Edexcel BTEC Higher National Diploma at NEU – Business Strategy – Individual Assignment 1

Hanoian Business Consultant Ltd

To: Consultant Manager

Date: November 11th 2008

Introduction

Nokia, a large Finnish industrial group, founded in 1966, started to expand in electronic
product areas in the 1970s and became the world’s number one with estimated 38% share of
global mobile device in 2007 with its over 110,000 employees, a net sales of over € 51 billion
and an operating profit of € 8 billion (Nokia, 2008, p.4).

Nokia, with Olli–Pekka Kallasvuo as its Chief Executive Officer (CEO), has stated its
mission and vision publicly, with quite detailed corporate objectives included.

This report, was created from Huu Chien Nguyen; a Consultant Officer of Hanoian
Business Consultant Ltd; to conduct, analyse and discuss about the following:

• The context of Nokia’s business strategy and the significance of its stakeholders
analysis

• Nokia’s external environment and organisational audits

• Nokia’s SWOT analysis and the application of strategic positioning techniques about

• An analysis of the current external environment in Vietnam

• Possible consideration for Nokia’s strategic analysis and

• A strategic plan for the entity

The main source of reference on which this report is based its theoretical issues on is
the guideline of the syllabus Edexcel HNC & HND (2004), Business Strategy, Aldine House,
London.

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1. Nokia’s business strategy and stakeholder analysis

1.1 The context of Nokia’s business strategy

The following mission, vision, goals and objectives and business strategy are stated in the
official website of Nokia (2008):

“There is a progressive and continuous increase in consumer involvement in technology

and communications globally.

Social networks are becoming central for how people communicate.

Nokia is a consumer led company.

1.1.1 Mission

. To help people feel close to what is important to them

. People want to be connected, independent of time and place in a way that is very personal to
them: Nokia connects people in new and better ways

1.1.2 Vision

. Nokia’s vision is a world where every one can be connected

1.1.3 Goals and objectives

. Strong infrastructure business with Nokia Siemens Network

. Nokia’s competitive advantage is based on scale, brand and service: scale based assets and
capability; leading brand and build further competitive advantages by differentiating the
company’s offering through services

. Compelling consumer solution with devices and services

1.1.4 Nokia’s business strategy

.Trusted consumer relationship: maximise Nokia’s lifetime to consumers; enhance and

capture market growth in emerging markets

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. Best mobile devices everywhere: take share and drive value across price bands and
geographies

. Context enriched services: take share of the Internet market by delivering winning solutions;
take share of the business mobility market”

1.2 The stakeholder analysis of Nokia

Stakeholder analysis is crucial to improve the business environmental knowledge of the

organisation. It could show the likely effects that a proposed strategy would have on different
groups of stakeholder.

Stakeholders are, by economists, divided into three groups as Internal–, Connected– and
External–stakeholders. Each of the groups would have different interests to defend and their
response risks. We quickly look into detail (the table was created based on the guideline in
Edexcel HNC & HND, 2004, Business Strategy, p.17):

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Stakeholder Interests to defend Response risk

(and related issues to Nokia)

Internal

Managers & Employees . Jobs/Carriers . Pursuit systems’ goals rather than

shareholder’s interests
(manufacturing capacity) . Money

(operating capacity) . Promotion . Industrial action

. Benefits . Negative power to impede implementation

. Satisfaction . Refusal to relocate

. Resignation

Connected

Shareholders . Increase in shareholders’ wealth, measured . Sell shares

by profitability, P/E (price-earnings) ratios,
(corporate strategy) . Replace management
market capitalisation, dividends and yield

. Risk

Bankers . Security on loans . Denial to credit

(cash flows) . Adherence to loan agreements . Higher interest charges

. Receiverships

Suppliers . Profitable sales . Refusal of credit

(purchase strategy) . Payment for goods . Court action

. Long-term relationship . Wind down relationship

Customers . Goods as promised . Buy elsewhere

(product-market strategy) . Future benefits . Sue

External

Government . Jobs, training, tax . Tax increases

(legal issues) . Regulation

. Legal action

Interest/pressure groups . Pollution . Publicity

(ecological environment) . Rights . Direct action

(working environment) . Other . Sabotage

. Pressure on government

Stakeholders have their roles, primarily divided into two categories as:

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1) Performance role as they are directly involved the value system (suppliers, distributors
etc.), which adds values to the products/services through stages of itself.

2) Support role (banks, government etc.) as they support the adding value group.

