Internal and external market analysis of Nokia

Every organization occasionally has to take some momentous decisions that affect the entire destiny of the organization for years into the future. These decisions are considered to concentrate on the major and most significant issues facing an organization.

In 1994, Henry Mintzberg, an iconoclastic professor of management at McGill University, took the entire strategic planning establishment to task in his book, The Rise and Fall of Strategic Planning. In effect, Mintzberg declared strategy did indeed have several meanings, all of which were useful. He indicated that strategy is a plan, a pattern, a position, a perspective and, in a footnote, he indicated that it can also be a ploy, a maneuver intended to outwit a competitor

Strategic planning is a defined, recognizable set of activities. Techniques vary with the particular author but the substantive issues are essentially the same across authors.

Background History of Nokia:

Nokia, a company that takes its name from a small river outside the Finnish city of Tampere, began life in 1865 as a wood pulp and paper producer. Over its history, it has manufactured rubber boots, tyres, television sets and generated electricity, Nokia found its way into telecommunications in the early 1960s. Since then, in a mere 40 years, Nokia has developed and refined it telecommunication focus, and by connecting on mobile communications it has become a global technology leader and the world’s fifth most valuable brand.

TASK 1

1.1 Importance of External factor of Nokia.

There are certain external factors that Nokia should be very aware of, such as P.E.S.T.L.E factor and also S.W.O.T A business must take into account all these constraints for strategic planning.

PEST Analysis:

Political factors:

Political factor is very important for Nokia. Because Nokia sales their product globally. If government changes their laws in terms of export import the sales will be affected. Any political harassment or political party’s threat can be affected market of Nokia. Political riot is a giant problem for any company and Nokia as well. For example in Egypt and Libya there are ongoing a political riot and in this situation Nokia company decreased their market. The governmental bodies in the U.K have introduced new laws into the business environment, which ensure that none of these procedures take place; if a company is to be successful they must follow all of these laws.

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Economical factor: Economical factor is a very important for a company. Nokia’s market all around the word. In this economic rescission all over the world Nokia’s Market decreased in a wide range. Especially in Europe and U.S.A Nokia loosed their market. There are other things as well such as labor share to value added where Nokia consolidated rate is 39.8% and high rate of export duty.

Environmental and Social factors: Some un-ethical practices are against the law and companies cannot become involved in them but there are also some practices that aren’t illegal by law but are considered highly un-ethical by the consuming public, companies who engage in these practice’s can lose a lot of market share. In this recent year Nokia loosed their market in Asia because China and India producing their own Nokia hand set which is cheaper on the other hand there are lot of local hand set captured their own market. So now Socio and environment factor is a challenge for Nokia as Asia is a giant market for Nokia.

Technological: In the communications market technology is perhaps the most important factor that companies like Nokia have to take into consideration. They have to keep up to date with all the newest technological advances (like express music, Smooth touch screen, unexpected memory and camera and motion capture phones) if they are going to capture the biggest market share and stay ahead of their competitors (Apple and HTC).

Legal: Legal constraints must be taken into account because many businesses aim to make a profit so they may be tempted to mislead their customers about prices, quality of products and the availability of their products. They may also try to cut expenditure by using lesser quality materials in their products all of these are illegal. So legal factors are very important for Nokia. As Nokia is running their business globally so it is very important factor to aware about global legal issue.

1.2 Stakeholder needs and Expectation of Nokia:

Stakeholders are those groups and people who are interest of business and organisational activities. Nokia is one of the largest companies so its stakeholders are major part of Nokia Corporation.

There is chart of Nokia’s stakeholders and their needs and expectation which is described below:

Organization

Internal Stakeholders

External Stakeholders

Shareholder

Employee

Suppliers

Customers

Government

Local Community

Media

Business

Community

Bank and Insurance

Business Competitor

Stakeholder’s needs and Expectations:

Internal Stakeholders

â- Shareholder: Nokia always try to do better for them. Shareholders arrange the major part of capital for organization development as they part of owner of an organization. Shareholders receive share of profit, bonus, and dividend as well as reward. Its company policy to give them bonus share, dividend, premium share as they are feel secured to invest money more.

â- Employee: Nokia regularly involve employees in discussions about issues such as corporate values, career and competence development, performance, diversity and work-life balance that’s meet employee’s need and expectations.

â- Suppliers: Suppliers are very effective role for an organization. Nokia understand the important of them and try to meet their needs and expectation such as early payment, advanced payment, competitive value, communication regularity, preference of product etc.

