Another connected stakeholder is credit investors. They concern with the growth of the company and their benefits after investing company. The investors want to receive regular information about the organization including specific up date for credit analysts. In addition, they want to be informed about the developments affecting both the group and the utility sectors. Investors also need to have conferences; meetings which are organize by Nokia to get more information. For instance, Nokia arranges Investor Days twice annually and keep contact frequently with the private investor community or a range of investment and research organizations, such as the Dow Jones Sustainability Index and FTSE4Good.
Nokia has large number of customers over 80 countries in the world. Customers want to receive acceptable quality goods and service with a suitable price and get future benefits. They have significant influences on the prices, procedures and even the growth of the company. Customers will determine what quality is necessary, what price is charged and what development is needed. Through feedbacks, complaints, suggestions, choosing whether or not to buy, and filling the questionnaires…customer can affect the company. Thus, Nokia may get risks when customers buy somewhere else or sue the company. With the consumers, company carries out “comprehensive regional and worldwide brand surveys as well as related focus-group discussions on an ongoing basis; stage issue-specific studies, such as community involvement survey of opinion leaders” (Nokia, 2006).
Bankers are also interested in Nokia’s overall condition. However, they concern with whether or not company can pay the loan. In another word, they care about the security of any loan, the adherence to loan agreements. They always want to limit or minimize the risk of interest not being paid. The risks made by bankers as disclamation of credit, high interest rate and receivership…also affect directly on Nokia. The last connected stakeholder is supplier. Suppliers have interest in being paid promptly for goods and services delivered and receiving regular repayments of any capital provides. That means they concern with their interests about their profit and the long term relationship with Nokia. Moreover, the suppliers also care about face-to-face meetings, assessments, contractual agreements, training programs, and supplier-focused events. Refusal of credit, wind down relationships and court action are the response risk of suppliers toward company. Thus, in order to help promote good performance and also to monitor compliance, Nokia carries out the supplier assessment.
(Nokia, 2008)
Nokia’s external stakeholders involve government and nongovernmental organization like interest/pressure group. We can say that government has a vital affect on the success of the company. The government’ roles are passing laws to protect employees and customers, collecting taxes such as VAT, income tax; helping exporters, legal actions, and regulations. Government want to know that whether the organization meet legal requirements and harm the environment or not. On the other hand, the policies or guidelines of government, tax increases, and legal action will affect on company’s strategies. Local authorities are interested in the number of local employees that company can bring. Pressure groups are interested in pollution, rights and other issues of Nokia. These groups influence company through publishing business activities, political pressure for changes in the law, and illegal actions.
We see that stakeholder analysis has the strong impact on the development and position of Nokia in global market.
External environment and organizational audit of the company
It is easily to see that the external environment affects directly on Nokia’s strategies. The physical and social environments can be divided in to PESTEL factors: Political, Economic, Socio – cultural, Technological, Environmental and Legal.
The political and legal environment in Finland is relatively stable. The legal system is clear and less bureaucratic (The Heritage Foundation, 2008). Finland joined the European Union in 1995 and highly open to investment and free trade. The foreign investors are welcomed with highly educated workforce, stable policies, and excellent infrastructure. This is the favorable condition for Nokia Finland to attract potential investment. There is a heavy tax burden and inflexible job market which means that is more job market regulations. However, the regulation in product market is less. According to The Heritage Foundation (2008), property is protected by a transparent rule of law, and foreign investors enjoy excellent market access. Besides, Finland has a standardized monetary policy, virtually no corruption, and business operations are not impeded by government bureaucracy. All worker have to obey lengthy and bureaucracy imposing country – wide contract. Although, Nokia must follow law and regulations, company can take the advantages of political and legal factors.