Stakeholders possibly have the sufficient power to influence on the strategy choices of the
entity’s managements.

There are, refers to Edexcel HNC & HND (2004), two aspects of stakeholder risk listed to
date:

i) Strategic options affect the interests of different stakeholders in varying degrees and

ii) They may response in the ways to reduce the attractiveness of the proposed strategy.

Businesses depend on their stakeholders at any time. However, the degree of dependence
varies, based on:

a) Disruption: is the stakeholder able to disrupt the plan (withdrawing from investors etc.).

b) Replacement: is the relationship replaceable.

c) Uncertainty: to which degree could the stakeholder cause uncertainty towards the plan (e.g.
how important to the firm is that amount of investment by this investor).

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2. Nokia’s external environment and organisational audit

2.1 The external environment audit

There are two ways to conduct an external environment audit, based whether on the
PESTEL factors or the Porter’s five forces.

2.1.1 The audit on external environment in Finland based on the PESTEL model

PESTEL is an mnemonic, stand for: Political, Economic, Social and cultural,

Technological, Environmental/Ecological and Legal. Here is an external environment audit
for Nokia’s business in Finland based on the PESTEL model.

i/ Political

The political environment in Finland is quite stable instead of there are different parties in
power at different points of time. Laws in Finland, like any of other parliamentary republic
countries, are set by the Parliament. Finnish laws are consistently set in macro since decades
(right after the World War II) so that there has never been any political crisis since.

In January 2002, Finland fully jointed the European Union (EU) with the introduction of
the Euro currency. Finnish laws then had to have several changes to adopt to the EU laws and
regularly receive directives from the EU Parliament. However, these changes were not that
significant that Finnish political environment could be said to be unstable to date.

Finally, Finland has pursued the policy of being neutral towards the East-West political
conflict since decades so that is unlikely that the country might run into any political
difficulty in the future.

ii/ Economic

Capital per head of Finland has breached the benchmark of $ 35,000 and brought total
GDP of the country to $ 246 billion in 2007, world rank 23 and 34, respectively. The
economics is expected to growth wealthy in the next 5 years period due to world’s
economists (International Monetary Fund, 2008).

The wealth of the Finnish economy as well as that of the Northern Europe and the Euro
zone as a whole are providing a stable background for high–tech businesses like Nokia. And

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that, fortunately, would be continued in the future due to analysis and forecasts of economists
around the world.

iii/ Social and cultural

Finland has had a long history of more than 1,500 years which has build up a strong
cultural base for its 62.5% urban population and mostly Lutheran protestant (Christian) today
(Cao L., 2007, p. 358). That means that business ethical and consumer commitments are of
vital important factor for any business to operate there.

Furthermore, consumers in such a developed economy have ever increasing complicate

demands so that Nokia is to give its best in order maintain the number one manufacturer even
in its home market.

iv/ Technological

Operating in the high–tech area, Nokia has a great deal of the high developed Finnish
technological infrastructure. There are plenty of highly qualified labour provided from the 5.3
million population of the country as well as a system of the best up–to–date technological
infrastructure such as telecommunication, electronics, energy industries etc.

However, that also means a hard competition between firms in the area of high–tech.

v/ Environmental/Ecological

Environmental has been a factor that Finnish government, like all the other three
neighbouring countries in Northern Europe (Sweden, Norway and Denmark), gave attention
to since long time ago (particularly since the acid rain in Sweden in the mid 80’s). Businesses
have to follow very strict environmental conditions by operating so that the production and
operation costs are seem to be high there compared with businesses operating in developing
economies.

On the other hand, Nokia has gain an environmental friendly brand in the mind of global
customers. It is a vital criterion nowadays for the sustainable growth in the long-term future.

vi/ Legal

Legal is mostly related to the political issue and was analysed above, in that the Finnish
laws are set by its Parliament with one or another changes due to directives from the EU

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Parliament. However, the Finnish legal system is stable to date and would most likely to
continue likewise in the long-term future.

2.1.2 The audit on external environment in Finland based on Porter’s five forces model

Michael Porter (1996) argued that there are competitive forces that influence
organisations in their competitive environment and these forces together will determine the
potential profit of the industry. He suggested a five forces model which consists of: the
threats of new entrants and substitute products/services, the bargaining powers of customers
and suppliers and the rivalry amongst current competitors.

i/ The threat of new entrants

It is unlikely that a new company, start from a scratch, would enter into the market of
Nokia in Finland or even any where in the global market due to the very high barrier of entry.

