Company Analysis for Nokia - Case Study Example

Company Analysis (For Nokia) Introduction: Nokia is easily recognized as market dominant for mobile devices capitalizing on phones with features that are always first in the global market. Its current logo "Connecting people" has "Quality is at the heart of Nokia's brand promise, very human technology," defining the very goal of Nokia to be the best quality company in the mobile devices industry. This includes best products and services, most loyal customers, with the most efficient operational mode. This essay reviews company information as well as studies conducted about Nokia by industry analysts. 1. Nokia, the Company Nokia is currently the world's largest manufacturer of mobile telephones with an estimated international market share of 36% (Nokia, 2006) and also currently the world's largest manufacturer of digital cameras with its camera-equipped mobile phones exceeding all other conventional camera manufacturers (Wikipedia, 2007). Based in Espoo, Finland near the city of Helsinki, Nokia is the largest Finnish company with about half of the market capitalization of the Helsinki Stock Exchange or OMX Helsinki playing a major role in the economy of Finland. Nokia have been rated best Finnish brand and employer many times (Wikipedia, 2007). Nokia has research and development, manufacturing and sales representation in many continents with the Nokia Research Center sites in Athens, Helsinki, Tampere Oulu, Tokyo, Beijing, Budapest, Ulm, Bochum, Palo Alto, California, Bangalore, and Cambridge, Massachusetts. Its major production factories are located in Salo, Finland, Dongguan, China, Chennai, India, Komarom, Hungary and Ruhr, Germany. The Nokia Design Departure is at Salo, Finland (Nokia, 2006). Nokia is comprised of four business groups: the Mobile Phones, Multimedia, Enterprise Solutions and Networks. Its Mobile Phones provide expanding mobile voice and data capabilities across a wide range of mobile devices. Multimedia brings mobile experiences to consumers in advanced mobile devices and applications giving people access and use of multimedia through a range of radio technologies. Enterprise Solutions offer businesses and institutions a broad range of product solutions, including enterprise-grade mobile devices, security infrastructure, software and services and collaborating with companies to provide fixed IP network security, mobilize corporate email and extend corporate telephone systems to Nokia's mobile devices (Nokia, 2006). 2 Current situation In its Annual Information Report, 2006 gained net sales of 41,121 million as compared to 2005's 34,191 million. The operating profit increased from 4,639 million in 2005 to 5,488 million while its operating margin declined from 13.6 to 13.3%. The Earnings per share (diluted) is 1.05 from 0.83 (Nokia, 2006). By the end of 2006, Nokia already has 14 manufacturing facilities in nine countries around the world and research and development in 11 countries employing 68,483 persons. In January 25, 2006, Nokia reported a net sales growth of 11,701 million from its 2005 fourth quarter 10,333 million. Its operating profit grew to 1,519 million from 2005 fourth quarter's 1,368 million. Earnings per diluted share grew to 0.32 from 2005 fourth quarter's .025. The Quarterly and Annual Information reported the following: Net Sales by Business Group Q4 2006 EURm % Mobile Phones 7 076 60 Multimedia 2 136 18 Enterprise Solutions 305 3 Networks 2 184 19 Nokia Group 11 701 100 Source: Nokia, 2006 3 Human Resources Nokia reported to had a year-end employment of 68,483 in its global operations Source: Nokia, 2006 While Nokia provided people friendly devices through their mobile phones and its features, Nokia have constantly earned the trust, respect and confidence of the Finnish as the most sought-after employer (Wikipedia, 2007). The HRMID (2004) also reported that Nokia used its human resources policy in continuing its success. The report noted that Nokia's people policies have played a major role in keeping the company reach its 40% share on the global handset market leading by profit margins of 20-24 percent in a very tight Asian competition. 4 Financial Resources Nokia as a major global player in mobile devices capturing the largest markets in the phone, digital camera and music indicates a strong and robust dominance. Laitinen (2005) indicated that there had been a shift in the objective function and strategy of Nokia towards revenue maximization that posed alteration in the order of balanced scorecard perspectives recommending that the focus should be elastic and adoptable to changes in strategy. Nevertheless, following are the solid indication of Nokia's steady growth. Key Data Based on financial statements according to international Financial Reporting Standards IFRS: Source: Nokia, 2006 Europe accounted for 42% of Nokia's net sales in 2005 with the Asia Pacific next at 18%, China 19%, North America 8%, Latin America 8%, Middle East and Africa at 13%. The leading market countries are China, the US, UK, India, Germany, Russia, Italy, Italy, Spain, Saudi Arabia and France accounting to 52% of total net sales in 2005. 5 Product Portfolio Nokia is comprised of four business groups: the Mobile Phones, Multimedia, Enterprise Solutions and Networks. Mobile Phones- In 2005 alone, 41 new mobile device models that include 18 new Code Division Multiple Access (CDMA) phones. 