Economic environment influences on Nokia at various levels. In accordance with Central Intelligence Agency (2008), Finland has a highly industrialized, large free market economy and telecommunication is its key economic factor. The largest industry is electronic (21%) and largest sector is service which contributes 65.7% to the GDP. In 2007, GDP real growth rate is 4.5% and GDP official exchange rate is $245 billion. This is average level in comparison with the global economy growth rate; hence, it is positive impact toward Nokia. Beside that, the inflation rate is 2.7%. The low inflation rate less influences on selling price and low affects to Nokia’s business. Finland has moderate tax rates. The income tax rate is 32 %, and the top corporate tax rate is 26 %. Other taxes include a value-added tax (VAT) and a real estate tax. The income tax is higher than other countries in EU. This makes the net income of people lower; thus, they will spend less money on consuming. This will be the challenge for Nokia in attracting customer. However, the corporate tax is at medium level and the property tax is low. Therefore, they have low and minor effect to Nokia.
The population in Finland is 5,244,749 in which 16.6% from 0 – 14 years old, 66.8% from 15 – 64 years old and 16.6% from 65 years and over. People from different social class with different ethnic background, religion, age, sex and work have distinct needs which will influence company’s strategies. The labor force is about 2.675 million and unemployment rate is estimated to 6.9%. The labor force by occupation is agriculture and forestry 4.4%, industry 18.6%, construction 6%, commerce 16.3%, finance, insurance, and business services 13.9%, transport and communications 7.6%, public services 33.2% (Central Intelligence Agency, 2008). A worker in Finland can make EUR 25.1 per hour. The income as well as the living condition of Finnish people is higher than average countries in European. In addition, 92% of population uses mobile phone; hence, the demand for telecommunication is high. This is the favorable condition for Nokia’s business.
Prime Minister’s Office, Finland, (2008) claim that “Finland is a leading information society in terms of the utilization of high technology products and communications technology”. The World Economic Forum’s Global Information Technology Report 2005-2006, assessing the state of economies’ networked readiness, ranked Finland fifth after the United States, Singapore, Denmark and Iceland. For example, mobile phones are particularly popular in Finland. Prime Minister’s Office website also stated that in 1998, Finland became the first country to reach the milestone of 50 mobile phones per hundred inhabitants. Today, there are 91 mobile phones per hundred Finns. In 2004, Finns wrote an astonishing 2.1 billion private text messages. We see that, people are very keen on the development of technology. This requires Nokia to invest in researching and development products in order to satisfy customer’s need. According to scenario, Nokia improves the technology of mobile phones based on WCDMA, GSM, CDMA and TDMA to 3G phones which can be used to download TV, make video calls, watch TV and browse the web.
The physical environment has a consideration effect on organization’s operation. Nokia also realizes that natural environment influenced directly on the success of company and protecting environment is the responsibility of everyone as well as Nokia. Therefore, Nokia’s target is to be a leader in environmental performance. Company manages environment issues based on lifecycle thinking. They take a cradle-to-cradle approach in order to reduce environmental impacts in operations and throughout the life of products, including proper treatment and recycling at the end of useful life. Nokia also uses Environmental Management Systems (EMS) and the ISO 14001 standard to control and manage the environmental aspects of production and large offices (Nokia, 2008).
Another external influence upon Nokia is the competitive environment. According to Michael Porter (1966), there are five basic competitive forces: new entrants, suppliers, buyers, substitutes and rivals.
(Value Based Management.net, 2008)
The power of suppliers is shown through number of suppliers in the market, size of suppliers, the uniqueness of service, the strength and control of suppliers over company, company’s ability to substitute and cost of changing. Nokia is cooperating with some research tools, directory services, and suppliers of first – class digital map to provide local results quickly to customers. Although, technology in Finland is developed, the number of these suppliers is very little, and products and services they provide are not popular. Moreover, it is hard for Nokia to find substitutive suppliers and the cost of charging is also high. Therefore, the power of suppliers toward Nokia is really strong. Nokia needs to have suitable strategies in order to build long –term relationships with suppliers.
