External-internal environment of Nokia Corporation

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Introduction

“Nokia - Connecting People”, slogan is known all. Nokia is the global leader, in mobile communications and driving the growth and sustainability of the broader mobility industry. Nokia connects every people and the share information that matters to them with easy-to-use and innovative products like mobile handsets, devices and solutions for media, games, and businesses.

From offices in the Europe, U.S., China, Japan and Singapore Nokia provides technical and business development support to developers and operators to assist them in achieving their goal of successfully launching applications.

The History of Nokia starts in 1865; a wood pulp mill was established in southern Finland by engineer Fredrik Idestam. In 1920s, the Rubber Works started, Nokia as brand name. 1967, they were merged as The Nokia Group. The Finnish Cable Works had manufactured cables and in the 1960 they established the Cable Works ´Electronics department. Nokia's global successes in communications were planted. That year, The Nokia Group was formed.

Company Profile

Nokia (NOK) is the largest mobile devices maker. In global market, it has 40% share dwarfs LG, Samsun, and Motorola. It has the no.1 market share in nearly all markets and sells and over 90% outside U.S.

Its next place of growth will come from cell phone purchasers in places like China and India. Nokia currently has an earnings yield of 12.6% which is really quite cheap for such high markets, return on capital and dividend yield?

Product & Services

Nokia Corporation offers a well-developed variety of products, such as mobile phones, land telephones, computer hardware, radios, TV receivers and satellite carriers, cameras, digital music player, etc.

Their network services are grouped into specific categories: Broadband Access, Radio and Core Network, Narrowband Access, OSS, Security, Service Enablers, Terminals, and Transmitter.

Market Sales, Share & Status

According to Gartner, Inc report, in the second quarter (2009), worldwide cell phone sales totalled 286.1 million units. 6.1% decrease from the previous year second quarter. Sales surpassed 40 million units, a 27 per cent increase from the same period last year, on Smart phones, representing the fastest-growing segment of the mobile-devices market (Table 2). “Touch screen mobile phones and qwerty devices remained a major driver for replacement sales However, the decline in average selling price accelerated in the first half of the year and particularly affected manufacturers that focus on mid-tier and low-end devices”

The recession continued to suppress sales on replacement in both mature markets and emerging markets. Financial pressure, using up by 14.2 million units of existing stock before ordering more.

N97 Smartphone met little enthusiasm at its launch in the second quarter of 2009 and has sold just 500,000 units in the channel since it started to ship in June, compared to Apple's iPhone 3G S, which already sold one million units in its first weekend.

Source: Gartner (August 2009)

“Smart phone sales were strong during the second quarter of 2009 (Table-2), with sales of 40.9 million units in line with Gartner's forecast of 27 per cent year-on-year sales growth for 2009,” said Ms Milanesi.

Shares in Nokia have fallen 10% after the Finnish mobile firm reported weak US sales. Its US handset sales fell 46% in the first quarter of the year and, despite strong sales in other regions, Nokia's global market share dipped slightly. It also warned that the value of total mobile phone sales, denominated in Euros, could fall this year. However, Nokia saw profits jump 25% to 1.22bn Euros ($1.95bn; £980m).In emerging markets like Asia and Latin America," Nokia enjoyed robust sales in the first three months of the year". “Nokia's main market - Europe - is slowing down and the company now gives clear evidence of that”.

PESTEL Analysis

Political factors

Legal constraints must be taken into account. Many businesses organisations target is make profit. For that, they try to mislead their customers about quality of product, its price, and the availability. They also try to reduce expenditure by using materials like lesser quality, in their products. Some companies dispose their waste in a very bad ways which may damage the environment and create pollution. More on these companies are not ensuring the hygiene and safety's high standards, in the workplace and outlet stores. All these things are not legally allowed and can face companies in a big legal-trouble. UK government introduced some new laws about business environment, which ensure that none of these activities take place. Company must have to follow all of these Rules and regulation; if a company is to be successful.

Economic factors

According to the fact that Russian Federation was collapsed in early 1990s and it assaulted with Finnish economics Organization for Economic Co-operation and Development (OECD, 1996). Nokia also face with the problem, and changed its functions from single market and overall products to global market and focusing mobile phone market.

