2012

Nokia Case Study

Strategic Planning Model
Submitted to: Dr.Abhijit Deshpande

Harsh Vardhan Pandey PRN 11040141100 8/14/2012

Abstract:
Although Nokia have been going through a rather difficult spell in recent years, they have still been managing to cling on to the top spot when it comes to global sales of cellphones until now. According to new research conducted by a number of analytics firms, Samsung have ousted Nokia from the top of the leader board. Recently the world found out that Samsung surpassed Nokia for the top position in the global handset market in the first quarter of 2012. The Korean company shipped 93.5 million handsets in the first quarter for a 25 percent share of the market, even as global handset shipments grew a little over 3 percent annually. In contrast, Nokias handset shipments were down 24 percent year-on-year to 82.7 million units, giving it a 22.5 percent share

Introduction:
Nokia, the mobile company which is going down day-by-day was not how it is today. It was the top mobile provider and it made Symbian the top operating system as well. Everything was going quite good for Nokia but Samsung decided to get to the top! They focused on the smartphones category which was rising by every minute. Samsung used Android which was a growing OS with many apps at that time as well. Soon, Android, which had the support of several other companies, took the title of the top operating system. Symbian fell off its 10 year reign and the problems had started for Nokia. People were bored out of Symbian. They wanted an Android and Samsung was the second most reliable company so they chose Samsung for Android instead of the other companies that were offering Android phones. Nokia was not able to deliver amazing smartphones but at the other hand, Samsung launched some great smartphones out of which the best were from the Galaxy series.

Apple also launched new iPhones and they sold amazingly well which slid Nokia back to no. 3 from no. 1. Apple also got to the no. 1 spot but that was for a single quarter after which Samsung took back the position. Nokia remained at no. 3 and then it partnered with Windows. Nokia launched phones with Windows Phone 7 OS and they worked nicely in the market. The Lumia series started giving those profits but it was not enough. They also launched the Asha series which targeted the under INR 10k budget in order to stay at the top position as the overall mobile manufacturer. Thats how Nokia is doing right now. In such a condition when it is not being received properly and Samsung is getting tremendous response, it is impossible for them to get on the top of the smartphone list.

1. ASSESSMENT
External Environment

Political The external political environment has the potential to impact Nokia significantly especially due to the fact that Nokia is operating on a global scale and must abide to a whole host of nation specific platforms in which the political and legal systems could differ substantially. To its success, Nokia surveys its scope of limits in order to isolate prohibited actions, regulations and aid from the government so as to withstand the international trade. Within the United States Nokia has to devote funds to lobbying on matters relating to patent protection, electronic waste exports and trade barriers in 2011, $500,000 has been spent thus far. Other political aspects that impact Nokia include new and existing laws or regulations, in 2010 Saudi Arabia suspended Blackberrys messaging service a critical core feature and competitive advantage on the grounds of national security illustrating how easily national laws can quickly impact and upset core competitive advantages. Labor laws have also impacted Nokia; Nokia China announced plans to cut the number of employees, to which they were accused of violating Chinese labor laws. Nokia works closely with national authorities in order to gain maximum advantage and to not incur any penalties. Economic Economic factors such as growth rates, interest rates, exchange rates and inflation rates are critically important to Nokia both in the short term and long term. The impact of these factors can have major implications, including how they operate and make decisions. Gross Domestic Product (GDP), dictates what strategies Nokia should implement and consequently what products should be offered in which countries. This helped shape Nokias Next Billion strategy for the emerging markets in which more basic cheaper phones are offered. The volatility of the Indian rupee is another example in which it affected Nokias topline growth, restricting in their ability to increase price to push the costs onto the consumer high inflation within India causes price stability problems Social Very few industries can rival the mobile phone industry in relation to constantly changing consumer tastes. Nokias products have relatively short product lifecycles; this means Nokia has to pay close attention to trends and social tastes. Developments in how mobile phones and smart devices are used have changed over the years, for example, the emergence of camera phones, touch screens and 3G. Failure to implement features when they first emerge can lead to significant market share erosion. Nokia operates in a huge number of markets mainly due to its strong distribution network all of these markets have specific tastes, cultures and expectations; thus, Nokia caters to these

