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Pt nokia

  1. 1. Value chain and competitiveadvantage The Coca-Cola Company Teory Michael Polter Nama :Aprilia Rotama – 224409125 Kelas/Semester : S1 MLM B 2009/V Dosen Pembimbing : R. Didiet Rachmat Hidayat Mata Kuliah : Distribution Management Sekolah Tinggi Manajemen Transpor TRISAKTI Jln. IPN No. 2 Cipinang Besar Selatan, Jakarta Timur Tlp (021) 8516050, Fax 856934
  2. 2. The Nokia storyOnce upon a time, by the Nokianvirta river…In 1865, mining engineer Fredrik Idestam sets up his first wood pulp mill at the TammerkoskiRapids in south-western Finland. A few years later he opens a second mill on the banks of theNokianvirta river, which inspires him to name his company Nokia Ab in 1871. How apt thatNokia begins by making paper – one of the most influential communications technologies inhistory.The galoshes revolutionOK, so it‟s not exactly a revolution. But in 1898, Eduard Polón founds Finnish RubberWorks, which later becomes Nokia‟s rubber business, making everything from galoshes totyres. Nokia rubber boots become a bona fide design classic, still on sale to this day – thoughtwe no longer make them.Electronics go boomIn 1912, Arvid Wickström sets up Finnish Cable Works, the foundation of Nokia‟s cable andelectronics business. By the 1960s, Finnish Cable Works – already working closely withNokia Ab and Finnish Rubber Works – starts branching out into electronics. In 1962, itmakes its first electronic device in-house: a pulse analyser for use in nuclear power plants.In 1963, it starts developing radio telephones for the army and emergency services – Nokia‟sfirst foray into telecommunications. In time, the company‟s MikroMikko becomes the best
  3. 3. known computer brand in Finland. And by 1987, Nokia is the third largest TV manufacturerin Europe.Three become oneHaving been jointly owned since 1922, Nokia Ab, Finnish Cable Works and Finnish RubberWorks officially merge in 1967. The new Nokia Corporation has five businesses: rubber,cable, forestry, electronics and power generation. But as the 1980s come into view, it‟s anentirely new industry that makes Nokia a household name around the world. INTRODUCTIONNokia is currently the largest mobile phone manufacturer in the world. With sales of $27 bnin 2000, it has about twice the market share of its closest rival, BLACKBERRY andSAMSUNG. While it is in a very strong leadership position right now, the future of thecompany is in balance as the industry matures. The slowdown in the economy has affectednew subscriber growth, while handsets are increasingly becoming a commodity item withlittle to distinguish between different brands. At the same time, huge investments need to bemade to upgrade to 3G technologies. In the midst of all this turmoil, it is interesting to seehow Nokia will be able to maintain its brand image and customer loyalty, factors that havetraditionally been its strong points.Headquartered in Finland, Nokia‟s business is divided into four divisions: Nokia Mobile Phones Nokia Networks
  4. 4. Nokia Ventures Organizations Nokia Research CenterIn this report, however, we analyze the U.S. mobile phones business of Nokia. The initialsections of our report focus on the mobile phone industry in general and Nokia‟s marketstrategy till now. We then analyze the current industry trends and make recommendations toNokia about their future strategy. Briefly, these are to resist commoditization, concentrate onthe replacement market, enable data-driven services and finally to focus on the CDMAmarket in the longer term.We believe rethinking their marketing strategy will enable Nokia to remain the dominantplayer in the handset market as mobile communications enter the next generation. INDUSTRY OVERVIEWValue ChainMapping of Business Processesmapping the business process is useful for analyzing the specific activity in NOKIA companyso later to get the value and benefits specific to perusahaan.jika mapped into "porters valuechain" then the specific activity that occurs in NOKIA company can be described as can beseen as the image below. Michael PolterThe goal of these activities is to offer the customer a level of value that exceeds the cost ofthe activities, thereby resulting in a profit margin.The primary value chain activities are:
