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Nokia vs. Apple - the ongoing war in the mobile industry
 

Nokia vs. Apple - the ongoing war in the mobile industry

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One of my MBA assignments back in 2008. I don't know why I uploaded it here. It is not particularly good even ... but kind of nice PowerPoint template, eh?

One of my MBA assignments back in 2008. I don't know why I uploaded it here. It is not particularly good even ... but kind of nice PowerPoint template, eh?

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  • http://conversations.nokia.com/tag/manufacturing/
  • http://www.allbusiness.com/electronics/computer-electronics-manufacturing/6260097-1.html Apple has the highest brand and repurchase loyalty of any computer manufacture Only few out of US – Paris and Tokyo

Nokia vs. Apple - the ongoing war in the mobile industry Nokia vs. Apple - the ongoing war in the mobile industry Presentation Transcript

  • Nokia vs Apple: the ongoingNokia vs Apple: the ongoing war in the mobile industrywar in the mobile industry GROUP E Garcia Sobrin, Javier – Le Guennec, Xavier – Marjalaakso, Mika – Quassim Tayeb Khory, Nabil – Roveda, Massimiliano – Zakhvataev, Dmitry
  • OutlineOutline  Industry context and desciption of corporate objectives  Description of company’s marketing strategy  Identification and ranking of order winners and qualifiers  Operations strategy a: Identification and description of key business processes as well as main process business policies  Operations strategy b: Identification and description of strategic infrastructure support • a) What human resources strategy is used? • b) Salaries and incentives? • c) What type of organizational structure is used? • d) What type of quality system is applied? • e) What types of planning and control systems are used?  Summary and Conclusions
  • What mobile phones are made of?What mobile phones are made of? Key revenue elements: - hardware - software applications - services Global developer community Mobile Application Store Revenues are shifting from devices to applications and servicesRevenues are shifting from devices to applications and services
  • Industry overviewIndustry overview  2008: 3.3 billion of active mobiles worldwide2008: 3.3 billion of active mobiles worldwide (vs. 800 million of cars, 850 million PCs, 1.3(vs. 800 million of cars, 850 million PCs, 1.3 billion fixed lines, 1.4 billion credit cards, 1.5billion fixed lines, 1.4 billion credit cards, 1.5 billion TV sets)billion TV sets)  2008 annual growth of the global mobile2008 annual growth of the global mobile industry: 21% (vs 2008 global GDP growth ofindustry: 21% (vs 2008 global GDP growth of 4.2%)4.2%)  900 billion of dollars of revenues (2008) for the900 billion of dollars of revenues (2008) for the global mobile industry split as follows:global mobile industry split as follows: a.a. 35% data content (vs 15% in 2006)35% data content (vs 15% in 2006) b.b. 65% voice (vs 85% in 2006)65% voice (vs 85% in 2006)
  • Industry overviewIndustry overview The Developed WorldThe Developed World  Purchasing criteria: from mere functionality to user experience and searchPurchasing criteria: from mere functionality to user experience and search for funfor fun  Clear trend of the whole industry moving towards higher end smart andClear trend of the whole industry moving towards higher end smart and multimedia phonesmultimedia phones  This has enabled the consumption of data intensive services such as webThis has enabled the consumption of data intensive services such as web navigation, web access, credit card services, mobile tv broadcast etc.navigation, web access, credit card services, mobile tv broadcast etc.  Apple has lead the way in user experience and redefined the mobile valueApple has lead the way in user experience and redefined the mobile value chain for applications delivery and discovery (Apple’s app store)chain for applications delivery and discovery (Apple’s app store) The Developing WorldThe Developing World  Purchasing criteria: cost andPurchasing criteria: cost and availabilityavailability  The low-cost mobile phones willThe low-cost mobile phones will radically change how poor peopleradically change how poor people in developing countries accessin developing countries access information first time ever (theinformation first time ever (the digital divide)digital divide)  The mobile phone will be the firstThe mobile phone will be the first device poor people use for emaildevice poor people use for email and internet access and it will alsoand internet access and it will also offer the first bank account foroffer the first bank account for millions of people previouslymillions of people previously unbankedunbanked  Nokia has led and continues toNokia has led and continues to lead on this market segment duelead on this market segment due to its economies of scale, reachto its economies of scale, reach and unmatched brandand unmatched brand Two parallel universes: the developed and the developing world
  • Industry overviewIndustry overview Phone manufacturersPhone manufacturers • Nokia is the world’s largest manufacturer of phone devices (39% share in Q3/ 2008). • The followers are: Samsung (17.3%), Sony Ericsson (9%), Motorola (8%) and LG Electronics (8%). • All the above manufacturers account for over 80% of all mobile sold. • Apple has captures a market share of 1% only tightly focused on the high-end segment (multimedia phones)
