Analysis of Nokias Business, Corporate, and Competitive Strategies - Case Study Example

Analysis of Nokia’s Business, Corporate, and Competitive Strategies

Introduction

The level strategy in which a company operates be it business or corporate determines its future success. Most changes made in organizations are either done to modify the strategy of the corporation or to improve the existing one. The right strategy is, therefore, the key to the success of the business. This study aims to understand the applicability of business, corporate, and competitive level strategies using Nokia Network and Technologies.

Nokia Network and Technologies is a multinational communication and information Technology Company whose headquarter is in Espoo, Finland. The company was founded by Fredrik Idestam and Leo Mechelin in 1865. Nokia serves customers in over 150 countries around the world. The company focuses on telecommunication infrastructures and mobile telephone manufacturing. As a way of coping up with the stiff competition, Nokia signed a deal with Microsoft to use Microsoft's Windows Phone platform in its future smartphones. In April 2014, Microsoft acquired Nokia's mobile phone business leaving Nokia to focus on its original business of telecommunication infrastructure. Nokia has substantially invested in research and development where it spent EUR 4.7 billion in 2014 working with over 40,000 research scientists and engineers.

Business-Level Strategy

In 14th January 2016, Nokia announced the acquisition of Alcatel-Lucent (Nokia.com, 2016). The deal is expected to reduce the combined entity’s operating cost and interest expenses by 900 million Euros and 200 million Euros respectively by 2019. The deal will enable Nokia to gain a strong financial base from which to grow and invest. Moreover, the acquisition would increase the company's global presence in market segments. Combined with its state-of-art software technologies, Nokia applies a strategy known as differentiation. Differentiation is a business level competitive strategy where the value is provided to the customers through unique features and characteristics of the organization’s products (Goldman & Nieuwenhuizen, 2006). It can be done through image management, high customer service, rapid product innovation, advanced technological features, and high-quality features.

Nokia has significantly invested in technological innovation. It spent over 4.7 billion Euros working with over 40,000 research scientists and engineers to boost its product innovation. The Nokia research scientists and engineers work tirelessly towards innovation of new technologies. They are responsible for the creation and licensing of the technologies that are increasingly connecting the lives of people. Currently, the researchers are working towards helping communication service providers, governments, and large enterprises to deliver their promise of 5G. Nokia can, therefore, be said to be applying the strategy of differentiation.

The business level strategy of differentiation chosen by Nokia is critical for the long-term success of the company. If the expense and entity operating cost reduce as anticipated by 2019, Nokia will have an edge over its competitors in terms of low operation cost. The future of a technological company relies primarily on innovation. Nokia has invested a lot in scientific research. Besides, the company has survived all these years due to its belief and willingness to adapt to technology. If Nokia can manage to keep up with the competition, then it is destined for long term success. Considering the differentiation strategy that Nokia is applying, it can remain competitive for a long time which is essential for the long-term success.

Corporate Level Strategy

At the corporate level, Nokia is following an innovative strategy that has played a role in building its competitive advantage. Corporate level strategy concerns strategic decisions that are made by a company. They affect the entire firm and give it a competitive edge over its competitors. Nokia’s objective is to have a technology that is accessible to all. This objective targets to ensure that no one in the world is left behind. Knowing that it may be difficult to realize its purpose while doing it alone, Nokia has partnered with several other companies.

Nokia targets to lower the cost of its products and bring mobile communication to the poor people. Its acquisition of Alcatel- Lucent, which aimed to reduce the operating cost and interest expenses, also targets to increase its market share. Besides, the purchase of Alcatel-Lucent will increase Nokia's market force which will, in turn, lead to a big image compared to its competitors. Nokia is, therefore, applying a corporate level strategy known as value-creating strategy. In value-creating strategy, the business seeks to edge its competitors by gaining more market share (Furrer, 2010). The Nokia-Alcatel deal will enable Nokia to gain a strong financial base from which to grow and invest. Moreover, the acquisition would increase the company’s global presence in a number of market segments thus giving it an edge over its mobile business competitors such as Huawei and Ericsson.

Value-creating strategy is a corporate level strategy that seeks to add real and perceived values to the firm (Orcullo, 2008). It targets business products and services, and resources and capabilities to reduce cost and increase efficiency. Nokia Partnership with Microsoft to use the Windows Phone for its smartphone software added both real and perceived value to both the companies. However, the main reason Nokia sold its mobile phone business to Microsoft was to increase its efficiency and outdo its competitors; Apple, Samsung and Huawei in the smartphone sector. By selling the phone business, Nokia was aiming to utilize the smartphone technology with its communication infrastructure so as to provide high-quality features at a reduced cost. Moreover, Nokia targeted to provide high-quality customer service through the new product in the form of windows phone.

