Nokia Strategy for Industry Leadership - Report Example

NOKIA Introduction The current report reviews the strategy of Nokia, a major industry leader in the wireless technology/telecommunications market, over the past 3 years. In addition, recommendations are made regarding changes that are required. Strategic decisions considered include the introduction of new models, partnerships with other companies like Microsoft, competition and legal action against companies like Apple, expansion into new markets, and marketing and pricing strategies. The industry of which Nokia is a part is very competitive, so companies in this industry have to react proactively to change, or create change rather than reacting. Due to changes in the external environment with wireless 3G and 4G capable smart phones, Nokia has also responded by focusing more on smart phones in terms of marketing, in response to customer demands. The demographic for smart phones has not changed significantly, and changes in technology that have led to more integrated cell-phone platforms (phones with internet access, phones with cameras, etc.) have been successfully marketed, and sales have increased for many, but not all, companies. The closeness of competition has meant a closer focus on the customer for Nokia, to good effect: “Sagem shows significant declines in user satisfaction across all features while Alcatel lost ground in user satisfaction ranking in the display, keypad, and UI areas. Nokias best selling tool has been user satisfaction but now, Siemens and SonyEricsson are competing at the same level” (Strategy, 2008). Companies have to keep up with technological advances in offering the latest product and service features for smart phones. Strategic decisions As mentioned above, the wireless telecommunications industry, of which the smart phones in which Nokia specializes are a part, is very dynamic and competitive. Therefore, over the last three years, many strategic decisions at Nokia have been dictated by, a response to, or an attack towards, competitors. “The intensity of industry competition and an industry’s profit potential are a function of five forces of competition: the threats posed by new entrants, the power of suppliers, the power of buyers, product substitutes, and the intensity of rivalry among competitors” (Ireland et al., 2006). This is an industry that has very intense rivalry. Strategic and decision making models in the smart phone industry are complicated, and they are often formulated in relation to competitive forces. Nokia is one of the players near the top of the market, which is dominated by just a few makers of smart phones; the gulf between the top and bottom of this market is very wide, as this is an industry that requires substantial start-up and marketing costs. The impact from the external business environment often impacts the formation of strategy, such as when pricing controls change or when the service or product becomes more or less affordable as technology increases. “When cellular telecoms services were launched, phones and calls were very expensive and early mobile operators (carriers) decided to charge for all air time consumed by the mobile phone user. This resulted in the concept of charging callers for outbound calls and also for receiving calls:” (Mobile, 2008). In the US, a lot of smart phone companies are still able to charge for receiving calls, whereas in Europe this has changed somewhat: this shows that strategy formulation has to change in this global industry. “While some systems of payment are pay-as-you-go where conversation time is purchased and added to a phone unit via an Internet account or in shops or ATMs, other systems are more traditional ones where bills are paid by regular intervals. Pay as you go (also known as "pre-pay") accounts were invented simultaneously in Portugal and Italy” (Mobile, 2008). Pre-pay accounts are currently a major draw in the US, and there is a lot of competition to offer the best service with the most options and coverage. Nokia has responded to this pressure by strategically determining effective marketing moves, in terms of introduction as well as pricing, which makes it more competitive with arch-rivals like Samsung. “Market leaders Nokia are usually among the key news makers at the Mobile World Congress. By using a clever marketing move to postpone the announcement of their 8 megapixel flagship 8MP for the second day of the MWC 2009, they really got all the attention to themselves” (Nokia, 2009). Product launches at technology expositions are a great way for a company like Nokia to get attention from industry insiders as well as intelligent consumers. Nokia has a lot of brand recognition that it can cash in on in terms of marketing, as well. Strategic moves at Nokia are also complicated by the entry barriers in this industry. Not just any company can make and introduce a smart phone. High barriers are like high obstacles that keep competitors from entering the industry, while low barriers are more easily surmountable to competitors seeking returns within the industry. It is a rule of thumb within this equation that the fewer competitors there are in an industry, the more they can take advantage of opportunities and strengths to garner better returns. The industry in which the typical smart phone company operates is slightly more complicated than this however, because, as mentioned, it tends to have a small and concentrated number of large and well established companies at the top of the market share, and a relative abundance of smaller companies at the bottom, showing a high entry