Nokia Strategy Analysis essay

Even though, their product oratorio is quite diverse, their main products are mobile phones and IT devices. Monika occupied the leadership position in the mobile phones’ industry for more than a decade; however in 201 1 this position was lost. The introduction of the smartness in the market, the scandal related with Stephen Elopes memo, ex-CEO (Ratter Effect), and the loss of trust in the brand related with the too-early announcement of changing in the operating system (Osborne Effect); resulted in a boycott both from carriers and retailers against Monika that had a strong negative impact in its performance and overall results.

As a consequence, Monika had to re-think their position in the industry and attempt to innovate in order to attain the previous position in consumers’ mind. Nevertheless, it is still one of the giants in the industry. In fact, it is the second-largest mobile phone maker in the world with a global market share Of 22. 5%. Therefore, this report will focus not in Monika Corporation, but also, and mainly, in their smartness, i. E. Their attempt to restore its previous position in the market and regain the lost ground in the industry. General Data- Monika Corporation Founded Industry Finland, 1865

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Telecommunications equipment; Internet; Computer software. Revenues Net income Total Assets Employees ?30. 176 billion (2012) ?3. 106 billion (2012) ?8. 061 billion (2012) 97,798 (2012) TO get a clear picture of the company, it is important to know its mission, vision and core values, since they are the lifelines to sustainability. They are presented below: O Mission: “Con injecting people” Vision: “To build great mobile products that enable billions of people worldwide to enjoy more of life has to offer. Our objective is to achieve this in an increasingly dynamic and competitive environment”.

Core Values: focus on the customer, win together, innovate, communicate openly and inspire. II. Industry Analysis PEST ANALYSIS There are a variety of analysis that can be used in order to understand the external factors that influence the decisions and performance of an industry. The PEST analysis was chosen since it is a direct but systematic approach used to identify the factors that are more likely to influence the activity and the competition inside the industry. Not only in the present but also in the future: INDICATOR POLITICAL : Legal Restrictions Stability of the Government Licenses

REASONING Each company that manufactures smartness must take in consideration the legal requirements to produce in those countries (e. G. : minimum wage, maximum hours of work per week, Health and Safety regulations and environmental values). Understand the political condition; the relations between political parties and possibility of creation/alteration of laws. The restriction made by the government regarding the G and G wireless services’ access might influence not only the operators but also the demand for smartness.

The smartness started to appear during the global crisis which decreased the demand for previous cellophane, while the sales of smartness were not so ECONOMICS Economic Activity affected because they were a new product. However in the future this scenario can change once this type of cellophane are, nowadays, ordinary, which can lead to stabilization or even a decrease in sales. In these countries the wireless structure has been developing which increases the portion of the market of this type of products. Also the globalization leads to a broad knowledge of this technology and create the desire for these goods.

The economic situation of a country is important once it has a direct impact on the cost of borrowing money because of the fluctuation of the interest rate. Also the Exchange rate is very important if a company has its activities in countries with different currencies. It is important to understand the social factors in the countries in which a company is or pretend to promote its activity such as religion, culture and everyday life. Consumers are becoming more ambitious and dynamic since they are after the innovative fashionable smartness which obligates companies to be competitive and in continuous development.

The smartened industry is characterized by the technological advances, the continuous growing and the high level of competition. In this sense, Monika must ensure that their smartness are not only the most innovative but also simple to use and have useful software. Smartness in developing countries Current Economy culture Factors SOCIAL Changes in trends Dynamic Process TECHNOLOGICAL Mergers Alliance between companies can created add value to a product when two companies can complement each other and obtain a better product.

This happened for example when Monika and Microsoft worked together in the reaction of smartness recently. 3 PORTER’S FIVE FORCES OF COMPETITION FRAMEWORK The smartened market is rapidly changing with constant product introductions. It is characterized by quickly evolving technology and designs, short product life cycles, aggressive pricing, rapid imitation of product and technological advancements, and highly price sensitive consumers. There is no firm in the market with sufficient market share to control prices, resulting in strong rivalry and competitive pricing.

