Case Study Analysis: Finland and Nokia: Creating the World s Most Competitive Economy

Brief Summary:
Nokia s history begins in 1865 as a pulp mill in the country of Finland. In 1967 the modern corporation of Nokia was merged with a telecommunications cable corporation and electronics business and Finnish Rubber Works. This became the telecomm company that we know today. In Finland the Nordic Mobile Telephone ( NMT ) network was created in 1981 and brought several innovative aspects to the consumers. The NMT pioneered roaming technology that allowed for usage across country borders. The creation of the NMT caused the Nordic region, once a subtle region, to become the largest single mobile market of the time. This network raised the standard of mobile technology and began to be incorporated in other foreign markets. In 1979 Nokia began forming joint ventures and acquiring other companies, expanding its market and in turn becoming the largest consumer electronic company in the Nordic region during the 1980 s. Nokia then consolidated the Finnish telecommunications system in 1987, through mergers and acquisitions. In 1999, the telecommunications sector became Finland s leading sector, making up 21% of the value added. By 2001 Nokia was in the top three competitors in mobile phone manufactures internationally, reaching sales of 30.4B Euros. The company employed over 60,000 people and production locations in 10 countries, R&D in 15 countries as well as sales in over 130 countries.

SWOT analysis
Strengths: Nokia s innovative presence allowed it to be a market leader in mobile phones. By providing the best coverage and largest selection of models Nokia became the world leader in digital phones with a market share of 31% in 2000. Nokia consistently searched for ways to improve their product by setting up R&D facilities by leading universities and developing centres of excellence. Nokia developed the fundamental values known as the Nokia Way . These four values tied into the Finnish national character and consisted of customer satisfaction, respect for the individual, achievement, and continuous learning. The Nokia Way proved to be successful as Nokia tapped into other countries. The company s character was pragmatic, honest, quiet, and serious. Weaknesses: Beginning in the 80 s Nokia began to invest in electronics such as TV manufacturing and suffered a severe loss. The financial blow could ve been prevented if the company had done a better analysis of the situation prior to acquiring several of the electronic companies. Also, in 2001 Nokia was having trouble keeping up with new industry standards surrounding the development of software for PDA and palm pilot organizers. Also, due to the size of the company, Nokia was enduring the concerns of nation for being such a large role and cluster in Finland s economy. Opportunities: Being a strong player in the logistics of mobile devices, Nokia has the opportunity to increase their products functions and further develop their Smart phone idea. Based on their worldwide reach the company should be able to continue with their intricate supply chain and continue to market products worldwide. Also, since consumers are changing to a wireless world the telecomm market should still be growing steadily with room for innovation and improvement.

Threats: The recent emergence of the I-phone and redesigned models of the Blackberry seem to be stealing the market in the U.S. Nokia will need to unveil a product that is comparable to these devices and invest in an ad campaign that will convince the consumers that the product is not only a smart phone but also a fashion trend.

Nokia is a world leader in mobile market, based in Helsinki Finland and with more than 31billion dollar in revenue. It has good reputation all around the world. It is leading brand in some areas and still growing day by day. The vision is a world where everyone being connected can contribute to sustainable development.

Pestel Analysis

Political:
Legal constraints must be taken into account because many businesses aim to make profit so they may be tempted to mislead their customers about prices, quality of products and the availability of their products. Also taxes such as import and export have an effect on Nokia s development and theses are more or less impossible to avoid unless a company can afford to run factories in every country and continent in the world. As markets are deregulated, both operators and manufactures are free to act independently of government intervention. In countries like India and China were partial regulations exist, government intervention does take place.

Economics:
in the European market, growing economy in European leads to the increasing income of the people. In contrast, if the economy is decreased, consumers will spend less money on mobile phone, which are negative for Nokia. Weak global economy in 2009!

