Online Users

Custom Search

Categories

« Marketing Assignment - Apple | Main | Strategy, Business Information and Analysis Essay »

04/25/2012

A Strategic Analysis of Nokia


Executive Summary

There is important account to the strategic analysis the case of Nokia, as there implies to external and internal environment of the company wherein critical discussion and analysis is acquired to add up levels of certain market based tools for definite analysis such as PESTLE, SWOT, Michael Porter’s Five Forces Model as well as matrix such as CPM, Grand Strategy and so on. Indeed, Nokia contribution to success and growth of the mobile/telecom industry has been significant and that strategic management at Nokia is working well with is critical success factors as well as core competencies as provided in their financial flows which involve important ratios and figures in which strategic models at Nokia will be set properly. There has been conventional assumption of Nokia's successful increase and market leadership and there can rely on strategic studies as supported by Porter’s strategic systems, dynamics of underlying interactions between technologies and institutions connected to Nokia’s business operations and key information. There has been rapid market dominance in terms of products and services by which Nokia had achieved its global breakthrough over its rivals such as Motorola, Sony Erickson, Apple and many others. Nokia’s strategic proposition was being advanced through marketing oriented models and its application for instance, Nokia’s focus on mobile launching and such advertising and promotions that attempt to determine relations with technology cues and Nokia competence and its strategic development one indication is the switching platform technology and equipment for Nokia standards from which crucial competence do underlie the overall success of the company in terms of the overall marketing approach and other factors. According to press releases, Nokia has been world leader in mobile communications, driving the growth and sustainability of the broader mobility industry.

Introduction

Nokia is dedicated to enhancing people's lives and productivity by providing easy-to-use and secure products like mobile phones, and solutions for imaging, games, media, mobile network operators and businesses. In 2003, Nokia achieved net sales of EURO 29.5 billion, Nokia had 16 manufacturing facilities in nine countries around the world and R&D centers in 11 countries at the end of 2003. In addition, Nokia employed approximately 51,000 people. Indeed, relative importance of production will decrease rapidly when the strategy is shifting towards revenue maximization. Thus, there seems that for a technology firm such as Nokia the relative importance of CPM and internal/external factors will increase with degree of revenue maximization at Nokia, importance of production and demand will diminish as there should change when shift in marketing strategy toward revenue maximization has been made There show values for Nokia performance measure, financial cost structure increase when strategic assimilation can be shifted toward sales and profits allocating well on Nokia’s revenue maximization. For instance, Nokia’s profit to net sales ratio will diminish as sales volume ratio will improve rapidly with the shift in marketing based strategy. Nokia can be expected to shift its strategy like toward revenue maximization, productivity measure will improve but financial performance measures (cost structure and profitability ratios) will deteriorate slightly if not handled properly by the top management denoting that such action for Nokia gives confusing message that improving non-financial performance, possible decline in Nokia’s financial performance can be evident. Strategic shift is ideal at Nokia such as going to sell more at a lower selling price, this strategy may improve productivity through economies to scale but impair financial performance due to the decrease in selling price. For the new strategy, which gives weight on revenue maximization, demand and production are not as critical factors as for the profit maximization. For the profit maximizing firm it is important that demand and production will stay at the optimal level, which gives rise for demand and production oriented performance measurement systems and important to focus on customer relationship management and development and learning.

Discussions and Analysis

Truly, Nokia has carried out certain strategy resulted into effective market share and good profitability. Nokia left other businesses and increasingly focused on telecommunications and had three core processes namely: product process, customer commitment process, and management and support process and performance of the process were measured from several perspectives (Kosonen, 1995) of customer satisfaction, operative efficiency, people involvement as well as strong market position and market share, growth, net profit. Recently, Nokia has changed its strategy to maintain strong market position, even on the cost of profitability mean, shift toward revenue maximization such as during the year 2002 Nokia's overall profitability and market position were still excellent (Nokia Press Release, 23 January 2003). Nokia's net sales decreased by 4 percent but operating profit increased by 3 percent but, the environment has become challenging and shift in Nokia strategy will be necessary in order to maintain effective strategic position of markets (Nokia Press Release, 23 January 2003). Notably, Nokia will continue to use pricing selectively and aim to strengthen the competitiveness of the product portfolio in order to increase its market share in the market. Nokia expects the profitability to continue to come under pressure as in Nokia Phones as the number of personnel came down 7 percent (Nokia Press Release, 27 January 2005). Nokia has its priorities in customer relations, product offering, R&D efficiency, demand/supply management and the ability to offer effective solutions. The illustrative case of Nokia Corporation showed that the lines of the shadow prices may intersect with a rather low tension towards revenue maximization, the kind of strategic shift can be observed in the market behavior of Nokia, the importance of the management areas may change which should be taken into account when designing market bases as Nokia shows that situation increases productivity, a better signal to the management about causal relationships when strategic process is not in stable manner.

