NOKIA’S STRATEGY

ByPrasenjit (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 nonbiodegradable.

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 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.

POWER

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

SWOT ANALYSIS
STRENGTHS
•Strength of CORPORATE BRAND •Design, the branding and the technology •Dominant player in SMARTPHONE market •Largest CELL PHONE VENDOR

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 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 •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 NOKIA Success Factors Technology 5 Strategy 3G Products Application s Software Total 4 5 5 19 MOTOROL A 3 5 3 4 15 Edge Nokia Motorola Nokia Nokia

NOKIA

Main Division: Mobiles
NOKIA SALES OPERATING INCOME 60.2% 70.4% MOTOROLA 66.2% 65.7%

Vs

200 Million

75 Million

Vs
Continuous innovation and new features.  Moves faster than rivals in introducing new features Year No of New Products 2002 34 2004 2006 36 39 Motorola's approach is more risky as they depend on single “big hits” as focused on “iconic” products to change trends on the market

Nokia’s approach is more flexible to diversify its product line

FINANCIALS: STOCK VARIATIONS

COMPARING FINANCIALS

$mm

Profit Margin

%
14.0 12.0 10.0 8.0

$mm

Profit Margin

%
15.0

60,000 50,000 40,000 30,000

50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 -5,000 2002 2003 2004 2005 2006 2007

10.0

5.0

6.0 20,000 10,000 0 2001 2002 2003 2004 2005 2006
Total Revenue Income After Tax P rofit Margin

0.0

4.0 2.0 0.0

-5.0

-10.0

Total Revenue Income After Tax P rofit Margin

FINANCIALS
Year

(in EUR millions)

2003

2007
-

2006
13379

2005
11,982 5488

2004
11,192 4,639 3,616

Gross Profit 12,208 Operating Profit 4,326
Net Income

7985 4,960 4306

3,192

7205 3,543

FINANCIALS
Year Equity
2006 2005 2004 2003

Assets
22617 22425 22669 23920

=
10557 9938 8270 8608

Liabilities

+

12060 (in EUR 12514 millions) 14339 15312

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

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