32 were mid-range or high end while nine were at the entry level. Nokia identified four launch highlights as: Nokia's first operator-specific designs on models such as Nokia 6102 and Nokia 6234 3G or Third Generation phones for mass market: Nokia 6280/6282 and Nokia 6233/6234 First musicphone: Nokia 3250 L'Amour fashion collection: Nokia 7380, Nokia 7370, and Nokia 7360. Nokia's highest revenue generating phones for 2005 were the high-end Nokia 6230 and Nokia 62301. These are also the mobile phone industry's best selling devices in Europe selling about a cumulative volume of 25 million units (Nokia, 2006). On top of this, Nokia is currently outpacing iPods of Apple in sales of MP3 capable mobile phones selling about 15 million in 2006. It aims to sell about 80 million music phones (Forum-Nokia, 2007). Multimedia - This division aims to design devices and applications that bring multimedia experiences to customers of Nokia allowing users to create, access and consume multimedia and share this experiences as well. These devices use a wide range of connectivity including GSM, 3G/WCDMA, WLAN and Bluetooth. The Nseries uses Symbian operating system. Driven by converged modern devices with advanced imaging, music, web browsing and email functionality, Multimedia continued growing making Nokia a market leader in 3G or WCDMA devices for 2005. Key development was the launch of six Nokia Nseries sub-brand and multi-media computer product category models. These targets early adopters and technology leaders and shipment began that same year for two units. Devices include Carl Zeiss optics, megapixel cameras, multi-gigabyte memories, stereo sound, VHS resolution video, and Wlan connectivity (Nokia, 2006). Other developments include: Launch of the Nokia 770 Internet Tablet - the first device in internet Tablet category Announcement of collaboration agreements with Yahoo!, Carl Zeiss, Microsoft, Bose, Harman Kardon, JBL and Sennheiser. Launch of the world's first DVB-H enabled mobile device: Nokia N92 Cumulative deliveries of Nokia's Mobile Broadcast Solution server 3.0 reached 25 at the end of 2005 Announcement of plans to expand the N-Gage multiplayer gaming experience across a range of Nokia smartphones and Nokia Nseries devices. Enterprise Solutions - The Nokia 9500 Communicator and Nokia 9300 enterprise smartphone began shipping in volume by 2005. Shipment of both devices includes Blackberry Connect software that reached about 30 operators and distributors worldwide. Other developments include: Launch of the Nokia Business Center software solution Pending acquisition of Intellisync Launch of the Nokia Eseries devices Licensing agreement for Microsoft Corp's Active-Sync to enable direct over-the- air synchronization between Nokia enterprise mobile devices and the Microsoft Exchange Server 2003 Work closely with Cisco, OnRelay and Avaya on enterprise options for mobile voice (Nokia, 2006). Networks - Networks announced 16 contracts in 3G/WDCMA and agreements with 10 new customers in 2005. It supplied a total of 44 out of the 100 operators that launched commercial 3G/WDCMA services. Nokia currently have a total of 20 High-Speed Downlink Packet Access or HSDPA reference (Nokia, 2006). The Serices Business unit was created to focus on managed services, consultation and integration. By the end of 2005, this division accounted for more than 30 percent of Network revenues and it also closed majors deals that include a contract with Bharti Tele-Ventures. It also sold professional mobile radio business to EADS while growing new markets in Bangladesh, Tunisia and Vietnam. Net Sales by Business Group (2005): 6 Current target market Goldman Sachs (2000) indicated that of the four-tier players in the handset market, Nokia is in tier 1 managing to establish a powerful brand that is widely recognized - fifth after Coca Cola, Microsoft, IBM, and Intel (Financial Times, 2001). Its prediction and satisfying offers to the needs of consumers ahead of the competition including but not limited to Matti Alahuhta's three-point focus of product development with global appeal, fast and flexible international sales, and commitment to learning what consumers want without consideration of the limits of existing technology (Isaacs, 2001). It was suggested that Nokia with other later mobile phone entrants Samsung and Ericsson developed its strategies by avoiding being a copycat and instead develop sustainable business based on innovative technologies (He, Lim & Wong, 2006). 7 Current pricing strategies Nokia provides a variety of models for a variety of markets so that its prices range from necessity to luxury. Price varies depending mostly on plans but outright purchases are often available from retailers. Price for a brand new Nokia handset starts from about $60 and up to about $400 for Sim-free items. Nokia also assembled a diverse research team that successfully segmented the target market from rugged, sophisticated to youth, among others (Isaacs, 2001). Just recently, with its new models, Nokia acknowledged to have gained most profits with high-end users (Nokia, 2006). 8 Current distribution strategies Consumers do not directly purchase hands sets from Nokia but enroll in cellular call plans from service providers, therefore, Nokia sells phones to the mobile service provider although retailer shop where products are showcased now abound. 