Review And Study On Nokia Business Essay

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The e-portfolio builds up to a project report on a RandD innovation, which you will negotiate with the course tutor. This should be a company/product/technology you are interested in and answer/respond to a particular question or theme.

* 10% Clear and significant Management of R&D&I question and answer

* 10% Illustrating and referencing relevant theory

* 10% Presentation of case study and evidence

* 10% Reflection on what you think and what you have learned from the course

* 10% Quality of multimedia presentation and links

Nokia—the legend of Finland—

tells a story from a wood, cable and rubber conglomerate to the world No.1 mobile phone producer and R&D network leader. With the goal of becoming the leading provider of mobile solutions, it has achieved 36% of global mobile phone market in 2009, with net sales of EUR 41.0 billion and operating profit of EUR 1.2 billion. What's its key success factor? What are the competitive advantages? Will it be able to maintain its leading position in the fast changing world of technology? This web folio is trying to answer these questions.

Firstly, let's have a look at Nokia's history.

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The Nokia story began with Fredrik Idestam's paper mill on the banks of the Nokianvirta river in 1865. At the beginning of the 20th century, the Nokia Corporation set on the path to electronics. When the European telecommunications markets were deregulated and mobile networks became global, the newly formed Nokia Corporation was positioned for a pioneering role in the early evolution of mobile communications.

In 1992, Nokia decided to focus on its telecommunications business. This was probably the most important strategic decision in its history. As adoption of the GSM standard grew, new CEO Jorma Ollila led Nokia in the mobile telephone industry's global boom, and made it the world leader before the end of the decade.

In the 21st century, Nokia's story continues with 3G, mobile multiplayer gaming, multimedia devices and it carries on its mission of connecting people to the future. However, the fierce competition puts Nokia in a more difficult situation than ever before, as can be seen from the SWOT analysis below. Innovate or die—it is a question that Nokia and other technology oriented companies have to face.

Strength

Brand Equity

Nokia is one of the world's best recognized brand. The brand equity is an important part of Nokia's asset.

Market leadership

Nokia ranks No.1 in both mobile phone devices and mobile operation system market.

Network

Nokia is one of the leaders in R&D network.

Supply chain

Nokia enjoys large economic scale and has a great distribution capability worldwide.

Technology

Nokia's leading position in mobile technology is worldwide recognized.

Weakness

Design

Nokia's design is less stylish compared with other competitors.

Niche market

Nokia's strategy is to satisfy the mass market, therefore the niche market is neglected.

Negative financial performance

As can be seen in the graph below, Nokia's net sales and profit fall significantly in 2009.

Opportunity

Smartphones

In the 3G era, the smartphone has a huge market potential.

New product-3G netbooks

Nokia began to produce netbooks in 2009.

Market in developing countries

The developing countries, such as China and India, have a great potential for mobile devices.

Threat

Traditional competitors

Samsung and LG are catching up in terms of sales and market share.

New competitors

Although Apple and Google's smartphone only take 1% of the market, the growing potential is huge.

Potential competitors

Local companies in emerging markets, such as China, are also posing threat.

Source http://www.nokia.com/about-nokia/financials/key-data

NRC

http://www.youtube.com/watch?v=YVuDsKKO6o0 Nokia Research Center 2007

"The mission of Nokia Research Center is to explore technology frontiers and solve scientific challenges today, in order for Nokia to deliver irresistible personal experiences tomorrow."

SVP & Head of Nokia Research Center

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The best thing about working at NRC is that you are not just guessing what the future will be like; you are actually making it happen.

Petra Sodering

Head of Marketing NRC

Nokia considers the continuous high investment in R&D as one of the key success factors. As of December 31, 2008, the R&D department employed 39 350 people in 16 countries, representing approximately 31% of Nokia's total workforce. R&D expenses totaled EUR 5968 million in 2008, representing 11.8% of Nokia's net sales in 2008, up from 11% of net sales in 2007.

Nokia Research Center was founded in 1986 from the Nokia Electronics R&D unit, with a headcount of 86 persons. Today, NRC employs 800 researchers from 43 countries and a wide variety of fields. Representing over 4% of Nokia's R&D employees, NRC researchers produce about one half of Nokia's essential patents, and 34% of all Nokia invention reports (2006). There are 500 NRC teams in Europe, Asia, Africa and North America.

NRC is divided into two main sectors. One is the work for core technology breakthroughs supporting Nokia's existing businesses, which takes place in the Core Technology Centers (the CTC's). CTC focus mainly on the applied research, which is oriented to serve particular business objectives (OECD, Frascati Manual). The other more visionary, exploratory systems research that goes beyond current business model is conducted at the System Research Centers (the SRC's). SRC may conduct basic research, which may not meet particular application in view, but it can lead to unexpected technology breakthrough (OECD, Frascati Manual).

