Nokia Siemens Networks - Essay Example

 NOKIA SIEMENS NETWORKS Nokia and Siemens are coming together to form one of the world’s largest network companies in the world. The announcement made in June 2006 will see the two companies have a share of 50% each in the company’s infrastructure. The new partnership which was designed to be operational by January 2007 will see the firm combine their portfolios to offer advanced products and services including; 3G access mobile core and fixed broadband services, low cost mobile voice products and transportation services. The main comprehensive mover however, will be the ‘the next generation network’ convergence products including mobile phone handsets and accessories which will be developed. The joint venture The organizational structure of the new company will see its headquarters based in Helsinki, Finland-the home of Nokia. It will also house the company’s Radio access and operational supports systems for the new firm. Munich, Germany-the home of Siemens-will have four business units for the new firm. All the sectors of the two companies will be headed by the current executives of the companies both in Finland and in Germany. The technical systems of Nokia Siemens Networks are designed into six business units, these are; Services, Radio Access, IP Networking, Transport, Operational Support Systems, Service Core and Applications and Broadband Access. Individual financial performance, services and products offered by each company differ and therefore the joint venture is expected to incorporate not only the services but also the strategies used by both Nokia and Siemens to improve the new business. Looking at the individual companies, a lot has been done by the two in terms of technologies, skills, human resource and infrastructure. Siemens Company Siemens is an electronic and Telecommunication Company located in Berlin and Munich, Germany. It is considered one of the greatest and successful companies of all time with well over 461,000 employees and millions of employees in over 190 countries according to 2006 estimates. Siemens has been active in many areas of electrical, communication, construction, medical and transportation sectors. The main business that the company engages in is the communication sector. It offers products, services, and other solutions for industries adopting ICT technology in their day to day running of their businesses. Siemens also provides a range of power and lightning products such as, electronic control gear, opt semiconductors, lamps etc. Medical and franchising and real estate businesses have provided a wide range of business spectrum for the company. Provision of integrated technologies, new innovations and therapeutic services has taken the popularity of Siemens to higher levels. Strategies Siemens has strived to grow in its business as the worlds leading telecommunications and electronic company. Its main goal states that it endeavors to maintain a strong but conservative financial position through the implementation of new marketing strategies. With careful management of its net working capital, the company intends to strike a good financial objective in the near future and one of them is the new joint venture with the Nokia Company. Through research and development, this company has developed new innovations in the past making it a global prowess. Currently the company holds to its name a whooping 53,000 patents including numerous licensing agreements around the world making the most innovative company of the century. It was estimated by an annual world report that Siemens in technology and innovation is ranked among the top ten companies in the U.S, the best in Germany and second in Europe. This growth is attributed to recent transaction undertaken by the company. The most significant one was a major breakthrough in the energy sector in which the company acquired CTI Molecular Inc. of the U.S (a wind power company) and Bonus Energy A/S (Bonus) of Denmark in 2005 and 2004 respectively. The company was interested in acquiring the two companies because of the lucrative potentially and fast growth in the energy sector. The company also continued its support for the automation portfolio in the industrial and manufacturing sector by further acquiring a local based industrial gear manufacturing company in Germany- the Flender Holding GmbH-, U.S based Robicon Corporation that deals with manufacture and distribution of voltage converters. Acquisition of VA technologies of Austria in mid 2005 helped Siemens to consolidate its strategies in the industrial engineering and power distribution business Nokia Company Nokia is a telecommunication company based in Finland. It was first set up in 1960 as a major corporation dealing with paper manufacturing1. Later through its cooperation with Finish Cable Works, it evolved to a world leader in the manufacture and provision of mobile network equipment. Since then, the company has been diverging across other fields of businesses and currently it engages in; Manufacture of mobile equipments and devices such as mobile handsets Supply of equipments and solutions for imaging and games to be used in the media industry, corporations and businesses Providing services and solutions for network operators During the early and mid 1980s, Nokia was able to acquire the following companies; Luxor, Televa, Salora and Mobira of Sweden to increase its competitive advantage in the then fast growing sector-telecommunications. The first fully local telephone exchange was developed by the company in 1982 and that changed the telecom industry as other players in the sector were drawn back to the drawing board to offer improved technologies to compete with Nokia. From this reality came other companies such as Nortel Networks which equally shared the market share with Nokia. A product –Nordic Mobile Telephone Analogue Standard- was also launched by the company in the same year as the World’s first mobile car phone. Nokia also managed to buy companies like the Swiss cable machinery (Maillefer), Dutch Cable Company NKF, standard electrik Lorenz of Germany and French oceanic company in the late 1980s and this gave the company a boost as it gave the necessary financial, human resource and asset power to undertake market challenges posed by stiff completion in the telecommunication sectors. At the beginning of the 21St century, the company had grown bigger and statistics indicate that actually in 2002, Nokia was second to Ericsson which had the highest revenue and market share on the worldwide network infrastructure. The company through its expansive network divested across the networks of the world and in each made special needs depending