Company and market analysis of Nokia

Nokia Corporation has been known well as the world’s No.1 manufacturer of mobile phones. The head-quarter of Nokia Corporation is located in Finland and it is quite active in electronic industry. It is organized well by some key executives. Olli-Pekka Kallasvuo is the current president and CEO of the company. Timo Ihamuotila is the CFO. Mary T.Mcdowell is Executive VP. Isabel Marey-Semper and Keijo Suila are the directors. Dame Majorie Scardino is the director and vice chairman as well. According to Nokia official website (2010), the company is under function by an amount of 123553 employees at the end of 2009.In 2009, Nokia’s net sales were 41.0 billion, with a reported operating profit of EUR 1.2 billion.

Nokia’s products are so famous and can even complete with the world’s other top rank mobile manufacturers such as Motorola, Sony Ericsson and Samsung. Now Nokia is nearly reach the peak of the cell phone market. It is divided into four major segments which are Devices, Services, market and solutions, and NAVTEQ. Nokia also has a partnership with Munich-based Siemens. The combination of their intelligence in the industry has build up Nokia Siemens Networks and makes them become No.3 player in the wireless networking equipment market and on top of it are Ericsson and Arcatel-Lucent.

2. Company Overview

2.1 History

Nokia Corporation is the world’s leading manufacturer of mobile phones, with a worldwide share of 27 percent, surpassing the runner up, Ericsson. Ericsson has a worldwide share of 17 percent. The net sale generated by Nokia Mobile Phone business group is about two-third of their total sales. Nokia Mobile Phone business group is also doing Nokia Networks, which has 30 percent of the net sales. Nokia Networks is the global supplier of infrastructure for mobile, fixed, broadband, and Internet Protocol (IP) networks. Nokia Corporation has generated more than half of its sales in Europe, a quarter in Americas, and 22 percent in Asia-Pacific. The company has been in business for 135 years and has evolved from a concentration in pulp, paper, and other basic industries which focuses on telecommunication.

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Most importantly, Nokia Corporation focuses on the revolution of telecommunication in the mid-1990 and beyond. Nokia has now become one of telecommunications’ most profitable companies. From 1988 to 1993, Nokia consumer electronic business was unable to find buyers and nearly lost US$1 billion, which cause Ollila to cut 45 percent of the workforce, shuttered plants, and centralized operations. Ollila has been successfully by bringing innovative products into the market. This gave Nokia an advantage over cell phone research and development with the Acquisition of the United Kingdom Technophone Ltd. The company started selling the cell phone for US$57 million. Ollila’s occupation has brought Nokia success and global recognition. The sale of the company doubled from 15.5 billion in 1991 to 36.8 billion in 1995. The outcome rebounded from a net loss of 723 million in 1992 to 2.2 million profit in 1995.Nokia’s capitalization multiplied ten times from 1991 to 1994. In the late 1995, Nokia suffered a temporary setback due to the shortage of chips for its cell phone. The production cost has gone up and lost most of the profit. With this, Nokia was slightly ahead of the market, particularly in North America. Not long after the incident, a rivalry, called Motorola, appeared with greater quantity of phones but sadly their sales and technology was very slow. Due to that situation, Nokia rise to the top position. In 1997, the 6100 series was introduced and became popular because of its small size. Soon after that, the 6100 series went worldwide and sold nearly 41 million phones in 1998. Besides that, Nokia has begun pursuing aggressively on the mobile internet sector. They have produced Nokia 9000Communicator, which is only for business use, as well as surfing the internet. Nokia 8110 mobile phone can also surf the internet.

In the end of 1990s, Nokia has already ascended to the top position of the wireless world. This trend has continued into the 21st century and has increased the production of new cell phones with wireless and internet technology. Nokia has now become a formidable competitor to other phone company. Nevertheless, Nokia spend US$2 billion a year on research and development and to continue to produce new innovative products which concentrates on various standards.

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2.2 Nokia’s Product

Nokia came out with mobile and slowly developed from a big bulky phone into a smaller compatible hand phone. Just like what we know, the Nokia brand produce the mobile phone for people to have an easier life. In 1982, Nokia have its 1st phone on market that is Mobira Senator. In 2007, The 1st N series phone with Xenon flash have been produced, N82. As time goes by, Nokia changes by not using antenna, and by attaching camera to its specifications.

