Nokia External Environment Analysis - Report Example

Next Company Table of Contents Table of Contents 2 Introduction 3 Objective of study 4 External Environment Analysis 4 PESTLE Analysis 4 Market Analysis 7 Porter’s Five Force Analysis 8 Findings 10 Recommendations 11 Conclusions 11 References 13 Introduction The leading companies around the world are trying to capitalize on the advantages of globalization in the competitive global market. After getting success by business practices in domestic market, the leading companies try to expand their operational boundary in order to achieve growth, huge market share and maximization of profits (Porter, 2008, p.272). . They tend to go for internationalization of their business. In order to do global business practices organization need to know about the foreign country’s business environment, understand about the social and cultural factors of the specific foreign country. Nokia is the leading communication and information technology corporation in global market. For the purpose of the study Nokia has been selected. Nokia is Finland based company established in the year 1865. The operational area of Nokia is global market (Steinbock, 2010, p.132). The products that Nokia deals with are mobile phones, smart phones, mobile computers and network. The company created evolution in global telecom market by introducing various range of mobile phones according to different market segments. They deal with services like music, media software solution and maps and navigation. The organization has near about 98,000 employees worldwide. The organization has successfully justified their mission statement in late 90s by providing innovative mobile phones and smart phones globally (Businessteacher, 2011). The study will reveal the external environment factors of Nokia. Flowed by this the research will find the issues and advantages of the organization in internationalization process. Finally the study will provide the recommendation plan for the issues and it will end by the conclusions. Objective of study External environment analysis is the critical part of both domestic and international business analysis (Neelankavil and Rai, 2009, p.39). The major objective of the study is to conduct a detailed and in depth analysis of external environment factors that may or may not affect the business performances of an organization. Nokia is one of the global leading telecom organization has been selected for the purpose of the study. The external environment analysis will give a crystal clear overview about the company’s global market status and will help to find the problem statements of the business unit. To achieve the objective various analytical models and recommendation plan is implemented. External Environment Analysis External environment analysis help to find the several environmental factors that may or may not be affect the company’s business performance (Williams, 2008, p.97). In order to analyze the external environment factors of Nokia different macro element analytical model like PESTLE analysis, Porter’s five forces analysis and Market analysis has been implemented that are described below. PESTLE Analysis In order to analyze the macro environmental factors of Nokia considering the international market, PESTLE analysis has been adopted in this study. Macro environmental factors are the external factors (Young and Pagoso, 2008, p.58). The analysis will reveal Nokia’s control and the significant effect of the company’s operation and strategic decision making by the impact of the macro environmental factors. PESTLE analysis will analyze the political, economical, social, technological, legal and environmental elements that are impacting on the industry. This will provide an in depth analysis which has elaborated below. Political Factors: The political instability of several countries is affecting the business performances of Nokia in global market (Kvint, 2009, p.28). The deregulation of international competitive market and governments’ intervention in countries like China and India is affecting the business performances of Nokia. Economical Factors: the global threats like financial recession and global financial crisis has affected badly on the economy of western countries. The unfavorable economical factors has decreases the per capita income and GDP growth of the countries. Low disposable income of people is also preventing the consumer4s to buy the expensive smart phones and mobile phones. Social Factors: Consuming a high end smart phone Nokia Lumia 800 is actually increases the self esteem and personality level of people. People tend to buy expensive smart phones and mobile phones in order to show off their personality and ego factor rather than communication purpose (Laszlo, 2006, p.77). The current trend of market is to consume a smart multimedia phone with several attributes and attractive get up. The trend has spread all over the world. Therefore, it is easy for Nokia to introduce different types of products in global competitive market. Technological Factors: The present era of modern and advanced technology is highly influencing and impacting the telecommunication industry globally (Brady, 2008, p.183). The telecom industry requires advanced and hi-tech technology in order to produce mobile phones with different attributes. Therefore, the technological development of an economy is highly necessary. In past years Nokia was the market leader in Telecommunication industry but the increasing industry rivalry has affected badly on the business performance of Nokia. Samsung mobile phones are the biggest competitors of the products of Nokia as now they are not implementing the advanced technology appropriately. However, the introduction of global advancement technologies in mobile and smart phones like WAP, Bluetooth, GPRS, GSM, high pixel mobile cameras are the appropriate example of advanced technology dependency of mobile