Strategic Analysis of Nokia Company
The assignment is a strategic analysis of Nokia Company, basically what the organization has done or is doing to survive in this very competitive business world. The paper evaluates the external environment that Nokia competes in; it also identifies the core resources and competence of the company and justifies the choice. In addition to this, the research evaluates Nokia strategic choices as well as explaining the implications of the current choices, finally, the work selects one strategy that is deemed to propel the company to greater height if pursued, and this is justified.
According to Ansoff, (1985) organizations strive to move towards a certain position which relates to the company and its environment in a way that will ensure it continues to succeed and secured from all kinds of surprises, for this reason, Nokia is not an exception. Two approaches that explains how strategies are formed are classical approach holds that when wise leaders are equipped with vital information as well as other necessary resources they will come up with a successful strategy; evolutionary approach states that the methods adopted by managers do not matter, those that will be the best in this competitive world are the only guaranteed survivors. The argument is that the market and not the managers that determine the prevailing strategies in a particular environment, in short, the approach is simply referred to as “survival for the fittest”(Samer, 2009).
I chose Nokia because it is widely known in the entire world and has been in business for a very long period (over a decade) and a perfectly adhere to hierarchy, stability, uniformity, and specialization, specifically designed to enforce control and authority in this throat cutting competitive business world.
Nokia with its headquarters in Keilaniemi, Espoo, founded in 1865 is a Finnish multinational communications corporation. Nokia’s primarily deals with manufacturing of mobile devices as well as converging in internet and communications industries. The products include mobile phones, Smartphone, mobile computers, networks, mini laptops, internet tablets, GPRS products, accessories, ADSL modems, digital television services include; online services, software solutions, security solutions to mention but a few.
All these products and services enable people to enjoy music, videos, television, imaging, game, navigation among other things at their convenience. Clients/customers of Nokia range from organization to individuals who sort after mobile communication and internet services. As at 2009/2010 financial year, (Oktemgil & Greenley, 1996) Nokia employed 129,746 employees in 120 countries, it sales its product in over 150 countries in the entire globe having a total revenue of £41 billion, asset of £35.74 billion, operating income of £1.2 billion, net income of £891 million and a total equity of £14.8 billion.
Main competitors of Nokia Company are Erickson LM Tel Co., Motorola Inc, LG, Samsung EL. GDR; others include QUALCOMM Incorporated, Nortel Networks Corp., Cisco Systems Inc. and Alcatel-Lucent.
Nokia’s external environment
A number of scholars, theorist, and economists among other persons have noted that internal but more so external factors influence the ability of any organization or business in meeting their customers’ needs and aspirations. This, in turn, dictates the future survival and success of such businesses in this competitive business world. Among the external factors to be discussed in the case of Nokia are; competition, economical forces, legal and regulation forces (political), technology and innovation, social cultures & demographic and globalization.
Despite these external forces, according to Wit and Meyer (2004), organization/firms need to adapt to developments in the market by building on strengths of the resources at their disposal.
Nokia in the past and more so recently have faced various competitions for customers from a number of upcoming and well-developed telecommunication giant companies such as Motorola, LG, Samsung, Alcatel, Cisco among others. For instance, Microsoft Corp a potential new competitor recently announced that it will enter into the mobile phone industry. These competitors developed affordable products that almost substituted the company’s products and services.
This thus made Nokia use huge funds in developing and popularizing their products and services and at the same time change the pricing policy. To counter this stiff competition, Nokia Company developed a research department well equipped with competent personnel’s. As a result, various products and services of high quality and affordable products have been developed.
For instance, it recently released Symbian^3, Maemo, iPhones among other products and services such as Ovi that have fully captivated customers while at the same time keeping competitors at bay. to themselves an edge in the market, Nokia realized that it needs to offer quality services, new products and services as well as carry out extensive advertisement which they have done satisfactorily in my opinion.
Local, national and/or international economic forces have directly and indirectly impacted on Nokia Company. For instance, 2008, 1990 economic recession lowered the purchasing power of the company’s potential buyers as they tightened their wallet zips and spend their money carefully and on significant things as food, shelter. When countries manipulated the interest rates, this had consequences for instance high interest rates depresses business as money in circulation will be small, on the other hand when the rate is lowered more money will be in circulation hence high purchasing power of customer, similarly the company is at a position to borrow more funds to expand the business. Economy also dictates bargaining power of buyers, and due to price sensitivity, Nokia will be faced by this challenge.
Legal restriction and political stability
Political conditions dictate expansion of businesses. Areas that have civil unrest are usually not good for business establishment. Governments all over the world in most cases do play a part in telecommunication sectors and they put forward laws, regulations to be followed, such laws for instance concerning taxations, accounting standards, environmental laws directly or indirectly affects businesses such as that of Nokia Company.