Nokia has come out with an application call the “OVI” services this can help Nokia users to connect to the internet via your hand phone to ease the users from having the trouble of driving or finding an operation centre. Beside that, Nokia also provide the service such as the “Come with Music”, “My Nokia” and “Nokia Messaging”. Below in the picture you can see that Nokia hand phones are fully developed.

Nokia has simplified their product into different categories. This category has been divided into series such as C, X, E, N, and S. C stands for voice-centric handsets. X stands for entertainment. E stands for business focused. N stands for high-end. S stands for limited editions. Nokia implants different functions on different series of its product in order to make its product line clear to make sure the customers can purchase its products with the functions they needed. Nokia N900 is one of the specific products among Nokia products. It is also the current best Nokia phone. It has slide sliding QWERTY keyboard design which can hardly be found on other Nokia product. It has all the essential functions implanted inside thus having other high technological functions as well such as WLAN, accelerometer and proximity sensor, high pixel camera with auto focus, and Maemo 5 operation system which makes it powerful enough as a mini computer in the mobile world.

2.2.1 Nokia latest Product

The picture above is Nokia N90. Nokia N900 is the current best phone among Nokia products. It has obtained all the necessary function for a mobile phone yet it obtained other superior function as well. It has a 3.5 inches screen with accelerometer sensor. It has a full QWERTY keyboard too. Unlike other normal phone, it has included 32GB internal memory which is the largest capacity for the mean time. It also obtains a 5 megapixel camera branded by Carl Zeiss optics. All of these make it become an unbeatable opponent in mobile market but these are not the main focus on Nokia N900. The highlight of this phone is its superior performance of its function. It has included one and only operation system in the current cell phone market which is Maemo 5. With the support of this operation system, it has been called as “mini laptop” because its function can even complete with a laptop.

2.3 Nokia Sales

Table 1- The market sales in year 2009 and 2010

Source: Gartner

The Table 1 shows the Worldwide Mobile Device Sales to End Users in 2009 and 2010. As we can see from the table above, Nokia is the one with highest market share among other company. Nokia Corporation is doing well in their business. Nokia are one of the famous and popular Companies to everyone. The total sale units show in 2009, 286,122.3 and the units that Nokia sold in 2009 are 105,413.4 which are 36.8% of the market share at that time. For this year 2010, total sales in market of all the company is 325,556.8 and Nokia total units sales are 111,473.8 which are much more than previous year but the market share decrease. Form this we can know that there are more users need mobile phone. Although that market share of Nokia decrease in year 2010 but it still stay on the top 1.Nokia can stay on the top of sales in their product , this can show how Nokia did well in satisfy the customer needs and wants. After Nokia, Samsung is the one on the second place. It has 19.3% of market sharing in 2009 and 20.1% in 2010. Samsung will become the most effective competitor if this situation continues. Other than Samsung, there have more Nokia’s competitors; there are LG, Research in Motion, Sony Ericsson, Motorola, Apple, HTC, ZTE, G’Five, and other so on.

2.4 Competitor

Direct Competitor Comparison

NOK

ERIC

MOT

PVT1

Industry

Market Cap:

36.94B

33.72B

19.56B

N/A

54.73M

Employees:

129,746

87,413

53,000

N/A

372.00

Qtrly Rev Growth :

0.90%

-8.00%

-1.50%

N/A

10.20%

Revenue:

53.68B

27.96B

21.63B

95.89B1

138.63M

Gross Margin :

32.51%

37.16%

35.47%

N/A

40.35%

Operating Margin :

6.92%

11.12%

5.23%

N/A

6.96%

Net Income :

1.25B

603.23M

385.00M

4.37B1

N/A

EPS :

0.34

0.19

0.17

N/A

0.06

P/E :

29.55

56.42

50.79

N/A

14.65

PEG (5 yr expected):

N/A

N/A

N/A

N/A

N/A

P/S :

0.69

1.21

0.90

N/A

0.72

Table 2- Direct Competitor Comparison

ERIC = LM Ericsson Telephone Co.

