Nokia Management Strategy and Policy - Case Study Example

Company Name: Nokia Title: Management & Strategy Project Table of Contents Company Name: Nokia 1 2 Title: Management & Strategy Project 2 Table of Contents 2 1.Introduction to the Study 4 1.1 Background and History of the company 5 1.2 Industry Analysis 6 2 Mission of the company 8 2.1 Mission statement 8 2.2 Vision of the company 8 2.3 Values of the company 9 2.4 Goals of the company 9 3 External analysis of the company 9 3.1 Porter’s 5 Forces analysis 9 3.1.1 Threat of new entrant 10 3.1.2 The power of the suppliers 10 3.1.3 The power of buyers 10 3.1.4 Threat of substitutes 10 3.1.5 Rivalry among the competitors 10 3.3 External opportunities for the company 11 4 Internal Analysis of the company 12 4.1 Resources and capabilities of the company 12 4.2 Competencies of the company 12 4.3 Competitive advantages of the company 12 4.4 Strengths of the company 12 4.5 Weaknesses of the company 13 6 Global Strategy 13 7.1 Entry Strategy Used 14 7.2 Entry Strategy Recommendation 14 8 Conclusions 15 References 16 1. Introduction to the Study Strategic management involves utilising long term strategic plans and executing the organisation mission and vision and making sure it’s within the firm environment. Strategic management involves both planning and implementing the organisation strategic plan. The company capabilities are analysed and matched to the environment needs. The steps involved in coming up with a strategic management are; defining the business, creating a mission and vision, analysing the firm internal and external weakness, coming up with a new business statement, transforming the mission into the firm goals and coming up with a strategic course of action. This is a process which requires the business to determine where they are and where they want to be. The business has to come up with a strategy to determine how to get where they want. When the firms realise there is a threat and increase in competition, they have to engage in a process that will enable them to revitalize their business (Charles & Gareth, 2012). The success and failure of the business is determined by how fast the firm is able to change and adapt to the business external environment. To know where the organisation ought to be in the future, the management must have a mental picture. This is what is referred to as company vision. The vision that the management comes up with must be credible, realistic and a vision which is better than the current firm position. The firm vision is a broad image and is a long term item. The mission lays the tasks that the firm is engaging in now. The firm is expected to perform both internal and external audits. This gives insight on the firm conditions both internally and externally. The firm is then expected to come up with new mission and vision statements and then translate them into the firm goals. After this, the firm is expected to come up with strategies to achieve the goals, implement them and lastly to evaluate the performance (Charles & Gareth, 2012). This report will look at strategic management and policy for Nokia. This will be done by looking at firm’s history, analysis of the industry and market, mission, vision, porter analysis, internal and external threats, opportunities, entry and global strategies. 1.1 Background and History of the company Nokia has a long history which dates back to 1865. It all started when a Finland Engineer was granted a permission to build a wood factory at River Nokia in Finland. The company was able to thrive and become a multinational dealing with paper. The company started to diversify with cables, rubber and other types of electrical equipments. In 1963, the company made its first radio phone and was later allowed to install mobile phones in cars. The company started engaging in production of small phones that were comfortable to use compared to the competitors. By 1996, the firm have shifted their operations to telecommunication though there was still production of TVs and car wheels. The company have continued being a leader in the field of telecommunication occupying a place among the world’s known brands. The company history has been full of innovation and expansion through appropriate marketing processes. The company have been able to align itself with the rapid changing technology spending a lot in innovation and product development. The company success has been associated with its strategic history and the cooperation that the cellular industry in Finland was able to achieve from all stakeholders (Nokia, 2014). 