Retrenchment Of Ericsson In The Handset Market example essay topic

B. Ericsson in the Global Environment Stereotypes have been attached to many things; from groups of peoples to certain industries. Ericsson as the "world-leading telecommunications provider" also has it's own set of stereotypes. Swedes are seen as a cold, reserved and sterile society, and their company is thought that it just sells phones. Globalization has proven to be challenging because Ericsson's top executives had to implement a plan that would allow for their company to be seen in a different way. When doing business outside of Sweden the CEO soon realized that preconceived notions can be harmful to a companies image and must be changed through providing excellent services and also giving back to society. Ericsson has definitely been affected by the technology bust of recent years.

However in an effort to still make forecasted profits, the firm has had to reach new markets, which includes developing nations. New areas that are being reached consist of China, Russia and the African nation of Nigeria. All three of these markets are reacting differently to the new technology and therefore will be explained separately. China is slowly emerging into a consumer nation. Restrictions that the Communist government once placed on goods are being lifted allowing for an increase in trade. Ericsson has become a major player catering to a country that has over 190 million cell phone users, and an estimated 5 million subscribers signing contracts each month Ericsson did a poor job of catering to the Chinese people.

In the last few decades Ericsson has seen a loss in market share in the cellular handsets, mostly to Nokia and Motorola. At the end of 2001 they were 5% of the market and presently Ericsson accounts for only 2%. The problem was that Ericsson designs were not updated to achieve the look that the consumer craved. Ericsson's technology set the standard but what a Swedish consumer considers "cool" is not what a Chinese customer thinks of as a great gadget. There is also competition from within. China's own "up-and-coming" electronics company from southern Gan dong called TLC has taken a major portion of the market share.

The new Sony Ericsson handsets were also delayed until Beijing granted approval in August of 2002. Ericsson has tried to make up for loss market share and late product advertising by selling multi-media handsets with color screens and photo messaging. The problem here is that the handset cost $400 which is expensive to most people, epically the Chinese market. Even though handsets are proving to be a disastrous segment of Ericsson's business, they are still profitable in China for their global systems for mobile communication (GSM).

They sold over $434 million in equipment in the first half of 2002 and have contracts for another $600 million in the coming year. Ericsson displayed the "early mover" type of competition meaning; they were the first telecommunications firm to tap into China's market. Ericsson is learning that they are unable to compete with handsets. It is their infrastructure that all the other cell phones will be using each time a mobile call is placed.

Similar to the Chinese's story, Russia is playing "catch-up" to the rest of the world in terms of technology. The Russian economy is evolving to be less of a centrally planned one to more of a market economy. Ericsson has taken a different approach to selling their product in the former Soviet Union. The new focus of Ericsson is to sell equipment that enables the Russians to use cellular phones as opposed to actually selling the handsets themselves.

According to an article from March 2003, in BusinessWeek magazine, Ericsson has begun building a wireless network for VimpelCom, which is Russia's leading carrier. The retrenchment of Ericsson in the handset market shows that they are seeking out new areas of business that are not overly saturated. Ericsson has signed a contract with Nigeria's Reliance Telecommunications Limited for $145 million dollars. The contract is to deploy a nation-wide wireless network, not for handsets. The agreement was signed April 2, of this year and shows a new focus of the company. According to Ericsson's press release the contract includes equipment ranging from radio base controllers to services such as messages and voice mail.

The chairman of RelTel, Sir Oon kow, explains the importance of partnering with Ericsson in order to create a better future for Nigeria. Even though Ericsson is not the leading manufacturer of handsets like they were in the early 1990's, they are dominant in mobile and broadband Internet communications throughout the world. Ericsson is also involved in contributing to the world through humanitarian projects. In 2001, the United Nations (UN) accepted the GSM mobile communications system that will support its humanitarian operations. This gift included network equipment, hardware and software and the company also installed the equipment and trained the individuals.

This is all made possible by the company's Corporate Citizenship program, Ericsson Response. Executives at the Swedish based telecommunications firm are making sure they contribute to benefit the world even if profit is down and their market share is declining. In 2000, Ericsson set up a program called Ericsson Response which offers effective support and rapid response to human tragedy caused by disasters. This disaster support team is comprised of highly skilled telecommunications staff and technology, which works closely with humanitarian relief organizations such as the UN, International Federation of the Red Cross (IFRC) and Red Crescent Societies. In March of this year, Ericsson in union with IFRC began a humanitarian assistance program for Central America and the Caribbean. The program includes mobile network equipment that can be quickly deployed to disaster areas.

The packages contain 12 phones and corresponding lines. This is the first of their initiatives in the Americas but is not to be the last. Ericsson signed a global agreement at the World Summit of 2002 to continue to work closely with the ITRC and provide aid by using their telecommunications knowledge. Ericsson has had to change its image to deal with their shift into the global economy. No longer is Ericsson known for handset, but now rather for training and equipment. This transition has resulted in downsizing and lost revenue.

The leaders at Ericsson are still developing innovative technologies and will continue to set records and break conventional stereotypes into the future. Einhorn, Bruce. BusinessWeek online. "Ericsson in China: From Cool to Cold".

Oct. 28th 2002, viewed April 2nd 2003. Einhorn, Bruce Einhorn, Bruce BusinessWeek Online, "Russia: Playing Catch-Up in Tech". March 4, 2003, viewed April 02, 2003 Ericsson Press Release, "Ericsson and Nigeria's RelTel Sign CDMA 2000 1 X" April 2, 2003. Viewed April 2, 2003 Carriers World. "Ericsson gifts the UN" Dec. 12, 2001. viewed April 2, 2003 Ericsson Press Release, "Launch of Humanitarian Program" March 31, 2003. viewed April 2, 2003.