MOT = Motorola Inc.

Pvt1 = Samsung Electronics Co., Ltd.

Industry = Communication Equipment

Source: HOOVERS

As you can see in the table above, Nokia has the highest in Market Capital with 36.94 billion compared with Ericsson, Motorola, and Samsung. It is clearly shown that Nokia is the highest so far, as profitable as it seems the number of employees also exceeds the expectation of that company. With 129,746 employees Nokia seems to be making quite a profitable income and with more employees comes greater expectation of a company. Though some handsets value as more than fashion accessories, it has come too succumbed that it still fuels the market growth.

The Three Top Nokia Competitors consist of LM Ericsson which is located at Stockholm, Sweden, Motorola Inc located at Schaumburg, IL and Samsung Electronics Co., Ltd at Seoul, South Korea is very competitive about finding customers. To boost sales, Nokia will have to come up with a way of finding what specification suits the needs of the customers. Nokia will have to go all out to find and battle other competition in order to gain attention and attraction. Nokia competitive advantage would be mobility workforce of the company and with this advantage comes increase market share and revenue growth. Choosing what is necessary is essential in building a company and brand name, without this Nokia is bound to be doom. Next is the LM Ericsson telecommunications, is placed second in the table above due to lack of network equipment supplier. Most probably, LM Ericsson is placed second because of lack of resources and employees. Without the proper tools LM Ericsson is lead to believe that Nokia is a formidable opponent. Compared to Motorola, LM Ericsson is very much ahead of them, the gross margin of LM Ericsson is higher by 1.69% compared to Motorola and 4.65% to Nokia. This makes LM Ericsson the lead in gross margin.

Seeing that Samsung Electronics Co., Ltd is not benefitting this is due to lack of planning. They are operating in a Market that is dominated by companies which are better. Samsung Electronics Co., Ltd has the highest net income and revenue compared to Nokia, Motorola, and Ericsson. Nokia can be expanded through advertising and on websites. A comparison shows that Nokia is still the leading handset company up to date. With Quarterly Revenue Growth of 0.90% Nokia is bound to soar in markets. Technology like Nokia nowadays can help users to interact smoothly with each other. Not to mention, Nokia has come up with plans to increased sales by putting software and different technology into handsets. Now from a simple touch of a button users can locate when and where they want to go. Conclusion, with flexibility and improved productivity Nokia will have a competitive advantage in markets.

2.5 Nokia’s Aim and Goal

According to Nokia Webpage (2010), the aim of Nokia Company is providing innovative, high quality products and services which help people connect with each other. They want their product to be used at every kind of people which include people have problem to use the normal hand phone. Nokia has been studying environmental aspects of design for more than 10years and they are working to continuously improve the sustainability of all their products and services. They are making their products for people easier to live sustainable lifestyle.

3. Situation of Nokia Company

Nokia Company

Nokia, as a one of the world’s largest telecommunications equipment manufactorersIn telecommunication industry, nokia brand are famous and become a leading brand being in markets and business that has expanded greatly in every area to fulfill the customers needs. Nokia produces mobile and other telecomunications equiqment for applications even for every main market and protocal which also include the GSM, CDMA ans WCDMA.

Strength

According to the Nokia, the strength of Nokia Company is the strong brand name they have. Nokia release their products with more advantages than other because of the strong name brand that acceptable, reliable and trustable for customers. Nokia also have a wide network of promotion and selling their product which make Nokia stronger than the other telecommunication company. Nokia Company has the group such as high quality and professional teams in the Human Resource Development Department which make the Nokia Company have a strong backed. Nokia’s product are user friendly and contain all the accessories satisfy their customer, this is one of the reason that make Nokia become No.1 selling mobile phones in the world. Their products are also affordable for all class of people.

Weakness

Nokia Company is a successful company on the world but it still has some weakness. The weakness like the product’s price that offered by the company. Although most of their products are high quality and user friendly but the price is not. Some of the Nokia’s products are cannot afforded by some lower class of the society people. These led those products hard to sell and make the market of those product fail at the end.

