Nokia - Opportunities and Threats - Case Study Example

Nokia Student’s Name Student No Unit Name Word Count Nokia Introduction The high-tech industry is one of the most competitive and profitable in the world. Nokia had a good record and was one of the top mobile phone manufacturers before it was edged out with the launch of Android and IOS smartphones. Chen (2013) says that during the better days, Nokia brands accounted for a fifth of the world’s 100 brands. For 14 years, it was the leading telecommunications firm before its market capitalization dropped rapidly to 87%, and its credit rating went to the lowest possible level. Neelu (2014) adds that it became a successful company in handsets market because it predicted the enormous demand for mobile phones, which other companies could not foresee. As of now, the company lags behind its rivals in the growth oriented smartphone market. It can only regain its position by unveiling new products that compete against the best in the smartphone industry. Opportunities One of the major opportunities that Nokia can take advantage of is the growing smartphones market in the world. Smartphones have changed the way individuals communicate in the world. A smartphone comes with many features that enable people to perform many tasks in addition to making calls and receiving emails. They also come with 3G and 4G internet that makes it possible for their users to access their social media sites with ease. According to a report by Statistita, there were 2.1 billion smartphone users by the year 2016, and the number is expected to surpass 5 billion by 2019 (Statista 2016). China is the world’s largest smartphone market with India and the United States coming second and third respectively (Ming 2017). On the brighter side, new markets are emerging in Africa and other countries in Asia, which means that it is a viable business opportunity for Nokia to invest in. The other opportunity that Nokia can take advantage of is its extensive distribution network. The company has one of the largest networks of selling and distribution than reach across countries. Neelu (2014) explains that Nokia is a global company that has presence in over 150 nations. It has been also been listed on the Helsinki, Frankfurt, and New York stock exchanges. With better distribution network, the company would find it easier to sell its new smartphones compared to other companies that are starting from scratch. Nokia has an opportunity to increase its presence in 3G and Edge market. The Corporation specializes in telecommunications network equipment, ISDN, broadband access, voice over IP, and wireless LAN. Its investments on telecommunications and its early focus in GSM technologies propelled it to be the leading mobile phone manufacturer until 2012. The increase in smartphone provides opportunities for the growth of all telecom sub-sectors. These include network equipment/infrastructure companies, wireless and wireline/broadband carriers, and device manufacturers that Nokia can take advantage of. Deloitte notes that in the future there could be a shift towards areas with a higher growth potential such as content and the Internet (Deloitte 2017). There is a huge demand for enhanced content at the carrier level. Moreover, carriers should focus on providing data and voice services that are reliable, affordable, and of high quality. In addition, carriers should make upgrades to their core connectivity infrastructure networks. All these require significant amounts of capital that would enable Nokia to expand its international market. The company can reclaim its former leading position by introducing new android smartphones. The downfall of the enterprise can be attributed to its failure to read the mood of times and use the Android system like other phone manufacturers. The Android operating system was superior to its Symbian operating system since it had a better user interface and many applications. To reverse this, Nokia has to introduce new products that match or surpasses the current standards. The company is working on introducing new smartphones that run on the Android system this year. It has confirmed that Nokia 3, Nokia 5, Nokia 6, and Nokia 8 will be available for purchase in 2017. The new phones will be on sale in 120 markets across the globe. Besides that, the company announced that it would reintroduce the Nokia 3310, which is the world’s most sold out mobile phone. The Nokia 3310 is going to catch the attention of people who loved the brand years back. Apart from smartphones, it could concentrate on making other electronic devices. For example, it could start producing smart watches, fitness trackers, and smart scales among others. Most importantly, this would help it diversify its products that would enable it to take its competitors head on. Some companies like Apple and Samsung reinforce their brands through selling additional products such as smart watches. Gartner