phones. Legal Factors: A legal issue like intellectual property is the biggest drawback for the technological business. Moreover, every company on this industry has to maintain the copyright policy of several products. Considering Nokia, not only the competitors are threat for them but also they have to make sure that nobody should duplicity their products (Yang, 2003, p.88). Nokia have several manufacturing plants in several international markets. There are very few legal barriers that are faced by Nokia. The governments of different countries motivate Nokia to come and operate their business practices in their country as it increases the job opportunity and many beneficial aspects of a country (Wilkinson, 2005, p.156). Nokia operate in foreign countries according to the rules and regulation of country. The company has to abide by several laws like health and safety laws, employment laws etc. in order to successfully run their business in global market. Environmental Factors: It is important that the companies should operate their business practices according to business ethics in an environment friendly way. Increase of Green House gas emission is the critical factor for world environment (Ferrell, Fraedrich and Ferrell, 2012, p.334). Nokia should look after the issues like disposal of batteries in phone, recycling the damaged mobile phones. If these are not disposed properly then global environment should face several environment challenges. Moreover, it can harm the business performance of Nokia as the government of several countries may enter into these issues. Market Analysis The leading companies in global market have to deal with different types of market. In this study Nokia has make the strategies considering different markets before introducing the products and services in competitive market are discussed as follows: Monopoly: Nokia is one of the leading mobile phone manufacturer and supplier company. Last 15 years Nokia has dominated the telecom market with its low end mobile phones for the economic class people and high end N-series smart phones to satisfy the people in higher income level. The effective international marketing strategy that has with the help of advanced technology attracts the interest of the customers regarding various products (Luo, 2000, p.78). Duopoly: It is the type of market where two leading players compete with each other with respect to similar products. In this type of market Nokia has challenged HUAWEI in producing 3G technologies in mobile phones. Nokia have rapidly changed the market status by attracting all the interested customers towards their company. It is an effective example as HUAWEI was the dominant 3G technology producer (Prasad, 2011, p.225). Oligopoly: The oligopolistic market is known as few sellers and many potential buyers in a market place (Cowie, 2010, p.343). By introducing various mobile phones and smart phones considering various segment of people in international market with different product attributes Nokia has take away the market share of his competitors like Motorola, Sony Ericsson, Siemens Mobile and Samsung. Nokia became the giant company in the global telecom industry. Perfect Market Competition: The perfect market competition is known as many sellers of a product against many buyers (Mankiw and Taylor, 2006, p.64). In this segment Nokia has to face the competition from other several telecom companies like LG, Samsung, Motorola, Sony Ericsson, and different domestic companies in every international market. Nokia has able to get the customers’ brand awareness by proper marketing mix and strategic analysis. Nokia has attracted all the people in different segments like every high and low end people according to income level and technology loving consumers. Porter’s Five Force Analysis Porter’s five forces competitive industry analysis helps to develop the economical and marketing competitive intensity of an organization. The five forces determine the attractiveness of competitive market (Ahlstrom and Bruton, 2009, p.131). The Porter’s five forces analysis is consist of following factors. Buyer’s Power: The global financial crisis and economic downfall of several developing and developed company has affected the sales of a company (Dwivedi, 2010, p.148). Therefore Nokia after the year of 2008 has confused to implement proper strategies to increase the demand of different product ranges as the global recession has decreased the buyer power of the consumers. So it is feasible that international buyer’s power of Nokia is low. Supplier’s Power: It is feasible that if the suppliers increase the price of raw materials and distributing price, then it affects on the pricing of products of a company (Jain and Khanna, 2008, p.158). If there is huge number of suppliers in a potential market then it is easy for a company to do a pricing strategy (Stokes and Lomax, 2008, p. 138). In global telecom market there is huge number of suppliers. It has benefited Nokia as they can switch to different supplier in order to reduce the cost of supplier. Therefore, it is notified that Nokia has to face low bargaining power of supplier. Threat of Substitute: In today’s competitive world there are many substitutes of every different and unique product. Day by day gradually people change their taste because of introduction of new products. Considering Nokia mobile and smart phones the company Nokia itself is gradually introducing the substitute of every product. Moreover, already created international brand value by Nokia is preventing the customers switch to the different substitute products as the people thinks that they might find it difficult to use new product. Threat of Nee Entrants: The leading global companies always have to face the challenges from the domestic and international competitors who are newly entering in the competitive industry (Drucker, 2012, p. 133). For an example it can be state that in Indian market the