Situational Analysis

Competitive Profile Matrix (CPM)

 

 

 

NOKIA

 

MOTOROLA

 

APPLE i-PHONE

Critical Success Factor

Weight

 

Rating

Score

 

Rating

Score

 

Rating

Score

 

 

 

 

 

 

 

 

 

 

 

Market Share

0.11

 

3

0.33

 

3

0.42

 

2

0.34

Price

0.16

 

4

0.56

 

3

0.48

 

3

0.40

Financial Position

0.16

 

4

0.56

 

4

0.11

 

1

0.19

Product Quality

0.14

 

4

0.56

 

3

0.42

 

3

0.42

Consumer Loyalty

0.11

 

3

0.33

 

3

0.33

 

3

0.33

Brand and image

0.13

 

2

0.26

 

3

0.39

 

4

0.52

People Management

0.03

 

4

0.12

 

4

0.12

 

1

0.03

Global Expansion

0.05

 

3

0.15

 

4

0.20

 

2

0.10

Technology Advancement

0.08

 

4

0.32

 

4

0.32

 

3

0.24

Market Communication

0.07

 

2

0.14

 

4

0.28

 

2

0.14

 Advertising and Promotion

    0.12

 

         4

       0.36

 

         3

        0.11

 

       2

       0.10

Total

0.15

 

 

0.35

 

 

0.28

 

 

0.27

 

For Nokia, competitive profile matrix is essential tool used in strategic management process of the company as there contain imperative critical success factors of the Nokia business as it can vary from the Nokia competitive stature, Nokia, Motorola and Apple through CPM as being on the scale by considering the same success factor as for the IFE, consider internal strengths and weakness and EFE constraint from Political, legal, environmental, social and technological. The success depend on the importance it of the external or internal environment.

Factor Evaluation (EFE) Matrix

 

Key External Factors

 

Weight

 

Rating

 

Weighted Score

Opportunities

1. Consolidating of the Nokia industry 

16

3

0.48

2.Innovation of Nokia phones

11

4

0.44

3. Privatization of branches

8

4

0.32

4. Growth in the Nokia products and services

12

3

0.36

5.Increase demands of latest Nokia phones

10

2

0.20

6.Customer loyalty and base

11

4

0.44

7. Product strength and accountability

16

3

0.48

Threats

 

 

 

1. Fierce Competition coming from rivals ex. Motorola and Apple

5

2

0.10

2. Strict laws on business entrants of countries

8

2

0.16

3. High prices and low prices on Nokia phone models

15

1

0.15

4. Changing revenues and taxes

5

2

0.10

5. Nokia profits, sales – looses and gains

8

2

0.16

6. Limited resources on advertising, promo applications

5

2

0.10

7. Sudden business and economic downturns

10

1

0.10

Total

 

 

0.42

 

Internal Factors Evaluation (IFE) Matrix

Key Internal Factors

Weight

Rating

Score

Strengths

 

 

 

1. Leading manufacturer and trusted maker of mobile phones

12

4

0.48

2. Supplies major stores and malls worldwide

10

4

0.40

3. Award winning image and brand reputation

4

3

0.12

4. Effective Nokia team and management

5

4

0.20

5. Intact heights to people sites and bonding areas

4

3

0.12

6. Stable and controllable finances

4

3

0.12

7. Performing employees with initiative cues 

5

4

0.20

8. Access to durable and good reasoned financial team

3

4

0.12

9. Transparent financial ratios

3

4

0.12

Weaknesses

 