differences by providing different models with both subtle and extensive differences throughout their entire range of products. Technological Within the telecommunications industry, specifically OEMs, the speed of change and adoption of new technology impacts incumbents significantly the success of Nokia is based on constant innovation. Nokia analyses research and development advances by competitors Industry advances, for example cellular telephony spectrums 3G and now 4G impact both Nokias business unit and corporate level strategies; examples of the Pareto principle in action. Environmental changing public attitude towards environmental sustainability as well as product disposal and recycling have transformed considerably over the past decade. Nokia have been proactive with regard to environmental responsibility and sustainability, they put forward that it is integrated into everything we do. From the devices we build and the suppliers we choose, to our mobile solutions that enhance peoples education, livelihoods and health. Legal Nokia has over 132,000 employees in 120 countries (Mashable, 2011) and thus recognizes the importance of issues that relate to employment regulation as well as employee health and safety. Product safety and security is another legal issue that is of utmost importance to Nokia All Nokia products are designed and manufactured to be safe for users products have been designed to meet relevant safety guidelines for electromagnetic field emissions (Nokia, 2011) As previously mentioned legal battles over patents and the protection of intellectual property are intense between the leading manufacturers with many manufacturers usually trying to ban the importation of devices they believe infringe upon their patents (Economist, 2011). Porters Five Forces (Porter, 1985) Porters Five Forces analysis is used to assess the attractiveness of different industries and it can help illustrate the sources of competition in an industry (Johnson, Scholes & Whittington, 2011). The Porters Five Forces analysis has been conducted with attention on each of Nokias SBUs; mobile phones, smart devices and, location and commerce. Porters Five Forces Mobile Phones Threat of Entry of New Competitors HIGH Barriers to entry within the basic mobile phone industry are relatively low; hence Nokia stands to, and currently is subjected to, intense competition on their next billion strategy. The market within emerging markets is dominated by local OEMs and is extremely price competitive illustrating those low cost rivals can enter at any time. Nokias awareness of this can be seen in their 20-F filing with the SEC: In the mobile phones segment a different ecosystem is emerging involving very low cost components and manufacturing processes. In particular, the availability of complete mobile solutions chipsets from MediaTek has enabled the very rapid and low cost production of mobile phones by numerous manufacturers in the Shenzhen region of China which have gained significant share in emerging markets.

Threat of Substitute Products or Services HIGH Within emerging markets the buyers propensity to substitute is relatively high, with the one overarching factor being price. Switching cost is minimal, especially with regard to the handset, rather than the network. If the customer has a laptop and internet connection VOIP services such as Skype could challenge the need for a basic mobile phone. The Bargaining Power of Customers HIGH The bargaining power of mobile phone customers is high within both developed and developing markets as switching costs are low, and competition between manufacturers is high. Brand loyalty is the only real defense that manufacturers can use to prevent switching; Nokia recently saw its brand value fall $9.9 billion in the Brand Finance Global 500 listings the largest decline of any name. The Bargaining Power of Suppliers LOW Nokia has an extremely complex supply chain that handles 100 billion components, 60 strategic suppliers, and 10 factories worldwide (IBM, 2006). Nokia strives to build partnerships with its suppliers linking supply chain objectives to corporate objectives; within this supply chain redundancies are built so that no one supplier is critical to the production process. The power is further reduced by Nokias upstream and downstream vertical integration at its own factories as well as by its strong brand and bulk purchase agreements. Many factories and companies exist solely because they are suppliers to Nokia. Nokia constantly ranks amongst the leaders in supply chain management. The Intensity of Competitive Rivalry HIGH Within developed markets the intensity of competition in basic mobile phones has curtailed, with the product line currently in significant decline. Within emerging markets Nokia is facing strong competition not only from the usual players but also domestic firms who are both able to provide innovative basic mobile phones for low cost. China was 21% of Nokias sales in 2010 but sharp decreases in revenue in 2011/2012 are expected (Goldman Sachs, 2011). In the same way, the porter five forces model for smart devices and location and commerce constraints, the porters five forces model are as follows: Smart Devices Medium Low High Low High Location & Commerce Medium High High Low Medium

Threat of Entry of New Competitors Threat of Substitute Products or Services The Bargaining Power of Customers The Bargaining Power of Suppliers The Intensity of Competitive Rivalry

