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Market analysis of the mobile phone manufacturer Nokia

5030 words (20 pages) Essay in Marketing

5/12/16 Marketing Reference this

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Nokia derived its name from the river in southern Finland known as the Nokianvirta River. The huge success of the paper mill made Mr Idestam known as the name of father of Finland’s paper industry.

Nokia Corporation was created with the merger of three companies: Nokia Ab, Finnish Cable Works and Finnish Rubber Works which were jointly owned since 1922, officially merged together in 1967.

First step towards telecommunication industry:

During 1970s, Nokia made advancements towards telecommunications industry by developing a product Nokia DX200, which was a digital switch used for telephone exchanges. In 1982, this device became the world’s first microprocessor controlled telephone exchange. During the decade of 1970-80, Nokia developed communication devices for the Finnish Defence Forces.

In 1979, merger of Nokia and Salora led to the establishment of Mobira Oy. In 1982, first Car Phone was introduced by Mobira. Salora Oy was bought by Nokia in 1984 and the telecom branches name was changed to Nokia-Mobira Oy.The same year, Mobira launched world’s

first transportable phone. In 1987; Nokia launched one of the world’s first handheld phone, the Mobira Cityman 900.

In 1992, Nokia took one of the most important strategic decisions in the history focussing primarily on telecom business and move out of other businesses. During this decade, rubber, cable and consumer electronics divisions were gradually sold as the company moved to concentrate on communications. Now Nokia’s Core Business was to manufacture mobile phones and telecommunications systems.

NOKIA IN 2010 – 40% Profit Fall Reported

Profit of Nokia Corporation has fallen down by 40% in the second quarter of 2010 as compared to the previous quarter.Nokia also stated that they expected such fall in the profits since the tech giants like Apple and Google have also entered in smart phone market. Despite

of 1% increase in the net sales, profit margins and service division has dropped since Nokia is slashing down the prices if the handsets in order to increase sales. This has also contributed in the fall of average price of Nokia handsets by 21% as compared to 2009.

Source:

*http://www.insideireland.ie/index.cfm/section/news/ext/nokia001/category/1084

Source: http://www.sramanamitra.com/2010/05/05/nokias-market-share-declines/

Failure of products leading to decline in market share :

The above mentioned statistics shows that Nokia has reported decline in the profit margin. To answer the question that what has led to the decline of the market share can be Nokia’s frontline devices have failed to impress the consumers and hence have led to the decline in sales intern resulting in the decline of the profit margins.Nokia N97 is the perfect example of this.

Nokia has admitted that their market share has significantly declined and this is something which has come to them as as SHOCK. Nokia N97 has been a failure has been announced by one of the Nokia officials Anssi Vanjoki who is Executive VP of markets.” Nokia N97 has been a tremendous disappointment in terms of experience quality for the consumers” added Mr Vanjoki in an interview.

Source:http://www.gsmdome.com/nokia/nokia-admits-that-the-n97-is-a-failure-promises-not-to-do-it-again_13483

SWOT ANALYSIS- NOKIA N97

Strengths:

Global Image & High Quality Products: Nokia is a global company which not only sells its products in 130 countries but also has set up research and development teams in 15 countries to produce products in different languages.

Unprecedented Features: Nokia N97 is considered to be the most advanced mobile computer of this age and undoubtedly one of the most advanced phones of Nokia Portfolio.Nokia N 97 possesses several “firsts” It’s the first QWERTY mobile phone with a slide out in N Series. Its also the first Nokia device with built-in-memory of 32GB. It’s also the first touch screen device in N line series.

Weaknesses:

Difficult Applications: From the first view, it looks like a complex device as compared with other Nokia devices which are user friendly. People tend to draw comparisons with Apple I-Phone which is a user friendly device. This hits Nokia N97 badly.

Undifferentiated Name: N series was launched in 2005 and N97 belongs to the same line of series. People fail to identify it as a next generation mobile device due to undifferentiated name as it is one of the devices of N line series like N73, N73 etc.People tend to create notions as its just another phone in N series with some added features which is bad for N97. Customers have failed to form a connection with the device.

High Price: This device is not in line with the income levels which exist in India. The current price of the device 30,000 INR is relatively high as compared with other devices available by the competitors like Samsung. This price does not cater to the middle class segment of the society.