 

 

1. Saturation of mobile marketing

8

2

0.16

2. Sensitivity to major competitors

10

1

0.10

3. Overly usage of Nokia product launching and ads  

15

2

0.30

4. Absence of controllable dealer and retailer ports to some restricted areas for market 

4

1

0.04

5. Limited collaboration to global business aspects

8

2

0.16

6. Too crowded mobile phone models as released every month/year

4

1

0.04

TOTAL

 

 

0.13

 

TOWS Matrix

 

Strengths

Weaknesses

 

1. Leading manufacturer and trusted maker of mobile phones

 

2. Supplies major stores and malls worldwide

 

3. Award winning image and brand reputation

 

4. Effective Nokia team and management

 

5. Intact heights to people sites and bonding areas

 

1. Saturation of mobile marketing

 

2. Sensitivity to major competitors

 

3. Overly usage of Nokia product launching and ads  

 

4. Absence of controllable dealer and retailer ports to some restricted areas for market 

 

5. Limited collaboration to global business aspects

Opportunities

SO Strategies

WO Strategies

1. Consolidating of the Nokia industry 

 

2. Innovation of Nokia phones

 

3. Privatization of branches

 

4. Growth in the Nokia products and services

 

5. Increase demands of latest Nokia phones

1.  Create technology pathways for consolidated areas

 

2. Practical product/service market communication and launching

 

3.  Flexible and moving of branches for market entry

 

4. Exchange information with the suppliers of materials

 

5. Customer dynamics and CSR presence 

 

 

1. Recognize management options in the industry

 

2. Select innovative partners and distributors

 

3. Hire more technical staff and sales representatives

 

4. Increase of business efficiency in the global market

 

5. Execute more advertisements and promotion strategies  

Threats

ST Strategies

WT Strategies

1. Fierce Competition coming from rivals ex. Motorola and Apple

 

2. Strict laws on business entrants of countries

 

3. High prices and low prices on Nokia phone models

 

4. Changing revenues and taxes

 

5. Nokia profits, sales – looses and gains

 

1. Strong Market Penetration

 

2. Compliance to business requirements and permit of business operation

 

3. Established fixed prices of products

 

4. Stability of Financial position

 

5. Liquidated cash flows and balance sheets

1. Adaptation of benchmark ways

 

2. Adhere issues to the authorities such as executive board, lawyers 

 

3.  planning, execution and updating of Nokia catalogs and brochures

 

4. true and honest statement of accounts and reports

 

5. Sharing of annual reports not just to partners but to certain research domain

The SWOT Matrix is an important matching tool that helps Nokia executives to develop types of strategies. The above TWOS matrix show certain type of strategies, SO  strategies are developed using PSO strengths and exploit external opportunities, WO strategies are developed to overcome weaknesses by utilizing the opportunities, ST strategies are developed by PSO to minimize threats using internal strengths thus, WT strategies are developed to avoid threat and minimize weaknesses of Nokia company.

Grand Strategy Matrix

 

The model defines the situation of Nokia through mobile market growth and Nokia competitive position in the market as discussed in four strategy quadrants Nokia had categorized into.

Quadrant I indicate that Nokia will be in ample business growth and effective competitive stature and that Nokia will be continuing to concentrate more on its core business goals and vision and with presence of excess resource Nokia can use vertical integration in keeping stable.

Quadrant II indicate that Nokia can be having market growth and weak competitive position along with Apple iphone dominance for instance, Nokia needs to evaluate strategic approach to the market and identify why several market based strategy is not effective and will adopt grand strategy options accordingly.

Quadrant III indicate that Nokia can be expected to be in slow market growth and weak competitive position and the company should decrease resources used. Another way is that Nokia should diversify resources by investing global expansion options.

Quadrant IV indicates that Nokia might be in slow market growth and strong competitive stature and have excellent position and can chose to diversify into highly profitable area of business.

The model allows better implementation of Nokia strategy because of intensified focus and objectivity upon conveying a lot of information about Nokia marketing plans in simple ways. However, not be as simple as it seems, upon application to real life due to Nokia limited factors and some complications in the business world. In addition, Nokia’s relationship between market share and profitability differ in the industries Nokia operates and that grand strategy options are being concern on cash related issues at Nokia but not on its value as a company.

