effective and efficient +. activities particularly for operational e)penses# It can "e done "y conduct market research deeply to understand what actually market needs and wants for upcoming years considering the +. re=uire long time# *here are many ways to do this such as spreading survey, maintain net promoter score# *his should "e conducted in detail cover all of segmentation varia"les# It is very critical action "ecause Ericsson should aware and understand what market they are "eing involved and new market that can "e created or entered "y the invention of new technologies# *he "usiness lines that are unprofita"le also need to "e revaluated to ensure the operational activities are supporting to increase their sales in market and the share of operating e)penses in cost of sales can "e minimi0ed# If the "usiness lines seem not give great contri"ution to the revenue and have not great value for the market Ericsson might dispose them "y sell them or create another company focusing to manage the "usiness# ;t the same time Ericsson need to strengthen the "usiness line that has great chance in the market such mo"ile systems# *he allocation of the resources should "e reorgani0e in order the resources are effectively used correspond with the weight or value of the "usiness line that Ericsson has# In other word, rationali0e its products line and organi0ations need to "e done if the products line do not give great value to the company# *he most important thing is Ericsson should find the right product for its customers not the right customers for it products -5otlet and 5eller, !$, 8arketing 8anagement %!e, 2$%2# Conclusion
*he structure of the marketing, sales and +. functions was the key issues# ;ll of them should coordinate to ensure that +. creates the right product, and sales functions can sell them to the market# In here, marketing has very important roles to give knowledge to the +. functions a"out the market and the characteristics of the products that need to "e developed and give knowledge to the Sales function a"out the keys to approach the market# In other words, the "usiness functions of Erricson work with precise planning to generate effective and efficient work performance# 2
Bibliogra!y
Narayandas, as, @incent 8arrie esain, aniela 6eyersdorfer, and ;nders S'oman# +einventing Erricsons#4 :arvard 6usiness Shool Aase B3&$C3$C&, (une 2$$C# 5otler, Philips and 5eller, 5evin# 2$%2, Marketing Management 14e. Pearson#
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