Ericsson, one of Sweden’s largest companies, is provider of telecommunication and data communication system, and related services, covering a range of technologies, including especially mobile networks. Ericsson is founded in 1876 as a telegraph. Since the mid-1990s, Ericsson's extensive presence in Stockholm has helped transform the city into one of Europe's hubs of information technology (IT) research. Equipment repair shop by Lars Magus Ericsson, it was incorporate on August 18, 1918. Since the mid-1990s, Ericsson's extensive presence in Stockholm has helped transform the city into one of Europe's hubs of information technology (IT) research. In the early 20th century, Ericsson dominated the world market for manual telephone exchanges but was late to introduce automatic equipment.
Ericsson is one of the few companies worldwide that can offer end-to-end solutions for all major mobile communication standards. The company has a global presence supported by strong base of research and development activities. Increasing demand for smartphones and mobile broadband infrastructure gives an opportunity to strengthen its business performance. However, increasing competition and regulations could adversely impact both its business operations and financial position. Thus, the largest challenge in the highly competitive telecommunications faced by management would be driving the company to achieve the high level of quality while maintain the low cost.SWOT Analysis:1.
Strengths:* Ericsson has a strong research and development focus. It spends lots on research and development. * Ericsson is part of developing the next network – long term evolution (LTE) and multimedia telephony. Ericsson’s market share for LTE is twice as big as the largest competitor. * In the telecom service, internal market data indicates that the company increased its market share to 13% and making it larger than any competitor in fragmented market. * Ericsson has increased their operational efficiency.
The income statement in 2010 showed the direct cost increased 2.5% from 2009. * Ericsson has geographically diversified business, with customer in more than 180 countries. And it has established relationships with all major telecom operators in the world * Service delivery is industrialized in four global service centers and local researches in ten regions, this ensures standardized services packages of high quality. * Ericsson has over 100,000 employees in the origination. * Ericsson is uniquely positioned as a leader in the development of standards for all major mobile and fixed communication systems, and the convergence of these systems.
Globally standardized technologies ensure worldwide interoperability between networks, devices, and network operators.2. Weaknesses* Networks revenue was declined by falling demand for CDMA. Ericson’s Networks sales declined 17.9% in first quarter 2012, and worldwide CDMA sale were down 40%, with the decrease mainly attributed to North America.
* Operating margin declines continued in 2012, as the company emphasizes market share gains in the short term. * ST-Ericsson joint venture not flying as expected* Low revenues and earnings * Ericsson’s enterprise strategy remains unclear. Ericsson expressed its commitment to cater to the media and TV, public safety, and utilities sectors. But addressing the enterprise sector is very different from selling to the carrier segment.
3. Opportunities* Growing and diversifying telecommunication market. The world is becoming more involved with networks, especially wireless connection. Mobile phones and other broadband terminal devices are increasing in popularity. Upgrading devices and descending prices are triggering the telecommunication market day by day.
* Wireless mobile data traffic growing and expected to grow at a fast pace mainly from smartphones and tablets. * New emerging market: Ericsson has encountered increased competition from the new market entrants, alternative technologies or due to evolving industry standards. * Vendor consolidation may lead to stronger competitors who are able to benefit from integration, scale and greater resources. Industry convergence and consolidation among equipment and services suppliers could potentially result in stronger competitors that are competing as end-to-end suppliers as well as competitors more specialized in particular areas4. Threats* High Competitive Pressure: With the advent of technology such as the internet, the world continues to become smaller.
As a result, Ericsson is facing more competition than ever before. Being a large player in both the local and international markets, they were fortunate in the past as there were few companies in their local market and few companies who had the capabilities and capacity necessary to compete in an international market. Small market players are a continuing threat as they usually have lower overhead as a result of a non-unionized workforce, and lower employee benefits.* Global Regulations: Being a global company has many challenges; one of which being required to comply with the various country, regional, and global regulations that are continuously promulgated and changed each year.
Regulations that are currently having the most effect on Ericsson are those of the environmental protection nature. * Rapid changes in technology, and as a result, many of the products that Ericsson invests millions of dollars developing have short life cycles. This creates a need for Ericsson to always be ahead of the curve the majority of the time. These short product life cycles allow new and emerging companies many consistent opportunities to penetrate the market with their new products * Weakness dollar: The decline to the weak dollar, which eroded the value of half of Ericsson’s sale, as result, Ericsson is laying off 1,000 employees in Sweden this year and up to 3,000 in other countries.Issue Identification Nowadays, globalized business environment provides a great amount of business opportunities; however, it also forces companies to enhance their competitiveness in order to survive. There are thousands of examples of business failure caused by over or underestimating costs as well as product pricing related to cost estimation.
Therefore, assessing and controlling various costs such as labor, material, and administration are the crucial and decisive elements to business success. From the Ericsson report, the problem that we identified is that: even though the sales are increasing but the gross margin is dropping in a significant percentile. As a result, from the decrease of gross margin, we can tell that the company’s cost of goods sold is increasing. This cause company less competitive in costing and pricing in the telecommunication filed compared to its rivals.
Costs are not only a driver to Ericsson’s profitability but also more importantly can lead its executives to make a better decision to their products’ price, which will be a very competitive tool standing out the products in its business field. Whether a company is surviving or not, effective cost control and advantageous product pricing are critical. For this reason, we will thoroughly choose the best forecasting method and operation strategies for Ericsson Sales such as weighted average and seasonality according to Ericsson’s data report. Sales have very close and straight relationship with costs.
A more accurate sales forecast can lead company to have better number estimates of production, labor, material needed, administrative expenses, and so forth. Thus, expenses can be well foreseen and properly allocated and controlled. Furthermore, saving costs from more accurately predicted sales can also make a competitive pricing decision for Ericsson.
