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1. Introduction
1.1 Nokia at a Glance
For most of Nokia's 140-year history the Finish company was a sprawling
conglomerate making toilet paper, rubber boots, wooden flooring, telephone cable, and
a bunch of other unrelated products.
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The firm entered the telecommunication business
in the 1960s when it started making radio transmission equipment, and it strengthened
its position in that industry during the 1980s when it introduced the first fully digital
telephone exchange in Europe and introduced the world's first mobile car phone;
though at 22 pounds the phone wasn't all that mobile and was marketed mainly as a
business tool.
Today Nokia is the world leader in mobility, leading the convergence of mobility and
the Internet. Nokia now makes a wide range of mobile devices, services and software
that enable people to go beyond communications to navigation, music, video and more.
Nokia is not only the world leader in mobile phones. They are also the world's largest
camera manufacturer and a leader in digital music with sales in more than 150
countries.
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1.2 Components of a Strategy
A company's strategy is management's action plan for running the business and
conducting operations. The crafting of a strategy represents a managerial commitment
to pursue a particular set of actions in growing the business, attracting and pleasing
customers, competing successfully, conducting operations, and improving the
company's financial and market performance.
4
Mullins, Walker and Broyd suggest in a more marketing-related approach that a strategy
should specify (1) what objectives to be accomplished, (2) where on which industries
and product-markets to focus, and (3) how which resources and activities to allocate
to each product-market to meet environmental opportunities and threats and to gain
competitive advantage.
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Thus a well-developed strategy contains five components, or
sets of issues:
1. Scope
2. Goals and objectives
2
Mullins, Walker, Boyd (2008), p. 458
3
About Nokia (2008), p. 5
4
Thompson, Strickland, Gamble (2007), p. 3
5
Mullins, Walker, Boyd (2008), p. 40
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3. Resource deployments
4. Identification of a sustainable competitive advantage
5. Synergy
1.3 Three Level of Strategy
Mullins, Walker and Broyd claim that most organizations have a hierarchy of
interrelated strategies, each formulated at a different level of the firm. The three major
levels of strategy in most large organizations are (1) corporate strategy, (2) business-
level strategy, and (3) functional strategies focused on a particular product-market
entry.
6
In this work, all three strategy levels of Nokia will be identified, and later gathered and
collectively examined in the Strength, Weaknesses, Opportunities, and Threats (SWOT)
Analysis.
1.4 Changing Environment Requires New Strategies
With a well crafted and executed strategy a company can gain success, but whenever a
company encounters disruptive changes in its environment, questions need to be raised
about the appropriateness of its direction and strategy. If a company experiences a
downturn in its market position or persistent shortfalls in performance, the company
managers are obligated to investigate for causes and to take timely corrective actions.
7
Nokia as the largest mobile phone company in the world is facing to stronger
competition; its long-term dominance is now challenged more than ever. Observers
have begun asking whether the cutting edge that has turned Nokia into the No 1 vendor
still exists, as Nokia's market share and revenues have been on the decline.
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Falling
average sales prices and market share have had an impact and forced Nokia to further
re-think its strategy towards developed and emerging markets.
The next chapters will analyze the potential of Nokia's strategic planning to protect the
firm's financial success while business environment is changing.
6
Mullins, Walker, Boyd (2008), p. 41
7
Thompson, Strickland, Gamble (2007), p. 43
8
http://www.the-infoshop.com/study/kt32528-nokia.html
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2. Corporate Strategy
2.1 Corporate Vision and Mission
Olli-Pekka Kallasvuo, Nokia CEO, is manifesting in Nokia's annual report 2007 that
there are some very clear things all companies need to take care of if they are to take
care of their customers. "And it's not only in what a company does, its how the
company does it. It's how we listen to consumers and how we respond to their needs;
how we select, empower and motivate the right people that work in our company; how
we work with the partners that complement our own strengths; and how we live our
values in everyday work and shape a culture of innovation. It's getting this mix right in
each company environment that makes for both a responsible as well as a strong-
performing company, the two things needed to generate success that can be sustained."
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2.2
Corporate Objectives
In Nokia's "Access for all" objective, they want to ensure that no one is left behind
while seeing supporting social and economic development as a huge business
opportunity. Millions who live in areas with network coverage will still not
be connected because the cost of ownership is too high. Nokia is seeking for ways of
bringing mobile communications to poorer areas.
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Nokia is aiming at extending and enhancing his brand while creating value and choice
for people. They offer services and software in the areas of advertising, business,
navigation, entertainment and social communities. Ovi represents Nokia's vision in
combining the Internet and mobility. The word literally means "door" in Finnish and
Ovi is the door to the mobile Internet and a growing range of services.
