Group 3 Nokia vs Samsung | Nokia | Revenue

Comparative analysis of Nokia and Samsung

Dnyaneshwar 2011HE007 Narendra 2011HE011 Navdeep 2011HE012 Shikha 2011HE027 Utsav 2011HE035

Company Profile
Nokia
• Finland based • Headquarters: Espoo • Founded in 1865, started as pulp rubber and cable manufacture • Telecommunications, internet, software industry • Subsidiaries: Nokia Siemens networks, Navteq, Vertu, Qt development framework
• • • • •

Samsung
South Korea based Headquarters: Seoul Founded in 1938 Conglomerate industry Subsidiaries: Electronics, life insurance, heavy industries, etc.

Vision and Mission
Nokia
Vision
Voice Goes Mobile….If it can go mobile – it will

Samsung
Vision
Leading the Digital Convergence Revolution
Mission Digital –e-company

Mission Connecting People

Products
Nokia • Mobile Phones • Smart phones • Mobile computers • Networks • Military communications and equipment • ADSL modems • Digital television • PCs: Nokia booklet 3G Samsung
• • • • • • • • • • Consumer electronics Shipbuilding Telecom Construction IT and communications Financial services Retail Heavy industries Entertainment Medical services

Samsung • Chairman and CEO: Lee Kun – Hee • President: Lee Soo-bin • Vice chairman and CEO. out of which 29611 employees are in asia pacifice region. appointed by board of directors: 14 members • Employees: 130050.726 (2011) .21.Manpower Nokia • President and CEO: Stephen elope • Chairman: Risto Siilasmaa • Board of directors: 11 (7 to 12) members • Nokia leadership team. samsung electronics: Geesung Choi • Board of directors of samsung electronics: 7 members • Employees: 2.

87 billion Samsung (2011) • Revenue= US$ 247.164 billion • Total assets= €36.5 billion • Net income= US$ 18.Financial comparison Nokia (2011) • Revenue= €38.073 billion • Net income= €-1.3 billion • Total assets= US$ 384.65 billion • Operating income= €1.3 billion • Total equity= US$ 224.20 billion • Total equity= €11.7 billion .

“Organizational” “Structure” .

.

Samsung organizational structure .

Financial Benchmarking The key ratios can be divided into four different classes: • Profitability ratios • Liquidity ratios • Income ratios • Efficiency ratios .

Profitability Indices RATIOS Return on Assets NOKIA -0.11% Return on book value of shareholders’ total investment in company Measures the profit before interest and taxation as percentage of capital employed in business Ratio data TTM as of 03/31/2012 .5% 10.5% SIGNIFICANCE Measures the amount of profit generated by assets divided by the profits earned by total assets Return on Equity -23.24% Return on Capital -16.30% 16.50% SAMSUNG 2.

11 Interpretation A calculation used to assess a company's efficiency at allocating the capital under its control to profitable investments.Return on Capital Return on Capital 15 10 5 0 -5 -10 -15 -20 --16. Samsung dominates in this comparison with 10. It gives a sense of how well a company is using its money to generate returns.5 % losses.11 % returns (profit) while Nokia shows 16. .5 Nokia Samsung 10.

02 2009 2010 5.17 20 15 10 5 0 -5 -10 -15 Nokia -8.32 Samsung 12.98 5.69 .04 4.76 7.24 2008 4.28 2011 2012 -20 -25 -20.82 16.Returns on equity 30 25 29.

• Nokia corporation’s profitability for the investors has continuously declined over the years. This means Nokia corp has failed to give profit returns on equity towards its investors.69 % (loss)in 2012. • Samsung electronics.Interpretation.17 % (profit) in 2008 to 20.24 % returns on equity for its shareholders. Samsung showed 16. . however has succeeded in providing sustainable profits to its investors.Returns on Equity • Return on equity measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested. It has declined from 29. In the first quarter of year 2012.

58 . now it is grown up to 7. ROA gives an idea as to how efficient management is at using its assets to generate earnings.5 2. has shown sustainability in utilizing assets with efficiency.4. For Samsung. in 2012 it has gone for a loss 7. the corporation has shown deterioration in its efficiency at using assets to generate profit. ROA was 10.1 in 2008.Return on assets Return on assets 2. Samsung had ROA 3. For Nokia.5 0 Nokia -0.26 in 2008.5 2 1.5 1 0.5 -0.5 Samsung Interpretation An indicator of how profitable a company is relative to its total assets.

