Contents

Identify and discuss the multidimensional external forces that brought changes to Nokia. ............. 2
Question: Critically discuss the nature of changes and their impact on company’s operations........ 5
Evaluate the proposed changes by the company and recommend appropriate methods for
implementing it. .................................................................................................................................. 7
In an attempt to facilitate the change process, advise Nokia’s leaders on issues of organisational
culture, politics and leadership. ........................................................................................................ 11
References ............................................................................................................................................ 13
Identify and discuss the multidimensional external forces that brought changes to
Nokia.

The multi-dimensional changes which have occurred in and around Nokia can be explained through
the environment, Industry and other strategic analysis which have had direct effect on the working of
company. The first segment in this answer focuses on how external forces determine the changes
which are strategic in nature to the firm. The second segment diagnoses as to how and what kind of
external forces have been in action which have changed the face of Nokia.

These analysis have been observed by various strategic authors like Porter. Some of them include:

PEST: for Wider scanning of global market conditions

Porter’s five forces: This is for Industrial scanning of conditions

SWOT analysis: This is to consider the Strengths, weaknesses, threats and opportunities of Firm.

Environment analysis is necessary as choo (2008) in one of his papers whereby he states that with
environment scanning one gets to know about the rate of change and complexity in outside
environment. The external forces which have acted to bring changes to the firm begin from identifying
the environment of the firm. Few authors also express that company’s marketing system must operate
within framework of forces which comprise of firm’s environment and this includes major external
variables which are not easily controllable. Companies can use the environmental scanning to pursue
many strategic decisions such as foraying into new market, investing in new product line or to innovate
the current product (Babatunde and Adebisi, 2012). Porter argues that sustainable competitive
advantage cannot be achieved through operational effectiveness alone. It has to incorporate
innovative nature to explore different horizons. He further argues that some companies in last decade
have tried to be innovative by re-engineering their operations to stay ahead of the competition like
just in time method, business process re-engineering (Babatunde and Adebisi, 2012).

Moving on to the external forces scanning one can say that PEST analysis is best tool for analysing the
span of 10 years (2000 to 2010) in the time which has effected Nokia’s profits.

Political: On the political front the collapse of many corporations and housing problems had effect on
the economies as whole. Further the gulf wars on political front also had effect on the world
economies making it difficult for companies to expand in those particular countries. These political
issues combined with others had effect on the Turnover and changes which were felt around many
companies.
Economic: There are a number of changes that may have contributed to the rebound in economic
growth over the past decade. Probably the most important is the rise of China, and its imports from
developing countries. China’s economy has multiplied more than 17 times over the past three
decades, to become the world’s second largest economy (Weisbrot, 2012). The other factors which
contributed to the recovery and slowdown of the world economy was the Wall Street breakdown from
2007-2010. However it was china’s economic growth which balanced and also the developing
countries which helped the economies to recover the slowdown (Weisbrot, 2012).

Social: Amongst the other social impacts the cultures came closer than before with the social
networking websites. These social websites had impact on behaviour, beliefs and everything in daily
lives of people. These affected the needs and wants of people on larger extent.

Technology: The technology factor in these years changed a lot because of the search engines, smart
phones and the graphitic technology which brought various other markets closer and changed the
industry dynamics. Amongst the other industries Mobile communications was the worse which got hit
with the advent of these factors. Nokia’s turnover was effected by these factors most than others but
however the other factors contributed to the erosion of the position in world brands.

Furthermore the Industry Dynamics can be understood through the porters Industry model of rivalry
and then factors effecting those powers.
Source: Google/images, 2014

The above model with relation to telecommunication Industry can be followed up and how it has
evolved and changed to bring changes to Nokia through external forces.

Threat of new entrants: The new entrants can be low if capital requirements are more like in the case
of telecommunications Industry. To start a new venture in this Industry a lot of barriers and switching
costs are required like purchase of licence for new software to be embedded in the mobile phones
and also various government policies are to be scanned. To quote an example the telecommunication
regulations and policies which are chalked out in different countries can affect the particular new firm
foraying in this market. Hence threat of new entrant on whole with global front is high because of
incumbent regulations and rules which only make way for huge capital owners to expand in this
Industry.

