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Nokia marketing management

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Published: Mon, 5 Dec 2016

This report has been commissioned to provide an up to date analysis of Nokia’s marketing management, concentrating upon its strategic approach to marketing. It is submitted that strengths and weaknesses in this area are of particular significance as overall marketing strategy provides the backdrop to all marketing activities. A critical assessment of this area will provide an insight into Nokia’s position within its competitive market. 

Nokia is a world leader in mobile communications, providing consumer products and technology development.. It has strong brand identity and is committed to future development. It has positioned itself to utilise a ‘differentiation’ strategy through four business groups within its structure. Its commitment to technological development in its ‘traditional’ mobile handset sector has kept it at the forefront in established markets, whilst ensuring continued high market share on a global scale through value for money products. In attempting to widen its markets through new business groups it faces the dichotomy of established research and development skills versus absence of identity in its proposed new areas. It faces the risk of losing its established position in the market place if its focus is lost. To address this it must ensure that the core research and development function retains its key role as business innovator to ensure that branding and market positioning is not undermined.

Global mobile phone market:

International Mobile phone market is being growing at a tremendous rate. According to IDC, vendors shipped 256.4 million mobile phones, a YTY increase of 10.0% for Q1 2009. However, the shipments were 13.8% lower than the record shipments in Q4 2007; the decline was expected owing to the seasonality of the market. Q1 2009 marks the first quarter of slower growth in the mobile phone market, a significant change from the growth exhibited each quarter during all of 2007. YTY growth during each of those quarters topped 20%, significantly higher than the 10.0% growth posted at the start of 2009. (IT Facts n.d.) Penetration rates for the UK cell phone market are greater than 75%, and in Western Europe, Japan and Hong Kong penetration has already exceeded 100 % (multiple cell phones per subscriber). Although there is still significant growth to be found in these markets, much of this growth will take the form of selling increasingly sophisticated services (e.g. video, GPS) to existing customers rather than growing the overall number of subscribers. Emerging markets such as Brazil, India, China, Africa and Latin America have demonstrated blistering cell phone growth in recent years. (Global mobile market n.d.) [1]

Global mobile phone shipments in Q1 2009

 

Q1 2009

Q1 2007

Growth

Vendor

Shipments

Share

Shipments

Share

YTY

Nokia

91,100,000

35.5%

75,100,000

32.2%

21.3%

Motorola

45,400,000

17.7%

46,100,000

19.8%

-1.5%

Samsung

34,800,000

13.6%

29,000,000

12.4%

20.0%

Sony Ericsson

21,800,000

8.5%

13,300,000

5.7%

63.9%

LG Electronics

15,800,000

6.2%

15,600,000

6.7%

1.3%

Others

47,500,000

18.5%

53,900,000

23.1%

-11.9%

Total

256,400,000

100.0%

233,000,000

100.0%

10.0%

Source: IDC

Company history:

Nokia is presently a leading global technology company with customers in over 130 countries and less than 3% of revenues coming from their native land of Finland, this has not always been the case for the organization that started with modest beginnings in the wood pulp industry.  The company began in 1865 as a paper mill along the Nokia River (from which it took its name from) in Finland.

From this beginning, they entered numerous international markets.  In the 1980’s, they began to concentrate on the cellular phones.  Today, Nokia is the largest provider of cellular phones in the world.  They have achieved a 33% market share in the cellular phone market, with their next closest competitor trailing behind at 17%.  This market share translates into over 200 million cellular phones sold in 2007 (Business Week, Jan. 22, 2008).  Nokia presently has 27 production facilities in 10 countries and Research & Development centres in 12 countries as well.  With over 54,000 people employed worldwide, Nokia is now truly a global company.[7]

Market positioning:

Market positioning is determined by a variety of factors. Initially an understanding of the external forces acting upon the company is important. The ‘push’ and ‘pulls’ of these external factors represent the confines within which strategy can be developed and to what extent that strategy can be effective. Positioning strategy can be confined to two main types that can facilitate competitive advantage, developing a cost advantage enabling lower pricing or higher profit margins or product differentiation. A company’s ability to manage these factors is determined by its management of the market and external environment.

