Global Leadership and Management - Nokia - Essay Example

? Global Leadership and Management Global strategies must build on the principles of social responsibility and stakeholder involvement. The case of Nokia suggests that global strategies are insensitive to the cultural dimensions and stakeholder concerns. The goal of this paper is to review the essence of the global strategies and their relation to the issues of corporate social responsibility at Nokia. The paper includes a brief synopsis of the case, the analysis of strategies used by Nokia in its movement to Romania, a discussion of the global strategies at Nokia, as well as personal reflections. Keywords: global, Nokia, corporate social responsibility, stakeholders. Global Leadership and Management Nokia has always been one of the leaders of the global telecommunications industry. Nokia’s mobile gadgets are used and loved by millions of consumers around the world. The quality and efficiency of Nokia’s strategies cannot be overestimated. However, the company is not always sensitive to the needs and concerns of its employees and stakeholders. At the heart of this discussion is Nokia’s decision to move its production facilities from Germany to Romania. Of the biggest concern is the fact that German facilities have been extremely profitable, and Nokia’s striving to cut its costs by all possible means subjects thousands of employees to the risks of unemployment and poverty. The goal of this paper is to review the strategies used by Nokia in its movement to the top of the business hierarchy and to analyze the pros and cons of Nokia’s approaches to global expansion and growth. Until 2008, Nokia had been the biggest global manufacturer of cell phones (Jain, 2009). Based in Finland, Nokia gradually turned into the leading provider of cell phone devices and applications in the global telecommunications industry. Throughout the first decade of the new millennium, Nokia produced four of the tenth world’s most popular phones, and in 2007 alone, the company profits increased 67% compared to the previous year (Jain, 2009). Nokia was always one step ahead of its competitors, and the range of products it offered to consumers left its competitors no chance to expand their own market position. Unfortunately, at the beginning of the new millennium, Nokia faced increased costs and faced the need to reconsider its global strategies. A decision was made to close the plant in Germany and move production facilities to Romania (Jain, 2009). Nokia believed that cost reductions was a necessity and would help the company to retain its profitable position in the global telecommunications industry (Jain, 2009). Reasons why Nokia decided to move its production facilities from Germany to Romania were simple and obvious: employees in Germany were paid ten times as much as employees in Romania would need to fulfill the same amount of work (Jain, 2009). Moreover, the creation of a new plant in Romania was part of Nokia’s low-cost strategy (Jain, 2009). At that time, the company ran a number of manufacturing facilities in Europe (namely, Hungary, Finland and Germany), a manufacturing plant in Britain, as well as in Africa and the Middle East (Jain, 2009). The plant in Germany added to the burden of costs carried by Nokia in Europe, and the company management felt that moving to Romania was the best way to stay competitive in the long run. The decision to move the production facilities from Germany to Romania stirred mass protests, and the wave of backlash resulting from employee opposition soon expanded to cover European consumers of Nokia (Jain, 2009). Employees disagreed with Nokia’s decision to move the plant to Romania, mainly because Nokia’s presence in Germany had been extremely profitable for the entire business (Jain, 2009). Labor unions in Germany called Nokia’s strategic plans unacceptable and inhuman (Jain, 2009). In the meantime, Nokia believed that the German plant would reduce the company’s global competitiveness (Jain, 2009). The plant accounted for more than one-fifth of the company’s personnel costs, and by moving the facilities to Romania, Nokia would be able to reduce and balance those costs (Jain, 2009). Nokia recognized that, with its emphasis on global expansion and growth, the company was simply unable to consider cross-national and local peculiarities of doing business: what mattered the most was the amount of profits earned by Nokia globally (Jain, 2009). The abrupt and inhuman nature of Nokia’s decision to move to Romania could hardly be exaggerated: the decision threatened the company’s humane and customer-friendly image, and many customers expressed their willingness to turn their back to Nokia, in case the company did not change its strategic preferences and intentions to shift production facilities to Romania. It goes without saying, that the growing intensity of competition challenges global players, their strategies, decisions, and market position: everyone from telecommunications to consumer electronics fights to compete in the global market. The situation with Nokia and its approach to cost-reduction and competitiveness is a classic example of how “corporate response to the threat is misdirected and ill-timed – in part because many executives do not fully understand what global competition is” (Hamel & Prahalad, 1985, p.139). In the current state of globalization, competition and competitiveness are no longer limited to profitability and measurable financial dimensions of company’s performance. On the contrary, global competition encompasses a variety of social issues and concerns, and the social ramifications of company’s value chains should not be ignored (Porter & Kramer, 2006). In other words, corporate social responsibility and attentiveness to stakeholder problems and concerns are at the heart of the most successful competitive strategies adopted by firms. Unfortunately, Nokia fails to account for the non-financial, economic