However, after an unlikely revival that saw the US giant ride its Razr handset back into Wall Street’s affections, it appears that Moto is losing lustre, with Q4 profits dropping by almost half, stemming from declining prices for the Razr and weak sales of its new offerings.
The setbacks come as the world’s attention is firmly fixated on Apple’s new iPhone. Moto’s own email device, the Q, may have received early praise, but tough competition from the likes of Research in Motion will only be amplified by the rollout of the iPhone.
Meanwhile, Motorola continues to face cutthroat competition from Nokia, LG, Samsung and Sony Ericsson, while faced with saturated developed markets. Add in a handset interface which is, essentially, the opposite of the Nokia model that is widely deemed ‘intuitive’, and it is easy to see why consumers are less than enamoured with Motorola’s new product range.
Still, in Asia at least, the signs are not all bad. China has grown at a remarkable rate in recent years and is expected to result in Moto’s North Asian leadership team of CEO Michael Tatelman and marketing chief Ian Chapman-Banks taking charge of the newly-created Asia-Pacific region. The move will see the disbanding of Moto’s high growth markets division, which — ironically enough — has seen some of the brand’s most innovative marketing strategies, along with the rollout of its lowest-cost handsets, causing consequent pressure on profit margins.
With incomes rising in emerging markets, Motorola can at least be assured that many Asian countries are seeing surging demand for higher-priced products. Whether this will placate either Wall Street or its shareholders is another story.
Motorola attributes its poor results to ‘an unfavourable geographical and product-tier mix of sales’, and has cut 3,500 jobs globally. If it can successfully shift emerging markets up the mobile phone value chain, Moto can prosper.
Diagnosis 1... Charles Wigley, chairman, BBH Singapore
Over the last two years, Motorola has staged a phenomenal global share comeback, from approx 13 per cent in 2004 to 23 per cent now (second only to Nokia’s 36 per cent).
Its current profit woes are a direct result of a calculated strategy that puts volume ahead of margin. This is because — in a marvellously American way — it wants to catch and then overtake Nokia to become the biggest handset brand in the world again. This, of course, is something that Nokia will not allow without an enormous fight.
The big question is whether this share-orientated strategy is the right one for Motorola, given that Nokia is reported to have the lowest manufacturing and distribution costs in the business, as well as a far broader range of products.
Rather than trying to be the biggest, a strategy might be to try to position Motorola as the most aspirational/best. A brand that people graduate up to. This is certainly something that would be in tune with its product design and advertising tonality (and which would drive the profits that the markets crave). On the other hand, companies, like consumers, are often driven more by emotion than rationality, and I suspect Motorola has its heart set on global domination.
Diagnosis 2... Fredrik Sarnblad, regional creative planner, Y&R
Motorola has a bit of catching up to do before it can comfortably rub shoulders with the likes of Nokia and Sony Ericsson in terms of features and user-friendliness. That said, the brand’s rejuvenation in recent years has been successful. Razr has been a smash hit due to its aesthetic design. But replicating this success will be hard to achieve. Nevertheless, new news is needed to maintain momentum. Apple’s iPhone, which will undoubtedly set the golden standard in music phones, is likely to emerge as a tough competitor for the Rokr line. At the moment, ‘Red’ and design-led co-branding efforts are serving as a Band-Aid solution for extending the Razr life cycle.
If asked what the Motorola brand represents — its essence — I suspect a lot of people would have a hard time articulating an answer other than a few adjectives. These adjectives are unlikely to be significantly different from what these same people would use to describe the competition.
Motorola’s communication challenge is to take a unique position in the consumer’s mind via a sustainable core brand idea that carries relevant meaning and resonates with people on a deeper emotional level beyond lifestyle or template advertising.
