Nokia Presentation

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  • Nokia Presentation

    1. 1. It’s tough being #1 Jill Alvidrez, MBA Peimin Chi, EECS Nipul Chokshi, MBA Sarang Dalal, BioE Steve Sinha, EECS Rahul Shah, EECS Nancy Suh, MBA
    2. 2. It’s Tough Being #1 <ul><li>No, really, it is! </li></ul><ul><li>Overview of US Handset market </li></ul><ul><ul><li>Value Chain & Market Characteristics </li></ul></ul><ul><li>Outlook & Key Decisions </li></ul><ul><li>Recommendations </li></ul><ul><ul><li>Opportunities/Risks </li></ul></ul>
    3. 3. Handset Market Value Chain Consumers don’t buy directly from Nokia Consumers Handset Makers Nokia Motorola Ericsson Siemens Samsung Others Motorola Phillips Texas Instr. Qualcomm Cypress RF Microdevices Others AT&T Wireless Sprint PCS Cingular Verizon Wireless Voicestream Others Service Providers Component Vendors
    4. 4. Handset Sales Volume (in mil) Merrill Lynch Research, April 2001
    5. 5. Nokia US Market Share Source: Info-tech Trends 64.4% of GSM/TDMA market Only 2.9% of CDMA market
    6. 6. Key marketing strategy <ul><li>Respond to consumers’ preferences </li></ul><ul><ul><li>Lindholm team: engineers, graphic designers, psychologists, sociologists, and a theater director to study human behavior </li></ul></ul><ul><ul><li>Well-designed, high-quality, technologically advanced… </li></ul></ul><ul><ul><li>all in a user-friendly package </li></ul></ul><ul><li>Year 1992: CEO sheds chunks of Nokia business to focus on mobile telecommunications </li></ul><ul><li>Pricing Strategy </li></ul><ul><ul><li>Lower price on most popular models </li></ul></ul><ul><ul><li>Avoid price wars </li></ul></ul>
    7. 7. Nokia’s Outlook: Two Extremes <ul><li>WORST </li></ul>BEST <ul><li>End of growth phase </li></ul><ul><li>Mobile data services  difficult intro continues </li></ul><ul><li>No emergence of single standard </li></ul><ul><li>Commoditization of handset </li></ul><ul><li>Voice traffic will cont. to be robust </li></ul><ul><li>GPRS “always on” will be key enabler and driver of data-driven services </li></ul><ul><li>Maintain cost leadership </li></ul><ul><li>Sustain brand equity (e.g., Nike, Intel) </li></ul>
    8. 8. Key Decisions Facing Nokia <ul><li>Push and pull marketing </li></ul><ul><li>First-time and replacement markets </li></ul><ul><li>Consumers and businesses (TBD) </li></ul><ul><li>Voice and data markets </li></ul><ul><li>CDMA and GSM/TDMA markets </li></ul>
    9. 9. Resist Commoditization by Push and Pull Marketing Customer Nokia Retailer Service Provider Employer PUSH PULL
    10. 10. Global: New vs. Replacement Phones Source: Merrill Lynch April 2001
    11. 11. Focus on Replacement Market <ul><li>Replacement market increasingly important </li></ul><ul><ul><li>Penetration rate grows </li></ul></ul><ul><ul><li>Replacement cycle is shortening </li></ul></ul><ul><li>Replacement determined not only by demand but also by supply </li></ul><ul><ul><li>Reasons to trade-in: size and battery life </li></ul></ul><ul><ul><li>People are more savvy, they want more features and accessories </li></ul></ul>
    12. 12. Risk Factors <ul><li>Economic slowdown  Slowing subscriber growth </li></ul><ul><li>Replacement market weaker than anticipated </li></ul><ul><ul><li>Still mostly driven by voice; data services not rich/easy enough to use yet to encourage replacement buys </li></ul></ul><ul><ul><li>Average holding time </li></ul></ul><ul><ul><ul><li>Globally just under 2 years (Merrill Lynch 2001) </li></ul></ul></ul>
    13. 13. Data-driven Services: Opportunities to partner with Content Providers <ul><li>Demonstrate value of a “feature-rich” handset </li></ul><ul><li>Partner with AOL/Amazon/Yahoo/MSN to deliver their content over NOK handsets </li></ul><ul><li>Note that SPs have to agree to the scheme to allow users access to content </li></ul><ul><li>Probably the “long-shot” opportunity </li></ul>
    14. 14. Long-term: Focus on CDMA market in US <ul><li>CDMA represents another growth opportunity </li></ul><ul><ul><li>MOT lost market share to NOK b/c they were slow on converting from analog to digital </li></ul></ul><ul><li>Establish market share leadership in CDMA sales </li></ul><ul><ul><li>Current market leader is Samsung (21.7%) </li></ul></ul><ul><ul><li>Nokia’s share is 2.9% </li></ul></ul><ul><li>Aggressively pursue partnerships with CDMA service providers – </li></ul><ul><ul><li>Sprint PCS </li></ul></ul><ul><ul><li>Verizon Wireless </li></ul></ul>