20% 33.Gross Margin Gross Margin 34. Gross Margin 33.80% 33.92% The gross margin % indicates the profit which a company retains over each unit of revenue generated. This indicates both of the companies earn a profit of 33 over sell of 100 .60% 33.80% For both Nokia and Samsung.20% 33.40% 33.00% 33. the profit over each dollar (any unit) of revenue generated is 33 %.00% 32.

00% -2.00% 6.00% -5.00% 0.00% -6.00% 2.Operating Margin 11.20% Operating Margin 2012 Nokia Samsung .00% 4.00% 10.00% -4.05% 12.00% 8.

• Nokia is not able even to cover up the total cost of its productions. there is significant difference in their operating margins. the revenue generated is negative which means that Nokia is actually in loss. productions etc. • Though both Nokia and Samsung have equal gross margin.Analysis of Operating Margin • It indicates how much of each dollar of revenues is left over after both costs of goods sold and operating expenses are considered. This is clear indication of bad health of the company. • Nokia is showing negative figure which reveals that after paying for the cost of raw material. . labour.

4 Nokia Samsung . Depreciation and Amortization EBITDA 18. Tax.43 20 15 10 EBITDA 5 0 1.EBITDA: Earnings Before Interests.

It is actually an attempt to hide the actual net income.Analysis of EBITDA • This figure is actually a ‘window-dress’ to Nokia corp. . taxes etc so it is always higher than what actual profit a company is making. this comes as positive for Nokia too. • This shows the net income excluding the depreciations. • For this reason.

58 1.58 Current Ratio Samsung Mobile 1.59 1.55 1.4 1.42 1.57 1.52 1.548 Current Ratio Samsung 1.459 Current Ratio Nokia 1.46 1.5 1.56 1.6 1.Liquidity ratio comparative Analysis : Current ratio Current Ratio Nokia 1.54 1.57 2010 2012 2011 2010 2011 2012 .555 1.6 1.56 1.48 1.44 1.

Samsung has highly improved while Nokia has declined.  Current ratio was almost equal for both the companies in previous years. But in 2012. .Interpretation  Current ratio for Nokia has been reducing since last three years while it has improved for Samsung implying that Samsung has lesser liabilities in relation to the available assets than Nokia and its situation is continuously improving.

08 1. which is not a case for any of the companies.06 1.1 1.96 1 Quick ratio nokia and Samsung Interpretation Quick ratio for both the companies is satisfactory and both are able to pay their current liabilities through their liquid assets However.94 Nokiaamsung S .04 1.98 0.1 1.Quick ratio Quick ratio nokia and Samsung 1.02 1 0. 0. this ability is slightly more for Samsung. A quick ratio of less than one can be problematic.

Inventory turn-over ratio Inventory Turn-Over Ratio 12 10 8 9. 6 4 2 0 Nokia Samsung .6 Inventory Turn-Over Ratio Interpretation Nokia is more efficient in managing its inventory as compared to Samsung. Nokia’s inventory stays for about 40 days and this duration for Samsung is about 50 days.8 7.

2 (high).Efficiency ratios Asset turnover ratio 1.1 1.2 1. In case of Nokia it is 1(low) and hence it has high profit margin and for Samsung it is 1.9 It tells about the dollar of assets generating dollar of revenue.So Samsung sells with low profit margins .95 0.15 1.2 1 Asset turnover ratio 0.05 1 1.

High ratio means company operates on cash basis. bad for a firm .2 Receivable turnover ratio Measures company's efficiency in collecting its sales on credit and collection policies.2.3 5. Samsung has 8.Receivable turnover ratio 9 8 7 6 5 4 3 2 1 0 8.3 ratio means it collects it receivables early or operates on cash basis than Nokia which has low ratio 5.

• More the turnover ratio faster the rate of paying to it suppliers.05 0 0.2 0.15 0.Accounts payable to sales ratio 0. Thus Nokia pays at faster rate to its suppliers than Samsung .07 Accounts payable to sales ratio It measures the number of times a company pays its suppliers during a specific accounting period.19 0.1 0.

97 days only.19 43. .97 Average collection period ratio Average Collection Period represents the average number of days it takes the company to convert receivables into cash.Average collection period ratio 80 70 60 50 40 30 20 10 0 70. • Thus Nokia takes more days(70.19 days) to collect its cash on credit sales than that of Samsung which is 43.

5 Asset to sale ratio 0.4 1.2 0 • A measure of companies efficiency in managing itsa ssets in relation to the revenue generated. the smaller the investment required to generate the sales revenue.6 0.8 0.5 so it shows that it generate max.6 1. Samsung has higher ratio 1.Asset to sale ratio 1. .86 1. profit with smaller investment compared to Nokia.2 1 0. • Here. The higher this ratio.4 0. and therefore higher profitability of the company.

