Future Proofing Through Strategy Nokia Marketing Essay

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It is of extreme important for any organisation especially those such as Nokia who operate on a global basis to have established practices in place to deal effectively with the wide array of factors affecting the ability of the business to grow and prosper.

The formality of the strategic management process can vary widely with formality referring to the degree to which membership, responsibilities, authority and discretion in the decision making process is specified. Formality is an important consideration in any strategic analysis and its application because the degree of formality is usually positively correlated with the cost, comprehensiveness, accuracy and success of planning.

An important issue is that involvement with the strategy process should not necessarily create significant amounts of paperwork (Camerer, 1994)) as this would be viewed negatively which would be a contradiction in terms of the reasoning and operandi in identification of the reasons for the process to be undertaken in the first place.

The strategic management process is based on the belief that businesses should continually monitor internal and external events so timely changes can be made to ensure that the business is not affected in a negative manner. To thrive and gain a larger market share, companies must be able to identify and adapt to change. This involves timely planning, directing, organising and controlling both the strategy-related decisions and actions made by the company (Camerer, 1994).

Quite often, strategy processes are improperly perceived as a unidirectional flow of objectives, strategies and decision parameters from management to the employees. In fact, the processes should be highly interactive and be bi-directional since they are designed to stimulate input from creative, skilled and knowledgeable people working at every level of the business.

1.1 Company Introduction

Nokia is a global communications provider who has a Multi-Country Strategy developed to sell its products in over 130 countries. Nokia mobile phones can be sold under the Nokia brand name, but are in addition co-branded with an operator's brand (companies such as Vodafone). In an attempt to cater for all requirements for perceived and differing requirements across their global market in every country they are present, the company encourages each country unit to develop its own promotional campaigns.

Nokia considers its mobile phone manufacturing to be a core competency and that it provides them with a competitive advantage. They currently operate more than 10 manufacturing facilities in 9 different nations. The US plant primarily supplies the American markets, as do its manufacturing plants in Mexico and Brazil. Three major European plants, located in Finland, Germany and Hungary, principally supply the European market and non-European countries that have adopted the GSM standard. In addition, the United Kingdom plant serves Nokia's UK subsidiary, Vertu. It also has plants in China and South Korea that were introduced primarily to supply the Far Eastern market.

2.0 Analysis Tools

There are several widely used strategic tools available to identify business opportunities available to Nokia and the following sections of this paper critically examine each of the main frameworks, they being; Porters 5 Forces, SWOT, PEST and EVR.

2.1 Porters 5 Forces

Porter's five forces are a structured expansion of the SWOT analysis and by using them and breaking down the SWOT categories into smaller information sectors, a business can gain a strategic advantage over their organisations direction and competitive positioning in the market place.

As Porter's 5 Forces analysis deals with factors outside an industry that influence the nature of competition within it, the forces inside the industry (often referred to as the micro-environment) that influence the way in which firms compete, and so the industry's likely profitability is conducted in Porter's five forces model. A business has to understand the dynamics of its industry and markets in order to compete effectively in the marketplace. Porter (1980) defined the forces which drive competition, contending that the competitive environment is created by the interaction of five different forces acting on a business. In addition to rivalry among existing companies and the threat of new entrants into the market, there are also the forces of supplier power, the power of the buyers, and the threat of substitute products or services to contend with. Porter suggested that the intensity of competition is determined by the relative strengths of these forces.

The original competitive forces model, as proposed by Porter, identified five forces which would impact on an organisation's behaviour in a competitive market. These include the following:

The rivalry between existing sellers in the market

The power exerted by the customers in the market

The impact of the suppliers on the sellers

The potential threat of new sellers entering the market

The threat of substitute products becoming available in the market.

Understanding the nature of each of these forces gives organisations the necessary insights to enable them to formulate the appropriate strategies to be successful in their respective market.