  5. 5. Inbound Logistics: the receiving and warehousing of raw materials, and their distribution to manufacturing as they are required. Operations: the processes of transforming inputs into finished products and services. Outbound Logistics: the warehousing and distribution of finished goods. Marketing & Sales: the identification of customer needs and the generation of sales. Service: the support of customers after the products and services are sold to them.These primary activities are supported by: The infrastructure of the firm: organizational structure, control systems, company culture, etc. Human resource management: employee recruiting, hiring, training, development, and compensation. Technology development: technologies to support value-creating activities. Procurement: purchasing inputs such as materials, supplies, and equipment.The firms margin or profit then depends on its effectiveness in performing these activitiesefficiently, so that the amount that the customer is willing to pay for the products exceeds thecost of the activities in the value chain. It is in these activities that a firm has the opportunityto generate superior value. A competitive advantage may be achieved by reconfiguring thevalue chain to provide lower cost or better differentiation.The value chain model is a useful analysis tool for defining a firms core competencies andthe activities in which it can pursue a competitive advantage as follows: Cost advantage: by better understanding costs and squeezing them out of the value- adding activities. Differentiation: by focusing on those activities associated with core competencies and capabilities in order to perform them better than do competitors.The Value Chain SystemA firms value chain is part of a larger system that includes the value chains of upstreamsuppliers and downstream channels and customers. Porter calls this series of value chains thevalue system, shown conceptually below:
  6. 6. The Value System …. Supplier Firm Value Channel Buyer value chain Chain Value Chain Value ChainLinkages exist not only in a firms value chain, but also between value chains. While a firm exhibitinga high degree of vertical integration is poised to better coordinate upstream and downstream activities,a firm having a lesser degree of vertical integration nonetheless can forge agreements with suppliersand channel partners to achieve better coordination. For example, an auto manufacturer may have itssuppliers set up facilities in close proximity in order to minimize transport costs and reduce partsinventories. Clearly, a firms success in developing and sustaining a competitive advantage dependsnot only on its own value chain, but on its ability to manage the value system of which it is a part.Specific activity at NOKIA divided into 2 types, namely: Primary activities Supported activities 1. inbound logistics, activities associated 1. procurement, relating to the acquisition with handling the material prior to of inputs / resources. use. 2. operations, activities associated with 2. human resources management, HR the processing of input into output. management from recruitment, compensation until stoped. 3. outbound logistics, activities 3. tecnologycal development, development undertaken to deliver the hands of tools, software, hardware, procedures, customers products. in the transformation of inputs into output products. 4. service, activities that maintain or 4. firm insfrastucture, composed of improve the product. departments, functions (accounting, finance, planning, etc.) that serve the needs of the organization.
