PESTEL Factors and Nokias Decline - Assignment Example

PESTEL Factors and Nokias Decline Q1. Nokia  a. What PESTEL factors have influenced Nokias decline?  The PESTEL factor that influenced Nokias decline was the “technology” factor. Nokia just failed to keep up and adapt to the dizzying change in the mobile phone industry that resulted to its decline. In 2007 and 2008, Nokia was the leading company in the mobile phone industry producing nearly half a billion handsets a year (Shaughnessy 2012). It however failed to foresee the smartphone boom when it turned down the idea of the Open Handset Alliance (OHA) which we now know as Android. It blew its chance to join the Android platform by rejecting Google’s idea of the Android which now substituted its place as the leading mobile handset provider. b. Which of Porter’s five forces factors is most responsible for Nokia’s decline  Of the Five Forces of Porters Factors of Threat, it is the threat of new competition and the threat of substitute products or services that is most responsible for Nokia’s decline. Back in the GSM days, Nokia was the dominant player in the industry but when smartphones were introduced particularly the Open Handset Alliance or Android, its market share fell a steep plunged from 23.8% to a mere 8.2% with Samsung getting most of the chunk of the market. The substitute products or services were the Android platform for smartphones of which Nokia rejected (it had the chance to join the Open Handset Alliance but rejected the idea). Samsung on the other hand capitalized on the Android by offering low cost smartphones (Samsung Galaxy etch. ) which enabled it to ascend to the position once occupied by Nokia making the threat of new competition responsible of its decline. c. Which of the SWOT factors is most responsible for Nokia’s decline?  It is the external threat and failure to capitalized on an opportunity (which later became a threat) of the SWOT that are responsible for Nokia’s decline. The missed opportunity to join Open Handset Alliance or Android later evolved to become a threat that undermined its position in the industry. d. What strategy should Nokia follow to survive? If Nokia will be able to develop a new platform that will replace Android, then it can again dominate the mobile handset industry. This possibility is not remote because Nokia is very capable of coming back on top of the industry. It has already done it before during the early stage of the handset industry where Motorola dominated the industry and Nokia beating Motorola through the innovativeness of its handsets. Part B  Q1 . a. Which country would you choose and why?  If I were an investor of a US multinational company and given the chance to invest in countries outside the US, I would invest in the Philippines. It used to be China but China’s record on the protection of intellectual property rights is just horrible. It is a country of counterfeits and the billions of dollars spent on Research and Development will just go to waste due to China’s disrespect for intellectual property rights. The same goes for India. Philippines in this aspect have a relatively better record because the country respects intellectual property rights. There is Guanxi in China or the interrelatedness of business and relationships that extends to the government. While corruption was a major issue in the Philippines before, the country has now dramatically improved in reducing red tapes due to the present administration’s seriousness in curbing if not removing corruption in public office. In addition, enforcement of laws relative to business is better in the Philippines compared to China and India. e. Which country is the least attractive for investment and why? I will now avoid investing in China. In addition to the abovementioned reason of the country’s disrespect for intellectual property rights, corruption and poor enforcement of laws relative to business, China is also not known for the quality of its products. Outsourced manufacturers often complain that their Chinese counterparts do their products perfectly only when they are around to inspect it but become inconsistent once they leave. f. How do the factors listed above affect the intention to engage in a licensing agreement?  It increases the cost of business which undermines the company’s competitiveness in several ways. First, there is the hidden cost of bribery to get a licensing agreement if the host country is corrupt. Second, the delay in getting the licensing agreement also meant foregone income in terms of opportunity cost. Lastly, Chinese counterparts are known to cut corners in terms of the content of licensing agreements. g. How do the factors listed above affect the intention to engage in a franchising agreement?  It is a disincentive to engage in a franchising agreement due to high cost and uncertainty of doing business. Q2. Determinants of country advantage a. Discuss how Factor conditions contribute to the advantage of the United States.  