This model offers a very simple method of assessing how market structure can impact on the profitability of a particular business. A company's competitive strategy consists of business approaches and initiatives it undertakes to attract customers and fulfil their expectations, to withstand competitive pressures, and to strengthen its market position. "Competitive strategy is about being different. It means deliberately choosing to perform activities differently or to perform different activities than rivals to deliver a unique mix of value." - Michael E. Porter

Porter states that using this analysis method it is possible to confirm if the company is being effective in capturing value created for buyers or if this value is in fact being driven away by competition from suppliers, rivals, new market entrants etc (Porter in De Wit Meyer, 2004)

2.2 SWOT

This analysis measures how strengths and weaknesses match the business opportunity or threats that may exist to the environment. Environmental opportunities are only potential opportunities unless the organisation can utilise resources to take advantage of them and until the strategic leader decides that it is appropriate to pursue the opportunity. It is therefore important to evaluate environment opportunities in relation to the strengths and weaknesses of the organisation's resources and in relation to the organisational culture. Real opportunities exist when there is a close fit between environment, values and resources. An evaluation of an organisation's strengths and weaknesses in relation to environmental opportunities and threats is generally referred to as a SWOT analysis.

Whilst this process has its doubters, there is still a continuing interest in this form of analysis of the forces that impact on an organisation, particularly those that can be harnessed to provide competitive advantage. The ideas and models which emerged during the period from 1979 to the mid-1980s (Porter, 1998) were based on the idea that competitive advantage came from the ability to earn a return on investment that was better than the average for the industry sector (Thurlby, 1998).

2.3 PEST

This provides for a simple method of business analysis by looking at possible future trends categorising them in to 4 distinct areas, they being:

Political

Economic

Social

Technological

Any strategically aware business must be able to understand the environment within which it is working and be able to change its products and operating regimes to meet changing expectations.

This particular model has been criticised widely and many argue that the appraisal of the external environment with such simple non empirical methodology over simplifies the unpredictable nature of economic and social trends (Mintzbery. Ahlstrand & Lampel 1998).

2.4 EVR

The EVR model was introduced in 1998 and published in 2000-2004 in the International Journal of LCA and in the Journal of Cleaner Production (it then being updated in 2007). The concept of EVR is based on eco-costs (and there are numerous general databases containing published eco-cost data).

The basic idea of the EVR model is to link the 'value chain' to the ecological product chain. In the value chain, the added value (in terms of money) and the added costs are determined for each step of the product 'from cradle to grave'. Similarly, the ecological impact of each step in the product chain is expressed in terms of money, the so-called 'eco-costs'.

3.0 Nokia Strategic Analysis

3.1 Pest Analysis

Political

Economic

Social

Technological

License Costs

Economic growth

Income distribution

Research spending

Tax Policies

Interest rates and monetary policies

Demographics, population growth, rates, age distribution

Industry focus on technology expansion

International trade regulations and restrictions

Unemployment policy

Labour / Social Mobility

New inventions and development

Contract enforcement law

Taxation

Lifestyle Requirements

Rate of technology transfer

Employment laws

Work / career attitudes

Life cycle and rate of technological obsolescence

3.1.1 Political

As Nokia generate sales from countries from all over the globe they are relatively safe from economic or political turmoil in any one nation (or even continent). For example, working at their sites in Europe and America carry a much lower economic/political uncertainty risk but on the downside labour costs are considerably higher when compared to the sites in Mexico, Brazil and China.

Constraints such as the G3 technology costs (110 billion Euros in Europe alone) must be taken into account because all businesses aim to make a profit so they may be tempted to mislead their customers about prices, quality of products and the availability of their products in an attempt to recover such unexpected costs. They may be tempted to cut costs by using lower quality materials in their products (such as inferior materials for phone cases and batteries), also some companies may also dispose their waste in ways that damage the environment (pollution) and not ensuring high standards of hygiene and safety in the workplace.

In addition Nokia must always be aware of changes in taxation policies around the world especially in the current financial climate as governments are looking to reduce the fiscal deficits by increasing taxes on imports/exports.

3.1.2 Social

It is very difficult to arrive at an exact figure as some people own more than one phone, but according to a survey undertaken by the Daily Telegraph, in excess of 50 million mobile phones are registered in the United Kingdom alone which makes the mobile phone handset the most successful consumer product in history!

With Nokia having been at the forefront of this boom, it is important that as a large and influential global organisation that they do not view profits as being more valuable than their ethical branding as this will govern behaviour and potential users perception of them. Many large organisations (notably some of the large oil companies) have to date fallen foul of this very simple measure.