Samsung’s shareholder has invested less than Nokia’s shareholder for equal worth.3987 • Samsung.Other Efficiency Ratios Debt to Equity Ratio • Nokia.0.0.  Interpretation of the ratio depends upon the financial and business policy of the company.5 Interpretation  This ratio gives an idea about the cushion available to outsiders on the liquidation of the firm. .

31 .

5% Samsung Nokia Apple 35.Global mobile handset shipments (Q1) 2012 Company SOURCE: STRATEGY ANALYTICS Units (millions) 93.4% 22.5% .5 82.7 Market share 25.1 9.

76 Billion loss for 3 months • “We are navigating through a significant company transition in an industry environment that continuous to evolve and shift quickly” • “Over the last year we have made progress on our own strategy.NOKIA : $1. but we have faced greater than expected competitive challenges” • The gap have ended Nokia’s 14-year reign in the phone global market. .

Smart phones reached 30% market share in 2011 483M units shipped worldwide Smartphone shipments as a % of total handset shipments .

Source: VisionMobile .

Source: Asymco. VisionMobile estimates .Profits are monopolized by companies with a tailored value-chain 100% 90% 80% LG Sony Ericsson RIM Motorola HTC Nokia Apple Samsung Commodity modular market 70% 60% 50% 40% 30% 20% 10% 0% 2007 2008 2009 2010 2011 2012 Integrated from cloud to silicon Integrated across handset BoM Share of profits across top-8 handset vendors.

Marketing Strategies of Nokia and Samsung .

a Big Smack to Nokia • Nokia has been long the market leader • Enormous reach and huge customer base • Created significant entry barriers for any new player as such.Samsung. • Its Symbian OS being the backbone of the whole success story .

.But. radical innovations and high end technology coming its way..... Nokia did a blunder by being very much myopic and complacent about its achievements and didn’t envision the competition.. which certainly had potential to dethrone it of its place.. .

Reasons???? .

Price Allowances and deals Distribution and retailer mark-ups Discount structure Product Quality Models and sizes Packaging Brands Service 4 P’s of Marketing Promotion Advertising Sales promotion Personal selling Place Channels of distribution Outlet location Sales territories Publicity Warehousing system .

consumer electronics and Internet industries Product differentiation with Android Commoditization of devices Resulting downward pressure on pricing . computing.Competition in Market Convergence of the mobile telecommunications.

Strategies leading to Cost advantage to Samsung  Samsung’s overall cost was 24 per cent lower than the weighted average cost of the other four producers  The cost advantages related to raw materials by better negotiated agreements with suppliers (perhaps due to the larger volumes of purchases  Higher yields (due to process quality and use of more efficient. larger silicon wafers).  Use of common core design for different products supported by the flexibility of production lines  Competitive advantage due to quality and product mix .

Samsung had 18 state-level distribution offices and a direct dealer interface The direct dealer interface helped the company get quick feedback from dealers.Samsung has always produced volumes Product innovation. Products are market driven and customer centered .Android with Google Smart Pricing strategy Wide Distribution network.

Android revolutionized the mobile phone market and Google in association with many mobile phone manufacturers to come up with low budget smart phones . which helped it to work on its previous weaknesses as found from a market research Samsung came up with mobile phones to directly compete with Nokia in low end segment in developing economies.World class R&D facility.

with three core elements: i) to win in smart phones. and iii) to continue to invest in long-term exploratory research into the future of mobility . Nokia announced a new strategy for its mobile products business.Current Marketing Strategies of Nokia In 2011. ii) to connect the “next billion” consumers to the Internet and information.

corporate customers and consumers. .Customer engagement and fulfilment .Brand and design .000 points of sale globally • growing online retailing presence • Increasing channel of mobile network operators. independent retailers.50.Technology and architecture • Mobile multimedia experiences to consumers in the form of advanced mobile devices and applications • more than 8. distributors.Three strategic assets that Nokia will invest in and prioritize: .

automation. tools. processes and culture of quality brought to the company through the assets acquired from Motorola Solutions which was widely acknowledged as one of the industry’s leaders in quality .  Quality • Nokia Siemens Networks expects to leverage the systems.To regain its Brand Equity…  Innovation • Enter smart phone market by collaborating with Microsoft and bring its smart phones to the market with Nokia Lumia 800 • Plans to increase its investment in capabilities such as end-toend testing. customer-focused metrics and training. dedicated resources.

