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1、CONFIDENTIALMobile Handset Competitor Analysis: EricssonSAMSUNG ELECTRONICS CHINA (SEC China)August 20, 2001This report is solely for the use of client personnel. No part of it may be circulated, quoted, or reproduced for distribution outside the client organization without prior written approval fr

2、om McKinsey & Company. This material was used by McKinsey & Company during an oral presentation; it is not a complete record of the discussion.OVERVIEW OF COMPETITOR ANALYSIS FRAMEWORK1. Background informationLocationRegistered capitalManagementteamEquitystructureStarting yearNumber of emplo

3、yeesEra analysis4. Value chain strategy5. Organization and ownership6. Financial performanceFocus onMarketing, advertising and promotionDistribution (channel and sales force)Organization structureOwnership structureSales Profit 2. Strategy 3. Product/market MissionVisionCorporate strategyMarket posi

4、tionKey product offeringsKey customersValue propositionGeographic focusPricing1KEY ISSUES TO PROBE - ERICSSONStrategyProduct/marketValue chainstrategyOrganization &ownershipFinancialperformanceWhat will be Ericssons strategic focus for the next 5 years?How will Ericsson secure its leading positi

5、on in mobile infrastructure?What products will Ericsson be focusing on?Which market segment will Ericsson be interested in?Will Ericsson become a niche market player in mobile handset?How does Ericsson secure its leadership in technology?How does Ericsson improve its local production capability?How

6、are Ericssons mobile handsets distributed?How does Ericsson organize its JVs and WOFEs?What functions does Ericsson China centralize?How good is Ericssons recent financial performance?How will Ericsson improve its performance in the future?2BACKGROUND INFORMATION1. Background informationLocationRegi

7、stered capitalManagementteamEquitystructureStarting yearNumber of employeesEra analysis4. Value chain strategy5. Organization and ownership6. Financial performanceFocus on Marketing, advertising and promotion Distribution (channel and sales force)Organization structureOwnership structureSales Profit

8、 2. Strategy 3. Product/market MissionVisionCorporate strategyMarket positionKey product offeringsKey customersValue propositionGeographic focusPricing3ERICSSON IS A TECHNOLOGY LEADER IN MOBILE COMMUNICATION AND A MARKET LEADER IN MOBILE INFRASTRUCTUREImplicationLeader in mobile system technology in

9、cluding GSM, GPRS and 3GEmphasize on mobile infrastructure and claim to be the only total solution provider for a full range of 2G and 3G standardsLocationBased at Sweden, with 24 offices in ChinaSince 1998, China has been Ericssons largest market in the worldInvestmentInvested more than USD 0.6 bil

10、lion in ChinaBusinessFour main business units: Mobile infrastructure, mobile handset, data network and circuit switching/packet switching multi-service networksStartingFirst office in China in 1985, first JV in China in 1992Employees 100,000 staff in 140 countriesOver 4,000 employees in China24 offi

11、ces, 10 JVs and 4 WOFEsHistory1985: First Ericsson office in Beijing1987: First mobile network launched Qinhuang island1989: Set up offices in Guangzhou and Shanghai1992: Started JVs in China for mobile infrastructure and handset1994: Established Ericsson China Limited1995: China became Ericssons th

12、ird largest market in the world1996: China became Ericssons s second largest market in the world1997: Established R&D center in Shanghai and Ericsson China institute1998: China became Ericssons largest market in the world, established Chongqing Ericsson technology1999: Established Ericsson consu

13、lting in Shanghai and mobile multi-media lab in Zhonguancun2000: First to complete WCDMA test in ChinaBackground4SAMSUNG010605BJ-kickoff2STRATEGY1. Background informationLocationRegistered capitalManagementteamEquitystructureStarting yearNumber of employeesEra analysis4. Value chain strategy5. Organ

14、ization and ownership6. Financial performanceFocus on Marketing, advertising and promotion Distribution (channel and sales force)Organization structureOwnership structureSales Profit 2. Strategy 3. Product /marketMissionVisionCorporate strategyMarket positionKey product offeringsKey customersValue p

15、ropositionGeographic focusPricing5ERICSSON AIMS TO SECURE ITS LEADERSHIP POSITION IN NETWORK EQUIPMENT AND MAY BECOME A NICHE PLAYER IN MOBILE HANDSET ProductMaintain foothold in the low end mobile handset market through JV with Nanjing PandaDevelop 3G technology (WCDMA) for mobile communication by