Mobile phones, whilst serving a greater purpose, have also triggered a rise in crime through theft and by providing greater communication channels for the professional criminal. The situation has had such a large impact on street crime (according to the Metropolitan Police it accounts for 50% of all street crime in the UK) that a National Mobile Phone Crime Unit was created to try and deal with the matter. However, just as every cloud has a silver lining, the good news is that the service providers have managed to implement methods preventing stolen phones from being used once stolen which should over time assist in reducing this tendency.

2002, was the year that camera phones came on to the market place and it was thought that it would take a considerable amount of time for them to become popular! This was proven not to be the case as in 2009/2010 virtually every mobile phone sold by Nokia has both camera and video game functionality with satellite navigation and video streaming also becoming hugely popular as consumers look to consolidate their requirements into a single piece of hardware.

Wifi and blue tooth wireless technologies are feeding the demand for Nokia users to access and download information from the internet and other mediums at high speed with "hotspots" being located now in countries all over the world.

With Nokia's diversely geographic operating centres they are always close to their client bases enabling them to quickly respond to changes in requirements of the market and to respond to competitors.

For instance, to target high value customers, Nokia created Vertu, specializing in handcrafted, high-performance mobile phones. The first Vertu products were delivered in August 2002 and are now selling through new distribution channels that consist of Vertu stores in Paris and Singapore, client suites in London, New York, Beverly Hills, Singapore and Hong Kong, and selected luxury department and specialty stores internationally.

A possible disadvantage to Nokia's multi-country strategy is that it is not capable of taking full advantage of the low cost manufacturing centres it has in the Far East and South America but current perception is that the ability to react to local trends more than out weighs this negative.

3.1.3 Technological

In the communications market in which Nokia operates, technology is perhaps the most important factor that has to be taken into consideration. It is of absolute core value and importance that Nokia keep up to date with all the newest technological advances (like camera and motion capture phones) if they are to maintain the largest market share and stay ahead of their competitors.

The primary purpose of the Cellular telephone today is not simply to communicate through the medium of speech. They are now considered as complex units able to read, manipulate and communicate data in many different forms (sound, video, image, data telemetry etc)

A very popular technology is Bluetooth which provides short-range communications technology replacing cables connecting portable and/or fixed devices while maintaining high levels of security. The key features of Bluetooth technology are robustness, low power, and low cost. The Bluetooth Specification defines a uniform structure for a wide range of devices to connect and communicate with each other and has become a primary requirement on most of Nokia's range of handheld units. The structure and the global acceptance of Bluetooth technology means any Bluetooth enabled device, almost everywhere in the world, can connect to other Bluetooth enabled devices located in proximity to one another.

Speed of transfer of data has increased significantly in recent years with latest technology Blue Tooth phones operating at speeds of up to 24Mbps (as opposed to original data transfer systems used by Nokia in early 2002 of a mere 64kbps).

Nokia's current marketing strategy has until recent times helped them become the biggest selling brand in the communications market, but now sales are starting to decrease due to saturation of the current market segment and so Nokia needs to rejuvenate its position. A number of possible methods to achieve this include:

Re-launch their products with an aggressive promotional scheme to target a different as yet un-tapped segment of the market.

Differentiate their products to offer something no other company is able to offer

Diversify the business into selling additional and different technology products.

Learn from the competition

3.1.4 Economic

The cost of operating new generation mobile phones is considerable and varies widely from country to country. The table below indicates the amount of money paid by each European country to operate a licence to sell 3G mobile phones.

3G Government Licence Top  Prices

UK:                                                          £22.4bn

France:                                                     £6.32bn

US:                                                         £11.24bn

Germany:                                                 £30.4bn

Italy:                                                           £7.5bn

Netherlands:                                             £1.68bn

Poland:                                                       £1.9bn

Sweden:                                                   £26,000

Switzerland:                                                 £80m

Belgium:                                                    £300m

Australia:                                                   £500m

Spain:                                                           £12m

The data contained within the above table was sourced from the BBC, (http://news.bbc.co.uk/1/hi/business/1272501.stm).

