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Comparitive analysis of Nokia and Samsung

A PROJECT in the subject of Marketing Strategies and Plans





Roll No.(14) Specialization:Business Management UNDER THE GUIDANCE OF


YEAR - 2013 14


I, Kum/Smt/Shri Mohd. Mohsin Khan, student of M. Com. Part-I Roll Number (14), at the Department of Commerce, University of Mumbai do hereby declare that the project titled, (Compartive analysis of Nokia and Samsung) submitted by me in the subject of Marketing Strategies and Plan for Semester I during the academic year 2012-13, is based on actual work carried out by me under the guidance and supervision of Dr. Sangeeta Prasad.

I further state that this work is original and not submitted anywhere else for any other examinat

Signature of Student


This is to certify that the undersigned have assessed and evaluated the project on __ Dr. Sangeeta Pawar in the subject of Marketing strategies and Plan submitted by Kum/Smt/Shri Mohd.Mohsin Khan , student of M. Com. Part-I at the Department of Commerce, University of Mumbai for Semester I during the academic year 2013-14.

This project is original to the best of our knowledge and has been accepted for Internal Assessment.

Internal Exaimer

External Exaimer

Director Dr V. Deolankar


SL. N0.



CHAPTER 1 - INTRODUCTION 1.1 Introduction 1.2 Comparative analysis of corporate strategy of Nokia 1.3 Corporate strategy of Samsung CHAPTER 2 UNDERSTANDING OF CONCEPT 2.1 A Smartphon Industry 2.2 Description of Smartphone 2 vendors 2.3 CHATER 3 THE COMANIPIE'S INNOVATION 3.1 Nokia's innovation process 3.2 Samsung innovation process CHAPTER 4-- CONCLUSION 4.1 Conclusion 4.2 Questionnaire regarding Mobile Phone usage 4.3 Bibliography



Nokia have enjoyed being the market leader within mobile phone industry for a long time. The long period of industry leadership is impressive when considering how volatile the mobile phone industry is. However, during the last decade a new product emerged, the Smartphone,1 which eventually shook Nokias world. Nokia were able to dominate the Smartphone industry at first and enjoyed large market shares. But their situation changed as new competitors from the Internet service- and personal computing industries became a part of the Smartphone industry. These new competitors had been industry leaders within their former industry and they had different core competencies and strategies, compared to the traditional mobile phone companies. Nokia, nonetheless, felt ready for the new Smartphone challenge as they were proud of their ability to change.3 Nokia continued to dominate the Smartphone industry when Apple entered the industry in 2007 and later in 2008 when Google entered. But the different competencies and strategies made it difficult for Nokia to maintain their position and they were losing market shares every year. They were finally passed by Apple and Samsung, a competitor who uses Googles Android, in the second quarter of 2011. This is a critical situation for Nokia as the Smartphone is the most lucrative product compared to the traditional mobile phone market, the feature phone. The very volatile market and the need for different core competencies are good arguments for using open innovation. Open innovation is about having an open approach towards ideas and technologies to improve and speed up the R&D processes. Open innovation will be explained further in the theory section. Nokia have although practiced open innovation since the mobile industry, according to Nokia, have: escalating R&D expenditures, ever shorter product life cycles, rising entry barriers, increasing needs for global economies of scale and, particularly in technologyintensive industries, the growing importance of global standards. Nokia thought that they were ready for the new challenges and were aware of the opportunities that open innovation gave. But Nokia still lost their market shares within the Smartphone industry after a good start and this leads to the following problem statement.

Comparative analysis of Corporate strategy of Samsung and Nokia

1.2 Corporate strategy of Nokia

NOKIA Our vision and strategy: Nokias mission is simple: Connecting People. Our goal is to build great mobile products that enable billions of people worldwide to enjoy more of what life has to offer. Our challenge is to achieve this in an increasingly dynamic and competitive environment. Ideas. Energy. Excitement. Opportunities. In today's mobile world, it feels like anything is possible - and that's what inspires us to get out of bed every day. Moving with rapidly changing times: From Rio de Janeiro to Nairobi, Berlin to Mumbai, mobile technology is changing our world. How can we make the most of the opportunities in our everyday lives? How can we keep a sense of identity as societies, economies and governments change all around us? We found people everywhere connected by a shared excitement for its potential. Watch our film to find out more. Teddy bears and talking drums Key elements of Nokias strategy

build a new winning mobile ecosystem in partnership with Microsoft bring the next billion online in developing growth markets invest in next-generation disruptive technologies increase our focus on speed, results and accountability