Specifically is that Nokia is operating as one of the oldest and most successful in its
mobile device industry so that it has already won lots of experiences, favoured access to raw
material and distribution channels as well as the economies of scale. These factors
collectively give Nokia great advantages in production and operating costs. Nokia’s highly
expected brand image is another significant point which would discourages new starters.

Finally, there is a great capital requirement for new entrants in such a high–tech area of
business.

Summarily, it is most unlikely that there would be any new entrant into the mobile device
manufacture market since all the potential competitors are already attended in Finland as well
as in Europe and any where else in the developed world.

ii/ The threat of substitute products/services

Substitute products (Motorola, Ericsson, etc.) and services (Apple, Voodoo Phone, etc.)
to Nokia’s ones are plenty on the market today so that there is a very hard competition in the
mobile device manufacture market with Nokia, Motorola and Ericsson fighting at the top and
Nokia versus Apple in the same matter of the 3G high–tech communication area.

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iii/ The bargaining power of customers

The bargaining power of customers raise together with the hardness of the competition in
the manufacture market since they have more options to choose and thus consequently
increase their degree of complexity in demands.

However, Nokia’s products’ quality and characteristic are factors that reduce these power
of its customers since they could not purchase from its competitors for having a personalise
mobile device in high quality like that would be by Nokia.

iv/ The bargaining power of suppliers

Bargaining power of suppliers of Nokia is not unexpectedly high since Finland has plenty
of raw materials resources in its 338,000 square kilometres. Furthermore, Nokia could obtain
raw materials cheaply from any of the two neighbouring countries, Russia and Sweden,
which both have large land area and low population density.

The supply of high qualified staffs, like discussed previously, has never been a matter in
the top developed area in the world of Northern Europe.

v/ The rivalry amongst current competitors

This is the most critical issue in this external environment audit. There are many, if not
too, rivalries manufacturer to Nokia in Finland as well as in the global market, significantly
out standing of them are Motorola and Ericsson who both shared each about 25 to 30% of
global mobile device market compared with 38% of Nokia in 2007.

The mega exit barriers (fixed assets break-up, redundancy payments, effects of
withdrawal and governments’ pressure) face these internationalised entities provide them no
way out but to compete aggressively.

However, the rapidly and stabile growth of personal high–tech communication market
would provide plenty of development chances to all competitors of in the battle and thus
reduce the hardness degree of the mortal competition.

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2.2 The organisational audit

2.2.1 The position audit, resources and limiting factors

Nokia has plenty of sources serve for its material inputs and highly qualified staffs
requirements like discussed just. It also has no difficulty in the matters of fixed assets,
working capital and finance with its successful businesses in the last decade which has
brought the company into the top of very few organisation with the net sales of more than $
65 billion globally in 2007 (ranked 64 between GDP of the countries, just 2 places behind
Vietnam, and about equal to Siemens, one of the Germany’s largest high-tech group).

Operated as one of the oldest in the industry, Nokia possesses the greatest knowledge in
product development, operating and production issues and a strong organisational culture
base. It furthermore has adopted a quite efficient and flexible organisation structure.

Human resources are effectively used by Nokia as it has regrouped its marketing and
R&D centres to work side by side in Geneva. Materials could also be used effectively with
production centres allocating around the world.

There is no limiting factor aroused to date to Nokia so that summarily, the position audit
seems to be favourable to the company.

2.2.2 Competences and critical success factors

Nokia’s core competences are the experiences in producing and marketing its products;
providing access to a wide variety of markets (developed, emerging and developing markets).

The personalise dimension of mobile communications is the distinctive competence of the

organisation.

The critical success factors of Nokia are technology and R&D.

Key tasks to be done to ensure that critical success factors are satisfied are the efficient
and effective uses of human and raw materials resources.

Priority is given to the R&D and marketing activities based on the unique characteristic of
the mobile device industry.

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2.2.3 The value chain

The value chain of Nokia is best developed with the newly supplemented organisation
structure, especially with the help of Nokia Siemens Networks, a separate company jointly
owned by Nokia and Siemens.

2.2.4 The product portfolio

Nokia is producing any type of personal mobile device with a number of communication
services like consumer Internet service and business mobility.

Nokia aims to continue on create winning devices, embrace consumer internet services,
deliver enterprise solutions, build scale in networks and expand professional services.

2.2.5 Organisational structure

Nokia is using different methods of co–ordination in its various organisational areas.

The Marketing and R&D centres co–operate as mutual adjustment as they are working
side by side.

The production area have its standardised working processes and outputs.