16、collaborating with MII and DoCoMo, and apply leading technology to productsSecure its leadership position in network equipment rather than becoming the best-selling brand for mobile handsetsValue delivery systemR&D localization through collaboration with Chinese government and universitiesFurthe

17、r expand local production capacityCentralize marketing functions under Ericsson ChinaDistribute though 5 first-tier resellers including PTAC and PTICBuilds consumer website for Ericsson handset usersVisionTo innovate in mobile network and internet convergence and to lead in the era of mobile interne

18、tStrategySource: Ericsson press release, Dresdner Kleinwort, McKinsey analysis6SAMSUNG010605BJ-kickoff2ERICSSONs MARKET SHARE IS DECREASING OVER THE PAST FEW YEARSMonthly market share development (Percent of market in units sold)9899Jan 00Dec 00010203040NokiaMotorolaSiemens EricssonSource: Retail Au

19、ditSource: IDC, McKinsey Analysis7SAMSUNG010605BJ-kickoff2ERICSSON IS NOW NUMBER FOUR IN SALES VOLUME AND NUMBER FIVE IN REVENUE IN THE MOBILE HANDSET MARKETOthers SiemensEricssonMotorola3332342927268777810599181714199920012000Samsung NokiaBreakdown of sales by brand each yearPercentSource: GfK, IDC

20、, McKinsey analysisOthers SiemensEricssonMotorola34293032282888981012387151714199920012000Samsung NokiaBreakdown of units sold by brand each yearPercent8SAMSUNG010605BJ-kickoff2PRODUCT/MARKET1. Background informationLocationRegistered capitalManagementteamEquitystructureStarting yearNumber of employ

21、eesEra analysis4. Value chain strategy5. Organization and ownership 6. Financial performanceFocus on Marketing, advertising and promotion Distribution (channel and sales force)Organization structureOwnership structureSales Profit 2. Strategy 3. Product /marketMissionVisionCorporate strategyMarket po

22、sitionKey product offeringsKey customersValue propositionGeographic focusPricing9Ericsson claims to be the only total solution provider in mobile communication who offers a full range of 2G and 3G standards. To secure its leadership position in mobile infrastructure, Ericsson may become a niche mark

23、et player in mobile handsetsEricsson is a technology leader in mobile communication, which is reflected in its early releases of WAP, GPRS and bluetooth handsets and 3G networksEricsson gives up the high-end market in mobile handset to focus on low-end. It is relatively strong in 1st tier cities, an

24、d the North and East ChinaKEY MESSAGES - PRODUCT/MARKET10ERICSSON OFFERS TOTAL SOLUTIONS IN MOBILE COMMUNICATION WITH MORE EMPHASIS ON MOBILE INFRASTRUCTUREProductsNow and futureEricsson mobile handsetEricsson product offeringsEricsson networkFirst WAP handset in the world (MC 218)R320sc WAP handset

25、 with Chinese interfaceA2638sc for young and successfulT29sc for mobile professionalR380sc for business eliteT20sc, A2618sc for young and fashionableGSM and UMTS mobile infrastructure includingGSM, DCS1800, CDMA and WCDMAData network, e.g. AXD301 ATM switch AXI540 IP router, and IP phoneFirst GPRS h

26、andset and first bluetooth handset (T36)First to provide GSM 1800/1900 networks simultaneouslyLeader in WAPLeader in GPRSTotal solutions in 3G based on WCDMA, CDMA 2000 and EDGESource: Ericsson press release11SAMSUNG010605BJ-kickoff2ERICSSON MAINTAINS FOOTHOLD IN THE LOW END MARKETHigh( RMB 3,500)So

27、urce: Sino-MR (Jan 2001 Feb 2001), CCIDBreakdown of unit sold by brand for each price pointPercentHigh-mid(RMB 2,500-3,500)Mid(RMB2,000-2,500)Mid-Low(RMB1,500-2,000)Low (RMB1,500)565123241629323400121013141615433010550171800020Others SiemensEricssonMotorolaSamsung Nokia9%15%7%Units as % of total26%4

