NOKIA TURN DOWN A STRATEGIC ANALSYSIS

The present study is conducted on Nokia Corporation. The Company was considered as the pioneers of mobile phones.  Nokia’s long history and reliable products has led the company as one of the largest mobile manufacturers in 1990’s. However, soon after the company faced major setbacks in its product line. The present study was conducted in order to identify the various aspects that have led the company in such a devastating situation. Moreover analysing the external and internal factors helps in evaluating Nokia Corporation and what constructive steps should be taken in order to regain its market position. Numerous strategic approaches were used in order to critically analyse the company’s position. In order to analyse the internal factors companies resources and strategic capabilities were analysed. Furthermore for the external variable analysis tools such as PESTEL and porters five forces analysis were used.

The present study analysis revealed that the Nokia Corporation’s reason of down turn lies in the failed management policies. As the company’s management was unable to predict the trend in changing customer preferences. Similarly the corporation got isolated in the industry were as its competitors used other aggressive market approaches to cater the demand of its customers. Therefore the company needs to carefully design its future strategies while focusing on its customers, innovative products and pricing strategies. These strategies will help the Corporation to re-enter in to the mobile industry and regain its position back.

 

 

 

 

 

 

 

 

Introduction

 

 

1.1Introduction

This era is considered as the era of diversity and dynamism, where organisations are striving hard in order to sustain their market position (Perraton et al., 1997). Numerous organisations are taking strenuous efforts for their growth and survival in the global economy. According to Aminy (2002), the rapid technology interventions, high volatile markets and political relationships have blurred the traditional boundaries and let the businesses to grow instantly, thus providing a road map of rapid economic globalisation.

In such instances organisations are focusing on its strategic position in order to undermine the challenges faced by numerous external and internal factors (Catanzariti, 2013). Fronting of these numerous challenges will help to ascertain the organisations’ strategic position in the world market (Knight, 2000). Amongst many businesses the present study will focus on one of the largest consumer electronics manufacturer of the world the Nokia Corporation and the reasons behind its down turn. The study will highlight and assess exogenous and endogenous forces that led the company to face severe market down turn and also help in recommending certain strategic approaches for the future growth and development.

1.2Nokia Corporation

Nokia is a Finnish Multinational corporations established by a mining engineer Fredrik Idestam in the year 1865. Fredrik initially established a wood pulp mill in southern Finland in order to manufacture paper (Haikio, 2002). With the advent of industrialisation in 1980’s company started on flourishing attracting a larger workforce and also exhibiting in to Finnish rubber works. Expanding the rubber work leads Nokia to electronic manufacturing and sharing majority of cable works in the Finland by 1920’s (Jia and Yen, 2015). In the mid 1960 the company first emerged as the Nokia group, which was now focused on manufacturing cables for telephone and telegraph networks (Steinbock, 2001). This was the era where seed of telecommunication was planted by Nokia group. The Nokia group now was more focused on the semiconductor generation technology for uplifting Nokia telecom industry in to another higher level.

The Nokia electronic progress was much immerse in delivering electronic products in 1970’s. The company first digital switch Nokia DX 200 was a great success, Steinbock, (2001) in his study highlighted that this digital switch was considered as the pioneers of electronic revolution of Nokia Group. The DX 200 was featuring highly programmed computer language with Intel microprocessors which was still used by the Nokia’s network basic infrastructure today. Later in 1980’s Nokia started on manufacturing communicating products for the Finland’s defence force including the most renowned communicating device the Sanomalaite M/90 (Ballon and Delaere, 2009).  Gradually the company moved in making conglomerates with radio industry and joint ventures with Solara a television maker were considered as developing the base of Nokia’s mobile phones. In 1981 under mobira (Nokia and Solara joint venturing group) the Nordic Mobile telephone (NMT) was manufactured. Later in the 1982 the company introduced another product in the market the Senator car phone (Haikio, 2002).

The Nokia’s first portable mobile phone was Mobira cityman 900, but now the company focused on GSM technology in latest mobile phones with collaboration with Siemens. The Finnish Prime Minister Harri Holkeri on July 1, 1991 made the first GSM call of the world by Nokia equipment (Leppaniemi, and Karjaluoto, 2005). After this massive success in 1992 first commercial mobile phone of Nokia 1011 was entered in the market. Gradually the company overtook the largest mobile manufacturer Motorola in 1998 and became the largest selling mobile phone brands (Ballon, 2009). Under the NOKIA brand the company products include Nokia smart phones, Nokia communicators, Nokia desktop computers; Nokia Television sets and many more including variety of Mobile phones.

Capturing such a huge market and moving forward in such a progressive rate however, Nokia faced major setbacks. According to Ollila, former CEO of Nokia Corporation that the major cause of the company downturn was that the company failed to sense the popular trends in the mobile industry.  The changes in industrial dynamic have been the major cause of the company’s downturn. According to Leppaniemi, and Karjaluoto, (2005) the effectiveness of industrial analysis and its link with the company’s strategic approaches helps in achieving better market position. Innovation and forecasting consumer demand needs to be carefully embedded in the company’s strategic processes which will help in gaining competitive advantage (Keller, Parameswaran, Jacob, 2011).

