Technology is the soul of telecommunication industry which is the reason why the R&D investment of Nokia in the year passed is EUR 5.6 billion (Company information, 2008). Smart phones, 3G mobile phones and environment protecting mobile phones are the evidence of technology progressing in telecommunication industry. Nokia Research Center invented many new technology reflected by the upcoming innovations including indoor positioning, location sensing, mobile journalism and so on (Upcoming innovations, 2008).
The leading brand, scale and number one market position is the most significant strengths of Nokia (Nokia Capital Markets Day, 2008). As the most famous brand of mobile device provider in the world, Nokia is the symbol of quality. Consumers are comfortable with its devices and services. Nokia’s highly variable, low fixed business model gives it the opportunity to scale to a declining market (Nokia Capital Markets Day, 2008).
The mobile communications industry is changing rapidly, for example, network plays a more and more important part and the market segments have been introduced and are still being introduced (Annual report, 2007). Nokia’s sales and profitability are significantly affected by the growth and profitability of the new market segment, which requires a far outlook and sensitivity of the market. Nokia lost the market share of 3G mobile phones once owing to the neglect of the importance of network. Conversely, Apple observed the trend and brought out iphone.
Competition is intense in mobile communications industry. To avoid the failure the company should improve its market reputation, or adapt to the changes in the competitive landscape which is very important for Nokia’s strategic marketing design. Although Nokia has already been the top one in the mobile communications industry. The existing the threats are from other telecommunication providers such as Samsung, Motorola. Moreover, as the growing importance of network in mobile communications industry, the entry of network companies beccomes a great concern.
3. Strategic Options
3.1 The Grand Strategy of Nokia
Considering the strengths, weaknesses, opportunities and threats of Nokia, the grand strategy Nokia should adopt is growth strategies. And among which, intensive growth strategy is deserve to be paid great attention in order to strengthen the competitive position of existing products or services of Nokia such as devices, PCs and the integration with the Internet (Nokia Capital Markets Day, 2008).
3.2 Competitive generic strategies
In details, the competitive strategies lead the succeed in the marketing campaign. The key principle for a competitve strategy is how to build advantages in market competition. Cost leadership、differentiation and focus are three competitive generic strategies(Porter, 1980,1985). Three of them allow companies to obtain the profits over the average level of industry and form constant competitive advantages.
3.2.1 Cost leadership Strategy
Cost leadership strategy is a strategy obtains competitive advantages with a low cost which emphasizes to produce standardized products for the customers who are sensitive to prices.
Nokia claims a cost reducing on its capital markets day at the end of this year. Nokia CFO, Rick Simonson emphasized that Nokia is practicing a cost reduction which is effective now and is continuing to keep the strategy for 2009 and 2010 ((Nokia Capital Markets Day, 2008). Nokia is always using a highly variable, low fixed cost business model. The balance sheet of 2007 gives us a clearer view of this. The fixed assets and other non-current assets are 8305 EURm, but the current assets are 29294 EURm (Annual report, 2007).
Mobile phones are identical products if you do not call for multifunction except sending massages or making calls. Thus, the cost leadership strategy is possible to practice. And the switching cost for customers of mobile telecommunication industry is very low, almost zero. So it’s rather easy for a customer to purchase another brand of mobile phone only for a lower price.
Economics of scale means when Nokia expand its produce capacity, the unit cost of mobile phones will decrease. And with limits, Nokia can reduce its cost if it produces more.
One of the risk of adopting a cost leadership strategy maybe the imitation of competitors which lead to a price campaign and lower the profitable ability for the whole market. And the change of technology can dissipate the low cost advantage.
3.2.2 Differentiation Strategy
Differentiation strategy means providing different products or services from competitors to obtain competitive advantages focused on massive market.
Modern telecoms market is changing change faster, grows up quicker, and compete fiercer than most other markets. So it is rather important to maintain competitive by keeping up to date and focus on innovation. The marketplace is changing all the time and the traditional mobile device industry is involved with internet services, therefore, the products and services Nokia provides should be totally change (People management, 2008). Seeing this trend, Nokia merged with Nokia Siemens Networks.
Nokia is the leading brand in mobile telecommunication industry, and its quality and technology is acknowledged by consumers all over the world, thus the different product can be accepted easily. Besides, Nokia has a strong research and development capability supported by the Nokia Research Center which makes the differentiation possible. The strong research capability can be better explained by the figures follows, 27 percent of the 100,000 employees in 10 countries housing its R&D arms in Central and South America, Europe and Asia (People management, 2008).
Consumers have different preferences, for example, the youth prefer individuality so that they pursue motivation not only according to the quality but also the unique services, and distinguish feelings which makes the differentiation meaningful.
3.2.3 Focus Strategy
Focus strategy is using the cost leadership or differentiation focus on certain consumer group, regional market and product segment market. It often applies to medium and small enterprises which are not capable to accomplish cost leader and differentiation in the whole industry (Lynch, 2003). As for a leading company of mobile telecommunication industry, the focus strategy is not suitable for Nokia.
