Strategic Issues Faced by Nokia - Assignment Example

I. What are the key strategic issues that face the firm at this time? What shapes the behavior of a business is the degree of uncertainty in its environment. In order to assess the degree of uncertainty, it is important for us to note the key dimensions that define an organization’s environment. As Stephen Robbins (2005, pp.443-444) illustrated in his book Organizational Behavior, there are three dimensions to the environment of any business, namely capacity, volatility and complexity. Using this framework, we try to assess the environment in which the company currently operates in. The environment plays a huge impact in crafting strategy and strategic management decisions an organization makes. The strategy depends on the dimensions of the environment where it operates in, as mentioned earlier, which depends on the overall objectives of an organization. A. First dimension: capacity Currently, Nokia operates in the mobile phone industry, which belongs to a larger portable consumer electronics industry. In order to find a key strategic issue for the company, we first analyze the first dimension of the environment: capacity. Capacity is about the relative abundance versus scarcity in the company’s environment. In the case of Nokia, the mobile phone industry supports a huge capacity for growth, as the demand that determines the industry’s market potential is made by the increasing reliance of people on better electronic devices. Being part of the larger industry which is the portable music industry, the environment is abundant as the demand for consumer electronics is driven by greater reliance of people in electronic devices for their day-to-day lives. This is a key strategic issue for Nokia: strategic marketing. As the environment provides more opportunities especially for incorporating other features to the mobile phone industry, Nokia is set to enter an overlapping industry within the portable consumer electronics industry as music has been included in the features mobile phone manufacturer offers. With Nokia’s adoption of innovation strategy for its business-level strategy, the company is set to pursue innovation by constantly changing its products by adding more features, constantly redefining what a mobile phone is comprised. However, this strategy pushes the company to compete indirectly in other markets within the portable consumer electronics industry, such as the market for music devices and markets for digital cameras. B. Second dimension: volatility The second dimension in the model is volatility, which is about the relative dynamism and stability in the environment. The whole portable consumer electronics industry where Nokia operates in tends to the extreme of a more dynamic environment. Because technology continues to update itself in such a rapid phase, new products in the portable consumer electronics business have shorter product life cycles and product obsolescence has become so much faster. Due to this, the industry can be said to be very dynamic, as changes appear very fast, and that the first-mover advantage—companies who are the first to introduce a new product to the market gains a significant foothold and is ahead of the competition, is still applicable in most instances that occur in the industry. This is a key strategic issue for the company: strategic human resource management. Volatility in the industry where Nokia operates in has an implication on its organizational structure, which determines its speed in coping with changes in the market place and continuous efforts to innovate. The innovation strategy that Nokia pursues has an implication on the structure of the company. Therefore, organizational structure as part of the strategic human resource management is a major strategic issue for the company as it determines the company’s flexibility to respond to the changing preferences of consumers. As the company pursues innovation strategy, another implication on strategic human resource management is the company’s organizational culture. When the structure encourages the culture, the culture is mainly determined by the values of the top management. Nokia’s culture to support innovation is a key factor in terms of pursuing the innovation strategy of the company. C. Third dimension: complexity Complexity is the third dimension in the three-dimensional model of the environment. This third dimension is about the relative simplicity and complexity of elements that are offered in the market, in terms of homogeneity and heterogeneity of products. The portable consumer electronics industry is relatively complex because of heterogeneity of the elements in the electronics industry. While there are a handful of players which significantly hold and control the market, the lower costs due to constant advancements in technology new smaller competitors keep coming. And because technology can be copied virtually immediately among the portable electronic devices, new improvements are made possible in the shortest possible time, which makes the environment very complex. The elements constantly keep on redefining the competition in the portable consumer electronics industry. This is a major strategic issue for the company: strategic operations management. The complexity in the portable consumer electronics industry prompts Nokia to capitalize on the complexity of the industry to its advantage by infusing other benefits that the mobile phone provides. Complexity redefines what product competes against another, especially with the case of the mobile phones. The complexity keeps the market from redefining the rules; by strategic operations management, which will focus on delivery of innovative products through the research and development and production, when combined with other functions such as marketing and human resource management, Nokia will be the one to keep on redefining the market and create new level of standards. II. Identify and evaluate three strategic options that the company might realistically pursue. The product-market expansion grid in Philip Kotler’s book “Principles of Marketing” provides a good way to analyze the business portfolio and identifying growth opportunities for the company (2004, 48). These opportunities can be represented by the different quadrants in the grid. A. Innovation thru product development One strategic option for Nokia to adopt is to innovate thru product development. In the product-market expansion grid, this means introducing new product in existing market. Nokia can continue on its innovation strategy by