Nokia Under Global

Mobile Phone Industry

PREPARED BY:
Abhaya (PGFB0901)
Anshika (PGFB0908)
Pragya (PGFB0929)
Prashansa (PGFB0930)
Pompi (PGFB0937)
Sugandh (PGFB0943)
 “Positive Signs”

• NOKIA- THE WORLD LEADER…..

• Emerged as an industry leader in the late 1990s, had

run into rough weather in 2003-2004, with sales and
earnings falling below expected levels.

• Several analysts declared that it was the beginning of

the end of Nokia's dominance in the industry. 

• However, Nokia was not ready to give up so easily.

The company put up a tough fight over the second
half of 2004 to recapture its lost position in the
market.

• Nokia's efforts started paying off by late 2004. The

company announced satisfactory results for the
fourth quarter of 2004 and market share for the year
2004 also stabilized at 32 percent by the end of the
year.

• In the first quarter of 2005, Nokia's sales increased

17 percent over the corresponding quarter of the
previous year to $9.65 billion.
• Net profit rose 18 percent to $1.1 billion. Global
handset sales rose 11 percent, prompting Nokia to
increase its estimate of the size of the global handset
market in 2005 by 100 million to 740 million.

• Commenting on Nokia's improved performance,

Jussi Hyoty (Hyoty), an analyst at securities firm
FIM Securities, said, "Nokia's result was definitely
better than expected, and it shows that it's a growth
company again.”

• However, despite these positive signs, several

analysts wondered whether Nokia would ever be able
to dominate the industry as it did in the late 1990s
and the first two years of the new century, especially
in light of the aggressive competition posed by
several new Asian companies as well as more
established players like Motorola and Sony Ericsson.
 Issues To Be Dealt

• To understand the difficulties faced by an erstwhile

giant in the global mobile phone industry in 2003-
2004.

• To appreciate the importance of innovation in a

dynamic and volatile industry.

• To analyze the effect of changing market conditions

on companies.

• To appreciate the importance of keeping abreast

with changing market conditions and adapting to
them speedily.

• To examine future challenges that the company faced

and the various options available to it.
 “Background”

• The company was first set up on the banks of the

river NOKIA (after which it was named) in
southwestern Finland.

• 1865 – Establishment of a forest industry

enterprise by mining engineer Fredrik Idestam.

• 1898 – Witnessed the foundation of Finnish

Rubber Works Ltd.

• 1912 – Finnish Cable Works began operations.

• 1967 – The three companies were merged to form

the Nokia Corporation. paved the way for
Nokia's future as a global corporation
• At the beginning of the 1980s, Nokia
strengthened its position in the
telecommunications and consumer electronics
markets through the acquisitions of Mobira,
Salora, Televa and Luxor of Sweden

• 1981 – The company manufactured the first car

phones for NMT, the world first international
cellular mobile telephone network.

• 1987 – First hand portable phones. Purchased

the Swiss cable machinery company Maillefer.

• 1994 – The company was listed on new york

stock exchange.

• 1998 – Nokia overtook Motorola to become

largest mobile manufacturer in the world.
• Eventually, the company decided to leave
consumer electronics behind in the 1990s and
focused solely on the fastest growing segments
in telecommunications.

• Probably the most important strategic change

in Nokia's history was made in 1992,
however,the new CEO Jorma Ollila made a
crucial strategic decision to concentrate solely
on telecommunications.

• Thus, during the rest of the 1990s, the rubber,

cable and consumer electronics divisions were
gradually sold as Nokia continued to divest
itself of all of its non-telecommunications
businessess.

• Nokia saw a huge increase in sales to North

America, South America and Asia
• Nokia was one of the key developers of GSM
(Global System for Mobile
Communications), NMT (Nordic Mobile
Telephony), the world's first mobile
telephony standard that enabled
international roaming.

• By 1998, Nokia’s focus on

telecommunications and its early
investment in GSM technologies had made
the company the world's largest mobile
phone manufacturer. Between 1996 and
2001, Nokia’s turnover increased almost
fivefold from 6.5 billion euros to 31 billion
euros
 “The Rise to the Top”

• Nokia was first mobile phone manufacturer to realize

in late 1990s that phones not played only a functional
role, they were also becoming a fashion symbols.

• Nokia emphasized functionality over aesthetic appeal.

• Nokia broke new ground in 1999, when it launched its

8210 handset at a Paris fashion week, on its success
with the 8200 series, the company regularly brought
out phones that were considered design marvels. For
Nokia it not only achieved the ‘First mover advantage’
and increased market share but also establish strong
brand name in the mobile phone industry.