28、3%712SAMSUNG010605BJ-kickoff231303024293028109911107772125243028Tier 1Tier 2Tier 3Tier 4NokiaMotorolaOthersERICSSON MATCHES SIEMENS IN THE 1st TIER CITY MARKETPercent market share, 2000EricssonSiemens18%19%23%40%Tier size as % of total100%=Million units 6.77.08.514.8Source: McKinsey Analysis13SAMSUN

29、G010605BJ-kickoff2ERICSSON IS RELATIVELY STRONG IN NORTH AND EASTMarket share by brands per geographic area, 2001PercentMarket share by geographic areaPercent293129312828302529262926141613131117987581315121513146410571311EastSiemensEricssonSamsungOthersNokiaMotorolaWestNorthNorth-eastSouth3013151311

30、Central18Source: GfK, McKinsey Analysis14SAMSUNG010605BJ-kickoff2VALUE CHAIN STRATEGY1. Background informationLocationRegistered capitalManagementteamEquitystructureStarting yearNumber of employeesEra analysis4. Value chain strategy5. Organization and ownership 6. Financial performanceFocus on Marke

31、ting, advertising and promotion Distribution (channel and sales force)Organization structureOwnership structureSales Profit 2. Strategy 3. Product/market MissionVisionCorporate strategyMarket positionKey product offeringsKey customersValue propositionGeographic focusPricing15For core products such a

32、s mobile or fixed line infrastructure, Ericsson has centralized the sales forces to provide “one face” to customers; for smaller products such as mobile handsets, Ericsson sells through JVs and distributorsEricsson uses PTAC, PTIC, Stellar, 508, and the United First as its 5 first-tier resellers. In

33、sufficient support provided by resellers limit the ability of its dealer and channels to provide pre- and after-sales support to customers, which greatly afftect Ericssons position in the China marketKEY MESSAGES - VALUE CHAIN STRATEGY16ERICSSON PRESENTS ONE FACE TO CUSTOMERS BY CENTRALIZING CORE PR

34、ODUCT SALES THROUGH ITS OWN SALES FORCER&DManufacturingMarketingSalesServiceNetworkMobile infra-structureShanghaiR&D centreNanjing EricssonBeijing Ericsson Telecom SystemEricsson ChinaEricsson ChinaDalian EricssonGuangdongTerminalMobilehandsetBeijing Ericsson Mobile TelecomShanghai EricssonE

35、ricsson ChinaDistributors/dealersRationaleEricssons route to market is based on product characteristicsCore products are sold through the Ericsson sales force Smaller products are sold through JVs and distributorsElectronic compo- nentsWired-lineDistributors/dealersSource: Ericsson press release, in

36、terviews, McKinsey analysisChongqing Ericsson TechnologyNanjiing Ericsson Mobile TerminalHeilongjiangBeijing Ericsson17ERICSSON IS STRONG AT TECHNOLOGY AND MARKETING, BUT RELATIVELY WEAK AT MANUFACTURING AND SERVICE IN MOBILE HANDSETTechnology leader in GSM,GPRS and 3GFirst to release WAP, GPRS, blu

37、etooth handsetsExpanded local manufacturing with 2JVs devoted to mobile handsetsCentralized purchasing and supplyR&DManufac-turing and supply chainMarketing and brandingSales and distributionServiceCentralized marketing functions to promote strong and consistent brand imageGood relationship with

38、 resellers such as PTAC and PTICStrengthsLack of big-hitting new modelsProduct development not meeting market demand in ChinaManufacturing with uncompetitive cost structureLocal production capacity insufficient compared with Motorola, Nokia and SiemensInsufficient support provided by the resellers l

39、imit the ability of its dealers and channels to provide pre-and after-sales supportLevels for improve-mentSource: Ericsson press release, IDC, McKinsey analysis18SAMSUNG010605BJ-kickoff2ERICSSON DISTRIBUTES THROUGH FIVE FIRST-TIER RESELLERSSource: IDCRationalesEricsson uses PTAC, PTIC, Stellar, 508,

40、 and the United First as its 5 first-tier resellers.Since there is a huge price gap between official and parallel imports, the unit sales of Ericsson handset in China through official channels was affected resulting in downward pressure on handset prices.Insufficient support provided by resellers li

