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Nokia and Finland_International management

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  • Government Policies- Less interfering and policies facilitating deregulation. Huge investment in R&D- encouraged innovation and skilled workforce.Open Market Policy- Foreign Investments private and venture capitalist investingJoined EEA (European Economic Area) in 1993- lifted trade barriers with many Nordic and EU nationsLargely free-market economy with per capita output roughly that of the UK, France, Germany, and ItalyImproving eco-efficiency - by creating more value with less environmental impact
  • Macroeconomic policies were simply unable to cope with the profound structural changes taking place in the economyIn the early 1990s, the Finnish economy was in the middle of its deepest recession of the century GDP fell by more than 10% in 1991–93.The unemployment rate was rocketing; by 1994 it had risen to almost 20%. The economy was in a deep slump, which revealed weaknesses in production and export structures. There was an urgent need to study competitiveness and its origins, to predict the factors that would lead to future competitive edge and industrial structure. It is our belief that the project contributed in many ways to the rapid structural changes that took place in the 1990s (Steinbock, 1998).
  • Factor ConditionsTradition of innovative engineering and telecom industrySophisticated education and university systemRelated and supportive industriesLocal supply for highly customized inputsTelecom cluster with more than 4,000 specialized firmsHighest public R&D spending in EuropeMany R&D centers of global companiesVenture capital forum - Number of Venture capital for start-upsNational Technology Agency facilitates stake holders in the emerging digital media industryDemand ConditionsNordic Mobile Telephone Network NMT created the world’s largest single mobile marketFirst to have severe competitionFinland is a member of the European common market since 1995A market of early adopters with very high standardsMobile phone is a “national symbol”Finland amongst the world leaders in mobile penetrationFirm Strategy, Structure and RivalryFinnish telephone network is never monopolized by stateTraditionally, operators engage actively with equipment manufacturesA national industrial message for national competitivenessOpen market No restrictions for foreign ownershipServe distinct customer needs with out constraints on standardsGovernmentVery stable (6 year terms) with a long-term view Initiatives to improve national innovative capacityAssurance of technological neutralityOpen socialist economyA policy of minimum interferenceWhat else should the government do?Remove centralized wage settings mechanismsEncourage young and low-skilled to join the work forceEncourage more global firms to open R&D centers in Finland
  • Threat of New Entrants - MEDIUM•High investment capital•Non-existent customer loyalty•Highly competitive marketBargaining power of SuppliersLow as large number of contract manufacturers dependent upon Nokia
  • Personality counts - The ability to find the "right" person to fit into the Nokia team is one of the company's core competencies. Nokia's core competencies consist of their brand name - brand development. Nokia's brand is associated with well-designed high quality and technologically advanced products and a user-friendly customer service.Nokia is the largest phone manufacturer in the World. The Nokia brand gradually strengthened in all areas while the attractiveness of Motorola, the biggest rival, declined.R&D - Nokia maintains global contacts to universities, research institutes and other companies to monitor and influence developments in technology. 14.500 employees (32% of their workforce) work in 10 R&D centers all over the worldEach of these research facilities has focus on a specific subject and technology. The diversity of these locations allows Nokia to better prepare the company to compete well in the futureMass production - One more Nokia’s core competency is its ability to mass produce products quickly and cheaply to meet demands in the whole world.They have captured almost half of the total market share for mobile phones which makes it difficult for new companies to penetrate the market
  • The 90’sRising Interest Rates in Europe -> Falling Investment Activities in EuropeFalling prices of its Main Export Industry-Wood Pulp and PaperHigher UnemploymentHigher InflationWhat did the Government DoTighten Macro Economic PoliciesTaxation moderationMonetary policy aimed at increasing Interest rates initially via government bondsCentre of Expertise Program & Cluster ProgramThe 21st CenturyDeclining growth rates and exportsDownturn of Tele-Communication IndustryEntry of Chinese Low Price PlayersScarcity of Skilled Human ResourcesWhat the Government should have doneIncentives for Skilled People Entry into FinlandMaking Demand Conditions in favor of local players (Nokia)Firm, Strategy, Structure and Rivalry: Collaboration between Local PlayersMatching Investment to Firms: Investor Holdings of CompaniesDevelopment of Related and Support Industries to Tele-Communication IndustryGlobal Outsourcing of Components to achieve cost benefits
