Business Model of Nokia - Case Study Example

Topic: skill/routine/capability Institute A ment about the business model of Nokia Nokia is one of the gigantic brands of mobile phone manufacturers with the total revenue of 58,801.42 Trailing Twelve Months in the world. Its total net income is 1,278.35 Trailing Twelve Months according to the estimates of December, 2009 (MarketWatch, 2010). Besides mobile devices, it also offers computer softwares and internet services. It produces mobiles for every segment of market and protocol, like GSM, CDMA, etc. According to the company’s accounts sheet, the total assets of the company in December 31, 2009 were 35 738 EURm. This comprises of current assets and noncurrent assets, 12 125 EURm and 143 EURm respectively (Nokia Corp, 2010). Total liabilities of the company were 32,496.88 Trailing Twelve Months out of which 21,790.84 Trailing Twelve Months were the total current liabilities. The company’s total liabilities and stock equity were 51,274.77 Trailing Twelve Months, out of which 18,777.89 Trailing Twelve Months was the total equity (Market Watch, 2010). In 2009, Nokias net sales were EUR 41.0 billion and the operating profit was EUR 1.2 billion. EURm. In 2009, the company’s net sale showed a deceleration of 19%, from 50 710 EURm to 40 984. The operating profit of the company also showed a decline of 76 % from 4 966 EURm to 1 197 EURm during the same year. However, research and development expense of the company increased 1 % from 5 968 EURm to 5 909 EURm. (Nokia Corp, 2010) Net sale in the United States and UK was 1 731 EURm and 1 916 EURm respectively, while the net sale in China, Russia and Indonesia was 5 990 EURm, 1 528 EURm and 1 458 EURm respectively. Europe and Asia Pacific have greater net sales of 36 % and 22% respectively. (Nokia Corp, 2010) The Resource-Based View of Nokia (RBV skills) The resource- based view of Nokia is comprised of the following: Resources that cannot appear on a balance sheet Capabilities Competitive Advantage-Sustainable The conceptualization of those assets that do not appear on a Balance Sheet is discussed below: Resource Items Resource items are those assets of a firm that cannot be duplicated easily, like brand reputation and differentiation, innovations, etc. Some of the resource items of Nokia are discussed in detail below: Brand Nokia is an interesting brand and has an edge over other mobile phone companies, due to the fact that it is a natural brand and has its headquarters in Finland. Branding is all about designing products. R&D and other manufacturing processes are therefore devised to improve the time required to reach market. Nokia’s main aim is to control efficiency and effectiveness in its R&D project. That is why Nokia was listed as the eight most valuable global brand in the Interbrand/BusinessWeek Best Global Brands list of 2010 .The question hence arises about the factors that determined the success of this brand. For the past few decades, Nokia is concentrating on the corporate brand, giving individual products a generic brand personality instead of creating any sub-brands. The use of inspirational and beneficial features and competitive positioning strategies has made Nokia as one of the friendly brands in the highly competitive market of mobile manufacturing. Innovation Innovation means to offer a new product or service to customers, by using new technological and market knowledge. No product can attain success in the consumer market without introducing innovative products and new market strategies. All companies thus, try their best to make use of their available resources in the best possible manner. They aim to popularize their product and attain a distinguishing status in the market. “Recent management literature suggests that companies should be more inclined to put their ideas and products out to the market and further develop them with customers and other partners.” (Pontiskoski, Asakawa 2009, p. 373). Nokia’s innovative strategies are one of the most significant factors behind its success. Competitive Advantage Comparative advantage is a strategic superiority or edge that one company enjoys over its opponent companies within the competitive market structure. Nokia attained comparative advantage because of its wide cost range mobile phones and other technologies. Nokia understands the needs of its consumers. Therefore, this ability has helped it to build a relationship of trust and confidence with its customers. The strategy of building friendship and trust has given Nokia a distinguishing position in the market. Nokia is successfully competing with its competitors like Sony Erricson, Motorola, LG, etc by introducing new technologies. Today, Nokia accounts for over half of the value of the Finland stock market. Nokia has transformed business trends by mobilizing business infrastructure and offering secure and effective solutions to achieve business goals. Its professional services organization helps business companies to understand the business challenges of mobile technologies. Capabilities Capabilities are activities that a firm performs better, in comparison to its