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Nokia is seeking to grow, transform and build the Nokia business based on firm's
business strategies and strategic capabilities. Nokia's business strategies reflect the
primary focus of each business areas as follows:
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· Lead and win in mobile devices
· Grow consumer Internet services
· Accelerate adoption of business solutions
· Leverage scale and transform to solutions in infrastructure
9
About Nokia (2008), p. 3
10
About Nokia (2008), p. 7
11
About Nokia (2008), p. 10
12
Nokia Annual Report 2007
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3. Business-Level Strategy
3.1 Generic Business-Level Competitive Strategies
Researchers have identified general categories of business-level competitive strategies
based on overall patterns of purpose, practice, and performance in different
businesses.
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Michal Porter distinguishes three strategies or competitive positions
that business pursue to gain and maintain competitive advantages in their various
product-markets: (1) overall cost leadership, (2) differentiation, and (3) focus.
Robert Miles and Charles Snow identified another set of business strategies based in a
business's intended rate of product-market development.
14
They classify business units
into four strategic types: prospectors, defenders, analyzers, and reactors. Figure 1
classifies business strategies according to Miles and Snow on two primary dimensions:
the unit's desired rate of product-market development and the unit's intended method of
competing in its established product markets.
Figure 1: Combined Typology of Business-Level Competitive Strategies
15
13
Mullins, Walker, Boyd (2008), p. 217
14
Miles, Snow (1978)
15
Mullins, Walker, Boyd (2008), p. 219
Reactor
Defender
Analyzer
Prospector
Units
primarily
concerned
with
attaining
growth
through
aggressive
pursuit of
new product-
market
opportunities
Units actively
seeking to
expand into
related product-
markets with
differentiated
offerings
Units actively
seeking to
expand into
related product-
markets with
low-cost
offerings
Units primarily
concerned with
maintaining a
differentiated
position in
mature markets
Units primarily
concerned with
maintaining a
low-cost
position in
mature markets
Units with no
clearly
defined
product-
market
development
or
competitive
strategy
Emphasis on new product-market
growth
Heavy
Low
Cost
Leadership
Differentiation
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3.2 Five-Forces Model of Competition
Far and away the most powerful and widely used tool for systematically diagnosing the
principal competitive pressures in a market and assessing the strength and importance of
each is the five-forces model of competition.
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Figure 2: The Five Forces
17
This analytical tool will be used to examine which of the business-level competitive
strategies Nokia is deploying; the result of the strategy assessment is illustrated in
chapter 5. Five competitive forces collectively determine an industry's longterm
attractiveness. To summarize the analysis judgement of the favourability of the five
forces for the mobile phone manufacturing industry, all data is gathered in the chart
below.
Rivalry among present competitors
Score: rivalry is high leading to high customer churn
Rationale:
Motorola and Samsung have made Nokia pay dearly for its rudimentary approach in
marketing its phones. The aggressive marketing practices followed by Motorola had hit
Nokia very hard and it has lost very crucial global market share to its American
competitor.
18
16
Thompson, Strickland, Gamble (2007), p. 55
17
Thompson, Strickland, Gamble (2007), p. 54
18
Mridul (2007)
Potential
Entrants
Buyers
Suppliers
Substitutes
Rivalry among
Competing
Sellers
6
Costs are coming down and the mid-tier handset of yesterday is the low-end handset of
today. The mobile handset market is mature and more competitive and OEMs have to
find innovative ways of differentiating themselves.
19
Nokia re-structured its
organization to be more customer focused and for developing multifunction `smart'
products as cutting-edge technology.
Nokia has a powerful competitive edge in its global economies of scale. It sells 2-3
times more phones than its nearest rivals.
20
Threat of new entrants
Score: threat of new entrants is moderate due to competition from related businesses
Rationale:
As a result of developments in the mobile industry, including convergence device
technology with the Internet, Nokia is facing new competition from companies in
related industries, such as Internet-based products and services. In addition, new
companies, primarily consumer electronics manufactures, are entering the mobile
device business. To protect the market share, Nokia is answering withy developing or
acquiring complex, evolving technologies to use in the mobile industry.
21
Supplier power
Score: supplier power is low
Rationale:
Nokia is extremely good at managing its supply chain and component costs. This will
serve it well as growth rates in the handset market taper off from 30% in 2004 to 10% in
2005.
22
Nokia depends on a limited number of suppliers for the timely delivery of sufficient
amounts of fully functional components and sub-assemblies and for their compliance
with firm's supplier requirements.
23
19
Rao, Kumar (2005)
20
Rao, Kumar (2005)
21
Nokia Annual Report 2007
22
Rao, Kumar (2005)
23
Nokia Annual Report 2007
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- , 2014, Analysis of Nokia‘s Corporate, Business, and Marketing Strategies: Examination of Nokia’s strategy execution in three steps, Hamburg, Bedey Media GmbH, https://www.anchor-publishing.com/document/312707
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