Technological Factors

In the communications market, technology is the most important fact that companies like Nokia have to take into deep consideration. They must have to keep up-to-date with all the newest technology like camera and motion capture mobile phones if they want to capture the majority share of market and to compete with Sony, Samsung and Siemens, etc.

Environmental, Social and Ethical factors

Some business organisations view profits are more valuable than a strong ethical code which can govern business conduct and behaviour. Some un-ethical activities are against the law. There are also some practices which are not illegal by law but by consuming public, it is considered highly un-ethical. Companies who involve in these practices might lose market share if they exposed. Cosmetic test on animals is a example. This might be legal but some consumers might not be happy about it and avoid certain products. Companies must have to be careful how they conduct themselves. Nokia managed to be quite environmental-friendly and have not done any offensive thing which may create suffer to consumers. Because of their carefulness, they are such a most popular brand in mobile phone industry.

Legal factors

These are related to the legal environment. In UK, there have been many significant changes in law which already have affected firm's attitude and behaviour. Introduction of age and disability discrimination legislation, an increase in the minimum wage and requirements for firms to recycle their product are examples of relatively recent laws. Legal changes also affect a firm's costs, demand and product quality.

Industry Life Cycle

Introduction stage

The 1st mobile phone was launched in Finland, and was expensive. Around 1987, when Soviet leader was pictured making a call with it to his minister in Moscow, it received a public boost. It was thought of as a yuppie product and a status symbol, and was selling well. Nokia did not face much competition in their initial stage because that time, they were the main developer of GSM technology. As Nokia establishes herself as the brand of mobile phones and a symbol of user-friendliness, simplicity and style, the no. of mobile phone subscribers in Finland increased rapidly and the prices of mobile phones went down at a fast pace.

Growth stage

Mid 1990s, Nokia supplied GSM systems to 94 operators in 43 countries, due to GSM wide market coverage in Europe, Asia and Africa. By 1998, Nokia had become the world leader in mobile phones (selling annually 40 million cell phones). 1996-2001, Nokia's turnover increased almost fivefold from EUR 6.5 billion to EUR 31 billion. Competitors like Motorola, Samsung, Sony Ericsson, enters the market and wowing customers with clamshell phones and music phones. Nokia market share fell from 38% in 2003 to 29% in early 2004. Nokia put in aggressive innovation efforts and in 2005 and introduced 40 new clamshell models and slider phones. Nokia was the 1st company to innovate a mobile phone with the antenna inside, a built-in camera, and SMS chat feature.

Maturity stage

With new competitors in the market, Nokia explores into new markets. For instance, up to 2002, Nokia was only focusing on China's business elite market with cell phones, priced averagely at $240. To gain new users, it started to target the younger generations by offering low-end cell phones below $120 and began focusing on rural markets. Mobile users get more savvy with mobile phones, expectations rises and life cycle time of cell phones decreased from twelve to eighteen months to just under nine months. The market demands drive Nokia to invest heavily in R&D for innovative designs and product modifications - feature and style improvements. For instance, Nokia 5140i is an outdoor mobile phone featuring compass and flashlight; it was developed with the 'sporty consumer market' in mind. Nokia also tries to improve the intangible features of the product by increasing its offering of consumer Internet services, in 5 areas - music, maps, media, messaging and games. In 2007, Nokia announced their “Comes with Music” program, where Nokia device buyers receive a year of complimentary access to music downloads. Nokia also commenced operations of Nokia Siemens Networks and launched Ovi, its new internet services brand, to support its mobile internet business. At the end of the year 2007, Nokia had sold almost 440 million mobile phones, accounting for 40% of global mobile phones sales.

Decline Stage

This is the stage that Mobile phones have entered (Nokia had recorded their first drop in sales earlier this year), and all the remaining companies are trying to re-launch their products by either developing their products or entering new markets. At this point phone sales will be decreasing and promotion and advertising costs will start to rise again as companies fight for the remaining market share and struggle to make a profit.

Competitor Analysis (Samsung)

Samsung is the world second handset producer in the global and has recently benefited from its super-thin touch screen attractive mobile handsets (www.wired.com). Samsung had a pretty decent showing in second quarter as they owned 19.3% market (table-1) share in mobile handset sales.