  7. 7. Firm insfrastucture technology NOKIA HumanResources NOKIAService Maintenance Proses NOKIATo fully understand Nokia‟s position in the mobile telephony industry, we must first assessthe industry value chain (Fig. 2). Handset end- users do not purchase directly from Nokia –instead, they enroll in cellular calling plans from service providers. Nokia sells its phones tothe mobile service provider after building each handset using many componentsmanufactured by other vendors. This position puts Nokia at a negotiating disadvantage,where it is constrained by the costs of the handset components themselves, while it issimultaneously at the mercy of the service provider when selecting a handset selling price. Component Handset Service Consumers Vendors Makers Providers Motorola Nokia AT&T Wireless Phillips Motorola Sprint CPS Texas Instr. Ericsson Cingular Qualcomm Siemens Verizon wirleess Cypress Samsung Voicestream RF Microdevices Other Other Others
  9. 9. Social strategy: empowering peopleOver a billion people in the world use a Nokia phone. So we have a unique opportunity tomake differences that go beyond our own activities, to improve people‟s livelihoods, educateand encourage more sustainable lifestyles.Environmental strategy: minimising negative impact, maximising positive impactWe aim to lead in the reduction of any negative environmental impact. We have a user baseof more than one billion people which means that we have a unique opportunity to make animpact that goes beyond our own activities. That‟s why we aim to offer people products andsolutions that help them make sustainable choices. Also, by closely collaborating with oursuppliers, we also hope to improve the environmental performance of our supply chain.Products with sustainability: life cycle thinkingOur environmental work is based on considering the environment during the entire life cycleof all our products, which begins with the extraction of raw materials for production, andcontinues with recycling, treatment of waste, and recovery of used materials.Beyond requirementsOur environmental targets are never driven simply by regulatory compliance – they actuallygo beyond legal requirements. Environmental issues are everyone‟s responsibility at Nokia –they are a part of everything we do.NOKIA MARKETING STRATEGYTo provide context to the recommendations discussed in this paper, an analysis of the keystrengths of its current marketing strategy is imperative. Specifically, an understanding of itsrecent success provides hints regarding the particular competencies that Nokia shouldleverage as it develops a strategy to maintain market leadership and profitable growth.Nokia is currently the world‟s largest mobile phone manufacturer, with 64.4% of theGSM/TDMA market and 2.9% of the CDMA market6. Despite the argument that the U.S.
  10. 10. handset market is about to follow in the footsteps of the PC industry – in which the product isbecoming increasingly commoditized – Nokia has thus far managed to establish a powerfulbrand that has been widely recognized as the key to its recent successes. It has been ranked asthe world‟s fifth most valuable brand, following Coca-Cola, Microsoft, IBM, and Intel7. TheNokia brand is an asset that has been carefully cultivated during the past ten years,throughout which the company has managed to predict and satisfy consumers‟ needs andpreferences ahead the competition.In 1989, Matti Alahuhta developed a new strategy for Nokia that focused on three key points: the development of a product with global appeal nimble movement to sell it internationally most importantly, a commitment to learning what consumers want, withoutconsideration of the limits of existing technologyBy 1990, Nokia had already begun to identify some of the features that would eventuallyestablish it as the leader in setting industry benchmarks. The Nokia 2110, launched that year,gained popularity with a large screen, elegant design, and a clean user interface. During theearly 1990s, Frank Nuovo, head of Nokia‟s worldwide design team, led Nokia to designphones that offered customizable rings, elliptical designs, and custom faceplates. Althoughsuch features may appear trivial or obvious in hindsight, Nokia continued to gain marketshare by paying attention to the details that worked to enhance ease of use and customizablepreferences.The insight that the handset could be a stylish fashion accessory, rather than merely acommunication tool, allowed Nokia to lead the trends and direction of the entire handsetindustry. In addition to a superior design effort, Nokia assembled a diverse team to researchhow consumers can use its phones. The team consisted of engineers, graphic designers,sociologists, psychologists, and even a theatre director. While they‟ve designed similar,easily recognized handsets, Nokia has successfully segmented the market to targe t specificdemographic groups. For example, in the year 2000, different phones were marketed toappeal to the “rugged” user, the “sophisticated” user, and the youth market, among others.With all these product innovations, designed to satisfy customer preferences, Nokia hasreinforced its brand image of providing cutting-edge communications technology. Analystshave positively characterized the company by describing it as “young, sexy, sophisticated,hip and generally „with it.‟” Alternatively, they‟ve compared Ericsson as an “austere,conservative, middle-aged Swedish engineer,” which supports the widely held belief that
