ABSTRACT

Organizations face rapid change due to globalization .

Globalization has

increased the markets and opportunities for more growth and revenues . Organizations can achieve a distinct advantage in the marketplace by strengthening the firms overall strategy.Operations will provide a marketing edge through differentiation and innovation and unique technology

developments in processes that competitors can not match. A firm's operational strategy must be conducive to developing a set of policies in both process choice and infrastructure design (controls, procedures, systems, etc.) that are consistent with the firm's distinctive competency (West et al, 2010).

INTRODUCTION

This paper aims to evaluate the main strategy and structural changes in MNCs under unstable market conditions. Firstly, it reviews the theoretical connotations of strategic and structural changes in todays business world. It goes ahead to describe the recent history of Finnish based Nokia. The strategies and business model of Nokia have been discussed in -depth in order to identify major changes as markets evolve. The impact of structural changes on financial performance is also critically analysed with the help of ratio analysis. Finally, recommendations are made on how best to strategise so as to yield positive results in No kias ever-changing market environment.

LITERATURE REVIEW:

Johnson et al, 2007 explicitly defined strategy a s the direction and scope of an organisation over the long term, which achieves advantage in a changing environment through its conguration of resources and competences with the aim of fullling stakeholder expectations.

Strategic capability is concerned with the resources and competences that an organisation can use to provide value to custome rs or clients. Unique resources and core competences are the bases upon which an organisation achieves strategic advantage and is distinguished from competitors.

Nokia has in the past made certain strategic changes which analysts have applauded. Accordingly, Kamran (2009) suggests that the business strategy of Nokia will be a success because; 1. Innovative business solutions will attract the corporate users since Nokia devices are based upon a very stable platform . 2. More than 46.7% of the mobile devices are operating on Symbian. Further, Nokia N97 is much more advanced in features and reliability is very much higher than its rivals Blackberry &iPhones. 3. Internet services provided on all Nokia devices will draw a large customer base to Nokia. Most high end devices have in ternet services but Nokias promise to deliver these services to all its devices will attract a large user base especially in the emerging markets.

MAIN STRATEGY AND STRUCTURAL CHANGES UNDERGONE BY NOKIA DURING THE LAST 10 YEARS (A RECENT HISTORY)

Nokia is a world leader in tele-communication devices. The company started in 1865 in Finland. It is a huge multinational corporation that deals with mobile phones, multimedia, operation systems and services. With the rapid development of technology during the last 10 years, the company had to change strategy to keep its market position.

In 2000 Nokia created its first coloured mobile phone and opened a new niche in the mobile phone market. In 2001, Nokia came up with new business units to provide internet access on all its devices. In 2002, Nokias internet and research department created the 3G network, that gave an opportunity for consumers to use internet with speed almost 3 mb ps. The other striking feature of this phone was an integrated camera. In 2003, Nokia came up with phones that focussed on multimedia applications such as games, video and photo world (Nokia, 2011).

To keep up with the market competition, Nokia changed its organisational structure in 2004. The new structure consisted of four vertical business units (Mobile Phones, Networks, Enterprise Solutions and Multimedia) and four function units (Customer and Market Operations, Technology Platforms and Research, Venturing and Business Infrastructure). In 2005 Nokia continued to develop its multimedia market sector which became popular all over the world. In 2006,Nokia merged with Siemens and became Nokia Siemens

Networks. The major reason being: Siemens lost its market position because of strong competition but still had big potential that was interesting for Nokia. In 2007, Nokia was recognised as 5 th most valued brand in the world. Nokia Siemens network launched its internet services under the brand name OVI. It gave access for GPS navigation, music and video (Nokia, 2011).

In 2008, Nokia released E71 with a QWERTY keyboard to compete with Blackberry phone. However, compared to Blackberry, E71 was much cheaper. In 2009, Nokia introduced new music and social networking phones (X6 and X3). However, it was losing its corporate customers due to imperfect business solutions. In the beginning of 2010, the new CEO, Mr Stephen Elop made a new alliance with Microsoft. In 2011 both the companies have started their work to create new operation system o f mobile phones Windows Phone 7.Thus, new leadership team, operational s trategy and structural changes in the corporation increased their focus on speed, results and accountability (Nokia, 2011).

SIGNIFICANCE GIVEN TO THE INTERNATIONAL BUSINESS:

Investing and ensuring a financially sound future is the main strategy of Nokia while taking advantage of the opportunity to innovate, to differentiate and build new mobile products at a speed that will surpass what they have achieved in the past. The elements emphasized and the importance attached to Nokias international business had diverse reasons.

Most importantly, an emphasis was to regain their leadership in the smart phone space by building a broad strategic partnership with Microsoft to deliver differentiated and innovative products which are unique in brand, size and geographical reach. This would lead to the use of the windows phone as the primary smart phone platform, and to use their expertise at optimum levels on developing hardware and software (All About Symbian, 2011).