Employees are indoctrinated with the mission and vision of the company as they have to
remember the overall impression of the list of attributes.

Conclusively, Nokia has a efficient and effective organisational structure, supports by a

strong organisational culture.

2.2.6 Marketing audit and the customer base

The size of the customer base in Nokia’s home market is not great due to low population
but it is very large in the global level, most of them are individuals using Nokia’s personal
mobile devices.

The net sales of € 51 billion and a gross profit of € 8 billion reached in 2007 has shown
the great sales revenue and profitability of the organisation (a gross profit margin of 15.69%
compared to the 2.5% nominal interest of the Euro currency).

The main segment which generates the major profit of Nokia is the export market with
personal mobile devices, consumer Internet services and business mobility.

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The organisation is having the greatest market share in mobile devices globally and the
market is showing a brightly potential growth in short–, middle– as well as far–future.

The only main point not in best favour to the organisation is the ever increasing degree of
complexity of demand of customers due to the ever increasing living standard.

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3. Nokia’s SWOT analysis and strategic positioning techniques

3.1 The SWOT analysis

3.1.1 Strengths

Nokia has its greatest strength in financial results from its successful business in the last
decade which has bough a great amount of retained earning from the highly profit margin
earned as to be a pioneer in the mobile device market.

Expertise and marketing skills are another strengths of the organisation as it was one of
the firsts operating in the mobile device area.

Finally, reputation and customer loyalty are factors that Nokia has won through its
business history which greatly discourage new entrants into its operating markets.

3.1.2 Weaknesses

As the organisation has growth to be too large like it is today, it increasingly become
inflexible so that it would become more and more difficult for the organisation to adopt to the
ever quicker change of the high–tech environment today.

There is a risk that customers tend to try “different” as a trade mark becomes too popular,
which is the current situation of Nokia.

3.1.3 Opportunities

There are great opportunities for Nokia provided from the current developed and
emerging markets as well as from the potential developing market.

The ever increasing living standard that subsequently increase the demand for high–tech
products also provides a good opportunity for Nokia present and future alike.

3.1.4 Threats

The attractiveness of the current and potential high-tech market on the other hand attracts
new entrants and encourages current competitors to compete harder to win market share.

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Finally, the globalising financial crisis which initiated from the US’s estate market is
threatening to be worse and thus tends to affect businesses in every aspects of operation.

3.2 The strategic positioning techniques

However, a strong financial based business like Nokia could turn the threat of the global
financial crisis into its opportunity as raw materials, land and labour costs together have the
trend to decrease at once so as to strongly down turn the overall cost of inputs.

Potential attracted new entrants to the high–tech market; apart from the high entry
barriers of capital investments, legislation, reputation, experiences and customers loyalty;
could be discouraged from brand names created from Nokia itself to serve certain uncovered
segments of the market like it did with Vertu in the luxury mobile device market. Another
example of an alike successful strategic move is the brand name of Lexus created from
Toyota in the last decade.

The opportunities provided by the emerging and developing markets could be exploited in
that Nokia as a manufacturing and service providing organisation try to expand its
contribution channel paralleling with marketing activities to enhance its reputation and to
establish its brand name in these markets.

The increasing living standard; instead of slowing down in the developed world, is still
significant in others; could be exploited by Nokia with new created brand names (not
necessarily be in the luxury segment like Vertu, but also in middle quality level or even in a
bit lower one). New created brand names also lighten the weakness of Nokia that it is now
becoming too popular so that customers might want to try “different”.

Nokia’s weakness of to be too large could be lighten in that it adopts the de–layering
strategy which reduces levels of managements in the organisation and increase delegation and
employees empowerments that improves the flexibility and effectiveness of the entity.

Financial strength of Nokia could help the organisation to take the chances of overtaking
small competitors in this difficult time of businesses. Expertise, marketing skills, reputation
and customers loyalty are factors that help Nokia to maintain its leader position in the
operating markets.

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4. The external environment in Vietnam

Again, there will be PESTEL and Porter’s five forces analysis, but this time they are done
based on the external environment in Vietnam.

4.1 Vietnam’s external environment audit with PESTEL model

i/ Political

Political environment in Vietnam is very stable to date since more than 30 years and
together with the opening market policy of the Vietnamese government, they collectively
provide an attractive market to world’s investors. As making investments in Vietnam, Nokia
would have no trouble with political issues like nationalisation and so on.

ii/ Economic

The booming economy together with low input costs on land, labour and raw materials
factors also attract foreign investors. It is an ideal market for Nokia to invest into to take
advantages of these growth potential and low cost factors, added from a large population base
(about 86 million in 2007, ranking 13 in the world).

iii/ Social / cultural

The reach in tradition culture of Vietnam makes it a typical Far East social that
accordingly needs its appropriated marketing activities.