Regaining leadership in the smartphone space: To help us achieve our mission, Nokia has formed a strategic partnership with Microsoft that will, we hope, see us regain lost ground in the smartphone market. Together, we intend to build a global ecosystem that surpasses anything currently in existence. The Nokia-Microsoft ecosystem will deliver differentiated and innovative products with unrivalled scale in terms of product breadth, geographical reach and brand identity. Connecting the next billion: We will continue the renewal of our Series 40 platform in QWERTY, touch &

type, dual SIM, Nokia services, including Maps, Browser, Life Tools, Web apps and Money. We are also investing in the future; developing assets (platform, software, apps), which will bring a modern mobile experience to consumers and enable business opportunities for developers. Driving change: Our new strategy is supported by changes in Nokias leadership, operational structure and approach. The renewed governance will expedite decision-making and improve time-to-market of products and innovations, placing a heavy focus on results, speed and accountability. Nokias strategy is about investing in and ensuring Nokias future. I have incredible optimism, said Stephen Elop, Nokia President and CEO, because I can see fresh opportunity for us to innovate, to differentiate, to build great mobile products, like never before, and at a speed that will surpass what we have accomplished in the past. How will the Nokia-Microsoft partnership work? The Nokia-Microsoft partnership brings together two global businesses with highly complementary sets of assets and competencies. But what will it actually mean for Nokia smartphone products?First and foremost, Nokia is adopting Windows Phone as its primary smartphone platform. Working with Microsoft, well help to drive and define the future of the platform by leveraging our expertise in hardware optimisation, software customisation, and language support.Nokia and Microsoft are also combining services assets to drive innovation. Nokia Maps, for example, will soon be at the heart of key Microsoft assets such as Bing and AdCenter, and Nokias application and content store will be integrated into Microsoft Marketplace. Similarly, Microsoft will provide developer tools, making it easier for application developers to leverage Nokias global scale. At the last count, the Nokia Group employed approximately 98,000 people around the world: not bad for a company that started life as a small riverside paper mill in Finland. In 2012, the Devices & Services and HERE businesses together employed approximately 40,000 people from over a hundred different nationalities. And

approximately 40% of them were women. Such diversity is crucial to our success so far and to our continued success in the future. Were operating in various markets and employees from diverse backgrounds can give us invaluable insights into our customer bases. Just as important, a mix of cultures, genders, age groups, beliefs, interests and opinions in the workplace helps foster debate, discussion, ideas and innovation. Not to mention making Nokia a more enjoyable, stimulating and rewarding place to spend your working day. Doing things the Nokia Way Commitment to diversity is just part of what we call the Nokia Way the core values and shared philosophy that make our company tick. Creativity, empowerment, openness, collaboration, and consideration for people and the environment these are all integral to the way we do business. But above all, its about being human in everything we do respecting and caring, even in tough business situations. Smart Devices Our Smart Devices team focuses on the area of smartphones and smart devices. Under our new strategy, Smart Devices is partnering with Microsoft to bring to together our respective complementary assets and expertise to build a new global mobile ecosystem for smartphones. The partnership, under which we are adopting and licensing Windows Phone from Microsoft as our primary smartphone platform, was formalized in April 2011. Nokia launched its first Windows Phone-based smartphones, bearing the Lumia name, in late 2011. Mobile Phones Our Mobile Phones teams focus is on bringing a modern and affordable mobile experience to people around the world. In particular, the team leverages its innovation and strength in growth markets to provide people with an affordable Internet experience on their mobile device in many cases, their first ever Internet experience with any computing

1.3 Corporate strategy of Samsung Samsung

Samsung Electronics commenced its operations in India in December 1995 and is today a leading provider of Consumer Electronics , IT and Telecom products in the Indian market. Samsung India is the Regional Headquarters for Samsungs South West Asia operations, which provides employment to over 8,000 employees with around 6,000 employees being involved in R&D. In 2010, Samsung India achieved a sales turnover of US$3.5 billion.

Samsung began operations in India through its manufacturing complex located at Noida (UP), which today houses facilities for Colour Televisions (including 3D, LED and LCD Televisions), Mobile Phones, Refrigerators, Washing Machines and Split Air Conditioners categories. Samsung commenced operations of its second stateof-the-art manufacturing complex at Sriperumbudur, Tamil Nadu in November 2007. Today, the Sriperumbudur facility manufactures Colour televisions, Fully Automatic Front Loading Washing Machines, Refrigerators and Split Air Conditioners. Samsung India has two R&D Centres in India at Delhi and Bangalore .While the Delhi R&D Centre develops software solutions for hi-end televisions such as Plasma TVs, LCD TVs and Digital Media Products, the Bangalore R&D Centre works on major projects for Samsung Electronics in the area of telecom, wireless terminals and infrastructure, Networking, SoC (System on Chip) Digital Printing and other multimedia/digital media as well as application software.

Samsung India is a market leader in product categories like LED TVs, LCD TVs, Slim TVs and Side by Side Refrigerators. While it is the second largest mobile handset brand in India, it leads in the smart phone segment in India.

Samsung India has won several awards and recognitions for both its corporate initiatives as well as its product innovations in audio visual, home appliance, IT and telecom product categories.

Apart from development of innovative technology, Samsung places great

importance on acting as a responsible corporate citizen in the communities where it operates. Its CSR programs respond to the social and environmental needs and seek to give back to communities that support the company. In 2009, Samsung launched the companys Corporate Social Responsibility initiative Samsung Hope Project with projects in the areas of education, culture, sports, social welfare and community development. Each program under the Hope Project uniquely addresses the needs of individual communities while emphasizing on innovations for development of the community including education, technology, engineering and IT technical training.