Again, management was concerned about maintaining the volume and value leadership in the mobile phone space . Its international business was to provide the best mobile devices for everyone regardless the prices and geography. It also hoped to make available internet services on all mobile devices. By focusing future investments and assets development mainly on growth economies, Nokia wanted to sustain the future as the worlds leading mobile manufacturer. Due to the high level of emphasis pla ced on achieving its goals, a new leadership team, operational structure and governance was constructed to drive the change in strategy (Eweek, 2011).

OPERATIONS EMPHASIZED AND THEIR LOCATIONS:

The company made a lot of strategic changes in various countries as market conditions continued to change. Nokia lost nearly 39% of its market share to its competitors due to rapid expansion through acquisitions and mergers and lost its focus on wireless technologies. However, it reorganized by selling most of its unproductive business and directed its focus once again to its wireless technologies. An acquisition of Sega in 2003 and then merger with Siemens AB in 2006 put Nokia once again on its track where it could compete with its rivals (Scribd, 2011).

In 2008 Nokia exited from expensive Germany and moved its production to low cost countries like Romania where the labour costs was almost 10 times lower. Majority of Nokias cell phone production is in lower cost countries like Hungary, Bulgaria, Romania, China and India. The Finnish manufacturing site has been refocused to high end production and research and development. Nokia Siemens Networks cut almost 15% of its global workforce. Around 2290 of them were from Germany. Nokia plans to sell its automotive accessory business and is in talks with Indias Sasken Technologies to sell its research and development unit. Nokia taps the rural markets. It has already introduced internet based service for the rural Indian market which will help it to position itself effectively in the non-urban markets. Nokia provides its programmes for farmers in India which include providing solutions from information on market prices for agricultural products to weather updates to financing options (Nokia, 2011).

Currently, there are plans to establish a new manufacturing site in Hanoi in Northern Vietnam. Vietnam is a country that has both the location and developing infrastructure that make a good choice for Nokia. Nokia has a global manufacturing network stretching from Latin America (Brazil and Mexico) to Europe (Finland, Hunga ry, Romania, the UK) and Asia (China, India, Korea) (Nokia, 2011).

JUSTIFICATION OF CHOICES MADE IN TERMS OF PRODUCTS, SERVICES AND ORGANIZATIONAL STRUCTURE

As the importance of organizational culture gained foothold, Nokia revamp ed its organizational structure again in 2010. It aimed to develop a strong position to face competition, to speed up innovation and execution of policies. It came up with a flatter model of organization so as to be able to disseminate the vision and mission to its people and resources. The new organization structure has board of directors on the top. It is followed by corporate development office that is responsible for stra tegy and planning. It is further divided into three business units: Mobile solutions, mobile phones and market (Nokia, 2011).

Mobile solutions unit is in charge of developing se rvices in areas of music, games and media. Its function is to provide service in an easy manner. The mobile phones unit deals with the development of affordable mobile phones. The third unit of market carries on the tasks of marketing, sales, delivering phones to the markets. Nokia Siemens network provides a wide network by

integrating fixed line networks with wireless. It also holds responsibility to provide service to operators. Navteq, an acquisition of Nokia, deals with government and business solutions along with helping users to download maps and controls navigation systems. The structure is justified as it ensures fluidity in the organization for its smooth functioning (Nokia, 2011).

Nokia recognizes the need to continuously innovate and provide value products and services to consumers. It introduced the OVI brand as it faced the threat of maturing handset market and tough competition from Apple. Nokia also introduced the Nokia Internet tablet to provide easy access to internet calling, emails, wi-fi connectivity. Nokia mini laptops were launched after a proper study to enter the market and targeting a particular segment that was waiting for a booklet type device. No other mobile company had ventured into this area. This gave an added advantage to Nokia. As the market demanded Smartphones, Nokia concentrated there in increasing its profit and attempted to cope with its competitors. Though Nokia could not keep up to the smartphones provided by apple and android, it provided cheaper smart phones to hold its market share. Nokia aims to meet its strategic objectives of developing continuous consumer relationships and creating personalized services through some changes in products, services and organizational structure (Eweek, 2010).