9 Current promotional strategies are described Product placement, aggressive tie-up and events sponsorship as well as traditional promotional strategies have all been employed by Nokia. Analysts described Nokia as young, sexy, sophisticated and hip (CBI, 2000) with superior marketing strategies and powerful brand image 10 Company strengths The worldwide popularity and market explosion of mobile telephones which was not anticipated by Nokia led to the overhauling of Nokia's entire logistics operations and is now considered its major advantage over its rivals together with greater economies of scale. Nokia aims to maintain its customer-focused strategy through consumer understanding with the priority "to be the most preferred partner to operators, retailers and enterprises," (Nokia, 2007) with the objectives: Create winning devices Embrace consumer Internet services Deliver enterprise solutions Build scale in networks Expand professional services As it commits to three strategic assets that Nokia will invest in and prioritize: Brand and design Customer engagement and fulfillment Technology and architecture Market trends that Nokia adheres in to include the user experience concept making simple products rich with customer experience sharing, from messages, photos, to music, wireless convenience and internet convergence, consolidation of regional, global operators, internet diversity, acknowledging the role of Asia as China and India drive demand and design preferences (Nokia, 2007). Strategic Direction (2005) also summed up that Nokia fared well in facing up to challenges in the fickle and fast-changing technology market closely linking Nokia's fortune to Finland as it accounts to 20% of the country's exports. In another study conducted by Collin and Lorenzin (2006), Nokia's supply chain agility had also been accredited to have added up to the company's customer-focused delivery. The supply chain agility, different planning, and forecasting concepts all linked to the an integrated project management program that strictly implements effective customer-focused delivery process in Nokia. To support the growth and strength of Nokia, following is a table indicating its market position against its competitors: Source: He, Lim, Wong, 2006 11 Company Weaknesses SD (2005) pointed out that Nokia need to constantly review its strategies in order to maintain market share in a crowded market as well as satisfy the increasingly sophisticated consumers. This came after N-Gage gaming device which incorporated mobile phone, games console, FM radio, and digital music had a disappointing reception. D'Souza (2005) implied that Nokia shot to the top for its mobile phone. But as it turns itself into other things such as a game console, then, it was suggested that it re-thinks its tactics. Conclusion: Leadership could be attributed to the substantial growth, and even market dominance of product entities as Nokia's stellar success had been easily traced during the leadership of its former CEO. Although it can be said that Nokia snatched up dominance from other mobile device player or players in the 90s, it could be easily presumed that Nokia could retain its status within the next few years. But the assurance is low as diversity seems to divide focus on the priority of the company. At present, its line of products may be interrelated to one another and its R&D continue blazing trails in the industry as Nokia still enjoy dominance. Its products now include all-in-one mobile phones, with camera, music, and even games. But as already stated, there is a continuous growth in the market and in the industry so that other players, specifically from Asia may at one point actually threaten this dominance. It all remains to be seen. References: Cahners Business Information (CBI) (2000). "A Tale of Two Mobile Telephone Makers." May. Collin, Jari and Dennis Lorenzin. (2006). "Plan for supply chain agility at Nokia: Lessons from the mobile infrastructure industry." International Journal of Physical Distribution and Logistics Management 36 (6), 418-430. D'Souza, Sean (2005). "Is Nature a Marketing Guru" Psycho Tactics. Accessed from http://www.psychotactics.com/artnature.htm Forum-Nokia. (2007) "Developing Music Applications." Accessed from http://www.forum.nokia.com/main/market_segments/music/index.html Goldman Sachs Global Equity Research (2000) Mobile Handsets Report. September 5 He, Z.L., Lim, K., & Wong, P.K. (2006). "Entry and competitive dynamics in the mobile telecommunications market." Research Policy 35, 1147-1165. Human Resource Management International Digest (HRMID) (2004). "Nokia connects HR policy with company success: Firm seeks to defend its No. 1 slot in market share and profit margins." Oct., 12 (6) 30-32. Isaacs, Andrew. (2001) "Nokia-It's tough being #1." Haas School of Business, Fall. Jauhiainen, Jussi (2007). "Men, money and mobile phones: Tracing the technology discourse in Finnish newspapers." Technology in Society 29, 79-91 Laitinen, Erkki (2005). "Microeconomic analysis of the balanced scorecard: a case study of Nokia Corporation." International Journal of Productivity and Performance Management 54 (5/6) 325-339 Nokia. (2006) From nokia.com Strategic Direction (SD) (2005). "Nokia feels heat as it tries to be cool: How a world leader plays catch-up in a fickle market." May, 21 (5), 21-23. Wikipedia (2007). "Nokia." From Wikipedia.org Read More