The present study was designed to analyse the performance of Nokia Corporation through the company’s exogenous and endogenous variables and critically discussing the Nokia’s down turn.

Research Question

To achieve the objectives stated earlier, following is the leading research questions modelled for the present study

  • What are the factors (Internal and external) behind the Nokia corporation business performance?
  • What strategic approaches are essential for the company’s future performance?

Research Objective

This research will be an effort to study reasons behind the Nokia corporation downfall

  • To identify the reasons behind the company’s lower financial position.
  • Highlighting and assessing strategic approaches that will help to analyse the firm present performance and giving recommendations for its future growth and development.
  • Underlining the significant improvement measures through studying different strategies for their development

1.3Methodology

The basic research conducted in the following study would be literature review of secondary data obtained through different sources including articles of different journals, books, company’s financial records and university Library. Secondary data is a feasible approach which gives access to the international comparative studies (Cooper et al., 2003). Similarly the data helps in generating new insight from past analyses and also enables a larger set of data. This approach according to Hair, (2009) is considered a most feasible approach for analysing vast amount of information.

This approach is a qualitative strategic base approach analysing the company’s past through different sources and analyse its future on the on-going environmental conditions. The PEST analysis will help to identify the present and future strategic approaches of the company that are essential for its growth and development. Whereas Resource based view will help to consider the company’s dynamic capabilities. Finally the TOWS analysis will help us to identify the link between external and internal environment of the company and suggest feasible strategic approaches for the company’s development. All these strategic approaches were used in order to analyse the company’s position and suggest certain constructive steps for its development.

 

 

 

 

 

 

 

 

Chapter 2

2.Performance Analysis

 

 

2.1Introduction

Therefore, in the present chapter we will analyse critically the company’s performance measures such as analysing the strengths and weaknesses of the company. In addition analysing company’s internal and external factors through different strategic methods which will enable us to identify the factors associated with the company situation.

Globalisation is the connectivity of the world economies, which has led businesses to operate at much larger scale and hence originated the concept of Multinational companies (MNC) (Knight, 2000). Thus, globalisation at one hand generated opportunities of growth and development while on the other hand companies have to face numerous challenges as well such as fierce competition, volatile market, rapid technological growth and human resource management. According to Van Vught et al., (2002) in order to survive the companies basic persistence lies in to dimensions such as increase productivity, encourage creativity, innovation, predict change in customers demand and reduce competition. In such instances many company’s mark their niche in the market place while few of them fall back.

 

Fig 1: Nokia comparison with its competitors

 

 

Nokia Corporation has been one of the leading mobile companies of the world according to the statistics of 2004 (see fig.1) the company made a record sales of 22.15 Billion Euros in European Market only while capturing 39% market share globally (Bhutto, 2005). Company’s huge success lies on the Nokia phones, television sets and computers. However, the company gradually started on losing its market position by the intervention of smart phones and when in the year 2008 world recession hits European economies much intensively (Aspara et al., 2011). This gradual down turn has further deepens and led company in to a devastating condition. Various reasons of the company down turn were analysed such as the company failure to innovate, sensing changing customer demands, managerial problems and fail to strategize long term company’s plans (Leppaniemi, and Karjaluoto, 2005; Birt et al., 2008).

 

2.2Performance Analysis

Nokia Corporation has a strong historic background where company initiated from pulp mill to Nokia mobiles. However company faced a major hindrance from early this decade whereas numerous studies indicated that the company was unable to meet the demand of the customers (Jia and Yen, 2015; Leppaniemi, and Karjaluoto, 2005; Birt et al., 2008). Gradually Nokia Corporation started on losing its market position and a prominent decline was observed in the company’s performance. As, according to Leppaniemi, and Karjaluoto, (2005) the Nokia corporation became unable to grasp the market demand accurately because the company failed to predict popular trends of customers. Hence the company’s performance started on declining.

In the present study the performance analysis of the company is conducted on the basis of three major perspectives including financial perspective, market perspective and other internal perspectives.

2.2.1Financial Perspective:

Financial analysis of the company helps in building the company profitability and its return on the shareholders in the form of dividends/share price (Birt et al., 2008). This will also help in analysing the business future perspectives by underling the issues in the financial statement of the companies (Magnusson et al., 2005). Company’s consolidated statement will help to analyse the company’s position and trends which includes cash flow statement, income statement and balance sheet from the year 2010 to 2013.

Table 1: Consolidated Income Statement of Nokia for the Year Ended 2010-2013

Year

2006-2007

2008-2009

2010-2011

2012-2013

Revenue/Sales

51,402

50,235

42.356

40,356

Gross Profit

17,356

17,369

13,458

12,589

Cost of sales

33,256

33,470

27,256

29,256

 Res and Dev

5636

5956

5987

5246

Other Exp

424

5510

56

240

Net profit

6746

3889

260

2643

Source: Statistica, Amount is recorded in Billion Euros

This income statement depicts the company has a gradual fall in the company’s net profit where company sales reduced much adversely with every passing year. However company’s net profit increase in the year 2013 with the company dealing with Microsoft in exhibiting smartphones together (Ali-Yrkko et al., 2013). This venture helped company to improve the product features through advance operating system.