Whereas, power of buyer involves number of customer, bargaining leverage, buyer information, brand identity, price sensitivity, threat of backward integration, product differentiation, substitute available, and buyers’ incentives (Internet Centre for Management and Business Administration, 2007). Nokia has a large number of customers over 80 countries in the world. Price of Nokia’s mobile devices is quite sensitive to customers. In addition, they can choose other companies because there are many companies supply mobile devices Samsung, Motorola, Sony Ericsson…. People may choose products of other companies or compare the prices, designs, features of products with competitors’ price. Consequently, customer will affect and set the price of products. Besides, buyers influence directly on the products such as the designs, types and functions of the mobiles. On the other hand, they may think about other substitute products as telephone or beeper rather than mobile. There are a lot of choices for buyers when finding mobile telephone in the market. Thus the power of buyer is really high.
Another force is threat of substitute products. It happens when customers find other product with similar functions that can take place our product as telephone and beeper. We see that “a product's is affected by substitute products - as more substitutes become available, the demand becomes more elastic since customers have more alternatives” (Internet Centre for Management and Business Administration, 2007). Hence we need to take care of substitute performance and cost of charge. Although telephone and beeper is not so convenience as mobile, people still using them due to low price and low cost. Almost households have a telephone in the house because it is affordable with average and low income family and it is also easy to use; while, mobile has more complicated functions. However, now people are much interested in mobile because of its new technology, features and convenience.
Furthermore, company has to concern about barriers to new entry because appearance of new mobile companies will affect the competition of our company. Threat of new entry is about time and cost of entry, specialist knowledge, economies of scale, cost advantages, technology protection, and barriers to entry (). Finland is known as the most advanced mobile phone market in the world. Though, time and cost of entry is high and it requested specialist knowledge about mobile and technology, entry barriers is low; hence, the threat of entrants is high. That requires Nokia to have appropriate and timely strategies in anticipations of the power of new entries.
Rivalry among existing firms is one of Porter’s five forces that company should keep an eye on. Factors of rivalry among existing firms are exit barriers, industry concentration, fixed costs/value added, industry growth, intermittent overcapacity, product differences, switching costs, brand identity, diversity of rivals, and corporate stakes. According to the scenario, with Nokia, Motorola and Ericsson fighting it out at the top an several less successful brands like Samsung, Philips, Siemens and Panasonic trying to make inroads into their top competitors’ market share. The level of company in the market depends much on the brands, and what the brand names mean to customers. Furthermore, the switching cost for company to converse to other industry and the exist barriers are high. That increases the competitive power. Therefore, Nokia should attach special importance to quality and differentiation of products, brand and customer loyalty.
Beside the external environment, the internal environment as core competences also influence on the Nokia’s business. “The distinctive competence of an organization is what it does well or better than its rivals” (Edexcel HND/HNC Business, 2004). Nokia has two main core competences: competitive advantages of products and services and competitive advantages of resources. As regard to the competitive advantages of product and services, Nokia provides to customer high quality product range from simple to complex with the latest technology. That allows people to use mobile phones in valuable new ways. In addition, Nokia designers also concentrate to improve the shape, color, design, and soft key touch pads. Based on the scenario, the shape of phones is curvy and easy to hold. The faceplates with different color are designed to fit the personality, lifestyle and the mood of users. The soft key touch pads add to the felling of friendliness, expressing and the bland personality. Moreover, mobile has many modern functions: download music, make video call, watch TV on the move and browse the web. Nokia’s first commercialized consumer environmental service is MobilEdu. “It provides wireless learning that integrates device, content, and service for mobile users to learn and share in an effective and efficient way “(Nokia, 2008). All of these are made to meet the customer’s need fully.
Nokia’s resources that can bring the competitive advantages are brand, good financial situation, technology, human resources, distribution channels and marketing capability. “Improved performance in 2007 has catapulted global mobile handset equipment leader Nokia to the world's fifth most valuable brand, worth Euro 35 billion after Coca Cola, Microsoft, IBM and General Electric” (Rediff.com India Limited, 2008). This will be the most competitive factor that other companies can not compete with Nokia. Beside that, with good financial situation (the operating profit is EUR 1469 million in third quarter 2008); Nokia has the positive position when competing. Nokia specially focus on the technology and research and development. For instance, Nokia launched its first 3G phone in 2002 and after 2 years, Nokia’s first phone with built – in camera and first video capture phone was launched. In addition, Nokia has a well – trained and committed staff. Company opens dialogue about performance and opportunities for development helps to motivate the employees. Company also encourages managers to coach employees continually as well as having at least one formal personal development discussion every year (Nokia, 2008). The success of Nokia depends much on the staff; thus, this will be the competitive advantage for company. Nokia has a wide range of distribution channels and high marketing capability. Example, Nokia has representatives from 23 operators and more than 400 Nokia for Business Channel Program participants from around the world. All of them create competitive advantage for Nokia in the competition with other rivals.
