Laura Turpack

Adrian Bucher
Shane Kato
Jason White
10/31/07

Preliminary Strategic Audit Report: Nokia

Executive Summary

Nokia is based in Finland with operations in Europe, the Middle East, Africa,

China, the Asia-Pacific, North America, and Latin America. In Quarter 3 of 2007,

Nokia’s market share grew to 39%. Nokia will sell approximately 430 million handsets

this year which is more volume than its competitors; Motorola, Samsung and

Sony/Ericsson combined. Nokia’s revenue is projected to grow about 30% this year to

$76 billion, with profits.1 From 2006 to 2007, Nokia increased mobile phone sales by 3%

and more notably, they increased operating margins by 78%.2 Furthermore, Nokia is a

progressive company. They have been around for 142 years and they continue to stay on

the cutting edge. Nokia plans to create an internet services and software segment of its

company in January 2008. The company has already purchased a map database, a

phone/video sharing site called Twango and it already offers services in downloading

music, navigation, email and games.3

Currently, Nokia has operations in four segments: Mobile Phones, Multimedia,

Enterprise Solutions, and Networks. Within the mobile phone segment, Nokia sells

mobile phones and devices based on GSM/EDGE, 3G/WCDMA, and CDMA cellular

technologies.4 Nokia is the market leader in all of the fast growing markets including

China, Southeast Asia and India. Furthermore, Nokia’s global sales and manufacturing
1
http://www.forbes.com/free_forbes/2007/1112/DONOTTOUCH048.html?partner=yahoomag
2
http://www.nokia.com/link?cid=EDITORIAL_606557
3
http://www.forbes.com/free_forbes/2007/1112/DONOTTOUCH048.html?partner=yahoomag
4
http://finance.yahoo.com/q/pr?s=NOK
are so strong that their profit margins are wide and they are able to capture 80% of the

industry's profit with only 38% of the volume. However, Nokia’s sales have been lacking

in the United States. The following analysis will focus on Nokia’s performance in the

global mobile phone segment, particularly what Nokia is doing well in the developing

regions and what they are doing poorly in the United States.

Nokia SWOT Analysis

• Strengths

o Experience – 142 year history

o Wide product range

o Distribution channels in developing markets

 For example, direct coverage of 90% of Chinese market with offices in

80 plus locations. Nokia has expanded beyond large cities to the lesser

developed markets.

o Economies of scale

 Lower logistics costs than competitors.

 High margins.

 Do it yourself manufacturing – manufactures 75% of its phones

o Market share

 Nokia accounts for half of the global smart phone market.

 38% of the global volume.

• Weaknesses
 o Global standards & global phones.

 Tried to apply these phones to all regions.

 Didn’t customize phones based on customers in each region.

 Responsiveness/adaptability to customers’ needs.

o Decrease in sales in the United States.

 Loss of market share – dropped from 33% in 2002 to 10% in 2007.5

 Low level of Nokia phones stocked by carriers in the United States.

• Opportunities

o Leverage low logistics costs to further decrease prices in volume market &

increase profit margin overall.

o Provide internet services to capture this growing market.

 Integrate internet services with mobile phones to add value.

o Improve sales in the United States.

• Threats

o Growth in handset models to slow from 21% experienced over the past few

years to 10% in 2008.6

o The Google phone will encourage new entrants and Nokia may have to

compete with dozens of small firms instead of four large firms as it currently

does.

o Dilute brand by expanding into internet services.

o Overpaying for web services.

5
http://www.forbes.com/free_forbes/2007/1112/DONOTTOUCH048.html?partner=yahoomag
6
http://www.forbes.com/free_forbes/2007/1112/DONOTTOUCH048.html?partner=yahoomag
o Alienate the carriers.