How Nokia Has Been Able to Build Its Market Share across the World - Case Study Example

Business and Management Challenges ON NOKIA 2009 Submitted by: Number Submitted Organizational Background: History: Nokia is the largest mobile phone manufacturers in the world. It was started way back in 1865, by engineer Fredrick Idestam. It was then that he established wood – pulp mill in southern Finland and here he started the production of paper. Europe at that time was facing a high level of industrialization which led to an increased consumption of paper and cardboard, making Nokia a huge success. After thirty years in 1895, Nokia was handed over to his son – in – law Gustaf Fogelholm. The first export of the product was made to Russia following which the company started exports to other countries like UK and France. The company also attracted a number of people for work as well. This moved to grow into a tiny community by itself and this is still existent on the riverbank of Emäkoski which is located in southern Finland. Post this Nokia grew to become more attractive to a number of different businesses. Nokia was used a s a brand name for the Rubber works and the company went into manufacturing footwear, tyres, rubber bands, industrial parts and also raincoats. As years past, in 1967, Finnish Rubber Works and Finnish Cable Works shares merged together to come Nokia Group, which provided employment to almost 460 employees. The early 70s saw a big change for the company where Nokia first stepped into the telephone industry and developed digital switches, which became major success for the company. By the end of 1980s, the company had developed a common standard for the digital telephony, and called it Global System for Mobile Communications (GSM). The 90s saw the company grow into other countries and expand its network to almost thirty one countries. The 1990s also saw a high recession. It was now that the company decided to move completely into the telecommunications and mobile sector and make it the main business of the group. The company managed to become a success despite the recession and this was majorly due to the strategic decisions to divest its non core operations and concentrate completely on telecommunications (Nokia History, 2009). Rumours also have it that Nokia was tried to be sold to Ericsson – a Swedish company in 1990s. Nokia’s 2100 series was very successful during this period and sold as many as 500,000 units. Over the years, Nokia has grown to become the world leader in digital technology. The product portfolio of the company includes not only mobile phones, but telecommunication networks, wireless data solutions, and also multimedia terminals. The company spends as much as 8.5% of its net sales on research and development and is one of the only companies that tries to ensure as much as innovation as possible in its products. Major Markets and Current Performance: Nokia has grown to become the most famous and desired companies of the world. The company’s ten major markets are as below. The company’s performance in these markets is clearly indicated from the graph and the table below. It needs to be noted that the figures that have been included are from the top ten markets of the company and hence do not display the actual earnings of the company. Figure 1: Net Sales by Market Areas – 2007 (Nokia Markets, 2009) Table 1: Net Sales for the years 2005, 06 & 07 in the 10 major markets (Nokia Markets, 2009) Products: As mentioned earlier, Nokia deals with a number of different products. The graph below highlights the company’s net sales based on the different business groups of the company, i.e. the various products of the company. Figure 2: Net Sales by Business Groups 2007 (Nokia Graphs, 2009) Nokia’s production of network technologies is mainly out of China, Finland, Germany and India. The mobile devices are produced from Brazil, China, Finland, Great Britain, Hungary, India, Mexico, Romania and South Korea. Distinctive Feature: Nokia is the number one mobile phone provider in the world and this is based not only on the fact that the company provides its customers with the latest technologies but also the company’s vision. This highlights the path taken by the company to be able to meet the needs of its customers. Nokia’s vision is “Our promise is to help people feel close to what is important to them” (Nokia Vision, 2009). Nokia is a company which prioritises its customers to a great extent and all their strategies are customer led. The company has a continuous increase in consumer involvement in terms of the technology and the communications globally. The company allows the customers to be completely mobile and also with the increasing need of different modes of communications Nokia allows the customers to completely mobile. There is a new need for the Web and for social networking sites by all the customers which is possible with Nokia as it allows people to connect with others in new and better ways. This forms the distinctive feature of the company. Nokia is also known for its every growing range of devices with context enriched services (Nokia Vision, 2009). Creation of Competitive Advantage: Competitive Advantage is a very essential element for every business. This is a feature which makes a business successful. Creating competitive advantages can be possible by innovating, reputation or relationship with the customers and the stakeholders of the company. It is essential that this feature is carefully planned as other companies should not be able to imitate this from a company (Business Dictionary, 2009). The competitive advantage is when a company creates or produces something which is different from its competitors and becomes a factor for the customers to buy a product from the company. Companies can build a competitive advantage for their companies using three main elements, i.e. Innovation, relationships and reputation. Innovations: With the growing