Strategic Management of Nokia

Abstract:
The roots of Nokia go back to the year 1865 with the establishment of a forestry industry
enterprise in South-Western Finland by mining engineer Fredrick Idestam. While in the year 1898,
witnessed the foundation of Finnish Rubber Works Ltd, and in 1912, Finnish Cable Works began
operations. Gradually, the ownership of this two companies and Nokia began to shift into hands of
just a few owners. Finally, these three companies were merged to form Nokia Corporation in 1967.
[1]
Nokia Corporation engages in the manufacture of mobile devices and mobile network equipment,
as well as in the provision of related solutions and services worldwide. The company has four main
business functions or segments: Mobile Phones, Multimedia, Enterprise Solutions, and Networks. The
Mobile Phones segment provides various mobile voice and data devices. This segment offers mobile
phones and devices based on GSM/EDGE, 3G/WCDMA, and CDMA cellular technologies. The
Multimedia segment offers mobile devices and applications with multimedia connectivity over GSM,
3G/WCDMA, WLAM etc.

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Role of Strategy:

Every company on a small level with very low risk or a multinational company with much more to
lose than just money on the line have to have a strategy to make its name in the world with other
companies in mind. Strategy is as important in an organisation like walking for a human. Behind
every successful organisation there is a strategy.

“It may be hard for an egg to turn into a bird: it would be a jolly sight harder for it to learn to fly
while remaining an egg. We are like eggs at present. And you cannot go on indefinitely being just an
ordinary, decent egg. We must be hatched or go bad.”C.S.Lewis [7]

The idea from above statement says in strategy you cannot just attempt something that you have to
or will do just like that you need to take small and control in sometimes brave steps to achieve what
you desire and have to be patient because in planned strategy to work time is your biggest friend and
sometimes the worst enemy. Sometime it takes years to be where you want your organisation to stand.

In a competitive business environment you have to realise the brutal facts of Market environment,
Financial and Economic conditions. You need to ask yourself the hard questions before making a
strategic plan weather it can be achieved or not and have to make sub small plans those will help you.
You have to think of the value added to the organisation after the completion of your strategy.

External analysis:
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The External Analysis examines opportunities and threats that exist in the environment and I
will be discussing the fallowing.

1. P.E.S.T Analysis
2. Porter’s Five Forces/Market Trends
3. Types of Market

1. P.E.S.T Analysis:

PEST identifies the political, economic,

social, technological, environmental, and legal factors that of which directly affect a company. In this

case Nokia.

Political – As markets are deregulated, both operators and manufacturers are free to act
independently of government intervention. In Countries like India and China where Partial
regulations exist, government intervention does take place.

Economic – With incomes rising, people have more disposable income, which enables
consumers to be more selective with their choice of mobile phone, looking to other factors rather
than fulfilling the most basic of user needs (text messaging and phone calls) and price being such a
key factor.

Social – The rise of the so-called information society has made telecommunications
increasingly more important to consumers, both in terms of work and leisure. Users are more aware
of mobile phone handset choice and advancements due to increased information availability.

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Technological – There have been much global advancement in technology such as MMS,
Bluetooth, WAP, GSM, GPRS, cameras etc. The Asian markets are more technologically advanced
than their European counterparts, for example in 2002, just 4% of phones had cameras, whereas in
Asia 90% did.

2. Porter’s 5 Force/Market Trends:

It uses concepts developed in

Industrial Organization (IO) economics to derive five forces which determine the competitive
intensity and therefore attractiveness of a market. It consists of fallowing factors.

Power of New Entrants: In any market arrival of a new product is not always welcomed.
In mobiles world it’s not different a mobile phone or an online service is launched by Nokia it has as
50 percent chance of success. It’s like the launch of Nokia’s N95 Smartphone which was much
appreciated by buyers then the launch of N96 Smartphone.

Power of Buyers: Due to recent down fall in the economy, the demand of consumers buying
new mobiles has come to a halt. Due to which companies everywhere are thinking of strategies to
increase the demand of their products.

