The value chain analysis: A case study of Motorola

In the globalised era when most of the business organisations are involved in different business activities it has become inevitable for the firms independently perform all the functions. Most of the companies do not operate their supply chain and rely on other firms to perform the multi-faceted tasks. The successful and efficient combination of the operations of these firms provides the company with the competitive edge in the market. (Cook, DeBree, and Feroleto, 2001).

Lummus and Vokurka  (1999) points out towards the need for the managers to understand the performance of all the stake holding firms in the supply chain. According to (Pohlen, 2003), this insight in the performance of each firm will enable the managers to develop measures in order to fulfil the demands of the customers. The main task of the supply chain management is to develop a strategy which can cater the need of the customers and is aligned with the company objectives (Pohlen, 2003).

In this lieu it is important for the mangers to keep on measuring the performance of different parts of supply chain (Deloitte, 1999). It has been a proven fact that the improvement in the company’s performance cannot be undertaken with out improving the performance of its suppliers (Lummus, Vokurka, and Alber, 1999). The planning and information taking activities can be easily performed by the operations managers and senior executives it they have an up to date information regarding the performance of different supply chain firm and stake holders and the resources available to the firm.

Authors (La Londe and Masters 1994; Lambert, Stock, and Ellram 1998; Mentzer et al. 2001) regard a supply chain as a set of firms involved in the upstream and downstream flows of products, services, information, and/or finances.  Mentzer et al. (2001, p. 4) described a supply chain as “a set of three or more organisations directly linked by one or more of the upstream and downstream flows of products, services, finances, and information from a source to a customer.” Thus, the nature of a supply chain is comprehensive so that membership is not limited to a supplier, a manufacturer, and a distributor, but open to any firm that performs various flow-related services (Mentzer et al. 2001).

“The term ‘Value Chain’ was used by Michael Porter in his book “Competitive Advantage: Creating and sustaining superior Performance” (1985). The value chain analysis describes the activities the organisation performs and links them to the organisations competitive position. Value chain analysis describes the activities within and around an organisation, and relates them to an analysis of the competitive strength of the organisation. Therefore, it evaluates which value each particular activity adds to the organisation products or services.

This idea was built upon the insight that an organisation is more than a random compilation of machinery, equipment, people and money. Only if these things are arranged into systems and systematic activates it will become possible to produce something for which customers are willing to pay a price. Porter argues that the ability to perform particular activities and to manage the linkages between these activities is a source of competitive advantage.

Porter distinguishes between primary activities and support activities. Primary activities are directly concerned with the creation or delivery of a product or service. They can be grouped into five main areas: inbound logistics, operations, outbound logistics, marketing and sales, and service. Each of these primary activities is linked to support activities, which help to improve their effectiveness or efficiency.

There are four main areas of support activities: procurement, technology development (including R&D), human resource management, and infrastructure (systems for planning, finance, quality, information management etc.).

The term ‚Margin’ implies that organisations realise a profit margin that depends on their ability to manage the linkages between all activities in the value chain. In other words, the organisation is able to deliver a product / service for which the customer is willing to pay more than the sum of the costs of all activities in the value chain. Some thought about the linkages between activities: These linkages are crucial for corporate success.

The linkages are flows of information, goods and services, as well as systems and processes for adjusting activities. A typical value chain analysis can be performed in the following steps:

1.  Analysis of own value chain – which costs are related to every single activity
2.  Analysis of customers value chains – how does our product fit into their value chain
3.  Identification of potential cost advantages in comparison with competitors
4.  Identification of potential value added for the customer – how could our product add value to the customers value chain (e.g. lower costs or higher performance) – where does the customer see such potential. (Dagmar, 2001)

The international sourcing policy effects the corporate, marketing, purchasing, and other strategies.  It is important for the firm to connect the future objectives with corporate objectives and strategy. The purchasing function should also be undertaken in order to support the corporate objectives. It is often observed that the purchasing functions in the firms are undertaken without gathering proper and enough information.