  • Corporate objectivesCorporate objectives NOKIA’s corporate objectives: a. Create winning devices b. Embrace internet c. Deliver enterprise solutions d. Build networks e. Expand professional services APPLE’s corporate objectives a. keep coming up with proprietary products b. Innovation c. R&D around both hardware and software d. Provide unique differentiations What is the difference? On paper the differences are few ...  Both Nokia and Apple are targeting continuos innovation and new product development Both companies want to win the war for the leadership in the high-end segment and associated software and service revenues (same goals) In practise ...  Apple has redefined the industry with its iPhone and Nokia has not been able to follow on this high margin segment, which is the key to service revenues
  • Marketing StrategyMarketing Strategy PRODUCTS / PRICES • Nokia is targeting the low-end, mid-range and high-end segments • Nokia has a wide portfolio of phone devices (N-series) for its high- end segment with a range of different prices • Apple is manufacturing only one device, the iPhone: perfectperfect balance between coolness and mass appealbalance between coolness and mass appeal • There is one price for the iPhone worldwide
  • • Nokia was 5th in 2008 in brand ranking: spirit of constant innovation with an innate ability to segment its customers • iPhone boosts Apple brand: increasing recognition and value • IT community and lead users love Apple brand Marketing StrategyMarketing Strategy 2008 Rank 2007 Rank Brand 2008 Brand Value ($m) 1 1 66,667 2 3 59,031 3 2 59,007 5 5 35,942 7 7 31,261 9 9 29,251 10 20 25,590 24 33 25,577 BRAND  2/32/3 of Web searchesof Web searches conducted on a mobileconducted on a mobile device in the month ofdevice in the month of February were madeFebruary were made from an iPhonefrom an iPhone
  • • Nokia can leverage its scale (a million phones/day) • Nokia has the best-in-class global supply chain • Nokia has a huge presence on the major markets (except US and Japan where it continues to struggle) • Apple has limited number of stores worldwide (205 in USA and 42 abroad) • Apple is opening a new retail channel for iPhone • Apple has partnered with selected mobile operators to increase the reach and coverage of its distribution network for iPhone •Apple is leveraging its Mobile Application Store (MAS) to sell mobile content: network externality effect Marketing StrategyMarketing Strategy DISTRIBUTION
  • Nokia vs AppleNokia vs Apple Why is Apple I-Phone a big threat to Nokia? I-Phone market share in Q3/2008 grew 327.5% (vs Q3/2007). Nokia smartphone market share in Q3/2008 fell 3.1% (from 48.7% down to 42.4%)  Nokia is loosing market share to the competitors, mainly Apple  Winner will eventually take the biggest share of the pie and the leadership of the market
  • Nokia vs AppleNokia vs Apple 99$ 199$ 729€ Why is Apple I-Phone a big threat to Nokia? Scale advantage no more • To cover high-end and mid-range Nokia needs some 20 different products • Apple can cover the same space with only two products based on the same product platform and differentiated through a few key features and pricing • This mean Nokia can’t compete on scale only because Apple’s per unit volumes are at or above those of Nokia’s highest selling models User experience and innovation lacking behind • Nokia’s management knows exactly what it should do • The execution, unfortunately for Nokia, has not met the talk and promises
  • Order qualifiersOrder qualifiers Low-end segment:Low-end segment:  Functionality: the phones must be good asFunctionality: the phones must be good as technical devicestechnical devices  Availability of mobile phones: if it can't beAvailability of mobile phones: if it can't be easily purchased, there is no saleeasily purchased, there is no sale High-end segment:High-end segment:  Availability of data content: the customerAvailability of data content: the customer is looking for data content before evenis looking for data content before even considering devicesconsidering devices  Image: prestige and trendinessImage: prestige and trendiness
  • Order winnersOrder winners Low-end segment:Low-end segment:  Cost: customers are very cost-conscious (a keyCost: customers are very cost-conscious (a key issue in the developing world)issue in the developing world)  Durability: contributes to TCODurability: contributes to TCO  Reliability of the brand: lowers transaction costsReliability of the brand: lowers transaction costs High-end segment:High-end segment:  User experience: customers are choosing theUser experience: customers are choosing the device that offers the best user experiencedevice that offers the best user experience  Extendability/flexibility: customers areExtendability/flexibility: customers are continuously looking for new applications andcontinuously looking for new applications and services to expand the possibilities of their mobileservices to expand the possibilities of their mobile phonesphones
  • Operation StrategyOperation Strategy Nokia Supply ChainNokia Supply Chain  The industry’s leading supply chain…The industry’s leading supply chain…  …….with excellent coverage and also high levels of flexibility..with excellent coverage and also high levels of flexibility.  …… Nokia is well-known for its ability, power and willingness to steer theNokia is well-known for its ability, power and willingness to steer the ecosystem, which is built around Nokia … in tough times, Nokia is the lastecosystem, which is built around Nokia … in tough times, Nokia is the last player whose actual profit margins will drop even the actual street pricesplayer whose actual profit margins will drop even the actual street prices would drop like hell; the other players role is to absorb shockswould drop like hell; the other players role is to absorb shocks While Nokia has aligned its structure once every four to five years its three core processes have largerly remained intact.