  • Market has changed. Smartphones have emerged and Nokia has not kept up with innovation, especially on the software front.Fast losing ground in feature phone segment as well, finding it hard to compete with low cost competitors from India and China. Just shut down its last manufacturing facility in Finland, laid off 3500 workers in a cost cutting effort. Shares are at an all time lowShut down its software division, aligned itself with Microsoft to keep Windows on all their smartphones. Therefore, Nokia’s success is dependent on Microsoft’s success in creating a Windows ecosystem.2001Evolution of standards – 3G, GSM, CDMA, etcNew low cost entrants – Huawei, ZTC, etcPDAs were emerging – Palm, BlackberryCompetitors like Sony were horizontally integrating devices – Camera phones, etc. Reduction of product life cycle – Samsung phones quick to market Move towards business solutions – Nokia Siemens JV
  • Evaluation of alternatives – FinlandTie-ups with education institutesAbility to meet demand of high skilled laboursCost involved in training Students may migrate to other attractive destinations Hike in R&D expensesAbility to evolve quickly and meet market demandsRapidly evolving technologies might make recovering the cost impossible.Risk of sunk costs involved in infeasible projects.Investment in consumer- targeted modelsCan generate significant revenue and help capture market shareDifficult to forecast product acceptabilityEvaluation of Alternatives - NokiaPromote Finland as an educational hubSource of revenue Ability to meet the demand for high skilled laboursStudents may migrate to other attractive destinations.Trade agreementsAccess to new markets.Improve relationship with other countriesImprovement in standard of living of citizensPossible adverse effects on the local market – shortages, increased pricesReviving old industriesIncrease employmentBoost economyReduce dependency on telecom industryThe investment in these industries might not be profitable. Growth in low-skilled service sectorIncrease in employmentReduce income disparityReduce the margins of companies which are restricted from outsourcing some of their jobsModification in central wage policyWill make firms more profitable.Unions might react negatively to such policiesPromotion of tertiary educationCreation of local high skilled labour forceEducated workforce might choose to work in other lucrative destinations
  • For government in 2001Use Porter’s Diamond approach to evaluate each determinant and its dependent relationship. Encourage immigration of high-skilled professionals to join the work force.Encourage more global firms to open R&D centers in Finland by providing tax incentives.For Nokia in 2001Continue creation of stylish but short life cycle mobile handset is one example that Nokia could do. The market for South East Asia had a low penetration of mobile phones, and can concentrate their sales in this region. With increased importance of email communication on the go, improve WAP technology to enable data services.Finland universities should market them as Global IT & Telecommunication specialized universities to attract more foreign students. NOKIA should get skilled labor from its global existing markets to cope up with skilled labor shortage
  • Transcript

    • 1. Group 3A
    • 2. Presenters
    • 3. OutlineSituation Analysis in 2001: FinlandSituation Analysis in 2001: NokiaThe Nokia StoryCritical ChallengesEvaluations of AlternativesRecommendations
    • 4. Situation Analysis Situation Analysis in 2001: Finland Finland - from a sleepy nation to a very competitive one Government Policies Huge investment in R&D Open Market Policy Joined EEA (European Economic Area) in 19932001 Declining GDP growth Increased unemployment among the low skilled labors Telecommunications cluster accounts for 6.9% of GDP Shortage of skilled Finnish workers
    • 5. Situation AnalysisSummary of Situation in 2001: Nokia Nokia was the leader of the Telecom industry  Market share: handsets 31%, Infrastructure 10% Motorola lost mobile phone leadership to Nokia  Market share: handsets 15%, Infrastructure 13% Severe downturn in the Telecom  Slow/Delayed transition to 3G system  Nokia stock fell 38% during 2001  Revenue grew by 9% in 2001 (compared to 43% in 2000) Shortage of skilled Finnish workers  Nokia foreign employment grew 4 times faster than Finnish employment Finnish suppliers produce highly customized inputs
    • 6. Situation AnalysisCluster Program The cluster program had an impact not only on industrial and technology policies, but also on science, educational and regional policies  Unmanageable Macroeconomic policies  Deepest recession  GDP fell by more than 10% in 1991–93  Unemployment rate had risen to almost 20%.  Weaknesses in production and export structures  Urgent need to study competitiveness and its origins  Cluster goal: Strengthen Finnish competitiveness  83,000 employees, >4,000 firms, 6.9% of GDP  R&D focused on technology and telecommunications
