Strategies of Noki Company - Case Study Example

. An analysis of strategies of Noki Company Introduction Countries in the world are fast becoming to be a next door’s neighbors. This is brought about by the rapid technological changes in the telecommunications that bring people closer together. Business transactions, researches, and people’s connectivity comes with just a snap of the finger from many source providers. These are the mobile phones, internet and other means of sending messages provided by big companies such as Noki Company. Noki Company is a company incorporated in 1871 and is based in Finland. It is classified under telecommunications, internet and computer software sector. It is offering mobile phones, smart phones, mobile computers and networks to customers worldwide. In the light of technological changes brought about by modernization, research and development, this study will attempt to find out how Noki Company deals with the macro environment changes that affects its business. Part 1 of the study presents a PESTLE analysis, Part 2 is a SWOT analysis and Part 3 is conclusion. Part 1. The PESTLE analysis. Political Before the1980s, the telecom industry operated under a monopolistic environment, but for different political economic reasons. US, Japan and UK ended this era of monopoly and allowed new players in the industry. Radical changes have been instituted since then; and liberalization has invited several telecom companies to participate in the telecom industry. The government of Finland has been supportive of technological changes. In 1980s it has veered away with agricultural products and took position to be one of the leaders in the technology field. Thus, during this period Nokia has established a strong alliance with the government and has now be converted into the number one corporation in Finland. IT has turned out to be the third source of revenue for the country. The mobile phones introduced by Nokia developed to be an important tool in connecting people together around the world/ Economics. Noki Company has three main core businesses, the Nokia Mobile Phones, Nokia Networks and Nokia Ventures. Noki Company is considered a very important employer; likewise, it also plays a vital role in the financial system in Finland financial market. It is publicly traded company listed in NYSE, Helsinski and Frankfurt. The company has established branches in 120 countries worldwide employing 128,445 personnel. In 2009, Noki has an operating profit margin of 5.0 % a market share of 37% and has increased the country’s GDP.(Essays Experts). Judging from the revenues generated by the telecom industry in the U.S. and elsewhere in the world, the telecom industry faces a brighter future despite recession. Table 1. Telecommunications Industry Overview Telecommunications Industry Overview Number Unit Year Source U.S. Telecommunications Industry Revenues 1.10 Tril.US$ 2008 TIA Worldwide Telecommunications Industry Revenues 3.85 Tril.US$ 2008 TIA Service Revenue, U.S. Telecommunications 518.3 Bil.US$ 2008 TIA Service Revenue, Worldwide Telecommunications 1.7 Tril.US$ 2003-08 Insight Projected Service Revenue, Worldwide Telecommunications 2.7 Tril.US$ 2013 Insight Landline Households with Wired Subscribership, U.S. 112.7 Mil. 2008 FCC Landline Revenue, U.S 304.0 Bil. US$ 2011 TIA Global Landline Subscribers 1.27 Bil. 2008 ITU Landlines, Compound Annual Growth Rate 2003-2008, Worldwide 2.40 % 2011 ITU Global Landlines per 100 Population 18.95 per 100 2008 ITU Wireless Wireless Revenue, U.S. 238.0 Bil. US$ 2008 TIA Approximate WiFi Hotspots, U.S. 66 Thous. Jun-09 JiWire Number of Wireless Subscribers, U.S. 270.3 Mil. 2008 CTIA Projected Number of Wireless Subscribers, U.S. 282 Mil. 2011 CTIA Wireless Penetration, U.S. 87 % 2008 CTIA Average Monthly Wireless Bill U.S. 50.07 US$ 2008 CTIA Number of Cell Sites U.S. 242,130 Sites 2008 CTIA Direct Wireless Service Provider Employment, U.S. 268,500 Workers 2008 CTIA Wireless Devices Sold in the U.S. 144 Mil. 2008 CTIA Global Cell Phone Subscribers 4.01 Bil. 2008 ITU Projected Global Cell Phone Subscribers 5.8 Bil. 2013 Portio Wireless Subscribers, Compound Annual Growth Worldwide 2003-08 23.2 % 2003-08 ITU Number of 3G Subscribers Worldwide 472 Mil. Q1 2009 CDG Annual Shipment of Cellular Handsets Worldwide 1222.2 Mil. Units 2008 Gartner Text Messages Sent Worldwide, Monthly 110.4 Bil. 2008 CTIA Global Mobile Data Traffic 33 PetaBytes 2008 Cisco VNI Equipment Revenue Total Equipment, U.S. 210.7 Bil. US$ 2008 TIA U.S. Exports of Telecommunications Equipment 34.85 Bil. US$ 2008 U.S. Census U.S. Imports of Telecommunications Equipment 85.29 Bil. US$ 2008 U.S. Census TV, Cable & Internet Number of High Speed Internet Lines, U.S. (including wireless) 150.4 Mil. 2008 FCC Number of Broadband Subscriptions, U.S. (not incl. wireless) 74.4 Mil. 2008 TIA Broadband Revenue, U.S. $34.70 Mil. 2008 TIA Global Internet Traffic 10,174 PetaBytes 2008 Cisco VNI Residential Cable Telephony (VoIP) Customers, U.S. 20.5 Mil. Mar-09 SNL Kagan Number of Basic Cable TV Subscribers, U.S. 63.7 Mil. 2008 SNL Kagan Number of Satellite TV Subscribers, U.S. 31.7 Mil. Q1 2009 The BRIDGE Employment Employment in the Telecommunications Industry, U.S. 1,021.4 Thous. 