  • Return Ratios

Return ratios are important aspect to analyse the business through analysing the efficiency through which business employed its equity, assets and capital for profit generation (Birt et al., 2008; Laitinen et al., 2006). The ratio returns (see table 2) validates a decreasing return in the company ration returns.

Table 2: Ratio Returns

Year

2010

2011

2012

2013

Return on Assets

17.49%

9.87%

1.00%

3.1%

Return on Capital

54.9%

27.4%

6.4%

7.02%

Return on Equity

53.1%

27.5%

6.5%

8.54%

Source: Statistica

The company’s demonstrate continuous decreases as per each passing year. The company assets reduce to minimum as the company has taken a decision in changing business through a pact with Microsoft in featuring smartphones in future (table 1). The sale records clearly depicts Nokia in its good times and also the down fall after year 2009 as with the advent of the smartphones in the market and gradual change in the customers preferences over mobile phones.  Fig 2 displays that how the company profit of 468.5 billion euros in 2008 reduced to 250.9billion euros till 2013. The negative slope in the profit margin of the company accentuates that company gradually loosed its customers with each passing year.

 

Fig 2: Nokia sales (billion Euros) from 2005 to 2013

2.2.2Internal Perspective

Enabling resources of the organisations efficiently and effectively will results in high performance measures and analysis. In case of Nokia corporation performance analysis it is necessary to analyse the company resources and identify what led the company to such a down fall. Numerous business analysts were of view that the company major reason of declines falls within the company’s forces such as the management of the company which was unable to predict the market accurately, a deviation of the business tactics was observed but company was unable to foresee that change (Keller, Parameswaran and Jacob, 2011; Fleisher and Bensoussan, 2003). Therefore, Nokia’s management became one of the major reasons of the company position.

According to Schienstock, (2007) the market prediction helps in strategically analyse the company’s approach for future decision making. The face of change in the consumer demand of the product when the companies like Apple incorporated advanced technology in mobile phones the basic features pertaining to communicating device gradually changed to manage all gadgets in to one product. However Nokia’s management still stuck with the product oriented approach the company lack to envision the changing customers demand (Bhutto, 2005). The market analysis of the company was not been followed critically as Mugnusson et al., (2005) contended in it research that Nokia thus separated itself from the market didn’t progressively demonstrate its vigilance in meeting the changing customers’ demands.

Company’s tactics in enabling better hardware while ignoring the software aspect of the product. In late 1980’s when company developed highly programed computer language Symbian that revolutionised mobile industry and company remain at the top for several consecutive years and attain highest market share (Aspara et el., 2011; Ancarani and Shankar, 2003). However with the advent of operating system the company failed to realise change in its business tactics and thus followed same procedures for operating while problems were gradually been identified and later became major hindrance of the company product line (Barnes, 2002).

Another aspect of the company was highlighted was company isolated itself from the other manufacturers in the same industry (Laitinen et al., 2006). Company thus fails to comply within the changing demands of the customers. The management of the company focused on creating profit monopoly while loosed its own customers share (Ancarani and Shankar, 2003).       

2.2.3Market Perspective

In this era of fierce competition companies needs to analyse several approaches to sustain its position in the world market (Knight, 2005). Nokia Corporation went through different stages of development but the company failed to meet the continuing demands of their customers. According to Ali-Yrkko and Hermans, (2005) in order to sustain a position amongst your competitors, companies carefully need to scrutinise the market demand and its trend. If however, when they were unable to meet those changes the company will not able to sustain its position.

The study of David J, Cord highlighted this trend in his book “The decline and fall of Nokia” in which David described that the Nokia’s reason of decline lied on the company’s management. Where they were unable to identify and predicted the market demands. The change in the mobile phone industry has been observed and the greater inclination was detected when companies such as Samsung has modified all range of its product. Therefore the company was unable to retain its customers as according to Vecchiato, (2015) the company sells reduced from 36% from 2008 to 2010.

Nokia needs to work on establishing market for the company’s product line while executing advance features in the company’s product. The recent market analysis will also help in identifying the leading competitors of the industry (Ali-Trkko et al, 2004). The company needs to establish certain strategic approaches to deliver better market results and accompanying the customers demand.

2.3Summary

In the following chapter the company’s performance analysis was conducted on the major perspectives including financial, market and internal perspective. The major insights of the chapter includes that the company from 2008 started on losing its financial position as with the advent of smartphones. On one hand company management failed to analyse the changing demand of the customers while focusing on company’s old approach of product orientation. On the other hand market was completed changed with the advent of the smartphones in the market the competitors aggressive marketing strategies also improved its position while Nokia further went on reducing its due share.

 

 

 

 

 

 

 

Chapter 3

3.External Environment Analysis of Nokia Corporation

 

 

3.1Introduction

This chapter will focus on the external environment variables of the Nokia Corporation. In the following chapter PESTEL analysis and Porter’s five forces analysis will be conducted of Nokia Corporation. These analyses will help to give an overview of the company’s external forces and how they should be tackled.

