Case Study On Strategic Management On Nokia Pc
Nokia Case Study
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Nokia: A Phone for Every Segment
"While practically everybody today is a potential mobile phone customer, everybody is simultaneously different in terms of usage, needs, lifestyles, and individual preferences," explains Nokia's Media Relations Manager, Keith Nowak. Understanding those differences requires that Nokia conduct ongoing research among different consumer groups throughout the world. The approach is reflected in the company's business strategy:
We intend to exploit our leadership role by continuing to target and enter segments of the communications market that we believe will experience rapid growth or grow faster than the industry as a whole....
In fact, Nowak believes that "to be successful in the mobile phone business of today and tomorrow, Nokia has to fully understand the fundamental nature and rationale of segmentation."
Nokia started in 1865, when a mining engineer built a wood-pulp mill in southern Finland to manufacture paper. Over the next century, the company diversified into industries ranging from paper to chemicals and rubber. In the 1960s, Nokia ventured into telecommunications by developing a digital telephone exchange switch. In the 1980s, Nokia developed the first "transportable" car mobile phone and the first "handportable" one. During the early 1990s, Nokia divested all of its non-telecommunications operations to focus on its telecommunications and mobile handset businesses.
Today, Nokia is the world leader in mobile communications. The company generates sales of more than $27 billion in a total of 130 countries and employs more than 60,000 people. Its simple mission: to "connect people."
The mission is accomplished by understanding consumer needs and providing offerings that meet or exceed those needs. Nokia believes that excellence in three areas-product design; services such as mobile Internet, messaging, and network security; and state-of-the-art technology-is the most important aspect of its offerings.
THE CELLULAR PHONE MARKET
In the 1980s, first generation (1G) cell phones consisted of voice-only analog devices with limited range and features that were sold mainly in North America. In the 1990s, second generation (2G) devices consisted of voice/data digital cell phones with higher data transfer rates, expanded range, and more features. Sales of these devices expanded to Europe and Asia. In the twenty-first century, Nokia and other companies are combining several digital technologies into third generation (3G) communication devices that reach globally and feature the convergence of the cell phone, personal digital assistant (PDA), Internet services, and multimedia applications.
The global demand for cell phones has increased significantly over the years-from 284 million in 1999 to 410 million units in 2000 to 510 million units in 2001.
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Producers of first and second generation cell phones used a geographic segmentation strategy as wireless communication networks were developed. Most started with the U.S. and then proceeded to Western Europe and Asia. However, each market grew at different rates. By 2001, Asia had the largest number of handsets-170 million units. Western Europe was a close second at 167 million units, followed by North America at 90 million units. Latin America had sales of 42 million units while the rest of the world had sales of 38 million units. In terms of market share, Nokia led all producers with 32 percent in 2000 and 35 percent in 2001. Motorola and Ericsson, the second and third share leaders respectively, each had less than 20 percent of the market in 2001.
The total number of worldwide wireless subscribers reached 1 billion in 2001 and is expected to increase to 2.3 billion by 2005. Demand should increase due to the growing demand by teens for high-speed handsets that will provide Internet and multimedia applications. According to the Cellular Telecommunications& Internet Association (CTIA), U.S. wireless subscribers spend an average of $45 per month on calls.
HOW NOKIA SEGMENTS ITS MARKETS
According to Debra Kennedy, Director of America's Brand Marketing at Nokia, "Different people have different usage needs. Some people want and need all of the latest and most advanced data-related features and functions, while others are happy with basic voice connectivity. Even people with similar usage needs often have differing lifestyles representing various value sets. For example, some people have an active lifestyle in which sports and fitness play an important role, while for others arts, fashion and trends may be very important."
Based on its information about consumer usage, lifestyles, and individual preferences, Nokia currently defines six segments: "Basic" consumers who need voice connectivity and a durable style; "Expression" consumers who want to customize and personalize features; "Classic" consumers who prefer a traditional appearance and web browser function; "Fashion" consumers who want a very small phone as a fashion item; "Premium" consumers who are interested in all technological and service features; and "Communicator" consumers who want to combine all of their communication devices (e.g., telephone, pager, PDA).
NOKIA'S PRODUCT LINE
To meet the needs of these segments, Nokia has recently introduced several innovative products. For example, for the Communicator segment, Nokia's 7650 features a built-in digital camera, an enhanced user interface, large color display, and multimedia messaging (MMS) functionality that allows users to combine audio, graphic, text, and imaging content in one message. Once the user has selected a picture, written text, and included an audio clip, a multimedia message can be sent directly to another multimedia messaging-capable terminal as well as to the recipient's email address.