Impulse buying, a typical behaviour of Vietnamese customers (Nguyen, 2007, pp 70–87)

should also be considered in Nokia’s strategic marketing activities.

An unfavourable factor in the social aspect in Vietnam for a high–tech company like
Nokia is that the labour market might not be sufficient enough by providing high skilled
labours due to the current lack of that.

iv/ Technological

This is another unfavourable factor for Nokia as well as for other investors with an
underprovided infrastructure due to the still being low level of economics development [$835
per capital in 2007 (Nguyen & Nguyen, 2008, p.23)].

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However, the matter seems to be strongly improved with mega investments of the
Vietnamese government and its strategic partners [15 energy bases with total power of more
than 20 GWh in 5 years, highway and super-railway worth $ 46 billion together with Japan,
HCM City’s road infrastructure worth $ 14 billion and that of Hanoi worth $ 11 billion etc.
(various sources)].

v/ Ecological / Environmental

Vietnam is as large as Finland in land area (330,000 km2 and 338,000 km2, respectively)
but it is much more crowded (86 million population or 260 inhabitants/km 2 compared with
that 5.3 million population or 16 inhabitants/km2 of Finland) so that there are less
environmental resources per head to use. That means that the Vietnamese environmental
standard would going to be stricter each day so that it becomes a considerable factor for a
long–term industry investor like Nokia.

vi/ Legal

Perhaps, using the very economic environmental strategy like Vedan, a South–Korean
company, could help Nokia to deeply cut its manufacturing costs, but there are also legal
issues to take consideration of.

There are various legislation set by Parliament in Vietnam which Nokia has to take
consideration of. Particularly, in the field of economics, there are law’s components in power
on trade, investment, estate, labour, environment etc.

These regulations will affect Nokia’s activities in trading, investing, recruiting, operating
and so on, in any point of time that it is operating in the country.

4.2 Vietnam’s external environment audit with Porter’s five forces model

i/ Threat of new entrants

The threat of new entrants does not really exists in the Vietnamese mobile device market
since all of Nokia’s potential competitors such as Motorola, Sony Ericsson and Samsung,
Phillips, Siemens are already attended. The very high barrier of capital investment would
furthermore prevent new entrants into the industry.

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ii/ Threat of substitute products/services

Nokia is now providing only products in the Vietnamese market.

The minimum threat of new entrants has the negative effect of maximising the number of
substitute products which are offered from all the attending competitors. The booming
demand help the competition to become a bit cooler, but it is becoming harder and harder
each day.

iii/ Bargaining power of customers

Increase together with the number of substitute products offered on the market since they
have more to chose from.

Note that there are not only brand substitutes such as Motorola and Sony Ericsson, but
also product substitutes such as the 3Gs from Apple and O2; product class substitutes such as
Television set and DVD player and finally want substitutes such as Holiday package and Spa
resort etc.

iv/ Bargaining power of suppliers

Similarly to that of customers, the bargaining power of suppliers are likely to increase
with the number of firms operating in the area, in this particular case, the mobile device
market in which Nokia is operating in. Suppliers tend to be more strict on trade credit issue,
delivery terms and so on as there are plenty of customers to chose on their side.

v/ Rivalry amongst current competitors

Nokia’s competitors are highly concentrated in Vietnam with all possible brand name
from Elitek (China) to O2 (UK) in every city of the country. The crowded density makes the
competition to become increasingly hard each day, each of them try to offer as quick as
possible new models to win customers’ awareness and market share.

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5. The strategic plan for Nokia

Nokia has started to operate in Vietnam since almost a decade so that the market is
nowadays not a new one for the organisation so that there are two strategic options left for it
to chose on.

Both of these remaining options should be use by Nokia in the relevant context as
explained as follow.

5.1 Market penetration (growth) / Consolidation (maintain)

Market penetration means to slowly gain market share through widely vertical
investments (in distribution channel and show rooms and so on) and through offer products
with low profit margin. This should be the most preferred strategy by Nokia at establishing in
Vietnam.

