Ericsson Mobile Platforms Using Value Chain Model Information Technology Essay

Ericsson active Platforms Using prize Chain Model culture Technology EssayThe harbor grid sexual climax al subalterns firms to identify opportunities and threats in a more(prenominal) explicit way than the traditional rate range. This research aims to sort the Value Grid in a multinational compevery Ericsson Mobile Platforms (EMP). How does the entertain grid model help to define the organizations reveal Success Factors (KSF)? For this shift study, the tax grid concept proved to be an interesting heuristic tool to locate opportunities that atomic number 18 not evident from a traditional measure out stove perspective. EMP great deal identify indirect ways of influencing demand by playing a coordinative role with network operators.Key Success Factors for Ericsson Mobile Platforms using Porters Value Chain modelThe hold dear cosmic string model, first depicted and popularized by Michael Porter in 1985, has proved to be an effective approach to analyze and capture the lever generated a ache a chain of activities. But, with the increasing complexity of proceeds and service de followry, critique has arisen from both academics and professionals in terms of value chain model applicability. The value grid approach allows firms to move beyond their industry lines and to identify opportunities and threats in a more explicit way. This research aims to rivulet the Value Grid in a multinational company Ericsson Mobile Platforms (EMP). How does the value grid model help to find novel opportunities and define the organizations Key Success Factors (KSF)? For this grounds study, the value grid concept proved to be an interesting heuristic tool to locate opportunities that are not evident from a traditional value chain perspective. EMP corporation identify indirect ways of influencing demand by playing a coordinative role with network operators.1. Models of ValueThe purpose of this carve up is to analyze the evolution of value models from the value chain to the value grid through the value governance, the value network and the added value chain. The role is to clarify the relevance of the value grid choice for studying the case of Ericson Mobile Platform.The Value chainThe value chain includes all the activities involved in product making. It is a useful tool to measure the value constructd for each military action in the process of product creation. It is a part of a firms strategic planning to arrange these activities in a way that the total value, the value that buyers are pass oning to pay, exceeds the total bell. According to Porter (1985), a company washbowl create value through a cost advantage or product unlikeiation.Porter (1985) identifies two types of activities in the value chain Primary activities and documentation activities. Primary activities are those that create customer value. The goal of the primary activities is to realize value that exceeds the cost, in that respectby resulting in a service margin. Support activities concern procurement, gracious resource management, technological development and infrastructure such as traceing, legal, finance, planning, public affairs, government relations, quality assurance and general management. The activities in the value chain are not independent. Linkages may exist surrounded by activities. In crabbed, one process may affect the cost and performance of the others. Linkage can exist between primary activities, as well as, between primary and support activities. Therefore, competitive advantages can also be derived from the linkages between activities. This is a highly relevant blank space for EMP.The Value SystemPorter (1985) extends the concept of the value chain a firms value chain is a part of the Value System, which is a network of unified value chains between suppliers and buyers. The value system includes the value chains of the upstream suppliers and downstream channels and customers. The available total margin is spread c rosswise suppliers, distributors and customers (Recklies, 2001) in the value system. The amount of how much part of this margin is received by each member depends on its market position and negotiation world power (Recklies, 2001). A firm who has high degree of perpendicular integration has a better position in coordinating its upstream and downstream activities and therefore enamour a higher margin, merely a company with low level of vertical integration can also get high margins if it can strive better coordination with suppliers and partners.The Value NetworkPorter (1980, 1985) measures value chain and the five forces model extracted from the organizations activities, in terms of financial value (margin) but ignore the fact that impalpable assets such as competencies, internal structures and relationship with the environment are the driving factors behind the financial results (Sveiby, 1997). New methods appear to take into consideration the intangible assets. Value Network Analysis (Allee, 2003) is a method that combines tools that analyze strategy with insight into complexity of interactions among people (Middendorp, 2005). According to this analysis, the intangible assets should be considered as passable and exchangeable.Peppar and