• There are different type of strategy such as Deliberate

and Emergent.

• To rise to the top Nokia adopted Emergent strategy

basically to achieve a fit between the organization
strategy and environment.
“Strategy Adopted by Nokia”
• This type of strategy emerges from the stream of
decision, best suited to hyper dynamic and hyper
competitive environment.

• Nokia adapted these strategy to meet the customer

need and to earn the dynamic global market share.

• Nokia greatly emphasize on innovation, it catered on

the successful innovation from the employees such as
“Text message” Nokia “Navikey” (which changed user
interface systems on phones by removing some of the
dispensable keys and combining their functions in a
single key) an internal antennae design. This series
became one of the most profitable products in Nokia’s
history, grossing profit margins of 70% to 80%.

• This transition required both an inside out capability

to produce the custom product which differentiated
with the competitor products.

• To facilitate and promote innovation in the best

manner, Nokia adopted an un-conservative R & D
structure.
• Nokia’s R & D operations were scattered across the
world in nearly 70 sites.

• These centers were given complete freedom to

employees to operate and developed their own ideas,
the structure was flat and most of the employees
reported directly to the head of R & D.

• The aim of dispersed R & D was to ensure that the

researchers did not develop “tunnel vision”.

• By establishing research centers around the world,

Nokia was able to get a wider perspective of the
market as well as access to international intelligence.

• In 2000-2001, Nokia was firmly established at the top

of the mobile phone industry, controlling around
35% of the market.
TABLE I Nokia’s Popular Phone
Models up to 2000

Model Year of Unit sales (in

Number Launch millions)

101 1992 12

2100 1994 20

5100 1998 100+

3200 1999 45

8200 1999 35

3300 2000 70+

TABLE II Market Share of Major Players in
Mobile Phones

2001
2002 Sales 2002 2001 sales market
Compa (in market (in share
ny thousand) share (%) thousand) (%)

Nokia 151421.8 35.8 139672.2 35

Motoro
la 64640.1 15.3 59092.2 14.8
Samsu
ng 41684.4 9.8 28233.5 7.1
Siemen
s 34618 8.2 29752.8 7.4
Sony
Ericson 23112.9 5.5 26955.9 6.7

Others 107941.4 25.5 115876.6 29

Total
market 423418.5 100 399583.2 100
 “The Fall”

Olli-Pekka Kallasvu, Nokia’s CFO, even

remarked ,”The complexity [of the new
devices] benefits us. We know the industry
better then anyone. Complexity improves our
competitive position.” But even at that time,
Ollia remarked that the biggest danger the
company faced was its own complacency.
• Nokia totally failed to read the market signals like
growing demand for ‘clamshell’ phones, color
monitors and camera options, while Asian players
like Samsung, LG and Sharp quickly introduced new
models at better prices.

• Companies like Sony Ericsson also proved more agile

then Nokia in adapting to new market demands.

• Nokia’s global market share fell to 28.9% in the first

quarter of 2004, from 34.6% in first quarter of 2003.

• Nokia’s global share market fell to 27.7% in the

second quarter although the sales, increased 11.8%.

• Had very little to offer in the mid price segment of

phones.
• Company’s tardiness in introducing customized
operators-specific handsets which was emerging as a
major trend in the industry in the early 2000.

• Nokia just concentrated on developing the high end

phones and the complicated software while paying
insufficient attention to external developments.

• Market wasn’t ready for such devices .Thus the

company's distinct competence on technology based
products did not improve its performance and failed
to meet customers need and its blunt market sense.
 SWOT Analysis

STRENGTHS WEAKNESSES

• First mover Advantage • Misinterpretation of market

• Market share of 35% which signals
was higher than the • Design backwardness
competitors • Excessive investment in high-
• Diversified through end phones and complicated
acquisitions ( overtook structure
Motorola and became the • Lower than expected
largest manufacturer) performance of its gaming device
• Innovation N-Gaze
• Bottom-up approach • Invested heavily in the
• Flat structure development of advanced
software
• Unconservative R&D
Approach • Focused too much on
technology
• Failed to see some of the trends
emerging in the mobile phone
industry in the early 2000s
(clamshells, color screens,
camera phones)
• Company’s delay in
introducing customized,
operator- specific handsets
• Underwent an internal
reorganization
OPPORTUNITIES THREATS

• Emerging markets in • Facing more new

developing countries like competitors (Microsoft
China, India Corp. decided to enter
• Emerging market for the market )
high-end mobile phone such • Lost market share
as business user phone. • Strong competition in
mobile industry
 “Efforts At Recovery”
• Nokia tried to align the resource – based strategy
with the market- driven strategy once it realized its
slowing sales and decreasing sales revenue.