Social:
The company does businesses around the world. The population is diversity. For example, the European market that people can be divided into different subcultures and the consumption behaviors are different as well. Also, today, telecommunication is important to people for work and leisure. Also consumers are more aware of mobile phone choice.

Technological:
In the communications market technology is perhaps the most important factors that Nokia have to take into consideration. They have to keep up to date with all newest technological in advance if they are going to capture the biggest market share and stay ahead of their competitors. (Bluetooth, GRSP, and cameras) Nokia is reaching 130 countries and about 250 operator networks.

Environmental:
This issue has become more important in the last few years. Nokia has changed the ways of producing. And the use of mobile phone could be damaging to health. Sustainable development---Nokia do the environmental design to ensure that new products do not contain restricted materials, reduce energy waste and to optimize regeneration. The environmental management system responsible for controlling the operations of Nokia s own impact on the environment. Production recession deal focused on the recovery system and reuse of the products.

Legislation:
Legal constraints must be taken into account because businesses aim to make profit so they may mislead their customers about prices, quality of products and the availability of the products. Law in business environment. Domestic law in different foreign markets. International law. European law. Health regulation, because the danger of using mobile phones.

Five-force analysis

Competitive rivalry:
There are several competitors, which are LG, Motorola, Samsung and Sony Ericsson. And devices and products became more complex and features.

Threats of new entrants:

High fixed costs mean that volume is essential to companies. And capital requirements are high because the activities such as R&D and advertising require large capital commitments.

Power of buyer:
The power of buyer is high because there are many products for customers to choose in the mobile phone market. The speed of technology innovation is quick, competitors has more power to

compete with Nokia. Also, the price of Nokia s product is high, so customers are sensitive towards the prices.

Power of suppliers:
If the suppliers change the price then Nokia has direct impact on the pricing of their products. If there are more suppliers then it is easy to change from one to another.

Threat of substitutes:
The threat of substitutes is medium, there are some new technology appeared in recent years. For example, IP telephony, PC based applications.

Porter s Diamond II - Finland

Structure and Rivalry:
- Historic reasons for highly competitive landscape within Finland - Strong export-centered commerce experience - Strong network and links between companies, banks and government - Regional Development Act- favors intense rivalry.

Factor Conditions:
- Investing Money into Education (1st in Pisa European school comparison) - Uniform, market-orientated government.

Related and Supporting Industries:

- Huge R&D spending by government and companies - Strong Venture Capital, Content provider, Manufacturer network - Lots of specialized companies due to fragmented market

Demand Conditions:
- Sparsely populated area supports adoption of wireless devices - 1st world country with resources available to pay for services - Weather supports phone- over face-to-face conversations.

Telekom Cluster Program:

Introduced by the Institute of the Finnish Economy (ETLS) to strengthen Finnish Competitiveness in the 90 s. Combined effort of economic and industrial policies, education, R&D efforts, private and public interactions to be world-class leader in specific content.

Specifically: Telekom Cluster

To provide Finland with a strong world-wide competitive advantage through Public-Private Partnerships - 4000 Firms (VC, Software/Hardware-Vendors, Manufacturing, R&D) - 83.000 Employees, producing 6.9% GDP

Nokia s culture
When we take a look at the Nokia s history, organisation has been in existence for more then 100 years now. If we consider the past it is one of the most successful developer of phones and that to at a competitive price. However the downfall or minimization in market share is because of its old culture which hasn t changed with time. If we look at their product range we understand that Nokia had almost everything to be still world leader in phone industry, however they lost because of weak culture where every little or big thing had to go through extensive approvals. From the developments at Nokia it seems they were pioneer in smart phones as well as they were the first to introduce phone with stylus which was successful. Despite of that touch screen technology was seen as a high cost to production and the idea was dropped. Result of this was seen as Apple came up with iphone and Nokia lost the battle before even entering the market. It had such a huge impact that in U.S it lost almost half of its market to Apple in smart phone market. From this we can agree to industry analysts that Nokia had a bureaucratic culture where ideas had to go through various hierarchies which were time consuming and still results were negative in terms of getting them approved. According to company employees view upper and middle management were quit stiff in approving things which had low profit margins however a clear business strategy was missing that initial low profit margins could become more once market has been captured.