1.2 Industry Analysis In the industry, it’s important to know where the firm stands in its life cycle. This can explain the situation in which the firm is in including and the increasing or decreasing demand for their goods and services. The firm choice of strategies should be determined by the phase of life cycle which it is in. The concept of firm life cycle is very important as it acts as a prediction for sustainable development of firm. For Nokia, the firm is at the maturity phase of life cycle. This is a period where the firm experience a reduction in growth as opposed to previous high growth rate. This is the most critical period for a firm as there are fundamental changes that are taking place it. The reduced growth means there is increased competition in the market share. The management at this period tries to tackle competition. The product at this phase means that the clients have been used to it and it is no longer new hence are capable of focusing to other brands. The resultant is low growth, increase in consumer knowledge and high technology. This makes the competition to shift to prices and the quality of the service. Nokia have faced stiff competition at this phase from Android phones. There have also been rise in global competition for mobile phones. This has led to the profitability of the industry to fall (Virki, 2012). At this phase, there are changes in the structure of the industry. The changes include the mobility carriers, competition intensity and importance of the company specific barriers. The company is supposed to respond in a strategic manner. The firm can utilise a cost leadership strategy, cost leadership and qualitative differentiation. The cost leadership strategy looks at lowering the production costs which leads to lower prices that the competitors. The qualitative differentiation strategy is a strategy that involves creating unique products to the customers while focus strategy leads to the firm segmenting the customers geographically or on a specific customer group. Nokia have adopted the differentiation strategy in their products making them unique in the market. This is through use of unique technology and customer service. This has enabled the company to remain among the top players in the mobile phones market despite the increased competition (Virki, 2012). 1.3 Market Analysis Nokia have been able to successfully dominate the mobile phone industry for a long time. However, their dominance has been affected since the entry of the smart phones. The emergence of the touch screen phones with android OS and Apple, HTC and Samsung attracting more attention have reduced the market share. In 2011, Nokia partnered with Microsoft in a bid to counter the competition threat (BBC, 2011). Nokia market share have been on decline for the past years. This started when iPhone was introduced in 2007. The company launch of Nokia Lumia after partnering with Microsoft did not yield the expected goals. Compared to their competitors such as Samsung, Nokia have not done well in the market in their products. The creation of massive smart phones market has acted to erode Nokia dominance and popularity (Virki, 2012). The Symbian platform that Nokia had been offering their Smartphone in has not been successful in the market compared to the competitors. The system had been blamed for lack of enough applications for the consumers. The company failed to understand that the basic functions cannot help it capture the growing Smartphone market. The growth of Apple’s Apps store and the android system by Google, Symbian have lost their market. The market share reduced from 38% in 2008 to 28% in 2010. Despite their introduction of windows Smartphone, the market share rose only by 3%. At the moment, Nokia are ranked third in the Smartphone market behind Samsung and Apple and have a market share of 16 percent in the European market (BBC, 2011). At the moment, Nokia have continued their production of the Lumia phones in a bid to capture the Smartphone market. The products were introduced in the market in 2011 after the partnership with Microsoft had lasted for 10 months. The company has adopted segmentation strategy that can be taken to be of two types. The modes of segmentation are differentiated from each other by the price and features. The two target markets are the middle class customers who are capable of paying high prices for quality products and the lower middle class who are able to afford the cheap products model. The main problem with the mode of segmentation is that there is low understanding of the group needs and desires (Virki, 2012). 2 Mission of the company The company vision and mission statement gives insight on what the company want to achieve and how it intends to achieve it. This is important in understanding what Nokia wants to gain in the Smartphone market and how they intend to achieve it. It will also give insight why Nokia choose a specific strategy in the Smartphone market. The mission statement is the start point of the firm’s strategies and plans. This is due to fact that it enables the firm to know where it is and where it needs to go. In order for a firm to have a good mission statement, they have to understand five key points. The points are; their business, their customers, customer’s value, the current and intended position of the business. 