The framework will analyze not only the current situation but also the future expectation: THREAT OF ENTRY Capital acquirement Risk: Moderate (**) Capital requirements extremely high. Large sum of money is needed to be able to achieve economies of scale, to invest in R&D and technology. Huge fixed costs and variable associated with smartness manufacturing. Most firms have the hardware of the phones manufactured overseas but costs of developing the research, Economies of scale design and engineering, test the smartened and software can be prohibitively expensive for an entering firm.

An entering firm would either have to enter with existing resources targeting the smartened market, or it loud have to have another significant competitive advantage. Absolute cost advantages Patents are one major absolute cost advantage in the industry. Many parts of the smartened hardware and software are protected by patents held by majors. Different sources of differentiation: developing operating systems, applications, and content Product differentiation services. Shift of focus from hardware to software: Google with its Android SO and Apple with its ISO control nearly 90% of the smartened SO market.

Application Store also important (e. G. Apple store). Access to distribution channels The access to distribution channels is not an obstacle of entry on the industry. The channels of distribution include shipping straight from the manufacturer to the mobile phone network providers and to some specific retail chains. Many parts of the smartened hardware and software are protected by patents held by the big market participants. There are some barriers related to governmental regulation of electronic devices.

Multiple companies produce and develop chippies for different smartened manufacturer. Retaliation by established producers Some manufacturers have started making in-house processors for their own mobile device (e. G. Apple). The software operating system from Google does not pose a significant retaliation as it fully open source. Government and legal baa reasserted OF SUBSTITUTES Risk: Low (*) Substitution is not a significant threat to smartened manufacturers. The only competitor that can shake the semaphore’s market is the feature phone.

The primary reason that consumers Buyer propensity to substitute chose to go with a feature Instead of a smartened is the price of the phone as well as requirements for basic functionality. The trend in emergent markets for feature phones is probably going to be the same as in the rest of the world, ND the preferences will eventually shift to smartness. Having in consideration the features that smartness have, MPH player, cameras, video Relative prices and performance of substitutes player, it would not be practical having a single device for each one of this feature, a camera, a MPH reader, a DVD player, etc.

People prefer having all this possibilities in only one handset. Also, although a camera takes better photos than the camera of a mobile, and GAPS device probably has more functions than the application on a smartened, the price of all these devices summed would be much higher Han the smartened. BUYER POWER Risk: High (***) Network operators will be playing their part making sure there is more competition to drive Bargaining Power down the price of the hardware. The power of operating companies becomes stronger in emerging countries.

Elastic Demand Buyer Information Price sensitivity and differentiation among products SUPPLIER POWER Demand for smartened is elastic and buyers can delay buying new models. For instance, due to the economic crisis, sales of smartness declined by 1 . 7% in 2012 (source: Gardner) Easy access of information for buyers (can easily compare prices). Every innovation is easily imitated the industry and it is very price sensitive. As more models are launched, manufacturers may have to the cut price of their handsets to attract consumers. Profit margins may shrink.

Risk: High (***) Bargaining power of hardware producers is moderate because there are a lot of possible Bargaining Power of hardware producers manufacturers. Monika should avoid their hardware suppliers to launch their own brands since sometimes these companies get into the market with appealing products with low price. Some critical components, such as the chippies are controlled by a few large impasse who have potential bargaining strengths. Bargaining Power of software producers Bargaining Power of complements producers Bargaining power of software producers becomes more and more important. Microsoft has a high bargaining power for Monika.

The bargaining power of software producers may increase in the future as Monika planned to reduce significantly its spending on R. Suppliers of complements create value for the smartened industry. It is in our case for example the producers of applications for smartness. It is possible that these suppliers will exercise a bargaining power in the future. INDUSTRY RIVALRY Risk: High (***) Important concentration ratio of the industry: in 2012 2 firms concentrate 50% of the Concentration ratio smartened total market share (Apple with 30,3% and Samsung with 19,1 Monika is third with only 4,9% (CB. Able 1 in Appendix). During several years, competition focuses especially in advertising and promotion. Price Diversity of competitors competition is now increasing with the development of low cost products by producers like Hawaii, MicroVAX or Mexican. Monika is currently launching cheaper smartness, starting at 130? which can be very interesting to expand its share especially in emerging markets. As price competition arises, differentiation among the smartness increases. As more models Product Differentiation are launched, manufacturers have to the cut price oftener handsets.