Growing to be the best: Samsung India aims to be the 'Best Company' in India. 'Best Company' in terms of the internal workplace environment, our manpower, our products as well as our efforts to make our customers happy through our products and services. Samsung aims to grow in India by contributing to the Indian economy and making the lives of our consumers simpler, easier and richer through our superior quality products. "Our aim is to gain technological leadership in the Indian marketplace even as our goal is to earn the love and respect of more and more of our Indian consumers."

Samsung India is working with and contributing to the development of the domestic component industry in the country. The Company is working with its partners to improve their product quality and processes. Thus, Samsung vendors are sent to different Samsung subsidiaries to meet the Samsung overseas vendors in order to benchmark their own processes. All the components used by Samsung for manufacturing its products are 'eco friendly' as per ROHS norms.

The Samsung Philosophy: At Samsung, we follow a simple business philosophy: to devote our talent and technology to creating superior products and services that contribute to a better global society.Every day, our people bring this philosophy to life. The result is that all of our productsfrom memory chips that help businesses store vital knowledge to mobile phones that connect people across continents have the power to enrich lives. Our Values: We believe that living by strong values is the key to good business. Thats why these core values, along with a rigorous code of conduct, are at the heart of every decision we make. People: Quite simply, a company is its people. At Samsung, were dedicated to giving our people a wealth of opportunities to reach their full potential. Excellence Everything we do at Samsung is driven by an unyielding passion for excellenceand an unfaltering commitment to develop the best products and services on the market. Change: In todays fast-paced global economy, change is constant and innovation is critical to a companys survival. As we have done for 70 years, we set our sights on the future, anticipating market needs and demands so we can steer our company toward long-term success. Integrity: Operating in an ethical way is the foundation of our business. Everything we do is guided by a moral compass that ensures fairness, respect for all stakeholders and complete transparency.

Co-prosperity: A business cannot be successful unless it creates prosperity and opportunity for others. Samsung is dedicated to being a socially and environmentally responsible corporate citizen in every community where we operate around the globe.

Vision 2020 Samsung Electronics' vision for the new decade is to "Inspire the World, Create the Future." We are committed to inspiring communities around the world by developing new technologies, innovative products and creative solutions. We are also committed to creating a brighter future by developing new value for our core networks: industry, partners and employees. Through these efforts, we hope to contribute to a better world and a richer experience for all.

As part of our new vision, we have mapped out a specific plan of reaching $400 billion in revenue and becoming one of the worlds top five brands by 2020. To this end, we have also established three strategic approaches in our management: creativity, partnership and talent. The future as we buid on our previous accomplishments, we look forward to exploring new territories, including health, medicine and biotechnology . We are commitied to being a creative leader in new markets and becoming a trult no.1 business going forward.

Chapter 2 2.1 The Smartphone industry

The Smartphone industry is characterized by having quite a diverse set of players. There are hardware developers, software developers, apps developers, manufacturers, companies who only license their patents, carriers, old players, newcomers and many others. Some companies are active within most areas while others only focus on a single or few areas. As mentioned in the delimitation, the thesis will primarily focus on the Smartphone vendors. A short description of the operating systems (OS) providers can be seen in appendix A. The next section will be a short description of the three chosen Smartphone vendors in the Smartphone industry.


The first company to be described is the main company in this thesis, Nokia, and will be followed by the two industry leaders, Samsung.

NOKIA HISTORY AND BACKGROUND: Nokia are one of the traditional players and they were the industry leader in the total mobile phone industry. Nokia started as a company in 1865 and have been a forestry -, a rubber-, a cable, an electronics- and a mobile phone company during its lifetime. Nokia began to experiment with telecom equipment during the 60s, but the first many years were not successful. Their mobile phone business became a success when present chairman of the board, Jorma Ollila, started as CEO in January 1992. Nokia sold a lot of business divisions and began to focus on mobile phones. Nokia and Ericsson were pioneers within GSM and when the European countries chose GSM as standard, the two companies got a good start within the mobile phone industry. Ollila has been a huge contributor for Nokias overall success since Nokia went from $3.5 billion in revenues by 1992 to $54.3 billion when he retired as CEO in 2006. The number of employees also more than doubled during that period, since Nokia went from having 27,000 to 68,000 employees. Nokia were well aware of the convergence between the Internet and mobile

phones. In 1998 they joined up with Ericsson, Motorola and Psion to develop Symbian, since they realized that the future competition would be within software. Nokia would rather compete within the hardware part, which is one of Nokias main forces and wanted to neutralize the software competition by developing a common software base. In 2002, Nokia began to focus even more on the Smartphone business and invested intensely because of pressure from Microsoft. Nokia got a good start within the Smartphones market, but their success did not last as their dominance was shrinking. In 2010, Samsung and Sony Ericsson were the last to leave Symbian in favour of Android. Nokia reacted by hiring the former head of Microsofts business division, Stephen Elop, as their new CEO by September 2010. Elop quickly realized that Nokia could not deliver the same experience as Apple or Android and he knew that something radical had to happen. By February 11th 2011 Stephen Elop announced that Nokia were going to cooperate with their former competitor, Microsoft to adopt Windows Phone 7.5 (WP7.5) and that their own Smartphone OSs, Symbian and Meego, would be phased out.