Inc. (2016) says that because the smartphone market is reaching saturation, companies such as Google are pursuing opportunities by investing more in wearables, connected homes, cars, and immersive experiences. Besides, the company can take advantage of the latest market trends. According to the latest reports, the market is shifting from high-end smartphones to towards low-cost phones (Tanner 2016). The two leading companies Samsung and Apple that target the high-end market recorded slow growths in the previous year. On the other hand, China’s companies Huawei and Lenovo, which target the middle and low market, emerged as strong players. Smartphones sells are still strong with a penetration up 10 percent annually( Deloitte 2017). The highest growth is among people aged 45 – 50. This means that smartphones are now popular across all the age groups. There are also opportunities for mergers and acquisitions. Nokia should enter into any strategic deals with reliable companies. It can also acquire tech firms with established markets to increase its market share (Deloitte 2017). Previously, it entered into an unsuccessful partnership with Microsoft Company that led to the launch of the Nokia Lumia phones. However, the smartphones did not perform well as expected. Threats Tech companies face many challenges including market demands, new competitors, and technology progress. For example, Nokia is embroiled in patent issues with Apple and other competitors. Hitt, Ireland and Hoskisson (2017, p. 74) say that diverse aspects in the world economy including rapid development of the web’s functions and globalization, in general, have made it tough for businesses to formulate strategies long term strategies. To create sustained benefits, companies ought to build innovative products. The main threat is competition from other smartphone companies. Unlike before, smartphones companies are springing up in all corners of the world. China, for example, has several smartphones brands that give established brands a run for their money. The existing market conditions mean that Nokia will find it very hard to maintain and expand their market share. So far, the world’s leading smartphone manufacturers include Samsung, Apple, Huawei, OPPO, and Xiaomi. As of 2016, Samsung had the largest market share of 23.2%, Apple 14.8%, Huawei 8.3%, and Xiaomi 4.3%. Gartner Inc. says that in the competitive smartphone industry, only companies with innovative business models will succeed. In fact, Nokia’s plan to return into the smartphone and tablet markets will not be a walk in the park. It takes more than name recognition to sell devices. Furthermore, it is more challenging for mobile handset sellers to achieve previous levels of growth. The leading smartphone operating system remains Android at 84%. The other possible threat is the issue of the infringement of intellectual property rights. Most technology companies find it hard to deal with the problem since they may either be implicated or fall victim to the same. For example, it was involved in a patent case with a US chipmaker Qualcomm that was thrown out by a German court. Anderson (2007) notes that the case is one of the several internationally that could have an impact telecommunications and information access. Jolly, Fletcher, and Bourne (2012) advice organizations that they should be realistic about what they can and cannot protect. Arguably, this will help Nokia and other businesses to avoid unnecessary court cases that could be time-consuming and bad for their reputation. The authors add that a patent regime covering all the countries in the world is a rare sight and most big companies choose to restrict themselves to key markets. Growing political tension between countries could affect the international smartphone market. Already, the new U.S. president Donald Trump plans to protect the American economy from cheap Chinese products. A retaliatory move by China will not only affect the U.S. companies such as Apple but also others in the industry. Li and Xu (2016, p. 423) Say that a trade war between China and U.S. would bring great loses to China’s development but will not reverse the trend. It will also accelerate the decline of the U.S. Therefore, both countries would lose. Nokia could also suffer from reputation damage. Reputation damage could arise from getting involved in unethical practices such buying raw materials from countries that use child labor. It could also be due to tax evasion. For example, in 2015, the company faced claims of fraud in India and the state government of Tamil totaling to US$ 500 million (Maxwell, 2015, p. 126). Nokia evaded tax by claiming false tax exemptions due to improper reporting of exports and failing to submit the required tax documents over several years. It has also previously been faced with the problem of striking workers who were demanding workplace democracy. To bring to end cases of workers strike, the