Financial Ratio Analysis

Key Data

 
Source:
http://www.nokia.com/about-nokia/financials/key-data/graphs March 2009

 

Share Data


Source:
http://www.nokia.com/about-nokia/financials/key-data/graphs March 2009

 

Source: http://www.nokia.com/about-nokia/financials/key-data/graphs March 2009

Nokia believes that these non-IFRS financial measures provide meaningful supplemental information to both management and investors regarding Nokia’s performance by excluding the above-described items that may not be indicative of Nokia’s business operating results. These non-IFRS financial measures should not be viewed in isolation or as substitutes to the equivalent IFRS measure, but should be used in conjunction with the most directly comparable IFRS measure(s) in the reported results. Nokia reported net sales were EURO 28 996 million and earnings per share were EURO -0.02 for the period from January 1 to September 30, 2009. Further information about the results for the period from January 1 to September 30, 2009 can be found in this press release on pages 10, 12, 19-20 and 22.

Several Nokia Outlook

Nokia expects industry mobile device volumes in the fourth quarter 2009 to be up sequentially.

Nokia expects its mobile device market share in the fourth quarter 2009 to be approximately at the same level sequentially.

Nokia expects industry mobile device volumes to be approximately 1.12 billion units in 2009, down approximately 7% from approximately 1.21 billion units Nokia estimated for 2008. This is an update to Nokia’s earlier estimate of industry mobile device volumes declining approximately 10% in 2009 from 2008 levels.

Nokia and Nokia Siemens Networks also now expect that Nokia Siemens Networks market share will decline by more than previously expected in 2009, compared with 2008. This is an update to Nokia and Nokia Siemens Networks earlier expected moderate decline. Nokia and Nokia Siemens Networks continue to see strong performance in its Services business unit expected to be offset by declines in certain product businesses.

Source: http://www.nokia.com/about-nokia/financials/quarterly-and-annual-information/q3-2009 

 

Problem Child/Question mark: 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: 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: 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: The 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.

External Environment  

There are external factors that can affect Nokia’s marketing
style and the decision of which strategy to use, Nokia may evaluate by using PESTLE Analysis  

Political factors- Legal constraints are the hardest external factor  to try and avoid making any serious impact on any pricing, or  marketing choices made. The only legal constraint that my new strategy  "dodges" is the G3 licensing, as the new style of Nokia product  doesn't need any of the newest technologies under the G3 frame.

Environmental and Social factors- Nokia have never really had any of these affect the way in which they operate because they have never  done anything that is really anti-environmental, the only problem is  the fact that the mobile phones let of radiation and has been said to
increase the risk of cancer in mobile phone users, but this has not  been highly documented and hasn't affected how Nokia have conducted  themselves.

Technological factors- This is the most important external factor in the communications as mobile phones are based around technology and  new discoveries. The new strategy does have to be careful with technological advances as Nokia do not want to make the new phones to complicated as my market research discovered that this is exactly what
the target market does not want, they want phones that are simpler to  use.

As Nokia will be entering a new market as part of the new market  strategy, I have decided to change the current pricing plan to mixture of two theoretical pricing approaches:

Market skimming and demand based pricing- Market skimming is where the competition in a market is slim or non-existent and the company can  charge what ever price they want because there is no other company to  offer a lower one. As Nokia will be entering a new market, we will be  able to choose whatever price we want to start selling mobile phones
at, and I think they should first be introduced at around £150, as my  market research showed that consumers in the new target market would  be hesitant to pay any higher, and this is the part that relates to  demand based pricing.

Internal analysis

Resources

In order to investigate the real significance of Nokia’s innovation networks in more detail interviews were held with several experts on Nokia and the Finnish ICT industry. These semi-structured interviews involved Nokia Group’s management as well as Finnish researchers of the research institutes ETLA and VATT who are experts in Nokia’s networking strategies and the development of the Finnish ICT industry. Preliminary open interviews were held with the head of the department of Industrial Affairs of the Confederation of Finnish Industry and Employers.

