Nokia Corporation - Assignment Example

Case Study: Nokia Table of Contents Introduction 3 Overview of the Company’s Present Scenario 4 Evaluation of the Five Forces Model 6 VRIN Framework 8 Porter’s Generic Strategies 10 Critical Analysis 12 Conclusion 14 References 15 Bibliography 19 Introduction During the year 2007, Apple Incorporation launched its most renowned product iPhone in the market which made it possible for general people to take the advantages of Smartphone features which were previously directed towards the business persons only. Later on, with the introduction of Android phones in the market, the competition in the telecommunication industry became extensively fierce. Such fierce competition has created a greater requirement for the companies in the telecommunication industry to come up with exclusive and creative ideas followed by unique technologies in order to sustain their business successfully (Prasad & Sahoo, 2011). Nokia is considered to be one of the most popular information technology and communications international companies, which has its headquarters in Espoo, Finland. Nokia is one of the most renowned and respected companies’ operating in the worldwide market. The company is known for providing network equipment and telecommunications services (Ali-Yrkkö, 2001). Over the years, the organisation has been able to develop strong brand image by offering quality products within the mobile telecommunication industry (Capon, 2008). The products of the company are of distinct designs and are versatile as well. Moreover, the company offers other attractive services that range from internet services that include music, applications, games, navigation and information services and media along with free digital maps that are offered to the consumers at large by the company (Alänge & Miconnet, 2001). The company has been able to cement its position as one of the leading mobile telecommunication companies since 1998 to past couple of years (Ali-Yrkkö, 2001). The company is known to employ around 101,982 individuals who are being sourced from nearly 120 countries worldwide. Nokia is said to conduct its sales operations in almost 150 countries. The yearly revenue of the company is ascertained to comprise €30 billion (Nokia, 2013; Nokia Corporation, 2013). One of the best aspects about the company is that it has been the largest trader throughout the years 1988-2012. However, in the recent years, the company is facing certain challenges that have caused decline in the sales of its products. Accordingly, the company is identified to face difficulties in grabbing the changes in the customer trend at the marketplace. In other words, unlike its competitors, Nokia has failed to introduce innovative and creative products at the market place. The purpose of this study is to develop a case study applying and evaluating three analytical tools. Correspondingly, this study represents the case study of Nokia Corporation using analytical tools including VRIN, Porter’s five forces and generic strategies. Overview of the Company’s Present Scenario In relation to the aspects associated with Nokia’s business scenario in the present day context, it has been learnt that the company’s success rates have been viewed to decline in the recent times. It has been ascertained that the company is losing customers to its rivals such as Samsung. The organisation is probably seemed have had troubles in terms of adapting to the changes occurring at the market place. Nokia is acknowledged to have failed to recognise the release of iPhone which has marked the beginning of new era in the mobile telecommunication industry. The company still uses its own software ‘Symbian’ which has failed to offer as many applications as offered by iPhone and Android equipped smartphone (Blandford, 2011). The failure of Nokia to understand the prevailing market trend can be attributed to declining market for the company in the recent past years. At the same time, it has been determined that the company in the recent years has widely been involved in promotional activities through television newspaper and billboards. However, the company has not been involved in any type of campaign activities in the recent years which may also be attributed to its failure factor. This factor can be provided with the maximum amount of weightage owing to the fact that there has been an increasing amount of competition which the company had to face. High amount of competition seem to come into play due to large competitors which served Nokia with tough business consequences. The formerly great Nokia mobile and device trade has sold itself to the American giant namely Microsoft at US$7.17 billion (WIRED.com, 2013). This stance had been a major turning point for Nokia through all the years of its existence. Microsoft acquired Nokia in order to expand its business operations by way of entering into the cellular phone business domain. Nokia’s financial conditions had not been very much fair, and the primary motive towards Nokia’s alliance with American giant i.e. Microsoft proved to be an excellent marketing strategy for the company to survive. In the current day business context, it has been learnt that Microsoft acquiring Nokia has brought in numerous business benefits (Chang, 2011). The overall smartphone devices trade unit has been able to see to major changes that included high amount of business success that the Lumia brand brought in. In recent times, Nokia’s major success rates have been majorly contributed by the grand launch of the Nokia Lumia series. Lumia handsets have been able to claim numerous awards along with recognitions. As a result, there has been an increase in the sales volume in each of the previous three quarters, whereby the sales have been viewed to reach 7.4 million in the second quarter of the year 2013 (Aarhus School of Business and Social Sciences, 2013; Rukmani Devi Institute of Advanced Studies, 2013). Evaluation of the Five Forces Model Entry Barriers There are several barriers that prevent companies from entering into the business domain. A few of the barriers that may work in favour of Nokia need to be determined. High fixed cost which is required for research and development among other divisions is considered to be one of the biggest barriers to entry into the industry. Image of the firms is determined to be the other barrier to entry for the new firms since people prefer to purchase goods from those companies that they trust. In relation to Nokia, barriers to entry may be provided by its competitors such as Samsung and Sony among others (Johnson & et. al., 2011). Bargaining