Opportunities:

Growing Economy: India is considered to be one of the fastest growing economies in the world and hence resulting in the growth in the income levels of the people. If Nokia continues to add features with suitable pricing, it can strengthen its hold on the market share. Although with this pricing also Nokia targets wealthy customers who remain unaffected by the economic downturn.

Threats:

Low Purchasing Power: Due to worldwide economic crisis, buying power of consumers has been reduced. This has severely affected the sales of such high end phones. Consumers do not have high spending power so they are more inclined for the more economical options. Increase in the competition has also led to the cost effective options available in the market as the competitors are manufacturing mobile phones which suit the purchasing power.

Cut Throat Competition: Competitors like Apple are already well known for its smart phones like Apple- I phone which has brought a revolution in the smart phone industry and has also set a bench-mark for the same. Not just Apple, competitor like

Samsung has also entered in this segment of the industry and manufacturing mobile phones at highly competitive price which is adding on to the competition.

Michael Porter’s Five Forces Analysis;

Threat of potential entrants: Though Nokia has been a world’s leader in mobile and telecommunications sector for years now but the performance and reviews about Nokia N97 has not been up to the mark.Smartphones are one of the most rapidly growing segments in mobile industry. Hence many mobile manufacturers like arch

rival Apple, Motorola etc are eying on the greater market share in the mobile sector through this segment. Though Nokia N97 is a feature packed phone but at the same time it has not been impressive when it comes to performance and user friendly experience. Arch rivals like Apple have gain the market share beating N97 on these grounds.

Bargaining power of suppliers: As Nokia is a vertically integrated company and it does its own manufacturing of variety of handsets, so the bargaining power of suppliers in this case is not relevant.

Competitive Rivalry: Today’s Smartphone industry is going through a phase of Cut Throat Competition where in almost all the mobile phone manufacturers are raring to be the front runners in this segment. Nokia faces a tough competition from its arch rivals Apple which is considered to have an upper hand over Nokia when it comes to applications and innovations. Now a day’s Apple I-Phone has become the synonym to the smart phones and this has contributed in the brand depletion of Nokia.

Competitors like Samsung, Micromax who doesn’t have that huge share in the market but they are also eyeing their opportunities in the Smartphone segment and hence costing Nokia’s market share.

Bargaining power of buyers: Entire world is going through economic recession where the purchasing power of the consumers has declined. This has also given an opportunity to the competitors like Samsung, Micromax, Lava and other Chinese Brands to manufacture mobile devices which are quite cost effective and also sometimes resembles to Nokia phones.

Threat of substitute products: Nokia N97 is a mobile phone and mobile phone is a prime means of communication in today’s times. I believe there are not enough substitutes of this means of communication. Though, people can switch to other means of communications like laptop for video- conferencing but a laptop can not be considered as an substitute.

Objective Setting:

Corporate Level: To achieve Nokia’s net sales by the end of Q4 2010 should increase to EUR 11.5 Billion.

Source: http://www.nokia.com/about-nokia/financials/quarterly-and-annual- information/q2-2010

Business Level: Reports clearly shows that the market share of Nokia has dipped from 64% in ’08-09 to 52% in ’09-10. The objective of the business units is to take the graph to 55% by Q4 of ’10.

Source: http://www.pluggd.in/nokia-market-share-india-297/

Marketing Level: The objective is to enhance the brand awareness amongst the business segment and high networking individuals.

Strategy Development:

Ansoff’s Matrix has been used to illustrate the growth strategy of Nokia N97:

Nokia Corporation has been in India for more than 15 years now. It has a huge product line catering to all the income levels in India. So Nokia is operating in the existing market along with the existing product line. Though Nokia has been a market leader in tele-communications industry but they are also experiencing decline in their market share. They have to focus on increasing the sales volumes which would also increase their market Share.

Key points for Market Penetration

Revised price structure: Nokia should consider revising prices for the handsets like N97 to focus on the other income segments of the society. This would lead o less margin of profit but in turn would also result in greater market share.

Aggressive promotion: Though Nokia has launched a revolutionary mobile phone likes N97, but it has not reached to the masses. Advertisements through print and electronic media like TV Adverts, Newspapers bring N97 on the larger stage.

Product profile: There has been a talk in the mobile industry that Nokia loses its hold when it comes to looks of the mobile phone i.e. sleekness which gives arch rivals like Apple an edge over other mobile phone manufacturers. Weight and size of N97 should be decreased to make it enhance its appeal.