Nokia's 6340 phone allows Classic consumers to roam between various global networks; has a new wallet feature that stores the user's credit and debit card information for quick wireless Internet e-commerce transactions; supports voice-activated dialing, control of the user interface, and three minutes of voice memo recording; and includes a personal information manager (phone book and calendar).
To target the Basic segment, Nokia provides very easy-to-use, low-priced phones that are likely to be used primarily for voice communication. They are designed for consumers who are buying their first cell phone. "We want it to be a very easy choice for the consumer," explains Kennedy. Products designed for the Expression segment are still in the low price range but allow young adults to have fun while communicating with friends. Nokia recently introduced the 5210, a cell phone that offers a youthful and vibrant style with improved durability, for this group. Features include a removable shell, a built-in stopwatch, a thermometer, downloadable game packs, a personalized logo, and a personal information manager.
Nokia also designs phones for the Fashion segment-people who want a phone to "show off." The Nokia 8260 and 8390 products are in this category. They provide basic communication and other features but are not designed for heavy use. One of Nokia's television commercials for fashion phones showed two people sitting on a couch trying to talk to each other at a loud party-so they call each other on their phones! In addition, Nokia offers phones for the Premium segment-people who also want a distinctive and elegant design, but as a fine item to appreciate rather than to show off. The Nokia 8890, a phone with a chrome case and blue back light, was designed for this group. In addition, Nokia recently introduced the all-in-one 5510, which features an MP3 player that can store up to 2 hours of music, an FM radio, a messaging machine with full keyboard, a game platform with game controls for two hands and keys located on either side of the screen, and of course, the cell phone.
THE FUTURE FOR NOKIA
A fast-growing segment for wireless mobile cell phones is the automobile. According to the ARC Group, the number of cars with "telematic" systems will increase from 1 million units to 56 million units by 2005. Ford, Nissan, and other automobile manufacturers have recently introduced systems in selected models. One reason for the expected popularity of these devices is their "hands-free, voice-activated" operation, which is designed to reduce cell phone-related automobile accidents. The CTIA has recently developed a public service announcement (PSA) to curb this dangerous behavior and forestall legislation designed to eliminate cell phone use in the car entirely.
Nokia Executive Vice President Olli-Pekka Kallasvuo is so optimistic he recently commented that "our ambition should be extremely high," as the company has set its sights on capturing 50 percent of the worldwide mobile-phone market.
Nokia Case Study | Nokia Assignment Help | Strategic Analysis of Nokia
Research Problem: The analysis of the case of Nokia leads to the identification of the main research problem which has been the declining market share of Nokia despite having huge R&D investment made by the company. The case analysis revealed that Nokia spends excessively on R&D as compared to entire industry expenditure on R&D, but despite making such huge expenditure, the company is not able to introduce smart phones that can compete against iPhone as produced by Apple Inc. This has adversely affected the market shares of the company and it has become a significant managerial issue for the company to revive its brand name.
Rationale for Investigating the Problem: The main rationale behind investigating this managerial issue is that despite making significant efforts in terms of R&D expenditure, Nokia is not able to present a smart phone that can compete strongly against iPhone. Thus, the investigation of this issue will lead to the identification of the factors that caused company to face such severe threat of declining market share and the actual reasons for the problems could be better identified.
Argument in Carrying out this Investigation: On the basis of analysis of Nokia’s case, it has been argued that R&D activities alone would not enable a company to achieve higher market success; rather, it should be used in combination with the managerial leadership abilities to effectively utilise the findings and investment made in R&D.
An Analysis of the Case of Nokia
The performance of a critical analysis of the Nokia’s case indicates that the major issue with the company is its declining share price because of its inability to bring newer products into the market. The case of Nokia revealed that it spent $40 billion on research and development which is almost equivalent to four times what Apple has spent in the same financial year. Despite making such huge R&D expenditure, Nokia was unable to launch a smart phone that can effectively compete against the iPhone. The managerial issue as evident in the case of Nokia suggests that the management has not been able to introduce the right smart phones in the market that can compete with Apple and Samsung. The managerial problems as faced by Nokia is also clearly evident from the fact that Nokia has actually developed few products and designs, but the managers within the company failed to introduce them into the market on time. This is the major strategic blunder on the part of management of the company. Further, its inability to compete with the iPhone has resulted into the shift in its focus from smart phones to its basic phones. This is the major contributing managerial problem which led to the problem of declining market share of Nokia (Smith, Collins and Clark, 2005).
