CASE ANALYSIS IN STRATEGY NOKIA
Introduction ‘
Nokia is a Finnish based multinational telecommunication, information technology (IT) and consumer electronics company (Lesser, 2008). The company was founded in 1865. Nokia is a public company that has been listed in the New York and Helsinki stocks exchange markets. Its headquarters are based in Espoo, Helsinki. Nokia was listed as the 415 world largest company by fortune in 2016. The company has been in operation for about 150 years and served a worldwide market (Nokia. n.d). Nokia is also one of the main contributors to the mobile telephony industry. The company assisted in the development of the GSM, 3G & LTE standards (Nokia, n.d). Nokia has ruled the market with its technology and the simple motto ‘connecting people’. Following recent developments the company was acquired by Microsoft which is one of the worlds leading software developers and since then Nokia has manufactured a number of phones that are already in the market under the windows umbrella (Saintvilus, R. 2012). This case study aims to prove that Nokia is facing serious challenges in a radically altered mobile phone market. Nokia will be forced to radically alter operations in order to survive in the electronic market.
The troubles affecting Nokia are as a result of radical transformation in the business environment of the company. A brief examination of the Political, Economic, Social, technological and environment factors will provide a glimpse of how the company has been affected and the future of the company in the business. Political factors are some of the factors that have contributed to the current situation of the company (Burrows, 2011). Nokia is based in a European nation and over the years the government of Finland has refused to give the company favors or bailout the company in cases of financial crisis (Kelly, n.d). This has forced Nokia to make an uneasy alliance with Microsoft (NASDAQ:MSF). So many tech companies such as Apple Inc one of the major competitors of Nokia has been bailed of by the government in various occasions (Mazzucato, 2013). Unlike theses companies Nokia has lacked the support of the government, the company is based in a small European country, and this can hurt the company because it is not associated with a major super power.
Economic factors are some of the major contributors to the situation Nokia is in now. The company has suffered badly after economic turmoil in Europe, this turmoil left Nokia wounded by limiting the company’s buying power in its home markets (Milne, 2015). Unlike its competitor Apple which had a smooth time entering the fast growing Chinese market Nokia had a rough time tapping into this market (Doz, 2017). Apple, Samsung and Google have a vast economic resources availed to them. Nokia lacks these resources and this puts the company in a disadvantaged position. Nokia lacks the economic capabilities to carry out research that can help the company come up with new devices that can help the company tap into new markets (Winter, 2014). Nokia has no money that can help the company to carry out extensive research.
The widespread use of smart phones and the unique apps that come with these smart phones is a major social factor that has hurt Nokia. Some of the widely used app is WhatsApp. This app has been designed for the operating systems that are popular such as Google operating system, Android and Apple’s iOS which puts Nokia at a disadvantaged position since, Nokia smart phones are using windows. This has limited the appeal Nokia has on customers who prefer to use such apps thus there has been a reduced sales in Nokia phones (Roger, 2010). Apple has gained popularity and has been associated with smart phones in major international market key player nations such as the US and this has hurt the market shares of Nokia by creating a generation of consumers who only prefer one brand over all the other brands. In recent years Nokia has had a rough time dealing with a misconception that has gained popularity “there are only two brands of smart phones in the market, Namely; Apple and Samsung” this misconception has kept many Nokia potential Nokia costumers from considering the product.
Technological factors affecting the company have been rooted in the social factors that limit the company. Times have changes and consumers want to perform all kinds of task with their Smartphone’s, tasks such as; streaming videos and taking photo graphs and Nokia’s decision to utilize the less popular window as their smart phones operating system has limited costumers choice and made it difficult for Nokia to sell its product to a younger generation that wants to perform all sorts of tasks with their smart phones (Santillan, 2013).
The Legal environment surrounding Nokia is very challenging this is as a result of the company operating within the European nation (Peltonen, 2019). The European Union has been investigating the way Google is using Android, these actions that are being taken by EU could force radical changes such as Android spinning off from Google to form a separate company. How this spin off can affect Nokia is not clear but such a situation has the opportunity to level the play ground and increase the access Nokia has in the European market. One possible change in Google could limit the popularity it has thus giving Nokia a chance to gain popularity in the market (Hill, 2015). Environmental factors are a challenge for every tech and electronics company and Nokia is one of them. Nokia is faced by the challenge of safely and economically disposing its waste products in a way that will be economically and environmentally friendly. Lithium and batteries are products that Nokia need and the increased cost of these materials has been an environmental concern for the company. There is an increased cost of these products due to their usage in car manufacturing (PESTEL ANALYSIS, 2015). Climate change that has brought about global warming is a potential threat that could disrupt the company’s transoceanic shipping and the supply chain of Nokia.