3.2External Environment Analysis of Nokia Corporation

Organisations are no more operating in an insular environment however they are working in an integrated global network. Therefore in order to survive and sustain its market position organisations need to carefully scrutinise its external forces and take comprehensive steps accordingly. In order to analyse the external environment of the Nokia Corporation it is necessary to significantly assess all the stakeholders including industrial overview and Market overview. Therefore, in order to conduct Industrial overview PESTEL analysis will be conducted and market is overviewed through Porters Five forces Model.

3.2.1PESTEL Analysis

To analyse the macro environment which includes factors those are uncontrollable and influence the company’s performance and strategy (Barnes, 2004). The factors may include political, economic, social, technological, legal and environmental factors more commonly known as the PESTEL analysis. This strategic management tool is used to gauge the external environment of the company (Leavy et al., 2003). According to Pearce et al., (2000) PESTEL analysis helps in tracking company’s competitive advantage thereby seeking opportunities for the company to sustain its competitive position and increase market share.

  • Political Factors

Political issues and decisions significantly affect any businesses operating in the given region. As, Nokia operates in varied geographic regions it’s therefore necessary to carefully analyse all the factors that can affect the company (Ancarani and Shankar, 2003). In order to regain its market position companies needs to carefully obey and consider all the rules and regulations pertaining to the country as to avoid any problem while their operations. Nokia’s wide operations ranges to about 150 countries around the global and pertaining to such a wide geographical coverage the corporation needs to consider political conditions before implementing any plans in these countries.

  • Economic Factors

Mobile companies have made immense profits in past decades according to world economic report 2014-2015 this industry has contributed 4.5% to the world GDP. Such an increasing rate demonstrates that consumers are ready to invest in this industry. In addition China and India are more progressive markets Nokia should focus in these markets as to increase its percentage share.

In addition the economic survey on mobile industry reveals more conducive results for enabling mobile companies (Ali-Yrkko et al., 2013). Nokia being one of the mobile pioneers needs to work with its partners in enabling business opportunities and thriving back in to the market. However, the company’s latest position due to economic turmoil in European market led company to face financial challenges (Vecchiato, 2015).

  • Social Factors

According to Ancarani and Shankar, (2003) Social factors relates with the changing attitude of consumer behaviour. Mobile industry has grown immensely as discussed above that clearly depicts the customers preference in their purchasing behaviour. Nokia needs to ascertain the customer’s choice of mobile phones. The advent of smartphones has changed customer preferences of mobile phones (Dez and Kosonen, 2008). The Nokia should certainly focus on this factor in order to carry it in to its business.

  • Technological Factors

In mobile industry technological factors are considered as the most important and significant aspects. Nokia needs to carefully consider and all technological features in to its phones and also try to innovate in this factor. This technological drift will help the company in produce more innovative product and also enable them to achieve greater market share (Vecchiato, and Roveda, 2010). As the leading companies in mobile industry are spending heavily to evolve more and more enabling advanced features such as Apple, Samsung and HTC. Therefore Nokia in order to gain its market position needs to work more firmly and try to compete with its competitors (Leavy et al., 2003).

  • Environmental Factors

Environmental issues are rising every passing year because of increased industrial processes. However, this is a due responsibility of every organisation to work towards sustainable business operations. Nokia should also demonstrate its corporate social responsibility and contribute its due share (Wati and Koo, 2010). The concept of recycling and reduction of carbon foot prints are gaining importance amongst stakeholders’ choices. Therefore many companies are demonstrating all its responsibilities towards environment.

  • Legal Factors

The mobile is a lucrative market however certain issues of copy rights are always been highlighted in the media. Similarly the Nokia has a greater challenge to face is the European market the company is operating under European Union and recent changes may significantly affect the company (Aspara et al., 2012). Therefore, company needs to carefully consider legal limitation accompanying in the world market as well.

3.2.2Porter’s five Forces Model

This market analysis approach was developed my Michael E. Porters and as Fallah and Lachler, (2008) contended that it is a comprehensive technique for development of future strategies. The porter’s five forces model features five dimensions of external market analysis including Competitive rivalry, bargaining Power of Buyer, Bargaining power of Suppliers, Threat of new entrants and Threat of substitutes.

  • Threat of New Entrants

According to Fleisher, and Bensoussan (2003) threat of entrants in the market reduces the market share of the companies therefore analysing threats of entrants prior to any strategic decision helps in achieving the company’s objectives more concretely. Nokia has low barriers of entrance as already the industry has been established and high competition amongst the company reduces chances of entrants in the existing market. Similarly, high Capital is required in order to enter and then sustain its position in the mobile manufacturing. Therefore the barriers of new entrants are relatively high in the market for Nokia Corporations.

