Defensive Strategy

Motorola’s Branding Dilemma

24 Jun 2010  

Motorola is apparently going ahead with plans to split up the company. This move will raise a large and rather difficult branding question.

The proposed split with separate the handheld division from the rest of the company. The handheld division produces cell phones and smart phones such as the Droid.  The rest of the company manufacturers public safety radios, handheld scanners and telecommunications equipment. At the moment, the handheld division isn’t profitable; all the profits come from radios and scanners and such.

The big question: what happens to the Motorola brand after the split?

Letting both companies use the Motorola brand is the logical solution, but this is not an ideal approach. Who then owns the brand? Who decides what is ok, and what isn’t ok? What will Motorola stand for, anyway?

Giving the Motorola brand to the handheld division seems like the best solution to some since the handheld division is consumer facing. But this ignores the fact that the Motorola brand has enormous value in the radio and scanner area.

It isn’t clear how powerful the Motorola brand is in the consumer space. Motorola hasn’t been an industry leader in handheld devices for many years; Apple and Blackberry dominate, with Nokia strong in international markets. Still, Motorola is the company that invented the cell phone. It is hard to imagine the handheld division walking away from the brand and adopting a new name.

I’m not certain how Motorola will resolve this issue. I am quite certain that letting both companies use the brand won’t work well in the long-term.

6 Responses

  1. Stock…

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  2. Joe Mayer says:

    Perhaps I am skewed since I work in the 2-way radio division of Motorola, but I see this sharing of the brand as a VERY big problem in the long term.

    Despite what I feel is some strong progress in recent months, the cellular division has been, and will continue to get marginalized by the carriers in the United States. I cannot speak for international markets, but I know here in the US, I haven’t seen a Motorola commercial or advertisement for years. All of the ads are for Verizon or Sprint or TMobile. That makes me think that in the consumer driven cellular markets, the Motorola brand carries very little equity.

    In the 2-way radio markets, Motorola is still a very strong player and the brand carries tremendous equity (please remember my potential bias here). This market is far less consumer centric, and therefore, is less susceptible to external forces. Therefore I believe both companies would be better served with the 2-way radio division keeping the Motorola brand where it still carries some weight, and the cellular division re-branding to shed an image of a fallen star in the consumer markets.

    • Tim Calkins says:

      Joe—I agree that sharing the brand, as currently proposed, is not a great idea. There is a huge risk that it will lead to confusion and internal conflict. At some point the company should split things cleanly. Launching the cellular division with a new brand would be expensive but that is probably the best approach.


  3. andrey says:

    reply to Satish Varma Srivatsavaya

    You first question was whether there are any instances of a brand shared by two companies.

    There is one example i am aware of in spirits. In 2005 forced by other circumstances Pernod Ricard (second largest spirits company in the world), owner of a brand Seagram’s used for Gin and Vodka sold its right for this brand in relation to Vodka only to a third party, Young’s Holdings Inc (large wine & spirits wholesaler in the Western states of the US) while keeping rights for the Gin for themselves.

    I cannot comment how exactly questions of control over strategic marketing and brand reputation or packaging are solved between the companies since then (it is confidential inter-companies issue and I am just an observer) however the companies still remain separate owners sharing the Seagram’s brand for two different drinks.

  4. Satish Varma Srivatsavaya says:

    Dear Professor Calkins,

    I am sure the folks at Motorola are going through emotional and deep discussions on this very topic of who should own the ‘Motorola’ brand.

    Couple of comments and questions :

    1. Were there any instances in the past where two separate companies shared a brand?

    2. What is the efficient way to decide the owner of a brand when a company splits into two? I am sure there is no cookie cutter model to come up with a valuation model for the brand associated with one of the two future companies, but was wondering what the closest approach would be.

    3. Motorola shed some of its businesses earlier, which either merged into an existing company or formed new brands. For example, FreeScale & Continental Auto., both of these companies didn’t perform well. Would this cause some concern to the new company (after split) that may not carry the ‘Motorola’ brand?

    4. Since Motorola Mobile Devices had lost significant market share and leadership position over past few years, would it be prudent for it to create a new brand when the company splits and position itself as a revamped, renewed company that is customer centric and innovative? Of course establishing a brand that is recognized worldwide will cost a lot and may take a few years!

    Your thoughts and comments are highly appreciated.

    Satish Varma Srivatsavaya

    • Tim Calkins says:

      Companies frequently share brands. Indeed, any brand licensing deal involves people sharing a brand. For example, Starbucks licenses its brand to Kraft for coffee sales in store, and licenses it brand to Pepsi for bottled beverages. So it can be done.

      There is no single method to determine which business should own the brand. In theory, the best solution would be the one that creates the most value, so the primary brand owner would be the unit that gets the most added value from the brand. In Motorola’s case I’m not sure which unit this would be.

      My sense is that Freescale has had a number of problems, but I don’t think branding has been a primary driver.

      Creating an entirely new brand is not an appealing option, because it is an expensive undertaking. But I suspect one of the divisions will need to do this eventually.

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