According to a study conducted by Rosier, Morgan and Cadogan (2010), the principle challenge to firms is with respect to the ways in which strategies developed are implemented successfully by them. The managers within the organisations have a critical role to play in performing the successful implementation of strategies in order to achieve success. But this aspect has been lacking in respect to Nokia in the case, as the management of the company has failed to cope up with the market situation. As per the case, Nokia led the wireless revolution in 1990 and it was the first company to enter into the world of smart phones. However, with the introduction of the smart phone era, the company is racing to roll out the competitive products, as its share prices have collapsed significantly. Instead of bringing new smart phones to the market, the company seems to withdraw as it is unable to launch a competitive smart phone as against Apple iPhone. This aspect clearly indicates that the lack of sufficient ability of the management at Nokia to revolutionise the market through its smart phones (Rosier, Morgan and Cadogan, 2010).
Another major area of problem as identified from the case analysis of Nokia is that the company has recently introduced a series of Nokia Lumia phones which is basically a type of windows phone. But such introduction of Nokia Lumia phones has not been successful in allowing the company to achieve the lost market shares. Despite making huge expenditure over the R&D function, Nokia is still struggling to turn its new ideas into its product and the resulting impact is its further decline in the sales and market position across industry. On the basis of analysis, it has been argued that the innovation is essential to be performed in order to achieve success in the market, as the introduction of windows phone by Nokia has resulted into similar kinds of phones being brought by Samsung into the market. This has affected the performance of Nokia’s Lumia phones significantly and it is clearly evident over the market shares of the company (Bowman and Gatignon, 1995).
The fact that innovation is crucial to a firm’s success is also supported by Panne, Beers and Kleinknecht (2003) by indicating that innovation allows the firms with opportunities to offer something new and distinctive apart from their competitors. However, in order to achieve success in innovation, there are various factors that act as determining factors and these include firm’s culture, the experience with innovation, the multidisciplinary character of R&D team and the support from the top management. The analysis of the case of Nokia suggests that all these aspects are mostly lacking in respect to the company, as the managers were not able to introduce the new concepts into their products, the R&D team failed to utilise the key findings in introducing new products into the market and finally, the management’s approach also seems to be highly laggard, as despite introducing new and innovative smart phones, the management has undertaken decisions to take back their approach from introducing new and highly advanced smart phones to other small range of phones (Panne, Beers and Kleinknecht, 2003).
The analysis of the case leads to the identification of another major significant issue as faced by Nokia is the timely introduction of new products into the market. It has been argued that the higher level of benefits can be achieved from a product provided it has been introduced in the market on timely basis. This requires a proactive approach on the part of management of an organisation, as the important findings from the R&D activities should be reflected in their products on timely basis so as to achieve maximum level of benefits from it (Baker and Sinkula, 2005). However, in respect to Nokia, this aspect has been significantly lacking, as the analysis of the case revealed that Nokia has devised the concept of a colour touch screen phone which is set above a single button and this concept is mainly planned by the Nokia team seven years before Apple Inc. The device was shown locating a restaurant, playing a racing game and ordering lipstick. But the main issue was that it remained a plan for the company, and it never launched its innovative ideas into the market through its product offering. If the company have introduced all such innovations in its product offerings to its customer for the first time, it would have better position throughout the entire mobile industry.
Thus, the analysis of the Nokia case indicates that there are various managerial issues as faced by the company which has resulted into significant decline in the level of market share. Despite making efforts in the form of huge spender in R&D activities, Nokia failed to introduce new smart phones that could compete against iPhone and the inability to introduce its innovative ideas into the market through its product have all caused the mobile phone company to bear significant amount of loss in its market share.
Conclusion and Recommendations
In this report, a critical investigation of the management issues as faced by Nokia from the analysis of a case study has been performed, and the investigation revealed significant number of issues that are faced by the organisation behind its core problem of declining market shares. The analysis of the case leads to identification that Nokia made huge R&D spending and despite such effort, it has not been able to launch a smart phone that can compete in the industry. The major managerial issues as identified from the case analysis suggest that Nokia has failed to successfully integrate the strategies as developed by it into its products. Secondly, it has performed innovation in launching new smart phones, but they were not that innovative to compete against iPhones and other smart phones by Samsung, and thirdly, even after devising important innovative concepts, it failed to introduce them into the markets. This is mainly because of ineffectiveness on the part of management at Nokia, as they failed to create an impact in the market with their windows smart phones.