  • Bargaining Power of Suppliers

Power of suppliers’ refers to the force which suppliers can exhibit to take control of the market or the company (Jackson, Joshi and Erhardt, 2003). However, in case of Nokia corporations it is much low as the company sole supplier is the Microsoft. As, Nokia and Microsoft both companies agreed on a pact on working to produce new generation smartphones. There is no such other supplier that can put any kind of force to the company that can affect the company production line or performance.

  • Bargaining Power of Buyers

The company recent history clearly reveals that how the bargaining power of buyers does has changed the company facet (Dez and Kosonen, 2008). Nokia corporation has clear understanding that how does the power of buyers can significantly affect businesses. The buyers have variant choices of mobiles from various companies such as Apple, Samsung, HTC, Motorola and many more, many competitors of Nokia are providing higher quality, advanced features product ranging with variant price ranges while targeting populations (Vecchiato, 2015). In such condition the bargaining power of buyers is very high for Nokia Corporations. They need to take certain comprehensive plans in order to deliver quality product featuring advance technology with minimum prices only then the company can be able to attract customers and helps to gain market share in this industry. As Barnes, (2002) contended that the high competition in the industry leads to higher bargaining power of buyers with the view of variety of offers in product and choosing ones that depends upon their needs and satisfaction level.

  • Threat of Substitute Products

Mobiles are embedded very heavily in the daily routine of individuals’ life (Aspara et al., 2011). The substitutes of mobiles are not much evident. The threat of substitutes is relatively moderate for the mobiles. Nokia mobiles however face challenges from somewhat similar product line such as the tablets etc. The functions of mobile phones involved firstly for communication and secondly for disseminating quick information. Focusing these two functions the internets, computers, magazines, newspaper and landlines are unable to be its substitutes. Therefore, the fierce competition within the mobile products with the advanced features enabling within one product reduces threat of substitute product.

  • Competitive Rivalry

Mobile industry exhibits tough competition in the global market. Number of companies are operating and producing variety of products and targeting every possible target customers. Nokia faces immense competition from two big companies Apple and Samsung. These companies were able to capture about 36% of total market share. In addition the current Apple and Samsung customers according to the Vecchiato, (2015) reaches to 80 and 82 million in 2014 such a high ration indicates higher demand of the product. These companies have also been successful in meeting the changing demand of the customers through providing innovative and advanced feature mobile products. In order to develop its position and acquire a larger market share Nokia needs to produce more valuable product featuring all possible features and technology (Vecchiato, and Roveda, 2010).

High competition amongst the competitors reduces overall market share of individual company, the Nokia’s strategic approach towards attaining maximum market share should only be accomplished when company critically scrutinise the product development in to a more feature oriented and according to the customer preferences and market demand.

3.3Summary

Exhibiting the external factors of the Nokia Corporation according to the strategic analysis the major insights of the following chapter are as follows. Nokia Corporation needs to carefully consider all of its external factors as with increase in competition in the market each aspect of PESTEL analysis can affect the company’s performance. Similarly the Porters Five forces Model clearly depicts that company has a threat of competitors however due to larger investment the level of new entrant is quite low.

 

 

 

 

 

 

 

Chapter 4

4.Internal Environment Analysis of Nokia Corporation

 

 

4.1Introduction

In the following chapter a critical analysis of the Nokia’s corporation internal environment will be conducted. The present chapter will use certain strategic approaches to analyse the company’s internal capabilities and resources.

4.2Internal Environment Analysis of Nokia Corporation

According to Fallah and Lachler, (2008) a strategic analyst contended the strength and weaknesses are company’s endogenous variables and it effects internal performance drivers of any organisation. In order to assess Nokia corporation’s internal performances we need the resources and capabilities of the company and porters generic strategies which help to analyse that what internal factors lead the company in to such a situation.           

4.2.1Analysis of Companies Resource Based View

In 1990’s as with increasing competition between the organisations has reached to certainly at a very high level the strategic analysts considered that analysing the organisational resources and linking it with the strategic interface will help company to gain competitive advantage (Barnes, 2002). According to resource based view the company’s competitive advantage lies on its bundle of tangible and intangible resources (Fallah and Lachler, 2008; Priem and Butler, 2001). The evaluation of these resources must fulfil VRIN (valuable, rare, in-imitable and Non-substitutable) criterion. Analysing Nokia’s resource based view:

  • Valuable

Valuable means that the resources must employ value creating strategies that help to outperform and reduce its own weaknesses (Dekker, 2003). Considering the Nokia corporation assets company was blessed with number of tangible and intangible resources. The company long historic back ground has helped the company to establish a niche and reputation in the global communication market (Chang, 2012). Similarly they made no compromises on the product quality and standard, as the company’s research centre was established in 1986 having 500 scientists, engineers and other associates (Magnusson et al., 2005). In addition to its position Nokia has strong financial resources as well. The company has acquired all of its resources with the advance technology and machinery, specialised workforce and well established resource and development sector (Doz and Kosonen, 2012).

  • Rare

With being valuable the resources must be rare as it should expect to give above average return in future (Priem and Butler, 2001). The company’s resources must be rare in Nokia corporation the resources of company due to historic perspective were rare. The experienced workforce, the company technology usage and its research department makes the corporation stronger.