They will have continued growth throughout the remainder of 2009 and will end the year on a positive note owning 20.3% of the market. This will happen if they can hold true to the forecast of Strategy Analytics that they will ship 117.8 million phones in 2H of 2009, but with the likes of the Omnia 2 launching this month in 14 countries and other touch screen goodies getting released very soon, we don't see Samsung having any problems reaching this goal. If and when they accomplish this, this will be a new record for the company as this will only be the first time they've surpassed the 20% mark since they've entered the mobile phone biz. This probably won't have any significant effect on industry-leading Nokia, but will certainly help Samsung distance them even further from no. 3 LG.

The main success factor is, recently they got huge appreciation from Ultra Edition devices from customers. Strategy analytics also give it a high chances of managing 40 percent market share when it reports is 3rd quarter sales in August, 2009.

Wide collection of mobile phones and supporting a variety of mobile platforms including Windows Mobile, Symbian, and even the Android operating system, It's future looks very bright, and there's no doubt that they'll be the top of the market one day.

Currently, Nokia stands leading mobile device manufacture and maintain a well reputed distance from other rivals. But, table-1 data clearly shows that Nokia's market share down by 2.7% at 2Q, 2009 compare to previous 2Q, 2008. Whereas Samsung's share, increase by 4.1% compare to previous session.

As Samsung is (Table-1) Nokia's closest competitor. So, it's a high threat for Nokia in future.

Summary

Nokia's distinctive capabilities and competitive advantage are tied to its reconfigurable organizational architecture. Modularity allows Nokia to create differentiation rapidly. Ability to reconfigure itself means it can adapt the changing market conditions quickly. In emerging markets, Nokia reuses its key components and applies its experience from other markets to introduce phone models, which respond quickly to the needs of local consumers. While currently there is a fierce competition to come out with a better “IPhone”, Nokia came up with a close competition with its new N95. Based on personal opinion,

The strategy issues confronting Nokia resulting from digital convergence. A cell phone that acts as a boarding pass, a credit card, a multi-media player, a check book register, a camera, and a key to your car. These are all the things that with technology advancing a cell phone will eventually be used for. Currently about 75% of these things can currently be done with a cell phone. And yes, Nokia is streamlining their technological capabilities with the rest of the cell-phone industry. Nokia's globalisation strategy reduced its market risk as its dependence on home and local market. Financial risks are minimised by the centralised management of currency exposures however, Nokia's sales, costs and results are affected by exchange rate fluctuations, particularly between the euro, which is their reporting currency, and the US dollar, the UK pound sterling and the Japanese yen.

Nokia's sales are derived from, and assets located in, emerging market countries which may be adversely affected by economic, regulatory and political developments (www.nokia.com, Hill, 2005)

Recommendation

  • Increase the corporate focus on changing customer tastes and demand
    for customisation to regain lost market share;
  • Increase product development for high-end segments and previously
    overlooked niche segments, including the acquisition of firms with core
    comp entices in product design;
  • Overall corporate strategy shift from broad cost-leadership strategies
    towards more niche segments in the increasing fragmented market.
  • Long-term strategy of viewing regionalised markets in terms of product
    requirements to maximise economies of scale and scope in targeting all
    segments of the market.
  • Increase cross-industry strategic alliances and relationships to take
    maximum advantage of the converging industry such as:
    banking/shopping sectors; GPS and motor vehicles; camera technology
    developers and personal organisation technologies;
  • Target the handset replacement segments and establish a 'trade in'
    price reduction system and incentives for long-term/lifelong consumers;
  • Evaluate the need for potential backwards integration of components to
    reduce supplier risks;
  • Develop relationships with key network providers;
  • Continue to develop strategically located R&D facilities, however
    increase the exploitation of localised resources such as Indian software
    development capabilities.

Conclusion

From our finding and analysis, I saw people like Nokia for many reasons. Nokia is one of the largest mobile companies with 36% market share. People prefer Nokia more because of its attractive models, durability, availability, warranty, Symbian operating system, easy to use, attractive function, digital sound system etc. All of these are related to the handset. But Nokia Company has some other strategy to capture the market. These are efficient marketing policy, attractive & emotional advertisement, "connecting people" concept; worldwide sales centre & provide sponsorship in different places. When we did our survey we saw that most of the student & people use Nokia. On the other hand who are use other handset they are not quite happy with their handset. Most of them want to switch in Nokia. With the rapid awareness of the information technology, Nokia has many opportunities of expanding it technology and take it to the next stage.

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