domestic mobile company Micromax has created the threat and challenge for Nokia by introducing products of supreme quality considering the different market segments in comparatively low prices than Nokia. Micromax is the one of the leading competitor of Nokia is the company provides mobile phones in low prices. Actually Micromax is getting the raw materials from domestic market and they are manufacturing quality mobile phones in India itself. They do not outsource anything like Nokia; therefore Micromax is able to win the pricing war. Therefore it is feasible that in international market Nokia has to face high competition from the new entrants. Industry Rivalry: Global telecom industry is highly potential and competitive. There are several potential competitors of Nokia who are introducing the similar products in competitive market to achieve high market share (Lynch, 2001, p. 66). As the international market is uncertain and highly competitive and the higher competitive rivalry results Nokia to launch new products and services with different attributes. Moreover, keeping up to date the catalogs and adopting advanced technology is the example of higher industry rivalry. Findings From the above feasible study it can be identified that in last decade Nokia has upgraded and innovated their performance than other competitors in global market. They successfully run their business in global market. Nokia took lesser time to introduce different products according to the different market segments. They have introduced both the expensive smart phones and economic low end mobile phones (Viardot, 2004, p.173). Moreover, they have efficiently used the modern technology in order to develop their products. Currently Nokia is facing the problem of global market saturation (Boone and Kurtz, 2011, p.451). Since last two years they have failed to attract the customers by promoting new products. The operational and manufacturing cost of Nokia is increasing day by day. Therefore, Nokia is failing to provide a product of good quality in economic price. Problems of phone and battery assembling are creating negative brand images in customers’ mind about the products of Nokia (Johansson, 2008, p.512). Governments in several countries are implementing high import charges for outsourcing of parts and raw materials. These are the key findings that are combining of few advantages and current issues (Nigel, 2009, p.72). Recommendations In order to bring back the past brand image and to overcome the difficulties like global market saturation, Nokia should re-launch their some of older models by upgrading few attributes (Armstrong and Kotler, 2010, p.469). Moreover, Nokia should discover and invent few machinery tools in order to increase the productivity. The company needs to conduct quality check in order to increase the quality of all the parts in a mobile or in a smart phone. To increase efficient customer service and production Nokia need to appoint more number of employees. Setting up new manufacturing factories in operation countries will overcome the issues like high import charges. The pricing scheme should be attractive as there are many competitors in global competitive market who used to promote mobile phones in low prices and most importantly competitors are introducing mobile phones with supreme quality and high attributes (Usunier, 2000, p.126). Nokia should implement different advertising campaigning to ensure brand awareness. Last but not the least Nokia should maintain healthy relationship with all the foreign countries’ government to gain the advantages of political stability or the favorable government rules and regulations (Berg and Lewer, 2007, p.160). Conclusions Nokia is one of the leading telecom companies globally. They provide mobile and smart phones in different range and with several attributes (Talukdar, 2010, p.83). They are operating in many foreign countries and they are achieving success in their business practices. In order to analyze the impact of external environmental factors on Nokia’s business performance, several analytical tools have been implemented. Nokia has gain success in last 15 or 20 years as they made revolution in global telecom industry by introducing different high end and low end priced smart phones and mobile phones. In the year 2008 the global financial crisis and recession has affected many economies (Zheng and Tong, 2010, p.166). Therefore the purchasing power and the disposable income of people decreased. Moreover the inadequate cost control, pricing strategy and global market saturation has affected the business performance of Nokia. Moreover, the international competitors like Samsung mobile and several new entrant companies like Micromax in India is challenging Nokia in competitive market. The world’s leading telecom company is now suffering from the issues like high import charges and in adequate quality of products. The external environmental analysis has find out several issues that affecting the organization’s performance in global market. Nokia should rectify all the problems otherwise it is difficult for them to survive in leading position in this competitive global market. References Ahlstrom, D., and Bruton, G., 2009. International Management: Strategy and Culture in the Emerging World. Stamford: Cengage Learning. Armstrong, G., and Kotler, P., 2010. Marketing: An Introduction: Global Edition. New Jersey: Pearson. Berg, H., and Lewer, J., 2007. International Trade and Economic Growth. New York: M.E. Sharpe. Boone, L., and Kurtz, D., 2011. Contemporary Business. New Jersey: John Wiley & Sons. Brady, A., 2008. Marketing Dictatorship. Maryland: Rowman & Littlefield. Businessteacher, 2011. Strategic Analysis of Nokia. [online]. Available at: [Accessed on February 9, 2013]. Cowie, J., 2010. The Economics of Transport: A Theoritical and Applied Perspective. London: Taylor & Francis. 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