BUSINESS MODEL: Nokia differentiate themselves by being a manufacturer of the Smartphones compared to the new Smartphone competitors. Nokia claim that manufacturing is one of their main competences and this will be further described in the section about their innovation processes. Nokia have prioritized cost since they are aware of decreasing prices during a products life cycle. This means that they primarily earn their money by selling their own produced Smartphone with Microsofts OS installed.

NUMBER OF EMPLOYEES: Nokia had over 132,000 employees by mid 2011, and Nokia had manufacturing employees. By 2010 Nokia had 17,200 R&D employees, but Nokia have fired several R&D employees after they started the collaboration with Microsoft to make their R&D department more efficient.

HISTORY AND BACKGROUND: Samsung are also one of the traditional players within the mobile phone industry and they released their first mobile phone in 1988. Samsung are one of Nokias main competitors and the two companies compete in both the Smartphone market and the feature phone market. In 2010 Samsung sold 281.1 million mobile phones compared to Nokias 461.3 million, making Samsung the second largest player within the whole mobile phone industry the total mobile phone sales. Samsung did, however, not get the best start within the Smartphone market as they only shipped 5.5 million Smartphones in 2009 which added up to a market share of 3.2%. One of the reasons was that Samsung did not have the sufficient OS to become a success within the Smartphone industry. Samsung were, nonetheless, able to change their strategy and have become one of the main players of the Smartphone industry by introducing Smartphones that used Android and maintain their hardware advantages. Samsung gained a lot of market share by introducing the Samsung Galaxy S-line in June 2010, which is their main contender against Apples iPhone. BUSINESS MODEL: Samsung earn their money by selling mobile phones, but also by selling spare parts. Samsung are, as one of the traditional players like Nokia, quite interested in scale. They become specialist within certain parts and their goal is to sell those parts to as many as possible. Samsung have a complex relationship to Apple since they are fierce competitors fighting for the industry leadership in the Smartphone industry. But Samsung are also one of Apples key suppliers of flash memory, displays and processors. Apple have become the single largest customer for Samsung as 4 % of Samsungs revenue in 2010 originated from Apple. Samsung use several Smartphone OSs, but their main OS is Android which will be elaborated in Samsungs innovation processes. NUMBER OF EMPLOYEES: Samsung Electronics had over 190,000 employees by July 2011, but it is uncertain how many worked within the mobile phone business part since Samsung Electronics has several business areas. They have an unrevealed number of employees within the manufacturing, but Samsung have assessed that they had about 8,500 employees involved in mobile phones R&D


Nokia were by far the biggest player on the Smartphone market just some years ago. Nokia had approximately half of the Smartphone market in 2008, but the market shares fell to 39% in 2009. Their decreasing market shares continued during 2011 and Nokia were passed by Apple and Samsung in the second quarter of 2011. Nokia had 15.2 % of the Smartphone market shares in the second quarter of 2011 and they were the third largest competitor within the Smartphone market. Nokia had well over 50 % of the total profits in the second quarter of 2007 within the mobile industry, but Nokia actually lost money in the second quarter of 2011. Nokia have the lowest score in the second quarter of 2011 between the three hardware producers when it comes to market share and profits share. Nokia are although close to the two others competitors when it comes to market share, indicating a high score on the horizontal axis of the market portfolio, but still well beneath the two industry leaders since they had no profits.

Samsung have experienced a lot of growth during the last couple of years. They only had 5 % of the Smartphone market share in the second quarter of 2010 while they had 17.5 % of the market share in the second quarter of 2011. Samsung grew by 519 % when it comes to number of sold Smartphones. One of the main reasons for their Smartphone success was strong sales from the Samsung Galaxy S2. Samsung have, to some degree adapted, Apples one super Smartphone model per year, as the first Samsung Galaxy S was introduced in June 2010, while Galaxy S2 was introduced in June 2011. The Smartphones are also adapted for carriers different requests. Both Nokia and Samsung have not been able to capitalize the Smartphone market as well as Apple. Samsung were, nonetheless, able to capture 15 % of the total profits, but this number also includes profits from other Smartphones and their feature phones. Samsung have a high score when it comes to market share and profits since their market share and profits are between Apple and Nokia. This also means that Samsung lies between Apple and Nokia on the horizontal axis of the market portfolia.


NOKIAS INTERNAL INNOVATION PROCESSES Innovation strategy and their goal: Nokia are not always the first company to come up with a new innovation, but they try to be at the market at the right time. Nokia do not have 4G or dual core installed on their Smartphones. Nokia have been set back by the cooperation with Microsoft since WP7.5 does not support dual core yet. Nokia are known for their hardware and design capabilities since they make excellent screens, cameras and other hardware parts. The reviews in the technological portfolio confirm the design part, but they are lacking within some of the hardware parts. Nokia focus a lot on cost and Nokia consider cost as one of their primary reasons for their success. Chairman Ollila once stated: Nokias leadership is about cost, cost and cost . Nokia argue that they prepare themselves for prices erosion since they are aware of declining prices during a products life time. Their cost advantages enable Nokia to enjoy when people buy more expensive products during good times and during bad times where customers might trade down. Nokia can enjoy cost advantages since they focus on modularity. This means that many of their phones are 60-80 % alike while the rest of the phone is for local adaptations and to differentiate the phones for the different segments. This enables economies of scale within R&D, production and sourcing. Nokia have several factories placed all over the world to be able to respond to local demand fluctuation, and let the local factories specialize in the local adaptations. Nokia are planning to keep the manufacturing part for a while since they still are more efficient than possible suppliers. The manufacturing part might be outsourced if possible manufacturing suppliers become more efficient than Nokia. Nokia have a long term- and a short term R&D department. The long term R&D is done by Nokia Research Center (NRC) which in 2010 had 400 researchers employed all over the world. NRCs primary work area is trying to predict mobility in 3-7 years and to disrupt the current technologies. NRC are also supporting the short term R&D so the units can master the new technologies. NRCs purpose is to improve Nokias IPR situation, which is an important mission. Nokia have invested $60 billion in R&D during the last two decades which have given Nokia about 11,000 patents and most of these patents are very important for the mobile industry. Nokias investments in