company was forced announced a worker education program in 2013 that was aimed at impacting their employees with a basic understanding of the industrial dispute process and the steps required to follow it. Lessons The Nokia Company can derive several lessons from the above discussion. First, it needs to realize that it is in a very competitive industry and would require being flexible to exist. Particularly, it should focus on attracting talented individuals from all parts of the world to become part of its team. One of the reasons attributed to its dwindling fortunes in the mobile market is competition from companies with superior technology. Secondly, the company should work on increasing its market share by targeting emerging markets. In line with the latest global trends, it should concentrate on producing smartphones for the middle and lower markets (Deloitte 2017). Thirdly, it should strive to enter into a partnership, especially, with companies in markets that are doing well such as China. From the look of things, the Chinese brands would surpass Apple and Samsung if they continue to post favorable annual sales results. Lastly, apart from making smartphones, it should adopt strategic plans to diversify their products into producing wearables and networks. Other important factors to consider when making decisions include patent issues, employee relations, tax filing, and reputation. Being a technology firm, it’s highly probable that several patent issues may crop up. The best way is avoid copying other people’s innovations without following the due process. Concerning employee relations, Nokia should always strive to employ the best people’s management strategies to avoid cases of unrest and disputes among its staff. Furthermore, the company should comply with all the laws concerning tax returns in the different countries that they operate in to avoid running into trouble (Maxwell, 2015, p. 126). Lastly, it should strive to guard its reputation by engaging in ethical practices. Factoring all these issues could result in a smooth operation. Conclusion The Nokia Company has to do to a lot to reclaim its past glory back. It lost grip of the market after the launch of Android system and iOS in 2008 and 2009 respectively. The Company’s concentration on the hardware aspects as opposed to software made it lose out to new entrants. Since then, it has tried to regain its footing to no avail. Since it is a global company, it has to square out with many smartphones firms that exist in the already crowded market. However, to beat the competition, it would be required to produce products that are in line with the existing market trends and preferences. It should also enter into strategic partnerships with other companies to improve its position in the competitive smartphone market. Reference List Anderson, T., 2007. Qualcomm-Nokia Patent Lawsuits Advance - Intellectual Property Watch. [online] Intellectual Property Watch. Available at: https://www.ip-watch.org/2007/10/29/gaggle-of-qualcomm-nokia-patent-lawsuits-advance/ [Accessed 29 Mar. 2017]. Chen, C., 2013. Nokia and strategic agility. African Journal of Business Management, [online] Vol. 7. Available at: http://www.academicjournals.org/journal/AJBM/article-full-text-pdf/31DF6B638074 [Accessed 28 Mar. 2017]. Deloitte., 2017. 2017 Telecommunications Industry Outlook | Deloitte US. [online] Deloitte United States. Available at: https://www2.deloitte.com/us/en/pages/technology-media-and-telecommunications/articles/telecommunications-industry-outlook.html [Accessed 29 Mar. 2017]. Hitt, M., Ireland, R. and Hoskisson, R., 2017. Strategic management. Boston, MA: Cengage Learning. Jolly M, Fletcher AC, and Bourne PE, 2012. Ten Simple Rules to Protect Your Intellectual Property. PLoS Comput Biol 8(11): e1002766. doi:10.1371/journal.pcbi.1002766 Li, X. and Xu, D. (2016). From trade surplus to the dispute over the exchange rate. 1st ed. Singapore: World Scientific. Maxwell, R., 2015. The Routledge Companion to Labor and Media. Manitoba: Routledge. Ming, C., 2017. One of the world's largest smartphone markets got a little more crowded. [online] CNBC. Available at: http://www.cnbc.com/2017/01/11/smartphones-for-under-100-a-big-market-in-billion-plus-india.html [Accessed 28 Mar. 2017]. Statista., 2016. Number of smartphone users worldwide 2014-2020 | Statista. [online] Statista. Available at: https://www.statista.com/statistics/330695/number-of-smartphone-users-worldwide/ [Accessed 28 Mar. 2017]. Gartner Inc., 2016. Gartner Says Worldwide Smartphone Sales Grew 3.9 Percent in First Quarter of 2016. [online] Gartner.com. Available at: http://www.gartner.com/newsroom/id/3323017 [Accessed 28 Mar. 2017]. Tanner, P., 2016. What Is Samsung's Growth Strategy in the Smartphone Market? - Market Realist. [online] Marketrealist.com. Available at: http://marketrealist.com/2016/03/samsungs-growth-strategy-smartphone-market/ [Accessed 28 Mar. 2017]. Read More