Power of Buyer It has been observed that Smartphone along with cellular phone companies generally possess weak bargaining power. There is end number of substitutes available in the smartphone industry. And also, the product differentiation in this particular industry is quite low in comparison with the competitors. The demand for smartphones is generally elastic because of the fact that smartphones are not indispensable products (Johnson & et. al., 2011). Threat of Substitutes Products There are various substitutes available for smartphones which are generally utilised for mobile access to information. The plentiful substitute products available in the market are laptops, cellular phones, pagers and organisers. The cellular phones as well as laptops offer the services that are needed by most of the consumers in terms of mobile access to information. The different complements that the consumers can use for the smartphones are e-mails along with maps, internet applications as well as software that are available over the phones. This factor lays concurrent ideas in relation to the context of Nokia because the company had to face high amount of threats by topmost cellular phone companies such as Samsung, Blackberry and Sony among others (Johnson & et. al., 2011). Rivalry There is high competition in the smartphone industry and even though there are few strong competitors, the industry does not endorse numerous organisations. This is because of differentiation. Although there is greater differentiation between the casual as well as professional users for smartphones, there is limited capability to differentiate it. There is negligible scalability in order to generate more number of software, not directing the market to a small number of firms. When customers purchase a regularly utilised product, they tend to put greater emphasis upon quality instead of price. There is minimum differentiation for price and the companies with recognised low quality along with fewer budgets for research and development will worsen (Jeffs, 2008). Bargaining Power of the Suppliers This factor often plays a very crucial role in the fulfilment of the company’s objectives. On the other hand, this factor also leads to rearrangements of a company’s marketing operations. In relation to the context associated with Nokia, it has been learnt that the bargaining power of the suppliers of Nokia’s products is on the rise. Thus, in order to cope up with the issues relating to rise in the bargaining power of the suppliers, the company needs to create alternative marketing strategies in order to ascertain healthy business relationships with its suppliers. In relation to this respect, the company needs to be highly competent to meet the expectations of the suppliers and at the same time strive towards improving the business operations (Jeffs, 2008). VRIN Framework VRIN framework is considered to be one of the essential concepts from a resource based perspective. This framework helps in delivering corresponding results in relation to the aspects associated with the strategic management. This framework showcases various applications that pose high amount of importance in the overall context of the achievement of competitive advantage. VRIN primarily stands for Valuable resources, Rare sources, Imperfectly imitable, Non- substitutable. A resource is said to be an asset which a firm possesses. The asset may bring diverse ways through which a firm may be benefitted. It even allows companies to enforce various planned strategies for the purpose of development along with further enhancement of operations and for ensuring all round effectiveness. VRIN is responsible for defining the process of resource analysis four ways: 1. V which stands for valuable resources which are required by any organisation for creating new strategies in order to augment the effectiveness and efficiency in the organisations. For Nokia, valuable resources include experience, information about marketplace and quality offerings. 2. R is used for indicating the rare resources which are of primary importance for different companies but may be unavailable. For Nokia, rare resources include product features such as its own use of operating system. 3. I stand for those resources that are imperfectly imitable and which cannot be faked in any ways possible. In this respect there is requirement to look at personal belongings of other firm. In case of Nokia, managing suppliers’ relationship is a key constituent. Moreover, bringing in fresh designs in a continued basis also facilitates the company to succeed. 4. N in this respect signifies those resources which are non-substitutable and cannot be replaced from any of the resources that are available. After-sales service can be regarded as a non-substitutable resource (Talaja, 2012). It is of primary importance for each and every organisation to attain VRIN resources as these resources are responsible for defining the true position of a company in a market. It even allows a company for acquiring high amount of success and for improving the firm’s overall position in the highly competitive commercial industry. Thus, the overall analysis provides high amount of weightage to the fact that VRIN resources can very well put a company in a favourable position and it can also lead to organisational excellence as well (Talaja, 2012). Porter’s Generic Strategies Source: (University of Cambridge, n.d.). 1. Cost Leadership In relation to the aspects related with cost leadership, a firm is generally seen to fix low costs for its products in order to become a low cost manufacturer in its respective industry. The different source that relates to cost advantage primarily varies and usually depends on the overall structure of the particular industry. These aspects may very well include of economies of scale, technology, favoured admission to raw materials along with various other factors. It is of primary importance that low cost producers must have the expertise to exploit the different resources of cost advantage. If a firm is able to achieve and maintain the overall aspects of cost leadership, then it will definitely be able to surpass the average performance level in its industry. However, it is of primary importance that the firm possesses the necessary expertise to achieve the desired level of competence (Thompson & Martin, 2010). 