Capabilities

 

 

 

 

Computers

12

(37,5%)

8

(13,3%)

 

Software

13

(40,6%)

30

(50,0%

 

Telecommunications

4

(12,5%)

17

(28,3%)

 

Microelectronics

0

(0%)

1

(1,7%)

 

Other

3

(9,4%)

4

(6,7%)

 

Total

32

60

 

 

 

 

 

 

 

 

 

 

 

Nokia’s industry dominance is behavioral, not structural

Upstream innovation

– Open standards; strategic coalitions; and skillful supplier, channel and partner management

– Solidified own strengths and weakened powerful competitors

Downstream innovation

– Segmentation, branding and design

– Filled shelves with new and innovative products to dominate categories, become ubiquitous, and used its brand to sell new products and help penetrate new markets

Utilized preemptive strategies

Co-opted with most of its actual or potential rivals

Industry analysis – 5 Forces

There consists of fallowing factors.

Power of New Entrants: the 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.

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 technology

 

is to update its mobile and services.

SWOT analysis

S

 

Nokia has largest network of distribution and selling as compared to other mobile phone company in the world

The financial aspect is very strong in case of Nokia as it has many more profitable businesses.

The product being user friendly and have all the accessories one want

Nokia with wide range of products for all classes

The re-sell value of Nokia phones are high compared to other company’s product.

 

 

 

 

 

 

 

 

 

 

 

 

W

 

Some of the products are not user friendly

Some of the weakness includes the price of the product offered by the company

Nokia does not like to adopt change very quickly

The service canters in third world countries are very few

 

 

 

 

 

O

 

 

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

As the standard of living in third world countries has increased the purchasing power of the people has increased as well

Nokia has to target right customer at right time to gain the most out of the situation

 

 

 

 

 

 

T

 

The threats like emerging of other mobile companies in the market

The new mobile operating systems from Google and Microsoft

The biggest threat is not adopting new technology and putting in good use

 

 

 

 

 

 

 

 

 

 

 

 

 Recommendations and Conclusion

The core competence of Nokia may change which could lead to the decision to outsource production that is now considered to be in the core competence of the firm. This has been explicitly mentioned real possibility by the company itself as well as by researchers in the field. Ali-Yrkkö (2001, p. 24) noted, 'Nokia has reinvented itself so many times that it seems almost impossible to forecast what kind of structure or competencies Nokia will have in five to ten years time’. Nokia perceives itself still the best manufacturer in mobile telephony, so anything related to that will be produced internally without any form of collaboration. However, collaboration will become important not only in terms of the number of collaboration but also in volume of production, according to a manager at Nokia Group. Crucial elements are speed and flexibility of production. In the current technological environment, no single company is powerful enough to define the market alone. Therefore, going alone is not the wisest thing to do. Without that collaboration, local production would be impossible due to the restrictions that local governments make on market access by foreign companies. Therefore, Nokia had to collaborate with a local manufacturer in order to enter the Australian market. Since Nokia is a global company now, with access to almost every thinkable market, collaboration for market access is not that important anymore, or at least much less important than a few years ago. Nokia need to scale its operations to be better prepared for future competition. In comparison with other players, in step with industry demand and adjust to actual industry cycles. Competitors may achieve some streamlining and focus by reduction as dramatic downsizing can do more harm than good. Nokia should maintain that sustainable strategy on effective understanding of how mobile industry will evolve in the global market Thus, there has been majority of the incumbents competing in telecommunications equipment experienced downturn in sales, while Nokia and Samsung kept growing and emerged as the leaders in a newly defined industry. Nokia has all along been very open to new growth opportunities and actively engaged in exploring markets in varied industries. Industry-analysis modeling seems like a natural activity for them. 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.

References

Kosonen M (1995) Driving for excellence in performance – the role of the controller, Paper presented at the Business. Controller workshop, IIR Finland Oy, Helsinki, 27 September

http://www.nokia.com/about-nokia/financials/quarterly-and-annual-information/q4-2009

For further references, please refer to the enclosed PDF files.

 

 

comments powered by Disqus

Comments

Feed You can follow this conversation by subscribing to the comment feed for this post.

The comments to this entry are closed.

Get posts by email address:

Delivered by FeedBurner








Blog powered by TypePad
Member since 09/2011