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 TECHNOLOGY

DEVICES

NETWORK SECURITY CORPORATE 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 aremore 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 emittedby 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 OFBUYERS

• 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 STRENGTHS

•Strength of CORPORATE BRAND•Design, the branding and the technology•Dominant player in SMARTPHONE market•Largest CELL PHONE VENDOR

WEAKNESS •Slow to adopt new ways of thinking- Clamshell Phones•Being the market leader and its increase role in SYMBIAN is giving Nokia a bad image

OPPORTUNITIES

•Growth markets such as CHINA, LATIN AMERICA•Increase their presence in the CDMA market•Leverage its infrastructure business to get preference and stronger position with carriers

THREATS

•INFLECTION POINT- “A Disruptive Technological Change”•Cheaper MID RANGE models from Motorola & others• Operators want to lessen their dependency on handset vendors•Potential threat from Microsoft’s entry into mobile telephony

Vs

One To One Comparison

Main Division: MobilesNOKIA MOTOROLA

SALES 60.2% 66.2%

OPERATING INCOME 70.4% 65.7%

Key Success Factors

NOKIA MOTOROLA Edge

Technology Strategy

5 3 Nokia

3G Products 4 5 Motorola

Applications 5 3 Nokia

Software 5 4 Nokia

Total 19 15 NOKIA

Vs

200 Million 75 Million

VsContinuous innovation and new features. Moves faster than rivals in introducing new features

Has focused on “iconic” products to change trends on the market

Year No of New Products

2002 34

2004 36

2006 39

Nokia’s approach is more flexible to diversify its product line

Motorola's approach is more risky as they depend on single “big hits”

FINANCIALS: STOCK VARIATIONS

COMPARING FINANCIALS

Profit Margin

0

10,000

20,000

30,000

40,000

50,000

60,000

2001 2002 2003 2004 2005 2006

$mm

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0%

Total RevenueIncome After TaxP rofit Margin

Profit Margin

-5,000

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

2002 2003 2004 2005 2006 2007

$mm

-10.0

-5.0

0.0

5.0

10.0

15.0%

Total RevenueIncome After TaxP rofit Margin

FINANCIALS(in EUR millions)

Year 2007 2006 2005 2004 2003Gross 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 + Equity2006 22617 10557 120602005 22425 9938 125142004 22669 8270 143392003 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

(in EUR millions)

FINANCIALS

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THANK YOU!!!