Restructuring  reduce its annualized operating expenses and production overheads  plans to reduce its global workforce by approximately 17.000 by the end of 2013.  transfer of activities to global delivery centres  cost synergies from the integration of Motorola Solutions’ wireless assets.  efficiencies in service operations  company-wide process simplification .

two in Germany. one in Finland.and two in India (Kolkata and Chennai).  Started manufacturing of 3G mobile communications infrastructure at its Chennai facility to enable key customers in India to roll out 3G services faster.Production  Ten manufacturing facilities worldwide: five in China. .  First vendor of telecommunications infrastructure to manufacture 3G products locally in India.

SWOT: NOKIA V/S SAMSUNG .

SWOT analysis: Nokia

STRENGTHS…...
• Is a dominant player in the smart phone market via its majority ownership of Symbian • In the Asia Pacific sector Nokia ranks in the top 20 of most trusted brands and in India specifically it ranked number 1. • Nokia hold 37% of the world market which is almost 20 points higher than its next closest competitor Samsung.

WEAKNESS…
• Being the market leader and its increase role in Symbian is giving Nokia a bad image, much like Microsoft in the PC industry. • Slow to adopt new ways of thinking: good examples are clamshell phones which are preferred by many customers. Nokia was reluctant to produce a clamshell until 2012, when it launched its first model. • Although Nokia has had the largest mobile device market share in the world it has a rather small presence in the US market.

Contd…
• With the success of the iPhone and Android based phones Nokia will have a difficult time grabbing market share in the world. • Symbian is an open standard OS that Nokia has only so much control over. • It is managed by a meritocracy which makes it less than flexible and innovative. It looks dated when put up against Android and iOS and is not as enterprise friendly as RIM’s offerings. • Although outdated, Symbian has been a solid product. Nokia will need to be careful in how it replaces its flagship OS.

Motorola. Nokia will need strong business partners to stay on top of the market. RIM and HTC. . • The most watched partnership will be Nokia’s deal with Microsoft to run Windows Phone 7 on the next generation of smartphones. Apple. It is a big gamble for both companies as Nokia needs a new OS and Microsoft needs a respectable and dedicated platform. • Along with 3G/BB growth Nokia can continue to bring new and innovative technologies to market.OPPORTUNITIES… • With a hyper-competitive environment and strong players like Samsung.

• Nokia announced it was adding near-field communication (NFC) chips into future device offerings. • Leverage its infrastructure business to get preference and a stronger position with carriers. . • New growth markets where cell phone adoption still has room to go. which they are just entering.Contd. mobile payment. This short-range communication capability allows devices to support mobile ticketing. as well as 3G and Edge. including India and other countries. • Increase their presence in the CDMA market.. electronic identification and electronic keys.

• With competitors coming out with new products with improved capabilities every 6 months it will be difficult for Nokia to roll out a new generation of phones while at the same time taking on a new OS via Windows Phone 7.THREATS. • If Nokia lose the cases filed by Apple it could result in huge damages . • Nokia has been in a legal battle with Apple over patent infringement for several years over intellectual property. ..

nGo Bird) .. Orange. • Asian OEMs who are entering the market very aggressively (TCL. • ODMs (HTC and others) enabling carriers to leverage their customer power bypassing the handset vendor. Operators want to lessen their dependency on handset vendors and the dominance of Nokia. O2.Contd. and many other operators globally are selling their own brand of phones.

SWOT analysis: Samsung Electronics .

Strengths • Product Reliability: One of the company’s competitive advantage is the stress on quality. South Korea. This has costs savings from collocation and scale of investments for production process. • Manufacturing process: majority of manufacturing is performed in Seoul. . This is proven by a large number of awards won for performance and reliability.

Contd. • Human Resource Policy: Samsung covers 90 % of the expenses associated with health benefits.. • Samsung took advantage of the growing economy of Asian market by setting up manufacturing plant in India there by reducing logistics and supply chain costs. • Samsung brand value increased by 80% in past three years . They also have a rewards system based on achievements . retirement and education.

it captured Nokia’s market share by superior innovation in smart phones • Samsungs is the best in terms of design features and technology. 65k TFT/LCD color phone. • It was the first to introduced dual screen mobiles. phones with rotating lens.Contd… • Samsung is NO.2 in terms of market share in mobiles. thinnest and lightest note pad etc . first phone with polyphonic ringtones.

This results in reduction of sales • Samsung is a hardware leader but has too much of dependence for software from other parties.Weakness • Samsung Mobile launched a series of Smart phones recently which led to cannibalization. . • Chinese products focus on economies of scale and dump into Indian market for lesser cost.