The costs of licensing the new generation mobile phones that we use today was much higher than Nokia (or their competitors) were expecting as they had already developed the infra-structure costs required to operate the new technology. There is nothing to say that in the future and as new technologies are developed that additional licensing will not be required!

3.2 S.W.O.T Analysis

As stated previously PEST considers the external environment as a whole but SWOT analysis (strengths, weaknesses, opportunities, threats) describes the internal influences on the direction of the market. Therefore when findings are combined, the PEST and SWOT models can provide a unique breadth and depth of analysis.

Strengths

Largest network of distribution and selling mobile technology in the world

High quality and professional team in the R&D Dept.

Very profitable

Hardware is renowned worldwide for its reliability

Wide range of products

Resale values of Nokia phones is better than their competitors

Effective marketing

Weaknesses

Considered as not being user friendly

Hardware often not as stylish as competitors

Are viewed as being expensive when compared to competition

Not distinct in product definition from an aesthetics perspective

In recent years perceived as taking eye off the ball allowing in competition

Design time to market

Opportunities

Development of new technology

Increased use/sales of mobile phones in developing nations

To broaden the age band of mobile phone users

To diversify its product range and enter new markets

Enhance relationships with service providers

Identify and develop services and hardware to distinguish it from its competition

Threats

Worldwide financial crisis and poor availability of credit

Competitors developing more popular handsets

Stolen technology

Better technology

Wage escalation costs

Weakening demand in developed countries

Consumer requirements not being met

3.2.1 Strength

This involves looking at the company's current market share and researching how recognised Nokia is amongst consumers in the target market.

Volume and Market Share in the first quarter 2010, the total mobile device volumes of Devices & Services was 107.8 million units, representing an increase of 16% year-on-year and a decrease of 15% sequentially. The overall industry mobile device volumes for the same period was 323 million units based on Nokia's preliminary estimate, representing an increase of 11% year-on-year and a decrease of 10% sequentially. Nokia's preliminary estimated mobile device market share was 33% in the first quarter 2010, up from an estimated 32% in the first quarter 2009 and down from an estimated 35% in the fourth quarter 2009.

Financial and percentage data above was obtained from Nokia's website http://www.nokia.com/about-nokia/financials/quarterly-and-annual-information/q1-2010 Quarterly and annual information.

3.2.2 Weakness

This involves looking at where the product is failing or not doing as well as it should in the market or against its competitors. Nokia's problems are that they are currently aiming their products at a saturated market segment and have continually rising wage costs. In a number of different countries higher import charges have now also been put into place.

Motorola and Samsung have for the last few years been the thorn in the side of Nokia's boardroom meetings. Their aggressive marketing practices have hit Nokia very hard and it is losing very crucial global market share to both organisations.

 

Nokia being alarmed by its loss of market share and reduction in sales is now putting all its weight behind the N-Series range with this model being packed with multimedia features.

However, a failed and still failing strategy is that while Motorola (quite intelligently) gives great names to every phone it brings into the market, Nokia tends to do the exact opposite. Nokia from the very start has relied on numbers rather than names and whilst this strategy worked very well for them in the past (mainly due to the fact that they had little competition in the early days of development), times have now changed.

Consumers are more attracted by names because they can thus easily relate to the features of the phone. This is evident from the success of the MotoRazr, MotoSlvr, MotoRizr and MotoKrzr. These phones are not packed with heavy multimedia features like the N-Series yet still they are in huge demand and just by reading the name of the handset, one gets a broad idea of what the phone looks like and what its features are.

 

Nokia advertises more than Motorola. Still its market share is dropping. Motorola does not need to spend much money for the promotion of its products and it doesn't have to worry about the marketing of these phones; it just simplifies its job by naming its products right. Take the example of Apple as it did not have to do much to promote its iPhone thanks to the leaked photos and technical specifications. It then went on to become one of the most anticipated gadgets of all time.