    • 7. Situation Analysis Porter’s Diamond ModelGovernment Huge investment in Liberal and less research institutes Factor interference Sophisticated education Conditions Stability Abundance of natural Assurance of resources technological neutrality Demand Conditions Strategy, Structure Rivalry High demand for mobile in Nordic region Industrial message for national competitiveness Massive domestic mobile penetration Growth through acquisition and alliance A market of early adopters Heavy Exports and large FDI Venture capital forum Chance Highest public R&D spending More exports to EU in Europe due to disintegration Local supply for highly customized inputs Related and of Russia Joined EEA in 1993 Mobile Internet Supporting Industry
    • 8. Situation Analysis Porter’s Five Forces Model MEDIUM Bargaining • Buyers choose brand power of • Low opportunity customers for suppliers •Large no of customers were loyal to brand MEDIUM MEDIUMThreats of •High investment •More than 100 Threats capital • No real local substitutes new •Non-existent operators available of entrants customer loyalty substitutes •Active local rivalry • Tablets and •Highly in wireless portable competitive computers market communications LOW • Large number of contract Bargaining manufacturers dependent upon power of Nokia • Long term Suppliers strategies with vendors
    • 9. Situation AnalysisCompetitor AnalysisEricsson Motorola Worldwide leader in network  Leading worldwide supplier of technologies in 1980s and 1990s mobile phone handsets and infrastructure in 1980s Low end product were manufactured by Taiwanese firms  Controlled almost 25% of world market in 1990s In 2000, lead of over 40% in infrastructure market  2nd in mobile networks (13%) and phones (15%) in 2001 In 2001, served more than 130 markets  Slow to shift from analog to digital phones
    • 10. The Nokia Story Core Competencies of Nokia  Nokia’s Core CompetenciesInternational operations in  Personality countsvarious fields  Brand name/ Brand developmentWorldwide joint ventures  Research & developmentHighly skilled work-force  Mass productionNordic identity through the“Nokia way”  Nokias focus on two key industries  handsetsLow production cost and shortproduct development cycle  network equipmentBroad market: serves distinct  More than one-third of the total Nokia workforce is incustomer segments withdifferent needs R&D, and two-thirds of these are based in FinlandFocus on R&D (15 countries, 9%of its revenue)  Three Nokia’s main market areas  EuropeNokia is always ahead of its  Asia Pacificcompetitors  America
    • 11. Critical ChallengesCritical Challenges for FinlandThe 90’s The 21st Century Rising Interest Rates in Europe  Declining growth rates and Falling prices of its Main Export exports Industry  Downturn of Tele-Communication Higher Unemployment Industry  Entry of Chinese Low Price Higher Inflation Players  Scarcity of Skilled HumanWhat did the Government Do Resources Tighten Macro Economic Policies Taxation moderation Monetary policy aimed at increasing Interest rates initially via government bonds Centre of Expertise Program & Cluster Program
    • 12. Critical ChallengesCritical Challenges for Nokia2001 2012 Evolution of standards  Emergence of Smartphones  Fast losing ground in feature New low cost entrants phone segment as well  Shut down its last manufacturing facility in PDAs were emerging Finland on Friday 27th July 2012 Competitors like Sony were  Shares are at an all time low horizontally integrating  Shut down its software devices division,  Aligned itself with Microsoft to Reduction of product life keep Windows on all their cycle smartphones
    • 13. Evaluation of AlternativesEvaluation of alternativesFinland Nokia Tie-ups with education  Promote Finland as an institutes educational hub Hike in R&D expenses  Trade agreements Investment in consumer-  Reviving old industries targeted models  Growth in low-skilled service sector  Modification in central wage policy  Promotion of tertiary education
    • 14. Recommendatio nsRecommendationsFor government in 2001 Use Porter’s Diamond approach to evaluate each determinant and its dependent relationship Encourage immigration of high-skilled professionals to join the work force Encourage more global firms to open R&D centers in Finland by providing tax incentives Incentives for Skilled People Entry into Finland Making Demand Conditions in favor of local players (Nokia) Global Outsourcing of Components to achieve cost benefits
    • 15. Recommendatio nsRecommendationsFor Nokia in 2001 Continue creation of stylish but short life cycle mobile handset The market for South East Asia had a low penetration of mobile phones, and can concentrate their sales in this region With increased importance of email communication on the go, improve WAP technology to enable data services Finland should market Global IT & Telecommunication specialized universities to attract more foreign students NOKIA should get skilled labor from its global existing markets to cope up with skilled labor shortage

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