Opportunity

Nokia opportunity is to expand their business all around the world. With Nokia Company’s strength, which have a wide network of sale and promotion, features and different price range for different people, make its have the advantages more than the competitors. As an example, Nokia use to improve the equipment and knowledge of the phone to make a better product, so that can increase the customer’s attraction. By doing this, it can attraction new customers and purchase phone under the Nokia brand name. Other than that, Nokia also use the innovation to recreate their products. They offer what other competitors have offer to their customer and this make the Nokia have own style. At the same time, Nokia also target right customer at the right time, for an example, “Telecom penetration in India” is take action when the level of the living standard in India has increased. They also can afford to buy a phone as well, so this make Nokia have opportunity to expand their business as wide as possible.

Threats

Nokia, been as the top sales among the other competitors. The ranking of it remain at top until today and Nokia need to maintain its position as a market leader. The threats that Nokia facing may be something like offer new features, style and type of product and services. Because of the competition around, Nokia need to make strategies to overcome those problems in present and future. For an example, Once the WLL network growing demand, the sales of Nokia will drop. This is why Nokia provides many less CDMA phone as they can to customer.

Critical issue

Programmed and Market Threats

Programmed threats can definitely cause significant damage. The personal information of Nokia can be copied and get sent to any rival companies, confidential information can also be modified, and the configuration can be reset to allow subsequent unauthorized access, leaving an open entry to all intruders. The services provided by Nokia can be extended but the clients will start to worry about the Nokia Company and will start questioning the Company’s security to safe guard their personal information. Nokia would have to face consequences if their system is used as strategic launch points for broader distribution of programmed threat software. In addition, Nokia Company has a low popularity of Symbian Operating System. Most of the rivalry such as Samsung, Sony Ericsson, Apple and Motorola are now using the new the Google Android Operating System, which is better than Symbian Operating System. The Apple Company is taking up shares from the Nokia Company and their IPhone is the most popular mobile devices all over the world. There are now new entrants are entering the market following Apple such as Dell, Google, and Acer.

In 2009, Nokia Company now owns 36.4% of the market, and Samsung is the second runner-up with 19.5% of the market. Motorola and Sony Ericsson may now be an annoyance to the other two companies but it will change soon. Nokia isn’t expected to solve it’s problem anytime soon. For year, Nokia has been confident with its Symbian System and didn’t explore the system because there wasn’t much competition. During that time, Apple’s experts have been coming up with ideas and they have come up with Google’s Android OS which got Nokia’s Symbian caught in a shocked. On the other hand, Nokia responded by having their cell phone market share increased from 35-40%. Samsung and Motorola have been chipping away at their competitor’s market share and are delivering phones to consumers at a reasonable price.

Low-Cost threats and New Rivals

There are also some issues with the cost of the company. Nokia Company has been concentrating on their traditional competitors such as Motorola, Sony Ericsson, Samsung, and Siemens. Nokia Company has been focusing on how to compete with their competitors through mobile phones, market shares, and technology, that they allowed other low-cost company to be successful and has entered the market steadily. The low-cost company that has been successful is the Chinese low-cost competitor Huawei, whose company is now the leader in fixed-line networks, mobile-telecommunication networks, and Internet. Then another company, known as the Vizio, a little LCD TV supplier that took lead in the premium brand for five years and became the North American market leader in large-format TVs. These low-cost companies built their name and momentum slowly and in a smart way by paying close attention to the market and competing in an undeveloped segment in the market. Competition between low-cost competitors can go unnoticed due to their ranking in the market. With these said, it shows that Nokia Company has been too arrogant and comfortable with their position that they have made a blind spot for themselves. Nokia Company has a slow reaction when they are facing new rivals.

(A). Target market

The Nokia target market segment consists of specific group of customers like various age groups of people who focuses its marketing efforts. The Nokia target is likely to have two main reasons; the first is to gain profit and secondly is to aim at consumers that need form of communication. For example, it is targeted mostly at consumers with the age of 19-39 years old looking for entertainment. It is to attract them to use this specific brand and to promote itself in the market.