Monika admitted its desire of competing in all price ranges. Monika will have to adapt its strategy to each segment in order to maximize its sales. Barriers to exit are really important As there are important capital requirements to enter the Excess capacity, exit barriers and cost conditions industry and significant fixed costs associated with smartened manufacturing (most firms outsource their production but the cost of evolving R and software are really high), excess capacity that comes from declining demand could have bad consequences on manufacturers and encourages firms to offer price cuts.

MARKET SEGMENTATION Segmentation is a process commonly used to divide the market into relatively similar and identifiable groups in order to be easier to meet the expectations of different customers. Monika, in order to pursue its global leader position as a phone manufacturer, have engaged in various segmentation strategies. Nowadays, the smartened industry is in a mature state in where only a few segments exist. Monika uses two types of segmentation, simultaneously, which will be presented below: MULTI-DIMENSIONAL SEGMENTATION: determines the different variables which influence the consumers in the purchase decision.

The following table summarizes the wide-ranging number of variables, considering phone features and individual behavior preferences as the most important: 6 Who Enterprise Users What Connectivity, files, presentations When Outside the working place Where Supplied directed to the company Why To keep up-iodated, utilize idle time How Company, colleagues Qwerty, speed, High Volume Testers App store gamers, camera snappers,

Technology Lovers music streamers, music collectors dictionary All the time Official distributors, mass market To text quicker and easier, to facilitate communication and colonization Friends, mass market advertising All the time Official distributors, online stores, mass market To enjoy all the applications Online forums and reviews, experts’ reports, specialized magazines High speed and Web Searchers capacity Internet, connectivity Edgy and multiple Fashion Accessories designs, social networks access Away from home Away from home Official distributors, online stores, mass market Official distributors, Online tortes, mass Market To keep up-to-date with information To show off, to follow the trends Online forums and reviews, specialized magazines Advertising, sponsored events, fashion magazines, friends Ionians product portfolio is constituted by several devices, in order to be appealing to different age’s categories, income levels, family structures, and so on.

In fact, the company is able to attract people from several different backgrounds with their wide range of offers in terms of power life, applications, durability and practical design. Unlike Apple, Monika has a particular focus in women as almost every product is possible to be found in colors that attract this segment (e. G. : Monika Purple designed for women and young teenage girls accompanied by the slogan ‘Treat her like a lady”). This positioning states that women should have a phone particular to their preferences, and that a unisex device is simply not enough. On the other hand, Monika Alumina is very appealing to professional users since it gives the opportunity to use Microsoft Office anywhere they may be.

Another example that may be given is Alumina 900 as it is priced with the ultimate goal of being accessible to a wider range f consumers and its features and design/color also suggests a younger audience. Targeting: Using the examples given from Ionians portfolio and the table presented above, one can conclude that Monika is targeting preferentially Enterprise Users, Technology Lovers and Fashion Accessories. High Volume Testers would not usually buy Monika, since there are not many options with Qwerty. Regarding Web Searchers they are more likely to prefer more efficient systems, such as Android to access Internet. 7 GEOGRAPHIC SEGMENTATION: Monika is using a quite regional approach to segmentation, in order to appeal to several niche markets and gain their aspect and trust.

Hence, in similarity with what Monika does in their financial reports, the globe will be divided as the following: Europe Size (?m) Growth 1210 Middle East & Africa 745 Greater China 213 Asia-Pacific 941 North America 196 Latin America 549 For each geographical area, the net sales of the 4 the Trimester/201 2 are given, which gives an approximate size of the business. In addition, the estimated growth is also presented, calculated using the recent net sales’ growth from each region, individually. Also, to take advantage of the emerging economies, new low-end phone have been plopped at affordable prices and flagship stores have been opened to provide these customers with a high quality support services. For example, in December 201 2, Monika announced a partnership with the world’s largest operator, China Mobile, in order to be able to offer an exclusive Chinese variant of Alumina 920. This was considered a very important step to partially cover the 700 million Chinese customer bases.