External Stakeholders

â- Customers: Nokia increasingly engage with customers on issues related to sustainability. Network operators – Nokia’s biggest customers – expect to meet high standards of corporate responsibility in their own operations and increasingly in their supply chain. Nokia continues to receive enquiries and assessment requests about social and environmental performance from their operator customers. Nokia respond to those requests through our normal customer account management interface.

â- Government: Nokia is operating their business in world wide. Nokia always obey the government rules and regulation and pay tax vat as per government rules. Nokia create a giant employment all over the world and it is a government basic expectation from a company.

â- Local Community: Nokia is always promised to help all kind of local community all around the world. Nokia sponsored for AIDS hospital, cancer hospital, all kinds of national game. Nokia sponsors many research collaborations with industrial and academic partners. Nokia’s goal is to strengthen co-operation between our researchers and academics.

â- Business Community:

Nokia works in collaboration with other companies on key issues through a number of industry organisations, such as:

The Global eSustainability Initiative (GeSI): We participate in the Supply Chain Working Group, e-Waste Working Group and Climate Change Working Group.

International Chamber of Commerce (ICC)

World Business Council for Sustainable Development (WBCSD)

â- Bank and Insurance Company: Nokia always meet the expectations of bank and insurance company. They are taking loan from bank and investing money for other issue as well and paying interest.

â- Media: Nokia plying a vital role for increasing the media such as TV, newspaper, magazine and any other media. Nokia pays high rate of amount for promotion their product for advertisement with those media.

1.3 Major change in External Environment of Nokia:

Economical environment: In recent year there is ongoing a economic recession all over the world where is suffering world leading Mobile phone company Nokia. which released their results for the first second quarter of 2009 on Thursday, where they revealed losses in income and drop in volumes shipped, expect the setback to continue in the current quarter. Nokia continues to expect 2009 industry mobile device volumes to decline approximately 10 percent from 2008 levels. Nokia now expects its market share in mobile devices to be approximately flat in 2009, compared with 2008. This is an update to Nokia’s earlier target to increase its market share in mobile devices in 2009,’ the company says in a statement. (http://www.itnewsafrica.com)

2.1 Using appropriate tools to analyze the effect of current business plan of Nokia.

SWOT ANALYSIS:

SWOT analysis is the way of deciding on a successful marketing scheme, we must look at strength, weakness, opportunity and threat.

2.1.1 Strength (internal factors): Nokia is going to be one of the most popular Mobile communications companies in the industry all over the England, Nokia provide high quality of product with average price. And this company have very skillful technologist also have strong board of marketing management.

2.1.2 Weakness (internal factors): This is basically looking at where the product is failing or not doing as well as it should in the market. Nokia’s problems are that:

They are currently aiming their products at a saturated market segment.

2. Their wage costs are currently rising.

3. Higher import charges have now been put into place.

4. There are some quite high supply chain costs that Nokia are currently paying.

2.1.3 Opportunity (external factors): This is the area in which Nokia can make more profit, or gain more market share. There are 2 ways in which Nokia can currently do this:

1. Improve the technology that they are using to make their phones and use in their products, for example, camera phones and advanced picture messaging, 3G supporting and very smooth touch screen.

2. Using innovation to re-invent their products, change and develop within the market to offer something none of the competitors have.

2.1.4 Threat (external factors):

China Mobile made copy Nokia sets.

Orange, Voda-phone, and O2 are globally selling their own brand products.

Higher import charges.

2.2 Analysing the current Market position of Nokia:

Now the Nokia Corporation deals in 4 markets, Mobile Phones, Multimedia, Enterprise solution and Networks, the Mobile phone market being the most profitable and dominating among the rest. Currently, Nokia enjoys about 36% of the Mobile phone market, more than twice its immediate competitors Samsung and Motorola. 

http://www.yugatech.com/blog/wp-content/uploads/2007/08/mobile-market-share.gif

(Current Market Position of Nokia)

Although there have been reports of its competitors growing market shares, Nokia continues to stay close around the 35 % mark. It shows that the competitors are munching on the market share of the small players in the Industry.

2.3 Evaluation the competitive strengths and weaknesses of Nokia:

Strengths: It basically shows that Nokia upgrading and innovating performance is better than the other competitors. They are taking places very successfully in competitive market. These are given below:

They are taking lower time to innovate a product where as others Nokia’s core competitors (like I-phone, Blackberry) taking huge time to innovate a new product.

Nokia products easy to use or flexible that’s why different ages of people very comfortable of their products.