Bargaining power of buyers: It is very logical to say that on large scale the bargaining power of buyers
is high to low and depends on region to region. Telecommunication Industry has variable regions like
in China the bargaining power of buyer will be high because the country might have local firms
competing with Nokia on regular basis to provide handsets on cheaper rate which might lead to more
switching cost if it does not suit them. Further the buyers in UK or USA have contracts binding them
in legal enforcements which allows them to have less switching between different brands. However
the brands which innovate and put a lot of emphasis on innovation like Apple launching constant
radical changes compel the buyers to switch cost and buy new products regardless of the costs and
other regulations.

Threat of substitutes (High): Rivalry increases when there is slow growth in the Industry and also
diverse competition. The competition in smartphones and mobile market is high due to the constant
innovation in the Industry by giants like Apple and Samsung. Growth in this Industry was primarily lead
by Nokia until 2001 (Assignment brief, 2014). However in later stages the growth declined with advent
of new innovative handsets.

Bargaining power of suppliers (low): The suppliers of Handset Industry include Sim providers, lithium
battery providers etc. As there are vast number of suppliers for mobile market and from different
countries whereby low cost is one of the key to profits it is really likely that the power of suppliers is
low as compared to other industry specifics.

The above analysis of External forces provide some conclusion on facts which are evident that
combined effect of technological changes and other effects of maturity of the Industry lead to the
changes in Nokia which probably could not cope up with some vast and quick changes in the Industry.
Question: Critically discuss the nature of changes and their impact on company’s
operations.
Discussing the nature of changes which affected the company on larger and smaller scale and had
effect on operations of the company are provided in this chapter. Companies in telecom Industry are
clever when they squeeze out profit from per unit production with mass production techniques
bargaining power of suppliers Nokia could not change its downturn on sales for company. The same
is with Nokia however with low bar In the case of Nokia if we start from environmental analysis and
see how the firm’s operations were affected through these forces, one can say that most important
of all forces was technological change.

As per the Jodt (2014) firm has failed to respond to technological situational happenstances which
were faced by most of the firms in earlier 2000’s. The other firms like Samsung, HTC were able to
organise themselves according to the global terrain. Following are example of some of those changes
provided by the Jodt (2014).

(Journal of disruptive technologies, Jodt, 2014)

Joseph Scumpeter in 1942 was the first person who advocated creative destruction as one of features
in technological changes (Jodt, 2014). He explains that creative destruction means that the old and
worn out technology was efficiently removed from market and replaced with new and creative one
which could lead to innovation. Nokia as described by the author has been built on the effort that
company has had built in modular method for supply of new and old handsets by determining the
demand in global market however they could not survive and sustain the creative technological
changes which effected the company. Further the other dimension which is internal in nature consists
of cultural factor whereby some of the reports by Zahra et al (2008) suggest that company had all its
recruitment with young, creative and fresh minds which was the culture but over the course of time
after the company diversified into telecommunications more the fresh talent was not recruited. Hence
brought technological changes they brought disruptive technologies themselves and changed the
course of market. However with the changes which were faced outside with world the company failed
to keep up with the innovation on board with long term effect.

The other external force which was discussed in the above answer was social trends. The advent of
social media and again search engines effected the way people think and brought World more closely
as a global village. This teamed up with certain technological factors has brought a lot of shift on
operations of Nokia from 2005 onwards. The nature of changes were not only external but also
internal which have been driving positively the firm. The firm started with pulp and wood
manufacturing company and how it has forayed in other industry segments represents the brave
choices company leaders made. Further Kajanto and Carral (2008) refer that the firm saw that telecom
Industry on global scale was growing in 1990’s with demands coming up no one but the Industry
analysis modelling system they figured how to meet and tap this demand which affected their
operations to greater extent. The operations further increased to more countries in those years like
the company started its operations in Hungry and India. These positive effects on company made it
grow in all these years and expand further to new horizons.

However the negative effects which the company has survived through have also had same kind of
impact which effected profits so much so that the company had to shell one of the home software
company Symbian to outsiders. The divestment and negative change to the company have pushed the
company to share R&D and other facilities with Microsoft. Amongst the radical changes like
technological shift which happened at the centre of the telecom Industry which can be classified as
radical shift there were some other imminent dangers which should have been perceived by company.
The change in the mobile communication Industry like digital phones, internet speed and more
storage spaces were part of radical shift and changes. These changes and external forces were
recognized by the firm and were hence manoeuvred.