• Based on the above analysis, marketing-led strategy

and resource-based strategy both played key role in
Nokia’s process of success. Indeed, these two
approaches have a reciprocal and complementary
relationship.

• Recaptured its market share and increased revenue.

• Postponed the launch of the 7700 until 2005 as it was

found to be too early for the market.

• Launched software compatible with different

operators’ news, music and gaming services without
having to modify the hardware.

• Planning to open a new headquarters in New York.

• Began hiring Non- Finnish employees for top level

positions.
 Nokia’s Marketing Strategies

Aggressive
Pricing
Ensure Focused on
accountability handset
and quality manufacture

Improve Enhance
collaborations product
on design Customer portfolio
Satisfaction

Increase Increased
commitment distribution
to market channels

Adjust
Focused on preferences for
replacement specific market
 Corporate social responsibility

• Created 6% of new energy savings in technical

building maintenance systems between 2007-2012.

• Nokia created a climate strategy in 2006 where in

they looked at the energy consumption and CO2
emissions of their products.

• Use of renewable energy sources.

• Has come up with the idea of recycling its products.

 “A Challenging Future”

• Nokia faced a great challenge in becoming the

dominant leader in the mobile industry from its
competitors.

• Despite its laudable efforts in the direction of

capturing its lost position , it has not been able to gain
a competitive advantage in the mobile phone market.

• In early 2000 , mobile phones were expected to

perform a variety of functions in addition to looking
stylish and being easy to operate.

• Nokia’s competitors were launching several models

like Motorola came up with Motorola Razr V3 which
had a unique style and sleeked design.
• Sony Ericsson also became the first company to
launch a “swivel phone” with a jackknife style of
operation .Also it came up with a model named S700
that had a camera enclosed in it in the front side.

• Other players like LG were also fast developing as

they came up with the 3G Technology .

• The industry was becoming quite volatile and several

Asian players were emerging in the market.

• The major challenge for Nokia in its near future was

to identify new avenues for growth in market that
was becoming increasingly saturated.

• It was suggested that targeting the developing

countries would bring in good potential for mobile
penetration
 Steps Taken By Nokia

• It launched various new models specifically designed

for emerging markets and by 2004 its strengthened
its position in various countries like Russia , India,
Africa and middle east.

• Certain mobile phones were specifically designed for

Business users. Nokia found that it was a great
opportunity as this was the untapped market for it.

• Nokia also licensed with Blackberry Software for use

on some of its handsets .

• Multimedia and gaming devices were also into

consideration . It concentrated on improving N-Gage
model to ward off competition from Sony PSP and
Nintendo DS model.
 Nokia’s Vision for Future 2010

Nokia’s New Vision

“The Full Power of Being Connected”

By 2015 , all people would experience the

full power of being connected everywhere
anytime.
 Nokia’s Strategy

Competitive environment
is changing for Nokia

Traditional competitors making

an effort to increase volume
share in the low end. As the
mobile telecom , Internet and PC
industries converge , the
industry ecosystem is
expanding , new entrants like
Apple , Rim & Google are
creating value with mobile
solutions.
Consumer needs are changing

Voice and design driven devices

business continues to be important and
volume growth will resume . Innovative
mobile solutions are delivering
significant new value for many
consumers .The goal is to be a truly
consumer driven company and they
responding to these divergent consumer
needs.
Competitive Advantage now and in the future

Leveraging our core

Developing New strengths
strengths

•Leading brand •Seamless, delightful and

effortless user
•Scale experiences
•Distribution capability •Vibrant partner
•Product portfolio ecosystem
excellence •People and places
•Leading market position in enriched solutions
most markets •Direct and continuous
consumer relationship
•Regain market position
in all markets .
 Nokia’s Transformation
Underway

Direct and continuous

consumer relationships

Best
Smart Services
Devices

Irresistible solutions and

Vibrant ecosystems
 Transformation By Years

2007-08
Decision to expand into
services
Expand into services area
and become more like an
internet company
2009
Transformation
Planning
Transform into the
leading mobile
solutions provider
2010
Fine tuning execution
areas
Focus on execution
and fixing critical
success factors
essential to our
strategy delivery.