Nokia provides the same level of technology of their products like their core competitor (i-phone or blackberry) but Nokia provides lower cost.

Nokia’s accessories is available their local market.

Weakness:

1. They are currently promoting their products to a market that is verging on saturation- Nokia need to re-launch some of the older models to a different market and only promote new products to the existing market segment. 

2. Their costs are already high, and are always rising- To solve this they can try and invent or discover machines that can increase productivity so that the number of staff currently employed (The average number of employees in 2002 was 52714 and this was a decrease from 57716 in 2001). 

3. High import charges are being implemented by the government- To counter this Nokia need to set up factories in more companies.

3.1 Developing strategic options for Nokia:

Ansoff’s matrix:

Market penetration (existing markets, existing products): Market penetration is the least risky way for a company to grow.

The aim of market penetration is to sell existing products to an existing market, to do this Nokia must do a few things:

1. the pricing scheme should be reasonable (for example, penetration or competitor based)

2. Introduce discounting offer

3. Start up a different advertising campaign or consider changing an existing one.

4. Improve better quality of consumer services.

Market development (existing markets, new products): new product development can be a crucial business development strategy for firms to stay competitive.

To complete market development successfully, Nokia must look into the following:

1. Researching and selling to a different market (in case of saturation or poor market share)

Change times that television advertise are aired at and alter the places in which print adverts and leaf letting are being displayed (this can help your products appeal to a whole new market segmentation).

2. Lower current prices to help the products appeal to a wider range of consumers.

Product development (new markets, existing products):

An established product in the marketplace can be tweaked or targeted to a different customer segment, as a strategy to earn more revenue for the firm. For example, WAP phones are aimed at more professional people while Camera phones are aimed at the youth market.

Diversification (new markets, new products):

This refers to developing technology that offers consumers something new or different, this is the most common way of companies trying to gain greater market share and increase their profits.

3.2 A comparative understanding of activity from Nokia in the market:

Porter’s generic strategy of Nokia:

http://www.marketingteacher.com/image/content/porter_generic.gif

Cost leadership: Cost leadership means that the firms produces its goods and services at relatively low cost by taking advantage of economies of scale and the experience curve effect. In order to use this strategy the firm has to reduce costs at each stage of the business.

Differentiation: Differentiation means differentiating a product on the basis of superior performance in an important consumer benefit area. Nokia can differentiate its product in the following ways:

i. Superior product performance by adding features, improving reliability, durability, quality etc.

ii. Superiority of product perception achieved by marketing communication,

iii. Distributing the product effectively, making the product more conveniently available than the competitors

iv. Providing high service levels, better sales support and more affordable financing.

Focus Strategy:

Nokia that use Focus strategies concentrate on particular niche markets and, by understanding the dynamics of that market and the unique needs of customers within it, develop uniquely low cost or well-specified products for the market. 

Nokia basically maintains the cost leadership strategy in their competitive broad market because Nokia reduces costs at each stage of their business.

3.3 Future Organizational strategy of Nokia:

Nokia planning to take new organizational strategy based on their current market strategy, these are shown is given below:

The CTO Office will be responsible for Nokia’s technology strategy and forward-looking technology activities, including Nokia Research Center. It will be headed by Rich Green.

Design, responsible for Nokia product and user experience design, will be led by Marko Ahtisaari.

The CFO Office, responsible for all financial activity, will be headed by Timo Ihamuotila.

Corporate Development, responsible for driving implementation of Nokia’s ecosystem strategy and strategic partnerships, will be headed by Kai Oistamo.

Corporate Relations & Responsibility, responsible for Nokia’s government and public affairs, sustainable development and social responsibility, will be led by Esko Aho.

Human Resources will be led by Juha Akras.

Stakeholders Analysis of Nokia Ltd:

These are the owners of a business and most of them are concern about the company’s ethical performances as such the can increase their investment:

Stakeholder

Main Interest

Power

Potential

Impact

Strategies/Control Measure

Bankers

Suppliers

Government

Consumers

Bankers and other financial institutions are interested in the overall condition of a firm.

Suppliers will expect to be paid and will be interested in the future of the business.

Tax revenue,

Compliance with legal regulations and

Continuous national development

Consumers have high interest in the goods and services and reasonable prices.

A bank is interested in minimising the risk of interest not being paid.

Suppliers can reduce their level of service, or even switch to supplying competitors.

Government has legal power

To control business.

Consumers have more option to bargaining power.

Collateral security is being strongly.

Imposing new products with competitive price and reduces consumer’s rivalry.

Flexible rules and regulation for business.