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Threat of Substitute: There are substitute for everything out in the world. So goes for the
mobile, and the services provided by Nokia but the problem lies in consumers switching to the
substitute. The main reason is that most people don’t like to change to something new because they
might find it hard to use or switch over.

Power of Suppliers: If the suppliers change the price then company in this case Nokia has a
direct impact on the pricing of their products. If there are more suppliers then it is easy to change from
one to another if the first one is not able to provide the services a company needs.

Competitive Rivalry: Business is good where there are competitors because it gives more
chance to improve and go ahead of your rivals. Nokia keep their product catalogs up-to-date and keep
looking for better technologies to update its mobile and services.

3. Types of Market:

There are different types of markets on which a company makes strategies to fallow and consider
before releasing products. Which are discussed as below.

Monopoly: Nokia as a mobile manufacturer has dominated mobiles market with its high end
N-series Smartphone to its low end mobiles. It was Nokia’s intentional strategy to keep ahead with
the technology to keep customers interested in its products.

Duopoly: It’s a market state when two companies dominate the market. In this market Nokia
is challenging HUAWEI technologies in producing 3G technology dongles because at present time
there is no other company in the world expect Huawei producing 3G dongles.

Oligopoly: It’s a type of market where small numbers of companies in the market collude to
take control of the market prices and products. In Nokia’s case it is colluding with Sony Ericsson and
Samsung to make phones which use Nokia’s mobile operating system (Symbian S60). This eliminates
the use of Window’s mobile operating system and newly introduced Google’s operating system
Android.

Perfect Competition: It’s a market where all Companies are on a same level. Nokia as a
leading manufacturer still have Samsung, Sony Ericsson, Motorola, and LG give a tough competition
with products ranging from every low end user to high end tech loving customer.

Internal analysis:
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Internal environment analysis is the analysis of factors within the organisation that make give an
organisation advantages and disadvantages. Some of them are discussed below.

1. Resource Audit
2. Boston Matrix
3. Core Competencies

1. Resource Audit:

Human resources: It’s the count of all the skilled or unskilled staff a company hires to
work for them. Nokia do hire highly skilled staff due to its nature of technology work and provide
them with training to keep them update and create opportunities for program developers who can
work from home to compete in a competition to win prices and even offer them jobs .In this time of
recession and economy down turn every company is looking to cut cost by making their unwanted
staff redundant. Nokia as a mobile manufacturing giant has taken loses and make 1000 of its staff
voluntary redundancies and are planning to cut even more staff by 600 due to poor profits. [5] We can
see the change in the annual report of the first quarter of 2009 of Nokia.

[6]

Physical resources: These resources of a company can be seen in the form of building,
land, equipment and factories all over the world. Nokia in this respect has factories all over the world.
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It may be based in Finland but Nokia has its branches everywhere around the world. Nokia has shifted
it production plants to India and china to cut its production cost.

Financial resources: The Financial resources of Nokia have received a blow by today’s
market by a huge margin which can be seen in the first quarter report of 2009 as compared year 2008.
It’s a dramatic down fall from 12 660 million EUR to 9 274 million EUR.

[6]

Intangible resources: Nokia has many trademarks which are worth a lot. Nokia has a very
strong name among his competitors and loyal customers. Nokia as a brand is the trend setter in the
mobile industry.

2. Boston matrix:

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“It’s a management technique developed by Bruce Henderson for Boston Consulting

Group in 1970 for assessing the long-term viability or profitability of products and market
sectors. Categories include cash cows, dogs, stars, problem child or a question mark
companies.”[1]

Problem Child/Question mark: When a new product is launched in a promising market

but it has a low market share but got potential to be a Star then a Cash cow or if everything fails it
could become a Dog. In Nokia’s case its latest product from N-series Smartphone N96 is struggling to
get the market share like its predecessor N95 Smartphone.