Illustrating competitive strategies using Porter’s Generic Strategies:

Focus

Differentiation Nokia Cost Leadership

Nokia should emphasise in adopting combination of two strategies of being a cost leader in the market and differentiating itself from the competitors.Nokia has a huge product portfolio

catering to all segments of the society. Nokia N97 is a unique product but has a reasonably high price. If the price is slashed, it would invite more customers. Unlike Nokia other companies has also suffered badly from economic crisis. So, I recommend Nokia to slash prices of Nokia N97 to boost sales.

Nokia N97 is also different from other N series and has some of the features which are “firsts” in other Nokia phones and different from other handsets in N series line. Strong brand image of Nokia and user friendly attribute of the handsets.

I propose that Nokia should add a unique and innovative name to N97 device, which also makes it stand apart from other Nokia devices yet it is associated with the strong brand name and image of Nokia. A changed name would enable consumers to identify themselves with a new device in Nokia portfolio.

TACTICS to help strategies: 7 P’s

Product: Nokia N97 is undoubtedly one of the features packed phones in the N series line but its looks plays a spoilsport to the value of the device. Consumers have become quite choosy when it comes to the mobile device. In the first look Nokia N97 looks a lot bulky and heavy I recommend working on the design and size of N97 which makes it more trendy & sleek.

Price: Fierce competition in Smartphone industry has given an edge to consumers to have choice when it comes to mobile phone devices. This has also been boosted by the

current economic crisis. Nokia has always been considered of providing cost effective devices. I propose to slash the current prices of Nokia N97, which would give the device a competitive edge over the rivals like Apple, Samsung etc. This may force the competitors to slash their prices as well but it may not be that easy for them.

Promotion: I propose Nokia to become an official sponsor of cricket tournaments in India like IPL. As IPL has already been proved as a hit across the world and has huge TRP ratings, we can project N97 as the main products of Nokia during the IPL.

Since, Nokia is already a major sponsor of KOLKATA KNIGHTRIDERS , one of the teams in IPL, I propose Nokia should ask this teams Owner Mr Shah Rukh Khan to promote N97 and become the brand ambassador.

Nokia N97 is a device which caters the Enterprise segment. Nokia should advertising in the business magazines like Business Week, CFO Forum etc so that it comes in the eyes of business executive segment. Advertisement via TV can also play a vital role in targeting the desired segment. I propose to advertise majorly on the channels like CNN-IBN, BBC, TIMES NOW which has a high TRP rating when it comes to the business segment of the society.

Advertising through hoarding in the metropolitan cities like Delhi, Mumbai, Kolkata and Chennai with the brand ambassador like SRK using the phone would encourage people to recognize with him in any possible way.

India is a land of festivals. I recommend providing with gift coupons on every purchase of the N97 device at the occasions of Dussehra and Diwali when consumers

prefer to buy new products. This could be Scratch cards, Discount coupons, IPL Merchandisers etc.

Place: Nokia sells its phones majorly through retailers like Nokia Priority Dealer. I recommend that Nokia should join hands with one of the major service providers in telecom industry like Airtel, Vodafone, Idea etc and we can promote various offers in association with these service providers.

I also recommend that Nokia should tie-up with the major call centres, corporate houses in India in order to encourage the usage among the target group of customers. For example: A Nokia N97 can be given to the Top Performer in the call centre in a particular process.

People: This is one of the most crucial aspects which help in determining the success of any product or service. I recommend that comprehensive training programmes should be held. This would enable sales people to have a better understanding of the product and would also help them demonstrating while selling it to the end customers. The same is recommended for Nokia Care which are the service stations for Nokia Devices. Sometimes, people who are unaware of the certain features of the device believe the device to be faulty. In this case, proper training to the employees would result in increase in the confidence of the customer and also better customer service experience.

Physical Evidence: I recommend that Demonstration Stalls to be organized for a live demonstrations of the N97 device at the retailers and other service providers outlet inviting people to have a live user experience.

I also recommend providing add on products along with the device like leather covers, wireless headphones. Sometimes these add-ons also help in the promotion of the product.

Process: In order to make an efficient process, Nokia should cut down its cost by outsourcing its manufacturing of N97 handsets from local manufacturers who has an excellent track record. Also there should be control on quality of the handsets. Quality control teams should be employed to examine the handsets and reduce product defects.

