Convergence Strategy: il caso Nokia.

Nokia Convergence Strategy

MUMM Conference Day 2007Rome, 9th May

Background scenario

• Lower Global Average Selling Price => lower Margins

• Mature Markets (Europe and North America): one digit growth => tough competition for Brand switchover and investments for loyalty

• High Subsidy by Telecom Operators => tough negotiations and strong consumers’ attitude to lower prices

• Booming Markets (China, India and Latin America) but low range products => low Margins

• Faster commercial product lifecycle => high Investments in R&D

• Mix of financial investments coming from Multi-Businesses Companies

• Quite strong Convergence demand coming from Mobile and Fixed Operators

Actual Business Models are still effective to have two digits Operating Margin in MP Industry?

No! New Value Added Businesses are necessary

Convergence is the main driver to enter in new Businesses

Convergence is not a pure sum of two different needs/industries

Convergence is something more:

new Categories, new Businesses, new Experiences, new Benefits, new Markets

• Digital Contents

• High capacity Memories, fast Processors, longlasting batteries

• Stable and fast Operating System for Mobile Phones

• Wider Transmission Band (GPRS, UMTS, HSPA, …)

Technology

Consumers

Legislation

Competition

•“everything, everytime, everywhere”

•Needs of customization (ring tones, wallpapers, UI, cover, etc..):

• Everybody has a MP

• Deregulation

• Liberalization

• Margin erosion

• Tough Negotiations

Dri

vers

for

Converg

en

ceWhat’s Convergence

Nokia Convergence Strategy: General Approach

Networks

Experiences

Tech

nolo

gy

Mobile

Business

Wi-Fi/Wi-Max

Push e-mail

VoIP

UMA

Multimedia

MPix

MPEG4

MP3

Carl Zeiss

High Touch

Design

New Material

Form Factor

Sport

New Material

SW Features

Convergence Strategy: New Requisites

• Complementary Strategy => Experience completion:

• High End User Price

• Not compelling Features

• Not recognized Brand in the new Business

• Frontal Attack Strategy => Product substitution

Strategies

Competition

Partnerships

Acquisitions

• Competitor now Partner: Siemens

• New Competitors: Apple, Sony PSP, Nintendo, Nikon, etc…

• Co-Opetitors: Microsoft, Canon, HP, BleckBerry, Tom Tom, Yahoo

• Fundamental to complete the new Business Value Proposition and to gain credibility:

• Carl Zeiss, Gaming Publishers, Epson, Kodak, Adobe, IBM, Oracle, JBL, Sennheiser, Bose, Top of the Pops, Tom Tom, Route 66, Skype, Flickr,Google

• Loudeye (OD2), Gate5, Intellisync .....and more to come

6 © 2005 Nokia V1-Filename.ppt / yyyy-mm-dd / Initials

Company Confidential

What is our starting point?

Vision and MissionIn a world where everyone can be connected,

we take a very human approach

to

technology.

8 © 2005 Nokia 07 Catania - Nokia for SMS


Towards the four billion milestone

Source: Global brand tracking data ex Japan-Korea. Brand preference weighted by population.

#2 CompetitorNokia Others2004 2005 Q2’06

Global Brand Preference %

Brand Preference by Area

China

APAC

Latin America

N. America

MEA

Europe

39 43 45

Nokia wins consumers hearts and minds by 4:1 margin…

Italy

Source: Interbrand Corp, Business Week, July 2006

1.

2.

3.

4.

5.

7.

8.

9.

10.

Value Change 2005

vs. ’06-1%

-5%

+5%

+4%

-9%

+14%+12%

+5%

+6%

+9%

6.

… and is one of the most loved and fastest growing brands in the world.

Nokia:• Brand Number 6

• First European Brand

• First non-US Brand

• First Telco Brand

Why is this important?

Because great brands help grow gross margin…

ASP

Volume

MarketPressure

…while building long term brand equity.

…and while we are all the same …we have

different needs



“I expect the new global consumer segmentation model to re-install our reputation as having the best consumer understanding in the industry”

Olli-Pekka Kallasvuo – August 2005

Nokia’s Consumer Segmentation is of key strategic importance

http://www.nokia.com/nokia/0,,73860,00.html?name=olli-pekka_kallasvuo

Global segmentation• Continuously refreshable research

• 10 billion data points

• 77,000 Consumers x 1.5 hour interview

• 21 countries

• 122 questions

• Understanding of: Values, Beliefs, Attitudes, Lifestyle



Nokia Consumer Segmentation: a two dimensional space - the Axis

Rational Aspirational

High Involvement

Low Involvement



Vertical Axis – based on behavior High

Involvement

Low Involvement

How do consumers actually behave?