on the subscriber adoption and the revenue to be generated2. i. Networks technology- china, Finland and India ii. Customization and logistics centre-United States iii. Mobile devices and enhancements-Brazil, China, Finland, Germany, UK, Hungary India, Mexico, And South Korea Strategy The company has in the past developed business models, marketing strategies and new innovations in the telecommunication and network operation sector. Its main goals and objectives have been to; i. Meet specific needs for of diverse market for their products ii. Maintain economies of scale iii. Increase production efficiency in almost all its sectors The company’s strategy required to meet the core principles of these objectives is to fully exploit the mobile industry market through the potential it currently offers. Market and customer operations have for a long time supported the various business groups available in the company. The other horizontal entity that has provided enough support for the business groups is the new technology platforms created to allow for the management and driving force for Nokia products. Global challenges for Nokia Siemens Network Experts in the telecommunications industry have predicted that there will be a major battle for the Asian markets particularly in India and China. This has been attributed to the fast growing economies of these countries. With a sizeable market and subscriber base, the companies will have a potentially huge market for their services and products to accompany the needs for the fast growing sectors of the economy such as industrial development, manufacturing, telecommunication, medical, education sectors among others (Martins, 2000). At the moment china is adopting third generation wireless networks to meet the demands of its people and because the joint venture between Nokia and Siemens will meet harsh business challenges in the country, it has developed a strategic position to counter it. The joint venture aims to cut down prices for its services and products using entry price criteria. This will ensure that the existing companies will be forced to put up their prices or down to remain in business. Either way, however will pave way for the Nokia Siemens Network Company to gain a clear market share for its products and services. Since the joint venture is not the only company to try the Chinese market, it is aware of efforts done and being done by companies such as Ericsson which is currently the leader of Chinese telecommunication equipment manufacturer and supplier, Motorola and Nortel networks. These developments have put a lot of pressure for ‘smaller’ companies to merge in order to improve their market share. All these companies competing for the Chinese market is doomed to face harsh realities. First, they have been contented with low profit margins and high competition rates. Secondly, the increased need for massive investments in terms of upgrading available networks and development of new products which require lots of initial capital by the companies. That notwithstanding reflects the growing interest for the Chinese market by global companies especially in the next three years. Infrastructure and device supply/value chains Usually the companies in the manufacture and supply of telecommunication equipment engage the services of each other to meet the needs of their individual and corporate customers.3 An infrastructure supply chain means that a company Nortel buys switches, modems and gateways from another company, Ericsson which also buys internet components, cell switching components and base station components from Lucent or any other supplier. That chain will finally lead to the provision of voice and data for regional, national and global customers as the end point consumers. On the other hand, the supply value chain uses almost the same method but in this case, the customers buy mobile handsets from Network operators who buy them from the manufacturers. Nokia will sell the devices to Vodafone who finally sell them to the individual customers or corporations. Effects of changing mobile infrastructure market on Nokia Siemens Networks As technologies become more complex and accessible, the mobile infrastructure market will increasingly change and this will negatively and positively affect Nokia Siemens Network. Customers would like to have devices and services that match with the technology of the day. Introduction of mobile TV, General Packet Radio Service (GPRS), and Global System for Mobile Communications (GSM), Smart Phone, and Future Mobile Networks Etc poses a challenge and equally an opportunity for the Nokia Siemens Network Company to critically use the already available financial advantage to beat their competitors. The growth and advancement of mobile networks will s way for the Nokia Siemens Network depending on forces such as; Market driven factors-some products are developed without a clear market demand or its need derived from the customers Continued sophistication of devices Increased divergence in the use of the devices such internet use, video recording, music playing and other multimedia features that are available in a computer The joint venture between Nokia and Siemens4 will have an increased financial base to out-compete its competitors. Nokia, by the end of 2005 boasted of a pre-tax profit (€ in millions) of 4, 971 from a net sales value of 34, 191 and total asset base of 22,298. Siemens on the other hand by the same period had a gross profit (€ in millions) on sales of 21,943 from a sales value of 75,445 with an asset base of 85,205. The joint venture will generate an expected asset base of (€ in millions) of 107,503 and a gross profit of 26,914. These values indicate that the joint venture will financially boost the Nokia Company while improving the broad base of Siemens. It will also put the two companies on a better position to favorably go on a global expansion business models given the benefits that will accompany the venture; popularity, increased sales, quality services and products etc. Finally, future service infrastructure and mobile networks will move towards introducing new architectural features that will incorporate internet service providers. It is projected that hundreds of base stations will be developed world wide in the near future as the customer and end user benefit squarely from the increased competition among the companies resulting in an increased network base and higher band width for the users. The Nokia Siemens Network joint venture will therefore benefit from, these developments in the telecommunications and mobile network industry. References Ambrus, A. and Rosa A. 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