Nokia: Marketing Strategy - Research Paper Example

? Nokia: Marketing Strategy A Critical Evaluation Nokia Contents Introduction 3 1 Background and origin of Nokia: 3 2 Nokia’s Position in the Market 4 2. Situational Analysis 5 2.1 SWOT Analysis 5 Strengths 5 Weaknesses 6 Opportunities 6 Threats 7 2.2 Differential Advantage/Competitive Edge 8 2.2.1 Nokia’s Competitors 8 2.2.2 Differential advantage/ Competitive edge (USP) 9 3. Recommendations 10 3.1 Segmentation, Targeting and Positioning 10 3.2 Marketing objectives and goals (SMART) 12 3.3 Marketing Mix Strategies 13 4. Recommendations 15 5. Conclusion 16 References 17 About Nokia history. 2011. About Nokia history. [ONLINE] Available at:http://www.about-nokia.com/history/. [Accessed 29 November 2011] 17 Appendix A: 20 Appendix B: 21 1. Introduction The aim of this report is to analyze, appraise and make recommendations on the marketing strategy of one of the leading Mobile manufacturing companies, Nokia. The paper will identify the company’s strengths and exploit the opportunities that it has in the competitive market today. The paper would further analyze the environment in terms of internal and external factors and make appropriate recommendations to its current marketing strategy to attain higher customer satisfaction, brand loyalty and market share. 1.1 Background and origin of Nokia: Nokia is world’s leading mobile phone manufacturer operating globally. It is the symbol of quality, ease and excellence. It is a Finnish multinational information technology manufacturing company with head office in Keilaniemi, Espoo, Finland. It has wide operations in 120 countries with more than 100,000 employees worldwide (Forbes). It is the second largest mobile manufacturer of the world following the Samsung Incorporation. It has 22.5% market share in mobile phone industry (Damian and Calvin, 2012). The products are mobile phones, handhelds, electronic gadgets and notebook computers. Till the year 2012, it had been a world largest mobile phone manufacturer but after emergence of Samsung and Apple iPhone 5, it got its sales down sufficiently. A lavish life of Nokia brand was observed as lesser popular after when people started adopting Samsung Galaxy smart phones and iPhones. A couple of years back, it faced a similar situation when Blackberry phones were on demand fashion (Kotler, 2012). To cater the needs, Nokia has jumped in to the competition while the competitors are enough substantial to moderate the competition. Since Nokia has lost the market leader position but still it is on priority for student, middle class man and quality seekers (Dibb and Simkin 2013). 1.2 Nokia’s Position in the Market Figure 1: Leading mobile manufacturing Companies’ market share Source: Samsung, Nokia, and Apple dominate phone sales in spring 2012- August 2012 (Hill, 2012) Based on the 2012 results, Nokia is ranked as the second largest company in the competitive mobile industry. The further sections of the report shed light on Nokia’s current market status in the mobile industry. In order to achieve its aims, the paper uses tools like SWOT analysis and competitive analysis to understand the competitive edges that company stands on. After the careful analysis, Nokia’s marketing strategy is evaluated in terms of segmentation, targeting and positioning. Its marketing objectives are evaluated and strategies analyzed to identify any gaps between the marketing goals and strategies adopted. The paper reaches its conclusion after providing a number of recommendations to fill the gap in marketing strategies and suggests Nokia some efficient and effective strategic changes. 2. Situational Analysis 2.1 SWOT Analysis Strengths Nokia is ranked second largest distributer of mobile sets in the competitive mobile manufacturing industry (Figure 1). Nokia keeps its market share high by investing a considerable amount of capital in Research and Development strategies. It had spent 4.94 billion Euros on R&D in 2010 and was ranked 11th in the list of top R&D spending Multinational organizations globally (Sitkin & Bowen 2013). Nokia products are highly applauded for their quality, like battery time, efficiency, strength of its body and so on. Hence, Nokia has a strength and power to promote its high value and premium products specifically targeting a niche market. For instance, Nokia offers its luxurious product in the name of Vertu brand specifically at Vertu and Nokia flagship stores. The brand provides a premium position to Nokia as the handsets have diamond and gold decor and attracts the niche elite class able to afford mobile sets over the price of $6000 (Vertu, 2011; Dialaphone, 2007). Nokia has built customer loyalty and trust. Nokia has the competitive advantage of providing the highest priced handset equipped and decorated with valuable elements like