GROUP TASK MARKETING MANAGEMENT
Reinventing Ericsson

Oleh:
A Ademulia Djufri
Marchel Tito
Risma
Siti
PWB-23A
PROGRAM STUDI MAGISTER MANAJEMEN FAKULTAS EKONOMIKA DAN BISNIS UNIVERSITAS GADJAH MADA 2012

Reinventing Ericsson

Ericsson , one of the biggest telecommunication vendor , founded on 1876 by Lars Magnus Ericsson , start his business area on handset and fixed line network. Ericsson business ran well and became a leader in fixed line network. Good research and innovation , by started manufacturing new types of equipment, such as base stations, which carried the first portion of telephone traffic by radio waves instead of wires kept Ericson as leader. Being an end-to-end provider meant that Ericsson also started manufacturing mobile handsets, the company’s first move into consumer products. In 1990s where telecom industry were booming decade specially for GSM systems, Ericsson kept as leader and help 40% of GSM market share. Led by Lars Ramqvist, Ericsson booked nine times revenues in 1998 compare from 1990. Frequent executive changes and lag in the mobile handset business after Ramqvist step down 1998 , but still good in product that produced by good R&D bright forcast new technology in GSM , called 3G , keep made Ericsson growth well. Organization size also growing and bigger as it business by employed almost 107.000. Over-investment that did telecommunication operator , economic downturn, and “dot-com-bubble” , made the Ericsson’s customer halt their investment. This situation stroke Ericsson with telecom business went from dependable growth to rapid decline and the high fixed cost. It forced Ericson to restructure it organization , and reduced SEK 20 billion (or 23%) of the operating expenses, by cutting 22.000 employees , sold its stake in Juniper Networks, Ericsson continued with lay-offs and divestments, selling off distribution operations within Enterprise Systems and real estate assets in the first program still not sufficient enough. Saving another SEK 20 billion as second program followed by third program to save another SEK 20 billion in 2002. This second and third program implemented by cutting another 20.000 , release rights issue and divest 50% mobile handset business by made joint venture with Sony, and more efficiency still booked operating loss of SEK 21.3 billion in end 2003. In early 2003, another changes in executive been approached by Ericsson, but some of them came from outside, where didn’t have telecommunication experiences. An outsider was presented as Ericsson’s new CEO and President: Carl-Henric Svanberg, head of lock maker Assa Abloy and Swedish Businessman of the Year 1998 . Proponents supported the idea that an outsider would be able to break up Ericsson’s technical culture and make it more market-oriented from more product-oriented. One of his first measures was to launch another cost-cutting program. Reaching breakeven was not enough, he thought, a company had to be profitable. He has to reorganize the recovering company in late 2003 after a major industry downturn. He is convinced that only a more market-orientated and customer-focused organization will be able to remain competitive in this maturing, high-technology focused industry. Presents his change project, in which the sales and marketing structure play a central role. Under Svanberg lead , Ericsson segmented it market . Different segment will be approached with differently. Ericsson approach in developed markets, the mobile penetration was so high that wide-scale network construction was not needed anymore. There it now was a question of offering new technology, for instance 3G networks. The market approach also depended on if Ericsson already provided the operator’s 2G technology. In mature markets where Ericsson had no presence, it normally targeted the number 2 and 3 player, offering them low introductory prices to switch to Ericsson technology. In emerging markets, Ericsson instead went for the operator with the biggest potential. Developing markets such as China and India promised high growth potential. Another market segment for Ericsson was professional services such as managing operators’ networks and helping them integrate their systems. He decide this segment as one of Ericson’s target segment because this division touch directly to customer. Svanberg also made some changes in organization , by bring young , energetic and have good communication managements in his organization mixed with another management from external as independent consultant. This new organization gave a new energies to Ericsson for recovery process. He knew that one of Ericsson weak point was organize workflows. He and his new organization also that process simply and be clearer and always bringing “operational excellence” as the most value that Ericsson should give to their customer. He realized that by give “operational excellence” as value added that provided by Ericsson , the company can compete and lead again the competitor. Organization restructure also followed by divide based on product’s complicity so it can be treat in the same work process, event there were some resistant from internal. He also simplify and only bring successful product from outside mobile system’s business , fixed line and CMDA, as their core business to make that business units much healthier. He also keep The joint venture with Sony in Ericsson business even some analysts suggested to disposed it. In sales area , he changed the organization and make it more centralizing sales and placed a leader that very people oriented, cost-conscious and unafraid of taking decisions. In a tightening marketplace, Svanberg also felt that an efficient sales force was a fundamental building block. Various projects could be considered to help the sales staff, such as providing clearer job descriptions, automatic quotation tools, a corporate training program, sales competitions, regular sales meetings and business reviews, and a corporate sales information program. In Marketing area, he forced do more efficiency and complete centralization, in order to send one streamlined message out to the markets. Svanberg had also ordered a brand health survey of Ericsson and its main competitors to see how they were perceived by existing and potential customers and what the clients’ key selection criteriawere. Ericsson should listen more closely and become more customer than technology focused. R&D as “creative heads” also one of the focus from him .He forced certain kind of discipline, a more focused approach and more standardized processes could lead towards operational excellence in that area. He also ask R&D to cut development times that two thirds of the processes were not lead time dependant and wanted to cut these lead times into half. Svanberg was convinced that the ongoing savings programs had strengthened Ericsson. He nowhad to find the right organizational structure to prepare the company for future challenges. He needed to improve Ericsson’s processes and workflows. He had introduced the concept of operational excellence and wanted to see it in use in each unit and each area. Svanberg knew that Ericsson’s future was at stake, as the company faced a maturing market and increasing competition. And even if all his decisions were successes, Svanberg knew that he would probably never reach a stage where he could just lay back and watch the company work