R&D rose by a fivefold during the 90s and Nokia seemed to be proud of spending more on R&D than Apple.168 Short-term R&D is done by Nokia Units and their mission is to implement the innovations as smooth as possible into Nokias organization. The risks from a new technology have been reduced through NRCs work and Nokia Units will try to scale up the new technology to gain cost efficiencies. Number of models: Nokia had plans to launch 40 new mobile phones in 2011 and 10-12 of those would be new Smartphone models. Their plan was to release two Smartphones for the low end, 4-5 to the middle end and 3-4 for the high end. Nokias multiple model introductions could potentially make their own products compete against each other. One reason for Nokias many introductions is that they do not consider mobile phones as a rich man toy. Nokia believe in their slogan which says: Connecting people and it is about making mobile phones available to everybody. Nokia want to serve all segments in the industrialized- and the emerging countries as well. The focus on emerging markets has grown the last couple of years since Nokia want to exploit their cost advantages. In 2009 they were able to sell a mobile phone for $30 ( Rs 1950\-) to the emerging countries. The emerging countries are increasing their parts of the worlds total GDP and Nokia are interested in selling to these countries from start. Design and market research: Cost is not their only strength since Nokia are known for their hardware and design capabilities. Nokia want to produce products that people want and love to use. Nokia had a large design team which employed 340 designers, psychologists, researchers, anthropologists and technology specialists. They were placed all over the world, e.g. in Finland, England, China, USA etc. and they tried to spot the next consumer trend. Nokias vision is to be: ... recognized as the most consumer-focused, customer-centric organization on the planet. Nokia try to achieve this by conducting huge researches, e.g. by a survey which included 74,000 respondents from 26 countries, to figure out what the customers needs are. In this research, it was concluded that consumers only spend the phone for calling 20 % of the time, and that the consumers are using the Smartphone for texting, taking pictures, recording videos, watching TV, play games, surfing, emailing, navigating, scheduling etc.

NOKIA EXTRAS Nokias software problems: Nokia knew that software was the differentiating part since they claimed that 75-80 % of the value was created through software. Nokia had spent over a decade to develop and improve Symbian, when Nokia chose to shut it down in February 2011. It was important for Nokia to have their own Smartphone OS since having their own software would secure their independence. Symbian was considered as an excellent platform for the phone part, but the ease of use and program for applications were terrible compared to the iOS and the Android. The user experience is important since it is the interaction with the customer. It is argued, that Symbian failed because of mismanagement by Nokias executives. Nokia did not have the right software engineers employed for the different parts. Nokias main focus was on hardware and the management did not take the software development seriously. However, just before Elop was hired, the Symbian OS was almost becoming a proper OS and it had become easier for 3rd party developers to make apps for Symbian. One developer assessed that Symbian was about 80 % correct and were close to the last 20 %. Nokia also tried to develop Meego with Intel as an alternative to Symbian which will be mentioned in inter-firm collaboration later in this section. Critique of Nokias focus on cost: One of the reasons for failing within the Smartphone market might be because of Nokias ranking between cost and innovation according to a former employee. Nokia had several good ideas from talented employees, but Nokias primary focus was on economies of scale. Nokia claimed that a possible technology did not have to become a blockbuster, but Nokia had also grown too big and were not able to encourage their employees to be creative and in some cases discouraged them. Nokias managers were also not able to evaluate the employees ideas well enough and trashed good ideas. Another problem was that employees were hired with the wrong competencies and that affected the user experience. Nokia, for example, did not have enough employees who focused on usability and ease of use. There are several comments from former employees available about Nokia who claim that costs are Nokias ultimate goal.