Nokia is positioned to utilise a ‘differentiation’ strategy to achieve competitive advantage. This is typical of innovative and technological businesses, as fast evolution leads to dynamic changes in the market place. Thus providing a product that is exceptional in some way or simply away from the ‘norm’ attracts custom. Nokia’s competitive strategy involves maintaining an innovative edge utilising speed and flexibility to anticipate changing demand.

Generally a successful differentiation strategy is aimed at a wide consumer base, seeking “to be unique in its industry along some dimensions that are widely valued by buyers” (Porter, 1985). This is indicative of Nokia’s positioning, aiming its mobile telephones at the mass consumer market, throughout all segments. This wide base is extended further with Nokia’s move into business markets. [4]

The Macro-Environment

It is very important that Nokia organization considers the environment before beginning the marketing process. This includes all factors that can control Nokia organization, but that are out of their non-stop control. There may be hard-line competition and challenge in a market and the threat of substitute products and new entrants through globalisation. The wider environment is also ever altering, and the marketer wants to compensate for changes in culture, politics, economics and technology. To assess the external factors that influence the organisation, the marketing department should execute a PESLTLE analysis, which is the acronym for:

 

ƒ˜      Political

ƒ˜      Economic

ƒ˜      Social

ƒ˜      Technical

ƒ˜      Environmental

ƒ˜      Legal

 

Political Factors

The political arena has a huge influence upon the regulation of Nokia businesses, and the spending power of consumers and other businesses. Nokia seeking to internationalise typically investigates factors in the county such as:

ƒ˜      The stability of the political environment.

ƒ˜      Influence of government policy on laws that regulate or tax the business.

ƒ˜      Government’s position on marketing ethics, policies on the economy and their view on culture and religion.

ƒ˜      Government’s involvement in trading agreements such as EU, NAFTA, FTAA or CSME.

Economic Factors

In the context of Nokia’s marketing management, a number of key variables will shape the environment in which the business is conducted. Marketer of Nokia needs to consider the state of a trading economy in the short and long-terms. This is especially true when planning for international marketing. Factors will include:

ƒ˜      Interest rates

ƒ˜      The level of inflation and employment level per capita

ƒ˜      Long-term prospects for the economy

ƒ˜      Gross domestic product (GDP) per capita

ƒ˜      Economic growth

Socio-cultural Factors

The social and cultural influences on Nokia business vary from country to country. Several case studies have decided on work culture, management and organizational growth in multinational companies in different countries (Hofstede 1980; ILO 1991; Frenkel 1994; Garsten 1994). These studies reach different conclusions about how cultural factors influence Nokia’s management and organization in multinational groups, and especially how management and organizational culture pressure employees in these companies. It is important that such factors are considered. Factors include:

ƒ˜      Influence of modern fashion.

ƒ˜      Attitudes to foreign products and services.

ƒ˜      Impact of language upon the diffusion of products into the markets.

ƒ˜      Importance of leisure time to consumers.

ƒ˜      Roles of men and women within society.

ƒ˜      Age of the population and wealth of generations.

 

Technological Factors

Technology is vital for competitive advantage for Nokia, and is a major driver of globalization. Technological change can involve new processes of production. It includes new ways of doing things which raise productivity of factors inputs, as with the use of Nokia neon pad technology. The following points are considered:

ƒ˜      Technology allows for Nokia products and services to be made more cheaply and to a better standard of quality.

ƒ˜      Technologies offer Nokia’s consumers and businesses more innovative products and services such as Internet surfing, new generation interfaces in mobile.

ƒ˜      New technologies have changed distribution channels e.g purchase of books and flight tickets via the Internet through mobile.

ƒ˜      Technology offer Nokia’s a new way to communicate with consumers.  

Legal Factors

Legal systems vary enormously throughout the world, and these have a significant impact on the ways international Nokia business is conducted. This includes legislation that governs the industry and identifies factors such as:

ƒ˜      Legislation to support equity

ƒ˜      Existing crime and disorder legislation

ƒ˜      Sexual and racial discrimination legislation

Environmental Issues

The environment has become an increasingly important focus of national and international Nokia business policy makers as Nokia have managed to be quite environmentally friendly and have not done anything that the consuming public have taken huge offence to, they have been very careful about this and this is one of the reasons they are such a popular brand of mobile phones.