Porter’s Five Force is the best tool to be used to evaluate the microenvironment of Nokia. This took takes into consideration competitors, Customers, suppliers and new entrants (Borhanuddin, et al., 2016). Threat of new entrants; the mobile phone industry is one that is already established so new companies entering the market pose no threat to the companies in the industries since the technology needed to rival the companies in the industry need to be more advanced if the new company has any hope of differentiating itself from the other companies (Chan, et al., n.d). Entry to this industry is not easy since there are many barriers such as the high investment that is needed for start up and marketing. As new entrants enter the market they want large share that are already taken by organizations such as Nokia which holds 29% of the market, which is the highest market share as per the report given by BBC News in 2011. In conclusion, the threat of new entrants is not something that Nokia should be worried about since this threat is very low (Adamkasi, 2017)
Power of suppliers; Nokia greatly relies on its supplies to supply it with equipments for it to continue manufacturing mobile phones. The market has a large number of suppliers that Nokia could opt for, currently their software supplier is Microsoft, which has a high bargaining power over Nokia. Nokia is in a position to bargain with any mobile hardware suppliers using the argument that they control the largest market share of the industry no supplier would want to lose them. In conclusion, Nokia faces a moderate threat from power of suppliers because hardware suppliers have low power on them while their software supplier has a higher bargaining power on them. Microsoft has a lot of power on the company (Adamkasi, 2017). Power of buyers; the power that consumers have is on the rise since they have a lot of choices to pick from in the market, Nokia is facing competition from companies that are offering the same features that they are offering thus the industry has become price sensitive which each customer seeking value for their money. Buyers have a lot of power because of the availability of other phones they can purchase instead of Nokia (Adamkasi, 2017).
Threats of substitute, mobile phones are essential and hard to replace although Smartphone’s perform many tasks that can be done by other devices even better such as digital cameras can take better pictures than smart phones but the fact that mobile phones are an essential has made the threat of substitute very low (Adamkasi, 2017). Competitive rivalry; Nokia is operating in a market where the competition is stiff, the rivals of Nokia such as apple are moving at a fast speed while it comes to making smart phones thus leaving Nokia trailing behind (Bouwman, et al., 2014). Competitive rivalry is very high in the industry that Nokia is operating in.
VRIO frame work is a tool that is used to analyze the resources of a company and the capabilities of the company, this tool helps in discovering the competitive advantages and the weaknesses of a company. The VRIO is a framework of four set questions of value, rarity, imitability and organization (Lin,et al., 2012). Quality, price, service and brand image are the competence that can be choose from Nokia. The fact that Nokia offers high quality services makes it possible for the company to take advantage of environmental opportunities that helps the company neutralize environmental threats. Quality is an organizational strength for the company (Ciesielska, 2018). The prices of Nokia phones in some countries are relatively low and this gives the company a competitive advantage. Nokia resources are rare to imitate. Nokia as a brand is the world’s fifth valuable brand which gives the company a competitive advantage (Lartey, 2008).
Opportunities and threats are factors influencing the business externally. Nokia has the chance to make the Microsoft Nokia acquisition a win -win situation and the acquisition can still work in their favor if both utilize resources at their display in a better way (Pai, 2015). Nokia is in a position to utilize the news consumer trends to open up new markets. The new consumer trends also give the company an opportunity to diversify into other products. With the implementation of new taxation policies comes new opportunities for Nokia, Nokia is already an established player in the market and these tax policy give the company a chance to increase its profitability. With opportunities come threats, the major threat facing the company is stiff competition from other established key players in the international market (Bhutto, 2005).
For Nokia to sustain and maintain its success and improve continuously there are main options for growth that have been guided by the Ansoff matrix. Marketing penetration; which is done using the company’s existing products in the existing market. Market penetration is the riskiest way of growing a business (Loredana, 2016). Nokia should do a few things such as making sure that their pricing strategy are reasonable, introduce discounting offers to their clients, bring new marketing campaigns or improve the existing ones, carry out research and sell to a different market in case the already existing market is saturated. Lastly, lower the current prices of their products so that they can appeal to most of their customers. For product development, a product in the market can be altered a little so that it can target a different customer segment. In the diversification part the company can develop a technology or something completely new as a way of trying to gain more customers (Lubinaite, 2015). The last quarter of 2018 saw Nokia end the year well (Revuz, 2012). The second quarter of the same year saw an improved profitability in the technologies of Nokia. The net sales of the company had increased by three percent compared to the former year 2017. The sales rose from EUR 6.7bn to EUR 6.9bn. 2018 saw an increase in the sales and profits of the company (Nokia, 2019).
Nokia is in a very competitive field, the fact that the company registered an increase in profits last year does not mean the company will continue making profits. Nokia has to strategize on the future if it is to stay ahead of competition. Nokia 5G IOT is the future for Nokia. This is a game changer for Nokia, which is in collaboration with nine more companies. Nokia 5G IOT will be the first of its kind, Nokia is behind the development of a technology that will deliver the extra ordinary (Nokia n.d). Nokia 5G IOT will connect everything, everywhere efficiently and quickly and bring about new services. Competition is one of the challenges facing the company in phase one, therefore the introduction of 5G IOT will help deal with the competition. In phase two with reference to the ansoff matrix the company can diversify by creating a completely new product. Development of 5G IOT is a new product for the company and in order to make sure the profits do not fall the company has to find a way to attract new customers and the only way it can do so is by bring a new product that will attract more customers. The 5G IOT is development is underway following research that has been conducted by Nokia it can be sustained.
Conclusion
Nokia is a company that has been in operation for over 150 years it is based in Finland, Europe. The company has faced some serious political, economic, social, technological and legal challenges. In the industry the company is not threatened by the entrance of new companies though it is threatened by the power their software, supplier Microsoft has, threatened by competitive rivalry and threatened by the power of the buyer. The last quarter of 2018 saw the company register increased profits. The ansoff matrix has proposed ways that can be implemented by Nokia for it to boost its sales. For Nokia to have a hold on the future it should invest in 5G IOT in order to deal with competition and make sure it controls a larger share of the market.
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