Rylander (2006) introduce the Network Value Analysis (NVA) method as a way to analyze competitive ecosystems. Combinations of players co-create the value in the network and the method centralise not only on the company or the industry, but the value creating system itself (Peppar and Rylander, 2006). Firms cultivate an ecosystem a set of firms that can co-create value by create relationships among the diverse players in the industry suppliers, partners, allies and customers (Peppar and Rylander, 2006). Firms that understand the sources of value in the network and are able to exploit them will be the winners in tomorrows more complex industries (Peppar and Rylander, 2006).The Added-value ChainAccording to McPhee and W heeler (2006), focusing on the firms internal core activities is not sufficient to generate value in todays firms. The authors propose an added-value chain model that includes a set of expanded parentage activities from different business models and a redefinition of value that incorporates brand, reputation, and relationship-based value drivers of the firm. In the added-value chain model, the definition of value incorporates profit margin and intangible assets like leadership quality, innovate capability, brand equity and competences in strategic-alliance development. This new-sprung(prenominal) value definition gives to the firms the ability to evaluate how their strategies affect both hard and soft assets of the firms (McPhee and Wheeler, 2006). This model is incomplete for example in finding and exploring non-li airless value opportunities.The Value GridNew research conducted by Pil and Holweg (2006) argues that this approach can also put a stranglehold on innovation at a time when the grea interrogatory opportunities for value creation (and the most significant threats to long survival) often originate outside the traditional, linear view. run agroundd on this critic, Pil and Holweg (2006) develop an evolved concept of Value Chain called Value Grid, which has a variety of new paths to enhance performance, resulting in a three proportionalityal grid the vertical, the horizontal and the integrative diagonal dimensions.Regarding the vertical dimension, firms are seeking for competitive advantages in the value chain by reducing cost, reducing lead time between activities and improving coordination between supplier and customers. However, how the benefits are distributed across the value chain depends on the balance power between suppliers and manufactures. Therefore companies need to focus on three areas Opportunities to influence customer demand both upstream and downstream, opportunities to modify information bother in either direction, and finally op portunities to explore penetration points in multiple tiers that are not immediately adjacent (Pil and Holweg, 2006).The horizontal dimension provides opportunities for companies to move across value chains, in order to leverage economies of scale across multiple sources of demand (Pil and Holweg, 2006). The potential of this dimension is to change companies to manage risk, seize existing value (special products with advanced technology), integrate sources of existing value and explore new ways to create value. The horizontal thinking allows parallel value chains to be viewed from different industries, in this way companies can integrate these parallel value chains to offer package or price combinations, which cannot be achieved by the single value chain approach.Finally, in the diagonal dimension, firms explore the grid in an integrative fashion, in order to increase the catch over inputs and customers. Firms looks at the upstream and downstream of other value chains for controll ing the critical components of the supply chain and uncovering new ways of boosting customer demands (Pil and Holweg, 2006). Pil and Holweg describe the two strategies that take advantages from this dimension The first is pursuing Pinch-Point mapping when companies shall monitor key component supplies and negotiate alternative source of components. The second is defining demand enablers when companies that expect a particular expertise in a given value chain, can examine other value chains in other industries that can leads to new opportunities to leverage key competitive advantages (Pil and Holweg, 2006).Industry BackgroundThe telecommunications industry is undergoing radical transformations through liberalization, humbleing of technological barriers to entry and the diversity of players (Li and Whalley, 2002). Originally, the process of manufacturing a complete liquid set was finished within one company. However, as with the PC industry, the value chain for making a wandering phone has become more break up according to a more ranked approach (Anderson and Jnsson, 2006). Companies like Ericsson Mobile Platforms (EMP) and Qualcomm are examples of this change in the industry. They provide technology solutions for mobile manufactures that enable them to make a new phone model much faster without having the core knowledge like radio access.New actors and new services work out the mobile communications value chain in both ways, functionally and institutionally (Buellingen and Woerter , 2004 Ballon, de Munck, Poel and de Pas, 2001 Fertig, Prince and Walrod,1999).The