gold, diamonds etc., to low priced handsets which suit the need of middle income population. Nokia sticks itself to user-friendly operating systems including Symbian and recently Windows. Nokia proves itself as a highly responsible company pertaining to the environment and society. The warranties and after sales services are also a strength for the company as people, in developing or under-developed countries are usually risk averse, hence highly appreciate safer investments and products. Nokia’s distribution channel is not limited and it is available in almost every area of the countries it operates in. It also supports the resale price of Nokia which attracts more customers to avoid high losses on rapidly changing mobile handset technologies. Nokia is highly efficient in capturing the attention of developing and under developed populations, hence the need to control prices and provide different price categories to capture and target different sets of population under one brand name. Nokia stands with 46%, 57% and 66% market share in Asian, Indian and African markets respectively (Mohr and Sengupta 2010). Weaknesses Although Nokia spends a considerable amount in R&D activities, it has failed to incorporate the changing trends of technology in its strategies. IDC (2013) suggests that 68.8% of mobile handsets shipped during 2012 installed Android systems being the dominant and highly demanded Operating Systems in the mobile market (IDC-Press release, 2013). Nokia’s R&D costs are mostly spent on the testing phase of its products; this is a weakness as the value it could gain by developing technologically advanced and unique products is foregone. Nokia handsets are high in price compared to the features they offer. Moreover, the market prices of other companies, like Samsung, LG and many others are lower than Nokia with more advanced features. Opportunities Nokia’s brand image provides a competitive advantage of getting high customer attention over the introduction of a new product. Product specifications like windows Smartphone and Bing internet browser show Nokia’s opportunity seeking behavior accompanied with its proper utilization of R&D budgets as it worked with Microsoft in an alliance to keep the R&D costs minimal (Sitkin & Bowen 2013). Owing to the brand image that Nokia holds, it has an opportunity to regain its leading market position by adopting highly appraised technological advancement like Android systems or develop and market a new system to gain a competitive advantage over its biggest competitor today i.e. Samsung. Threats The most affecting threat to Nokia is the rapidly changing technology in the mobile handset industry. Nokia incurs significant amount of capital in Research and Development sector, however, the increasing competition and Nokia’s innate need to keep the quality as per customer expectations do not allow a rapid transformation from one technology to the other. Nokia spends a considerable amount of time testing its new products and advanced technologies. This time-consuming process does not coincide with the fast changing industry. Nokia is losing its share for being technologically backward, or at the latest slow technology adopter (Hill & Jones, 2012). Any move towards rushing to the adoption process of newer technologies and maintain its market share may lead to deterioration of Nokia’s brand image which is highly linked to the quality of its handsets and the operational efficiency that they offer. IDC provides an insight to the dreadful effects of using Symbian OS, as the sales of Android is 497.1 million as compared to Symbian at 23.9 million. The huge difference calls for an immediate attention and action by Nokia (Appendix A). Figure 2: SWOT Analysis of Nokia 2.2 Differential Advantage/Competitive Edge The competitive edge of Nokia can better be analyzed after evaluating the position of its competitors. The following section will provide an overall view of the mobile handset industry and give a better view over the position and competitiveness of Nokia. 2.2.1 Nokia’s Competitors With all this technology available in the communications market is, Nokia will obviously have a lot of competition, including:  * Samsung: The biggest competitor of Nokia is the now leading company in the mobile set industry, Samsung. The company gained competitive advantage through early adoption of the newer technology, i.e. Symbian OS. The company played a vital role in making its success and features known to the wider population. Another major strategy of Samsung is its controlled costs through in-house building of major components and achieving synergy benefits by specialized labor force. Its procurement and distribution channels is cut-down by its individual efforts to keep the services in-house and reduce additional costs of more parties