  • In-imitable

In-imitable refers to the resources that are not been duplicated by the competitors. The product of the company needs to in-imitable the Nokia initial technological development and ideas seemed in-imitable (Camponovo, and Pigneur, 2003). With increasing demand of the product and battery life, while company’s pre-cellular systems were considered as one of the greatest operating systems including VHF and Salora Oy (Doz and Kosonen, 2012).

  • Non-Substitutable

Analysing the substitutability of the resources the company’s product line was considered as one of the best of all times. However, with the time the product started on losing its position as many manufacturers in the mobile industry started on producing some what a similar product exhibiting advanced features (Meghisan and Meghi?an, 2008). The company therefore stated on losing its market position after competitors such as Apple, Motorola, and Samsung empowered advance features in to its system.

Table 3 gives a complete description of the VRIN criterion of Nokia Corporation.

Table 3: VRIN framework of Nokia Corporation

Resources

Value?

Rarity?

Imitability?

Non-substitutability?

Competitive

Implications

Economic Implications

Financial

Yes

 

Yes

 

Partially

Partially

Physical

Yes

No

No

No

Partially

Moderate

Technological

Yes

No

No

Yes

Partially

Low

Human

Yes

Yes

Yes

Yes

Competitive Advantage

High

Company’s Position

Yes

Yes

Yes

Yes

Competitive Advantage

High

Customers

Yes

No

No

No

Partially

Partially

Organisational capabilities

Yes

No

No

Yes

Competitive Advantage

Moderate

4.2.2Strategic Capabilities

Strategic capabilities refer to the resources and competencies involved in gaining competitive advantage for the firm (Priem and Butler, 2001). The Nokia Corporation’s strategic capabilities involved with the company resources and its experience in the market. Table 4 will illustrate this in detail:

Table 4: Strategic Capabilities of The Nokia Corporation

Resources

 

Competences

Raw Material

Technology in making Nokia products

Company’s well established Infrastructure

Nokia research Centre

Physical

Installed Production facilities

Shareholders

Financial

Nokia corporation can bring in large number of investors in the company

Company has well established staff

Human

Experienced Staff

Highly capable employees

Creative designers

Source: Constructed by author

4.2.3Thrush Hold and Distinctive Capabilities

The thrush hold and distinctive capabilities of the Nokia Corporation which help them in achieving the competitive advantage includes:

  • Innovation and creativity
  • Raw Material availability
  • NOKIA Brand Name
  • Diversified product Line
  • High Customer Loyalty
  • High quality and standard
  • knowledge intensive

4.2.4Value Chain Analysis of the Lego Group

The value chain analysis is a tool that is used to create best possible value of your product to deliver it to the customers. It includes primary activities and certain secondary activities (Gikunda, 2007). The Nokia Corporation’s value chain analysis can be seen in table 5.

Primary Activities

  • In Bound logistics

As the Nokia Corporation has not been dependent on its suppliers the company gain its control of suppliers through vertical integration.  Company has all the resources that strategically lead them in operations of their business. However, they needs to focus on its consumer-focus competence and levering in global brand building (Camponovo, and Pigneur, 2003; Priem and Butler, 2001).

  • Operations

The Nokia Corporation needs to use different tactical approaches and new technology to enable the demand of the product (Priem and Butler, 2001). They also have to update its operational activities as to increase the company’s position in the global market and ascertaining strategic approaches for enhancing and gaining operational excellence.

  • Outbound logistics

The Nokia corporations also requisite to emphasis on its outbound logistic, as company needs to focus on its outlets, warehouses, stores and channels of delivery. The company’s initiative as to open Nokia Corporation in Asian Markets also helps company to reduce problems of inventory shortage, thus enabling a larger market share (Meghisan and Meghi?an, 2008).

  • Marketing and Sales

Marketing and sales strategies are an essential component of today’s business. Better marketing and sales strategies helps in increasing sales (Gikunda, 2007). The Nokia Corporation need to emphases on its marketing strategies more concretely. The company should ascertain that its products are reaching to its potential customers more easily through global marketing approaches (Meghisan and Meghi?an, 2008).

  • Services

The Nokia should provide all quality of services to their customers and work towards the provision of customer retention schemes in order to attract and retain their customers.  Providing better service standards helps build customers confidence on company’s product and increase customer preferences (Priem and Butler, 2001).

Table 5: Value Chain Analysis of Nokia Corporations

Nokia Corporation Infrastructure: Well Established factories and Admin Services

Technology Development: Needs to focus on Product and Manufacturing Processes

Human resource: Needs big numbers and training and development processes for their growth

Procurements: Development of Components

Inbound Logistics

Much Stronger

Operations

Needs to focus

Outbound logistics

Needs to take constructive steps

Marketing and sales

Requires Much attention and investment

Services

Work on developing new strategies

 

4.3Summary

The following chapter highlighted the company’s resources and capabilities. Company is blesses with number of resources and capabilities however the management need to carefully use all these resources in order to gain competitive advantage. Nokia has strategic brand image therefore it will help company to attract their customers back. However, careful strategic analysis and business plans will surely help company to gain its market position.

