Concept used by companies


Strategic Management (U10067)

Strategy is a concept used by companies in order to not only maintain competitive advantage over rivals within a competitive industry but also to give the organisation a goal or "overriding purpose in line with the values or expectations of stakeholders." (Scholes & Whittington, 2008, p. 9). With this in mind it is possible to explore how the mobile phone manufacturer Nokia aims to create and maintain an advantage over rival companies within a highly competitive, technologically driven market. As Nokia operates within a fast moving consumer goods market it is essential that it answers the needs of consumers to ensure future potential and create opportunities, in effect creating a direction in which the company can direct itself towards with its products and services.

Nokia is Finnish Telecommunications company which has branched off into various industries the most significant being the telecommunications industry during the nineteen eighties. The reason for the shift was due to the acquisition of the company by International Computers Limited (ICL) which created a more focused approach with regards to Nokia's product portfolio (Mayo & Hadaway, 1994). From this strategic alliance, the parent company (ICL) was able to position Nokia as one of the market leaders in the telecommunications industry (Nokia, 2009).

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Technological advances have meant that companies within the mobile phone sector, such as Nokia are now able to provide a vast array of services through their mobile phone handsets; also innovative advancements have enabled companies to maintain a competitive advantage (Carral & Kajanto, 2008). The advancement in technology has enabled companies to develop software for handsets which can be used in everyday scenarios for example software on a handset that can read barcodes at a supermarket allowing the consumer to become totally independent as to how they shop (Ramnarayan, 2009). The change in consumer attitudes and the application of technology means that companies will be more inclined to listen to the demands of consumers, in effect changing the way the market operates.

To analyse the macro environment of Nokia the "PESTEL" analysis framework will show what factors influence the way in which the company operates within a particular market, in this case the telecommunications sector (Johnson, Scholes & Whittington, 2008, p. 55). The overview will highlight factors such as political issues which in turn may create ethical concern due to the nature of way in which the company has been operating.

It is apparent from the PESTEL analysis that the technology produced by Nokia has Political applications, as the company has supplied the Iranian Government with handsets that can be monitored, in an attempt to improve security in the country (The Dark Side, 2009. Appendix A1/ A1.1) therefore if foreign governments are willing to invest in the technology manufactured by the company it shows that there is a global niche market available to the company. The current recession has put pressure on companies and the way in which they operate within markets, one way in which Nokia has been able to counter this is by utilising its relationship with consumers (Appendix 1.3) therefore creating products which in some cases, can be unique and built for a particular purpose using a feedback loop from its consumer based knowledge.

The services offered to consumers have been supported by Third Generation (3G) Networks which have allowed services and software to be consumed whilst connected to a "Wifi" connection (Why the future is in your hands, 2008). However investment in the technologies next phase or Fourth Generation Networks (4G) are set not only to address problems with the Third Generation Networks but also to be able to handle new applications for the Fourth Generation Mobile phones (Forge, 2004). The benefits to companies such as Nokia are that unique user created content can then be distributed amongst the network and consumed by other consumers.

The uniqueness of the products are that the software used in the product is tailored for a purpose, i.e. consumers are relying on software to maintain contact with social networking sites such as Facebook and Myspace (Appendix A1.3) as a result the phones produced by Nokia now have integrated applications. In conjunction with this, it has been identified that consumers are in fact still willing to invest in technology during a recession (Stewart, 2008). The emergence of the new markets are yet to be utilised however competitors are showing signs of hostility for example Apple stated copyright infringement by Nokia (Nokia clashes with Apple, 2009; Apple and Nokia's battle hots up, 2009) this may have implications on how competitors perceive Nokia i.e. they may not consider strategic options such as a strategic alliance so readily as maintaining the market share gained will be a companies main objective.