In organizational audit, the value chain which groups the various activities of Nokia also be assessed. From the value chain, Nokia can secure the competitive advantage in inventing new ways to do activities, combining activities in better ways, managing the linkages in its own value chain, and the value system (Edexcel HND/HNC Business, 2004). In addition, through value chain, company can find out which activities can add value to both customers and company.
Through the value chain, we see that Nokia is good at the Marketing and sales, procurement, and technology development. From that, Nokia can improve these activities in order to satisfy customers’ need and get profitability.
SWOT analysis of the company and strategic positioning techniques to the analysis of Nokia
In order to know the strengths, weaknesses, opportunities and threats of Nokia in relation to the internal and external environment factors, we use the SWOT model.
In current time, Nokia has a lot of strengths. According to one brand valuation study in 2007, Nokia was World’s 5th most valued brand, 1st brand in Asia and 1st brand in Europe. In addition, Nokia takes 38% of global devices market share in 2007. Based on the case study, the Nokia’s net sales was EUR 51.1 billion and operating profit EUR 8.0 billion in 2007. That makes Nokia become the first manufacturer of mobile devices. Nokia has strong functional centralization structure with the cooperation between R&D and Marketing and competent and powerful management team. From that, commitment of employees is the strength of Nokia. Moreover, Nokia provides high quality products and has a wide distribution channels. From the strengths and environmental factors, the opportunities for Nokia will be the increase of customers’ demand, the increase of the market share, new market and supplier due to the development of 3G phone. However, Nokia’s products have limited designs when comparing with other competitors’ such as Motorola, Ericsson… Customers also complain about the limitation of game software in mobile phone. Nokia threats come from the new competitors who may have new brand, skills and technology. Although, 3G phone has many functions as download music, make video calls, watch TV on the move, browse the web, Nokia is still threaten of being replaced by other competitors. Finally, the most important threat with Nokia is losing customers. The customers may not satisfy with Nokia’s products and choosing other brand - name mobile with nicer design and cheaper price.
From the SWOT analysis, company can adopt appropriate competitive strategy which means “taking offensive or defensive actions to create a dependable position in an industry” (Edexcel HND/HNC Business, 2004). There are three basic generic strategies: cost leadership, differentiation, and focus. Cost leadership and differentiation are industry wide strategy. According to Edexcel HND/HNC Business (2004), cost leadership strategy is based on the position of lowest cost producer in industry as a whole. To achieve this strategy, company needs to have tight cost control, functional organizational structure. Whereas, the differentiation strategy is based on the particular characteristics of company’s products. In order to create the differentiation, company needs to build up a brand image, give product special features and exploit other activities of the value chain. Focus strategies includes cost focus and differentiation focus. With this strategy, company concentrates in particular segments of the market. It requires the combination of policies in cost leadership and differentiation strategies at particular strategic target and market segment.
Based on all the above analysis, we see that differentiation strategy can be applied to Nokia. Firstly, Nokia has strong marketing capability. Nokia has famous brand name, marketing slogan “Connecting people” and “Human technology” and a lot of advertisements in easy – to – see places as TV, magazine or newspaper, websites or billboards on highway… in accordance to the scenario, Nokia focus on the customer relationships and its personality is like a trusted friend. Building friendship and trust is at the heart of Nokia brand.