Corporate culture influenced by nation

In case of Nokia it is one of the largest employers in Finland and as a part of tradition of Finland which accepts people from different culture Nokia has also got people from different part of world in their research team. However one thing which is noticeable is that most of the board members are Finnish. This shows the difference in approach in corporate culture as compared to national culture at different level. At lower level Nokia has employed people from different countries however when it comes to top management most of the board members are from that country. The effect of this is seen in decision making which is taking a long time and has been quit late in responding to market demand. This clearly matches to Charles Handy s thinking of similarity between organisation structure and culture. He is of the opinion that corporate culture is linked directly with its structure. Such an structure is called power culture where authority lies in hands of few and decision making is very time consuming and difficult. If we consider the culture cluster in case of Nokia it is exactly

opposite to constructive culture which according to author Robert A Cooke is best suited to such organisation which needs constant innovation.

Organizational objectives (Nokia)

So far we have seen how Nokia had suffered due to its bureaucratic structure and want to change it to achieve newly aligned objectives. According to company s chief operating officer Nokia aims at getting new innovations in less time and take advantage of their existing technology. It aims in taking Symbian user interface to next level looking at its potential which is much more then any other operating interface in smart phones. Using this as a platform Nokia is planning to re-price its mobile phone range in order to get more profit margins. In achieving this Nokia aims at following a low price strategy to increase growth to 10%. In order to achieve these objectives Nokia has to bring in positive changes to its culture. First and foremost thing they need to understand is the only way of achieving it is by getting people involved by means of their performance and contribution. In Nokia s case which is not difficult as the employees have always been innovative right from beginning, it is just the management which needs to back them up. Leadership in such organisation should not be control based but should be more responsive and positive in accepting changes. Also company needs to take some bold steps in accepting innovations which are challenging, although they might be low profit making initially however could be worth risk taking. These are the few things which Nokia need to do in order to achieve its objectives in becoming a market leader. However there is one more challenge with this and that is to implement this change at all levels and keep on changing accordingly with time to be a worldwide leader. As a result of incorporating these changes it will motivate employees and they will have more confidence in management in approaching with new ideas.

Future of Nokia
Nokia is now researching into nanotechnology and the morph technology. Launched alongside The Museum of Modern Art Design and The Elastic Mind exhibition, the Morph concept device is a bridge between highly advanced technologies and their potential benefits to end -users. This device concept showcases some revolutionary leaps being explored by Nokia Research Center (NRC) in collaboration with the Cambridge Nanoscience Centre (United Kingdom) nanoscale technologies that will potentially create a world of radically different devices that open up an entirely new spectrum of possibilities.

Recommendations:
Although Nokia has seen success within the last several decades, the effects of outsourcing production to other countries is taking a toll on Finland. Since Nokia is crucial to Finland s economy it may be necessary to restructure certain areas to allow for there to be jobs available within the nation. A Nokia University could be implemented similar to Hamburger University for McDonald s Corp which trains and educates individuals to become managers and employees. Also, Nokia will need to address the issue in the recent growth of the Blackberry and I-Phone smart phones. These two products have begun to dominate the market in the smart phone category that

was once Nokia s focus. Currently, a product has not been presented by the company to match the capabilities and functions of these two different phones. It is just necessary to improve marketing tools in order for the products of Nokia to become more available and on the cutting edge of technology to the customers. One of the possible ways to do it is probably to return to the roots of the mobile phone development and see what actions were successful back than that made a company so great and try to implement them, of course with adjustments necessary for the current market conditions, in their marketing process. This will return the company s previous standing and move the Finland economy to the new stage of development.