competitors. Some of the Nokia’s capabilities are discussed below: Product Design The product design plays a vital role in the success of any brand and Nokia realizes this fact very well. Every new design of Nokia’s mobile phones is unique and is therefore imitated by small cellular companies soon after its release in the market. Hence, the question now arises about how the company manages to inject individuality in its product design? The answer is pretty simple. The product design should cater to the basic human needs and the consumer should be facilitated while using the product. For example, one of the unique features of Nokia mobile sets is their firmness. Unlike other companies’ phones that break easily, Nokia’s sets are not fragile. Costly to imitate It means the product should be costly, thus making it hard for competitors to imitate it easily. However, the product can be easily imitated if the competitors are highly capable or if the processing cost of the imitation is equal to the production cost of an original product. Non substitutability It means that the product should be very individual in its qualities and design, so that it cannot be substituted by its competitor’s product. This is possible only when the company successfully positions its product in the competitive market structure. And Nokia has successfully positioned its products in the competitive market of mobile phones, by presenting its message of human technology in a powerful way. Moreover, Nokia is strengthening its market position by intermittently introducing new technologies. Valuable The company should be capable of producing valuable products because consumers today are more rational than the previous ones. Rationality means awareness about the market trends, like prevailing prices, etc. Nokia possesses the capability to produce valuable products, which is why Nokia is successful in taking away a large number of consumers from its opponents. Competitive Advantage-Sustainable Nokia has the ability to maintain its competitive advantages in the competitive marketplace of mobiles. The dynamic capabilities of Nokias skill can analyze the flow and stock of Nokias knowledge which further gives push to its sustainable comparative advantage. The following points explain this component of balance sheet: Mobility An organization can achieve maximum benefits only when the correct building blocks are put in place. The building blocks of an effective mobile infrastructure often affect different aspects of an organization. These blocks can prevent costly missteps and failure of organizations. The overall impact of mobilization from a business perspective is essential before formulating effective business strategies. Nokia needs to understand these essential building blocks to achieve and sustain the true competitive advantage of the company. Brief Summary In a word, Nokia’s unlimited resources and capabilities would help it to maintain the future image of the company. For instance, Nokia is one of the well known, trusted and famous brands in the market. It is one of biggest non USA companies that have established itself, as one of the strongest brands worldwide. Nokia has attained this sound market position by being innovative and by catering consumers belonging to all classes of society. Today, it is known as the most trusted brand, even in the far flung areas of developing countries, like India. The net sale in India was 2 809 EURm. (Nokia Corp, 2010) A case analysis of the particular financial/managerial decision It is an undeniable fact that Nokia is a giant in the arena of mobile companies, as it is growing rapidly all over the world. When we look at the net sales statistics of Nokia by market share all over the world; we notice that the net sale in North and Latin America is just 5 % and 7% respectively. This is very low according to the population and the size of the region. At this point in time, there is a dire need to take strong and quick managerial decisions that can help increase the net sale in America as well. Hence, the company needs to study market trends and the consumer preferences of the United States. This is an easy goal for Nokia as it focuses on the behavioral level. In addition to this, managers should have a clear vision and understanding of how to increase the value graph of Nokia in USA. Moreover, Nokia should combine internally generated knowledge with the one from other sources, in order to bring more diversification in its products. References MarketWatch, 2010 .Consolidated statements of financial position, IFRS. Available at: http://www.nokia.com/NOKIA_COM_1/About_Nokia/Financials/Financial_Statements/pdf_2009/Statem_fin_09.pdf Nokia Corp, 2010. Nokia Group 2005 –2009, IFRS. Available at: http://www.nokia.com/about-nokia/financials/key-data/markets Nokia Corp, 2010.Markets. Available at: http://www.nokia.com/about-nokia/financials/key-data/markets Pontiskoski. E, Asakawa. K (2009) Overcoming Barriers to Open Innovation at Apple, Nintendo and Nokia. World Academy of Science, Engineering and Technology, vol. 53. Available at: http://www.waset.org/journals/waset/v53/v53-61.pdf Read More