NRC has been exploring and developing mobile technologies for over 20 years. Current research focuses on the areas of rich context modeling, user interface, high performance mobile platforms, and cognitive radio.

Network

Nokia is one of the global R&D network leaders. It actively participates in standardization and R&D projects in cooperation with universities, research institutes, and other companies. Nokia collaborates and contributes in creation of industry standards and other activities. It is a member of many standardization organizations, such as 3GPP--The Third Generation Partnership Project (3GPP), ETSI--The European Telecommunications Standards Institute, GSMA-GSM Association and OMTP—Open Mobile Terminal Platform.

The telecommunications industry is rapidly transforming where knowledge flow becomes essential. NRC attaches great importance to the open innovation with academia, industry collaborators and independent developers. The teams are located worldwide to collaborate with leading universities and research institutes in the mode of Open Innovation. The partners include Massachusetts Institute of Technology in Cambridge/MA, Stanford University in Palo Alto/CA, the University of Cambride in the Unitged Kingdeom, and Tsinghua University in Beijing, China.

30% of Nokia's total net sales come from Nokia Siemens Networks (NSN). Nokia Siemens Networks is one of the largest telecommunications equipment suppliers in the world. NSN is a joint venture between Siemens AG's COM division (minus its Enterprise business unit) and Nokia's Network Business Group. According to Infonetics Research report Q4 of 2009, Nokia Siemens Networks accounted for 21% of global market share in the field of IMS (IP Multimedia Subsystem), surpassing 16% of Ericsson, and is second only to Alcatel - Lucent's 26%.

Forum Nokia is Nokia's global developer program, which connects developers to the tools, technical information, support, and distribution channels and market applications around the globe. Through its website and offices around the world, Forum Nokia provides technical and business development support to developers and operators to assist them in launching applications and services to consumers and enterprises.

Nokia has also established network with customers. They developed a project called Design by Community. Any member of Nokia Conversations Community can share their ideas, suggestions, and insights into what they believe an upcoming Nokia device should look like, what features it should have, and what size screen, and how many buttons it should have.

However we should be careful about the networks. According to Hakansson (1989), appropriate governance systems and network management are critical to avoid the atrophic blinding of network participants and danger of insularity. Internal and external interaction are both crucial in building and maintaining networks.

http://www.youtube.com/watch?v=G245WX1CJ7c Welcome to Nokia Siemens Networks at Mobile World Congress 2010

http://www.youtube.com/watch?v=UHGcRblNxEE Nokia Siemens Networks - Vision

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http://www.youtube.com/watch?v=pImkTlDqj9M Nokia Siemens Networks (NSN): From copper to fiber - The roadmap towards the gigabit society

According to Gartners, Nokia still dominates the mobile phone market in 2009, with a market share of 36.4%. However the figure declines from 2008's 38.6%. And Nokia's annual mobile phone sales to end users drop from 472 to 441 million. "Nokia will face a tough first half of 2010 as improvement to Symbian and new products based on the Meego platform will not reach the market well before the second half of 2010," said Ms Milanesi, an analyst of Gartner, "Its very strong mid-tier portfolio will help it hold market share, but its ongoing weakness at the high end of the portfolio will hurt its share of market value."

Samsung is the best performer among the top five, with market share growing by 3.2%. Improved channel relationships with distributors to extend its reach and better address the needs of individual markets as well as a rich mid-tier portfolio contribute to this success. In 2010, Samsung is going to focus on its new operating system-- Bada, which aims at adding the value of an ecosystem to its hardware portfolio.

Motorola's sales drops to almost half it was in 2008, and exhibits the sharpest decline in market share, accounting for 4.8% market share in 2009. "Its refocus away from the low-end market limited the volume opportunity, but should help it drive margins going forward. ” Said Ms Milanesi, “Motorola's hardest barrier is to grow brand awareness outside the North American market, where it benefits from a long-lasting relationship with key communications service providers.”

Samsung is probably the closest competitor of Nokia in the mobile phone market, posing a threat with its considerable sales growth in the economic downturn of the industry. The South Korea electronics company grows from a national corporation to an international personal electronics leader with a vision of creating new space, including New Technologies, New Markets, New Businesses and New Lifestyles. More than $6 billion into R&D activities were invested and more than 2,500 patents were produced in US annually, which is second only to IBM. Samsung also has many R&D engagements with universities and keep expanding outreach toward research communities by sponsorships, internships and joint R&D project. Its difference from Nokia is the emphasis on innovation of market and business processes. Samsung has a wide range of products, including laptops, mp3s, LCDs and HDTV.