offering new products in the existing market. This can be a viable option for Nokia, which already has a significant investment in research and development. With the knowledge that it has already accumulated both in terms of technical know-how and knowledge of the market, Nokia can venture into introducing new products that can play in the portable consumer electronics industry. A major advantage of pursuing such option is the company have a huge number of customer base—the current users of their products. By introducing new products under the brand name Nokia, the benefits of the brand as regards its reputation for its mobile phones will be extended to the new products. This will give the company a larger share in the portable consumer electronics industry as a whole. While this is a good option for Nokia, there are also disadvantages. Marketing new products under the Nokia brand will require the company to redefine its brand in terms of marketing campaigns that it already ventures to the overlapping segments in the market. The Nokia brand will stand not only for being a manufacturer of the mobile phones, but a major player in the portable consumer electronics industry. This would require significant additional investment for the company, which could offset the potential economies of scale its current operations advantage could provide. Another disadvantage could be the new products that Nokia will manufacture can indirectly compete with its mobile phones. B. Innovation thru diversification Innovation thru diversification is another strategic option for Nokia. Diversification, as according to the grid is introduction of new products in new markets. When Nokia has tried the CWM model, it aims to sort of diversify, by entering the music distribution market. While Nokia has a reputation for innovation, the level of research and development for the company can accommodate the expansion choice. As the first-move advantage, Nokia in the case of the CWM model, can gain a significant foothold in the music distribution business, and can even revolutionize the music business if the model proves to be successful. While the advantage of being the first mover--in that among the companies that are players in the portable consumer electronic industry, it is first to offer such, is good, there are also disadvantages to Nokia. As the company joins the music distribution business, it will have to compete to other indirect competitors. This can make Nokia lose its focus by having to compete in different markets. And because the markets where it will compete are different, there are tendencies that it may lose touch with its customers. This can undermine the initial efforts of the company in terms of innovation. Playing in different markets because of the features the mobile phones will provide will require shuffling of priorities for the company. C. Innovation thru market penetration Market penetration is offering existing products in existing market. In the case of Nokia, it can stick with its product—the mobile phones while continually innovating the mobile phones that it can offer the market and redefining the competition. The major advantage of this option is that the company has a huge customer base for the current. It would not require major efforts for the company, such as marketing efforts should it continue to offer better handset models to the market. Because of its brand’s reputation, the company can utilize this option to further increase the demand for its mobile phones. It can further grow by adopting market development and brining the innovation to new markets. The disadvantage that comes in pursuing this strategic option lies in the opportunity to gain the first-mover advantage to the company. By just concentrating on mobile phones, it limits its ability as well as the economies of scale that the expansion could provide it. III. Which one would you recommend and would there be any implementation issues associated with it? A. Innovation thru product development With the continuous rapid improvement in the portable consumer electronics industry in the market, it is not impossible that in the near future, complexity will push the companies to consolidate the segments and offer a wide range of products to cater to these overlapping segments. The mixture of the benefits that the products provide will create a plethora of products in the portable consumer electronics industry which will dissolve the rigid classification among the different products in the future. Being a pioneer of innovation, Nokia has to gain the first-mover advantage for this opportunity. By pursuing innovation thru product development as its strategy, it will be the first one to redefine the market, take advantage of the complexity of elements as well as manage to set new standards that will once again revolutionize, now the portable consumer electronic industry. However, as it is a major strategic move, there will be some implementation issues that are needed to be addressed. These include: redefining the Nokia brand in order to incorporate the plethora of new product that it will offer the market; organizational re-structuring in order to make provisions for the handling of new product lines; process reengineering and restructuring of some of its operational processes in order to give way to manufacture of new product lines. As discussed in the previous number, product development as a strategic choice for Nokia will require it to redefine the brand as it provides brand extension to its other product lines. Although it already has a structure that focuses on the different handset models that it offers to the market, Nokia has to do some re-structuring to provide focus for the different segments where Nokia will have to compete, i.e. products sub-categories. Also, due to the different processes that are required for the new product lines, Nokia has to do some changes in its production processes. In order to make way for other consumer electronics that it will produce, the restructuring will also be applicable to the company’s production function. IV. Write a reflective statement about what you have learned about leadership through the activities involved in this module and assess the development of your own leadership skills. Bibliography: Bartol, K., Martin, D., Tein, M., & Matthews, G. 2001. Management: A Pacific Rim Focus. McGraw Hill Company, Australia. Kotler, P., & Armstrong, G. 2004. Principles of Marketing. 10th ed. New Jersey: Pearson Education, Inc. ROBBINS, S. 2005. Organizational Behavior. New Jersey: Pearson Education, Inc. Read More