Internal Analysis:
The internal environment is the final step in gathering information for the Environmental Analysis. It consists of identifying resources and capabilities (in the form of the value chain), finding competencies, and determining what competitive advantages (hopefully sustainable) the organization has. The internal environmental assessment, along with the external evaluation (macro and micro environment) already completed will provide all the information needed for the final SWOT Analysis. Some of them are discussed below. 1. Resource Audit 2. Core Competencies 1. Resource Audit: Human resources: To maintain a healthy, successful and efficient environment Nokia collaborates with its employees under the main goal to create an environment for all its employees where they can fulfill their potential. Motivation, encouragement and maintaining employees satisfaction and well-being at work are vital for Nokia to perform at its best. To encourage their employees, Nokia has adapted various HR techniques including pay system, training and developing employees, and fringe benefits rewards. The total compensation of employees aims to not only maintain a healthy working environment, but to also fulfill Nokias goal to fulfill employees potential. Nokia rewards its employees for good performance, competence development, and company success rewarding higher performance and contribution with higher rewards. Together with annual base salary, Nokia Connecting People bonuses and short-term incentives, Nokia also includes overtime pay and call-out pay as a payment system. There is also the possibility for Nokia employees to buy stocks or performance shares. To ensure a healthy work environment Nokia also gives its employee health and pension benefits. Physical resources: These resources of a company can be seen in the form of building, Land, equipment and factories all over the world. Nokia in this respect has factories all over the world, although it is a Finland based company but has raised its production units in India and china to decrease the production cost. Financial resources: The Financial resources of Nokia have received a blow by todays Market by a huge margin. The world found out that Samsung surpassed Nokia for the top position in the global handset market in the first quarter of 2012. The Korean company shipped 93.5 million handsets in the first quarter for a 25 percent share of the market, even as global handset shipments grew a little over 3 percent annually. In contrast, Nokias handset shipments were down 24 percent year-on-year to 82.7 million units, giving it a 22.5 percent share. According to market research firm Strategy Analytics, only 14% of Nokias shipments were smartphones, in contrast to 34% for Samsung. This marks the first time since 1998 that Nokia has not been number one in the cell phone market.

2. Core Competencies:
Core competencies are activities and process performed by a company to keep ahead of the Market and its competitors. Business professors Bateman and Snell offer this answer: Simply stated, core competence is Something a company does especially well relative to its competitors.Competencies of a company are things that are hard to imitate like customer loyalty etc.These Core Competencies change from time to time. In todays market where every company is in a lose Nokia is thinking of new ways to get an edge on its competitors by introducing new services and products that are harder to imitate and trying to give most for consumers money.

Situational Analysis:

Looking at product mix of both companies over the past few years, Samsung growth was almost entirely in the smartphone segment, whereas Nokia went the opposite direction. As a percent of total, Nokia has shrunk its smartphone business from a peak of 24% in Q3 2010 to 14% last quarter. In the same time frame Samsungs smartphone share of portfolio has exploded from 10% to nearly 50%. A look at global smartphone shipment data tells a similar story. At the end of 2010, Nokia was the number one global smartphone manufacturer, with 34.9% market share (100 million units shipped). Samsung was in 4th place behind RIM and Apple, with only 7.5% market share (23 million units shipped). Just one year later, the numbers were starkly different. Nokias smartphone market share dropped to 15.7% (77 million units shipped), while Samsungs climbed to 19.1% market share (94 million units shipped). In other words, from 2010 to 2011, Samsung enjoyed a 409% increase in smartphone shipments, while Nokia suffered a 33% decrease in shipments.

SWOT Analysis
Strength Largest market hare within the smartphone market (23.79%) High commitment to research and development, with spending currently three times its peers at 53.9 billion in 2010 (B-emstein Research, 2011) Largest network of distribution with a global reach to over 160 counties Valuable and recognizable brand; although the brand has seen a significant devaluation in recent Years currently estimated to be worth around 510 'billion Substantial cost saving in production through economies of scale and through vertical integration (both upstream and downstream Global leader in Supply Chain Management (SCM) NAVTEQ is a leading provider of geographic information system data and enjoys an 85% market share in automotive navigation systems alone. Pre-loading of Nokia's (Navteq based) Drive application into its new smartphone range, giving it a key differntiator. Portfolio of over 10,000 patents. Weaknesses Declining profits, more basic phones compressed margins. Weak presence in the United States Confused tablet strategy from both Microsoft and Nokia in their strategic partnership The **Osborne effect" that came about when Nokia announced the new Windows phones ahead of their launch impacting sales. If the Microsoft partnership does not materialize as expected. Nokia will have limited their options and more competitive alternatives may not be available at all severely impacting Nokia The Windows Phone platform is a very recent, largely unproven addition to the market Lack of motivation within the workforce. After countless reorganizations it is intractable. Even to insiders. Nokia's huge size means that it has lost its agility and its ability to react to consumer taste changes Acquisition of Competitors.