NOKIAS USE OF OPEN INNOVATION Nokia have a long history of using open innovation since Nokia is a small country multinational. Nokia do not have the sufficient access to talents, ideas or capital through their home country. Nokia were already cooperating with universities in the 1960s, and later in the 90s Nokia were cooperating with universities, research institutes and other telecom and mobile companies. Nokia are proud of their use of open innovation and claim that they are more open compared to their competitors. Nokia know that one company does not have all the good ideas themselves and that a lot of ideas are placed outside the company, e.g. at customers, competitors etc. University collaboration: Nokia are cooperating with about 100 universities all over the world, including universities from USA, Western Europe, China, India and Africa to ensure that Nokia capture local trends. They are working closely with two Finnish universities within user experience, mobile security, power management, computing architecture, cognitive radio, sensing and context, media representation, social media, mixed reality solutions and 3D platforms. But the cooperation with the universities does not always give positive results. A company has to go through a lot of complex negotiation with the university to make sure that the investments give positive results. User driven innovation: Nokia are cooperating with end users by engaging them through Nokia Beta labs. When Nokia have made new user applications, Nokia beta test them to get reactions from the users. Nokia also have Nokia Pilots where users are implemented in the \ development process. It is a program where users can send in their ideas and come up with possible improvements. Nokia will consider implementing these suggestions to improve their products. Venture capital: Nokia have a venture company, called Nokias Growth Partners (NGP), and they are searching for companies in the growth stages. NGP managed a portfolio of interesting mobile companies worth of $250 million in 2010 and also managed other investments worth of $100 million. NGP have offices in Silicon Valley, Finland, China and India. NGP usually invest around $5-15 million and are searching for companies

that can turn into a $100 million company. The companies have to be placed in USA, Europe or Asia; have commercially available products or services; have growing revenues in growing markets and have the experience of being a supplier for a major industry participant. The companies should be supported by Nokia so they can become a global leader within their field. Acquisitions: Nokia have acquired several companies and the focus has primarily been within Internet service companies and software companies during the last couple of years. Since December 1997 Nokia have acquired 43 companies which include several network, multimedia and service companies. The most expensive acquisition is Navteq which they bought for $8.1 billion. Navteq is a mapping service and it has been mentioned as one of the reasons that Nokia chose WP7.5 instead of Android since Google offers the free Google Maps. Interfirm collaboration: One of Nokias newer inter-firm collaboration is the cooperation between Nokia and Microsoft which was announced by February 2011. Nokia were considering both Android and WP7.5, but Nokia chose WP7.5 since Microsoft had fewer hardware partners and Nokia had better opportunities to get more attention. Microsoft would deliver the software while Nokia would provide the hardware. Nokia also received $1 billion for promoting WP7.5, but they will pay licenses for every Smartphone sold with WP7.5 installed. Microsoft will also pay licenses for using Nokias patent portfolio. Their goal was to innovate with greater speed to give their customers better products. This was not the first collaboration agreement between Nokia and Microsoft since they also had cooperated in May 2009, May 2010 and August 2010 within different areas. When the newest cooperation was announced there were lots of negative reactions and many said that two losers do not make a winner. However, few also believed that the cooperation could be good for both parties and especially for Nokia, since they did not have the right software engineers employed. OS supplier when they should have done like Samsung and have several OS suppliers. Up to a thousand employees from Nokias offices in Oulu and Tampere left their offices in protest when the announcement was made. The cooperation has turned out to be a surprise since Nokia and Microsoft were able to release their first Smartphone in mid November 2011.

Nokia have struggled with rumors about Microsoft wanting to buy Nokia. Even Danske Bank have speculated whether Microsoft would buy Nokia in the first half of 2012. These speculations seem to be fiction since Microsoft always have been a software company and mixing Microsofts management into Nokias organization could turn out bad. One of the positive aspects would be that Microsoft would acquire Nokias very valuable mobile phone patents. Nokias CEO Stephen Elop, a former Microsoft executive for two years, has been accused of being a trojan horse. And the fact that Stephen Elop still has 130,000 shares in Microsoft, worth $3.18 million, is extra fuel for the many conspiracy thinkers. It may be an unthinkable situation for now, but Nokia still have to consider them as serious threats since the rumors are continuing. Joint ventures: Nokia are active within joint venture and Nokia try to find a local partner with local knowledge when entering a new market. Nokia did this when they entered China in the 90s. They also started a joint venture with Siemens called the Nokia-SiemensNetwork, NSN. Nokia realized that they could not invest in the emerging network type LTE (Long-Term Evolution and one of the candidates for 4G today) by themselves and had to partner up with another company. They joined forces in 2005 and started the production in 2007. By 2008 NSN has grown into a huge business since they had over 60,000 employees and had customers in over 150 countries. But both companies wanted NSN to succeed and have managed to keep it alive. Nokia and Siemens have, however, tried to sell NSN or find a third partner in 2011 since NSN was a money losing business. By September 2011 both companies had to provide 500 million in capital to keep NSN alive. The joint venture will officially end in 2013. Spin-outs: Nokia have tried a different type of spin out when Nokia had to close their Danish division. 1,000 former employees were encouraged to start their own company and 40 of them were able to start their own business. Nokia helped them by giving them money and allowing them to stay in Nokias building as long as Nokia rented that building. The Danish manager wonders if this could be an option during good times.