2.1 Mission statement Nokia mission statement is designed in a simple way: “Connecting people. Our goal is to build great mobile products that enable billions of people worldwide to enjoy more of what life has to offer. Our challenge is to achieve this in an increasingly dynamic and competitive environment” (Nokia, 2014). The mission is focused in making Nokia a strong brand globally through credibility. The mission hints the company target to the mass market and countering the stiff competition that it faces. This is through developing products that are unique than what is in the market. The mission is aimed at gaining the lost share in the Smartphone market. The company mission also portrays the fact that the company understands they have lost the Smartphone market (Nokia, 2014). 2.2 Vision of the company Nokia vision is based on how it will be able to achieve the mission. This is built on their strategic alliance with likeminded partners. The company vision states; “To create, build, and encourage people from all parts of the world to communicate in order to make a world where everyone is connected” (Nokia, 2014). The fact that they want to gain market in the Smartphone market has led to a partnership to develop the Nokia-Microsoft ecosystem. Their vision recognises the need to be innovative and differentiate their products (Nokia, 2014). 2.3 Values of the company Nokia is founded on values of giving the consumers the best services in the Smartphone industry. The company have been able to develop their products by catering for the environment and community through the concept of shared value (Nokia, 2014). The company values are; Achieving together Engaging you Passion and innovation Very human 2.4 Goals of the company From the company mission, the goal is to come up with mobile products which are capable of enabling the consumers to enjoy life to the fullest. The company also aims to be a market leader in Smartphone market, a position that has been taken by the competitors (Nokia, 2014). 3 External analysis of the company The porter five forces analysis can give a clear picture of Nokia position in the market. This is due to fact that it gives a clear structure of the current industry status by looking at the competitive forces. The analysis also gives the firm current productivity and the framework that is required for the industry to compete successfully. The five forces as set out by porter are; threat of entry, power of the buyers, threat of the substitutes, threat of new entrants and the existing rivalry among the competitors (Donnelly, 2008). 3.1 Porter’s 5 Forces analysis 3.1.1 Threat of new entrant The mobile phone industry especially the Smartphone requires high capital to start and technical knowledge. This leads to low threat of a new entrant to the market. There is also a very high competition in the market from the established brands such as Samsung and Apple. This leads to most of the consumers in the Smartphone market to posses brand loyalty. The existing mobile phone market is composed of players who are equipped with patents and high technology. This gives them a competing edge against any new entrant to the market. For a new entrant to the market, technology and patents are very expensive to acquire. The current market is also composed of players with a strong distribution network. This makes it a barrier for new entrants (Porter, 2008). 3.1.2 The power of the suppliers The suppliers have low powers in the mobile phone market. This is due to the high competition that exists them leading to possibility of substitutes. The suppliers have low bargaining powers (Porter, 2008). 3.1.3 The power of buyers There is also a large group of buyers leading to reduced powers. Most of the consumers have been tied to the company contract for a long time. This makes it hard for them to switch to other service providers. This makes them to have low bargaining powers (Porter, 2008). 3.1.4 Threat of substitutes In the mobile phone market, the threat of substitute is low. This is due to fact that there are few products that can operate as mobile phones. The Smartphone acts as many devices in a single platform. This makes it hard for a single product to substitute the Smartphone. To acquire a substitute, it would be a costly process (Porter, 2008). 3.1.5 Rivalry among the competitors Perishable products demand a fast approach in selling them. For Nokia, the company have entered into the Smartphone market. This is a market where Smartphone is viewed as a perishable product and needs to be sold fast. This leads to the players in this industry to sell at low process to increase competition. The market has low exit barriers which make the unprofitable companies to continue competing though they can easily exit the industry. The fast growth rate in the Smartphone market has led to reduction in the rivalry among firms (Porter, 2008). 3.2 External threats to the company Nokia is facing huge threats in the existing mobile phone market. The threat is technological based due to rapid evolving mobile technology. The Smartphone technology has led to the company lose its market share to the competitors. The main threat to Nokia lies on the competitors who are using different platforms in their products. The rise of Android operating system from Google and Apple iOS has led to reduced market for Nokia Symbian platforms. The technological switch of Nokia from Symbian to Windows mobile operating systems lead to confusion among the consumers as there was no enough awareness (Virki, 2012). The mobile operating software is hard to switch. For a consumer using the Android operating system, it becomes hard to transfer their data and personal information to Symbian or Windows operating system. This may cost the consumers a lot of information. Nokia faces a threat in technology such that they have to come up with a technology that is better than what the competitors are offering (Porter, 2008). 