Opportunities Strategic partnership with Microsoft has given Nokia a strong base from which to develop and produce products. Development of sophisticated applications and content by third parties RIM is losing its grip on the business market due to network outages and failures; thus, customer loyalty is low with many businesses acing other manufacturers Launch of 4G will allow Nokia and Microsoft to push the barriers of innovation Emerging markets will continue to be an opportunity; first, through its rapid growth and second, through its progression to more advanced smartphones as citizens become wealthier Frontier markets such as Africa will become the last tier of users to enter the phone market Partnership with Microsoft should bring about significant developments in the Nokia App Store

Threats Windows OS is used by other manufacturers who have the opportunity to create more innovative offerings that are directly comparable Dependence on low margin, high volume products. Rapid technology changes and short product life cycles increased contract duration; IS to 24 months result in a decrease in phone turnover Threat of substitute products, e.g. tablets Customers are increasingly gaining bargaining power within all industries due to choice and abundance of information Inability to differentiate, innovate or customize significantly from other manufacturers utilizing the Windows Phone platform.

2. Baseline
Current Scenario:

A scoring mechanism (plus 5 to minus 5) has been used in Table 3.2 as a means of assessing the interrelationship between the environmental impacts and the strengths and weaknesses of Nokia. A positive denotes that the strength of the company would help it take advantage of, or counteract, a problem arising from an environmental change or that a weakness would be offset by that change. A negative score denotes that the strength would be reduced or that a weakness would prevent the organization from overcoming problems associated with that change. The most important points, were extracted from the SWOT. It can be seen throughout the table that the scoring resulting from potential opportunities that can be acted upon as a result of strengths far outweigh the threats. In the second table, Table 3.3, opportunities and threats are analyzed in the eyes of competitors, both in emerging markets (ZTE, Alcatel) and developed markets (Apple, RIM, Samsung and Motorola) these were chosen from strategic group analysis in Figure 2.8. As one would expect the greatest threat to Nokias potential opportunities come from those manufacturers that have the opportunity to develop phones for the Windows Phone platform Samsung and Motorola. From the grouping analysis we can also deduct that they have similar manufacturing capabilities. Furthermore, another short/medium strategy that has higher risk is the announcement of a Nokia tablet, competing against industry incumbent Apples iPad. This draws upon a number of Nokias strengths; for example, supply chain management (S6) and R&D capabilities (S1) it is also a new market for Nokia; and is reliant upon strong software offering from Microsoft with the software being the main distinguishing factor amongst consumers. This strategy will also open Nokia up to increased compensation as other phone manufacturers that use the Microsoft Windows Platform, such as Samsung join in the tablet competition.

3. Components:
Vision: Connecting people Mission: Our strategic intent is to build great mobile products. Our job is to enable billions of people everywhere to get connected

Goals and objectives To build great mobile products. To help people feel near to what matters to them. To enable billions of people to get more of lifes opportunities through mobiles. To capture volume and value growth to connect the next billion people to the Internet in developing growth markets.

4. Down to specifics:
Performance measurement:

Targets of performance:

Initiatives and action plans

Nokia has taken the following initiatives to prevent its downfall:
Nokia is planning to lie of 10,000 people before the end of 2012. Nokia will also SHUTTING down number of factories in Finland, Germany and Canada Three top executives chief marketing Officer Jerri Devard, executive VP of mobile phones Mary McDowell and executive VP of markets Niklas Savander have also been shown the door. Nokia is also selling Vertu a luxury phone brand to EQT VI in a deal that is expected to close during the second half of the year leaving just 10 percent of it in Nokias hands.

Action plans:
Invest strongly in products and experiences that make Lumia smartphones stand out and available to more consumers. Invest in location-based services as an area of competitive differentiation for Nokia products and extend its location-based platform to new industries. Improve the competitiveness and profitability of its feature phone business New Nokia Lumia 610, the most affordable Lumia, an ideal introduction to Windows Phone

 Award-winning Nokia Lumia 900 being made available in various markets outside the U.S. Nokia Pure View elevates industry standard in smartphone imaging New Asha feature phones and services grow increasingly smarter, Nokia is further blurring the line between feature phones and smartphones, launching three new Asha devices. In location-based services, Nokia and Group on plan to offer market-leading locationsensitive discounts and deals. Nokia is also announcing a new version of Nokia Drive for Windows Phone that will come with full offline support for turn-by-turn navigation.

5. EVALUATE

Performance management :

Balanced Scorecard:
Apple Market Share Sales volume JV/Alliances Cultural Awareness Political relations Brand Total Edge 5 5 5 4 5 5 29 Nokia 4 4 4 5 4 4 25 Samsung Samsung 6 5 4 5 5 5 30

Feedback:
Having a look at the present situation, we can infer that Nokia has entered a death spiral and to come out of it , she has to focus on strong innovation in technology to continue with their think different terms and condition . They should implement the following strategy as soon as possible : Make it the company's top priority to be competitive in smartphones. Shift the focus from smartphone hardware to software Pick a single smartphone platform to invest in, and dramatically simplify its platforms across the board Get the services strategy under control Convince US Carriers Prove to developers it's worth their time Boost employee morale