Targeting: Due to the market size and growth, Europe and North America are good regions to target. However, the bold strategies that Monika is undertaking in regions like Latin America, Asia-Pacific or Middle East, are a clear indicator about these segments’ importance. Regarding Great China, although sales decreased 70% in the previous year and that Monika has to face very strong competition from local producers, huge investment are being made in this region. As a result, one can easily see that Monika is a global company, with every geographic segment being targeted. KEY SUCCESS FACTORS In order to assess Ionians potential to succeed in its industry, it is important to evaluate its Key Success Factors.

Those are specific activities undertaken by the company that have racial importance in its analysis: Key Buying Factors Quality of the gadgets Trusted materials Loyalty to the brand related with emotional attachment – Easy availability Trusted materials Cost Efficiency Competition Factors Reputation Differentiation Production Costs (Economies of Scale) Cheap distribution Marketing Suppliers and Distribution Network Marketing Global production Economies of scale and scope Key Success Branding High technology Flexibility Duration of products Distribution Network Economies of scope Production Costs (Scale Economies) Quality Quality 8 COMPETITIVE ADVANTAGE ANALYSIS EMERGENCE OF COMPETITIVE ADVANTAGE INNOVATION The changes that create competitive advantage may be generated through innovation. One could say that Monika acquires competitive advantage through an open innovation strategy 1. Indeed, to innovate, Monika uses different means and capabilities that are both generated internally and externally. INTERNAL INNOVATION: Innovation in Monika is part of the tradition of the company. With 1 1. 00 patents registered in 20 years, it is one of the company’s in the mobile industry with the highest expenditure in R&D. For example, in 2010, Monika spent about ?3. Billion and had 17 200 employees in R&D (e. G. ?1 billion and 3 200 employees for Apple). However, due to the huge crisis the company is facing and due to the cooperation with Microsoft, it made significant changes during 201 1 in their operations for smartness to reflect their strategy (CB. Graphic 1 in appendix). These changes included personnel reductions as well as the transfer of approximately 2 300 employees to Accentuate as part of an agreement in which Accentuate is providing Simian software development and support activities to Monika through 2016.

To support the execution of this new tragedy, they are working to ensure that each of their research and development sites for smartness has a clear focus and that there is greater co-location of their teams (source: Annual Report, 2011-2012). CLC Monika R&D units and Monika research center: Exploratory technology development comes under the scope of Ionians COT (Chief Technology Office) organization. The teams in COT organization set the long-term research agenda for Monika and, in particular, explore next- generation, disruptive technologies and are organized as several sub-units, including Emerging Platforms, Compatibility and Industrial Collaboration, Advanced Engineering, and Monika Research Center. Monika Research Center looks beyond the development of current products, services, platforms and technologies to the creation of assets and competencies in technological areas.

Monika Research Center operates in a number of locations, including major sites in China, Finland, India, Russia, Switzerland and the United States (source: Annual report, 2011-2012). Concerning smartness, the major R&D sites are in Beijing in China, San Diego in the United States and in Solo (where is located also the center for windows phone). CLC Monika way jam: In Monika, innovation is not only generated by employees of the R&D sector. Employees through all sectors are encouraged to share ideas within the whole organization. The Monika Way Jam is a forum for registered Monika employees to share and brainstorm ideas. In 201 1 , 9000 employees shared ideas on this forum.

Open innovation is a paradigm that assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as the firms look to advance their technology EXTERNAL C] Outsourcing innovation and collaboration with other companies: The racket for smartness has shifted from a device oriented strategy to a platform oriented strategy. Today, industry participants are creating competing ecosystems of mutually beneficial partnerships to combine hardware, software, services and an application environment to create high- quality differentiated smartness. Monika has been outsourcing more and more its R&D and product development especially for software development. For this, it has established several agreements with companies like Microsoft, Accentuate and Foxing.

