NOKIA’S

STRATEGY
By-
Prasenjit (34)
Vibhas (52)
Vikram (53)
 OF
• Established in 1865 as a wood-pulp
mill by Knut Fredrik Idestam on the
banks of Nokianvirta river in Finland.
• Finnish Rubber Works acquired Nokia
Wood Mills  Telephone and
Telegraph Cables
• Nokia Corporation created - 1967 -
paper products- car tires- personal
computers-cables
 OF
• Nokia began developing the digital
switch (Nokia DX 200) which became
a success.
• 1991 Nokia - agreements to supply
GSM networks - nine European
countries.
• August 1997 Nokia - GSM systems to
59 operators in 31 countries.
 THE VISION
• The Vision of Nokia:
“Our vision is a world where
everyone can be connected. Our
vision is to ensure that 5 billion
people are always connected at
any given point and to achieve
100 fold more network traffic”
 NOKIA TODAY
• Head office in Finland; R&D,
production, sales, marketing
activities around the world
• World’s #1 manufacturer of mobile
devices, with 38% share in 2007
• 112 262 employees
• Sales in more than 150 countries
CORPORATE STRUCTURE
 NOKIA AND ITS SBU’S

CELLULAR DEVICES
TECHNOLOGY NETWORK SECURITYCORPORATE
EMAIL
 PESTEL ANALYSIS

Political – As markets are deregulated,

both operators and manufacturers are free to
act independently of government
intervention. In Countries like India and China
where Partial regulations exist, government
intervention does take place.
 PESTEL ANALYSIS

Economic – With incomes rising, people

have more disposable income, which enables
consumers to be more selective with their
choice of mobile phone,
looking to other factors rather than fulfilling
the most basic of user needs (text messaging
and phone calls) and price being such a key
factor.
 PESTEL ANALYSIS

Social – The rise of the so-called

information society has made
telecommunications increasingly more
important to consumers, both in terms of
work and leisure. Users are more aware of
mobile phone handset choice and
advancements due to increased information
availability.
 PESTEL ANALYSIS

Technological – There have been many

global advancements in technology such as
MMS, Bluetooth, WAP, GSM, GPRS, cameras
etc. The Asian markets are
more technologically advanced than their
European counterparts, for example in 2002,
just 4% of phones had cameras, whereas in
Asia 90% did.
 PESTEL ANALYSIS

Environmental – There is a concern that

the use of mobile phones could be damaging
to health, with tumours potentially being
caused by the waves emitted
by the handsets. There is also immense
wastage created by unwanted mobile phones
that are thrown away as they are non-
biodegradable.
 PESTEL ANALYSIS

Legal – Difficult to patent mobile phone

designs. Technology Infringement causes a
lot of legal issues.
PORTER’S DIAMOND
ANALYSIS
 Porter’s 5 Forces Framework
Analysis: The Mobile Handset Industry
 RIVALRY AMONG
COMPETITORS

• INDUSTRY GROWTH RATE: The industry has grown by

just 10% during 2007. This is down from the 23% growth
rate seen in 2006.
• CONCENTRATION AND BALANCE: The major players are
BenQ-Siemens, LG, Motorola, Samsung and Sony Ericsson.
• INFORMATIONAL COMPLEXITY: Devices are becoming
more complex and getting features (picture, audio, video)
that are outside the core competencies of traditional
manufacturers.
• CORPORATE STAKES: High stakes for the companies
because of huge investments into the business.
 BARGAINING POWER OF
BUYERS
• BUYER INFORMATION: Buyers have comparative
information about the product in terms of price and
features.

• BUYER CONCENTRATION: Network operators are

relatively concentrated and large service providers such as
Orange and Vodafone have high bargaining power.

• SWITCHING COSTS: Individual buyers have low switching

costs and are price or feature sensitive.

• PRODUCT DIFFERENCES: Low degree of product

differentiation and any new feature or technology is quickly
imitated.
 BARGAINING
POWER
OF SUPPLIERS
• SWITCHING COSTS: A large number of suppliers for non
critical components.
For critical components suppliers work closely with
companies as they involve joint development of specialty
inputs and sub-systems.

• IMPACT ON DIFFERENTIATION : Companies could switch

suppliers for non critical components but are closely tied to
them for critical components and sub-systems.