 

 

 

 

 

 

 

5.Identifying Challenges and Developing Solutions

 

 

5.1 Introduction

The present chapter will focus on the challenges that the company may face and also exhibiting solutions of these challenges. In this chapter TOWS analysis will be conducted in order to identify the company’s external and internal challenges.

5.2TOWS Analysis

In order to identify the challenges of the Nokia Corporation and recommend certain solutions the Heniz Wiehrich TOWS analysis is used. This strategic measuring tool helps in analysing the internal and external factors that are considered to be used in different business tactics as to improve the firm’s performance.  After TOWS analysis certain recommendations will be suggested from the above analysis and also highlights impacts of the proposed actions.

According to Dittrich, (2008) this 2*2 matrix is an important tool in strategic analysis of the company’s internal and external factors. As Priem and Butler (2001) argued that the TOWS analysis helps in answering business questions such as how to manage business threats?, how to Capitalize business through the firm’s own opportunities?, how to circumvent the firm’s weaknesses and how does the  firm makes of its own strengths?. The different arrangement of the acronym threats, opportunities, weaknesses and strengths helps in identifying various aspects of business where as the mangers are benefited in order to accentuate  on developing tactics, strategies and actions in order to achieve firms objectives and goals more comprehensively.

From the above analysis of the company following strengths, weaknesses, opportunities and threats have been identified and incorporated in table 6 below:

Table 6: TOWS Analysis of Nokia Corporation

 TOWS Analysis

 

 

 

 

 

 

 

 

 

 

 

 

Nokia Corporation

Internal Strengths (S)

1) The company’s strong research and development division.

2) Highly experienced workforce and advanced technology availability

3) One of the biggest networks of distribution around the Globe.

4) Company has Strong Financial position

5) Brand Image

Internal Weaknesses (W)

1) Failed to predict the change in customers demand.

2) The company failed to innovate in its product line and thus losing market share

3) Company’s product were considered price intensive then those of Chinese products

4) Company’s fragile position due to fierce competition

5) Management botched to take constructive steps

External Opportunities (O)

1) Company has enormous opportunities in markets such as china and India.

2) Company can peruse its brand image in other markets

3) Nokia has ability to do different joint ventures to gain market again

4) Style and aesthetics of new Nokia product will help to drive the market again

Maxi-Maxi Strategy (SO)

1) Increase in presence in Global market O1, S3.

2) Penetrating in markets such as India and china while enabling new product line S4, S1, S2, O4, O2.

3) Company should go for venturing as to enable a more innovative products and accompanying larger sales O3, O4, S1, S4

Maxi-Mini Strategy (OW)

1) focusing on the customer driven product line O4, W1, W2, W5

2) Penetrating in other markets through enabling differentiated products W1, W3, W4, O4, O2

3) Improving the customers services while exhibiting the products price ranges O2, O4, W1, W2

4) Enabling Better marketing strategies O1, W5, W2

5) Initiating Joint ventures as to reduce competition O3, W2, W3

External Threats (T)

1) Strong pressure from its competitors Such as Apple, Samsung, HTC etc.

2) Strong Price Compressions

Consumers became complicated in their choice and preferences

3) Loosing markets after Chinese manufacturers.

4) Hard to differentiate in the product line

Mini-Maxi Strategy (TS)

1) Reducing overall making Cost T1, T2, S4, S5

2) The company needs to focus on the customer oriented product line ( enabling the demand of customer preferences) T1, T3, S1, S2

3) Increasing campaigns of Product marketing T3, T4, S5

4) Producing products that are cost efficient T2, T3, S3

Mini-Mini Strategy (TW)

1) Offering products that are preferred by the customers but with associated discount rates T2, T3, W1, W2, W4

2) The corporation needs to be aggressive producer in the cellular market T1, T2, T3 W2 , W4, W5

3) Using the company’s Brand image T3, T4, W1, W2,W4, W5

 

  • Strengths and Opportunities (SO)

Every organisation is built on its strengths and enables opportunities for their further development (Doz and Kosonen, 2012).. The Nokia corporations has several strengths as discussed in TOWS analysis, these strengths of the company comes from the company’s research and development sector and experienced work force (Laitinen, 2005). In addition the company’s strong financial position also helps the company to develop more innovative product. Similarly, good brand image is also an asset to the Nokia Corporation has it empowers the company to go for certain joint venturing projects as to share its resources with other corporation and be able to produce a more advanced featured which is also customer oriented. Such venturing projects helps in reducing monopoly of its competitors while creating synergy (Aspara et al., 2011). Therefore, Nokia needs to ascertain certain strategies as to peruse company’s objectives in capturing its market share again from its competitors.

  • Strengths and Threats (ST)

With increasing competition in the mobile industry around the global put various pressures to the company (Heckmen et al., 1999). Nokia is no exception. Fierce competition amongst the company’s has led Nokia Corporation to focus on different strategic factors while exhibiting the company’s strengths (Vecchiato and Roveda, 2010). In such instances where there is a greater threat from its competitors the company needs to focus on exhibiting better featured products. They also have a strong distribution channel which also helps company to increase its sale volume in these regions. Better financial position also gives leverage in more research and development sector while better technology pursues mass production. Such strategies will affect the company sales and thus reducing the competitors’ position in the market (Keller, Parameswaran and Jacob, 2011; Doz and Kosonen, 2012).