2008 BLS TIA = Telecommunications Industry Association; Insight = The Insight Research Corporation; FCC = U.S. Federal Communications Commission; CTIA = Cellular Telecommunications & Internet Association; ITU = International Telecommunication Union; JiWire = JiWire, Inc.; Portio = Portio Research; CDG = CDMA Development Group; Gartner = Gartner, Inc.; U.S. Census = U.S. Census Bureau; Cisco VNI = Cisco Visual Networking Index; The Bridge = Media Business Corporation; SNL Kagan = SNL Financial LC; BLS = U.S. Bureau of Labor Statistics. Source: Plunkett Research, Ltd. Plunkett's Telecommunications Industry Almanac 2010 Copyright © 2009, All Rights Reserved Market Expansion It is expected that demand for services of telecommunications will not subside, but most likely, expansion will take place in terms of infrastructure investment. According to a study that cited World Bank, infrastructure investments in developing countries alone is estimated to be $60 billion annually for the next five years for upgrading of telecommunications network. In emerging countries like India, investments in telecommunications are estimated to reach $35 billion by the turn of the century. This report also cited US Industry and Trade Outlook that predicts the growth of this industry to continue all over the continents and market outlook is summarized below:.: In Europe, the growth rate of 5 percent annually is expected to rise to about 10 percent with the introduction of competition in basic telecommunications services; In the Asia-Pacific region, currently the world's largest single market for telecommunications products and services, investments over the next five years could exceed $300 billion; In Latin America, which in 1995 represented nearly 20 percent of the world market for US telecommunications equipment exported, the market place is enormous, greater than Europe and growing faster than Southeast Asia; http://www.transworldeducation.com/articles/telecom.htm, Social IT has answered the human need for social connection. Modern information technology has created an impact to work, culture and traditions. For example, IT has changed social attitudes in that various elements of the society are now better informed because of access to information. People can now make decisions based on information gathered about a product, service or organization. Location and distance are no longer a problem and connectivity brings people closer to each other in the conduct of everyday life. Technology The backbone of telecommunications is technology which is fast changing. Nokia believes that the secret of staying competitive and successful along this line is to adapt the technology to the market. Major technological improvements are expected to benefit the communication needs of many people. Nokia has a continuing research and development program and has a vision to “become the global leader of open innovation for human mobility systems of the fused physical and digital world, giving birth to the growth of businesses for Nokia.”To implement this, Nokia has focused on its research and development programs and has established its R & D presence in 16 countries and has employed 37,020 people in the R & D. (Wikipedia). The Nokia Research Center, established for R & D purpose in 1986, employs researchers, engineers and scientist and researchers working in its seven sites in seven countries: Finland, Switzerland, United Kingdom, United states, China, India and Kenya. It has also founded its own Nokia Institute of Technology located in Brazil. It has also established linkage with other universities for technology development. Legal. Nokia has encountered problem with patent infringement and has filed a suit claiming Apple had violated 10 Nokia patents in wireless technologies. Nokia has also filed similar lawsuits to Sony, LG and Samsung, and the long battle with Qualcomm. {Gibbs, Colin. 29 December 2009) Environment As a market leader in the mobile phone devices, Nokia believes that it should also show the responsibility of being a leading company in compliance with environmental protection. Nokia believes that everyone being connected by this service can contribute to its sustainable development through best practices.http://www.nokia.com/environment/our-responsibility/environmental-strategyAs a part of corporate responsibility, it has been the contingent plan of Nokia to incorporate environmental management in all phases of production, from the extraction of raw materials up to the recycling, treatment of waste and recovery of used materials. It has adopted a policy of better design of product, close control of the production, and greater material reuse and recycling. Supply chain of Nokia has been asked to follow same environmental procedute. To do this, suppliers have been asked to follow substance management in materials used; By this, suppliers are asked to reduce or eliminate use of toxic substances in the supply of product; reduce energy and fuel consumption and encourage take back and recycling measures. Part 2. The market for the telecom industry The market structure is defined as having an ,”Interconnected characteristics of a market, such as the number and relative strength of buyers and sellers and degree of collusion among them, level and forms of competition, extent of product differentiation, and ease of entry into and exit from the market”. {Business Dictionary} The market structure of the telecom industry has changed from a monopoly to become a perfect competition wherein there are many buyers and sellers in the market. The telecom industry in Finland is under a cluster environment wherein free market exists and the government exercises little control. This has created fierce rivalry among the manufacturers and providers. As of 2001, there are more than 100 100 telecom operators and 300 content providers in Finland. Barriers to entry have been low as standardized mobile expanded this industry and allowed a large number of new comers. Additionally, standardized mobile market- NMT and GSM, were introduced as an open standard that created the starting point of fast expansion for this industry. Cluster allowed a large number of new comers that created a competitive environment similar to U.S and Japan. Competition. Nokia faces competition from other mobile manufacturers like