The Industry forces which have been analysed in the previous answer can be justified that overall the
telecom Industry is regulated by patents, high threat of substitutes and low bargaining power of
suppliers. Hence it is tough to get in into the competition whereby the capital requirements are high
and returns are squeezed through constant innovation. It would be also viable to specify that Nokia
was ahead of most of the firms however through lack of constant Innovation and above given TSH the
firm lacked clear strategy to sail through the radical changes.
Amongst many other problems and internal changes were the company had problems with the
Symbian software which was developed at heart of Nokia. The changes and shift in demand lead to
giant exploratory venture for software to Microsoft. Again stating the fact that few authors pointed
that company always recruited young, talented and staff which developed software at heart of the
company was shifted to joint venture. This might have affected the operations of the company
drastically.

Furthermore the changes which effected the operations include many other things like the culture
shift in stages from owned and governed and now having joint venture with Microsoft. The ‘White
box’ transition whereby companies produced cell phones on cheaper rates than Nokia which had its
operations with old methods and also some spread in countries like hungry (Kajanto and Carral, 2008).
These kind of changes would have had impact on the profits and operations of company directly
because the company would have had not survived the threat of cheap substitutes. As the Jdot, 2014
suggest that the problem with some of these changes was that somewhere maybe the leadership skills
were also not apt according to the situations outside and sometimes as few authors (Koberg et al
(2004)) describe that innovation theory may have radical or incremental innovation. However the
firms which innovate have few common grounds like environmental dynamism, age and size of firm,
intra firm structural linkages, and improvisation, Experimentation, transitioning across projects, age
and tenure of policy makers. The leadership style of policy makers is also one of them. Further quoting
an example a firm like Apple when was led by Steve jobs had different mind-set as compared to others.
The same is with Nokia with its new CEO which has been appointed by the shareholders to have
smooth transition in the venture. This may have caused a lot of shift in operation because the company
has been used to the changes and the employees have had organisational culture which fostered them
to learn and innovate with in house software development. They might have to work with new R&D
firm which may have different work ethics and culture of working in the firm.

In the end the company has gone through a lot of changes which have affected operational facilities.
The company did not have always forayed in telecom Industry however with current erosion of its
position and sales on global front the company might have to focus on innovating with all its current
capacity and workforce for smooth sailing.

Evaluate the proposed changes by the company and recommend appropriate methods
for implementing it.

Evaluating the proposed changes for company are given below:

  Forming a broad strategic partnership with Microsoft to build jointly a new mobile
‘ecosystem’;
 Aiming to gain volume and value growth by connecting ‘the next billion’ to the internet in
developing markets;
 Making focused investments in next-generation technologies; and
 Putting in place a new leadership team and organizational structure with a clear focus on
speed, results and accountability.

(MBA, Case study, 2014)

The above changes proposed by the company were to allow the smooth sailing of the organisation
through the eroded brand effectiveness. Taking the first change which company has suggested the
broad strategic partnership with Microsoft to build new mobile ecosystem. The eco systems built by
different mobiles over the course of time are different. Following is the ecosystem of iPhone.

Source: Images/google.com, 2014

The eco system of iPhone above shows how it chooses its carriers, exclusive plans, technology support,
cost, standards and upgrade factors. Hence Microsoft has chosen Microsoft to partner for efficient
ecosystem. Chukhray (2012) suggest that business now does not only depends on scanning and
strategically placing your competitive advantage. Now business does not only depend on the supply
chain system which involves giving away different phones to the market, or way the Nokia had its
decision model represented by Carral and Kajanto (2008). This model recognized the demand in the
market and delivered the handsets in exact replication of that demand. This was calculated through
careful screening of cumulative mobile subscribers, added mobile subscribers and network build out
patterns. However authors like Chukhray (2012) express that innovation in the ecosystem is the
solution to the problem. This could be combined to the change which has been presented by Nokia’s
Management with Microsoft. The author uses the term "innovation ecosystem" having in mind such
forms of cooperation when organizations combine their individual proposals into integrated solutions,
ready for use on the consumer market. An innovation ecosystem is usually formed for the
development and implementation of innovations (Chukhray, 2012). The company could develop such
innovative solutions like apple which provide more sales to expand the operations in world. The
software Research and development with Microsoft as a brand and the platform will help to create
brand re-structure which has been depleted over the course of time. However the company has to be
careful with the creation of innovative ecosystem.