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The company should maintain a vigilant outlook on the surrounding environment as technology is constantly changing and with it so do the markets (Marlin, Hoffman & Lamont, 1994). As stated above maintaining a relationship with its consumers could give the company an advantage and a means to produce a product that consumers are willing to invest in. The way in which Nokia has created a relationship in the sense that it provides products and services that consumers will invest in, has been achieved through Nokia's Differentiation strategy. Nokia has created products that have revolutionised the market i.e. Nokia's "N-Gage" service, which allowed consumers to download applications such as games and videos via the internet to their mobile phone. Dasgupta and Sanyal (2009) argue that if a firm or organisation is to succeed for example in the fast moving mobile phone market then the firm must be connected to its consumers via networks (Appendix, B1.1).

The connection between the organisation and its consumers has provided the company with an advantage in that it can channel the information it gains into its internal operations (Appendix D). However the procurement of licenses and the cost to implement such a radical technology for the new 4G mobile phones, may hinder competitor's speed of entry into the market (Forge, 2004, pg. 13; Appendix E). Therefore Nokia as a result will gain personalised data from its consumers that will allow the company to tailor its new 4G networks to suit the consumer. Distribution of the products will be more direct as a result of the new network in effect lowering costs as consumers will be able to access material more easily than on the 3G Networks. Also Human Resource Departments will be able to build a more personalised image of the consumer, for example if a consumer searches for a specific product via the 4G Network the company could "text" the consumer the latest offers for products related to that category or a more personalised message could contain video messages. This may cause ethical concern as the consumer may perceive this as an invasion of privacy or harassment.

As the companies main aim will be to satisfy its stakeholders for example through marketing a new product in order to stimulate demand and therefore create consumption (Carrigan, Marinova & Szmigin, 2005). Due to the cultural diversification of the stakeholder base the distribution of advertising will have to be monitored and scrutinised in order to maintain positive public relations (Juholin, 2004) therefore the company may consider developing a division within the organisation to monitor issue that may occur and also to monitor user made content which in some cases may offend for example certain consumers due to the content. The nature of the market may also suffer another change in demand and therefore Nokia may also need to create for example a forum online where consumers can discuss their ideas. From this Nokia will be able to determine whether a new trend will occur within the market (Appendix E, Threat of Substitutes) the organisation can consider a contingency plan and whether they have the resources to satisfy the new demand.

Nokia would be angled towards a focused differentiation strategy with relation to Bowman's Clock (Appendix F) if the organisation were to angle its efforts towards user created content. As demand has already been stimulated for the content its advertising would not have to be as intense and as a result drive down costs. Competitors such as Apple are held within three on Bowman's Clock due to their premium status and the cost of the unit itself, however Apple are still using and implementing user created content within their services and Nokia could therefore under cut premium products with products and services that are not as expensive to implement and maintain.

Nokia may be able to consolidate its position in the current market however it has already been highlighted that the market does not have consistent trends and it is therefore unwise for the organisation to consider consolidation of its position as a long term strategy. Technological advances will also mean competitors gaining an advantage which will take time to recover, also draining on resources which in the current economic climate the company may not be able to sustain. Consolidation should be considered as a short term strategy that will allow the company time to design and produce a product or service to be used in conjunction with the new "4G" Networks in effect planning what the future may hold with regard to demand.

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Taking advantage of the new technology will allow the organisation to have first mover advantage in the market and quickly ascertain whether the services are capable of satisfying demand, this could be achieved by short market tests in the form of surveys and pilot tests for the product in order to gain first hand experience and also what consumers first impressions are.

A final strategic option for Nokia could be a strategic merge with a company of similar corporate values, so that a merge can be carried out more successfully. A company Nokia could theoretically merge with is Research In Motion who are the market leaders in business technology and produce the "Blackberry" mobile phone. Research In Motion angle their products and services towards the business market and a merge with this company would allow Nokia access to a mature market in comparison with earlier products which were angled towards consumers for example its "N-Gage" gaming service. The merge would signal the beginning of a more reputable product and as a result Businesses and also Governments would be more willing to invest in the technology. The organisation has shown that it can provide a high quality service to consumers, therefore it may be able to tailor a service to suit demand from a mature market in effect following a focused strategy.