Reviving Motorola - The Zander Way

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Case Details:

Case Code : BSTR197
Case Length : 19 Pages
Pages Period : 1995-2005
Organization : Motorola
Pub Date : 2006
Teaching Note :Not Available
Countries : US
Themes: Corporate Turnaround
Industry : Consumer Electronics

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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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EXCERPTS

The Problems

According to analysts, the problems in Motorola which began in the early 1980s were the result of years of mismanagement and misjudgment of changing consumer trends. One of the reasons for Motorola's downfall was the sudden promotion of Chris Galvin, the grandson of Motorola's founder and son of then Chairman Robert Galvin, as Executive Vice-president in 1990. Eventually, Chris Galvin was made the COO in 1993 and CEO in 1997...

Products

By 2004, Motorola had slipped from being a leading player to 4th position in the wireless infrastructure equipment market with a market share of just 10%, allowing Ericsson to lead the market with Nokia and Nortel Networks coming in second and third. Analysts attributed this fall to Motorola's inability to offer products using the latest technologies. In the semiconductors business, till 2000, Motorola was the leading producer of lock-on chips for PDAs but Intel soon captured Motorola's market share. Motorola's revenue growth slowed down due to lack of innovation as it worked in a closed environment and rarely looked out for new product ideas. Most of the products Motorola developed were what the company deemed necessary...

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Bureaucratic Culture

Motorola had been industry leader in several sectors including two-way radios, high-end communication equipment, and wireless communications technology including mobile telephones & wireless infrastructure equipment. The company did not face much external competition, due to which the then CEO Robert Galvin (between 1959 and 1990), encouraged competition among different divisions...

Efforts Made to Turn Around Motorola

Motorola's revenues peaked in 2000 and reached US$ 38 billion. The company posted losses of US$ 3.94 billion in 2001 on revenues of US$ 26.47 billion. In the same year, Chris Galvin and President & COO Edward Breen (Breen) implemented cost-cutting programs and fired around 50,000 of the company's 150,000 workers. By 2002, the revenues decreased further to US$ 23.42 billion and the losses reported in the year were at US$ 2.48 billion. In the second quarter of 2002, Motorola posted the highest ever quarterly loss of US$ 2.3 billion, mainly due to severance compensation to employees to the tune of US$ 3.4 billion and restructuring costs of Motorola's semiconductor division...

Zander Becomes Motorola's CEO

Zander had been with Sun for 15 years and had become President in 1998. At Sun, he was responsible for the development of Solaris, an operating system for businesses, which turned Sun into a major corporate computing player. He was also credited with making Sun a prominent supplier in the infrastructure market, due to which the company earned double digit margins...

Cultural Changes

Zander realized that the conservative mindset prevalent in the organization was preventing Motorola from coming out with the 'right' products. He said, "Changing the culture is like coming into someone's home and trying to change the way you do things. It's like changing your habits." One of the first things that Zander saw in Motorola's office was antique and ornate furniture, a huge private executive suite for the CEO complete with a personal treadmill...

Dismantling the Bureaucracy

Zander's vision of providing the customers with 'seamless mobility,' called for bringing in cooperation among different units of Motorola and dismantling the bureaucracy, which was known in Motorola as 'warring tribes.' For achieving 'seamless mobility,' it was necessary to have cooperation among different divisions like cell phones, automotive electronics, and set-top boxes. Addressing all the employees through an e-mail, Zander wrote, "If you understand only one thing about our evolving culture, let it be this one...

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