Ericsson in China

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Case Details:

Case Code : BSTR127
Case Length : 11 Pages
Period : 1985 - 2004
Organization : Ericsson China
Pub Date : 2004
Teaching Note : Available
Countries : China
Industry : Telecom

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Background

In 1985, Ericsson set up its first office in Beijing, China's capital. In 1994, Ericsson (China) Co. Ltd., was established. In 2002, China developed into one of Ericsson's three global supply hubs with full-line production capacity located in Beijing, Nanjing and Chongqing.

Ericsson's largest joint venture in China, the Nanjing Ericsson Panda Communication Company Ltd. (ENC), assumed the role of Ericsson's Flow Control Centre⁵ for the Asia Pacific Region. Ericsson Mobility World China⁶ provided a development and testing platform and toolkit for local Chinese developers who wanted to engage in mobile applications. In May 2002, the company launched the China Development and Research Institute to consolidate and strengthen R&D activities. Around the same time, Ericsson also started its technology licensing business in China. The company entered into a license agreement for 2.5G⁷ mobile phone technology with TCL, China's largest mobile phone producer.

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The same year, it also signed a worldwide WCMDA/UMTS⁸ patent license agreement with Huawei Technologies, a leading Chinese telecom vendor. In August 2002, it was among two companies to be awarded the MMS⁹ contract from China mobile.¹⁰

Ericsson was well positioned to support China's evolution into the third generation of mobile communications (For details on Ericsson's product offerings, please refer Exhibit II). The company made efforts to integrate China's excellent production facilities and human resources into its global production and R&D programme. In the first quarter of 2004, China accounted for about 9% of Ericsson's global revenues. The country became the Swedish giant's second largest market worldwide, trailing only behind the United States. Ericsson's success in China was a result of well-planned strategy by the company. To optimally utilize the vast resources in China, the company adopted an extensive localization strategy...

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5] Ericsson has introduced a logistics concept based on regional flow control centres (FC). Orders flow to the centre directly from the customer via Web tools. Products are then shipped directly from the flow control centre to the customer site. This has helped reduce traditional warehousing requirements and has greatly improved delivery precision.

6] The business wing of Ericsson devoted to encouraging rapid creation and market deployment of Mobile Internet applications and services is known as Ericsson Mobility World. Ericsson Mobility World China was officially launched in May 2004.

7] 2G and 3G refer to Second and Third Generation developments in the telecom sector respectively. 3G is the latest set of developments in telecom products.

8] WCDMA: Wide band CDMA (Code-Division Multiple Access); UMTS: Universal Mobile Telecommunication Systems.

9] MMS: multimedia messaging service.

10] China Mobile Communications Corporation -China Mobile - was officially established on April 20th, 2000. It is a key state-owned enterprise. It was formed to look after the mobile business when the former China Telecom was split up as a result of the reform and restructuring of China's communications industry.