Nokia can be described as a means of communication in today technological world. In terms of demographics it can define that Nokia target market apply to marketers commonly use in segmenting markets which also include gender, ethnicity, income, and social class. For example, to attract customers Nokia would have to come out with new ways of improving their cell phones, to add new applications or software to make it unique from its competitors. Not to mention, to gain reputation as a company that manufactures quality and provisionary cell phones. Gender on the other hand is another demographic variable commonly used, for example if Nokia were to aim their products at various age groups they would have to know when, where and how to aim. Thus, results could be astonishing then what seem to be. Ethnicity is a another variable of segmenting markets like Nokia, for example Nokia captures market in Asia hoping to attract buyers and dealers to sell their products and in turn gain status at that. Another is income, it often provides way to divide markets because it strongly influences people product needs. Product like Nokia segmented by income include, cell phones, wireless headset, memory cards and other small parts like battery, cable and installation Cd guide. For social class, consumers tend to be more alike as occupying inferiority or superiority according to their own, thus they are able to move up or down during their lifetime.

Psychographics variables of Nokia include personality characteristic, motives and lifestyles, to segment markets. Personality characteristics can be useful for segmentation, like when Nokia is competing with other competitors like Motorola, Samsung, and Sony Ericsson. However, this segmentation can also be very risky, although when appealing to a personality characteristic Nokia also must view opinion from different view. When motives are used, Nokia will probably be divided into different types of categories and likely will be judge by consumers like dealers and buyers. For example, Nokia target from various age groups but mostly aim at 19-39 years old to attract the younger generations into buying their products and hence enjoy growth rate sales as a result.

Lastly, behavioral variables for Nokia can be defined as a market according to some feature of consumer behaviors towards it. For example, Nokia can be group into environmentally friendly and will most probably be careful in producing cell phones in the near future due to popular demands. To satisfy the consumers needs Nokia have to be fully aware that setting prices, or even initiate special promotion and distribution activities are very vital in the upbringing of the brand name. For example, a consumer who purchases a cell phone is interested in the specifications or software. Thus, consumers are segmented directly according to their needs and wants.

B. Product (Core, Actual and Augmented Products)

(Nokia Core Product)

As you can see in the picture above, this particular cell phone happens to be a Nokia core product. The design is taken from a famous movie call the Star Wars, this product has many features that are able to solve problems for consumers. For example, if a consumer were to purchase this particular product expects it to be in ‘tip top’ condition which means brand new and not spoilt. Without the benefits, this product has no value in the market.

The actual product of Nokia which includes the core product represents the consumer most basic expectations of a product or service. It is here that basic and identifiable differences between dealers begin to surface. For example, in order to meet expectations of the actual product Nokia has created the product so that consumers have fully understanding of. In the second picture above, it tells that consumers can drag and drop the things that they wan onto the computer using the Nokia cell phone as a mouse. For example, when purchasing this particular device it is also important that a consumer consider the style of the device, the choice of applications, operational software and other extras.

Lastly, the augmented products of Nokia, can be define as a bundle for a specific product or service that the consumers expect. For example, the augmentations for a Nokia product may include an extensive warranty and product support package. But it also comes with a disadvantage like differentiating features and consumer needs or wants. Plus such augmentations are not always successful, particularly when it’s faced in reality majority does not like it because it have’s too many hardware or it could also mean that it is too complicated and not user friendly at all. Another reason is that Nokia cell phone could have lots of functions that users find it very difficult to use and instead prefer a less sophisticated cell phone. Hence, consumers should be very careful in choosing the right product to avoid regrets and dissatisfactory results.

(Branding, Packaging, Warranties and Customer Service)

Nokia branding has been recognize worldwide in today world, Nokia branding strategy involves or shall I say Nokia Group the Finland based manufacturer of mobile has been steadily working on the brand name. Its effectiveness and efficiency has even knock off mobile producer Motorola for the number 1 spot. Nokia has even succeeded in lending their personality and not even give out them names. Not to mention, there are three degrees of brand loyalty which includes recognition, preference and insistence. Brand recognition occurs when consumers see that Nokia exists and views it as an alternative purchase if the preferred brand is unavailable. For example, the Nokia branding strategy proves that its brand can be intangible, including ideas and places. Whereas, brand preference is a stronger degree of brand loyalty and brand insistence occurs when a consumer wants a specific brand like Nokia and will accept no substitute and is willing to spend a great deal of time and effort to acquire it.