41、mit the ability of its dealer and channels to provide pre- and after-sales support to customers, which greatly afftect Ericssons position in the China marketEricsson Channel StructureBeing a major mobile network equipment vendor, Ericsson maintains good relationship with government bodies and distri

42、butes through PTAC, PTIC and local telecom operatorsVendorPTAC, PTIC, etc.ConsumersLocal telecom operatorsRetailers/retail chain stores19ORGANIZATION AND OWNERSHIP1. Background informationLocationRegistered capitalManagementteamEquitystructureStarting yearNumber of employeesEra analysis4. Value chai

43、n strategy5. Organization and ownership6. Financial performanceFocus on Marketing, advertising and promotion Distribution (channel and sales force)Organization structureOwnership structureSales Profit 2. Strategy 3. Product /marketMissionVisionCorporate strategyMarket positionKey product offeringsKe

44、y customersValue propositionGeographic focusPricing20Ericsson has 10 JVs and 4 WOFEs in China, among which Beijing Ericsson Mobile and Nanjing Ericsson Mobile Terminal are devoted to mobile handsets. Ericsson believes that localization is key.Ericsson uses joint venture partners to enter the market,

45、 and established holding company in 1994 to better manage local operationsEricsson uses its own sales force to sell core products and delivers coordination to compete in “solution” salesKEY MESSAGES - ORGANIZATION AND OWNERSHIP21ServiceERICSSON CHINA HAS CENTRALIZED MANY COMMON FUNCTIONS FROM JVsEri

46、csson China Ltd.Nanjing EricssonNanjing Ericsson mobile terminalBeijing Ericsson mobileGuangdong EricssonChongqing Ericsson technologyMarketing and brandingPurchasing and supplyManufac-turingSalesManufac-turingSalesR&DManufac-turingSalesServiceMarke-tingSalesServiceMobile infrastructureMobile ha

47、ndsetMobile handsetMobile base stationMobile infrastructureMobile infrastructureSource: Ericsson press release22SAMSUNG010605BJ-kickoff2ERICSSON HAS 10 JVs AND 4 WOFEs IN CHINA, AMONG WHICH 2 JVs ARE DEVOTED TO MOBILE HANDSETS Source: Ericsson press releases; literature search; interviewsEricsson Ch

48、ina Ltd.(Holding Co.) 1994Esta-blished yearBeijing EricssonBeijingEricsson MobileShang-hai EricssonHelong-jiang EricssonNanjing Ericsson Mobile TerminalGuang-dong EricssonNanjing EricssonWuhan Yangtze EricssonChong-qing Ericsson TelecomChong-qing Ericsson Tech.Ericsson R&D center ShanghaiEricsso

49、n Consult-ing ShanghaiDalian Ericsson1994199519971995199219971998199819971999Product offeringPBX MD 110Mobile handsetMobile base stationElec-tronic compo-nentsTele-com equip-ment serviceMobile hand-setMobile infra-structure servicesGSM900/1800 AXE 10SDH trans-mission systemsDigital micro-waveMobile

50、system market-ing sales and serviceSoft-ware applica-tionConsul-ting service for wire-less and fixed line opera-torsTech-nical service55% with Beijing Cable Telecom49% with PTIC, Beijing Telecom Com-ponents,Beijing Telecom Equipment, Yun Shing80% with Shanghai Simtek56% with GD PTA Guang-dong Mach-i

51、nery Import and Export55% with Nanjing Radio Factory, HK Yun Shing 47.5% with WRILongxing Invest-ment Chang-qing South-west Wireless telecom100%100%100%65% with Nanjing Panda23SAMSUNG010605BJ-kickoff2ERICSSON USES JV PARTNERS TO ENTER THE MARKET AND ITS OWN SALES FORCE TO SELL CORE PRODUCTSInfluence

52、 Ericsson corporate focused on top to top relationsJoint venture partners help to gain local customer accessPartnership structure & roleEricsson China (10 joint ventures and 4 WFOEs)Holding company aims to coordinate all activities in ChinaWFOE for software R&D in ChinaLimited technology tra

53、nsfer to China heavily import dependentService joint ventures are cost centersRoute to marketEricssons sales force (based in the holding company) sells core products (switching and transmission)Joint venture sales force sells small and standalone productsWireless products sold through distributorsKey messagesUses joint venture partners to enter the market, then established