Evaluation of Macro-environmental factor:

The PESTAL analysis tool provides an opportunity to be specific as to the challenges facing Nokia and its respective advantages that can be utilised to minimise these. PESTAL analysis is a core tool in assessing the status and potential of a company, it involves analysis of the different market condition of political, economical and social situation. The resulting balance gives an indication of the most significant issues for a company.

Strong brand identity and being a market leader in the provision of mobile handsets to consumers has led to a degree of complacency within Nokia. Failure to respond to market desires for “clam” style handsets led to a small loss in market share. This is indicative of the impact of failing to monitor sociological trends and respond to consumer expectations. Although Nokia continues to lead with new technologies this alone is not sufficient; complacency in the market place is Nokia’s biggest enemy. This factor is further indicative of the potential difficulties of ‘differentiation’ versus ‘cost leadership’. However with a strong customer focus permeating its culture Nokia has responded to this weakness by modifying product lines and stepping up development of new style handsets. This corporate culture coupled with strong brand identity places Nokia in a solid position to deal with these challenges. Further, Nokia’s low cost production enables it to continue to penetrate new markets particularly where the mobile handset industry is underdeveloped, thus ensuring that any loss of market share in one area is compensated for in another. [4]

Strategic Marketing analysis:

Boston matrix analysis:

Nokia’s strategies centre around market orientated technological development, to meet the needs of present and future customers. This strategy operates across all business units; allowing integrative support throughout the company network. The Boston Consultancy Group Product Portfolio matrix provides a visual tool to illustrate inthefollowing:

The matrix not only analyses Nokia’s current market position but can be utilised to develop company strategy and resource allocation for the future by illustrating prospects for specific sectors. It pitches market growth against market share in order to categorise strategic business units, allowing decisions to be made for the future, particularly concerning investment, development and cash flow between business units.

The backbone or ‘cash cow’ of the Nokia portfolio is represented by the traditional mobile voice products i.e. mobile telephone handsets. Nokia is the leading provider of handsets to the consumer market. However, despite continual development and innovation market growth has slowed. Nokia is investing in new markets globally where mobile telephone use is not high the comparative market growth of generic mobile handsets has levelled off. By holding such a high share of the market and taking advantage of low cost production Nokia can utilise the revenue generated from this area to fund its research and development program and other strategic business units.

The categorisation of one of Nokia’s leading business areas in this way highlights the difficulties in utilising such a simplistic matrix, however when combined with analysis of product life cycle it proves a powerful tool. It is submitted that the generic mobile telephone is at the mature stage of its product life-cycle, hence its categorisation as a ‘cash cow’ rather than ‘star’ product, despite the constant technological updates that maintains and drives sales. It is suggested that this level of innovation is expected and as such provides no stimulus for actual market growth. 

Nokia’s ‘star’ business area is currently its multimedia services. This brings cutting edge technology by Nokia to consumers and businesses through advanced mobile devices and applications. The launch of the Nokia “N-Gage” and its huge success is indicative of this. It is submitted that this market is still in development and has distinct growth potential. If technological advantage is maintained this could be utilised to diversify Nokia’s product base and become a ‘cash cow’ of the future. Further, these developments support product life cycle regeneration strategies for the general mobile telephone unit.[4]

SWAT analysis:

A S.W.O.T. analysis is carried out to observe the current strengths and weaknesses in a firm and to identify the future opportunities and threats. Such analysis is useful when a company is creating awareness of all the possible factors in a marketing strategy. It has its disadvantages, however, as it does not reveal how the factors interact. Here is a SWOT analysis of Nokia. 

Strengths

Nokia’s most strong point is its market share. It dominates the wireless market and looks to do so for a significant amount of time. Its knowledge and innovations has far exceeded its competitors and will therefore attract more customers. Nokia has consumer loyalty of their customers and therefore, its consumers will buy their phone at any reasonable price. Due to its successful promotion, Nokia has a strong brand name meaning that customers will pay more for a brand they recognise and also for their unique products.

Weaknesses

As the Nokia company business being very big in size, the channel of communication will become very congested. The company has to ensure a flat hierarchy within the firm to make sure it runs smoothly. As the company grows larger, it may be encountering diseconomies of scale. Costs of production may rise as the raw components used to makes phones become more expensive.