 

It is time that Nokia starts applying some common sense approaches to its marketing strategies as simple naming and branding would have a dramatic impact on people's perceptions of its merchandise. A few months ago, a highly placed Nokia official told Reuters that his company would soon be doing business the Motorola way and would look at renaming its new phones. It is in Nokia's best interest that it takes to this path as early as possible, otherwise the once mighty market leader will see its market share plummeting to much lower depths

In addition, and as with all mobile phone manufacturers, Nokia are promoting their products to a market that is verging on saturation and there is a potential need to re-launch some of the older models to the emerging developing markets of the third world and only promote new products to the existing market segment.

Finally, wage costs are already high, and will continue to rise for the foreseeable future. In an attempt to alleviate this problem Nokia as a technology company could look at new Research & Development techniques to improve their existing productivity levels per capita of workforce employed.

3.2.3 Opportunity

This is an area in which Nokia should look to increase their profit making abilities and increase existing market share. There are a number of very simple strategies:

Improve the technology and tooling currently in use.

Using their considerable in house innovation teams to re-invent their products

To offer something new that none of their competitors are able to offer.

Use their reliability data to further enhance their networks with service providers.

Realise the need for a back to basics handset for the developing nations and introduce new (or revamped) handsets.

Re-look at the branding and naming of products.

Adopt a more Partnering Culture

3.2.4 Threats

This is looking mainly at the competition that are taking away Nokia's current market share and also government legislations (the total costs of 3G licensing in Europe was 110 billion Euros) that could hinder Nokia's further development.

Within the telecommunication industry, forecasts and market share estimates of the handset industry are increasingly being affected by the realisation of counterfeit and grey market devices. Such products find their main consumer markets are in emerging economies such as India and Africa, which are accounting for an increasing proportion of total unit quantities.

Nokia has recently broken the conspiracy of silence within the industry and has revised its own forecasts in an attempt to include for shipments of fake and unlicensed handsets. Beginning in 2010, Nokia revised its methology for estimating worldwide volumes and in particular will now recognise handsets shipped by both new and emerging entrants who include vendors of legitimate, as well as unlicensed and counterfeit, products with manufacturing facilities primarily centered on certain locations in Asia.

Obviously, this new outlook will have a dramatic affect to Nokia's key metric of calculation of market share and how this is then perceived by the outside world. Its share figures in the economies where counterfeit handsets are more predominant will be impacted quite considerably.

The biggest source of the unofficial phones is China, and the country is also the largest market for these devices, but it is also increasingly an export industry, threatening Nokia's overwhelming share of low-end products in other developing nations such as India. Grey market phones that are made in China are not recognised or licensed by the government and so do not pay value added taxes giving them an unfair advantage over other legitimate suppliers.

Whilst all of this could be perceived as a weakness of the Nokia brand, international authorities are now cracking down on illegal handsets which will assist in strengthening Nokia's position. The Indian government for example, has recently initiated a crackdown on illegal handsets, ordering operators to disable devices that do not have an internationally recognised or valid International Mobile Equipment Identity (IMEI) numbers. This is likely to affect 25 million phones, about 5 per cent of the national total.

Via their business forecast projections/data within the public domain on the internet, Nokia has reiterated that it expects the handset industry to grow by 10 per cent in 2010 compared with 2009, and that it expects its own market share to be flat in real terms compared with last year.

3.3 EVR

When analysing Nokia's values and beliefs it is important to consider in broad terms what is actually defined by that value. This should be an understanding which takes in to account both their ethical and economic commitments. De Wit and Meyer, 2004 state that organisational beliefs, values and business definition will be utilised and that organisational beliefs are "important assumptions about he nature of the environment and what the company needs to do in order to succeed ….. (and)….what they see as worthwhile activities".

3.3.1 Beliefs

The Nokia CEO recently stated:

"Our business objective is to strengthen our position as a leading communications systems and products provider. Our strategic intent, as the trusted brand, is to create personalised communication technology that enables people to shape their own mobile world".

Sourced from www.nokia.com

Nokia are currently creating innovative technology to allow people to

access Internet applications, devices and services instantly, irrespective of time or place. Achieving interoperability of network environments, terminals and mobile services is a key part of their intent.

Driving and delivering innovation is absolutely key to the future success of Nokia and as in the past creativity within the groups many different operating centres throughout the world will play a key in this undertaking.

