NOKIA’S

STRATEGY
By-
Prasenjit (34)
Vibhas (52)
Vikram (53)
 OF
• Established in 1865 as a wood-pulp mill by
Knut Fredrik Idestam on the banks of
Nokianvirta river in Finland.
• Finnish Rubber Works acquired Nokia Wood
Mills  Telephone and Telegraph Cables
• Nokia Corporation created - 1967 - paper
products- car tires- personal computers-cables
 OF
• Nokia began developing the digital switch
(Nokia DX 200) which became a success.
• 1991 Nokia - agreements to supply GSM
networks - nine European countries.
• August 1997 Nokia - GSM systems to 59
operators in 31 countries.
 THE VISION
• The Vision of Nokia:
“Our vision is a world where everyone can
be connected. Our vision is to ensure that 5
billion people are always connected at any
given point and to achieve 100 fold more
network traffic”
 NOKIA TODAY
• Head office in Finland; R&D, production, sales,
marketing activities around the world
• World’s #1 manufacturer of mobile devices,
with 38% share in 2007
• 112 262 employees
• Sales in more than 150 countries
CORPORATE STRUCTURE
 NOKIA AND ITS SBU’S

CELLULAR DEVICES
TECHNOLOGY NETWORK SECURITY CORPORATE
EMAIL
 PESTEL ANALYSIS

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.
 PESTEL ANALYSIS

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.
 PESTEL ANALYSIS

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.
 PESTEL ANALYSIS

Technological – There have been many global

advancements 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.
 PESTEL ANALYSIS

Environmental – There is a concern that the use of

mobile phones could be damaging to health, with
tumours potentially being caused by the waves emitted
by the handsets. There is also immense wastage created
by unwanted mobile phones that are thrown away as
they are non-biodegradable.
 PESTEL ANALYSIS

Legal – Difficult to patent mobile phone designs.

Technology Infringement causes a lot of legal issues.
PORTER’S DIAMOND ANALYSIS
Porter’s 5 Forces Framework Analysis: The
Mobile Handset Industry
 RIVALRY AMONG
COMPETITORS

• INDUSTRY GROWTH RATE: The industry has grown by just 10% during
2007. This is down from the 23% growth rate seen in 2006.
• CONCENTRATION AND BALANCE: The major players are BenQ-Siemens,
LG, Motorola, Samsung and Sony Ericsson.
• INFORMATIONAL COMPLEXITY: Devices are becoming more complex and
getting features (picture, audio, video) that are outside the core
competencies of traditional manufacturers.
• CORPORATE STAKES: High stakes for the companies because of huge
investments into the business.
 BARGAINING POWER OF
BUYERS
• BUYER INFORMATION: Buyers have comparative information about the
product in terms of price and features.

• BUYER CONCENTRATION: Network operators are relatively concentrated

and large service providers such as Orange and Vodafone have high
bargaining power.

• SWITCHING COSTS: Individual buyers have low switching costs and are
price or feature sensitive.

• PRODUCT DIFFERENCES: Low degree of product differentiation and any

new feature or technology is quickly imitated.
 BARGAINING POWER
OF SUPPLIERS

• SWITCHING COSTS: A large number of suppliers for non critical

components.
For critical components suppliers work closely with companies as they
involve joint development of specialty inputs and sub-systems.

• IMPACT ON DIFFERENTIATION : Companies could switch suppliers for non

critical components but are closely tied to them for critical components
and sub-systems.

• THREAT OF FORWARD INTEGRATION: Suppliers do not pose any credible

threat of forward integration even though they are outsourced.
 THREAT OF NEW ENTRANTS
-ENTRY BARRIERS

• PROPRIETARY PRODUCT DIFFERENCES: Technology and product designs

are protected by patents.
• BRAND IDENTITY: Powerful brand identity of the existing players
developed through advertising and product excellence.
• ECONOMIES OF SCALE: High fixed costs means that volume is essential to
companies.
• CAPITAL REQUIREMENTS: Activities such as R&D and advertising requires
large capital commitments.
• EXPECTED RETALIATION: Existing competitors have the financial clout to
deter new entrants.
• ACCESS TO NECESSARY INPUTS: Suppliers work closely with existing
companies and therefore critical components may only be available at a
premium.
 THREAT OF
SUBSTITUTES

• PC based applications such as IP TELEPHONY

• Convergence between PDA’S AND MOBILE PHONES.

