Critical Evaluation of Motorola's International Business in China

This report delves into Motorola's international business operations in China, examining the factors driving globalization and the company's strategic choices. It begins with a critical analysis of relevant factors, such as political, economic, social, technological, legal, and environmental aspects, using the PESTLE analysis tool to assess the Chinese market. The report then evaluates the effectiveness of Motorola's entry strategy, specifically its adoption of a joint venture approach. Finally, it explores the company's staffing approach for senior management in China, assessing its appropriateness and impact. The analysis considers both internal strengths and external factors influencing Motorola's success in the Chinese market, providing a comprehensive overview of the company's international business strategies and challenges.

INTERNATIONAL
BUSINESS

TABLE OF CONTENTS
Executive Summary.........................................................................................................................3
Introduction......................................................................................................................................4
Main Body.......................................................................................................................................4
1. Critical analysis of relevant factors responsible for the globalization by using strategic tools
.....................................................................................................................................................4
2. Critical evaluation of the effectiveness of Motorola's entry strategy......................................8
3. Motorola’s staffing approach for senior management in China............................................11
Conclusion.....................................................................................................................................13
REFERENCES..............................................................................................................................14
Books and Journals....................................................................................................................14
Online.........................................................................................................................................15
2

EXECUTIVE SUMMARY
International business can be defined as a establishment of whole business unit in other
country of the world. This encompasses wider range of professions which rely in the
management, marketing, business, IT, etc. It is very important for the company to adopt the
international business in this present world in order to get the exposure of world. This report has
been emphasized on the Motorola's business set up in China. Further, the company have assessed
the complete environment of the China and than analyzed some factors which encouraged the
firm to set up their business organization in the country china. In this country, the company
found huge scope to capture the market of China and become the market leader of that industry.
Moreover, the company also adopted the entry strategy as joint venture in order to meet the goals
of corporate. It has been argued that joint venture was a good strategy or not. In addition to this,
the report also describes that staffing approach adopted by the company was not appropriate and
due to this reason company has to incur heavy cost on training and development. However, from
different perspective it has been argued that this approach proved to be a reason for getting
success in the nation.
3

INTRODUCTION
International business refers to as the establishment of business organization in other
countries of the world (Hill, 2011). Further, this business is comprised of all commercial
transactions which includes private and government sales, investments, logistics and
transportation. This transaction takes place between two or more than two countries beyond their
political borders. The international business aids the organization to gain global exposure by
launching its brand in the other nation. This report describes the international business carried
out by the mobile company Motorola which establishes and maintain the top position of its
business organization in China. Further, the discussion has been made on the use of suitable
strategic tools for assessing relevant factors which is responsible for the globalization. Moreover,
the description of Motorola's entry strategy has been made. In addition to this, the appropriation
of staffing approach of the company have been focused.
MAIN BODY
1. Critical analysis of relevant factors responsible for the globalization by using strategic tools
Globalization basically refers to as the process of interacting and integrating among the
people, companies and governments of several nations (Bartlett and Ghoshal, 2003). In other
words, it is a process driven by international trade and investment in addition to the information
technology. In present scenario, globalization have become a most essential element in order to
survive in this competitive market. Due to this reason, the Motorola company globalized its
business and established its office in the Chinese markets. Further, the company have analyzed
the Chinese market in order to establish its brand in the China. Prior to that, a complete analysis
of environment of China have been done by using appropriate strategic tools (Barlett, 2002). The
description of environmental scanning have been made as follows:
PESTLE Analysis
Factors Outcomes
Political
 The political environment of China is not stable and as the force
of politics are considered as most unsettled force. This lead to the
imposition of rigid rules and those rules are always fluctuating
4

(Brakman, 2006).
 There is a Communist party in China so company do not face
difficulty in taking permissions.
 Tariffs are high thus, import cannot be done in an easier manner.
Economical  GDP growth of China is 9.5% which is an advantageous factor
for the company to establish there.
 Population of the China who are below the poverty line are 10%,
so the customers of the mobile phones or smart phones can be
more (Buckley, 2007).
 Tax rate for foreign investment is very high and this discourages
the new investment.
 Labour cost are low and due to this reason foreign company
invest in China.
Social  The young generation is highest in number and this created a
demand for more mobile phones.
 Literacy rate is 92% this means that people are highly educated
and thus they could not be cheated upon any factor.
 There are few kinds of religion so company has to take care about
the beliefs and values of all kind of religion.
 The east china earns more income than west china so the potential
for costly phone is in west china (Killing, 2012).
Technological  Technological aspect is highly appropriate in China.
 It provides high-end equipments which can aid in building and
producing high-tech products.
 The cost of technology is becoming cheaper, thus cost effectivity
in technological aspect can be achieved (Wild, Wild and Han,
2014).
Legal  There are several laws in china which are in the favor of allowing
5