However, after a decade of using market penetration as the main business strategy, Nokia
has reached the Vietnamese mobile device market share of 71% at the end of 2007 from that
50% of 2006 (Technology News, 2008). The 70%, based on various study and research of
economists, is said to be the ideal market share for an organisation. Trying to get more out of
the market would cost the organisation much by using aggressive marketing strategy and
might not be worthwhile even since there are always a certain proportion of the population
who do not want to use brand names which has become too popular.

That means that the market penetration strategy has now finished is mission and the main
task for Nokia now is how to maintain its current market share in the Vietnamese mobile
device market. The task of maintaining market share is called as the consolidation strategy by
economists.

Consolidation means to mostly stop further investments for growth and to stay relatively
competitive in price to competitors so as to maintain market share. That would be the most
appropriate strategy for Nokia in its current situation in the Vietnamese mobile device
market.

Go along side with these price and investment strategy components, an appropriate
marketing strategy should also be use that do not unnecessarily spend budget on advertising

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as an attempt to gain more market share but to relatively maintain current position to
competitors.

5.2 Product development

New products should perhaps be developed as a vital factor for the success of the
company. New products such as the 3G phone Nokia 6650, the first build-in camera Nokia
7650 and the first video capture phone Nokia 3650 has brought significant success to the
company in the past and such new products should be continually developed to contribute to
the success of the company likewise in the future.

Apart from the overall penetration strategy using competitive prices to slowly but
enduring gain market share, new products individually could be sell in their introductory
phase using skimming strategy (high price and profit margin) to quickly cover the related
R&D costs. Skimming strategy naturally goes along with aggressive marketing activities to
support sales of the particular new products individually.

R&D must be adequately invested in by Nokia as it is like by any of its competitors to

stay by step with the ever quicken development of technology today. More over that, Nokia’s
R&D has its additional task as of to maintain the pioneer position of the company by making
new deals for life with the company’s products.

Sincerely yours,

Huu Chien Nguyen

. Consultant Officer .

- Hanoian Business Consultant Ltd -

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Conclusion

The report, created from Huu Chien Nguyen, a Consultant Officer of Hanoian Business
Consultant Ltd, has analysed the context of Nokia’s strategy and its stakeholders analysis in
the first part.

The second part followed with Finland’s external environment audits based on PESTEL
and Porter’s five forces models and a Nokia’s organisational audit that has discussed on
various factors such as position audit, resources, limiting factors, competences, critical
success factors, value chain, product portfolio, organisational structure, marketing audit and
the customer base.

Nokia’s SWOT analysis and strategic positioning techniques are then discussed in the
third part of the report. The fourth part was analysis on the current external environment in
Vietnam based on PESTEL and Porter’s five forces models.

The last part has then considered on possible strategic plan for Nokia in the current
Vietnamese mobile device market, which has finally considered the overall strategy of
consolidation and product development strategy for individual new products as appropriate.

Related documents and sources of information referred to in the report are to be found in
the References.

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References

Books

. Edexcel HNC & HND (2004), Business Strategy, Aldine House, London.

. Cao L. (2007), Histories of 200 countries and territories in the world, Labour Publisher,
Hanoi.

. Nguyen T. T. M., (2007), Consumer values and behaviours in Vietnam, a transitional

economy, Publishing Industry National Economics University, Hanoi.

. Nguyen V. T. & Nguyen K. T. (2008), Vietnam Economy 2007 – The first year of joining
WTO, Publishing Industry National Economics University, Hanoi.

Newspaper

. Nguyen L. (2007), Building road infrastructure in 2 metropolises, Vietnam Economic

Times, Nr 291 (2287), Wednesday 05th December 2007.

Internet

. International Monetary Fund (October, 2008), World Economic Outlook Database [online].
Retrieved: October 19th 2008, from:

http://www.imf.org/external/pubs/ft/weo/2008/02/weodata/index.aspx

. Nokia, (August 2008), Vision and strategy [online]. Retrieved: November 10th 2008, from:
http://www.nokia.com/A4126317

. Technology News, (06 March 2008), The bustling mobile device market at the New Year
[online]. Retrieved: 22nd December 2008, from:

http://www.thongtincongnghe.com/article/4115

Other

. NEU-Tyndale (2008), Nokia – Building a powerful technology brand, Assignment Topic,

National Economics University, Hanoi.