  • Operation StrategyOperation Strategy Nokia  has proactively invested significant amounts to in-house manufacturing operations  had before the crisis outsourced less than 20% of their production to EMS/ODM • primary reason: external EMS/ODM not able to match Nokia’s internal manufacturing cost • secondary reason: flexibilityu’  a short while after the current financial crisis exploded, showed the power and flexibility of its manufacturing strategy by insourcing practically all of the previously outsourced production • thus enabling work and volume advantages for its internal manufacturing operations Apple  has fully (100%) outsourced its manufacturing operations to Taiwanese based Foxconn  Foxconn is the partner of choice also for Nokia; and even with Nokia’s industry low outsourcing rate, Nokia was the single largest customer for Foxconn  Foxconn has its greatest advantages, among its peers, • focus on the mobile phone related product development, especially the mechanical design; thus enabling outsourcing of contract R&D instead of mere production • their high vertical integration; Foxconn manufactures a wealth of key components required for the assembly of a modern mobile phone (e.g. batteries, LCDs) Manufacturing StrategyManufacturing Strategy
  • Operation StrategyOperation Strategy Nokia Supply ChainNokia Supply Chain  StrengthsStrengths  Very efficient (i.e. stocks turnover)Very efficient (i.e. stocks turnover)  Highly responsive to fluctuations in demandHighly responsive to fluctuations in demand  Cost effectiveCost effective  Time effectiveTime effective  Can reach customers everywhere in the world according to the planned scheduleCan reach customers everywhere in the world according to the planned schedule  Nokia has traditionally outsourced very small percentage (less than 20%) of theirNokia has traditionally outsourced very small percentage (less than 20%) of their production to so called electronics manufacturing service companies such as Foxconnproduction to so called electronics manufacturing service companies such as Foxconn that both Apple and Nokia are using; this gives Nokia excellent ability to adaptthat both Apple and Nokia are using; this gives Nokia excellent ability to adapt  WeaknessesWeaknesses  Innovation blocking capability; Nokia is a logistics wonder; what if a new gameInnovation blocking capability; Nokia is a logistics wonder; what if a new game changing product or idea of a revolutionary product does not match well at all withchanging product or idea of a revolutionary product does not match well at all with its existing supply chain?its existing supply chain?
  • Operation StrategyOperation Strategy Nokia Supply ChainNokia Supply Chain  Nokia can deliver reliable low cost mobile everywhereNokia can deliver reliable low cost mobile everywhere  Aligned with LOW END ORDER WINNERSAligned with LOW END ORDER WINNERS  Nokia has not lately been able to deliver innovative devices focused onNokia has not lately been able to deliver innovative devices focused on user experience on a timely manner to match or beat the competitionuser experience on a timely manner to match or beat the competition  This, however, we believe has less to do with Nokia’s operations strategyThis, however, we believe has less to do with Nokia’s operations strategy and the supply chain part of it, and more with Nokia’s corporate cultureand the supply chain part of it, and more with Nokia’s corporate culture  NOT ALIGNED with HIGH END ORDER WINNERSNOT ALIGNED with HIGH END ORDER WINNERS •WheWhe
  • Operation StrategyOperation Strategy iPhone Supply ChainiPhone Supply Chain  A simple supply chain designedA simple supply chain designed to serve the iPhone customersto serve the iPhone customers  It is estimated that material partsIt is estimated that material parts come from several countries,come from several countries, travelling to China to be assembled,travelling to China to be assembled, inventoried, and theninventoried, and then to retailers and toto retailers and to customerscustomers via purchases from the Apple Store.via purchases from the Apple Store.