    15. 15. Conclusion <ul><li>Resist commoditization! </li></ul><ul><ul><li>Continue building brand </li></ul></ul><ul><ul><li>Understanding customer needs </li></ul></ul><ul><ul><li>Forging industry alliances </li></ul></ul><ul><li>Bring new products to market </li></ul><ul><ul><li>Replacement market </li></ul></ul><ul><ul><li>Data-driven </li></ul></ul><ul><li>Long-term: </li></ul><ul><li>Shift technology from TDMA  CDMA </li></ul>
    16. 16. Appendix
    17. 17. US Market Penetration Source: Merrill Lynch, April 2001 Percent
    18. 18. Competition <ul><li>Partnerships attempt to overtake Nokia in 3G race </li></ul><ul><li>All competitors have weaker TDMA sales than Nokia </li></ul><ul><li>Secure phones </li></ul><ul><li>Partnership w/ Toshiba </li></ul><ul><li>Emphasizing Internet/WAP </li></ul><ul><li>Partnership w/Sony </li></ul><ul><li>Hurting in general, especially handsets </li></ul><ul><li>Key chip supplier to industry </li></ul>
    19. 19. Nokia’s Road to market leadership Alahuhta begins branding Industry benchmarks Ring, covers, elliptical edge designs 1 st GSM on a Nokia Segmentation by product lines Nokia becomes market leader 1989 1990 1995 1998 2000 1992 CEO sheds non-mobile phone/network business units
    20. 20. Nokia’s Current Strategy: Technology & Design <ul><ul><li>Year 1990: Industry Benchmarks </li></ul></ul><ul><ul><ul><li>Nokia 2110 ~ Large screen, clean design, easy UI </li></ul></ul></ul><ul><ul><li>Year 1995: Frank Nuovo, Chief Designer </li></ul></ul><ul><ul><ul><li>Product Design with a Competitive Edge </li></ul></ul></ul><ul><ul><ul><ul><li>Customizable rings and covers </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Elliptical Designs </li></ul></ul></ul></ul><ul><ul><li>Year 2000: Effective Segmentation </li></ul></ul><ul><ul><ul><li>Nokia 6250 ~ Rugged & durable </li></ul></ul></ul><ul><ul><ul><li>Nokia 8890 ~ Sophisticated metal case </li></ul></ul></ul><ul><ul><ul><li>Nokia 3300 ~ Colorful models </li></ul></ul></ul><ul><ul><ul><li>Watching customers in action, in traffic, at work, etc. </li></ul></ul></ul>
    21. 21. Nokia’s Current Strategy: The importance of the brand <ul><li>“ Is the handset industry following in the footsteps </li></ul><ul><li>of the PC industry?” </li></ul>Nokia argues no. “We’re selling branded consumer goods, not a [commodity].”
    22. 22. Nokia’s Current Strategy: Brand – Connecting People <ul><li>5 th most valuable brand </li></ul><ul><li>Value Proposition </li></ul><ul><ul><li>Cutting edge communications technology designed around individual human needs </li></ul></ul><ul><li>Differentiation </li></ul><ul><ul><li>Positioned as fashion accessory </li></ul></ul><ul><li>Personification of the brand </li></ul><ul><ul><li>“ young, sexy, sophisticated, hip and generally ‘with it’.” </li></ul></ul><ul><ul><li>Ericsson is an “austere, conservative, middle-aged Swedish engineer”. </li></ul></ul>
    23. 23. Nokia’s Current Strategy: Tactics <ul><li>Aggressive advertising and promotions </li></ul><ul><ul><li>Cut through clutter with exclusive sponsorships </li></ul></ul><ul><ul><li>Brand the ring </li></ul></ul><ul><ul><li>High profile events </li></ul></ul><ul><li>Club Nokia </li></ul><ul><ul><li>Customer “care and feeding” </li></ul></ul><ul><li>Classlink Programs </li></ul><ul><ul><li>Focus on youth and education </li></ul></ul>
    24. 24. Nokia Leverages competitors’ failures <ul><li>Motorola </li></ul><ul><ul><li>Analog lost to Nokia’s early digital phones </li></ul></ul><ul><ul><li>Late to leverage partnerships with service providers </li></ul></ul><ul><li>Ericsson </li></ul><ul><ul><li>Weak branding price wars </li></ul></ul><ul><ul><li>Widely regarded as unfashionable (…but has recently partnered with Sony, whose brand is associated with strong design) </li></ul></ul><ul><ul><li>Contract manufacturing to Flextronics, Singapore </li></ul></ul>

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