Technology and innovation
The world is turning to a global village; hence adopting new technology and innovation is paramount and has been associated with reduced production cost, provision of high quality products and services, efficiency, reliability, convenience and time saving. Innovation especially in communication has helped Nokia popularize their products and service.
It is rational for the company to seriously evaluate the benefits and costs of adopting an innovation since adopting it is not always a bed of roses as it can backfire and cause very serious setback to the business.
Mobile phones, their accessories as well as other services offered by Nokia positively correlated to increase in human population. The rise of information society has necessitated importance of telecommunication, in leisure as well as workplace. It is worth noting that the younger especially the x generation are aware of mobile phone handsets choice and technological advancement in the same yearning for better and quality communication products and services, this puts Nokia at an advantage.
According to Harrison, (2005) the free movement of human resources, capital throughout the world posed and still poses positive as well as negative implications to the company. The negative implication such as employee turnover has been addressed by improved job design, efficient and conducive working environment. At the same time, the company has continued to utilize the advantages of globalization for instance use of expatriates to provide quality products and services.
Core resources and competencies of Nokia Company
Webster, (1994) stated that these are the factors that enhance growth, expansion and future survival of the company. According to Bateman, a business professor and Snell core competence and resources are what a company has and how it does things relative to its competitors this include human resource, special skills, technology, ability and expertise.
For Nokia, the core resource is the human workforce the company holds that personality is important in attainment of their core competence. This thus is a competence in itself as Nokia strives to find the right person to fit into the system. Talented researchers and engineers are sort after who work as a team, can communicate and defend their ideas (Blau, 2003).
The core values of Nokia are customer orientation in which they are seen as the focal point of the company’s activities, respecting individuals, achievement that entails working towards attainment of predetermined objectives, continuous learning which includes exploring continually for ways that will foster performance. these values translates to a set of entrepreneurial behavior such as analytical thinking, risk management, flexibility to new innovations, creativity, customer orientation very vital in developing new and high quality products and services that place the company at an advantageous edge over its competitors.
At higher level where Nokia is, it has been able to expand its existing core competencies as well as developing new one. The company which initially manufactured rubber boots schemed and produced mobile phones. On this tradition, it has been able to open up new market and expand existing ones (Schulman Et al 1992).
Nokia Strategic Choices
Nokia being the world leading manufacturers and provider in mobile and communication systems industry is the number one corporation that should consider total strategy implementation in the near future. This is because all over the world in any business customer are the backbone of any business transacting organization, their impact on the organization would deem the future of the organization, thus the relationship should be pegged on royalty, faith and good customer services (Kotler, 2008). This would grant lasting commerce relationship that would elevate the organization to it objectives and goals. Some of the strategic choices that Nokia have recently adapted are planned and emergent approaches and Market-led and Resource-based approaches as imposed by Schulman Et al (1992).
Market-led and Resource-based choices
Nokia need to encompass to the market development and thus by doing so to be able to construct the resources bases and also the activity structures vigor. Furthermore these will help Nokia mitigate competition; this strategy has been proven ineffectual in deal and competing with other highly experienced and educated workforce from other competitors in the market. This will also enable this organization to be able to suit in the environment which it trends. According to Mintzberg (1990) articulates that this should be the first initiative that should be prioritized first the environment in which they organization exists in. through this initiative they would be able to choose an advantageous position in the market and improvise a mechanical system which can scout this choice and also allow Nokia to input resource base and activity structures. Through also observe that the internal strength is adhering to as the starting point fostered by Nokia resource base (Pisano & Teece, 1994).
Planned and emergent choices
This strategic choice is usually viewed to be deliberate and is therefore deliberately executed when planned. Here the management of Nokia had analyzed the future outcome and had fashioned plans for the concluded outcome. However, they did not design execution plans that would follow through the whole idea. This failed as this choice usually encompasses long-term planning and Nokia only projected this choice and based it on short-term planning. However, recently Nokia have embarked on putting heavy artillery structural planning which would help mitigate the rapid and turbulent change of the global market (Porter, 1980).
Implication of Nokia Existing Choices
One of the major implications which have surmounted Nokia is basically based on market-led and resource-based choices due to market segmentation. This is due to the fact that the balance market has been hit with considerable division in the latest development of the needs of customers. There has been high demand of communication devises and the market has been flooded with counterfeits products which are a bit cheap as echoed by Day (1990). One of the major segmentation which has had implication on Nokia is psychographic segmentation this is usually defined as the division of the consumer market into various segment which are subjected to the consumers social class, lifestyles or personality characteristics.
Kohli & Jaworski (1993) noted that this factor has also affected planned and emergent choice another strategic choice utilized by the management of Nokia; they are now facing the risk of failure because the current technology development has led the consumers to me more demanding and innovative. The fact that there are new products arising daily in the market has made tem to be very choosy and demand high standard than they used to a few years back. The competition in this field has also tightened its grip on the ultimate reward of being the number one developers of new invention which are of higher standards of those of Nokia.
