Case study on Motorola used to demonstrate how value creation can be highly beneficial within companie

Kilburn, David

English

Bournemouth University Research Online

Value creation in MotorolaIntroduction This is a critical assessment of the two proposed recommendations to maximize the currentprocurement model and ensure value creation to the shareholders. The assessment will evaluatethe pros and cons of the recommendations, along with suggested criteria which will aid themanagement decision making process. Assessment Up until 2007, Motorola had its procurement activities handled by the various business units; along tradition probably very efficient historically, when Motorola had a smaller number ofsuppliers and partners. Increased competition, outsourcing trends, and globalization in today’smarket have made the strategy inefficient and less flexible.  Identifying the changes and challenges in the market place, Motorola’s chief procurement officeradopted a centralized procurement unit, separating procurement from the business units to globalcategory teams that support all business units. This new strategy which is suited for today’schallenges however needs proper implementation for Motorola to achieve its benefits. The centralized procurement strategy is getting more attention from leading organizations today,the key factor for success is the extent to which these companies are able to develop andimplement the strategy, which is highly dependent on the attitude and culture of the staff of theorganizations. Doyle once stated, “In most situations organizational capabilities and culture aremore important than strategy”. Recommendations Two recommendations have been proposed to Motorola to enable it to achieve continuous successwith its centralized procurement strategy and to enable increased value for its shareholders viacollaboration. Lunch and Learn Programme. This interactive and educational programme brings together all stakeholders who engage with theprocurement department. The strategic aim of the event is to educate the stakeholders aboutmarket orientation and how focusing on the customer’s needs and demands help drive competitiveadvantage and value for Motorola. Understanding market orientation and how centralizedprocurement can drive organizations to improve their supply chain efficiencies. Motorola with anever growing number of supply chain partners, understanding market orientation and thecentralized procurement process means it can better take advantage of its partners by establishingthe right types of relationships, contracts and partnership which will then allow the business unitsto focus on their core business functions. [pic] Benefits of the Lunch and Learn Programme  Motorola adopted centralized procurement as a strategic move which allows all business units toget a structured and standardized support from procurement. One of the key benefits thecentralized approach allows Motorola to address is inconsistent prices the various business unitsreceived from vendors; the centralized approach eliminates this inconsistency. Educating the business units about early engagement of procurement in negotiations, will helpprevent price discrepancies and drive down prices leading to improved bottom line costs. Another key benefit of the programme is it gets more people in the company to adopt thecustomer led approach and its importance in creating shareholder value. The centralized approachis a key strategy towards achieving this goal, by successfully reducing development time, whileproducing better products that deliver superior and highly compelling consumer experiences.  Strategic Implications of the Programme The adoption of a customer led organization is that it provides Motorola with the flexibility toadopt more differential advantages such as product leadership, service leadership, customerintimacy and brand leadership. The way to get there is to ensure excellent execution for build upstrategies such as the centralized procurement approach. However, the strategic marketing implication is that adopting a customer led strategy needs to bea company wide approach, this means all other business units must adopt the strategy for it to beefficient.Customer led organizations need to understand customer needs and the sales team are the closestto the customer, so they need to understand how to get the message to the engineering teams toensure the customer’s needs are met. In turn the engineering team needs to define the resourcerequirements to procurement to ensure right partners and suppliers are selected. Finally, a key consideration is the cost of executing the programme and campaign, usuallyexpenditure is compared to revenue generated, however due to the fact that customer ledorganizations approach lead to increased shareholder value, which is not very straight forward toevaluate. The organization needs to justify its investment to its shareholders in a very differentapproach to other budget requests. This approach will be based on value based marketing and thevalue delivered by the programme. Let’s Collaborate Campaign This is a long term campaign grouped into three steps, it aims to position Motorola accordinglyfor the future by increasing and promoting collaboration amongst its business units, suppliers, andpartners.  Increased competition in the market place requires innovation and strategic policeswhich ensure Motorola remains competitive. Benefits of the Let’s Collaborate Campaign  Collaboration is a process which involves getting multiple groups or companies to centralize orshare common functions, which in turn help drive down cost, improve synergies, improvestandards, and most importantly deliver superior and highly compelling consumer experiences. One of the key benefits of collaboration is cost control; this is already evident with the centralizedprocurement strategy. Extending this collaboration to other Motorola business groups will ensurethe whole company gains more from a collective approach. A simple example will be in the areaof achieving consistent prices and better commitment from suppliers following the size of theopportunity the collaboration creates. Another key benefit is in the area of quality, having a consistent process of performing a task willdrive a new level of expertise and quality. Even collaboration outside of procurement in an areasuch as marketing will yield benefits for the brand and brand equity, as the consumer will receivea consistent message. Finally another key benefit of the collaboration campaign, when extended to third partycollaboration is in the area of creating strategic partners, these partners open up new markets andopportunities. Strategic Implications of the Programme This is a long term strategy where success is linked to successful completion of each step. Thefirst phase which is straight forward will require very little change when compared to the thirdstage of the strategy. The key considerations in the first phase is educating and getting buy-in forthe collaborative approach. This will require some culture change and training similar to theLunch and Learn Programme. The next stage of the strategy, which entails taking advantage of partners who have sistercompanies will also offer some challenges, this includes identifying the appropriate partners, it isimportant to not select sister companies of partners based on the fact that they are just part of thesame group of companies, an example of the implication of just selecting any sister companycould be in the quality of the goods, if one bad link is selected in the collaborative effort, all thegood work completed by others will be compromised. The implementation of the final stage of the strategy introduces more challenges, the strategicimpact include Motorola’s brand, financial position and legality. This collaboration asks formultiple entities to come together and collaborate, in certain markets these might fall foul ofcompetitive laws and be considered illegal, which can have a detrimental effect on its brand andvalue.  Evaluation of recommendations and decision criteria The two recommendations focus on getting Motorola to reduce its costs, standardize its processesto improve quality, better control risk, reduce time to market and most importantly satisfy thecustomers’ needs. However, there are challenges to these recommendations, top of the list is theacceptance of the changes by Motorola’s staff, with consolidation usually linked to reduction inwork and a potential downsizing opportunity for the organization. Marketing and the organizationhave to convince the staff and communicate properly the real motives of the recommendations. Also Motorola being an engineering company will have some resistance from staff whopreviously focused on creating solutions which at times are different from the customer’s needs. Itis important that this creativity, innovation, and energy are channeled into exactly what customersneed. The third party collaboration raises concern around the execution of the external collaborationphase and the position of the law. Evaluating the benefits, it is however clear that Motorola will gain from adopting theserecommendations in both the short term and long term. However, key steps need to be followed toachieve the desired benefits. Success of the strategy requires a structured and planned approach, but most importantly of all,commitment from Motorola’s management. The commitments need to come in the form of; • Demonstration of the commitment with Motorola’s values• Adoption by business units as key deliverables• Inclusion in performance goals of employees• Reward system for partners. Finally, the success and progress of the strategies needs to be measured and evaluated periodicallyto ensure the right value is created for the organization. 

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