Besides, Nokia also has strong R&D capability. Nokia has 30 415 employees work in R&D in total of employees 112 262 people. As of April 1, 2007, Nokia had R&D centers in 11 countries and employed 14,500 people in research and development, representing approximately 32% of Nokia’s total workforce. R&D expenses totaled EUR 3,9 billion in 2006, representing 9,5% of Nokia’s net sales in 2006, compared to 11.2% of net sales in 2005 and 12.9% of net sales in 2004 (Nokia, 2008). Nokia develop a wide range of products as mobile devices with services and software that enable people to experience music, navigation, video, television imaging, games and business mobility. Furthermore, Nokia is the pioneer of providing 3G phone. At the same time, based on the case study, mobile communications is converging with computing, digital, imaging and the internet, making it possible for people to use handheld devices for filming video, listening to music, playing games, surfing the web. For over 42 years, Nokia has a long tradition in the industry. It is a good condition for Nokia to adopt differentiation strategy. In addition, according to Olli – Pekka Kallasvuo – President of Nokia, company has a strong connection and cooperation between R&D and Marketing. The heads of marketing and R&D work side by side and closely together on new models. Nokia rewards employees competitively through a global reward framework designed to recognize individual contribution and achievement (Nokia, 2008). Company also offers an integrated package of classroom training, on-the-job learning, individual coaching, and mentoring to encourage people to learn through active participation by trying new roles at Nokia. Therefore, company also has the abilities to attract highly skilled labor. In addition, buyer needs and uses of mobile phone are diverse. Thus, Nokia has all the advantageous condition to adopt the differentiation strategy.
Current environment in Vietnam and possible consideration for strategic analysis of the company and strategic plan for Nokia.
According to the scenario, we see that the vision of Nokia still is “To be the world leader in mobility, driving the transformation and growth of the converging Internet and communications industries”. Nokia affirms that they are a consumer led company because they know people have the need of communicating and sharing. Nokia also promises to connect people in new and better ways with truly connected, independent of time and place. The mission of Nokia is “The purpose of Nokia Corporation is to satisfy the needs of communication by providing products and services with high quality and human technology to our customers”.
In order to achieve both the mission and vision, Nokia has to set up not only corporate objectives but also functional objectives. The corporate of Nokia in Vietnam is to increase the mobile device market share up to 35% by through product development and appropriate marketing strategies. Investing 7% of profit for each year to improve and develop product range is other objectives of Nokia. Company has strong functional centralization structure, thus each department will have private objectives. As regard to R&D department, they need to improve and develop new products and services to satisfy customer demands. Increasing the number of customer by 5% is the functional objectives of Sales department. Therefore, the Production Department’s objective is to increase the mobile volume by 8% over the volume in 2007. As regard to the Finance Department, the objective will be producing monthly reports quickly within 7 days end of each month.
When Nokia does the business in Vietnam, Nokia also needs to conduct an environment audit to find out what factors influence on the company.
After economic innovation in 1986, Vietnam has open market with many countries in the world. Thus, there is not much law restricted on the selling and marketing of goods. In 2008, Vietnam GDP real growth rate is about 8.5% and CPI is about 25% (Central Intelligence Agency, 2008). That figure shows that Vietnamese people’s living standard is increase and they spend much money on purchasing thus the demand for goods and services also increase. Especially, mobile demand is increase strong in recent years. Five years ago, there is about 2 million of Vietnamese people used the mobile phone, and now this number increase to 18 million people (Computer – Communication – Control Inc, 2007). Although, salary of a white – collar is about $300 per month and cost $9 for an hour using mobile phone, the number of mobile still increase. However, the inflation rate in 2008 is about 22%; hence, people will care much about price of product as well as the quality of products.
Besides, socio – culture factors in Vietnam also affect on Nokia. Vietnam population is 86,116,560 people in which two thirds of the population is under 30 years old. Due to Vietnamese young population, Vietnam is a potential market for Nokia. In addition, company also can attract young, skillful employees because the labor force is about 46.42 million (Central Intelligence Agency, 2008). On the other hand, the demand for mobile phone gathers mainly in big cities as Hanoi, Ho Chi Minh City, Hai Phong, Da Nang, Nha Trang… However, people different social class might have different need for the mobile phone. For example, people who have low and average income are more interested in cheap price mobile phone while, high income people are keen on fashionable, modern and functional mobile. The lifestyle and personality also affect the demand of Nokia mobile phone. Because of young population, Vietnamese people care much about the technology development as the way in which products are made, and the way services and products are provided. Mobile with modern functions, high technology attracts a lot of customers. At the current time, Vietnam does not have tight regulation of the environment. However, company should have environment protecting activities to show the responsibility of company toward the development of the country.