CHANGES IN ITS FINANCIAL PERFORMANCE AND POSITION IN ITS TARGET MARKET(S):

Strategic and structural changes made in any organisation have an effect on financial performance and position in the long run. Over the past ten years, NOKIAs top management has made certain important strategic decisions in a bid to effectively compete and increase their market share. The instability of market conditions in the telecommunications equipment industry gives relevance to these structural changes. An analysis is made below of how NOKIAs financial performance has been impacte d by the transformations.
NET SALES

2009 COUNTRY EURm

2008 EURm

China India UK Germany USA Russia Indonesia Spain Brazil Italy

5 990 2 809 1 916 1 733 1 731 1 528 1 458 1 408 1 333 1 252

5 916 3 719 2 382 2 294 1 907 2 083 2 046 1 497 1 902 1 774

(SOURCE: NOKIA FINANCIAL STATEMENTS, 2009)

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There has been a considerable fall in net sales between the years 2008 and 2009 in Nokias major markets. It was only in China, Nokias largest market, where a slight increase in net sales was recorded. Analysts have attributed this to intense competition provided by Apples I-phone products. Structural changes made by nokia were not successful in boosting sales and this gravely affected the financial position of the company.

SOURCE: NOKIA FINANCIAL STATEMENTS, 2010 The years between 2007 and 2010 saw Nokia s financial performance fall tremendously. $77 billion US dollars was lost in market value between these years alone. Despite managements frantic efforts to salvage the situation by embarking on strategic measures, it was not until 2010 that a marginal rise in profit was recorded. Bloomberg reported in July 2010 that Nokias share price had fallen by 67% since the I-phone by Apple was first launched. Although dividends per share has been consistent over the past three years since taking a dip in 2007, shareholders have been displeased by the poor financial

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performance of the company and the uncertainty about management ability to continue paying dividends in the future (Nokia, 2010).

SOURCE: NOKIA FINANCIAL STATEMENTS, 2010 From the graphs above, Nokias poor financial performance resulting from failed structural and strategic changes is evident. Low earnings per share have been recorded in previ ous years as profits have plummeted. The unstable market and fierce competition from rival companies like Apple has aggravated the situation as Nokia still struggles to find its feet. Thus, the Finnish based multi-national organisation has not been success ful in improving its financial performance and position in its target markets. Despite relocating its manufacturing units from Germany in a bid to cut production costs, low profits have been recorded as a significant part of its market share has been lost to rival companies. Owners of Nokia, dissatisfied, have called on top management to salvage the companys appalling financial performance by embarking on more goal oriented strategies that will better the finances of the company (Cellouts, 2011).

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EFFECT OF THE ECONOMIC DOWNTURN OF THE LAST THREE YEARS ON NOKIAS PERFORMANCE:

The downturn which started brewing in the mid 2007s began to show its effects in the early 2008. The effects of the recession were felt round the world with global stock markets falling, large organisations going bankrupt, closing down or being taken over, and even governments in the wealthiest nations have had to develop bailout packages for their financial systems (FT.com, March 2011). In the UK as well as many other parts of the world, businesses have been dealing with recession, according to the survey conducted by Walters (2009), affecting areas such as the business environment, recruitment, skill development, training and support (FT.com, March 2011). Nokia as a business has also been affected by the recession and all five aspects of the business mentioned above have been hit hard during the recession. The company has experienced changes in its micro as well as macro environment that has led to a series of changes that has swept thr ough all aspects of the Multinational Corporation. The effects of the economic downturn on Nokia have produced the following effects:
Increase in production costs: In 2008 the oil price rose above $100 per

barrel. This in turn increased the cost of product ion in many industrial sectors as energy prices soared. Nokia announced in late 2008 that its production costs had increased by 12% due to the energy crisis. (FT.com, Jan 2009)

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Reduction in Sales Volume: The effects of the downturn also saw the

company experience a reduction in the amount of products sold. Although this was the norm in most industries, the downturn had severe effects on the telecoms industry because consumers preferred to keep their exist ing devices instead of purchasing new ones. Nokia sales plummeted by about 11% from its sales figures in 2008 to 2009. (Nokia, 2011).

Severe Job Loss: Nokia announced in 2009 that it was going to lay off about

1,700 staff globally. The MNC also closed dow n some of its production plants and changed the employment status of some of its staff. These measures taken by Nokia were in a bid to reduce the effect of the increase of production cost and low sales volume as well as maintain or if possible increase pro fit levels.

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CONCLUSION AND RECOMMENDATIONS

Though it will not be easy for Nokia to grab a large market share in a short period of time, the new strategy, Operational structure and the governance approach will make a significant impact on its operations (Johnson et al, 2008). Their on-going market exploration of the next generation of devices and their expertise coupled with strength in technologies will drive them ahead of their competitors to a sustainable future. It is recommended that Nokia bases its business model on the following factors so as drive its performance up and achieve positive results . To gain a competitive advantage and emerge as a leader , it has to provide its users with good experiences. Implement low cost affordable best mobile devices for everyone regardless of geography . Provide internet services on all mobile devices. Finally, ensure that there are superior business solutions to corporate users than its rivals. Introducing such products and structures will lead to appropriate strategic advancement in line with the new developments management already has in place.

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