Want: Nokia have the same overall goal as Samsung since Nokia want to be a cost leader. Their focus on cost will be one of the main topics in the discussion chapter. Another goal is to provide good design and good hardware. To reach their goals, Nokia use a long list of open innovation tools, which includes cooperation with over 100 universities all over the world; joint ventures; including customers; have suppliers; acquiring a lot of companies and by having a venture capital company. For a decade, Nokia also wanted to provide their OSs, but in the beginning of 2011 they realized that they could not provide this part as well. They finally gave up their own software part and began to cooperate with Microsoft. Find: Nokia were for many years the market leader and technology leader within the mobile phone industry which eased the processes of finding the best partners. However, times have changed and Nokia do not enjoy these titles any longer. This has complicated their find processes since Nokia have to compete against Apple and Samsung who are currently placed higher than Nokia within the integrated portfolio. Nokias situation may force them to cut some of their suppliers which do not make this phase easier. Potential suppliers will prefer to cooperate with Apple and Samsung to ensure future revenues. There were not that many OS providers for the OS part so the find part within the OSs was quite simple. There were only two OS providers, Microsoft and Google, who were large enough to serve Nokia.

Get: When Nokia decided to find an OS supplier, the two biggest OS suppliers, Google and Microsoft, were fighting to become Nokias OS suppliers. Android was supporting Nokias former Symbian strategy to neutralize the OS competition between Smartphone vendors, but Nokia still did not prefer Android. A huge onetime payment and cross licensing have helped Nokia to choose Microsoft against Google.

Manage: Nokia do a lot of open innovation and the many open innovation partners must require a lot of management from Nokia. Nokia say for example that cooperating with a university requires a lot of preparation to ensure, that a company gets usable output. The cooperation seemed to have rough conditions: How would a Finnish organization cooperate with an American organization? The two companies are huge in each of their area, potentially leading to frictions between the two companies. However, Nokia and Microsoft were able to introduce their first common Smartphone in November 2011 which was a huge surprise for many. It has been estimated that Nokia have sold about 1 million Lumia 800 Smartphones from when they introduced it until ultimo 2011. It is a decent start, but still far from 30 million iPhones, which Apple sold in the last quarter of 2011. The integration between Nokias hardware and Microsoft OS seem to be a success and there is not much information about frictions between Nokia and Microsoft during the first collaboration period. Nokia and Microsoft have collaborated before and that may have eased up the managing phase. A serious aspect is the continuing rumors about Microsoft wanting to buy Nokia. The two other mayor OS players within the Smartphone industry, and Google, are also selling Smartphones which may start a new trend and force Microsoft to buy Nokia. When assessing Nokias innovation processes it becomes apparent that Nokia want to do a lot and be a part of several areas. They want to produce Smartphones and feature phones in every price category which are adapted to local trend. Nokia are the ones who use the most open innovation tools compared to the other two competitors, who have a very narrow focus within open innovation tools. Nokia have felt that they were forced to use open innovation since Finland did not have enough talents or ideas. They use all three types of open innovation which was described in the theory part. Nokia use external knowledge exploration by acquiring knowledge/technologies; they use external knowledge exploitation by licensing out and use external knowledge retention since they are a part of learning networks to enhance their knowledge base.


Innovation strategy and their goal: Samsung are known to make a lot of incremental improvement on others radical innovations. Samsung receive a lot of patents and they were number two in US when it came to granted patents. Samsungs overall strategy is to be a fast follower when the radical design has proven to be a success. Samsung are particularly interested in business areas that are small, but fast growing. The new industries have to be capital intensive and they prepare for the new industry by doing research within the new technology to increase their knowledge. When the timing is right, Samsung invest a lot of money in production facilities to gain cost advantages from start. They want to become a key supplier to as many as possible to lower their manufacturing cost. Their strategy usually pays off since Samsung become a success within the new industry. This has also been the case for the Smartphone industry where Samsung currently are one of the industry leaders and are providing Apple with several chips to get higher volume. Samsung are one of the leading suppliers of flash memory for the Smartphones which means that Samsung will not experience shortage supplies of chips and flash memory as some of the competitors might experience. Samsung are also manufacturing their own Smartphones and their manufacturing advantages have enabled them to fight competitors in several price segments. Samsung are more focused than Apple to have the newest technology installed which has already been mentioned. Samsung came up that they had the superior Smartphone. Number of models: The exact number of mobile phone introductions from Samsung is not known, but they have a lot of introductions per year since they have phones within the Smartphone and feature phone market for every segment. Samsung have had the same Smartphone strategy as Nokia, since Samsung have several models for the low, middle and high end of the market. Samsung are also able to provide much of the same entertainment package as Apple, since they produce tablets, laptops and many other electronic products. Samsung are fighting both Apple and Nokia in several price and product categories. Design and market research:

