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Case Study Analysis: Finland and Nokia: Creating the Worlds Most Competitive Economy Analysis: Nokias history

begins in 1865 as a pulp mill in the country of Finland. In 1967 the modern corporation of Nokia was merged with a telecommunications cable corporation and electronics business and Finnish Rubber Works. This became the telecomm company that we know today. In Finland the Nordic Mobile Telephone (NMT) network was created in 1981 and brought several innovative aspects to the consumers. The NMT pioneered roaming technology that allowed for usage across country borders. The creation of the NMT caused the Nordic region, once a subtle region, to become the largest single mobile market of the time. This network raised the standard of mobile technology and began to be incorporated in other foreign markets. In 1979 Nokia began forming joint ventures and acquiring other companies, expanding its market and in turn becoming the largest consumer electronic company in the Nordic region during the 1980s. Nokia then consolidated the Finnish telecommunications system in 1987, through mergers and acquisitions. In 1999, the telecommunications sector became Finlands leading sector, making up 21% of the value added. By 2001 Nokia was in the top three competitors in mobile phone manufactures internationally, reaching sales of 30.4B Euros. The company employed over 60,000 people and production locations in 10 countries, R&D in 15 countries as well as sales in over 130 countries. Strengths: Nokias innovative presence allowed it to be a market leader in mobile phones. By providing the best coverage and largest selection of models Nokia became the world leader in digital phones with a market share of 31% in 2000. Nokia consistently searched for ways to improve their product by setting up R&D facilities by leading universities and developing centers of excellence. Nokia developed the fundamental values known as the Nokia Way. These four values tied into the Finnish national character and consisted of customer satisfaction, respect for the individual, achievement, and continuous learning. The Nokia Way proved to be successful as Nokia tapped into other countries. The companys character was pragmatic, honest, quiet, and serious. Weaknesses: Beginning in the 80s Nokia began to invest in electronics such as TV manufacturing and suffered a severe loss. The financial blow couldve been prevented if the company had done a better analysis of the situation prior to acquiring several of the electronic companies. Also, in 2001 Nokia was having trouble keeping up with new industry standards surrounding the development of software for PDA and palm pilot organizers. Also, due to the size of the company, Nokia was enduring the concerns of nation for being such a large role and cluster in Finlands economy.

Opportunities: Being a strong player in the logistics of mobile devices, Nokia has the opportunity to increase their products functions and further develop their Smart phone idea. Based on their worldwide reach the company should be able to continue with their intricate supply chain and continue to market products worldwide. Also, since consumers are changing to a wireless world the telecomm market should still be growing steadily with room for innovation and improvement. Threats: The recent emergence of the I-phone and redesigned models of the Blackberry seem to be stealing the market in the U.S. Nokia will need to unveil a product that is comparable to these devices and invest in an ad campaign that will convince the consumers that the product is not only a smart phone but also a fashion trend. Economic Transformation in Finland Early 1990s Crisis Berlin wall fell -> dried up Finnish exports overnight Severe economic crisis (GDP fell, high unemployment) Finland was forced to float its currency Mid 1990s turn-around Lowered taxes Government expenditures cut-back High interest rates Devoted resources to R&D, competitiveness and innovations Expanded the capacity of higher education Liberalized and opened local markets The emergence of Finland as a telecom powerhouse Traditional expertise (army) and traditionally not monopolized NMT and the Nordic Region (Finland was always too small a market) Finnish characters Telecommunication cluster 2002-2004: Finnish Government adopted a resolution on the national broadband strategy. 2005-2007: The Government of Finland granted an operating license to build a new digital mobile communications network. Flash-OFDM was chosen as the technology for the network. In 2007 Finlands research and development expenditure represented 3.5% of the gross domestic product, which put Finland among the OECD top. 2008-2010: New frequencies were allocated to telecommunications companies allowing them to build 4G mobile networks which made Finland the first country in Europe to allow the use of 4G LTE technology at such low frequencies.

Over the past decade, the number of R&D personnel has grown from 40,000 to nearly 80,000. This makes over 2% of the overall labor force. The 3 largest clusters in Finnish economy were; Pulp & paper (accounted for 40% of exports) Wood products (accounted for 16% of exports) Engineered metal (accounted for 23% of exports)

Summary of Situation in 2001: Nokia Nokia was the leader of the Telecom industry Market share: handsets 31%, Infrastructure 10% Motorola lost mobile phone leadership to Nokia Market share: handsets 15%, Infrastructure 13% Severe downturn in the Telecom. Slow/Delayed transition to 3G system Nokia stock fell 38% during 2001 (MOT fell 30%) Revenue grew by 9% in 2001 (compared to 43% in 2000) Shortage of skilled Finnish workers Nokia foreign employment grew 4 times faster than Finnish employment Finnish suppliers produce highly customized inputs 2002: Nokia Networks, and Redback Networks Inc. announced strategic agreement to increase broadband solution. 2003: Nokia built Eizel's foundation to make wireless Internet access interactive and highly satisfying for business users. 2004: Nokia and Metrowerks completed transaction on transfer of application development technology to Nokia 2005: Nokia Corporation sold all of the approximately 3.2 million Nextrom holding shares it owned. 2006: Nokia acquired Intellisync, a leader in platform-independent wireless messaging and applications for mobile devices. 2007: Nokia acquired Twango to offer a comprehensive media sharing experience: Share photos, video and other media through virtually any connected device. 2008: Nokia completed its acquisition of Trolltech, a recognized software provider with world-class software development platforms and frameworks. Nokia acquired Symbian Limited. 2009: Microsoft and Nokia formed global alliance to design, develop and market mobile productivity solutions. 2010: Nokia completes acquisition of Novarra to enhance internet experience in Nokia series 40 mobile phones.

Nokia products accounted for 34% of the global market for cell phones, compared with 38% previously announced. The company blamed a flood of Chinese and fake phones devices often marketed under a brand close to Nokias but manufactured by others.

Porters Five Forces Analysis:

Recommendations: Although Nokia has seen success within the last several decades the effects of outsourcing production to other countries is taking a toll on Finland. Since Nokia is

crucial to Finlands economy it may be necessary to restructure certain areas to allow for there to be jobs available within the nation. Also, Nokia will need to address the issue in the recent growth of the Blackberry and IPhone smart phones. These two products have begun to dominate the market in the smart phone category that was once Nokias focus. Currently, a product has not been presented by the company to match the capabilities and functions of these two different phones.