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Globalization Strategy of Nokia
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Korea University
Graduate School of International Studies
Globalization Strategy of Nokia
Professor: Dong Ki Kim
Course: Global marketing management
Prepared by Mykhailova, Karolina
(Sogang University Student)
ID: I25004
November 8, 2010
Contents
Abstract
1. Introduction: Nokia’s background
2. Role of Nokia on the telecommunication market
3. Market Entry Strategy of Nokia
4. Nokia’s Foreign Direct Investment
5. Mergers, Collaborations and Acquisitions by Nokia
6. Foreign Exchange Market Impact over Nokia
7. Culture and Environment
Summary
References
Abstract
The mobile phone usage is increasing every day, revolutionizing the field of technology and our lives throughout the world. We all spend a considerable amount of time using our mobile phone for various purposes making it the technical innovation that we use most frequently. Nokia is one of the biggest brands in Telecommunications Industry globally. It enjoys a market share of around 35% at the moment. The Finland based company Nokia caters to GSM as well as CDMA segments. Nokia's phones are loved by a lot of people and its name is synonymous with reliability. Nokia has its presence in every segment of the market. It offers the cheapest of phones with the most basic features as well as high-end swanky phones with all the latest features.
The purpose of this paper is to briefly look at Nokia’s impact on the international business under the following topics:
• Nokia’s market entry strategy: Marketing Mix, Branding, PLC
• Foreign Direct Investment
• Foreign Exchange Impact over international Trade of Nokia
• Culture of Nokia and CSR
This will help to understand how Nokia’s way fits in to the theories of International Business and what strategy put it on the top of mobile phone market.
1. Introduction: Nokia’s background
Nokia was founded by Fredrik Idestam in 1865 as a wood-pulp mill in south-western Finland. It was later relocated to the town Nokia where the company got its name. The name Nokia is an old Finnish word for a dark, furry animal (such as the sable). In the beginning of the 20th century Finnish Rubber Works established its factories and began using Nokia as its brand. The companies merged in 1967 as Nokia Corporation, which went on to produce paper products, bicycles, car tires, footwear, personal computers, communication cables and televisions. It was not until 1987 that Nokia introduced one of the world’s first handheld phones, the Mobira Cityman 900. It weighed only 0.8 kg and cost ?4,650. In 1992 Jorma Ollila became the President and CEO of Nokia and focused the company on telecommunications. Nokia launched its first GSM handset in 1992, the Nokia 1011. In 1994, the first mobile to feature the Nokia Tune the Nokia 2100 was launched. In the same year, world's first satellite call was done using one of Nokia's GSM handsets. In 1997, the first mobile to feature Nokia's classic Snake game was launched, the Nokia 6110. 1998 was the year when Nokia became the world leader in mobile phones. The year 1999, was very significant as the Internet went mobile when the world's first WAP handset, Nokia 7110 was launched. 2002 saw the launch of Nokia's first 3G phones, the Nokia 6650. Nokia launched the N-Gage in 2003. It helped in making the mobile gaming multi-players. Another significant year in the history of Nokia was 2005 when the ‘Nseries’ was introduced. In the same year, Nokia sold its billionth phone. Nokia continues to be the market leader. It is now a huge multi-national company with manufacturing units all over the world. In the highly competitive world of mobile phones, Nokia still has a lot of market presence and provides a lot of mobile contracts and will continue to do the same (Nokia, 2010).
2. Role of Nokia on the telecommunication market
Finland, home of Nokia, the world's largest manufacturer of mobile phones, has honed a new innovation plan aimed at keeping the tiny Nordic country competitive in an increasingly competitive, global market. In 2006, Olli-Pekka Kallasvuo, formerly Nokia’s Chief Financial Officer, took over as CEO from Jorma Ollila, who became chairman of Nokia’s Board of Directors. Nokia’s success has made Finland one of the fastest-growing and most prosperous economies in Europe. A company becomes a ‘multinational corporation-MNC’ when it conducts any business function beyond its domestic borders’ (Cullen & Parboteeah, 2010). Internationally Nokia has captured markets of over 60 countries in the world where China, India, USA, Middle East, Africa, Asia, Australia and New Zealand having largest market shares. It was ranked in 85th place of ‘Fortune 500 list’ and employees over 125,000 staff (Cable News Network, 2009). "We are expanding our presence and operations in India, not for the local market alone. We want to strengthen our global presence by exploiting the skills found here.'' Said Kullasvuo to Bloomberg when India became the second largest market for Nokia surpassing USA in 2007 (Kallasvuo, 2007). This is clear intention of Nokia’s globalization strategy. The sales volumes depict how Nokia’s business arms have spread globally. Nokia Q1 2009 net sales were EUR 9.3 billion. This is enough proof for one to realize how Nokia’s presence in each country contributes towards GDP and employment statistics. (NOKIA, 2009) Finland already commits around 3.4 percent of its GDP (gross domestic product), or 6 billion [euro] (US$8.6 billion), to R&D. That compares with the European average of around 1.8 percent. Around 28 percent of this is paid for by the government, with the lion's share--72 percent--being footed by the private sector. Nokia accounts for 45 percent of all industrial R&D in Finland and more than 80 percent of the R&D investment in the telecommunications sector (Blau, 2008). Time marches on and history has proven that standing still means death for any company (Bradford, Duncan, & Tarcy, 2000). Change is inevitable for telecommunication industry and the size doesn’t matter even for a company like NOKIA if it is not adoptive. Based on strategies and events of 2008-09, let’s look at the SWOT analysis of NOKIA. SWOT analysis will help a firm to understand its Strengths, Weaknesses, Opportunities and Threats.
| Strengths • Long history of flexibility and adoptive to change • Steady revenue growth • Brand power • Strong financial position • Flexible Capital Structure • Investment in research and development of technology • Reached low operating costs in 2009 • Consumer retention rate of 55% • Product innovation bundled with value added services mainly focusing on maps, music, messaging, media and games. • Successful mergers, acquisitions and collaborations | Weaknesses • Reduced staff strengths to achieve low costs. • Declining profitability ratio due to current economic conditions • Decline in the converged device share (by 32% in 2008 despite the shipment of over 60 million units). |
| Opportunities • Consumer demand for mobile computers • New segments such as potential first-time email users in India, Africa, etc • Consumers attracted to less expensive devices during recession | Threats • Mobile device manufacturers • New entrants from the PC and internet industries • Contraction of the market due to current economic conditions • Innovative technologies in smartphone industry by competitors |
Out of the above weaknesses, reduction of overheads and staff was critical for Nokia since staff cut down had to be handled more humanly. Nokia announced plans to cut Operating expenses and cut production overheads by EUR500 million at an annualized level by the end of 2011. As part of this effort, the company is conducting a global personnel review, which may lead to headcount reductions in the range of 7% to 9% out of approximately 125,000 employees.
Also to reap benefits from the opportunities Nokia renewed its business mobility strategy in year 2008 and set out to excel in the following three key areas (International Security & Counter Terrorism Reference Center, 2009): 1. Successful device portfolio; 2. Collaborating closely with carriers; 3. Partnering with industry's leading companies. One of the key strategies in surviving in the economic turmoil is to re-invent the business by way of innovative product and services (Fischer, Gebauer, & Fleisch, 2008).
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