Cash Cow: When a certain product’s market matures and its demand slows but it has a
large market share is known as Cash Cow. Nokia has many products that reached their maturity and
died away in recent days its high end Smartphone N95 reached its market demand and is slowly dying
away because new technology is introduced every day.

Star: It’s a new product when launched has a high market response and its sales rise.
Companies like Nokia are in a search of new products which can be turned into stars and they invest
money in Problem Child and Dogs to turn them in to a Star and then hope to turn them in to Cash
Cow.

Dog: A Dog is a product new or old market shares and sales decline very fast. In mobile
industry technology changes very drastically so even a Star with bad strategy and marketing can be
turned in to a Dog just as easy.

3. Core Competencies:
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Core competencies are activities and process performed by a company to keep ahead of the
market and its competitors.

“Business professors Bateman and Snell offer this answer: Simply stated, core competence is
something a company does especially well relative to its competitors.”[4]

Competencies of a company are things that are hard to imitate like customer loyalty etc.
These Core Competencies change from time to time. In today’s market where every company is in a
lose Nokia is thinking of new ways to get an edge on its competitors by introducing new services and
products that are harder to imitate and trying to give most for consumers money.

SWOT Analysis:
Strengths:

1. Nokia has largest network of distribution and selling as compared to other mobile phone
company in the world.
2. The financial aspect is very strong in case of Nokia as it has many more profitable
businesses.
3. The product being user friendly and have all the accessories one want.
4. Nokia with wide range of products for all classes.
5. The re-sell value of Nokia phones are high compared to other company’s product.

Weakness:

1. Some of the products are not user friendly.

2. Some of the weakness includes the price of the product offered by the company.
3. Nokia does not like to adopt change very quickly.
4. The service canters in third world countries are very few.

Opportunity:

1. Nokia is also thinking of moving from mobile manufacture to personal computer

manufacture.
2. As the standard of living in third world countries has increased the purchasing power of the
people has increased as well
3. Nokia has to target right customer at right time to gain the most out of the situation.

Threats:

1. The threats like emerging of other mobile companies in the market.

2. The new mobile operating systems from Google and Microsoft.
3. The biggest threat is not adopting new technology and putting in good use.

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Conclusion:
After writing this article I came to a conclusion that in any business successful or a newly
established if not managed well and cannot take advantage of its opportunities can come to its knees.
So for a business to run successfully have to manage its Competitors and threats that may affect the
performance of a business.

References:
1. Boston matrix, Available at: http://dictionary.bnet.com/definition/boston+matrix.html
[Accessed at 25th March 2009]
2. Internal and External Analysis, Available at:
th
http://mystrategicplan.com/resources/internal-and-external-analysis/ [Accessed at 30 March
2009 ]
3. http://www.marketingteacher.com/Lessons/lesson_boston_matrix.htm [Accessed at 24th
March 2009]
4. Core Competence, Available at:
http://www.powerhomebiz.com/vol144/competencies.htm [Accessed at 26th March 2009]
5. http://www.computerweekly.com/Articles/2009/02/24/234998/nokia-calls-for-1000-
voluntary-redundancies.htm [Accessed at 30th March 2009 ]
6. Quarterly Annual Report, Available at:
http://www.nokia.com/NOKIA_COM_1/About_Nokia/Financials/Quarterly_and_Annual_Inf
ormation/Q1_2009/Q109_slides.pdf [Accessed at 30th March 2009 ]
7. C.S.Lewis Quotation, Available at:
http://thinkexist.com/quotation/it_may_be_hard_for_an_egg_to_turn_into_a_bird-
it/343614.html [Accessed at 30th March 2009 ]
8. Most of the Articles are taken from http://www.symbian-freak.com/[Accessed at 30th
March 2009 ]

Books:

Pro. Colin Eden and Pro. Fran Ackermann, (2004), Making Strategy: The Journey of Strategic
Management SAGE Publications.
Charles W. L. Hill and Gareth R. Jones, (2001), Strategic Management an Integrated Approach Fifth
edition.

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