needs of the customers and the wide range of products that are available in the markets, one of the most essential elements for any business to succeed is now innovation. The possibility of companies to introduce something new into the markets is a very strong way for the customers to be distinctive (Jobber, 2004). Every company requires being ahead of the game and providing the markets with newer innovations which cannot be copied by its competitors easily. Innovation also includes newer ways to reduce the production costs and to provide better and faster solutions to customer needs, without any compromise in quality. Relationships: Businesses apart from aiming at making profits and gaining a larger market share also need to pay close attention to treating the stakeholders well. This not includes their customers, but also includes employees, suppliers and shareholders. A successful business is one which works in coordination and sync with these groups of people (Johnson, et.al, 2006). Two very important relationships that the company require to retain at all times are with the customers and the suppliers. A company with a strong supplier relation will have no worries for the goods, i.e. raw materials. The good relations will lead to a definite timely delivery along with good offers o the prices. This will also affect the relationship with the customers, as timely delivery of the raw materials will lead to timely delivery of the finished products, which will lead to happy customers, i.e. higher possibilities of customer retention. This forms a strong competitive advantage for the company. Reputations: The third essential factor which allows for building a competitive advantage is reputation of the company. A company which is successful normally have high reputations. Take for instance while talking about phones, Nokia is the first name that customers can relate too. This is majorly because the company has provided customer with excellent services and products through out with high reliability. This makes it a competitive advantage as customers would prefer buying a Nokia handset as they can completely rely on it and are sure to gain something that is new and innovative (Kotler & Armstrong, 2007). High reputation is normally gained by companies by building an image for itself, by either, reducing the prices, appealing to the affluent, good quality, sensible selling, and keeping practical and also useful. It is important to understand that a business needs to spend years on building a reputation and a good will for the company (Mintzberg, et.al. 2002). Both these are priceless and can to a great extent lead to the success or the demise of the company. Thus a company with a strong reputation is one with a strong competitive advantage. Nokia’s Style of Competitive Advantage: As already discussed, Nokia is a consumer led company. The company’s strategies are all developed keeping the customers and the needs of the various customers in mind. Like every company, Nokia creates its competitive advantage by ensuring continuous development of products and technology to be in sync with the customer needs. Nokia has used all the above mentioned ways and has built a strong competitive advantage for itself across all the markets. Nokia is very conscious of the innovativeness of its products and this is clearly evident from the amounts of monies that the company spends annually on research and development. Almost 8.5% of the net sales of the company are spent on the research and development (Nokia Strategy, 2009). The company is known for the new and latest technology in all its products and is preferred by customers for the simple reason that is provides its customers with latest technology and provides customers with all the elements that would lead to complete freedom and mobility. This shows how the company has built its competitive advantage and has led the customer loyalty to increase. This is a very strong and positive step taken by the company and it allows for the company to be very popular among its people. This leads us to the area where the company has ensured to keep very strong and positive relations with its customers and the suppliers. Nokia as seen is a widespread organisation and the success of the company is very clearly due to the strong support it receives from its suppliers around the world (Nokia Strategy, 2009). This is possible as the company realises the needs of its suppliers and does not ignore them, thereby making them loyal to the company, and providing the supplies in time always. This ensures that the customers are provided with the best products always and in time. Last but not the least, Nokia has built a very strong brand image for itself and has created a very strong customer database. This not only allows the company to increase its brand image but also to a great extent leads to strong competitive advantages which ensure a higher number of people who would like to buy its products. There by making it in a position it is currently in terms of the market share across the world (Nokia Strategy, 2009). Conclusions: The above discussion has highlighted how Nokia has grown over the years and how the company has been able to build its market share across the world. Nokia is a company which is strong in terms of innovativeness, and also has a very strong brand name. The huge name that the company has gained over the years and the strong competitive edge that it has gained over its competitors is majorly due to a continuous and never ending need for technological development and the value that the company operates with, i.e. customer led. These form the backbone for the success of the company and these to a great extent lead to the company being so well accepted across the world. Nokia’s success in terms of its competitive advantage is clearly seen through the fact that the company has the largest market share. 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