Huu Chien Nguyen – Class: IBD-2G – Student Nr.: 101.310.2146

Edexcel BTEC Higher National Diploma at NEU – Business Strategy – Individual Assignment 1

TABLE OF CONTENT

(Word count 4,918)

Hanoian Business Consultant Ltd..............................................................................................1

To: Consultant Manager.............................................................................................................1
Date: November 11th 2008........................................................................................................1
Introduction................................................................................................................................1
1. Nokia’s business strategy and stakeholder analysis......................................................2
1.1 The context of Nokia’s business strategy.....................................................................2
1.2 The stakeholder analysis of Nokia...............................................................................3
2. Nokia’s external environment and organisational audit..............................................6
2.1 The external environment audit....................................................................................6
2.2 The organisational audit.............................................................................................10
3. Nokia’s SWOT analysis and strategic positioning techniques...................................13
3.1 The SWOT analysis...................................................................................................13
3.2 The strategic positioning techniques..........................................................................14
4. The external environment in Vietnam.........................................................................16
Again, there will be PESTEL and Porter’s five forces analysis, but this time they are
done based on the external environment in Vietnam.......................................................16
4.1 Vietnam’s external environment audit with PESTEL model.....................................16
i/ Political.........................................................................................................................16
Political environment in Vietnam is very stable to date since more than 30 years and
together with the opening market policy of the Vietnamese government, they
collectively provide an attractive market to world’s investors. As making investments in
Vietnam, Nokia would have no trouble with political issues like nationalisation and so
on......................................................................................................................................16
ii/ Economic.....................................................................................................................16
The booming economy together with low input costs on land, labour and raw materials
factors also attract foreign investors. It is an ideal market for Nokia to invest into to take
advantages of these growth potential and low cost factors, added from a large population
base (about 86 million in 2007, ranking 13 in the world)................................................16
iii/ Social / cultural...........................................................................................................16
The reach in tradition culture of Vietnam makes it a typical Far East social that
accordingly needs its appropriated marketing activities..................................................16
Impulse buying, a typical behaviour of Vietnamese customers (Nguyen, 2007, pp 70–87)
should also be considered in Nokia’s strategic marketing activities................................16
An unfavourable factor in the social aspect in Vietnam for a high–tech company like
Nokia is that the labour market might not be sufficient enough by providing high skilled
labours due to the current lack of that..............................................................................16
iv/ Technological..............................................................................................................16
This is another unfavourable factor for Nokia as well as for other investors with an
underprovided infrastructure due to the still being low level of economics development
[$835 per capital in 2007 (Nguyen & Nguyen, 2008, p.23)]...........................................16
However, the matter seems to be strongly improved with mega investments of the
Vietnamese government and its strategic partners [15 energy bases with total power of
more than 20 GWh in 5 years, highway and super-railway worth $ 46 billion together

Huu Chien Nguyen – Class: IBD-2G – Student Nr.: 101.310.2146

Edexcel BTEC Higher National Diploma at NEU – Business Strategy – Individual Assignment 1

with Japan, HCM City’s road infrastructure worth $ 14 billion and that of Hanoi worth $
11 billion etc. (various sources)]......................................................................................17
v/ Ecological / Environmental..........................................................................................17
Vietnam is as large as Finland in land area (330,000 km2 and 338,000 km2,
respectively) but it is much more crowded (86 million population or 260
inhabitants/km2 compared with that 5.3 million population or 16 inhabitants/km2 of
Finland) so that there are less environmental resources per head to use. That means that
the Vietnamese environmental standard would going to be stricter each day so that it
becomes a considerable factor for a long–term industry investor like Nokia..................17
vi/ Legal............................................................................................................................17
Perhaps, using the very economic environmental strategy like Vedan, a South–Korean
company, could help Nokia to deeply cut its manufacturing costs, but there are also legal
issues to take consideration of..........................................................................................17
There are various legislation set by Parliament in Vietnam which Nokia has to take
consideration of. Particularly, in the field of economics, there are law’s components in
power on trade, investment, estate, labour, environment etc...........................................17
These regulations will affect Nokia’s activities in trading, investing, recruiting,
operating and so on, in any point of time that it is operating in the country....................17
4.2 Vietnam’s external environment audit with Porter’s five forces model....................17
i/ Threat of new entrants...................................................................................................17
The threat of new entrants does not really exists in the Vietnamese mobile device market
since all of Nokia’s potential competitors such as Motorola, Sony Ericsson and
Samsung, Phillips, Siemens are already attended. The very high barrier of capital
investment would furthermore prevent new entrants into the industry............................17
ii/ Threat of substitute products/services..........................................................................18
Nokia is now providing only products in the Vietnamese market...................................18
The minimum threat of new entrants has the negative effect of maximising the number
of substitute products which are offered from all the attending competitors. The
booming demand help the competition to become a bit cooler, but it is becoming harder
and harder each day..........................................................................................................18
iii/ Bargaining power of customers..................................................................................18
Increase together with the number of substitute products offered on the market since
they have more to chose from..........................................................................................18
Note that there are not only brand substitutes such as Motorola and Sony Ericsson, but
also product substitutes such as the 3Gs from Apple and O2; product class substitutes
such as Television set and DVD player and finally want substitutes such as Holiday
package and Spa resort etc...............................................................................................18
iv/ Bargaining power of suppliers....................................................................................18
Similarly to that of customers, the bargaining power of suppliers are likely to increase
with the number of firms operating in the area, in this particular case, the mobile device
market in which Nokia is operating in. Suppliers tend to be more strict on trade credit
issue, delivery terms and so on as there are plenty of customers to chose on their side..18
v/ Rivalry amongst current competitors...........................................................................18
Nokia’s competitors are highly concentrated in Vietnam with all possible brand name
from Elitek (China) to O2 (UK) in every city of the country. The crowded density makes
the competition to become increasingly hard each day, each of them try to offer as quick
as possible new models to win customers’ awareness and market share.........................18
5. The strategic plan for Nokia.........................................................................................19