involved in the manufacturing and distribution of its final products. It holds 26% of the industry share in 2012 (IDC, 2012). * Apple: Like Nokia, Apple is gaining for its reputation. It holds only 7% of the market (IDC, 2012); however, its customers are high-paying and loyal. Apple stands alone in its brand image in the society. It specifically targets the high-income groups and professionals by its unique design, extra slim models and high-on-technology features. Apple outsources its operations to Samsung, LG, STMicroelectronics and many others (Hassu, 2011). It has a core strategy to provide unique and highly competitive products in terms of design, quality, usability and durability. Its Value added services include Apple Store which is equipped with a wide range of games, software, music, movies and so on which are highly appreciated by the customers. *LG: LG holds 4% of the total mobile manufacturing market (IDC, 2012). It is yet another competitor that provides slim, innovatively designed and high on technology handsets to the customers. Though not as famous as Apple and Samsung, LG still stands as a long-standing competitor with customers appraising it for the reliability of the handsets it manufactures. 2.2.2 Differential advantage/ Competitive edge (USP) Nokia Incorporation is one of the world’s largest mobile phone companies. The greatest competitive edge, which Nokia holds in comparison of other industry players, is its strong market image. The strong branding and quality assured image of Nokia is the core reason for what Nokia is still able to sustain in the market worldwide. The brand equity of Nokia is at 5th number in all over the world (Scotton and Zallocco, 2009). The cost of its brand or customer equity is 34,834 Million US Dollars. The durability and easy repairing of Nokia handsets makes it differential among all. The design and vast variety of Nokia handsets make it popular among every age group and every profession’s people. It is very attractive opportunity to choose a mobile phone according to one’s need and capacity (Guiltinan and Paul, 2011). The Unique Selling Point (USP) of Nokia includes extensive marketing by making the product available globally at same price and quality (Dibb and Simkin 2013). Customers may personally visit the outlets of Nokia to buy a phone or they can order online to get it at home. Nokia android phone includes huge number of Application that is available at Nokia OVI. 3. Recommendations 3.1 Segmentation, Targeting and Positioning Segmentation, Targeting and Positioning (STP) is a marketing research technique to identify and access the population which is intended to serve (Michman, 1991). In Segmentation, the whole population is divided in to sub categories in order to differentiate the people according to several characteristics for example income group, social class, age group, demographics, tastes and preferences, occupation and many more (Guiltinan and Paul, 2011). In context of Nokia, they have segmented their entire market on the basis of geographic, demographic, psychographic and benefit segmentation. The age group, income group and occupation play a vital role in the insight of such multidimensional segmentation process. The following are the basic segmentation that Nokia holds (Ivashchyshyna, 2011): 1. Demographical Segmenting: Nokia provides handsets that capture and attract males and females, youngsters and adults, married and bachelors and other social stereotypes equally. Nokia designs such handsets and differentiates those using distinguishing factors like Colors. 2. Psycho-graphical Segmenting: Nokia marketers identified a number of people with differing psychological needs. For working class, students and others, marketers identified a psychological homogeneity and considered that factor to become a part of their next product. Like N79 having a heartbeat counting feature for Sportsmen, elderly population and businessmen. 3. Geographical Segmenting: Nokia divides its customers as per their geographical location. The geographical segmentation includes Asian, Middle Eastern and American etc. to be targeted and offered the product as per their expectations. 