(Nokia packaging)

The picture shows the packaging of Nokia cell phones, packaging functions are manufacture from Nokia on factory and company which is located in Finland. Its purpose is to provide protection from any damages to the cell phone. Another function of this packaging is to offer convenience to consumers and also dealers. For example, the manual guide and installation is provided in the package when consumers buy the cell phone. Not to mention, cable memory card and battery are also put into the box for protection and it’s also easier to manage rather than splitting them and costing of the outcome is also not cheap. A third function of packaging is also to promote the product by explaining the details of the cell phones like the features, benefits and image to the consumer.

Nokia warranties usually include 24 months for the mobile device, twelve months for accessories (whether included in the mobile device sales package or sold separately). Six months for the batteries, chargers, headset and so on and a ninety days period for the replacement, and the repairing of any other items.

Lastly, the Nokia Customer Service is usually directed at their website, this is to ensure that consumers do not get the wrong idea and will ask question when is necessary. Consumers can always go to the Nokia website and ask question regarding their cell phone and get feedback from the Nokia Company. Also, remember to ask questions only related to Nokia else questions that do not regard the specific request will most probably be ignored. Also, instead of email-ing those consumers can give Nokia a call also if they find that email is a slow process of having questions being answer slowly. Nokia deserves the right to help those in need of their assistance and requirements. Nokia customer care line is usually the form or means of communicating and getting answers quickly then email.

D. Distribution

Nokia distribution channels would involve activities that make products available to consumers when and where they want to purchase them. For example, Nokia Corporation has signed with VoIP service of Vyke AS, Mobile IP under the terms of distributing their cell phones or shall I say their products worldwide. This in turns also helps VoIP service of Vyke AS, Mobile IP gain profit and help raise their reputation to be expertise. The ways that consumers can obtain the product is by finding its location of the whereabouts of the Nokia retailer, as for the service of the product consumers can visit the Nokia website for more details and information regarding it. Other channels include TESSCO technologies; to expand the distribution Nokia has selected this particular company to leverage its customer network and superior supply chain management capabilities to open new distribution channels for Nokia cell phone original accessories.

Lastly Nokia brilliant strategy is to have its products at the right time and in convenient locations. In dealing with the TESSCO technologies and Vyke AS, it is vital that Nokia carefully plan and strategize their work plan and their workforce together. With these objectives in mind, Nokia will be able to succeed and make its product available to consumers through stores, mail order, catalogues and website ordering. Nowadays, ordering and buying online is one of the common things in consumers. But what is more surprising is how Nokia can achieve it by supplying all the products and in time. The basic strategy of Nokia is to be present in all price ranges. This strategic plan helps them by attracting consumers from around the world to buy their product, for example like the Nokia Smartphone N97 has sold 500,000 since its launch in June.

E. Promotion http://www.youtube.com/watch?v=SbxyLnwFSvI http://www.facebook.com/#!/nokia http://blogs.nokia.com/

There are four possible elements of a promotion mix which are advertising, personal selling, public relations and sales promotion. As you can see in the video above you, this is the advertisement of Nokia product n900. We can conclude that advertising is a paid non-personal communication about an organization and its products transmitted to a target audience through mass media like the video shown above. Advertising on YouTube also helps consumers to see and review the specifications of the product that they might consider buying it. Not to mention, Nokia nowadays has been so popular that advertising on the social network call “Facebook” has even pop out. Consumers who have an account with Facebook can also see the ongoing promotions that Nokia has produce. As for the blogs, Nokia has created a website that helps consumers read about the featured articles and helps them gain knowledge about Nokia particular products.

Whereas, for personal selling Nokia would probably be paid personal communication that seeks to inform customers and persuade them to purchase products in an exchange situation. Personal selling also consists of three types of communication for Nokia, which are the kinesics communication, proxemic communication, and tactile communication. Kinesics communications are usually movement from the head, eyes, arms hands, legs and body. Nokia form of proxemic communication is by communicating in the physical distance like face to face. For example, a consumer may be displaying