L] Cooperation with end users and customers: Monika as been cooperating with end users by engaging them through Monika Beta Labs. When Monika makes new user applications, Monika beta test them to get reactions from the users. They also have Monika Pilots where users are implemented in the development process. It is a program where users can send in their ideas and come with possible improvements. I:] Acquisitions, licensing venture company: To acquire knowledge and innovate faster, Monika could also acquire companies or establish licensing agreements. Monika has also a venture company, Monika Growth Partner that searches companies in the growth stage (budget of 250 millions in 2010). Collaboration with universities and research institutes: Monika established more than 100 partnerships with universities throughout the world to enhance research capabilities (MIT, Stanford, Tampere, Distinguish University, etc. ). MONIKA INNOVATION STRATEGY: Innovation for Monika is not only creating new products, services or processes that embody new technology; it is also strategic innovation that represents for them new approaches to do business. The approach of innovation of Monika is embodied in their strategy that has 3 core elements: (i) to win in smartness; (ii) to connect the “next billion” to he Internet and information, especially in key emerging markets; and (iii) to continue to invest in future disruptions through long-term exploratory research into the future of mobility and computing.

Investing in future disruptions A focus on hardware rather than software, on technologies rather than human experience. Monika is known for their hardware and design capabilities. The focus on cutting edge technologies is part of the tradition of the company and investment in long term research through the Monika Research Center is really important. For example, on January 201 2 Monika mistreated Kinetic 01, a bendable stretchable device following on from Nanotechnology research. Monika has almost always produced high quality hardware but for a lot of analysts, it was its software that was the weakness of its smartness and it has underestimated the importance of third-party applications to the smartened proposition.

Monika hopes nowadays that its partnership with Microsoft will provide them opportunities to innovate and customize on the Windows Phone platform. They plan to contribute with their expertise on hardware, design and language support and plan to bring Windows Phone to a broad range of price points, market segments and geographies (Annual report, 2011-2012). However, Monika didn’t manage for the moment to create an ecosystem that creates value for consumers, giving them access to a rich and broad range of user experiences. Nowadays, the competitive landscape is increasingly characterized in terms of a “war of ecosystems” rather than a battle between individual hardware manufacturers or products.

It also seems that the focus on cutting end technologies was part of the failure of Monika in the smartened business. They produced a “human connected” marketing by focusing only on technical and technological characteristics of their products and didn’t manage to produce a customer experience. Their Kinetic 131, a bendable stretchable device following on from Nanotechnology research shows exactly these kind of initiatives that were “human disconnected”. – RESPONSIVENESS TO CHANGE “While competitors poured flames on our market share, what happened at Monika? We fell behind, we missed big trends, and we lost time. At that time, we thought we were making the right decisions; but, with the benefit of hindsight, we now find ourselves years behind. Stephen Elope, Ionians CEO Responsiveness to change can be the factor that enables a firm to grow and position itself as a market leader or it can cost that firms position, as it happened to Monika. Monika was a market leader for years. Their brand was a synonym of quality, durability and satisfaction. So what happened? Monika failed to respond to a major change in its market – the smartened revolution. While new competitors such as Apple and Google were entering into the market with new operating systems, ISO and Android respectively, and mobile applications, Monika kept focusing on mobile phone devices. In addition companies as Samsung took advantage of the lack of acceptance of Ionians Simian SO by combining Google’s Android with a wide range of devices, from the most affordable to the most developed and expensive.

In order to invert this situation, Monika decided to take sides with Microsoft on its unproven Windows 8 smartened operating system and launch a new product line, Alumina. The Alumina strategy is similar to the one that boosted Samsung to the top: a large range of smartness varying on price and complexity able to compete with the handsets from Apple, Samsung or ETC. If we are not successful in the smartened market, our business would become more dependent on sales in the feature phone market, which is, especially at lower price points, an increasingly commoditized and intensely competitive market, with substantially lower growth potential, prices and profitability compared to the smartened market.

Recently, smartness of other manufactures, particularly Android-based smartness, are reaching lower price points, which is increasingly reducing the addressable market and lowering the price points for feature phones and may adversely affect our feature phone business. Monika Annual report, 2001 Although when facing the smartened revolution Monika was not able to respond to the new trend, in emerging markets Monika was faster than its competitors to answer that market needs.