Business-Level and Corporate-Level Strategies: Nokia - Case Study Example

 Business-Level and Corporate-Level Strategies Table of Contents I. Introduction 3 II. Business-Level Strategies 4 III. Corporate-Level Strategies 6 IV. Competition 7 1References 10 I. Introduction This paper discusses the corporate-level and business-level strategies as well as the environment of competition of Nokia. Nokia competes in the technology sector, and in the phones and smart phones industry of that sector, up until recently. Nokia stands out in the news for the sale of its handsets business to Microsoft, dramatically altering the business dynamics of the firm, its size, and the kind of strategies it has to employ in order to reorient itself for the future. Nokia also stands out for the equally dramatic collapse of its business, from being the most dominant player in the mobile phone business, to a player whose debt had been reduced to junk, with dwindling and increasingly marginal shares of the total smart phone market, the collapse of its market capitalization and revenues, and its precarious cash and overall financial position. It had been reduced moreover into this state in just a matter of a few years, overrun by the current giants of the business in Apple, Samsung, and a host of new players in China and elsewhere making Android phones. On the other hand, what remains of the firm after the sale of the handset business is considered to be formidable and promising in terms of spurring future growth and establishing Nokia on a more solid footing. Its patents portfolio is large and valuable, and should be a source of stable revenues moving forward. Without the handset business Nokia is expected to leverage its patents portfolio more to be able to squeeze more revenues from them. Two, its mapping business, dubbed Here, is solid, and provides services that cannot be duplicated to Microsoft in its Windows Phone platform, as well as to a host of other parties, such as car manufacturers. Thirdly its network infrastructure business is a substantial source of revenues, and is a major player in that space. Together these three remaining business segments are expected to restore Nokia to financial health and prominence moving forward (Google, 2014; Cheng, 2014; Lappin, 2014; Ricknas, 2014; Mick, 2014; Scott, 2014). II. Business-Level Strategies The literature tells us basically that there are two business-level strategies that firms can pursue, one is differentiation and the other is low cost-based business level strategies. Variations of these two focus on specific parts of a market, and then doing either a low cost or a differentiation strategy (QuickMBA, 2014; Gallagher, n.d.). For Nokia there are several business-level strategies that are relevant to the discussion. One set of business-level strategies relate to its strategies for mapping. Mapping has become one of the remaining pillars of the remnants of Nokia after the sale of its handsets business to Microsoft. This mapping business is centered on its Here mapping property, which is robust enough to be a direct competitor to Google Maps. Here too, there are few alternatives outside of the offerings of Nokia in mapping, and economies and use scales favor the continued competitiveness of Nokia maps moving forward. This is not a commodity play, in other words, but owing to the specialized nature of mapping, and the absence of real alternatives to what Nokia offers in this space, Nokia is able to pursue a differentiation strategy. This strategy involves breakneck innovation and seeding of the Nokia mapping platform to as many devices and users as possible. This is necessary because the mapping services become better as more and more people around the world use it. One thing going for Nokia is that Microsoft has licensed its maps, and so have many other large entities such as car manufacturers, which are in turn poised to integrate Nokia’s mapping technology into its cars. All these translate to a large mass of users that Nokia hopes will further differentiate its mapping services and make it singular and without peer in the industry. This is a true differentiation strategy, and one that Nokia hopes to exploit moving forward (Lappin, 2014; Ricknas, 2014; Mick, 2014; Scott, 2014). The intellectual business strategies can be construed as likewise being differentiation plays. This is because Nokia has invested large portions of its research and development in the development of its massive portfolio of patents, a large portion of them being very vital to other firms who use the patents for their products and services. This patent portfolio is moreover difficult if not impossible to replicate. Given these, Nokia is in a position to capitalize on its monopoly over their patent portfolio, and to command large fees for their use. Moving forward too, Nokia is expected to continue to build on this patent portfolio, in order to stay ahead of the competition and to further differentiate the quality of its technology patents from others. The IP business strategies for Nokia make sense, given these (Cheng, 2014; Lappin, 2014; Ricknas, 2014; Mick, 2014; Scott, 2014). The Networks business strategies on the other hand, given the competitive nature of the business and the need for Nokia to build scale, are based on low-cost strategies as well as aspects that are based on differentiation. The differentiation aspects are tied to new networking technologies that Nokia has to pursue to stay ahead of the competition. On the other hand, to compete for business in existing telecommunications networks, Nokia also has to compete in terms of price, and therefore has to pursue low cost strategies. Overall, this mix of business strategies for the different business segments of the remnants of Nokia is sound, and reflects a mature understanding of the dynamics of mapping, patents, and networking. Nokia in particular needs dynamic business strategies for networking to balance out revenue concerns with the need for profitable growth and profitable revenues (Ewing, 2014; Lappin, 2014; Ricknas, 2014; Mick, 2014; Scott, 2014). III. Corporate-Level Strategies The overall strategies for firms are corporate-level strategies, and these are important not just for firms that are engaged in many kinds of businesses, but also for many other firms who may have a set of core products and competencies but who navigate their way through complex markets and intense competition,. among other things (Harvard Business School, 2014; Chartered Professional Accountants of Canada, 2014). For Nokia, an obvious manifestation of its corporate strategy or strategies is exactly that sale of its