• Replace phone every 6 months• Tend to pay higher price for mobile• Tend to buy from well known brands• More design driven purchasing behavior



Horizontal Axis – based on attitude


What do consumers want ?

I use my Mobile Phone as a fashion accessory

I would prefer a mobile phone that is great looking rather than having the latest features

I would be willing to own different Mobile Phone in different situations

I am embarrassed if my Mobile Phone looks outdated

I would like to keep up to date with the latest fashion trends



Key Attitudes: the quadrants


High Involvement

Low Involvement

Mobile Phone as empowerment tool

Mobile Phone trend leaders

Mobile Phone trend followers

Mobile Phone only when necessary



Italian Segmentation Model

Young Explorers (10.3%)

Technology Stylists (5.2%)

Style Leaders (5.3%)

Style Followers (6.3%)Family Providers (12.5%)

Life Jugglers (6.3%)

Pragmatic Leaders (3.4%)

Life Builders (8.9%)

Image Seekers (0.0%)

HIGHERINVOLVEMEN

T

Simplicity Seekers (34.3%)

Mature Acceptors (5.6%)

Technology Leaders (3.4%)

LOWERINVOLVEMEN

T

RATIONAL ASPIRATIONAL

(non-existent in Europe)

Key consumer need around modernity the latest and best– technology is a key driver.

Key consumer need around style / fashion. Design conscious consumers. Require well designed stylish products

More mainstream segments, but tend to be younger in demographics. Slower technology adoptionMore rational

attitudes. Key consumer need is the device as a tool for empowerment

Less involved with mobile telephony and consumer need is around a basic communication device



Global Segment SizesItaly

Wave 1

Italy

Wave 2

Young Explorers (7.9%) 6.9%10.3

%


3.6% 3.4%


1.1% 5.2%

Style Leaders (10.6%) 4.5% 5.3%

Image Seekers (7.2%) NE NE

Style Followers (6.3%) 6.7% 4.8%

Family Providers (10.3%)

21.6%

12.5%

Simplicity Seekers (13%)

28.1%

34.3%


1.9% 5.6%

Life Jugglers (3.8%) 7.1% 6.3%


6% 3.4%

Life Builders (13.9%)12.4

%8.9%

Italy Re-Fresh Segmentation Map

Young Explorers

Technology Leaders

Technology Stylists

Style Leaders

Style FollowersFamily ProvidersSimplicity Seekers

Mature Acceptors

Life Jugglers

Pragmatic Leaders

Life Builders

Image Seekers

SI = Statistically Insignificant NE = Non Existent

Globally, 11.1% of market has moved

onto or above horizontal involvement axis (= most segments

above axis have grown)

Four categories to help people navigate

Young Explorers (7.9%)


Style Leaders (10.6%)

Style Followers (6.3%)Family Providers (10.3%)

Life Jugglers (3.8%)


Life Builders (13.9%)

Image Seekers (7.2%)

Simplicity Seekers (13%)



RATIONAL

ASPIRATIONAL

Smart and collaborative business solutions

AchieveNokia Eseries

Achieving together

LiveDesign and style leadership

Inspiring the sensesConnec

t Essence of Nokia through balance of style and proven benefits

Connecting simply

Innovation and technology leadership

ExploreNokia Nseries

Sharing discoveries

Improve marketing yield

Sharing DiscoveriesAchieving Together

Connecting Simply

Nokia connects people through very human technology to help them feel

close

We believe life is better

when shared

We believe everyone

achieves more when

working together

We believe experiences are more valuable

when shared

WHATWe

Believe

WHATWe

Promise

…expressed through Nokia Connecting People

EXPLORE

Connect

ACHIEVECONNECTLIVE

We believe people need

inspiration to bond even deeper

Inspiring Senses

…expressed through Nokia Connecting People

1 Nokia brand4 Categories2 Sub-brands

With distinct tonalities, not multiple personalities.

What this means for us•Sustainable industry leadership

•Optimal product portfolio offering per category

•Improved marketing yeald

by in-depth understanding of consumer needs per segment



Thank you

Convergence Strategy: il caso Nokia.

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