  • Opportunities and Weaknesses (OW)

The Nokia Corporation fragile position due to certain management backlashes needs to be focused more concurrently (Camponovo, and Pigneur, 2003). The company needs to work on enabling external opportunities that will help in reducing the associated problems of the firm (Keller, Parameswaran and Jacob, 2011). The Nokia Corporation should work on enabling better management that is capable enough to take constructive steps in acquiring the external opportunities. Better management helps in analyzing the situation of the company and will also assume certain constructive steps for the company’s development through reducing its weaknesses and enabling external opportunities.

  • Threats and Weaknesses (TW)

Confronting from the firms internal weaknesses and also from the external threats are more imperative to overcome (Camponovo, and Pigneur, 2003). With the company’s latest position the company needs to characterize their threats and weaknesses in order to look more progressively. Similarly the threat from its competitors will be reduced when the corporation will work on reducing the company’s weaknesses. Analyzing and adopting the optimal strategies to change the corporation weaknesses in to its strengths needs to prioritize by the company management (Vecchiato and Roveda, 2010).  Correspondingly the competition within the industry needs to be carefully planned as to ascertain its position in the future.

5.3Summary

In this chapter we have discussed the challenges of the Nokia Corporation and also recommended certain strategic approaches to tackle these challenges. The major insights in the present chapter includes that the company needs to overcome its weaknesses. Similarly a number of opportunities are available that can help the company in competing with its competitors. Such measures are necessary to be considered as with changing pace of business environment. 

 

 

 

 

 

 

 

Chapter 6

6.Conclusion and Discussion

 

 

6.1Conclusion

From the market domination of several years the company suddenly plummeted from its position. In order to analyse the company’s fall a strategic analysis of the company is conducted in the present study through different strategic measures. These measures facilitated in analyzing the company’s position and the causes of its down turn.

The performance analysis of the company revealed that the company was unable to meet the changing customers demand in the cellular market. As with increasing pace of technology drift in the early twenty’s changed the market completely. The management of the company failed to analyse the trend and thus the company faced such a major setback. Numerous studies indicated that the company failed to evolve and it became its major reasons to down turn. Similarly the Nokia Corporation also unable to predict the market that changed due to smartphone invention, these smartphones are likely to become every one’s favorite soon after its invention. However, Nokia unable to produced customer oriented and market oriented product line. In such instances the company further inhibits sales and product demand.

Besides Nokia’s strategic fall it exhibits a larger amount of capabilities and resources to survive from this major back lash and to reenters in to the market again. This study also analyzed the company endogenous and exogenous variables. These variables help to scrutinize possibilities for the company’s future success.  Being pioneers of cellular technology the company possesses a variety of qualities that can help the company to take constructive steps for its development.

Similarly in the following study our analyses revealed that the company should utilize its potentials such as research and development department, efficient work force and brand image for the development of new product line. This product line needs to be carefully designed according to the customers’ preferences.  Utilizing company’s global distribution channels for increasing the company sales volume. However focus on certain joint venturing projects will also help the company to reduce competition by creating synergy through other companies.

Besides the company’s strength Nokia Corporation also exhibits certain weaknesses as well company needs to carefully analyse all its weaknesses and change them in to its strengths. As in the following study it has been identified that the corporation management failed to critically analyse its resources and capabilities more contemporarily as with changing demand in international market.

Therefore the Nokia should carefully priories each business aspect and then take constructive steps accordingly. This time the company should make more comprehensive plans in order to analyse all possible aspects of the today’s mobile industry and then take initiatives accordingly. The company has faced many problems from last decade the company should better learn from all of its mistakes and try to focus on not repeating them while demonstrating its fortes in the mobile industry. In such a way the company will be able to regain its market position while facing a bulk of other business challenges.

6.2Critical Reflection of the study

The mobile phone industry has become one of the largest industry in last two decades. The number of customers increased many folds within such a short period of time. The increasing pace also highlights the industry’s complexities and dynamism. Therefore, a single approach is not enough to cater all the relevant concerns. Numerous approaches need to be done on order to establish a more comprehensive approach for the company’s development and sustainability.

The present study strengths lie in the careful consideration and application of all possible strategic tools to analyse the company position and what necessary actions need to be taken for their development. The present study also critically reviewed literature to identify facts and figures that helped in analyzing the company’s position.  However the records may change according to its own ratio analysis that may bring changes in percentage share, sales volume and profit margins therefore in the present study credible data sources are used for the analysis.

In order to reach to more concrete results for future studies the following studies should collect primary data and analyse them quantitatively or qualitatively. However many analysts were of view that primary data sources are more effective method of analyses. In addition the primary data is collected by the researcher has it does not involve any kind of doubts regarding the data validity, quality and reliability and hence with the study requirement more data can also be used.

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