foreign company to get establish there so that Chinese people get
exposure of the western management style and technology.
 There are some rigid rules which emphasize the company to adopt
local management (Dunning, 2013).
 Other laws related to employment, safety and security at
workplace are highly obeyed there.
 There are also high tariffs on import so company cannot import
the good and have to purchase raw material form local suppliers.
 The wage rate of overtime are very high, thus company cannot
afford to pay them. Thus time limit is highly followed in china.
Environmental  The environment is not protected in China.
 There is a water shortage which can create difficulty in meeting
out the expectations for the company.
 Chinese people highly relied upon the coal and thus, this causes
acid rain which is harmful for the environment (Aharoni, Tihanyi
and Connelly, 2011).
 The land of china is vulnerable to natural disaster which is a
harmful factor for the company to get establish there.
By applying this tool, Motorola could assess the environment of China and there were
some factors which emphasized the firm to get globalized. Along with that, those factors also
proved to be inappropriate which let the company to adopt globalization. It can be argued that
political factors such as there are communist party in the china and they implement such laws
which allow the MNC to establish there business in China (Hill, Cronk and Wickramasekera,
2013). It can be criticized that there are some rigid laws which discourages the MNCs to build
their empire in China. For instance, Motorola was not allowed to import raw material from other
countries and also the company has to use local management as an employee. Further, the legal
factor such as employment safety and security should be high. Further, the wage rate of overtime
is very high, thus this factor did not support for the globalization (McCann, 2010). It can be
6

critically said that company could gain advantage as per these legal aspects because the supply
will be local thus tariffs charges and import charges can be saved. Moreover, this can be said that
due to this reason many suppliers got established there. Motorola suggested many suppliers to
establish their business in china so that supplies can be made in an easier manner. Moreover, the
economical factor was the most important factor which is responsible for globalization of
markets and production (Cherunilam, 2010). There are high number of literacy rate and the
inflation rate is no too high, thus there can be high number of users of mobile phones. However,
the tax rate and interest rate is very high for the new investment so that multinational company
get discourage for the establishment of new venture. Society has a altogether different thinking
so the people do not prefer much of the foreign products and rely mainly upon Chinese market.
This have made created issue for the company to build their organization. While, on the other
hand, the society get inspire if the company obeys proper social responsibility (Tian and Borges,
2011). In case of Motorola, the management started the new project that is Project Hope and
under which it has opened many schools and other activities are conducted which was beneficial
for the country. Thus, this factor entertained the globalization of production.
Moreover, the technological factor has to play a major role. The technology in the China
is getting cheaper which invites many company to open their manufacturing unit in the state.
However, Motorola were forced to adopt the law related to the supply of technology form china
only. Thus, they have to deal with the suppliers of china (Gubbi, Aulakh and Chittoor, 2010).
Due to this reason, Motorola advised many company to adopt new concept of supply chain
management, etc. Thus, these factors in one or the other manner were responsible for the
globalization of production in China. On the contrary, environmental factors also encouraged for
the same as the place is getting more involved in carbon trading and companies are getting good
opportunities to contribute more for the environmental protection. Through which the name and
recognition of the firm get increase (Clarke, Tamaschke and Liesch, 2013). Further, the criticism
is that China is a hub for natural disaster and the company's are vulnerable for their destruction.
Due to this globalization get discouraged.
By doing this, it has been assessed that these were some of the factors which are
responsible for the globalization of production and markets in the China. As Motorola was
highly influenced with some of the factors and this encouraged the company to establish their
7