Also the purchasing decision of most of the companies are not undertaken in the line of the strategy of the company. It is also important for the companies to undertake strategic planning while undertaking the purchasing decision. Most of the researchers emphasize the need of aligning the purchasing function with the firm’s strategic planning process. In order to undertake effective planning according to the company’s goal it is important to plan and implement strategic planning more effectively at the departmental level. Some of the researches also pay great attention in establishment of the link between the customers and the suppliers as part of their purchasing strategy.

The purchasing decision in the right direction can also help the company in acquiring the market leadership through cost reduction. “Purchasing’s contributions to corporate strategic planning include the following: monitoring supply market trends, interpreting the impact of these trends on the firm, identifying the materials and services required to support company and strategic business unit strategies, and developing supply options.” (Ellram and Carr, 1994)

Motorola puts great emphasise on the learning of its employees. It has created a strategic partnership with the ACS corporation in order to gain is tent expertise in learning and HR so that all the HR and training activities world-wide can be improved and modernised. The $650million contract has created a new business unit, which will play part in improvement of the HR and learning of employees. The step has been taken in order to gain world class management of administrative and transactional function related to HR with training and development. Many of the Motorola’s former employees provide virtual end-to-end HR capabilities. This is done in order to retain control over strategic areas.

Motorola has brought dramatic transformation in its training policy by shifting its rigid training hours of classroom training to a relatively flexible learning program individually designed for an employee. Motorola aims at improving the careers of its former employees. It is estimated that the people who focus only on training as a career are more enthusiasts rather than those in support function. The arrangement will put emphasis on the IT oriented skills development of employees at Motorola. (Harris, 2003)

Motorola has a reputation of being one of the best-managed companies in the United States. The firm is now being directly challenged on many fronts, and recent erratic stock performance suggests that the company must strengthen its response to heightened competition.

The company has successfully faced different challenges such as economic and political conditions, Global competition, New technology, Increasingly complex world markets and Scarcity of natural resources.  The business world today moves faster and is more highly volatile than ever before. In this age of unprecedented turmoil, the challenges of facing and successfully managing the uncertainties of the future are everywhere.

How well organisations adept to new conditions will determine which will survive and which will thrive. Those that succeed will meet the challenge, respond quickly and surely to new opportunities, and remain competitive in an era of accelerated change.

Motorola has gained wide admiration as a role model for business. Its excellence lies in a deeply bred ability to continually move out along the curve of innovation and to invent new, related applications of technology as fast as older ones become everyday, commodity-type products. It is successful, in short, because it is succeeding in renewing itself.

Fortune magazine stated, “Mention Motorola, the company that almost everyone loves to love, and the accolades fairly gush: Titan of TQM, epitome of empowerment, tribune of training, icon of innovation, prince of profits. A leader in the world-wide revolution in wireless communications, this manufacturer of a broad array of products has become the most unusual of creatures – a big company that sizzles.”

Management books and business school case studies have chronicled the company’s fanatic pursuit of six sigma, its high-profile battles with the Japanese, and its pioneering advances in self-directed work teams, training, and business-process reengineering. Consultants marvel at the way Motorola decentralises decision making, breaks down organisational boundaries, and promotes co-operation between labour and management.” Other similar prestigious publications have called the company an exemplar of the “high-performance workplace.” (Business Forum, 1997)

Since the last few decades the concept of learning organisation is gaining importance. It is due to the fact that the business environment is getting more and more volatile with every passing day. The competition is getting tougher only those organisations can survive which have cutting edge in knowledge. Learning is an important process, which should be carried on in Motorola in order to give it competitive position in the market.

The organisation should offer its employees a continuous up grading of skills and knowledge in order to present innovative products in market. Since Motorola competes. Motorola has a long history of technological innovations. This is due to the continuous learning process in the organisation. The company has a university named as Motorola University, which aims to make the world a better place to earn money. Motorola has a policy of 40-hour minimum per year of training per employee. The university has an extensive system of classroom instruction.

Motorola relies on a management philosophy with two key beliefs, respect for the dignity of the individual and uncompromising integrity. These beliefs in turn are meant to seed an environment of empowerment in a culture of participation, along with an environment which seeks to manage long term growth and investment in technology to maintain competitive. To support the development of its people, Motorola created Motorola University formed in 1986 ($40 M investment; $560/employee).