traditional concept of value chain may not be sufficient for todays firms (Buellingen and Woerter, 2004). Barnes (2002) tries to adapt the value chain analysis for m-commerce and analyses the players, technologies and activities involved. Full-size image (36K)The basic model consists of six core processes in two main areas setoff infrastructure and services, and second the area of content.Pagani and Fine (2008) consider five principal actors in the supply chain the content providers, application providers, infrastructure providers, network providers the finesse providers. They assume that the end consumers create demand, set the rules of engagement and accordingly pull the supply chain system (Pagani and Fine, 2008).In the last decade with the entry of almighty new players, rapid technological developments and increasing market turbulences (Li and Whalley, 2002), the mobile handset industry has changed from a vertical specialization to a more horizontally stratified structure. A complex and rapidly evolving value network is growing (Li and Whalley, 2002). There are more parties involved in the process of making a mobile phone. Each party focuses on areas of the value chain where they have core competences such as new technology, customer relationships management, or infrastructure management. The market is then highly complex and competitive given the fact that compani es compete also with companies from other industries operating under different value propositions and economics (Li and Whalley, 2002).Methodology look for shape and data collectionThere are several techniques for identifying Key Success Factors, Leidecker and Bruno (1984) propose the following environmental scanning, industry structure analysis, industrial experts opinions, competitors analysis, scoop practice analysis, appraisal of the companys internal feeling or judgment, intuitive factors and gathered data of profit impact and market strategy. This study mixes between internal assessment of a firm and industrial experts opinions. This internal assessment technique explores the firms forces and weaknesses. The KSFs are thus concluded from the oppugns with experts in the industry.-Figure 1 about here-As physiqueed in the research model, first a value chain analysis focuses on the firms core competences from an inside perspective. In parallel, the firms value chain is positio ned into the value system of the industry, to identify adjacent players and external linkages and determine firms ecosystem. An analysis of the Value Chain aims to identify competitive advantages. From the Value System and the ecosystem, the Value Grid manikin identifies competitive advantages from its three dimensions. The outcomes from Value chain and Value Grid are analyzed to running play the Value Grid and to extract the KSF for EMP.An ideal analysis of the KSF for EMP would be to do benchmarking with other companies from the same Industry. Then it will be possible to define EMPs real strategic advantages. However, due to availability of information this research focuses on an inside-out perspective and tests the concept of the Value Grid using one source of empirical data (a single case study).Semi-structured interviews are conducted with a particular list of topics to be covered (Bryman and Bell, 2003). The advantage of this method is that the interviewer is free to reform ulate the questions or simply ask new questions that may appear as a result of the answer of the interviewee (Bryman and Bell, 2003). According to Grunert and Ellegaard (1992), this type of interview with business decision makers can measure perceived KSF.Five key persons are chosen for an interview from EMP Robert Puskaric, head of EMP, Martin Jnsson, from Product Portfolio Management, Fredrik Dalhgren Deputy Director of System Management, Pr Stigmer from Sourcing and Supply and Linda Wenerman from Product Management.Empirical Findings for Ericsson Mobile PlatformsEricsson Mobile Platforms is a business unit within the Ericsson Group. It was founded in 2001 as a result of a split from the Ericsson mobile handset division, Ericsson Mobile Communications. This split ended up in Ericsson Mobile Platforms (EMP) and the joint-venture Sony Ericsson Mobile Communications. Before that time, Ericsson produced mobile platforms for in-house use only. Through EMP, Ericsson started to license o pen-standard 2.5G and 3G technology platforms to other mobile phone manufacturers and other mobile communication devices.EMP offers inactive platform deliveries that include ASICs and development boards ( hardware), platform software, reference digit, development and testing tools, training, support and documentation. The EMP platforms contain incorporate circuits and softwares needed to build a GPRS, EDGE and/or WCDMA phone. It provides all the system functions such as Network communicate, Data communications and Multimedia services. The system architecture of EMP is a modular design that is built on a use case analysis (Kornby, 2005). Examples of use cases are imagining, video telephony, voice call, multimedia streaming, call handling, audio and video.The following criteria have been taken into account to develop this system architecture (Kornby, 2005) complete platform software (not