Source:

Gartner (February 2010)

In the smartphone operation system market, Symbian continued its lead, but its share dropped considerably from 52.4% to 46.9% in 2009. Fierce competition from its competitors, such as RIM and Apple, and the continued weakness of Nokia's high-end device sales have negatively impacted Symbian's share. "Symbian had become uncompetitive in recent years, but its market share, particularly on Nokia devices, is still strong. If Symbian can use this momentum, it could return to positive growth," said Roberta Cozza, principal research analyst at Gartner.

The two best performers in 2009 are RIM and Apple, increased its market share by 3.3% and 6.2% respectively. Apple outperformed Microsoft Windows Mobile to rank No.3 in the market. Google's Android is also growing rapidly and becoming competitive in mobile phone operation system market.

What's Next?

The year of Smartphones

http://www.youtube.com/watch?v=CGwvZWyLiBU&feature=related Nokia Mixed Reality - Nokia World

There is no definition of smartphones. To put it simple, a smartphone is a mobile phone offering advanced capabilities, often with PC-like functionality (PC-mobile handset convergence). The mobile technology has entered the systems integration and networking era, in which technology push and market pull integrate. The mobile phones satisfy more advanced needs of people while more concept technology becomes practical. The market of smartphones will boost along with the operation systems, as well as the mobile application stores.

The competition of smartphones is becoming even more fierce. Apple's Iphone, Google's Nexus and RIM's blackberry are all strong competitors. Nokia's touch screen technology seems to lack behind Apple, which can be seen in the complaints about its N97. And its application store OVI still has a long way to go. Analysts at Gartner predict that 2010 is the year of smartphones, and the sales of touch screen mobile devices and mobile application stores will grow substantially. Although iphone only takes 1% of mobile phone market in 2009, the growing potential is huge. Nokia should devote more resources in developing high-end phones, while maintaining its leadership in low and mid level phone market. Design is an aspect that Nokia has to watch out. Nokia is famous for its high quality and simple design. However more and more customers are looking for the newest functions and coolest design. They may update their cell phones every month, so they care less about the durability. Therefore Nokia should focus more on the design of its product. Unlike innovation, design does not necessarily involve a change of technology, but design is an essential part of innovation since incremental design improvements accumulate into technological change or catalyse such change. (Kinder T. 2010)

What's more, Nokia is losing market in Asia, especially in China, to the local producers. Local companies take advantage of low cost of labour and materials to provide products of better value for money. The companies in China can be divided into two categories. One is the national brand companies, such as Lenovo, BBK and OPPO. They are investing heavily in R&D and try to raise their brand awareness against foreign brands by producing good quality products with a more reasonable price. The other group is the “shanzhai” companies. They invest little in R&D and just try to copy the design and functionality of successful models. The price is unbelievably low, you can get a phone looks exactly like iphone or N97 for less than 10 pounds. But you can tell the difference easily, because the quality is so poor. However it meets the need of low-income fashion-chasers.

Nokia's innovation strategy is kind of defensive (Freeman 1982) compared to its offensive competitors (Samsung and Apple). It has been focusing on mobile devices for decades. It has recently begun to produce netbooks. Nokia could try to enter other fields of electronics based on its advantage of extensive network, such as laptops, mp3 and DCs.

Nokia believes that effective research and development is vital to remaining competitive in the mobile computing and communications industry. The advancement of technology world never stops and there is no forever leader. The decline of Motorola set a negative example. Nokia has to realize and adapt to the cruel rule—innovate or die.

References

Kinder T., (2010), Lecture in Management of R&D, Business School, University of Edinburgh OECD Frascati Manual. 2002., 6th Edition

Ottosson S. (2004) Dealing with innovation push and market need, Technovation Pavitt, K.(1990), what makes basic research economically useful? Research Policy

Rosenberg, N. (1990), why do Firms do Basic Research (with Their Own Money)? , Research Policy

Howells J. (1997), Rethinking the market-technology relationship for innovation, Research Policy

Nokia Official Site

http://www.nokia.com/about-nokia

Nokia Research Center

http://research.nokia.com/research

Gartner Says Worldwide Mobile Phone Sales to End Users Grew 8 Per Cent in Fourth Quarter 2009; Market Remained Flat in 2009

http://www.gartner.com/it/page.jsp?id=1306513

Gartner Says Consumers Will Spend $6.2 Billion in Mobile Application Stores in 2010

http://www.gartner.com/it/page.jsp?id=1282413

Gartner Says Touchscreen Mobile Device Sales Will Grow 97 Percent in 2010

http://www.gartner.com/it/page.jsp?id=1313415

Gartner Outlines 10 Mobile Technologies to Watch in 2010 and 2011

http://www.gartner.com/it/page.jsp?id=1328113