3.3.2 Values

Nokia should look to capitalise on their market position and leadership role by continuing to target and enter segments of the communications market that will experience rapid growth or grow faster then the industry as a whole.

By identifying and expanding into these segments during the initial stages of their development, Nokia have established themselves as one of the worlds leading player's in wireless communications and significantly influenced the way in which voice and other services have been transferred to a wireless, mobile environment.

As demand for wireless access to an increasing range of services accelerates, Nokia are planning to lead the development and commercialisation of the higher capacity networks and systems required to make wireless content more accessible and rewarding to the end user. A Nokia statement on their website www.nokia.com states "In the process, we plan to offer our customers unprecedented choice, speed and value".

3.3.3 Business Definition

Nokia has a history of contributing to the development of new technologies, products and systems for mobile communications. Recent examples include: the commitment to the open mobile alliance; the co-development of the new operating system for the future terminals with symbian; short-range wireless connectivity with Bluetooth; the development of wireless LANs for enabling local mobility in fixed LANs; and MMS for enabling mobile multimedia messaging.

Whilst the product type appears to be firmly fixed and is renowned for its reliability, Nokia should look to broaden its thought processes to enhance its consumer appeal factor.

4.0 Conclusion

Whilst nokia may have taken its eye off the ball for a couple of years it continues to utilise its considerable resources to exploit opportunities in the market and is now fully aware of the measures it needs to take to mitigate against threats from competitors.

The SWOT/PEST analysis clearly demonstrated that there is room for expansion of the existing business by being more open and reactive of consumer reaction to competitor's products.

The core values of the business indicate that there is still a considerable appetite for future development and for connecting people

A recent statement on their website www.nokia.com stated that their vision for the future was:

"Connecting people" is now connecting people to what matters - whatever that means for each person - giving them the power to make the most of every moment, everywhere, any time. Connecting the "we" is more powerful than just the individual."

5.0 Recommendations

The objective of this paper was to undertake an appraisal and strategic review to evaluate the corporate global success of Nokia.

Nokia faces aggressive competition within its international markets and has until very recently always managed to stay one step ahead by responding quickly to the market's demand for advancement of technologies.

They must continue to invest significant resources providing focus groups, surveys, technology/industry analysis for specific countries to ensure that they fully understand the differing requirements of the different countries where they are involved

In their early years Nokia did not have significant competition and soon became large enough to absorb their perceived weaknesses with strategy and marketing techniques but now need to place considerably more focus on image, branding and how there products are perceived by consumers - reliability alone is not enough as consumers tend not to stay with any one particular handset for any great length of time.

Strategy making is "a complex process involving the most sophisticated, subtle, and at times subconscious of human cognitive and social processes". Strategic planning is not strategy making, "Planning, rather than providing new strategies, could not proceed without their prior existence (Galbraith 1986). Nokia should understand and embrace this statement as it has a direct correlation to the thought processes of its consumers and ensure that they fully embrace knowledge gained through keeping an eye on its competitors!

6.0 Reflection

I think that I have produced a well constructed and pragmatic paper, addressing both the concepts and theories of strategy and analysis of my chosen company Nokia. I was also very effective in merging the doctrines of Strategy with real world implementation.

For the purposes of this particular assignment I gathered and collated information from secondary sources ranging from books, newspaper articles and company websites.

In the beginning I found the procedures and reasoning of strategy formulation almost too vast for even contemplating writing such a small assignment narrative but with hard work and focus, managed to explore what I hope are considered to be the key areas of strategy management and how they will impact or have impacted Nokia's business model.

I deliberately chose an established market leader in the mobile telecommunications industry as it is often extremely difficult for such large organisations that have created such a large market share to sustain growth through strategic thought processes and analysis of their business model.

I identified that in the early years Nokia gained a huge advantage due to it having very few real competitors and that it is now clear that things have changed dramatically. A number of competitors have been extremely aggressive in reducing Nokia's market share and were aided by the fact that for a few years Nokia's sheer size led to a lapse in their thought process and strategy management. It would appear that they are now very much back on the case and are taking steps to adjust their methods to recover lost ground.

In summary, I believe my final paper to be coherent and that it addresses the topics requested in a pragmatic and systematic manner. It is both written and presented in a professional and fluent format.