Huu Chien Nguyen – Class: IBD-2G – Student Nr.: 101.310.2146

Edexcel BTEC Higher National Diploma at NEU – Business Strategy – Individual Assignment 1

Nokia has started to operate in Vietnam since almost a decade so that the market is
nowadays not a new one for the organisation so that there are two strategic options left
for it to chose on...............................................................................................................19
Both of these remaining options should be use by Nokia in the relevant context as
explained as follow...........................................................................................................19
5.1 Market penetration (growth) / Consolidation (maintain)...........................................19
Market penetration means to slowly gain market share through widely vertical
investments (in distribution channel and show rooms and so on) and through offer
products with low profit margin. This should be the most preferred strategy by Nokia at
establishing in Vietnam....................................................................................................19
However, after a decade of using market penetration as the main business strategy,
Nokia has reached the Vietnamese mobile device market share of 71% at the end of
2007 from that 50% of 2006 (Technology News, 2008). The 70%, based on various
study and research of economists, is said to be the ideal market share for an
organisation. Trying to get more out of the market would cost the organisation much by
using aggressive marketing strategy and might not be worthwhile even since there are
always a certain proportion of the population who do not want to use brand names which
has become too popular....................................................................................................19
That means that the market penetration strategy has now finished is mission and the
main task for Nokia now is how to maintain its current market share in the Vietnamese
mobile device market. The task of maintaining market share is called as the
consolidation strategy by economists...............................................................................19
Consolidation means to mostly stop further investments for growth and to stay relatively
competitive in price to competitors so as to maintain market share. That would be the
most appropriate strategy for Nokia in its current situation in the Vietnamese mobile
device market...................................................................................................................19
Go along side with these price and investment strategy components, an appropriate
marketing strategy should also be use that do not unnecessarily spend budget on
advertising as an attempt to gain more market share but to relatively maintain current
position to competitors.....................................................................................................19
5.2 Product development..................................................................................................20
New products should perhaps be developed as a vital factor for the success of the
company. New products such as the 3G phone Nokia 6650, the first build-in camera
Nokia 7650 and the first video capture phone Nokia 3650 has brought significant
success to the company in the past and such new products should be continually
developed to contribute to the success of the company likewise in the future................20
Apart from the overall penetration strategy using competitive prices to slowly but
enduring gain market share, new products individually could be sell in their introductory
phase using skimming strategy (high price and profit margin) to quickly cover the
related R&D costs. Skimming strategy naturally goes along with aggressive marketing
activities to support sales of the particular new products individually............................20
R&D must be adequately invested in by Nokia as it is like by any of its competitors to
stay by step with the ever quicken development of technology today. More over that,
Nokia’s R&D has its additional task as of to maintain the pioneer position of the
company by making new deals for life with the company’s products.............................20
Sincerely yours,................................................................................................................20
Huu Chien Nguyen...........................................................................................................20
. Consultant Officer .........................................................................................................20
- Hanoian Business Consultant Ltd - ...............................................................................20

Huu Chien Nguyen – Class: IBD-2G – Student Nr.: 101.310.2146

Edexcel BTEC Higher National Diploma at NEU – Business Strategy – Individual Assignment 1

Conclusion

References

Huu Chien Nguyen – Class: IBD-2G – Student Nr.: 101.310.2146