Together with the hostile competitive market there is also another headache and this has been for a while for not only Nokia but all major organizations China. China has been criticized by many on regulation of violating copyright and mass production of counterfeits which has flooded the global market posing serious health-related issues which the blame are being projected toward the original brand owner. Nokia is the victim of brand counterfeit and the result has been denting the sales of Nokia products as the replica are sold as the original merchandise and they are sold at a reasonable half the price of the original brand (Oktemgil & Greenley, 1996).
This counterfeit issues have been putting tremendous pressure on the sales of Nokia, when most of the unsuspecting consumer take full account that the product is defective the whole blame is posted on Nokia, this has made many shy away from the products of Nokia. The newer flashy intervention from Asia has also had it toll on the sales of the Nokia, this is because their prices are cheap and they have more cheeky designs which lure the unsuspecting consumers to purchase them. This Asian merchandise has no constant brand name and will keep changing to newer brand name to entice unsuspecting buyers. However, to mitigate this Nokia has been forced to lower their prices so as to keep their customers, a strategy choice which is costing them seriously (Andrews, 1987).
Another implication on Nokia choices is the use of numbers to names their products. Change in the behavioral straits which are fostered by the Nokia products and service consumers which are becoming diverse due to global development has posed another huge risk factor which is also affecting the sale of their products (Scholes, & Whittington, 2005). Use of numbers in naming the newer products has been failing Nokia to market new development as it is hard to differentiate new invention from older one because the naming makes them be identical. This confusion has made look like Nokia is not developing any new innovation which can entice the consumers. Other competitors like Samsung, Motorola and LG have been spicing up names which are being embraced quickly in the market than Nokia branding names of numbers.
The lack of strategic resources bases in organization like Nokia has been affiliated with globalization, deregulation, privatization and advances in communications technologies which have intensified competition between organization and placed pressure on the structures, processes and boundaries of which they are composed. These being the key factors to look into intensifying the competition, of the organization, to result to knowledgeable fruitfulness of an organization as old as Nokia will conclude that unless the company implements complementary changes across the three implementation strategic dimensions, the success of the change which we are to implement will be seriously compromised as echoed by Mintzberg (1990).
Nokia first recommending execution of implementation strategies as changing of boundaries, the thesis on the this case is that Nokia change consumer expectations by adding technology in the already existing entities for bettering, the services of the devices to the consumers, and here instead of economizing they will add value. The value been targeted will add on all Nokia accessories a Third Generation (3G) or Fourth Generation (4G) network solution for all internet enabled accessories. These will enable all subscribers of Nokia accessories to has uncontrolled internet access with a high speed and good responsive frequency (Shuen Et, al. 1997)
On the second implementation strategy recommendation will shift in focusing on hard, more tangible element of work organization to softer more tangible elements of work, in other words organization design. The element here is finding the knowledgeable key players in the marketing sector of Nokia and joins heads in activation of the structural design that has been proposed. According to Prahalad & Hamel (1990) managers and the key players (brand champion/outsourced agent) are here to advice on how to implement the service to all devices without altering any former setup. Build a lasting relationship with all candidates that are involved in this merger.
The third implementation strategy will be more considerate on emergence of network organization, the management of Nokia should adhere to sharing of knowledge, human capital, resources and technology so that they may pinpoint the areas that were diagnosed and offer the appropriate diagnosis. The shift of networks over production based hierarchies’ lies at the heart of Nokia change of response in the face of environmental hyper turbulence. These have to take effect so that this proposal may be implemented with less impact on the production of the new product without incurring too much expense than the original device had consumed (Schendel & Hofer, 1988).
Because the reconstruction of the strategic choices of Nokia may bring conflict of interest in management, the following has to be addressed adaptive or rational strategy development, cultural change or structural change, continuous improvement or radical transformation, empowerment or leadership and command and social goals (Ansoff, 1965). The participants have to first have good relationship with the proposed change of strategic choices, have the upper hand in implementing and conducting the process of production, these would eliminate any foreseen threats, keeping of some of the old strategic choices is another way of eliminating feud that usually arise in working places. When all these have been adhered to then all procedures are through and the final process of sales are to be implemented with new technology in place the consumer response and appetite is fulfilled (Barney, 1991; Harrison, 2005)).
From the analysis that has been featured about concerning the competence of the internal and external environment of Nokia. This would be then justifiable to acknowledge that the internal/ external orientation should be better used to implement the strategic choice management. However, it has been articulated that it’s also good to have internal/external principals so as to streamline and balance the resources for the objectives. Nokia to be successful in the future; they have to involve all the internal and external stakeholders competence involved, join together for the common course of improving the services/goods rendered to the customers, this help build a healthy relationship with the organization. This is because customer royalty and faith is built through having strong links with the organization (Meyer & De Wit, 2004). Involvement and better strategic choices planning is here streamlined with the effectiveness of reaching the desired goals.