• THREAT OF FORWARD INTEGRATION: Suppliers do not

pose any credible threat of forward integration even though
they are outsourced.
 THREAT OF NEW
ENTRANTS
-ENTRY BARRIERS
• PROPRIETARY PRODUCT DIFFERENCES: Technology
and product designs are protected by patents.
• BRAND IDENTITY: Powerful brand identity of the existing
players developed through advertising and product
excellence.
• ECONOMIES OF SCALE: High fixed costs means that
volume is essential to companies.
• CAPITAL REQUIREMENTS: Activities such as R&D and
advertising requires large capital commitments.
• EXPECTED RETALIATION: Existing competitors have the
financial clout to deter new entrants.
• ACCESS TO NECESSARY INPUTS: Suppliers work closely
with existing companies and therefore critical components
may only be available at a premium.
 THREAT OF
SUBSTITUTES

• PC based applications such as IP TELEPHONY

• Convergence between PDA’S AND MOBILE

PHONES.

• Technological regression due to ESCALATING

MOBILE COSTS.
 Basis of Competitive
Advantage

• Product competitiveness : Nokia profitably competes in

all mobile device segments from entry-level to high-end. It
has the broadest product portfolio in the market.
• Customer satisfaction : Nokia uses customization to gain
greater customer satisfaction
• R&D effectiveness : Nokia spent about USD 3.4 Billion on
R&D.
• Demand-supply network alignment : Nokia captures its
potential upside in high-demand situations by aligning its
demand-supply network. 
• End-to-end capability : Nokia systematically leverages
its end-to-end capability by integrating mobile devices,
applications and infrastructure
NOKIA’S VALUE NETWORK
 SWOT
ANALYSIS WEAKNESS
STRENGTHS
•Slow to adopt new ways of
•Strength of CORPORATE thinking- Clamshell Phones
BRAND •Being the market leader and
•Design, the branding and the its increase role in SYMBIAN
technology is giving Nokia a bad image
•Dominant player in
SMARTPHONE market
•Largest CELL PHONE VENDOR
THREATS
OPPORTUNITIES
•INFLECTION POINT- “A
•Growth markets such as CHINA, Disruptive Technological Change”
LATIN AMERICA •Cheaper MID RANGE models
•Increase their presence in the from Motorola & others
CDMA market • Operators want to lessen their
•Leverage its infrastructure dependency on handset vendors
business to get preference and •Potential threat from Microsoft’s
stronger position with carriers entry into mobile telephony
 Vs
One To One Comparison
Key NOKIA MOTOROL Edge
Success A
Factors
Technology 5 3 Nokia
Strategy
3G 4 5 Motorola
Products
Application 5 3 Nokia
s
Software 5 4 Nokia
Total 19 15 NOKIA
Main Division: Mobiles
NOKIA MOTOROLA
SALES 60.2% 66.2%
OPERATING 70.4% 65.7%
INCOME
 Vs

200 75
Million Million
 Vs
Continuous
innovation and new as focused on “iconic”
features. products to change
 Moves faster than trends on the market
rivals in introducing
new features
Year No of
New
2002 Products
34
2004 36
2006 39

Nokia’s approach is Motorola's

more flexible to diversify approach is more
its product line risky as they depend
on single “big hits”
FINANCIALS: STOCK
VARIATIONS
 COMPARING FINANCIALS

$mm
$mm Profit Margin %
Profit Margin %
50,000 15.0
60,000 14.0
45,000
50,000 12.0
40,000 10.0
10.0 35,000
40,000
30,000
8.0 5.0
25,000
30,000
6.0 20,000
0.0
20,000 15,000
4.0
10,000
10,000 2.0 -5.0
5,000
0
0 0.0
-5,000 2002 2003 2004 2005 2006 2007 -10.0
2001 2002 2003 2004 2005 2006
Total Revenue Total Revenue
Income After Tax Income After Tax
P rofit Margin P rofit Margin
 FINANCIALS
(in EUR millions)
Year 2007 2006 2005 2004
2003
Gross Profit - 13379 11,982 11,192
12,208
Operating Profit 7985 5488 4,639
4,326 4,960
Net Income 7205 4306 3,616
3,192 3,543
 FINANCIALS
Year Assets = Liabilities +
Equity
2006 22617 10557 12060 (in EUR
2005 22425 9938 12514 millions)
2004 22669 8270 14339
2003 23920 8608 15312

Net sales of EUR 51,058 million

Operating margin :15.6%

Estimated device market share 38%

14 manufacturing facilities in 9 countries

FINANCIALS
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THANK YOU!!!