This will improve the market share in rural market • The Indian youth population is growing and mobile phone sales is expected to increase due to lesser call rates • Its financial position is strong and there is a scope of entering into unrelated diversification .Opportunities • Samsung Mobile and Home appliance has future plans of launching Customized products for Indian market.

Threats • Samsung has wide variety of product lines. failure of one product line will have impact on the other and will result in brand dilution • The competitors like Nokia are focused only in one segment. • Threats from Chinese products .

Five Field Force Analysis .

• Nokia enjoys a slight advantage here. . • Samsung have a lot of experience making cell phones. but not necessarily software.Entry Barriers : Mobile Phone industry High Initial And Fixed Cost Requirement :In order to enter into a competitive market the new firm requires huge amount of capital. though it’s an advantage that may be quickly lost.

satellite and cable) in the India. technology and Design in order to satisfy customer with their product. television. The latest machine.. Technology Backup:• In order to enter into the mobile market the new firm is required to have a innovative and cutting edge technological back-up. .Entry Barriers Contd. wire. Government And Legal Issues:• Two factors may work to keep competitors from entering this market: the strength of current players’ patents and the regulatory obligations and approval requirements of the TRAI. which governs communication technologies (radio.

Nokia also has a certain amount of protection through the strength of its brand identity. . many of which share components of the other Nokia mobile: so Nokia is not adversely affected by this barrier. Product Differentiation:• Overall this trait sides favorably for Nokia (right now) because the new models of nokia are significantly different than its nearest competitors.Economies Of Scale :• Nokia already had pre-existing experience in manufacturing mass-market consumer electronics devices.

• Samsung is a hardware leader but has too much of dependence for software from other parties. packaging. they source products and services including components. manufacturing eqipment from thousands of suppliers all around the world. .Bargaining Power of suppliers: For Nokia and Samsung • At Nokia. • Suppliers are not having a strong bargaining power because the company purchases the raw material from many different suppliers so it is not affected at a by the supplier. softwares.

Bargaining Power Of Customers • Nokia is not producing products that are satisfying customers . • Nokia has come up with Windows based smart phones but the problem with these is that these are not low-cost and the hardware support needed for Windows is also not available in small size mobile devices. .Even the loyal customers are shifting to other brands like samsung because of the new and smart edge technological products. • Nokia has failed to produce low cost popular phones (like Samsung Guru) and Android based smart phones at very low price (Galaxy Y and other series by samsung).

Sony etc. there is threat of smart hand sets getting replaced by the very compact tablet notebooks of apple. blackberry. With some of the tabs cheaper than the high-range smart phones. Nokia mid-price range handsets drastically. Samsung’s Android operating system based smart phones have substituted.Threat Of Substitute Products • For Nokia. • Samsung though still has the compact size advantage. • For Samsung. .

“Environmental Analysis” .

not involved in international political disputes member state of European Union.Political Situations Samsung  Political instability at homeSouth Korea v/s North Korea  Hostile business environment.low barrier for Nokia trade and FDI Open door policy with china after WTO Former Prime Minister of Finland.African continent and the South East Asia  Conducive political environment which allows it to concentrate on the markets in a better wayIndia and China   Nokia Finland-very small country.Nokia Group Executive Committee members protection to deal with international politics for Nokia   .

the economy has started to show signs of recovery European economic integration These factors can provide opportunities for Nokia’s products to achieve globalization .Economic Situations Samsung operates based on the economic size and the strength of the consumers in terms of variables like disposable income aimed at the middle classes in the countries company enters markets where the business cycle for the products that it sells is in the initial stages  Nokia mortgage crisis in the United States-negative impact on Nokia In 2010.

Social Environment Samsung  Has effectively bridged the cultural and social gap between its home country’s business landscape and the markets where it operates  Strike a balance between the aspiration values of the consumer classes and the levels of income that they possess. games. twitter. Nokia  Access to cricket. stock exchange and news at one click  mobile phone as style statement .

 Pioneer for many of the technological innovations Nokia Invention of single chip and the rapid progress of semiconductor Nokia control the heading position in the communications industry that mostly relies on the high speed development of telecommunications of Finland Finland's well natural and geographical factors provide inborn technology environment for Nokia .Technological Situation Samsung  Innovative approach to technology and harnessing the same for rolling out products  Cutting edge technologies in their design and features.

com • investing. Samsung. • Review by The Board Of Directors And Nokia Annual Accounts 2011.businessweek.com • Analysing Key Financial Ratios. 2011. . • www.References • Annual Report. 2011.forbes. Form 20-F. • Nokia.2010.

Thank You For Listening… .

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