Opportunities

The biggest opportunity for Nokia lies on the other side of the border from Hong Kong- China. Now Nokia partially quite relays up on China where they would get lower costs of productions and higher turnovers. The new wireless internet service can also be a new opportunity for the company. As time will pass, the technology will flourish and Nokia can become a leader in this field if it continues to innovate in this field. Acquisitions can also be an opportunity as it would eliminate competition so that Nokia can dominate the market, and possibly monopolise the market. Organic growth is another prospect as it can venture into launching other products.  

Threats

Nokia’s main threats are its competitors. If competitors come up with ‘copycat products’ to enter the market, Nokia will have to adjust accordingly to continue to gain the major share in the market.

Marketing mix:

To determine the marketing mix for a product is essential to any company. They are the main variables through which a firm carries out its marketing strategies. These variables are more commonly known as the 4 P’s. They are:

·        Product

·        Place

·        Price

·        Promotion 

Product:

 The product is the most important aspect of the marketing mix. The reason for this is that without a product, a company will be like a vehicle without wheels A company’s product also reflects upon the image of the firm and thus is essential to ensure the quality of the product.                                      

The primary products of the Nokia Corporation are its wide range of mobile phones.  Nokia’s mobile phones are known in the market for their slick and unique appearance, their innovative services, and their user-friendly applications. Till date, Nokia has launched 33 different models of cellular phones, each one featuring something new, and there are more in prospect. Some phones, however, are aimed at some socio-economic groups rather than others. As an example, the model# 3330, with a wide variety of games, is aimed for the younger customers. Whereas, the Nokia 9210 Communicator which includes features such as word processor and a spreadsheet.

Place:

Identifying the ideal place, where to sell and promote once product, is crucial to any business. In order for a product to be successful, the place where it is sold should be convenient to its customers and the company should ensure that the place is going to be feasible for the company resulting in significant turnovers. For Nokia, UK holds a lot of promise.  This is because the European countries represent the most powerful economic region in the world, with a staggering gross domestic figure of £14 billion. Since the growth period started since the 1960’s, the region saw its collective global output percentage increase by six times- 4 % to 25 %. More than 90% of the population in UK have mobile phones, as it is very rare to see someone without one.

Price:

 Price of a given product can determine the socio economic group it will be sold to as well as how successful a product will be in the market.

Competitive advantage can be achieved by adjusting the relationship between product and price. If customers want anything that isn’t mass produced, i.e. something that is unique, they will be willing to pay a higher price. This is effective in the case of Nokia as it provides its customers with unique products such as the 9210 Communicator, thus, the consumers will be willing to pay more.

 Not all phones, however, are aimed at the socio economic group. Phones that are targeted at the teenagers are reasonably priced from £50-£100. This is a staggering improvement from 1995, when phone costs were very high. That was, however, due to the cost of shipping the phones from Europe. Since the establishment of the Nokia factory in Hong Kong, prices have gone down as more and more people are now able to afford the phones. [3]

 Promotion:

Nokia has done an extensive job in promoting its products to the local population. Nokia is marketing its products using Marketing Segmentation. This means that it is aiming certain type of product at a certain age or socio economic group. For example, the Nokia 3310 is featured in an MTV show means that the product is targeted towards the teenagers where as the more professional looking Nokia N-Series, E-Series is advertised in business magazines and news channels such as CNN and CNBC. Ads could also be seen on local trams and buses. Advertising is needed for image enhancement of a product and is also necessary to create a price inelasticity of the product. This is because as brand becomes more famous, products gain customer loyalty and thus the product becomes price inelastic.  Nokia’s branding can be considered as very successful as the consumers are willing to pay a reasonably high amount of money because they recognise Nokia and are aware of its quality.[3]

Conclusion:

Nokia’s experience in business solutions markets has already been identified as a company weakness. This problem is further enhanced by high levels of competition in these markets from large companies such as LG, Semen’s, Motorola etc. Despite being a forerunner in technological development in the mobile handset industry attempting to utilise a similar approach to compete in the general multimedia market and competitive markets represents a serious risk. Although research and development provides competitive advantage in one market it is unlikely to distinguish Nokia in these new markets and as such it is submitted that a new angle is required to develop these markets successfully. By spreading its technological focus Nokia risks being unable to keep up with developments.


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