Nokia
...ons and is based on the key elements of business vision – mobility, growth, and quality. Nokia has several resources and core competencies that can be used to offer the best product to the final consumer. The biggest resources that Nokia has are its knowledge, research & development and production. Nokia’s R&D helps maintain technology leadership and explore new business areas. It also helps to drive competitiveness and innovation within the corporation. The main goal is to offer innovative products in telecommunication, multimedia, and displays. Short-term R&D is used to support product development to master key technologies used and long-term development challenges present working methods and technologies to keep the company moving forward. High investment in the research and development department is one of Nokia’s key success factors. One of the results of this investment is trend setting picture and sound quality Thirty-eight percent of Nokia’s employees work in the R&D department and there are eleven worldwide locations including Canada, India, Japan and Spain. Another one of Nokia’s resources is its production. Nokia has increased production of handsets in the past to keep up with high demand and correspondingly increased the capacity of its factories to achieve higher volumes with less labor; this was done by installing new machinery and improving their manufacturing processes. Each of Nokia’s productions sites have also been ISO 14001 certified environmental management systems, which corresponds with their sustainable environmental development strategy. The main goal of the EMS system is to make environmental improvements, save money and decrease energy consumption and waste. Nokia has nine worldwide locations including the US, Mexico, China and Germany. Nokia’s core competencies consist of their name brand/brand development, manufacturing - Nokia only out sources 20% of their phones and operations. Experienced and efficient operations play a role in Nokia being the leader in the mobile phone industry. They balance new ideas and technologies with experience to deliver in product form, at the right time, in the right quantities to meet consumer demand. The Nokia brand is associated with well-designed high quality and technologically advanced products and customer service that is user friendly. Nokia is known for being able to release a wide range of products that covers all consumer needs. A considerable amount of resources are invested into cost efficient processes to keep the Nokia name where it is at and the company is fully committed to strong growth, profitability and to be a responsible industry leader. To strengthen the Nokia brand name in the future, Nokia is planning on using an aggressive approach in advertising, sponsorship and other activities in its primary market. These competencies allow Nokia to establish itself as a leading brand and work towards growth and profitability in the mobile communications industry. As mentioned above, manufacturing is one of Nokia’s core competencies. As stated by one Nokia employee, “We consider our mobile phone manufacturing to be a core competency and competitive advantage.” Along with manufacturing efficiency, Nokia’s competitive advantage comes from a combination of cutting edge handset design, renowned quality, and high-margin phone accessories. Nokia’s competitive advantage in the mobile systems industry can also be seen in their superior net profit margins of 13.6%. This is double what Ericsson’s is. Cash reserves four times greater then debt; a flow ratio of 1.05, which means Nokia is quickly collecting cash payments on sales, keeping inventory to a minimum and has the authority to force suppliers to finance part of its business; and cash generation, that consists of positive free cash flow on sales and a 4.5% cash margin also show how Nokia has an advantage over its competition. In order to understand what stakeholders expect, these expectations are compared to understanding what the customer needs. Nokia has two types of stakeholders, internal and external. Their only internal stakeholders are the employees. However, Nokia has several external stakeholders that include consumers, network operators, business associates & suppliers, shareholders & investors, media, non-governmental organizations and governments & authorities. These stakeholders want to know about supply chain management and are making sure Nokia has the correct ethical performance in the industry. In order to ensure sustainable shareholder value, Nokia recently filed an application to de-list from the London Stock Exchange because of liquidity issues. Nokia encourages trading where stock is most liquid and the stock on the LSE only represents less then one percent of trading globally. Nokia stock is still traded on the HEX, FPSE, NYSE, and SSE. If the application were accepted the de-listing would have taken place around November 26, 2003. Along with the partnerships they have with certain suppliers, Nokia also does some outsourcing, collaborations and joint venturing. The outsourcing that Nokia does is with Elcotech, and EMS that manages an assembly system for a short, fast production cycle. Nokia out sources it’s knowledge intensive activities to Celesta, who develops software tools and integration solutions with information systems, and distributes to retail outlets and network operations to sell mobile phones to the final consumer. One collaboration Nokia has is with Motorola and Ericsson. They have come together to work on Bluetooth that enables various types of electronic devices to transmit and receive large amounts of information from up to 32 feet. Nokia, Ericsson, Motorola, Panasonic and Psion have formed a joint venture to prevent the adoption of Windows CE as the dominant design in the mobile phone market. Several joint ventures were also put together to combine Nokia’s global technology leadership along with strong local partners to realize faster and higher market penetration in new markets. Nokia Strengths and Weaknesses Nokia is at an important point in its history. Having developed many areas for growth during the influential years of the mobile phone industry, the market that Nokia is so familiar with is adopting different rules, ones that it may not fully understand. This might happen because Nokia’s strengths are so well understood by its competitors; they are well targeted and improved upon. The wireless market’s growth has slowed, making it easier to challenge the veterans. Also, the progress of technology has made many of Nokia’s early advantages easier to overcome. Nokia’s leadership position is a result of paying close attention to market needs and taking chances at the right time. Nokia was the first to acknowledge that fashion is an important factor in mobile phone purchases, and is currently behind the push for Multimedia Messaging Service, which could become the first data service since Short Message Service to be successful. MMS can be used for both distribution of public content and sharing of personal content, making this channel a source for increasing revenue for operators and content providers. There is a serious gap between Nokia and startup companies, making it difficult to compete against Nokia. Nokia’s tie to operators is keeping its products directly in consumers’ view. While all these business moves have kept Nokia competitive, their research and development program is pushing Nokia even harder. The Nokia Research Center drives Nokia’s competitiveness technologically, and updating in technology areas needed for the company’s future success. Nokia’s R & D department employs over 19,000 people in 14 countries, investing 10% of net sales to create new ideas. Nokia’s success is shown by the fact that Nokia Research Center generates half of the essential patents of the company. One important element we need to know is that “Nokia has made mistakes with regards to WAP, especially over its marketing, and has been late to market its GPRS mobile phones in the UK” (Datamonitor, 2002b). Nokia spent more expenses on R&D, but it did not take the first chance available to launch new products. In addition, the global economic contraction has been getting serious. External Analysis- Porter’s 5 Forces To get a better understanding of the cell phone industry and where it is maybe headed in the future, Porter’s five forces is a great tool on how to better understand this. First of all, the threat of new entrants into the cell phone industry is low-to-medium. This means that there are many cell phones companies trying to compete with Nokia in the cell phone industry but very few if any can actually make it on their feet to compete. Having a strong brand name like Nokia has, and how that image is perceived has a lot to do with a companies’ success in the cell phone industry. If a company can make it past the initial investment of millions of dollars, and level off its fixed costs, then that could lead to a better success rate. Especially, with technology leading the way and changing all the time. You really need a very big initial capital investment and a huge distribution channel or you will have to outsource most of your product, which could turn out to be very costly. Secondly, the bargaining power of suppliers is low-to-medium. This means that there are large numbers of hardware, software, chips, batteries, etc, available in the cell phone industry, so Nokia can control the prices of their suppliers or switch suppliers very easily. With innovation being a key success factor, it tends to keep prices competitive among suppliers. If say Nokia wants to switch to another supplier they can do so pretty easily since they make 30% of their own parts and out source only 70%, so you can say they can control which suppliers they readily want to go to. Thirdly, the bargaining power of buyers is high. The buyers tend to be highly fragmented and there are very low switching costs involved. Consumers can easily switch from a cell phone to a different one, especially upgrading them to the newer models so they have the greater say when selecting which cell phone they are going to use. There aren’t very many substitutes to a cell phone except maybe a regular house phone or car...