barrier to get to the top of the market share, but a lower one to get into the industry in general. Over the last three years, Nokia has shown strategic directions in three main directions, mainly in response to the competitive forces and pressures mentioned above. First of all, it has expanded its marketing reach and concentrated more on the provision of smart phones, or cell phones which have 3G or 4G internet, cameras, GPS, and other applications which make them more than just phones. Secondly, it has formed alliances with potential competitors such as Microsoft, while going after other competitors like Apple and its standard-setting smart phone, the iPhone in legal battles. “Apple analyst Gene Munster thinks Nokia is looking to extract a royalty payment of 1 percent to 2 percent of every iPhone sold from Apple, which would be about $6 to $12 per phone. With 34 million iPhones sold to date, that would be $204 million to $408 million in back payments Apple would have to pay” (Nokia, 2010). Finally, Nokia has moved its strategic position to one that is specifically targeted to increase sales over its closest competitor, Samsung. Recommendations Nokia needs to stay ahead of the curve of developing technology in order to stay viable in this highly competitive industry. The established competition for high tech phones means that there is going to be a lot of supply-side competition, and the company that is able to get the product from the producer to the consumer in the most cost- effective and timely manner is going to wind up on top of this market. Therefore, distribution must be concentrated on in terms of its importance to the company’s future in this market. Distribution is also going to be international in this scenario, so Nokia is going to have to look to expand its manufacturing facilities based on multinational and continental alternatives; this is also going to affect distribution in terms of how long it takes the customer to receive the product. Nokia should also keep working closely with Microsoft, and keep fighting Apple in court. It is my opinion, on which my recommendation is based, that choosing between Microsoft and Apple is like choosing the lesser of two evils in this market. And if Nokia wants to retain its edge in customer service, it needs to distance itself from Apple as much as possible. “The two companies will begin collaborating immediately on the design, development and marketing of productivity solutions for the mobile professional, bringing Microsoft Office Mobile and Microsoft business communications, collaboration and device management software to Nokia’s Symbian devices” (Microsoft, 2009). This could be a very valuable relationship for Nokia. Nokia also needs to look at expanding its wireless specifications and improving speed. 802.11g is a specification for WLAN networks involving wireless communication in regards to smart phone computing. The confluence of mobile phone communication and wireless networking emphasizes this specification especially. There seems to be a present shift towards including different communication devices to work together in a wireless environment. Wireless networking is basically a way for two or more devices to communicate without using traditional cords and cables. This technology is supplied by a number of companies operating for the most part under the industry standard of 802.11g. Nokia has realized that wireless networking is in many cases quicker than more traditional methods of access, is becoming increasingly affordable, and is also being made available in various public areas to enhance the medium’s convenience and adaptability. Companies and institutions like Nokia that employ wireless networking in-house generally do so to increase the convenience of device interface, and to cut down on the confusing tangle of wiring that more traditional networking options often presents. Other companies use the system to improve inventory interfaces. Many current writers in the technology field are optimistic about wireless networking, seeing it as a dynamic and constantly changing type of networking that is capable of providing quick, easy access between devices in virtually any sort of application. Conclusion Nokia is a major competitor in its industry, and is releasing new products with effective marketing moves and solutions. “These solutions will be available for a broad range of Nokia smartphones starting with the company’s business-optimized range, Nokia Eseries. The two companies will also market these solutions to businesses, carriers and individuals” (Microsoft, 2009). In terms of environment that are more narrowly defined by marketing parameters, the smart phone market offers expanded opportunities that have been being taken advantage of ever since deregulation of the telecommunications industry. The internal environment is focused on the strength of product ties with consumers, especially in the case of new cell-phone technology. If Nokia is able to keep its focus on customer service and competitive validity, it can look forward to meeting the challenge of the future. REFERENCE Nokia sues Apple (2010). http://news.cnet.com/8301-31021_3-10381354-260.html Microsoft and Nokia (2009). http://www.microsoft.com/presspass/press/2009/aug09/08-12PixiPR.mspx Strategy Analytics: Nokia, Siemens, And SonyEricsson Lead the Way in Mobile Handset Satisfaction (2008) http://www.allbusiness.com/marketing-advertising/marketing-advertising-measures/5199201-1.html Nokia—review (2009). http://www.gsmarena.com/nokia_mwc_09-review-318.php Mobile technology (2010). Business Wire. Read More