Furthermore the second change which company wants to gain volume and growth by connecting to
next billion in developing market. This change can be executed through the operational directions
which can be given through previous experience by Nokia. The operational decision making model can
be innovated through the new ecosystem which both companies can develop and then create new
volume of customers. Company has further agreed to collaborate and work together which means
that Microsoft will be heading for software development whereas Nokia will be developing the
hardware. To smooth sail the developments for next level the company has to know the work culture
and the company culture of both firms. Nokia has been always good at evolving through times and
succeeding in those evolving times however Microsoft has not had any joint ventures on that bigger
scale and in new Industry.
The problem again in collaboration is not bound to the work environment or difference in culture but
it also goes to the level of working. The supplier and the company relation is not only collaboration in
work as is defined by Phillips et al (2002). The authors further explain that in order to work as a team
on international front in joint ventures focus is on inter-organizational relationships that are
essentially collaborative precisely because we believe that their dynamics differ substantially from
those of competitive relationships. Although both collaboration and market relations clearly involve
negotiation, the negotiation of collaborative relationships involves a wider and more fundamental
range of issues, including the roles to be played by different participants, and the nature of the
problem to be addressed. Hence in this Industry where the lines of demarcation between IT and
telecom are merging and entwined one has to clearly see both companies and their goals and values
of working.

The company explains the third change which is related to make focus investments in next generation
technologies. Scarnhost (2008) refers to the Industry life cycle of telecom Industry and explains that
this Industry is heterogeneous in nature. Emails, Wire call transfer and Nowadays the Voice over
Internet (VOIP) has also merged with the Industry. This makes it more susceptible to change than
other Industries. The investment in other generations in this Industry will have to be scrutinized very
carefully. In order to implement this change both companies will have to sail through period of
collaborative work and then chalk out the Industry dynamics and changes which are occurring on the
global scale with regards to regulations, trends and further Innovation. According to Koberg et al
(2002) the radical Innovations and incremental innovations are both different in nature. He specifies
that the change from fibre optical communication to Wireless is an example of incremental
Innovation. Hence these kind of changes might affect the decision making of the Joint venture. The
complexity theory provided by Koberg et al (2002) can be very well adjusted to the structure of this
Industry and this situation. He explains that with this framework whereby the stability and instability
is part of Industry life cycle, Complexity structure in the hierarchy of work is very well suited in order
to bring out the Innovation in products. These innovative products will not be incremental in nature
but radical outcome. This outcome can be researched through the previous experiences of both firms
combined and also the current Industry situations. The research and development as given by Zahra
et al (2008) in Nokia used to be built in system with Symbian and fresh talent which was always leading
force to steer it ahead of competition. Making the change necessary the company has to combine the
R&D teams of both companies and make a platform to work together to make these focus
investments.

Putting in place a new leadership team and organizational structure with a clear focus on speed,
results and accountability is the next change which company suggests to be made with this
collaboration. This change encompasses the leadership which has been constant talk for the company.
The replacement of old CEO Olli-Pekka Kallasvuo, with Stephen Elop was one of those changes. Going
by the exact meaning of this term one can say that the company’s survival in this Industry depends
highly on this change. As referred in case study Nokia has been very capable in handling those changes
and the phases continuously however changing from a Finland origin company to Multinational was
also a roller coaster ride with dismantling and acquisition of many Firms and Industries. The company
as some sources say is gearing for a takeover or acquisition which has happened in 2014 (Kovach,
2014). Some of these changes mentioned leadership which would target to examine global presence
for both brand names in digital market. To establish these changes Microsoft had to purchase Nokia
as a firm on whole however which happened to few divisions like its mobile segment only (Kovach,
2014).