3.3 Optimal Strategy
According to the analysis above, Nokia should adapt a combination of cost leadership strategy and differentiation strategy. Nokia has strong assets which make the strategy is possible to practice, and in the year passed total tangible assets are 33857 EURm (Calculated based on Annual accounts, 2007) comparing to 21777 EURm in 2006. Wherein, Property, plant and equipment amounts to 1912 EURm, Inventories is 2876 EURm, and accounts receivable is high to 11200 EURm (Annual account, 2007) Sometimes, an emphasis on cost leadership can act as a form of differentiation when the cost leadership strategy focused on providing value-oriented customers with products that are indeed value-for-money, relative to its competitors. Nokia is a consumer led company. Its vision is to create a world where everyone can be connected. And its promise is to help people feel close to what is important to them. That is why we can see two shaking-hands on the startup picture of Nokia Mobile Phone. (Nokia’strategy, 2008) Focusing on customers rather than the competitors is very important when deciding differentiation strategy. Many customers concern the design, quality or customer services of a company. Consumers requirements are always what Nokia concerned the most. The upcoming innovations such as indoor positioning, location sensing, and mobile journalism are the exhibitions. Strong research capacity is the precondition of differentiation strategy. As discussed above, Nokia has a brilliant Research Center. And it always invests a lot in R&D. In 2007, the R&D investment of Nokia is 5647 EURm which is 11.1% of the net sales. Continuous of innovation is vital in a company adopted differentiation strategy. Nokia put its priorities for 2009 in developing Services & Software and mobilizing consumer email and consumer instant messaging for millions of Nokia product purchasers.
4. What I have learnt
Leadership is a process of an individual guide a group of individuals to accomplish a common goal (Northouse, 2007). Leadership is very important for an organization because leaders always take charge of creating visions and strategies and accomplishing them, dealing with disturbances, allocating resources, aligning and inspiring employees. In my opinion, the key responsibility of leaders is setting up direction such as the position of the company, the vision and the strategies which concern what the company is going to be and how to achieve. Human resources management is also a crucial part of leadership. Employees are the blood of organizations that are inventors, designers, decision makers, strategy executants, and each of them can influence the whole company. Therefore, how to inspire the employees and explore their potential are what the leader should concern. For instance, Nokia adopted stock options to inspire its employees to dedicate themselves to work (Exercises with stock options of Nokia Corporation, 2008).
A number of qualities are required to be a leader like posses a lot of knowledge, full of creativity, the abilities of having a far-sight vision, possing many abilities, dealing with crisis situations wisely and so on, among which, the far-sight vision is most crucial in my opinion. It calls for knowledge, courage and boldness. And the goals especially the long-term goals decided by leaders influence the future routine of organizations. A leader’s abilities can be estimated precisely when facing a emergent situation because more qualities are required to deal with this situation such as emergency power and insisting the right things despite of dissenting opinions. When the leaders face the emergency, they suffer from more pressure than other people, because if it fails, they will take responsibilites directly, and that’s why they must be tenacity. Another quality the leaders must have is reliability, which can inspire employees to follow the leaders’ step and devote themselves to work. And to be reliable, a leader must model the way. Consequently, it’s really difficullt to be a successful leader. Sometimes, leaders will fail because of autarchy, actuation and so on. If a leader does not close to the common operation of the company, he or she may make a wrong decision. An autarchic leader is like a dictator who does not want to listen to other’s opinion no matter which is right or wrong and take his or her own course. This will do harm to the development of a company.
I do have developed my leadership after the studying of this module. At least, I realized to be a good leader, knowledge and confidence is required. And democracy is needed in order to avoid making wrong decisions. Be nice to subordinate will inspire them to dedicate them to work.
5. Conclusion
From the analysis of Nokia case above, it can be concluded that economic factor, technology, leading brand, scale and number one market position are the key strategic issues face Nokia today. The grand strategy that Nokia should adopt is intensive growth strategy. In details, among the three strategy options as cost leadership, differentiation, focus, Nokia should choose a combine of the cost leadership and differentiation strategy according to its strong assets, low fixed cost, and high research ability.
I have gained a lot in the module. Not only did I realize what calls for to be a leader, but also get the idea of the importance of leadership to a company.
Reference
(Annual account, 2007) Available at:
http://media.corporate-ir.net/media_files/irol/10/107224/reports/Nokia_in_2007.pdf (Accessed: 5 December 2008)
(Exercises with stock options of Nokia Corporation, 2008) Available at:
http://www.nokia.com/A4136001?newsid=1273771 (Accessed: 5 December 2008)
Lynch, R. (2003), Corporate Strategy, 3rd ed., Prentice Hall Financial Times.
(Nokia Capital Markets Day, 2008) Available at:
(Accessed: 6 December 2008)
(Nokia’strategy, 2008) Available at:
http://www.nokia.com/A4425426 (Accessed: 6 December 2008).
Northouse, P.G (2007) Leadership Theory and Practice.Sage Publications
Porter, M. E. (1980), Competitive Strategy, The Free Press, New York.
Porter, M. E. (1985), Competitive Advantage, The Free Press, New York.
(People management, 2008) Available at:
http://wf2dnvr9.webfeat.org/u9s8L12212/url=http://content.ebscohost.com/pdf9/pdf/2008/1QM/17Apr08/32024762.pdf?T=P&P=AN&K=32024762&EbscoContent=dGJyMNHr7ESeprU4wtvhOLCmrlCepq9Sr6m4S7WWxWXSAAAA&ContentCustomer=&S=R&D=buh (Accessed: 6 December 2008).
(Upcoming innovation, 2008) Available at:
http://www.nokia.com/A41223293 (Accessed: 6 December 2008).