Suppliers can analyze through the competitors of existing market.

Nokia never disrupts any bank money.

Nokia try to give them good feedback and a competitive value.

Obeying all rules and regulations.

Nokia always bringing hi- technology in a competitive price.

4.2. Criteria for reviewing potential options for strategy plan of Nokia:

Share Market Strategy:

Nokia regards it as its main scholar mobile phone devices to adopt Windows Phone, carries on the modernism of various fields on this stage. It and Microsoft will carry on close support in development and market will go about, and share the street chart of product development, in order to move forwards the evolution of the movement products in the future together.

Stakeholder Engagement Strategy:

Regular communication with respect to our sustainability efforts, both internally and externally, Nokia builds trust and helps develop of their reputation. Nokia understand how important it is to communicate clearly and correctly to the outside world the ways in which our business affects society.

Decision Making Strategy:

Nokia outlined its new strategic direction, including changes in leadership and operational structure to accelerate the company’s speed of execution in a dynamic competitive environment.

Major elements of the new strategy include:

– Plans for a broad strategic partnership with Microsoft to build a new global mobile ecosystem; Windows Phone would serve as Nokia’s primary smart phone platform.

– A renewed approach to capture volume and value growth to connect “the next billion” to the Internet  in developing growth markets.

– Focused investments in next-generation disruptive technologies.

Risk Assessment:

Nokia’s overall risk management concept is based on visibility of the key risks preventing it from reaching our business objectives. This covers all risk areas: strategic, operational, and financial and hazard risks. Political, social, human rights and environmental risks are considered within these categories of risk, rather than as a separate strand. The principles set out in Nokia Risk Policy and accepted by the Board’s Audit Committee, require risk management and its elements to be integrated into business processes.

4.3. Strategy plan of Nokia includes Resources implications:

Strategy has been defined as “the match an organization makes between its

internal resources and skills and the opportunities and risks created by its

external environment.”

Nokia’s strategy plan in connections of their external and internal environment which is described below:

4.3.1. Changing of Management structure:

Top management at Nokia to create an implement plan focused on people’s aspects of implementation of the new environmental plan of dropping its carbon footprint by introducing a centralized management information method and plan focused at reduction in paper and printing usage. Therefore the exact objectives can be decorated as to appreciate the dynamics of environmental initiative for the organization.

“Change Management due to Environmental Management” (2007)

4.3.2. Network Solution:

Nokia is introducing core network solutions that leverage the possibilities of IP to expand operators’ service portfolios, while keeping full control over their network usage.

4.3.3. Reduction of cost:

According to Nokia Siemens Networks the cost reductions should rise to EUR 500 million by the end of 2011. The company plans to review its global personnel, and expects for around 7-9 percent of its current number of around 64,000 employees to receive the pink slip, yet the number of layoffs will differ from a country to another.

4. Usages of Human Resources:

There is a system of Nokia to ensure the availability of workforce for current and future business needs, in a sustainable and ethical manner, at both organizational and unit level.

Nokia’s Resource Implications Imagination:

Resources

2011

2012

Jan- Jun

July- Dec

Jan- Jun

July- Dec

Market Research

Outlet

Face to Face

Telephonic

Online survey

Advertisement

TV

Newspaper

Billboard

Internet

Plan Development

Advance version mobile phone

Connected with Microsoft

Using I Tune

Flexible Application download

Price

Reducing production cost

Reduction

Export duty

Call charge low

Reduction of Accessories

Total

5.1 Core organisational values with the current business objectives of Nokia:

Product:

Nokia developing products and services which not only meet customers’ immediate usability needs but help them to make more sustainable choices through the innovative use of materials, technologies and concepts.

An advanced design team within Nokia has been researching and developing new ideas and concepts specifically based on sustainability. Their work focuses on futuristic ideas and retyping new approaches in materials, technologies, ecological, and ethical approaches.

Sales and distribution:

Nokia starts with achieving the utmost quality standards for our customers, partners and our employees and with our long future strategy we are looking to strengthen our leading position in the telecommunications field to be the pioneers in sales and distribution of mobile phones.

Technology:

The mobile phone in your hand is now packed with advanced tools that let you do so much more. A picture, music, Internet, games, radio, video, and navigation, messaging – today’s Nokia phones are overflowing with practical ways to help you make the most of every day.

Nokia gives you insights into the technologies that make your Nokia phone alive. From 3G to WLAN, the acronyms and terminologies are explained in detail.