and non-economic risks of moving its production facilities to Romania. The company’s quest from perfect profitability to extraordinary profitability is difficult to understand. Although Nokia’s decision has the potential to provide Romania with new jobs and earnings, these benefits are zeroed by the social, financial, and ethical losses incurred by Nokia’s movement from one country to another. Given the growing importance of corporate social issues in global competitiveness, Nokia should reconsider the far-reaching implications of its movement to Romania for its European and global industry position. When all factors of the decision are considered, it may appear that the costs of moving to Romania exceed the costs paid by the company to its German employees. Of the biggest risk are consumer intentions to turn their back to Nokia, and this is also one of the most vulnerable elements of Nokia’s cost-reduction strategy. Nevertheless, Nokia remains one of the principal representatives of truly global strategic approaches to competition in the telecommunications industry. It should be noted, that of all companies that claim themselves to be global, just a trifle can be considered as authentic representatives of the “global edge” in strategic thinking. Of the 380 companies Rugman (2003) analyzed in his study, only eight proved to be truly global. Nokia is believed to be one of the eight global companies, since more than 20% of its business is represented in each element of the EU-NAFTA-Asia triad (Rugman, 2003). Consequentially, the strategy Nokia employs can be considered as global. Global strategy is that which is focused on one and the same, standardized product in all countries and is based on the centralized control over all strategic decisions (Quick MBA, 2011). Global strategies are particularly effective when cross-country differences in consumer perceptions and preferences are small (Quick MBA, 2011). In case of Nokia, global strategies result in greater cost-effectiveness and faster product development (Quick MBA, 2011). That Nokia employs a global strategy of market expansion is not difficult to see. The fact is in that Nokia disregards the effects of its centralized decisions on employees in regional locations but uses global profitability as the principal measure of its strategic success. Other important features of Nokia’s global strategy include the presence of a well-developed product distribution network, the presence of a common mission statement to be followed by all divisions and affiliates, and the company’s success in conquering market quickly, with little attention paid to the cross-cultural and cross-country differences (Quick MBA, 2011). Unfortunately, the global strategy is not without difficulties. Global strategies are initially oriented toward maximizing profits by taking the benefits of cross-country similarities to the fullest (Quick MBA, 2011). Global strategies are particularly effective in places where local and regional issues are of minor importance. Simultaneously, global strategies make it difficult to monitor social issues and their effects on organizations; as result, companies often have to prioritize their global profits over the needs of stakeholders. The case has taught me a good lesson of global corporate growth and the social implications of global expansion in the telecommunications industry. The main thing I have learned is that global strategies are insensitive to the issues of corporate social responsibility. However, companies that disregard the importance of social issues have their industry position weakened against their competitors. We live at the time when the centrality of social issues and social accountability of organizations should be taken into account. Competitiveness is no longer limited to profits, and companies that limit their view of competitiveness to financial indices risk losing their customers and global position in the market. Certainly, global strategy by itself is not that bad, but the main question is how to use this strategy and its benefits wisely. This is also the question companies must ask before they enter the global market. Conclusion Globalization has become a distinguishing feature of industrial and organizational growth. Companies try to go global, in order to develop and sustain their competitiveness in the market. Nokia is one of the brightest representatives of the global telecommunications landscape, since it has more than 20% of sales in each of the EU-NAFTA-Asia triad (Rugman, 2003). Nokia’s decision to close its manufacturing facilities in Germany and move them to Romania became a cornerstone in the development of productive relations between the company, its employees and customers. The German plant used to be extremely profitable, but Nokia’s pursuit of huge profits pushed the interests of employees and stakeholders to the background. Apparently, global strategies are insensitive to the cross-cultural and regional issues. Consequentially, the decision to move Nokia’s facilities from Germany to Romania can threaten its customer-centered reputation. Global strategy by itself is not that bad, but the main question is how to use this strategy and its benefits wisely. This is also the question companies must ask before they enter the global market. References Hamel, G. & Prahalad, C.K. (1985). Do you really have a global strategy? Harvard Business Review, 28, 139-148. Jain, S. (2009). Nokia: Business interests vs. German pressures. Icfai Business School Case Development Centre. Porter, M.E. & Kramer, M.R. (2006). Strategy & society: The link between competitive advantage and corporate social responsibility. Harvard Business Review, December, 1-12. Quick MBA. (2011). Global strategic management. Quick MBA. Retrieved from http://www.quickmba.com/strategy/global/ Rugman, A.M. (2003). Regional strategy and the demise of globalization. Journal of International Management, 9(4), 409-417. Read More