Action: Once marketing and tactics have been set, it becomes necessary to turn them into action plans. To achieve the set targets, 3 activities are performed: a) allocation of tasks and responsibilities, b) scheduling of marketing activities, c) Setting the budget.

I propose to use the Percentage Of Sales method to set the budget for rejuvenating Nokia N97 from the decline stage:

Nokia reported Q2 2010 net sales of EUR 10 billion. The total cash reserves or cash flow of the company is 7% of the net sales i.e. 70 Million EUR. For the rejuvenation In India , I propose that Nokia should invest 2% of this amount. Now we should allocate this sum to rejuvenate Nokia N97 in India 40,000,000 INR

Illustration of Gantt chart:

Through this Gannt Chart, I propose to allocate 40 Million GBP for this project and also have allocated tasks to be performed by the different teams to achieve the targets:

G A N T T C H A R T

Total Budget 40000000 INR (40 Million GBP)

Marketing Activities

Month of Action

Team Responsible

 

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Re designing of the device

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R&D Team

Product Launch

 

 

 

 

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Advertising

 

 

 

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Marketing Team

Promotion ( festive season)

 

 

 

 

 

 

 

 

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Sales & Marketing Team

Demonstration

 

 

 

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Total Budget( in millions)

Control:

Once the marketing plan is implemented, monitoring and control of the action comes in the picture. Monitoring makes sure that plan is working accordingly and Control makes sure that corrective action plans as early as possible.

Auditing: Nokia is usually known for its user friendly features. During my research about Nokia N97, I have found out that one of the key factors of decline in the sales of N 97 were its complex and difficult to understand applications. I have recommended redesign and applications development of the device. I propose to go for the user’s feedback about the device. Audits from the external sources could also be used for the performance enhancement. Audits could also be helpful in determining the loopholes and can also be used in filling the gaps leading to low profitability. Audit reports could also help in finding out the brand awareness.

Critical Reflection:

Choice of Nokia as a declining brand: Products going through tough times: Though Nokia is the largest manufacturer of mobile device in the world, it is going through tough times as Nokia has reported 40% decline in the net sales. Though profitability of the company has increased but some of the major projects like Nokia N97 have faced a lot of criticism.I as an individual has been using Nokia mobile devices for many years due to its user-friendly interface. Nokia has placed itself in India as a brand which provides mobile device of high quality and comparatively low prices as available in the market. One of the best examples is Nokia 1100 which has a market price of 1100 INR which easily suits the purchasing power of Indian earning classes. The reputation of the Nokia as quality product becomes evident from the fact that sometimes people tend to own couple of mobile devices but they are of the same brand which is Nokia.

Even I own a Nokia E series model and I am pretty satisfied with the device in terms of price, features, functioning of the device. I have always been inspired by the innovations and pricing structure of Nokia devices. At the time of launch of Nokia N97, I was quite excited about the new addition to the N series line of Nokia which had quite of few features which were unprecedented in other devices of the brand. I also used to aspire to own N97 device. I waited for the reviews till the time I can wait to own one but I was disappointed to come across very negative reviews in terms of difficult to use applications and comparison on the grounds of pricing with other brands of smart phones available in the market. Soon I found out that Nokia’s advancement towards the Smartphone industry was slowed down by the declining sales of the device. Negative reviews about the device has not only led to decline in the sales which eventually led to decline in the profit margins of Nokia. Due to these factors, I realised Nokia is not only loosing the market share but failure of such projects has also led to brand depletion amongst the users.

Nokia is losing on its market share is not based on assumptions but is clearly reflected in the annual reports of the organisation and the top executives of the company have been brave enough to accept the failure of the brand and depletion of the brand image.

“Nokia N97 has been a failure has been announced by one of the Nokia officials Anssi Vanjoki who is Executive VP of markets.”Nokia N97 has been a tremendous disappointment in terms of experience quality for the consumers” added Mr Vanjoki in an interview.

Understanding of Marketing Module: Help in understanding the decline phase of Nokia

Before enrolling in MBA and studying Marketing Management, I had a perception that marketing is all about promotion of the products like direct marketing like door to door sales and indirect marketing like promotion via e-mails to boost the sales. But, after studying the marketing module I have a realised that Marketing is a broad concept which involves a lot of planning and implementation of the concepts.