unit in the country China (Folsom, Gordon and Van Alstine, 2012). Along with these factors
there were some of the internal strength which have been responsible for the globalization. There
is a emerging market in china and this has invited the Motorola company to capture the market
of china. This company saw the opportunities in Chinese market and also established their brand
in the minds of consumers (Papadopoulos and Heslop, 2014). However, the government of china
highly supported the firm to bring in many new technologies and management style in the
country. For this purpose, company has to open up a new university which teaches western
management style so that people could learn and adjust to the style applied in the company.
Further, also suggestions were provided to the supplying company about the improvements of
technology and quality. So this enhances the globalization more.
2. Critical evaluation of the effectiveness of Motorola's entry strategy
Entry strategy basically refers to as the planned method of delivering good and services
to a new target market and distributing the offering in that market. The market entry can be done
in international market in order to get globalized (Mason, 2007). Further, the company can enter
into overseas business by establishing its unit in the foreign market. Prior to that company has to
emphasize the various factors such as which country to enter, which segment to be targeted,
where to obtain raw material, how to enter or how to invest. Thus, company has to consider
several factors and than entry strategy has to be planned and implement (McAusland and
Millimet, 2013). On the other hand, there are several types of market entry strategy which can be
used by the company and than it can enter in the international market. Some of the types are that
by adopting joint venture company can establish their brand in other country, by buying a
already established company, the firm can establish its market. In addition to this, franchising or
licensing method can also be adopted to enter the new market. All these methods should
analyzed and their pros and cons should be noted. After that the firm could take the decision of
establishing a new venture in the country (Yeaple, 2003). As per the case, Motorola have
adopted the joint venture strategy to enter into a new market of China.
In order to sustain in the competitive scenario Motorola has being focused on the
effective entry strategy that has supported the company to easily expand their operations in the
China. While, making decision to enter in the overseas market there are variety of options
available to the Motorola so that they must select the effective entry strategy that would result in
8

accomplishing their different objectives like increasing market share, brand awareness etc
(Krempel and Plümper, 2003). The main aim of corporate strategy in the china was to increase
the market share of Motorola. One of the effective market entry strategy that is being used by the
Motorola in achieving their corporate strategy was to entered into joint venture with the Chinese
firm so that Motorola can easily expand their existence in the marketplace and thus, also result in
increasing their production capacity. According to Conteh-Morgan (2006) joint venture entry
strategy was beneficial for the Motorola as it support the business in expanding their activities
and services faster (Conteh-Morgan, 2006). Although it has also result in achieving their
corporate strategy through approaching the new market with the help of joint venture and it also
result in sharing the risks and costs associated with the production process. On the contrary
Wakeam (2003) enabling joint venture with the Chinese firm have also result in arising the
situation of conflicts and disputes within both the companies (Wakeam, 2003). However, in the
joint venture partners must posses different view point and suggestion related with managing the
situation and processes of the company. Therefore, disagreement between the partners may affect
the operations as well as it will result in not accomplishing the corporate objective of the
Motorola in China. As per the view of Frynas, Mellahi and Pigman (2006) enabling joint venture
with the Chinese firms have also benefited the Motorola that is the company is not being
required to pay the tax for operating their businesses and operation in the Chinese market
(Frynas, Mellahi and Pigman, 2006). However, in the joint venture Motorola company is not
obligatory to file the taxes as the business entity because they are with the collaboration to the
Chinese firm. While, with the view point of Vern (2013) criticism has been made that if the
company adopts the joint venture strategy than the employees should also be adopted and and as
per the case, Motorola has to spend high amount of money for providing training to the
employees and senior managers. Because the people has less knowledge about the Western
management concept. For that purpose company has to establish a university which provided
training to the local Chinese people so that they could cope up with the latest management
concept. Through this, they have aimed to make the staff highly efficient. However, this adds to
the cost of company. Although, Motorola company has collaborate their activities with the local
Chinese firm so that they can easily enter into the market (Wysokinska and Witkowska, 2004).
With this they must require less amount to set up their own business in the Chinese market as
9

they are in the collaboration with the Chinese firm. According to Bartlett and Ghoshal (2003)
Joint venture was also an effective market entry strategy for the Motorola as it result in
availability of the sufficient resources and thus also result in availability of the increased capital
that would support them to succeed in the emerging marketplace (Bartlett and Ghoshal, 2003).
However, joint venture also help in gaining access to the expertise. In the case of
Motorola, the firm has got the opportunity to work with the knowledgeable people in the firm as
their theoretical base was highly perfect. This enabled the company to implement the western
management concept in the company. This also avoided the resistance by the local people. Thus,
the joint venture helped the company to achieve the corporate strategy of acquiring highest share
in the country china. It has also been argued by the Wild Wild and Han (2014), Joint venture as a
market entry strategy also proves to be a less entertaining. It is due to the reason that older
people or existing people of the company has to face the greater changes (Wild, Wild and Han,
2014). They will be controlled and managed by the new staff. This leads to the evolution of
conflicts and disputes which may hamper the corporate strategy of Motorola. The strategy
adopted by the company to enter into new market and establish its brand image, joint venture
was the best entry strategy. Earlier the firm set up its plan which costed around $120 million
after that $400 million was invested to establish one more plant. But the result achieved was not
satisfactory. Further, the company entered in 9 joint ventures which helped them in gaining more
gain access to the Chinese market without establishing additional manufacturing plants (Aharoni,
Tihanyi and Connelly, 2011). These joint ventures also resulted in savings for the company
because the additional cost of setting up a plant was not applied. Thus, through this point it can
be proved that, joint venture as market entry strategy helped the firm to achieve the corporate
strategy. Arguably it can be said that the entry strategy adopted by the Motorola company was
highly effective in achieving the corporate strategy of capturing highest market share. As after
joining the hands with manufacturing firms, the company's brand was recognized (Hill, Cronk
and Wickramasekera, 2013). Further, the production capacity of the firm got increased which
helped in reducing the per unit cost of production. This enhances the sales of the products in the
Chinese market. Along with this, the firm also opened many research centres in the country
which helped in gaining the market share in the china.
10