4. Beneficial Segmenting: Nokia further segments populations in terms of the benefits it may achieve from its loyal customers. Nokia identifies the needs of loyal customers are shapes a model that fits the needs. Dual Sim mobiles, for instance, are more of a benefit to retain the loyal customers from switching to alternatives. The target group is the potential market which is finally to be served and for what a company sets goals and implements strategies (Michman, 1991). The positioning strategy is formulated in a lucid manner by which company can serve diversified target audience equally by providing peak levels of value (Damian and Calvin, 2012). The great and sound elucidation of positioning is low price, high quality and technology for all. The durability and sustainable quality are other traits which are formally associated with Nokia handsets. In CDMA technology, however Nokia has a number of exploitable opportunities. But still people prefer to buy Nokia phones to ensure service quality and high performance (Morgan & Kallianpur, 2002). In the mobile handset businesses, single brand name is used usually. The products are differentiated by unique product names or series with unique codes. For instance, Apples provides the name iphone and further classifies them as iphone4, iphone 4s and so on according to their advancements and technologies. Similarly, Samsung provides unique identification like S1, S2, S3 and most recently has launched S4. Nokia also creates distinction between its many product designs and models in terms of series including X, N, E and C series. It further distinguishes its mobile models via numbering like Nokia 3310 etc. Another strategy that Nokia uses is unique branding like N-Gage and Vertu (Nokia, 2011). 3.2 Marketing objectives and goals (SMART) Marketing objectives are the explication of overall company’s strategic goals. These goals are directly linked to the intended outcomes. Marketing performance is connected to the strategic objectives of the company (Morgan & Kallianpur, 2002). It merely depends upon marketing goal setting that leads a company to higher performance outcomes. Following are the marketing objectives of Nokia: Specific: the specific question is involved in the answers of 5 W’s. In context of Nokia, it includes the supply chain and backward integration (Dibb and Simkin 2013). These five Ws include who, what, when, where and which. Measureable: the objectives are intended to be measureable. The ultimate objective of Nokia is to create higher level of customer equity. For this purpose, they generate annual budgeting. In this process the intended outcomes are required to be queued in financial sense (Tony, 2004). Attainable: In this process, it is to be found that the preset objectives must be achievable and realistic (Tony, 2004). It elucidates the mission statement of the company through marketing campaigns and activities which are queued in such a way that it make easier to gain the required outcomes. Realistic: The specific, measureable and attainable goal is required to be realistic as well. The marketing and strategic objective of Nokia is to sustain the customer equity and maintaining the revenues (Morgan & Kallianpur, 2002). Timely: the efficiency and responsiveness in the marketing plan is most important. The timeliness of attainable objectives is a theme of implementation (Norman, 1992). Nokia has the greater opportunity in faster time to market as well as the newer technology is required to introduce earlier than the competition. 3.3 Marketing Mix Strategies Pricing (price/cost): Nokia uses competitive pricing. The brand loyal customers care less about the price as long as they attain their desired features with the company that they trust. Nokia is much of a relationship creating company and used this customer-company bond to maintain its position for a long time. Nokia N8, Nokia 89 and 88 series are the models that it created for brand loyal and status conscious buyers. Distribution (place/channels): The distribution channels play a vital role in the success of any product or service. The unavailability of a product in a timely manner may result in the deterioration of a company’s image. Nokia, to cope up with such uncertainties, selects and managed its suppliers and distributors base using 5C model. Nokia analyzes alternatives and decides on the Capital, Credibility, Channel, Cooperation and Control. Nokia keeps a track of its distributors and binds a legal agreement to avoid any unusual circumstances or uncertainties that may cause damage to Nokia’s position. The availability of Nokia products is extensive. They have adopted penetrated marketing strategy through which they make the products available widely globally. People find ease in purchasing of Nokia phones as compared to any other mobile phone brand. This is one of the competitive advantages of Nokia. Through this competitive edge, Nokia earns a lot. The major distribution centers never run short of inventory this is why the product availability is extensive and efficient (Damian and Calvin, 2012). Appendix B, figure 3 shows that Nokia does not use operators’ websites as a sales medium. Sprint, a leading name in mobile operators, does not represent a single Nokia model on the US website. Product management (product/competition): Nokia analyzed different personalities, divide consumer groups and decided the kind of mobile phones should be supplied to a particular consumer community. Nokia