3.3 External opportunities for the company Nokia have great opportunity in the technology environment through their partnership with Microsoft (BBC, 2011). This can provide a platform where the company can work in developing new products and gain a competitive advantage. The other competitors such as Samsung have also engaged in Windows platform but they have only a single model while Nokia has eight. This is a competitive advantage as it proves that Nokia have higher experience in their partnership. The company have also tried to venture into the Android platform. This can be a great chance for the future of Nokia in the Smartphone industry. Nokia has an advantage if they continue advancing their Lumia series as it will help them capture a higher market in Smartphone market (Davies, 2006). 4 Internal Analysis of the company 4.1 Resources and capabilities of the company Being a well established company, Nokia is endowed with both technology and human capital. The company has several patents that have enabled it to retain the market despite the competition. Through their strategic partnership with Microsoft, Nokia is now capable of reclaiming their market share through appropriate marketing strategies (BBC, 2011). The company products especially the Smartphone are well differentiated from the competitors. If the company can embark on an innovative approach, they have great capabilities in the market. 4.2 Competencies of the company The main competencies of Nokia are; brand image, innovation and differentiation. Nokia have been the market leader for a long time managing to build a strong brand image (Nokia, 2014). This enabled the company to gain consumer loyalty for its products. Nokia have also been able to be innovative in their products. There has also been a great deal of differentiation in Nokia phones especially the Smartphone. Nokia smart phones have been based on Windows operating system as opposed to the Android which have been in use by many companies (Charles & Gareth, 2012). This gives them a unique position in the market due to their products which are very different from the competitors. 4.3 Competitive advantages of the company Nokia main competitive advantages lie in their market experience and a strong brand. This has enabled them to produce quality products to their customers. Their experience has been used in forming the strategic alliances which have led to development of the Windows Smartphone. Having a strong brand has helped the company to make sales despite the competition through customer loyalty (Nokia, 2014). 4.4 Strengths of the company The main strength of Nokia is their brand name. Nokia had been able to gain respect globally and is among the most well known companies. Their products have been associated with uniqueness, quality and reliability. The company has been the world leader before being overtaken by Apple and Samsung. Their efforts in brand awareness have made them to be associated with high quality products. Their loyal customers can act as an asset for the company struggle in the Smartphone market (Davies, 2006). 4.5 Weaknesses of the company One of the main weaknesses with Nokia is their failure to catch up with the changing consumer trends. This is evidenced by the company failure of its Symbian platform and loss of market since launch of Apple’s iPhone. The company has also been experiencing weakness in their software and internet services (Davies, 2006). 5 Nonpricing Competitive Strategies Nokia is using the differentiation strategy in their markets. This is a combination of differentiation as a competitive advantage and targeting a large scope of consumers. This is through their products components of the marketing mix. Nokia smart phones are unique to the competitors due to their operating system (Charles & Gareth, 2012). The differentiation in their Smartphone has been based on both physical and non-physical aspects. This is the use of the physical appearance and different colours for their phones. This makes it possible to differentiate their products from rivals such as Samsung (Donnelly, 2008). 6 Global Strategy Nokia global strategy is aimed at capturing the lost market. This has been carried out through differentiation of its products from the competitors. The company have made unique products with different operating systems as compared to their competitors. Their global strategy targets both middle class and lower class consumers (Charles & Gareth, 2012). The middle class consumers are capable of paying higher prices for the quality products while the low class are more concerned with reduced prices. The strategy has focused on a large market segment as compared to the competitors (Donnelly, 2008).The company has also focused on the emerging markets as seen through their launch of Nokia Lumia series. This gives the company a great opportunity to expand their market. 