• Technological regression due to ESCALATING MOBILE COSTS.

 Basis of Competitive
Advantage

• Product competitiveness : Nokia profitably competes in all mobile device

segments from entry-level to high-end. It has the broadest product
portfolio in the market.
• Customer satisfaction : Nokia uses customization to gain greater
customer satisfaction
• R&D effectiveness : Nokia spent about USD 3.4 Billion on R&D.
• Demand-supply network alignment : Nokia captures its potential upside
in high-demand situations by aligning its demand-supply network. 
• End-to-end capability : Nokia systematically leverages its end-to-end
capability by integrating mobile devices, applications and infrastructure
NOKIA’S VALUE NETWORK

STRENGTHS
•Strength of CORPORATE BRAND
•Design, the branding and the technology
•Dominant player in SMARTPHONE
market
•Largest CELL PHONE VENDOR
OPPORTUNITIES
•Growth markets such as CHINA, LATIN
AMERICA
•Increase their presence in the CDMA
market
•Leverage its infrastructure business to
get preference and stronger position with
carriers
SWOT ANALYSIS
WEAKNESS
•Slow to adopt new ways of thinking-
Clamshell Phones
•Being the market leader and its increase
role in SYMBIAN is giving Nokia a bad
image
THREATS
•INFLECTION POINT- “A Disruptive
Technological Change”
•Cheaper MID RANGE models from
Motorola & others
• Operators want to lessen their
dependency on handset vendors
•Potential threat from Microsoft’s entry
into mobile telephony
 Vs
One To One Comparison
Key Success NOKIA MOTOROLA Edge
Factors
Technology 5 3 Nokia
Strategy
3G Products 4 5 Motorola
Applications 5 3 Nokia
Software 5 4 Nokia
Total 19 15 NOKIA
Main Division: Mobiles
NOKIA MOTOROLA
SALES 60.2% 66.2%
OPERATING INCOME 70.4% 65.7%
 Vs

200 Million 75 Million

 Vs
Continuous innovation and
new features.
 Moves faster than rivals in
introducing new features
Has focused on “iconic”
products to change trends on
the market

Year No of New
Products
2002 34
2004 36
2006 39

Nokia’s approach is more Motorola's approach is

flexible to diversify its product more risky as they depend
line on single “big hits”
FINANCIALS: STOCK VARIATIONS
 COMPARING FINANCIALS

$ mm
$ mm Profit Margin %
Profit Margin %
50,000 15.0
60,000 14.0
45,000
50,000 12.0
40,000 10.0
10.0 35,000
40,000
30,000
8.0 5.0
25,000
30,000
6.0 20,000
0.0
20,000 15,000
4.0
10,000
10,000 2.0 -5.0
5,000

0
0 0.0
-5,000 2002 2003 2004 2005 2006 2007 -10.0
2001 2002 2003 2004 2005 2006
To tal Revenue Total Revenue
Income After Tax Inco me After Tax
P rofit Margin P rofit Margin
 FINANCIALS
(in EUR millions)
Year 2007 2006 2005 2004 2003
Gross Profit - 13379 11,982 11,192 12,208
Operating Profit 7985 5488 4,639 4,326 4,960
Net Income 7205 4306 3,616 3,192 3,543
 FINANCIALS

Year Assets = Liabilities + Equity

2006 22617 10557 12060
2005 22425 9938 12514 (in EUR
2004 22669 8270 14339
2003 23920 8608 15312 millions)

Net sales of EUR 51,058 million

Operating margin :15.6%

Estimated device market share 38%

14 manufacturing facilities in 9 countries

FINANCIALS
STRATEGIC RECOMMENDATIONS
THANK YOU!!!