mobile phones won a great number of supporters around the world. Marketing communications (promotion/customer): Nokia uses an integrated strategy for its product promotion. It highlights the physical and psychological existence of its brand to create demand and a social and psychological need of users to buy Nokia’s products. Brand image is the basic concept that runs behind Nokia’s marketing. Nokia tries to bind its customers into a bond and makes them feel special, unique and distinct. This is done in its marketing campaigns, promotional procedures and advertisements by different visual and, at times unstated, messages. Nokia values its customers and intermediaries as it uses distribution system as well as dealership. The advertisements of Nokia are very much user friendly and cultural oriented. They design separate advertisements for each and every region they operate. This is the reason for what they put heavy budget under the advertisement head and people feel more association towards Nokia company (Haghirian, 2005). 4. Recommendations Nokia was a leading mobile set giant. Why did it fail then? The main reason is its ignorance to the emergence of competitors. It ignored Apple’s i-phone and further Samsung’s S series. Nokia needed to bring something remarkable and communicated that to the customers. As we see, currently Nokia is producing a large number of versions for each handset model. True, it gives users with the flexibility and range of alternatives in colors and slightly differing features. But, would it be enough to capture new customers when they have better alternatives like i-phone and S3? Certainly not! Nokia’s strategy to make something remarkable with Windows seems to be absurd as well. The costs that Nokia is bearing for its failing strategy of regaining its position needs to invested in market research. Customers’ wants and demands something ‘unique’ in design and features. Samsung and apple provides customers with such products. Nokia needs a carefully planned strategy to build ‘a few’ competitive products rather than ‘many’ homogenous versions of handsets to attract users. One success may bring a better change to Nokia’s failing market share. Nokia needs to adopt advanced technologies as soon as possible and integrate innovation into its organizational culture to avoid any such risks in future. Nokia should keep the features of its mobile set under review when pricing the products. Samsung and HTC provide better performing alternatives; hence, Nokia must cut down its R&D costs or other costs to reduce its prices up to the acceptable levels for customers. 5. Conclusion Nokia is a resource rich multinational company with widest operations worldwide in almost 120 countries. Nokia, although, operates in various kind of products which are technology oriented but its handhelds and mobile phones are most popular among the people of every age especially middle income people and students. The technology advancement is however not so much faster in order to beat the rivals but still it has highest brand equity in mobile phone manufacturing industry with more than 20 per cent sustained market share. The highest brand equity is the greatest strength of Nokia that posits the trust of people over Nokia brand. People still trust the durability and compliance with quality of Nokia (Forbes). Weaknesses include technology backwardness and less timeliness to market the products. Opportunity for Nokia is technology obviously. Threat is also technology. The environmental analysis reveals that Nokia complies with entire requirements of micro and macro environment. Situational analyses posit positive outcomes. To maintain the current situation of the company, Nokia needs to advance the several aspects. The most important is to exploit the technological advancement and by competing in smart phone market. This will enhance the market share of the company (Forbes). 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(2013). International business. Oxford, Oxford University Press. Tony, E., 2004. Culture and positioning as determinants of strategy: personality and the business organization. Houndmills, Basingstoke, Hampshire: Palgrave Macmillan. Vertu (2011), Vertu Internet site, www.vertu.com, accessed 15.3.2011 Appendix A: Global smartphone operating system share in 2012 and 2016, according to IDC Operating System 2012 sales (millions) 2012 market share 2016 market share 2012-16 Growth Android 497.1m 68.8% 63.8% 16.3% iOS 135.9m 18.8% 19.1% 18.8 BlackBerry OS 32.5m 4.5% 4.1% 14.6% Symbian 23.9m 3.3% N/A N/A Windows Phone 17.9m 2.5% 11.4% 71.3 Linux N/A 2.0% 1.5% 10.5% Others 15.1m 2.1% 0.1% N/A> Total 722.4m 100.0% 100.0% 100.0% Source: IDC-press release (2012) Appendix B: Figure 3: Nokia's Representation at Mobile Operators Websites Source: ( Hassu, 2011) Read More