Examples of the analysis like SWOT, PESTEL were GREEK to me but during the course work I realised that these analysis are frequently used in our day to day lives. Going through my Marketing Management Module, I came across a model known as SOSTAC Model which is used in the marketing plan for a product and which has also been used in my assignment of the decline products of Nokia to analyse the reasons and provide solution to overcome the current situation.

Marketing plan is always implemented when a product is to be launched. SOSTAC Model develops a flow of understanding the structure of the marketing plan. Situation analysis tool which is SWOT Analysis, Porter’s five forces helped me in the understanding of the current situation of the brand, i.e. Nokia and Porters Five Forces view also helped me understanding the environment in which Nokia is operating such as telecom industry.

After running the situation analysis, every organisation sets certain objectives which are to be achieved with in a stipulated time period. Objective setting is the reflection of what an organisation wants to achieve in the future. Objectives can never be abrupt thus they are set on certain criterions defined as the SMART Criterion in the Marketing Module.

Then comes the formulation of the strategy to achieve the organisation’s objectives. I came across Competitive and Growth oriented strategies to achieve the targets. I used the Ansoff Matrix as the growth strategy for Nokia. This matrix is used when a particular product of a brand is in the decline stage. Nokia is existent in the mobile industry since a long time but some of its products are not giving the desired results i.e. N97.

Another component of SOSTAC Model is Tactic. As the word suggest it’s the techniques which is adopted by the organisation to achieve the strategies. Tactics usually uses the 7 Ps factor which also helped me understand the importance of these 7 factors. This helped me understand how each component can play a vital role in the growth of the product.

This stage is followed by the Action part. This is the part when the plan comes to action in literal terms. Till now we formulate a plan, at this stage we allocate tasks by recognising the activities proposed in the plan, then we schedule the activities that will be executed and the time of execution. I have illustrated this with the help of GANTT CHART where I have allocated tasks, allocated required budget and also scheduled the months when the tasks would be performed.

Finally comes the Control part when we monitor and control the entire marketing plan. Usage of the operational strategies like balance score card, control on sales and auditing.

Individual Assessment:

This module of Marketing Management has helped me understanding the different concepts, strategies and analysis run in marketing of a product. Students were asked to choose a declining brand in UK or the home country. Nokia N 97 is my product in the assignment. During the course module, we also had discussion over couple of declining brands and the services as well like British Airways. The discussion in the lecture and seminar class helped me to find out the possible reasons and structuring my thoughts using different models.

During my course work I also got an opportunity to develop my IT skills like working on power-point presentations, use of technology while preparing the assignment. Although I was working as a Research Associate in a market research organisation, I could not develop such skills. Group work has also enabled me to develop on my skills of working in a team where people come from different age groups, nationalities, cultural values. Working in the team has also helped me to work on my people management skills by allocating different tasks to every individual of the group ensuring that every individual has an equal contribution towards the group assignment and also enabling us to learn from each other.

One of the core parts of this module has been Presentations. I as an individual was always scared of public speaking. During the module, we were asked to go through the case studies and present in front of the class. This helped me develop skills of public speaking and get rid of this fear to a certain extent. I was also part of the group work for preparation of the presentation which also helped me develop skills of making power-point presentations.

One of the most dynamic and innovative learning aspect I have come across while preparing the assignment was uploading a presentation in the You-Tube. At first, this looked like a mount climbing task since as an individual I do not possess high IT skills but since all the other MBA students were doing it for the first time and we all were sailing in the same boat we all found out ways to get it done. This is also one of the innovative aspects of learning which I came across.

Contribution of the Professor is also worth mentioning. I must say that till the times of my graduation, I have not seen a Professor putting so much effort to make students not only understand the strategies and models but also critically analyse it. Professor used to create a dynamic environment through the interactive session of learning where he made sure that every individual understands the concept through a discussion on the common platform which enabled us to understand the concepts in depth. The examples given by him to support the concept enabled us to understand the concepts in lay man’s terms.

Now when I have prepared an assignment on Nokia N97 as a declining product, has enabled me in the better understanding of the Marketing Management as a science which contains many analysis and strategies. Now whenever I would undertake a project in the future, I would try to imply the models, strategies and analysis I have come across during the learning of the model. Marketing Management has enabled me to carve a way which leads to the root cause of the problem. I realised SWOT, Porter’s 5 Forces are some of the models which we use in our day to day activities without realising that we are using such methodologies to understand the root cause of the problem. Marketing Management module has given way to develop and streamline the thought process.

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