like Sony Ericsson, Motorola, Siemens, Panasonic, Sagem, NEG and Toplux. Like Nokia. These manufacturers have their own technologies and can dictate prices in the market. Product differentiation Nokia is the pioneer in mobile phone capabilities and has an advance technology that gives them a competitive advantage over its competitors. The advanced mobile technology of Nokia includes information transfers through blue tooth, wireless internet capabilities and data synchronization. The cutting edge technology of Nokia in imaging, video, audio, browsing and in mobile instant messaging made them contrast from their competitors. Nokia has designed their products that has incorporated their corporate culture of providing customer’s satisfaction according to their technology compatibility needs. Nokia stresses their distinctiveness as a fashion thing and the company’s extensive R & D enables it to come up with product variety and market coverage. Part 3. Customer analysis ( who they are, their choice criteria, Customers of telecommunication system are the governments, commercial businesses; News and media organizations; educational organizations and households worldwide. Information technology has influenced the operations of these customers in varied ways. Government institutions Information technology, according to a study, said that it has improved the governments services to people. The IT helps the governments to manage the economy through informed manner. [Ben Meadowcroft] IT also helps improve the defense capabilities of the governments in terms of information, advance their weapons technology and design, and intelligence forces. Commercial business. The IT has provided benefits to customers belonging to the business sector. It has provided convenience in the operations of the company thru the use of word processing, database information, and AutoCAD designs. IT has made business connections easier worldwide. It has become easier now to monitor product developments, to know more about customers and learn about innovations. IT has provided a new venue for marketing of products such as on line ordering system. News & Media organizations The core of this sector is news information and dissemination. News reports can now be carried through different medium via internet, cable television and mobile phones. News and information has become cheap and accessible in all parts of the world. Educational organizations The IT has encouraged educational institutions to develop courses and trainings related to information technology and has provided learning opportunity for students. The IT has professionalized this IT as a branch of education and gave job openings for qualified graduates. On line researches have become valuable tool for researchers and students in the pursuit of knowledge. Household use. The evolution of mobile phones and computers has brought it closer to individual use. The various designs and add on value to these equipments make it easier to complete tasks efficiently and to connect to people quickly. SWOT Analysis. Strength – Nokia has technological advantage being a pioneer as mobile phone maker It is the top manufacturer in Finland, contributing to the increase of the country’s GDP It has a comfortable operating margin that could guaranty profitability and ROI for investors It is a well known brand and has created customer loyalty. Has intensive R & D that produces product differentiation and competitive advantage Weakness Rising costs involved in shaping up with the rapid technological changes in the industry in structure and design affects profitability Intense competition hurts Nokia; Price war differences and marketing strategies of competition makes the market volatile. Opportunities The rising of new economies like China, India, Brazil and Indonesia is a new market opportunity for Nokia. Liberalization and globalization open new doors for the telecom industry. The continuing interest of universities to promote learning in the technological field of information Market segmentation gives Nokia a competitive advantage Threat Environmental issues such as toxic wastes Consumer behaviors that are constantly changing Infringement of patent rights by competitors leading to legal issues Downside demand Recommendations Consider the opportunities open for Nokia such as opening up new markets in emerging countries like India, China, Brazil and Indonesia. The competitive advantage of Nokia is its well known brand and introduction will be less difficult. As a member of the EU nations, Nokia can take advantage of low tax for its export and import requirements. EU nations have bilateral agreements with other countries that could protect Nokia in entering member countries. The continued interest of universities in developing IT will provide Nokia with talented employees to work for its research and development to propel ideas for new products. Nokia should continue with its present strategy of market segmentation that identifies technological needs of each segment. Again, R & D are needed to identify and study particular needs of the government, business groups, news and households. References Business Dictionary. Market Structure definition. [n line] Available at www.businessdictionary.com/definition/market-structure.[viewed 15 February 2010] Gibbs, Collin. 2009. Nokia Steps Up Legal Fight with Apple. [on line] Available at http://gigaom.com/2009/12/29/nokia-steps-up-legal-fight-against-apple/[viewed 15 February 2010] Meadowcroft, Ben. The Impact of Information Technology on Work and Society. Ben Meadowcroft.com, [on line] Available at http://www.benmeadowcroft.com/reports/impact/[viewed 15 February 2010] Wikipedia. Nokia. [on line] Available at http://en.wikipedia.org/wiki/Nokia[Viewed 15 February 2010] Read More