United States is the largest economy in the world. It follows that it has a strong domestic consumption to support any industry. Also, being a highly industrialized country, it has a reliable infrastructure to support the movement of supplies and manpower to make a business functional. In addition to physical infrastructure, its legal infrastructure is also favorable to business (i.e. anti-monopoly laws, enforces intellectual property rights). b. Discuss how Home demand conditions contribute to the advantage of Germany.  Favorable home demand conditions make a company less vulnerable to the external shocks of the world economy such as the case of Germany. When the world market is experiencing a crisis such as financial crisis and recent European crisis, the company can rely on its domestic market to support itself. c. Discuss how Related and supporting industries contribute to country advantage in India.  India is known as a good country to outsource software programming. This competency in computer software enabled India to have competency in other technology related fields such as back office business processing. d. Discuss how Firm strategy, industry structure and rivalry contribute to country advantage China.  China is known for its cheap labor cost. This was the main reason why industries flocked to China. It has also a huge market that provides industry a greater latitude to expand Q4. Starbucks  a. What is the core competency of Starbucks? The core competency of Starbucks is its company culture on how it values its people, both its internal employees and its external customers and suppliers. In terms of valuing its workforce, this can be seen on how Starbucks give benefits to its employees. It gives dependent coverage as well as stock options to its employees. As a result, Starbucks has dedicated workforce unsurpassed by its competitors. b. Do competitors share this core competency?  To objectively answer the question, it is very telling to note that the industry attrition/turnover rate among employees is 140% while has only 60%. This manifests the level of dedication of Starbucks employees which is not present among its competitors. c. What new competency does Starbucks need? Starbucks must perpetually train its employees to ensure the competitiveness of the company. It must train its employees on how to concoct coffee to add variety to its present serving of coffees. d. How would the acquisition of this new competency influence Starbucks’s business performance  The coffee market is already saturated and empowering its employees to widen the diversity of its servings will not only add novelty to the company but will also enhance its competitiveness through the perpetual innovation of its employees. This will result in the economy of scope in terms of its product offerings that could contribute significantly to its bottom line. Q5.   Consider the supply chain for Dell.  a. What is the most and least important element of the supply chain for Dell? Why？  The most important element of the supply chain for Dell is its customers. Customer is the most important element of Dell’s supply chain because customers drive the company’s supply chain (Gilmore, 2011). The supply chain is designed and implemented in accordance to the need of how to best reach the customers and in a manner that would make the company more competitive not only in terms of cost (by being efficient) but also by marketability. Dell’s supply chain basically differs depending on the market segment it intends to cater (either by direct sale or retail) and to make the customization of its computers available to its customers at a reasonable cost. b. How does analysis of the supply chain influence the formulation of strategy?  The analysis of the supply chain influences the formulation of strategy in a manner that it could determine whether the existing supply chain serves the company’s objective of giving customers voice in terms of determining the configuration of their computers by selling customized computers at a reasonable price. Analyzing Dell’s supply chain would enable it to determine its weak points and enable it to address the same to make the company more competitive. More importantly, a close look at the present supply chain would also enable Dell to determine the efficacy of its supply chain; whether it is giving the company a competitive advantage or making it unresponsive to customer’s needs. In Dell’s case, its supply chain proved to be its competitive advantage leaving its competitors behind by a distance. Dell’s supply chain is aligned to people (both its customers and its supply chain people), processes and technology that meets customer needs at each step (Gilmore, 2011) and enabled the company to make the model to order computers possible. The efficacy of Dell’s supply chain influenced the company’s strategy by directing on how the company should reach its customers that would give it an advantage over its competitors. Bibliography Gilmore, Dan (March 18, 2012). The Lessons from Dell's Supply Chain Transformation. http://www.scdigest.com/assets/FirstThoughts/11-03-18.php?cid=4330[accessed June 28, 2012] Shaughnessy, Haydn (June 15, 2012). Nokia's Layoffs, The Euro and the End of The European Dream. http://www.forbes.com/sites/haydnshaughnessy/2012/06/15/nokia-the-euro-and-the-decline-of-the-european-dream/ [accessed June 28, 2012] Read More