The mission of the university is to supply broad based skills for its standing employees and customers and to train new associates world-wide to become productive team members. In addition to its University, Motorola provides alternative delivery systems through CD-ROMs, Internet applications, and wireless data. (Preliminary Report of the Task Force on Staff at Carnegie Mellon, 1997)

Motorola is an organisation with a history of embracing renewal and continuous learning. Those traits have served us well as we apply them to our Six Sigma business improvement efforts.

During the last 15 years, we have learned a great deal about what works and what don’t work in our Six Sigma efforts. We have moved from counting defects in our product manufacturing to managing variation and systematically improving all our processes. Most important, we have moved from Six Sigma as a tool for improving product quality to Six Sigma as an overall business improvement methodology. The new Six Sigma combines the power of good business application of statistics with the critical elements of effective business strategy. It uses an overall business improvement framework to improve the organisation’s ability to realise its strategic objectives.

This year and beyond, Six Sigma will be Motorola’s tool of choice for driving bottom-line improvement across the organisation. In this context, Six Sigma projects are carefully chartered to ensure their selection is based on there direct and near term impact on important scorecard objectives and metrics.

Sigma methodology: Special efforts are underway to ensure a high percentage of Motorola’s leaders are qualified GBs and the percentage of qualified BBs and BB candidates is up significantly. More of our Six Sigma efforts are—and will continue to be—focused on product design that enhances the overall customer experience and on software quality as the key driver of long-term performance and reliability.

In this lieu it is important for the mangers to keep on measuring the performance of different parts of supply chain (Deloitte, 1999). It has been a proven fact that the improvement in the company’s performance cannot be undertaken with out improving the performance of its suppliers (Lummus, Vokurka, and Alber, 1999). The planning and information taking activities can be easily performed by the operations managers and senior executives it they have an up to date information regarding the performance of different supply chain firm and stake holders and the resources available to the firm.

The notion includes the process of delivering the services to the customers with the products. With the changing time the aspects covered are increasing, the process now also includes R&D, value creation, marketing management, sales activities, accounting and finance.

The operation management model constitutes of inputs and outputs. The list of inputs include,

• customer needs
•  Information
•  Technology management
•  Fixed assets of the business
•  Human capital
•  Variable assets related to transformation process.

Information and the physical factors play an important role for managers in order to produce outputs. Most of the physical assets remain unchanged. These include buildings, land, manufacturing plants, warehouses etc.

The projects undertaken by the company focus on driving improvement across the Motorola value chain. Six Sigma projects teams that increasingly involve key customers, suppliers and other business partners are the norm, rather than the exception. The Six Sigma improvement methodologies Bob Galvin sponsored 15 years ago continues to grow robustly, supporting Motorola’s vision for its customers and shareholders. (Six Sigma Magazine, 2002)

We examined the Motorola’s highly visible effort to refurbish its business by following principles of sustainability. The result has been a bold rethinking of the relationship between a company, its products and the environment. The management of the company has been an outspoken advocate of the River Rouge initiative and the corporation has even added “environment” to its traditional set of standard metrics on safety, quality, delivery, cost and morale. Still, the concept of sustainability has not yet become deeply embedded in the values and beliefs of the company’s managers or in the corporation’s manufacturing processes and product development processes. A small staff and a handful of strong line leaders support Ford’s sustainability initiatives, but it remains to be seen if the vision will continue beyond the current CEO. (Kochan et. al., 2002)

Motorola is committed to equality of opportunity, fairness, work life balance; respect and dignity at work for all. Motorola values differences of culture, ethnicity, race, gender, nationality, age, religion, disability, marital status, sexual orientation, education, life experiences, opinions and beliefs.

Diversity adds a clear value to its employees, business, customers, the company, shareholders and the communities in which Motorola operates. Motorola believes valuing difference is not just a ‘good cause’ – it is a business imperative.

The population from which Motorola draws its customers and future employees is becoming increasingly diverse for a number of reasons including globalisation and changing demographics within the UK.

References

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