only protocols), stability, flexibility, scalability to different market segments, adaptabili ty to customer software applications, one single architecture for different mobile systems (GPRS, EDGE, WCDMA), maximum reuse of components and customer applications and backward compatibility in software over the time.Customers build their applications on top of EMP platform software stack. Examples of customers applications are multimedia players, phone call applications, web browsers, etc. EMP also supplies a suite of core applications where customers can use as a starting point for make their applications. EMP provides a complete application suite to support customers who do not build their own applications. This is especially for customers who want to focus in the low-end market. The goal of the EMPs application Suite is to reduce time-to-market for customers in launching their phones.EMPs business modelThe EMPs business model consists of two parts to license its core technology and to cover design support services to the customers. EMP charges a one-time up-front fixed pay ment for a Platform license and a royalty per unit that represent the major source of tax income (Kornby, 2005). EMP has built an ecosystem in order to view the maximum value creation for EMP. The five players in the EMPs ecosystem are depicted in figure 2.-Figure 2 about here-The first set of players relates to Network Providers these companies offer the telecom infrastructure such as wireless communications systems. The main partner with EMP is LM Ericssons network group. They work hand-by-hand to provide end-to-end solutions, align roadmaps and understand that EMP platforms can support the new network functionality offered by Ericsson (Kornby, 2005). Second, EMP has a closer relationship with the customers to ensure that new customer requirements are collected promptly in order to implement new functionality as early as possible.The trine set of players in EMP ecosystem relates to Network Operators. These companies provide the services to the end-users (subscribers). They als o purchase phones from mobile manufactures that are sold to the operators subscribers. Very often operators request mobile manufactures to use a unique(predicate) mobile platform (Kornby, 2005). Thus EMP has built an important relationship in order to understand future operators requirements to secure that new functionality is available in the EMPs platform.Fourth, EMP and LM Ericsson are active at work with the standardization bodies such as 3GPP, OMA, JCP and OMPT. This is through in order to ensure interoperability of EMPs mobile platforms worldwide. And finally EMP works actively with ASIC, peripheral, IP and software suppliers in order to get fair prices for building EMP products.4.2 The EMPs Value Chain and Value SystemThe direct activities of EMPs value chain are supply chain Management, hardware design activity, Software development and integration activity, a system reference design activity, a System sieve and Interoperability Test (IOT), Product Use, External Networks a nd finally a customization activity. EMP has also a prototype unit that builds prototype phones for testing early functionality. The EMPs value chain and value system are depicted in figure 3.-Figure 3 about here-4.2.1 Supply Chain ManagementEMP basically does not have any regular material flow, but outsource software and hardware through licenses. The task of the sourcing and supply department is to act as an internal consultant at EMP for deciding whether to buy an IP or develop hardware/software in-house. The sourcing department works tightly with the product definition and the RD organization they work proactively to ensure fair prices. The decisions are based on three aspects examine the prices of buying from others and developing by itself, assessing the risk of buying and finally evaluating the total value by an in-house development. For example, to get a new IP in the platform, the sourcing department evaluates the total cost composed of the getting IP cost from supplier an d the using IP cost (license) per ASIC. In this case customers pay the license directly, the cost of integrating an IP into the suppliers ASIC (a supplier may have already the knowledge of adding this IP, thus it becomes cheaper) and the cost of the final integration into the platform (how difficult is to make drivers and APIs to control the IP).The sourcing and supply department acts differently depending of what wants to outsource. For IPs, the negotiations are based on case, for ARM and DSP cores it builds long term relationship with the suppliers, and for a specific component such as Image Signal Processor (ISP) it chooses the best price in the market. Since ASICs are costly, EMP co-develops the design with suppliers and builds long term relationship.4.2.2 Hardware design (HW)Regarding the Hardware, EMP only designs and specifies requirements for the different hardware components in the platform. As is shown in the Error Reference source not foundASIC suppliers (or fabs) test an d manufacture the hardware. EMP verifies the hardware components only when it builds the reference design. The design of the HW is divided into two main parts, Front-End and Back End design. For the Radio Frequency (RF) hardware EMP designs the Front-End and Back-End. For the Digital Base Band (DBB) EMP only does the front-end design. Finally, the analog base band (ABB) ASIC, EMP only specifies the hardware requirements and leaves the rest to the ASICs suppliers4.2.3 Software development and IntegrationSoftware development and Integration refers to developing software solutions for the different stacks in the software platform architecture. This activity also involves developing EMP (in-house) software stacks such as Network Signaling protocols for WCDMA, GSM/GPRS and EDGE data communication protocols such as, TCP/IP, RTP, and IMS multimedia protocols for streaming music and video developing a set of application platform interfaces to control the software platform and hardware. DBB, ABB, RF, and peripheral are to implement low level drivers to control hardware components inside the mobile platform. This activity also involves integration of third party proprietary software components such as, music codecs (like MP3 and Windows media player), and operating systems. This activity also involves testing the software at different levels module tests, regression tests and integration tests.4.2.4 Reference designEMP builds reference boards and real-size reference phones. These non-commercial phones are produced in small quantities that are internally used for software development and hardware verification, interoperability test and early-stage test of hardware for customers.4.2.5 System Test and Interoperability testThe system test consists of the verification of the complete reference design. The tests are conducted in lab, with network vendors and interoperability test with major live networks operators in the world. This is a very costly task and it is done to unc over ambiguities in the basic standards and specification. It also covers informal type approval test for the phone (Kornby, 2005).Value Chain AnalysisAccording to the theoretical framework a company can generate competitive advantages by analyzing the different activities in the value chain. EMPs value chain basically works only in the service domain. EMP licenses its platform solutions and let the customers manage the manufacturing process with EMPs suppliers, thus the EMPs core activities are design (both in hardware and software), integration and testing of the platform (of the whole system). EMPs advantage appears in the fact that the firm has designed a holistic system architecture which makes easy to develop and test the functionality independently. This saves considerable a considerable time amount at the integration phase. Moreover, the system is designed to be flexible and scalable, so it is easy to re-use and add new functionality. Therefore, EMPs main strength is that th e firm successfully manages to develop, integrate and test very complex new technologies to deliver a abiding cost-effective platform solution when technology development is not in a mature phase. The main EMPs competitive advantage is to be the leader in providing cost-effective solutions for the mass market when the new technologies are emerging. Another interesting strength found is that the brand image of Ericsson plays an important role when meeting with new suppliers. The reputation of the Ericsson corporation is transferred to EMP and it facilitates the starting of new agreements and business opportunities.Potential RisksThe value chain is an analytical tool that helps to find value in each activity this can also be used for finding weakness and improvement areas. From the value chain we can identify two main weaknesses. First, the base band ASICs are the most costly part in the platform, despite that EMP says that it has managed to get fair licenses prices for the ASICs. Th e power of the suppliers is relatively high, thus EMP cannot have full control of the hardware prices. It seems that high margins still go to ASIC manufactures. Second, at this moment, EMP does not have the competence and the resources to integrate vertically in the upstream value chain.According to the interviewees, the most invaluable strategic resource at EMP resides in personnels competence in the area of radio access technology and in the skills for designing a flexible and low cost system. These two competences are the driving forces for providing a cost-optimized mobile platform. The main risk in the value chain comes from the suppliers side. When technology reached a mature market, there is a risk that the technology becomes a commodity product and thus, suppliers can acquire knowledge on how to implement these technologies in their own ASICs. This implies that ASIC manufactures can produce ultra low cost platforms, due to the fact that they can control the price of the har dware.Another identified potential risk relate to how much EMP should outsource (Varadarajan, 2009). As is shown in the value chain (figure 3), EMP outsources a number of software components. An indiscriminate software outsourcing policy may lead to the loss of competences inside the EMP value chain (such as signal processing knowledge) thus reduce the value of the platform offering.5.2 BenchmarkWhat are the EMPs keys factors that are considered important for success? EMP is constantly evaluating and comparing