On the other hand, many criticizers argued that entry strategy that is joint venture was a
not an effective strategy (McCann, 2010). It is because, the company has to spend lot of time and
cost for achieving the corporate strategy. Due to this factor, there was delay in achieving the
stated strategy.
3. Motorola’s staffing approach for senior management in China
Staffing refers to as the method or process of putting right people at right job on right
time. In other words it can be described as a recruitment, selection, training, development and
remuneration of the managerial employees (Cherunilam, 2010). Staffing process is a continuous
process. This process is completely people centered and require human skills. Moreover, staffing
proves to be a highly important function of a company because by performing this function
human resource can be put into use for other resources. Through this process technology and
other resources can be utilized in an effective manner. Further, staffing also leads to the building
of high morale in the company.
While opening Motorola's new venture in China, company has to do the staffing process
and for that purpose various approaches have to be adopted. The legal aspect also complied with
the corporate strategy (Tian and Borges, 2011). The government declared that in order to succeed
in Chinese market, condition of china should be respected. Along with that, it was a law to hire
local people in order to establish themselves in the environment of China. Further, the company
has made the strategic objective of capturing highest market share in the country. For that
purpose, a firm has to comply its objective with that of legal laws. Due to this reason, enterprise
have recruited Chinese people in the firm (Gubbi, Aulakh and Chittoor, 2010). The firm saw
that Chinese managers were not familiar with western management concepts and country is
lacking managerial ability. Thus, Motorola opened a university which train the senior
management about the Western management concept. Along with that. It was the aim of the
company to train and develop world class staff for Motorola. They trained the people to take
global managerial position (Clarke, Tamaschke and Liesch, 2013). For this aspect, rigorous
training was provided to them and the introduction of China Accelerated Management Program
(CAMP) was launched which was scheduled for 6 weeks of classroom learning and 14 months of
on-the-job training. This training includes all the modern aspect of management which can be
applied in worldwide. This university also took the test and people used to clear the 32 part of
11

structured interview in order to achieve the talent of managerial concept (Folsom, Gordon and
Van Alstine, 2012).
The staffing approach adopted by the Motorola was highly appropriate and this was in
relation to the company's strategic objectives. By adopting such approach, company was able to
sell it product in the market of China. It is because, the employees of Motorola were highly
satisfied and thus, they only got inspired by the firm and the type of technology it uses. This have
influenced the people to buy the phones of Motorola (Papadopoulos and Heslop, 2014). The
satisfied employees persuades others to buy those phones and through this, the market share of
the firm got enlarged. The employees got satisfied because the firm provided high-end training to
the managers and sent them to US and Hong-Kong to learn the manufacturing of the high-tech
phones. This made them to rely upon the quality and features of the cell phones (Mason, 2007).
However, on the other hand, it can be criticized that the staffing approach adopted by the
Motorola for the senior management was not appropriate. It is because, for the company it was a
totally new market and the people of china were not much aware about the western management
concept. Thus this became a highly risky decision to appoint Chinese managers. The company
has to open a new university and along with that it has to provide rigorous training to the people.
This became a costly procedure for the company (McAusland and Millimet, 2013). Even after
adopting this method, company's strategic objective of occupying highest market share does not
get achieved. In 2000, the Motorola was a market leader in with the share of 31% but in 2002,
the competition got increased and the market share started declining. This shows that staffing
approach adopted by the company does not proved to be an effective method. The company
spent million $ on the training and development of local people in order to achieve the strategic
objective of the company. But the return on investment was not enthusiastic (Yeaple, 2003).
Thus, it has been argued that and according to Krempel and Plümper (2003) it was stated
that the staffing approach adopted by the company Motorola was quite effective in gaining and
achieving the strategic objective of capturing highest market share in the China (Krempel and
Plümper, 2003). It can be explained that as per the requirement of government that MNC who
are working in China has to source a local people and thus, the r4ecipe of surviving in Chinese
market is to adopt the Chinese people and condition. Thus, through this approach, Motorola was
12