In an attempt to facilitate the change process, advise Nokia’s leaders on issues of

organisational culture, politics and leadership.
The change process in Nokia focusses on many divisions like leadership, cultural fit and politics.
Bollinger and Smith (2001) propose that human behaviour is the key to success or failure of KM
strategies, as KM involves an emphasis on organizational culture, teamwork, the promotion of
learning and the sharing of skills, experience and knowledge (Yang, 2006). Many companies have faced
issues whereby people act what their superiors do and this leads to sometimes arguments whereby
the decisions are not executed by the subordinates. As explained by Barkema and vermeulen (1997)
reasons to consider culture in joint venture or partially owned subsidiary on international projects is
that not only the leadership nature changes but also the transition of goals from one firm and working
jointly to finish the projects with other firm also is affected.

The culture issues were pointed first by Hofstede in his theory of organisation of how people react in
different aspects on different issues. Previous studies on the influence of cultural distance often used
an aggregate measure based on the four dimensions in Hofstede [1980]: power distance, uncertainty
avoidance, individualism, and masculinity (see Kogut and Singh [1988]). Hofstede's more recently
developed fifth dimension, long-term orientation (or Confucian dynamism) [Hofstede and Bond 1988],
has received less attention, perhaps because scores were available for only twenty-three countries
[Hofstede 1991]. The present study builds on Hofstede's five dimensions, including long-term
orientation (Barkema and vermeulen, 1997). However with new technologies and mingling of cultures
with work environment the old dimensions of work ethics seem to diminish.

Organisational culture does not only bound to the origin of the firm but it also extends to the way the
companies work towards the achievement of goals and long term missions. Schein (2009) states that
culture can be divided into many forms and now specifically it is very difficult to get into nitty gritty
details. Technological factors and expatriation in many firms has allowed different subcultures to be
existing within those dimensions referred by Hofstede above. The author above also states that
leaders and managers not only have responsibility to achieve goals but also to manage people in that
company. He exerts that leaders are supposed to create new form of work environment or culture
and also manage the previous cultures existing in the old organisation. With Nokia and Microsoft
having a lot of history of work it would be difficult for CEO Stephen Elop to smooth the process of
working together in Collaboration. Quoting an example here if the leader is creating a new company
he will have much more opportunity to embed values, morals and work ethics in a company than
bringing new leader to old company. Hence if the company succeeds and brings profits then what is
reflected as leadership is the values and work environment the leader has brought during start of the
organisation (Schein, 2009).

However if the company is old and new CEO comes then he is expected to learn the existing culture
and also bring in his own leadership skills. This is where politics come into existence. Some
subordinates may like decision making style which is fresh and some will not. It again depends if the
CEO destroys the original existing culture while bringing his own or makes it easier by taking old good
points. In the case of Nokia Microsoft is going to bring new culture, through the case study the political
factors were already seen whereby the terminology of Trojan horse was referred to the CEO. Further
Nokia has been good at accepting changes, however the firm has relied on young and fresh talent to
build its software platform, hence they will be used to the fresh ideas and will be more risk taking as
compared to Microsoft.

Furthermore the changes with cost cutting, redundancies and transfers may not be welcomed in
Nokia. The origin of Nokia as a company has been in Finland which through Hofstede’s study suggests
that role of trade union is very high in Europe as compared to USA (Barkema and Vermeulen, 1997).

Admittedly coming to the terminology of subcultures, it is very important to peep into this segment
because the company not only no works in different geographical boundaries but also has many
product lines, hierarchies and department goals in addition to the corporate goals. These subcultures
originate from these lines of demarcation and sometimes without any reason. It is kind of important
to understand these subcultures because this whereby the motivated, hardworking and innovative
minds lay. To provide a solution to the role of union mentioned above one can say that evolving union
as a subculture is also one of roles of leaders so as to not have further troubles with decision making.
This can be done through creation of subculture with trade union which has its corporate purpose
aligned to the mission and vision of Company.

In the end, to facilitate the change on broader level which have been mentioned and carved out by
CEO and board members it is important that company brand names should be evolved through all the
disturbing times. However this should not be done by depleting the brand existence, culture and
subcultures of the firm. Nokia leadership has been very steady with not many changes however
Microsoft has had a lot of leaders. This can lead to resistance in accepting the long term changes within
corporate board. The work culture of development could be new and positive because Microsoft has
good history of making software basics whereas Nokia had very durable and reliable handsets which
used to be sold like hot cakes.
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