Ericsson Case Study

In this paper we will observe 140-years activities of Ericsson, the global telecom giant and locomotive of Swedish economy, analyze the reasons of their major successes and failures. For the sake of the analysis the work is split in 6 chronological parts, in conjunction with the major events or strategic decisions, related to the period

1. The start of Ericsson

Ericsson was founded in 1876 when Lars Magnus Ericsson opened his own business, a telegraph repair shop, together with his friend Carl Johan Andersson, trading under the name of Firma L.M. Ericsson & Co. This was just a few months before Alexander Bell presented the telephone for the first time at the World Exhibition in Philadelphia in June 1876. The next year telephone

The management of the company seemed to have been reluctant to focus on mobile telephony. Nonetheless, the company always concentrated on technical development, and in 1977 the computer-controlled AXE switching system was launched. It was very flexible and could easily be adapted to different customer requirements, which resulted in a breakthrough order from Saudi Arabia in 1978. The largest contract yet signed in the telecommunications world brought Ericsson from the minor league among telecom providers to a major league

In 1997 for a few months Ericsson flagship model 788 kept leading position as No.1 mobile phone brand in the world. Unfortunately, this was the beginning of the second major crisis in the corporate history. There were several reasons to the failure. First, in the mid-1990s Ericsson was predominantly a radio communications company, they were weak in the booming data communications market. They failed to comprehend timely, how the mobile phone started evolving promptly from a voice device into a data one. Secondly, the company focused on cost saving and had only one supplier for their major parts. In 1999 a fire in a Phillips factory in Mexico disrupted the supply chain of Ericsson and its then main competitor Nokia. Ericsson was slow to react to this misfortune, which resulted in serious production delay. Conversely, Nokia had kept several suppliers despite the potential cost disadvantage and could reorganize their supply chain quickly. This strategy gave them a competitive edge in the struggle to keep production going, right at a time when mobile handset sales were booming. Moreover, Nokia’s market research team had realized that short messages and games were about to revolutionize the mobile phones market. Consumers would start using their mobile phones as data devices. Thus Ericsson started loosing their market share to Nokia and after the major telecom crisis of 2000, merged their