handset business to Microsoft. For a long time its handsets business had been losing money, and had been a drain on its cash flow and the overall viability of the firm. Its more recent moves to shift to Windows Phone and to move away from its legacy offerings in order to reverse its market share declines and revenue declines have largely failed, and the company had continued to bleed money. Should Nokia continue to slug it out in the handset business and risk losing all of its money in the process, or should it divest from the business and try to dispose of it in the most profitable way? Arguably in the early stages of its decline, with more money and with the chance to move to Android, Nokia could have had the luxury of pursuing the former strategy. However, given its precarious financial position and poor prospects moving forward, one can argue that its decision to sell the handset business was the best corporate-level strategic move that the company could have undertaken. One can view this move as a strategy to realize value from a handset business that was falling off a cliff in terms of revenue and value. In the end one can argue that this is a good move on the part of Nokia, and that this is the manifestation of a good overall corporate-level strategy. Taking a step back, one can see too that the overall corporate-level strategy revolves around shedding businesses that are losing money, while shoring up those that are key to the firm, and that secure the future financial prospects of the firm. Networks are profitable, and mapping and patents are the soul of the firm, one can argue. They are lasting sources of differentiation and competitive advantage. Given these, one can say that the overall corporate-level strategy of Nokia is sound, and the best that it can adopt given its vastly changed circumstances. The sale of the handset business allows Nokia to rebuild its cash position, while retaining the core businesses as discussed allows Nokia to make use of its patents and its mapping assets, as well as its networking business, to secure its future (Ewing, 2014; Lappin, 2014; Ricknas, 2014; Mick, 2014; Scott, 2014). IV. Competition In its core business of patents and mapping the competition is limited to Google, with its own patents and maps. The competition here, in maps especially, is formidable and is expected to continue to pour research and development money into its mapping solution, because it is a key offering for Google, and a source of differentiation for its platform offerings, including Android. On the other hand, Nokia also has the scale in terms of installed base, that it can leverage to continue to build and improve on its services for mapping solution. In terms of intellectual property, given the sheer size and quality of its patents, Nokia on the other hand is expected to have little competition, meaning that it is expected to be able to generate substantial revenues from those patents from the rest of the industry players. In patents and in mapping, moreover, Nokia can leverage a large portion of its intellectual property and related assets without building out physical devices, or be in competition with those who do so. Those assets are real but also intangible, and have zero costs for distribution. These are very real strengths that are difficult to copy and to beat (Ewing, 2014; Mick, 2014; Scott, 2014). In the networking business, on the other hand, the company faces a long list of aggressive competitors, including low cost players such as Huawei from China, which are expected to bring tough competition to Nokia moving forward. These low cost players have potentially lower cost structures, and can compete aggressively on price, so that moving forward the competition dictates that Nokia must try to shift towards higher margin, differentiated network offerings. This means a focus on innovation and research and development. The low cost players will have a good fighting chance of being viable in the long term, but Nokia also has scale, so if it doubles down on research and development it has a shot at emerging on top of the networking business too. The key is in achieving that balance between the need to build revenues in the short term and becoming profitable in the long term (Ewing, 2014; Mick, 2014; Scott, 2014). Finally, in terms of the choice of Nokia to be able to emerge on top long-term, prospects for Nokia are good regardless of whether the markets are fast-cycle or slow cycle, because Nokia has the assets and competencies to thrive in both kinds of markets moving forward (Ewing, 2014; Mick, 2014; Scott, 2014). 1 References Chartered Professional Accountants of Canada (2014). Corporate-level, business-level and functional-level strategies. ManagementAccounting.org. Retrieved from http://www.managementaccounting.org/en/sitecore/Content/Documents/MAP/STRAT-Corporate%20level%20business%20level%20and%20functional%20level%20strategies Cheng, R. (2014). Farewell Nokia: The rise and fall of a mobile pioneer. CNET. Retrieved from http://www.cnet.com/news/farewell-nokia-the-rise-and-fall-of-a-mobile-pioneer/ Ewing, A. (2014). Nokia Forecasts Lower Profit Margins on Network Slump. Bloomberg. Retrieved from http://www.bloomberg.com/news/2014-01-23/nokia-posts-fourth-quarter-loss-as-network-equipment-sales-drop.html Gallagher, S. (n.d.).Business Level Strategies. James Madison University. Retrieved from http://www.quickmba.com/strategy/generic.shtml Google (2014). Nokia Corporation (ADR). Google Finance. Retrieved from https://www.google.com/finance?q=nyse:NOK Harvard Business School (2014). Corporate Level Strategy. Institute for Strategy and Competitiveness. Retrieved from http://www.isc.hbs.edu/firm-corpstrat.htm Lappin, J. (2014). April 25, Nokia Will Be Cash Rich, Shorn of Its Money Losing Device Business. Forbes. Retrieved from http://www.forbes.com/sites/joanlappin/2014/04/23/aprilapril-25th-nokia-will-be-cash-rich-and-shorn-of-its-money-sink-device-business/ Mick, J. (2014). Microsoft Now Officially Owns Nokia Devices. Daily Tech. Retrieved from http://www.dailytech.com/Microsoft+Now+Officially+Owns+Nokia+Devices/article34793.htm QuickMBA (2014). Porter’s Generic Strategies. QuickMBA.com. Retrieved from http://www.quickmba.com/strategy/generic.shtml Ricknas, M. (2014). Smartphone lull a golden opportunity for Microsoft. PCWorld. Retrieved from http://www.pcworld.com/article/2148420/smartphone-lull-a-golden-opportunity-for-microsoft.html Scott, M. (2014). Digital mapping may be Nokia’s gem. The Times of India. Retrieved from http://timesofindia.indiatimes.com/tech/tech-news/Digital-mapping-may-be-Nokias-gem/articleshow/34255079.cms Read More