  • Operation StrategyOperation Strategy iPhone Supply ChainiPhone Supply Chain StrengthsStrengths  Through its Mobile Application Store (MAS) Apple has redesigned the value chainThrough its Mobile Application Store (MAS) Apple has redesigned the value chain how mobile software is delivered from the developers to usershow mobile software is delivered from the developers to users  Fully outsourced manufacturing means low fixed investment (typically vendors mustFully outsourced manufacturing means low fixed investment (typically vendors must finance part of product lines taylored for their proprietary products)finance part of product lines taylored for their proprietary products) WeaknessesWeaknesses  Cannot reach all customers everywhere cost-efficientlyCannot reach all customers everywhere cost-efficiently  In theory new product introductions should be more time-consuming and complexIn theory new product introductions should be more time-consuming and complex with fully outsourced manufacturing; Apple has proved this wrongwith fully outsourced manufacturing; Apple has proved this wrong  Scaling up manufacturing is not an issue with Foxconn but ramping up theScaling up manufacturing is not an issue with Foxconn but ramping up the distribution to get even close to Nokia’s reach and reliability takes years and is adistribution to get even close to Nokia’s reach and reliability takes years and is a multi-billlion euro investmentmulti-billlion euro investment  Cannot be very efficient: a disruption in one country can block the process flow andCannot be very efficient: a disruption in one country can block the process flow and final delivery to customersfinal delivery to customers
  • Operation StrategyOperation Strategy iPhone Supply ChainiPhone Supply Chain  Apple is delivering the innovative iPhoneApple is delivering the innovative iPhone device in combination with the virtualdevice in combination with the virtual distribution of content data (from MAS)distribution of content data (from MAS)  ALIGNED with HIGH END ORDERALIGNED with HIGH END ORDER WINNERSWINNERS
  • Operation StrategyOperation Strategy  Apple iPhone– Moving from market-leading MP3 players to MobilesApple iPhone– Moving from market-leading MP3 players to Mobiles • Inventing the future – innovations; Apple knows best how toInventing the future – innovations; Apple knows best how to create global hype and turn that into exploding revenuescreate global hype and turn that into exploding revenues • Focus on state-of-the-artFocus on state-of-the-art user experienceuser experience • Large amount of patentsLarge amount of patents • 2 ½ years development (industry average dev. time across2 ½ years development (industry average dev. time across phone categories is more than one and less than year andphone categories is more than one and less than year and half)half)  Nokia – Moving from Phones to Software and ServicesNokia – Moving from Phones to Software and Services • User experience and transition to software service businessUser experience and transition to software service business will be a key challenge for Nokiawill be a key challenge for Nokia • Worldwide network of R&DWorldwide network of R&D • Modularity and reusability cascading from high end to lowerModularity and reusability cascading from high end to lower endend • Network management strategy at company level (acquisition,Network management strategy at company level (acquisition, cooperation, alliances)cooperation, alliances) CrossoversCrossovers
  • Operation StrategyOperation Strategy  Apple – smaller volume, few products, highest qualityApple – smaller volume, few products, highest quality • Controlled design in California - control of Supply from mfg goods toControlled design in California - control of Supply from mfg goods to customerscustomers • Key bidding processesKey bidding processes • Outsource to Foxconn (Taiwan & China) – Capacity 800k per week. Re-Outsource to Foxconn (Taiwan & China) – Capacity 800k per week. Re- outsource to Quantum for peak demandoutsource to Quantum for peak demand • Initial expected cost around $250, sold around $400 (before subsidies)Initial expected cost around $250, sold around $400 (before subsidies)  Nokia – big volume, many products, highest qualityNokia – big volume, many products, highest quality • Phones are built around so called phone engines (key functionality,Phones are built around so called phone engines (key functionality, radio processing module, applications processor), which are leveragedradio processing module, applications processor), which are leveraged across distinct phone modelsacross distinct phone models • Controls the whole process, orchestrates complex supply chainControls the whole process, orchestrates complex supply chain • Owns nine manufacturing and assembly plants (e.g. in Salo, FinlandOwns nine manufacturing and assembly plants (e.g. in Salo, Finland with its focus on new product introductions)with its focus on new product introductions) • Strong logistics: Material flow optimized for local marketsStrong logistics: Material flow optimized for local markets • IPM planning platform; MES – Mfg Execution System. SAPIPM planning platform; MES – Mfg Execution System. SAP • Go-to-market process well-aligned with demand/supply processesGo-to-market process well-aligned with demand/supply processes Production: HardwareProduction: Hardware
