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How the Swedish telco can fight back from crisis
It is no secret that when the fortunes of the telecoms sector collapsed in 2000, network supplier Ericsson was hit hard. In October 2003, the Sweden-based firm had spent 11 quarters in the red and chief executive Carl-Henric Svanberg admitted "I think it's very low odds on guessing that we will soon be in the black." In a similarly worrying position, the Sony Ericsson partnership constantly lost money following its launch in 2001 until in 2003 it had halved its initial size. Admittedly, companies across the sector have experienced difficulties since the boom of the 1990s, yet when compared to rival Nokia Ericsson appears slow in fighting back. This has led to increasing suggestions that the firm's hardships stem not just from external economic factors, but from poorly considered strategic decisions.
Sony Ericsson: strategy mistake 1
Despite predictions that Ericsson would pull out of the partnership with Sony after their mobile phones failed to deliver profits in its first two years, Svanberg insists that his firm's commitment to Sony remains as strong as ever. But if the company is to improve its position of last of the six major players in handset production, strategic analysts strongly suggest a rethink.
Since its creation, Sony Ericsson has targeted the high-end, low-volume market. It brought the design edge of Sony together with the networks expertise of Ericsson, charging premium prices for innovative and sophisticated models. The 2002 model P800, for example, boasted a large touch screen, built in camera, the ability to play MP3 audio and MPEG4 video files and advanced personal digital assistant functions. At the time these features put the phone in a class of its own, being dubbed by one journalist "the Maserati of smart phones." Although it was priced high, the phone exceeded all sales expectations and the Sony Ericsson strategy appeared to some degree a smart one.
However, staying at the cutting edge of design and technology has proved more difficult since the P800, with rivals such as Nokia and Siemens working to close the gap with their own new and innovative models. Further, the shelf life of each handset...