Nonetheless, Nokia used a technology push to target untapped innovative ideas and use them to raise its performance in the building of telecommunication infrastructure. Its reliance on technological innovation stems from its vision of letting technology work for people. The over forty thousand researchers working with Nokia all strive towards making a force to reckon in the telecommunication industry. Through constant and continuous innovation, the company will be able to keep up with the growing demand for new products and services. This strategy will keep Nokia competitive against the giant smartphone manufacturers such as Apple, Samsung, and Huawei. Intrinsically, Nokia’s decision to use the windows phone for its smartphone software is also essential for long-term success. It will keep Nokia competitive against its competitors; Apple and Samsung, but at a lower cost since Microsoft will be responsible for the manufacturing of the smartphone.

Competitive Strategies

Competitive strategy is a long-term plan to help a company gain advantage over its competitor (Valdani & Arbore, 2011). This section shall compare the plans of Nokia and its main rival, at each level of strategy and then determine which company is likely to be more successful in the long run. Nokia’s main competitors include Ericsson, Apple, and Huawei. After the sale of its mobile business to Microsoft, Nokia embarked on its traditional business of creating telecommunication infrastructure. This, therefore, means that the main competitor to Nokia is Huawei.

Nokia’s goal is to connect people to everything through the use of technology. The vision is to expand the human possibilities of the connected world (Nokia.com, 2016). Through the struggle to meet this vision, Nokia has thus invested a lot of resources in research and development programs. It has even partnered with Universities and other research institution so as to realize its vision of connecting everybody to anything in the world through technology. Even with the ever-changing technology, the struggle to achieve its vision has made Nokia a very competitive company in the telecommunication industry. Nokia has thus applied differentiation strategy in its business level strategy

Huawei is currently the largest telecom and networking communication. It trades in over 140 countries and has more than 76,000 research scientists and engineers. Huawei has its research and development institute in 21 countries. Huawei therefore also applies differentiation strategy (Orcullo, 2008). Being a Chinese company, it uses the Chinese policy which allows the company to produce low-quality counterfeit products at low prices to cater for the low-income earners in the society. Huawei thus delivers both quality and sub-quality phone products to cater for people of all social classes. The production of counterfeit goods to enable all the customers to afford the products is a strategy known as cost leadership (Goldman & Nieuwenhuizen, 2006). Given that Huawei uses both differentiation and cost leadership strategy, it can thus be said to be applying Integrated Low-Cost/Differentiation Strategy.

Nokia's mission includes creating a balance between competing interest and various stakeholders, to motivate and inspire organizational members, and to guide and focus decision making (Nokia.com, 2016). Nokia believes that there are things that a company must take care of within itself before caring for its customers. One of the things is the employee satisfaction. Employee satisfaction is not just about what the company does to its employees but how it does it to them. Nokia has strong values that respect and listen to every employee's ideas towards innovation. They also partner well with other companies which makes it a responsible and performing company. Through these missions and values, Nokia has remained strong and competitive for over 150 years. Nokia thus uses value creating strategy at the corporate level.

Regarding corporate level strategy, Huawei applies the value-creating strategy. The company has invested a lot in the research and development and made numerous partnerships. The company has over 76,000 researchers all over the world with over 21 research institutes scattered all over the globe. It has done a joint venture with Siemens, Motorola, and Telecom Venezuela.

Given that both Nokia and Huawei apply the value-creating strategy for their corporate level strategy, the difference in their sustainability, therefore, relies on their business level strategy. Nokia uses differentiation whereas Huawei uses Integrated Low-Cost/Differentiation Strategy. As much as both differentiation and cost leadership strategies both have their difficulties, they are much difficult to sustain. However, if implemented, they are the most productive, though they require stability in leadership (Orcullo, 2008). Huawei is successful with the Integrated Low-Cost/Differentiation Strategy because of its stable leadership under its long-serving president, Ren Zhengfei. This may change in future if a new leadership comes in hence Nokia is likely to be successful in the future as opposed to Huawei.

In slow cycle market where few issues come up for sale to investors, both the companies would remain stable and successful in the future. However, in a fast cycle market where issues for sale to investors come up faster, Nokia would remain more stable and successful in the future. Huawei would have a difficult time to cope with the rapid changes due to the difficulty in the management of the Integrated Low-Cost/Differentiation Strategy.

Conclusion

Business level, corporate level, and competitive strategies are all important for the success of a company. Nokia Technologies have employed different strategies in its operation both business and corporate level. At the business level, Nokia applies differentiation strategy whereas, at the corporate level, it applies the value-creating strategy. This study, therefore, found that application of the two strategies has played a significant role in Nokia's success. Comparing Nokia with its closest rival, Huawei, the study found that the two companies apply the same corporate-level strategy; value-creating strategy. At the business level, Huawei uses the Integrated Low-Cost/Differentiation Strategy. This study thus believes that Nokia is most likely to be successful in the long term.