  • Operation StrategyOperation Strategy  Apple and Nokia base their mobile software creation on SWApple and Nokia base their mobile software creation on SW product platforms, which include key functionality such asproduct platforms, which include key functionality such as • low-level drivers, which match software on altering hardwarelow-level drivers, which match software on altering hardware platformsplatforms • core telephony applications (e.g. call, calendar, SMS, etc)core telephony applications (e.g. call, calendar, SMS, etc) • user interface frameworkuser interface framework  Product core functionality is expanded through specificProduct core functionality is expanded through specific applications created by the global developer communityapplications created by the global developer community Production: SoftwareProduction: Software iPhone 3.0 software platform
  • Operation StrategyOperation Strategy  Apple – large number of apps – extending the product!Apple – large number of apps – extending the product! • Core software (drivers, firmware and operating system)Core software (drivers, firmware and operating system) designed in-house by Apple in Californiadesigned in-house by Apple in California • Product extending applications software developmentProduct extending applications software development outsource to the developer community orchestrated byoutsource to the developer community orchestrated by Apple (70/30 profit sharing)Apple (70/30 profit sharing) • Central quality controlCentral quality control • Sold and distributed through Apple Store – first moverSold and distributed through Apple Store – first mover advantageadvantage • Direct feedback from end customersDirect feedback from end customers  Nokia – trying to fill in the gaps through acquisitionsNokia – trying to fill in the gaps through acquisitions • Symbian acquisition and then open sourcing itSymbian acquisition and then open sourcing it • Over $5b Navteq acquisition to get the mapping dataOver $5b Navteq acquisition to get the mapping data • Several smaller acquisitionsSeveral smaller acquisitions Production: SoftwareProduction: Software
  • Operation StrategyOperation Strategy  AppleApple • Centralized and controlledCentralized and controlled • Many large co-founders and owners working in the company, inc.Many large co-founders and owners working in the company, inc. Steve Jobs, the CEOSteve Jobs, the CEO • ““Life style”, start up & California flairLife style”, start up & California flair • Focus on customer experienceFocus on customer experience • Visionary, respected and autocratic leadershipVisionary, respected and autocratic leadership • Attracting talent – internal and externalAttracting talent – internal and external  NokiaNokia • Decentralized and dynamic – many centers across the worldDecentralized and dynamic – many centers across the world • Reputation for technical excellence (16 centers, 40,000 people)Reputation for technical excellence (16 centers, 40,000 people) • Scandinavian flair and fairnessScandinavian flair and fairness • Production orientationProduction orientation • Fact-based management; not as entrepreneurial culture anymore as itFact-based management; not as entrepreneurial culture anymore as it used to be; once highly successful management who fear mistakes?used to be; once highly successful management who fear mistakes? Internal organizationInternal organization
  • SummarySummary  Apple through iPhone and their app store have redefined the mobile phone industry  Very little detailed and factual information is available on the processes and operations of each company  iPhone, though a unique global success story, has so far failed in India and Russia  Nokia knows on paper what it should do (have done), but in practise the execution has failed when compared to the assets and resources at disposal  In terms of key operations strategy and processes, we don’t expect Nokia and Apple to differ greatly from each other
  • ConclusionsConclusions  Apple has been able to perfect user experience and mobile application distribution  Nokia has not been able to leverage its strengths and catch up Apple’s lead  What are the true sources for Apple’s ability to innovate • we believe it has less to do with efficiency, operation strategy and processes ... things Nokia has excellet at • and much more to do with a unique corporate culture admiring and supporting game changers, • coupled with few autocratic leaders such as Steve Jobs who have both talent, passion and obsession for user experience