Samsung have been accused of copying the iPhones design and have also been sued by Apple for infringements. Samsung have acted as a fast follower within this part which is confirmed when looking at pictures of the iPhone and comparing it to a Samsung Galaxy S2. The Samsung Galaxy S2 is just bigger than the iPhone. Samsung have also copied some of Apples other accessories since they copied a USB adaptor, a power adaptor and the boxes for some other products are almost alike.A US judge has although rejected the accusations since she does not think that Apple has suffered irreparably - Apple reacted by appealing this decision. There is no available information about whether Samsung conducts market research. SAMSUNGS USE OF OPEN INNOVATION Interfirm collaboration: Samsung are accused of not being users of open innovation, but Samsung are quite active in one area since they cooperate with several Smartphone OS providers. This has also always been their software approach, since they already in 2002 were users of Symbian, Microsoft and the Palm operating system. Their current OS approach includes Android, WP7.5, their own OS, Bada and they have just started a new cooperation with Intel to develop Tizen. Samsung have Android for the high end of the Smartphone market while Bada are for the lower segments. Samsung integrated Android late since they, like other Smartphone competitors, had missed the first Android opportunity. Android has become a very important factor for Samsungs success. It is estimated that 15.4 million out of 19.9 million Samsung Smartphone sales in the second quarter of 2011 were phones with Android installed,which means that Android accounted for 77 % of Samsungs Smartphone sales. Samsung and Google have the second largest pool of apps since they have about 400,000 apps which can be observed. The integration delay has been mentioned as one of the reasons that Google have acquired Motorola Mobility to ensure that the latest version of Android is installed faster. Ensuring better integration between software and hardware has also been mentioned as a reason. Samsungs newest cooperation, Tizen OS, with Intel and Linux is a replacement of Meego, which Nokia and Intel had abandoned in 2011. But Samsungs involvement is unsure since they already have invested a lot in Android, WP7.5 and their own Bada. Tizen could be another alternative to Googles Android as Samsung seem to prefer several OS alternatives after Googles acquisition of Motorola

Mobility. Samsung fear that Google will prioritize Motorola higher than their other hardware manufacturers. It will be hard work for Samsung and Intel to make Tizen work, since the two companies have very different cultures. It will also be a challenge for them to attract developers as a lot of developers are disappointed after the failures of Maemo (Nokia), Moblin (Intel) and Meego (Nokia/Intel). Meego will be described further in Nokias open innovation part. Tizen is predicted to have a slim chance for success. Licensing: Samsung have also been forced to pay licenses to e.g. Apple which was mentioned in the technological portfolio. ASSESSMENT OF SAMSUNGS INNOVATION PROCESSES Want: Samsungs primary focus is to lower their manufacturing cost as much as possible. This is best exemplified by their complex relationship with Apple. Samsung also search for inspiration from Apple to find a quick shortcut within the design part. They are apparently not the ones with the radical innovations, but are a quick follower who comes up with a lot of incremental improvements. Their E is to have an open approach towards Smartphone OSs and let others do the innovation within this field. They are not interested in having one OS provider, but prefer to have multiple OS providers to ensure that they do not get too dependent on one OS supplier. Google is, nonetheless, by far their largest OS provider since they accounted for 77 % of their Smartphone sales in the second quarter of 2011. Find/get: Their primary use of open innovation, Smartphone OS cooperation, does not require a thorough review within the find/get phases since Samsung is open towards every available OS. This has been their OS strategy for a long time and will also be their OS strategy for the future. However, Googles acquisition of Motorola Mobility has required some changes within the management parts.

Manage: Samsung have become quite unsure whether Google have some hidden intensions or not. Google claimed that they bought Motorola Mobility to protect their hardware manufacturers by buying Motorolas patents. This has been questioned since Google could have bought Motorolas patents instead of buying the whole company. Googles cooperation history tells that a company cannot always trust Google since they had a seat within Apples board before the launch of Android. Apple were very disappointed with Google when they introduced Android since they were close partners. Samsung have reacted by intensifying their cooperation with Microsoft and begun a new cooperation with Intel to make a new OS, Tizen. But it is a tricky situation: Many of the Smartphone manufacturers would turn to Microsoft if Google went solo and Google would really like avoid this. Their primary Smartphone revenue source is ads revenue generated through Androids browsers which is described in appendix A. Samsung would also have difficulties to replace 77 % of their market shares with another OS. Google will probably keep providing Android for free, but they will try to install Android updates faster on their own Smartphones and ensure that the software and hardware integration improves. When assessing Apples and Samsungs path to success it becomes apparent that the two have chosen entirely different paths. Apple are a newcomer compared to the two other competitors and they are not interested in manufacturing. Samsung are one of the traditional players within the Smartphone industry and their main focus is lowering manufacturing cost. Samsung have although realized that they need to open more up by increasing their cooperation with partners and acquire more companies. Samsung have, to some degree, been a part of the closed innovation paradigm when assessing their overall innovation strategies. Samsung do not have the best experience with other open innovations tools other than software cooperation. They tried to acquire a PC maker in the 1990s, but the integration was a huge failure. Samsung are although aware of the necessity to get access to external knowledge through sales channels and customers.

The conclusion will first answer the three research questions and then answer the problem statement to sum up the thesis findings. Where are Nokia placed in the integrated portfolio compared to industry leaders, Samsung? Nokia were, in the Smartphone market portfolio, well behind of Samsung in the second quarter of 2011. Now a days Nokias Market declining the progress due to the other Market Leaders like Apple & Samsung. Can Nokia optimize their use of open innovation to regain the industry leadership within the Smartphone market? Nokia use a lot of open innovation tools but its not very well received comparatively to Samsung and others.


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(Your profile information will be held confidential unless agreed otherwise.) ____________________________________________________________ Do you own a mobile phone? YES NO Which model/make? Nokia Samsung Other When did you acquire your first mobile phone? During Schooling During College During Job Which one is the most common service provider with your mobile phone? Airtel Vodafone Tata indicon Other

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