7 Entry Strategies 7.1 Entry Strategy Used Nokia entry into the global telecommunication industry was gradual and strategic. Their journey into the global operation started in 1963 when they launched their first radio phone. The company engaged in production of small and comfortable phones which earned them a great market share. In the 1980, the GSM gained a wide acceptance in Europe and pioneered for Nokia expansion in the market. The government policies at the time supported Nokia strategies to success. The company entry into the international market was facilitated by strategic partnership. This enabled the company to learn about overseas market and the best mode of penetration. Nokia had started overseas operations many years earlier through export of paper to Russia, England and France (Nokia, 2014). 7.2 Entry Strategy Recommendation Nokia entry to the market is mostly focused on differentiation and target of a large consumer base. The company have also used segmentation by looking at different consumer segments. The main problem with Nokia market entrance strategy lies on lack of clarity. There is lack of positioning in the company products and some does not seem to target a specific market. Though the products are aimed at a mass market, there is no required market mix to qualify them. Looking at the market entry strategy that Nokia used in entering the Smartphone market, the company seems to have lost their strategy of target customer. There is poor positioning of its products in the Smartphone market. Using Nokia Lumia as an example, the phones have great features but are hard to be distinguished (Virki, 2012). I would recommend that Nokia re-evaluate the marketing strategy they are using in their products. The differentiation strategy that the company has adopted in the Smartphone market should be carefully formulated. The company should use the marketing strategy formulation tool in their entry into the new market (Donnelly, 2008). 8 Conclusions Nokia main aim and mission is to regain the lost market share, especially in Smartphone. The firm has tried to do this by partnering with Microsoft in developing the Smartphone. The main threat for Nokia is the existing competitors such as Apple and Samsung. These are firms which have been able to change with the current technology and have innovative products. Nokia should work toward innovation and be able to adapt to changes in technology. Though Nokia have responded to competition with Lumia series, the products have not done well despite being impressive. The main reason for failure of Lumia series in capturing the market as expected is poor marketing strategies. There are also problems with market positioning. Nokia has to rectify these problems in order to regain their market. Poor positioning can be the reason why the customers have turned to competitors’ products. Making any mistake in their partnership with Microsoft has a capability of ruining the firm. This is due to fact that their vision is based on the partnership. In future entry to market, it would be advisable for Nokia to follow segmentation strategy formulation to avoid making mistakes. The company should also utilise the product promotion aspect of their marketing mix. The company has a great future if they implement these suggestion especially formulation of their segmentation strategy. References BBC (2011, April 21), Nokia market share falls but Microsoft deal confirmed. BBC News, Retrieved May 28, 2014, from: http://www.bbc.co.uk/news/business-13154794 BBC (2011, February 11), Nokia and Microsoft form partnership. BBC News, Retrieved May 28, 2014, from: http://www.bbc.co.uk/news/business-12427680 Davies, J. (2006), Nokia falls short of wireless goals, The San Diego Union-Tribune, Retrieved May 28th 2014, from http://legacy.signonsandiego.com/news/business/20060421-9999- lz1b21nokia.html Donnelly, A. (2008, Oct 01), Nokia. Marketing, 18-18. ProQuest, Retrieved on May 28th, 2014 from: http://search.proquest.com/docview/214961929?accountid=14468 Charles, H. & Gareth, J., (2012), Strategic Management: An Integrated Approach, Pearson Education Limited. http://books.google.co.ke/books?id=Xax9awcoiDsC&printsec=frontcover&dq=strategic+management&hl=en&sa=X&ei=B-2FU5nIEuOg4gTqoYG4Aw&redir_esc=y Nokia, (2014), About us, Retrieved May 28, 2014 from: http://www.nokia.com/global/about-nokia/about-us/about-us/ Nokia (2014), Nokia, story. Retrieved My 28th, 2014, from:http://www.nokia.com/global/about-nokia/about-us/the-nokia-story Porter, M. E. (2008), The Five Competitive Forces That Shape Strategy. Harvard Business Review, 86(1), 78-93. https://noppa.aalto.fi/noppa/kurssi/26e03600/materiaali/26E03600_porter__michael_e.__2008_.pdf Virki, T. (2012), Investors losing faith that Nokia can stop the rot. Reuters, Retrieved May 28th, 2014, from: http://www.reuters.com/article/2012/04/12/us-Nokia idUSBRE83B0X520120412 Read More