2. Differentiation While following the process of a differentiated product strategy, a company is primarily seen to consider all those aspects associated creating a sense of uniqueness in its particular industry. In addition, a firm such as Nokia uses this strategy as it is also seen to lay its primary stress on following those business dimensions that are usually valued by the top buyers in the industry. It selects one or even go for more than one attributes that are likeable to many buyers, it simply values of all those aspects that are marked as important by the consumers. In addition, Nokia is also found to uniquely position it so that it is able to meet the expectations of the expectations of the consumers (Thompson & Martin, 2010). 3. Focus This is considered to be one of the most important stages in the overall process of generic strategy. In this particular stage, high amount of importance is laid upon the aspects of choices that are needed to be made of a narrow competitive reach within an industry. In this particular stage, the primary business focus is laid upon a segment or a group of segments comprising in an industry. However, the best aspect about this stage is that proper business strategies are being prepared in order to serve the consumers in the best possible manner. The focus strategy primarily seems to comprise two major variants, the one being (a) cost focus and the other (b) differentiation focus. In relation to a cost focus approach, a firm is said to seek high amount of cost advantage and in case of a differentiation focus, a company such as Nokia is said to seek factors in relation to creating differentiation in a target segment. However, both of the aspects of the focus strategy lie on the broad amount of importance in relation to the aspects associated with creation of high range of focus. However, the aspects of cost focus are primarily utilised by Nokia for the various purposes that mainly comprise exploitation of differences in the segment of cost behaviour. On the other hand, differentiation focus is primarily utilised exploiting the special requirements of the buyers in different segments (Barney, 2007). Critical Analysis The analysis of all the above strategies showcases high amount of importance in the organisational context. This fact can be provided with the maximum amount of weightage owing to the fact that all of the aspects are more or less utilised by most of the companies. Most importantly, these factors are considered by the overall telecommunication industry as well. In this respect, it can be said that companies such as Nokia among others considered all of the above explained factors to a very large extent. Moreover, it has also been learned that all of these aspects i.e. Porter’s Five Forces Model, VRIN Framework along with Porter’s Generic Strategies are equally important are needed to be considered at all levels. Thus, considering all of these broad aspects, it can be stated that all these factors pose high rate of advantages for companies to grow and sustain in the long run. On a further note, it can be stated by way of following of all of the effective strategies laid out by Porter can very well put a company in favourable place. In addition, all these strategies can prove to be very beneficial for companies such as Nokia as well. However, companies considering all of the above mentioned strategies may prove to provide certain amount of disadvantages as well. In relation to this aspect it can be stated that if a company considers Porter’s Five Forces model then there may certain amount of criticalities that the company may need to face. For instance, it can be very well said that analysis of this particular model give rise to the threat factors that a company not be willing to face (Grant, 2008). It may lead to instances where a company may need to face high amount of competition from its competitors for which it may not be at all prepared. Thus, these instances may prove to be quite disadvantageous for any company and also Nokia as well (Ambrosini & et. al., 1998). In relation to the aspects associated with determination of the areas where these strategies can prove to be very effective, it can be said that these tools can very well applied in relation to determination to business prospects. This statement can be provided with the maximum amount of weightage owing to the fact that the tools allow companies to create high amount of focus in relation to the aspects associated with business growth. Moreover, it has also been learned that by way of following these effective tolls, companies can take the advantage of creating high amount of advantages in relation to measuring of competition. This factor proves to be very beneficial for companies as it helps in developing effective strategies in order to meet with the competition. In this respect, it also provides companies with great deal of helping hand towards the aspects associated fulfilment of the objectives of the business (Ambrosini & et. al., 1998). Conclusion It has been ascertained from the above evaluation that Nokia has been able to occupy a leading mobile telecommunication company for a long time. Nonetheless, the analysis of the company’s performance for the recent years revealed that the company is trouble with significant challenges. In this regard, the evaluation of Porter’s five forces revealed that the company is faced with fierce competition prevailing at the global market place from its rivals such as Apple and Samsung. Correspondingly, it has been ascertained that with the introduction of iPhone by Apple in the year 2007, the mobile telecommunication industry has witnessed significant transition. Nokia is no longer considering as the market leader. The primary reason behind its failure is attributed to its decreasing capability to adapt and track the changing customer trends. In order to deal with the increasing competition prevailing at the market place the company has launched some versatile products such as Lumia. However, these products failed to deliver the expected results. In this regard, it has been argued that failure of these products to deliver the desire outcome was primarily due to the implementation of inappropriate marketing strategies by the company. Due to the stiff competition prevailing at the market place and availability of large numbers of substitute the bargaining power of buyers has been ascertained to be high. According to the evaluation of Porter’s generic strategies, it has been ascertained that Nokia has been involved in differentiation strategy. Nokia differentiated its products in term physical and non-physical features. However, unlike Samsung and Apple, Nokia discarded segmentation strategy which caused the company to lose its target customers to its rivals. References Aarhus School of Business and Social Sciences, 2013. 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