with competitors in terms of cost, size, performance and power consumption of the product offering. From an end-users perspective, EMP is interested in delivering high quality multimedia functions for providing good speech and audio quality. other(a) benchmark measures are purely financial measures. All the interviewees agree that there are areas of improvement for EMP from a value chain perspective.5.2.1 Horizontal integrationIn most of the interviews, a potential improvemen t for EMP consists in the integration of the value chain from a horizontal perspective by adding others technologies for example to offer an integrated solution with WLAN, BT or FM radio. The platform today provides the flexibility to add these peripherals, but this is a work that the customer must do when he done the product design (and it doesnt add a real value for EMP). This extended platform function offering in EMP platforms has the following impacts 1) As customers will have less control over the price for these peripherals, they will not be able to bargain the prices 2) the cost of the EMP platform for customers will increase, 3) the total PCB area will go down due to integration of the peripheral in the ASICs and 4) the final product from a customer perspective (i.e. phone ready to launch with everything in place) will result in a total cost reduction. Thus, EMP would add value into the platform and customers will benefit from cheaper phones. In order to integrate these per ipherals, EMP should create alliances with these suppliers in a cost effective manner (Hkansson and Ford, 2002). It is not enough to just integrate any peripheral it should be a peripheral that can be used by almost all customers in the different platforms, in a way that provide a common platform offering. differently it will end up in a customized platform and the total value added from a portfolio perspective may not be that clear. An example of a peripheral that may fit with this approach is BT devices. The goal of EMP will probably be the re-use of the same platform as much as possible however this is not defined yet.EMP has managed to have more than one ASIC supplier. This has increased the possibilities of getting fair prices. EMP is still looking to increase the number of suppliers to gain bargaining power.5.2.2 unsloped integrationAlmost all the interviews discuss the fact, if the vertically integration must be in the upstream or not. As was described, the most costly part in the platforms is the ASICs and in order to offer competitive price, alliances must be created with ASICs suppliers. However, what if EMP chooses a fabless model? EMP would need then to focus more on the design of the hardware devices (today, it leaves it to some suppliers to design the hardware). EMP should start to do more IP designs, to focus on the back-end design of all the hardware components (ASICs) and create cell libraries for them. This vertical integration implies that EMP would leave ASIC manufacturing to a silicon foundry (for example, companies like TSMC, UMC, Chartered, etc). The advantage is that EMP would be able to choose suppliers, to get better prices and thus to get higher margins. For instance the EMPs competitor Qualcomm has this approach and uses TSMC as ASIC manufacturing.Nevertheless, complete back-end design requires EMP to build specific competence and skills for the complete hardware design. Moreover, EMP would need to take care of production issues l ike yield management, quality and logistics. This could lead to an expensive learning experience. Since EMP is a rather small company in global terms which focuses mostly in software design and system integration, a solution would probably be to invest in a company who has already the skills and experience. But in the near future this option will be not considered.Test of Value GridValue Grid offers a variety of new paths to enhance performance, resulting in a three dimensional grid the vertical, the horizontal and the integrative diagonal dimensions (Pil and Holweg, 2006).6.1 Vertical DimensionFrom the theory of Value Grid and the analysis of the value chain in the previous section, there is a match between the External Networks from the value-added chain concept and how to influence customer demand in the downstream. In this case the relationship between EMP and network operators plays an important coordinative role (Andersen and Christensen, 2005). EMP cannot influence demand dir ectly since this activity is mainly driven by EMPs customers who manufacture, distribute and sell the phones to operators and end-users by other distribution channels. Indeed, network operators distribute a great part of the mobiles phones to the end-users due to their infrastructure. In order to increase traffic in their networks, they finance partly the cost of the phone by tying it with contracts (fixed subscriptions periods normally for one or two years) or offering a phone at lower cost with the restriction that the phone can only be used exclusively with prepaid SIM cards. Therefore, to increase sales and market share, EMP can build a strong relationship with operators and persuade them to buy mobiles phones from EMPs customers.6.2 Horizontal DimensionIn this dimension similarities were detected betwee