Five forces factors are also analyzed to understand the external environmental factors that affect company. Nokia is also cooperating with some research tools, directory services, and suppliers of first – class digital map to provide local results quickly to customers. Although, the number of these suppliers is very little in Vietnam market, and products and services they provide are not popular. Moreover, it is hard for Nokia to find substitutive suppliers and the cost of charging is also high. Therefore, the power of suppliers toward Nokia is really strong. Therefore, Nokia needs to have suitable strategies in order to build long –term relationships with suppliers.
Nokia has a large number of potential customers in Vietnam market. Price of Nokia’s mobile devices is quite sensitive to customers. In addition, they can choose other companies because there are many companies supply mobile devices Samsung, Motorola, Sony Ericsson, WellcoM, iMobile…. People may choose products of other companies or compare the prices, designs, features of products with competitors’ price. In the market, a Chinese mobile with nice design and cheap price which affordable to low and average income people attract a lot of customers. Thus, the switching cost for customer to converse Nokia mobile to other brand name one is low. Consequently, customer will affect and set the price of products. Moreover, buyers influence directly on the products such as the designs, types and functions of the mobiles. On the other hand, they may think about other substitute products as telephone or beeper rather than mobile. There are a lot of choices for buyers when finding mobile telephone in the market. Thus the power of buyer is really high.
Another force is threat of substitute products. It happens when customers find other product with similar functions that can take place our product as telephone and beeper. Hence Nokia need to take care of substitute performance and cost of charge. Although telephone and beeper is not so convenience as mobile, people still using them due to low price and low cost. Almost Vietnamese households have a telephone in the house because it is affordable with average and low income family and it cost less than mobile phone. However, now people are much interested in mobile because of its new technology, features and convenience.
Furthermore, company has to concern about barriers to new entry because appearance of new mobile companies will affect the competition of our company. Vietnam is a potential market for mobile companies. Although, time and cost of entry is high and it requested specialist knowledge about mobile and technology, entry barriers is low; hence, the threat of entrants is high. Nokia is required to have appropriate and timely strategies in anticipations of the power of new entries.
Rivalry among existing firms is one of five forces that company has to focus on. In current Vietnamese mobile market, there are many competitors against Nokia such as Samsung, Motorola, Ericsson, Siemens, S – Fone, Apple and Chinese and Thailand mobiles as WellcoM, iMobile… Mobiles from China and Thailand with affordable price and various designs will become big competitors against Nokia. The switching cost for company to converse to other industry and the exist barriers are high. Thus, competitive power is also high. Therefore, Nokia should attach special importance to quality and differentiation of products, brand and customer loyalty.
A SWOT analysis is conducted to understand the strengths, weaknesses, opportunities and threats of Nokia in Vietnamese market.
Through the above analysis, we see that, the price competition among rivals is the dominant forces because Vietnamese people care much on the price when purchasing product. In addition, with many choices in the market, the switching cost of customer to change the sellers is low. Especially, the number of buyers is large and they have strong bargaining power. Moreover, Nokia in Vietnam has sustained capital investment, limited product range, and functional organizational structure. In addition, Nokia uses latest technology to reduce cost and enhance the productivity. Therefore, in Vietnamese market, Nokia may adopt cost – leadership strategy. However, Nokia can apply differentiation – focus strategy for high income customer segment. With these segmentation of customers, the demand for unique or differentiation is incentive than price. Hence, applying differentiation focus strategy will attract a lot of customers for company.
CONCLUSION
Nokia is trying to be the world leader in mobility, driving the transformation and growth of the converging Internet and communications industry. With the external and internal environment audit, the SWOT analysis, Nokia can adopt appropriate strategy. In different market or country, Nokia needs to conduct particular environmental and organizational audit to find out the most suitable competitive strategy for company.
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