5.2 Mission and Vision Statements of Nokia:

Mission:

Nokia helps communications service providers build more valuable customers relationship by providing efficiency and experiences.

Nokia built value by addressing efficiency, and continue to do that. But they also need to address the customer’s need for a better experience, because it’s experience that builds relationships, and relationships that build value.

Vision:

The individual communications experience is the greatest value a communications service provider can deliver to their customer, and so it’s the greatest value we can support communications service providers in delivering.

Nokia’s vision guides their mission, and mission is to build more valuable customer relationships. The individual communications experience builds more valuable customer relationships.

5.3 Future Management Objectives of Nokia:

â- Nokia planning to launch an advertising service – Point Find service, next year that will use pattern-recognition technology to let people point camera phones at cars, movie posters, and other objects and click to get various information.

â- Nokia going to provides the rates of i-Phone service plans. The plans are organized in three main categories – individual, family and existing customers.

â- Nokia plans to accelerate your mobile application development. Recently, Nokia announced its new Launch pad mobile software developer offering for the broad range of software developer companies seeking a fast-track for creating applications that target the millions of devices based on Nokia mobile platforms in the market.

5.4 Measures for evaluating a strategy plan of Nokia:

BCG MATRIX:

This is simplistic in many ways and the matrix has some understandable limitations that will be considered later. Each cell has its own name as follows.

Dogs:

These are products with a low share of a low growth market. These are the canine version of ‘real turkeys!’ They do not generate cash for the company, they tend to absorb it. Get rid of these products.

Cash Cows:

These are products with a high share of a slow growth market. Cash Cows generate more than is invested in them. So keep them in your portfolio of products for the time being.

Stars:

These are products that are in high growth markets with a relatively high share of that market. Stars tend to generate high amounts of income. Keep and build your stars.

Look for some kind of balance within your portfolio. Try not to have any Dogs. Cash Cows, Problem Children and Stars need to be kept in a kind of equilibrium. The funds generated by

Nokia Cash Cows are used to turn problem children into Stars, which may eventually become Cash Cows. Some of the Problem Children will become Dogs, and this means that you will need a larger contribution from the successful products to compensate for the failures.

Question marks: (also known as problem child) are growing rapidly and thus consumes large amounts of cash, but because they have low market shares they do not generate much cash. The result is large net cash consumption. A question mark has the potential to gain market share and become a star, and eventually a cash cow when the market growth slows. If the question mark does not succeed in becoming the market leader, then after perhaps years of cash consumption it will degenerate into a dog when the market growth declines.

6.1 Implementation a strategy plan for Nokia:

Resources

2011

2012

Jan- Jun

July- Dec

Jan- Jun

July- Dec

Market Research

Outlet

Face to Face

Telephonic

Online survey

Advertisement

TV

Newspaper

Billboard

Internet

Plan Development

Advance version mobile phone

Connected with Microsoft

Using I Tune

Flexible Application download

Reducing production cost

Labour Cost

Export duty

Call charges

Accessories

Total

6.2 processes to gain commitment from stakeholders of Nokia:

Stakeholders are the major part of an organization, Nokia always tries to negotiate with their customer, suppliers and shareholders. Its company policy to give shareholders bonus share, dividend, premium share as they are feel secured to invest money. Nokia always try to give its suppliers advance payment, competitive price. Nokia regularly involve employees in discussions about issues such as corporate values, career and competence development, performance, diversity and work-life balance that’s meet employee’s need and expectations.

6.3 Monitoring and evaluate systems for the implementation of Nokia strategy plan:

Balance Scorecard for Nokia:

In Balance scorecard there are four kinds of perspective should be think by top managers.

1. Customer Perspective: Managers of Nokia should make goals, quality, performance and service, and cost, after which translate the goals into specific actions that measure these four categories that tend to be the biggest concern of customers.

2. Internal Business Perspective: Managers should identify the company’s core competencies like Blackberry, Motorola, Samsung and business processes that have the greatest impact on customer satisfaction, and then specify measures for each.

3. Innovation and Learning Perspective: Companies need to be able to improve constantly due to heavy competition and changing customer demands. Although Nokia serially boosting their hi- technology and forwarding with great innovations.

4. Financial Perspective: Financial performance measures indicate whether the company’s strategy, implementation and execution are contributing to bottom-line improvement. Typical goals here have to do with profitability, growth and shareholder value. Nokia is financially strong and it always ready to complete their planning to implement.

By combining all these different perspectives, Balanced Scorecard can help managers to see and understand some of the interrelationships between them. This understanding can lead to improved decision making and problem solving.