  11. 11. Ericsson‟s handsets are unfashionable. Since Motorola lethargically moved from analog todigital phones, Nokia was able to overtake them as the leader in the handset market by 1998.Subsequently, Nokia leveraged its superior marketing strategies and powerful brand to avoidthe price wars that have recently afflicted its key competitors.STREAMLINGING LOGISTICAL TO CREATE VALUES IN NOKIANokia was founded in 1865 in Nokia Finland as a timber and paper company. One could sayNokia from the beginning was a communication company. On the turn of the century thecompany started producing rubber. It was not until the 1960s when Nokia started theelectronic venture. It was only in 1987 that with their major acquisition they brought theventure into reality and entered the electronic competition. With a rapid growth Nokiabecame one the leading European electronic companies. To increase profit Nokia was dividedinto five business groups which Nokia Mobile Phone is one of them. According to the case"in 1990, 68% of Nokias sales came from electronics, compared with only 10% on 1980. " .Nokias global competitions at the time were Motorola, Nov Atel, NEC, Panasonic,Mitsubishi, Phillips and Ericsson. Motorola, the industrys leader was "engaged in the design,manufacturing and sales of electronics" .After having several years of growth, Nokia was facing a challenging year. In 1991 JormaOllila began his strategy meeting with his executives began by saying with communicationindustry transforming so rapidly the competition is intensifying and old technology isbecoming obsolete very quickly. Also since the world of technology changing constantly, it isbecoming more challenging for Nokia Mobile Phone to maintain dominant world classmanufacturer of mobile phone. With that said, they knew they has to react so they applied theconcept of "Dominance or Death" meaning it was time to change they way they ran things.Nokia at that time was facing many challenges other that the fact of the global and localcompetitors. Among the challenges were logistics, miscommunication, processing, andmanufacturing. Manufacturing all by itself consisted was a hassle from purchasing, assembly,packing, sales and distribution.Key Decisions Facing NokiaNokia is confronted with the age-old question of how to maintain growth as the marketreaches maturity. It has the advantages of scale, experience, and name recognition, but will it
  12. 12. be nimble enough to adjust with the changing industry landscape? A number of forces in themobile phone industry do not bode well for Nokia. These include commoditization of thehandset, impending saturation of the U.S. market, slow emergence of a single standard forthird-generation technologies, and the possibility of the handset becoming integrated withother devices. As mobile phones approach the end of their growth phase in the U.S. market,Nokia faces a number of strategic decisions about where to focus its priorities. Should Nokiacontinue building its brand when there may not even be a handset in ten years? Should Nokiatry to be the Dell of the handset market and compete solely on cost? Which customers shouldit target – first-time buyers or the replacement market? On which technology should it focusits resources?Competitive Advantage NOKIAPorters Generic Competitive StrategiesWhen a firm sustains profits that exceed the average for its industry, the firm is said topossess a competitive advantage over its rivals. The goal of much of business strategy is toachieve a sustainable competitive advantage.Michael Porter identified two basic types of competitive advantage: cost advantage differentiation advantageA competitive advantage exists when the firm is able to deliver the same benefits ascompetitors but at a lower cost (cost advantage), or deliver benefits that exceed those ofcompeting products (differentiation advantage). Thus, a competitive advantage enables thefirm to create superior value for its customers and superior profits for itself.Cost and differentiation advantages are known as positional advantages since they describethe firms position in the industry as a leader in either cost or differentiation.A resource-based view emphasizes that a firm utilizes its resources and capabilities to createa competitive advantage that ultimately results in superior value creation. The followingdiagram combines the resource-based and positioning views to illustrate the concept ofcompetitive advantage. A Model of Competitive Advantage
  13. 13. Resources and CapabilitiesAccording to the resource-based view, in order to develop a competitive advantage the firmmust have resources and capabilities that are superior to those of its competitors. Without thissuperiority, the competitors simply could replicate what the firm was doing and anyadvantage quickly would disappear.Resources are the firm-specific assets useful for creating a cost or differentiation advantageand that few competitors can acquire easily. The following are some examples of suchresources: Patents and trademarks Proprietary know-how Installed customer base Reputation of the firm Brand equityCapabilities refer to the firms ability to utilize its resources effectively. An example of acapability is the ability to bring a product to market faster than competitors. Such capabilitiesare embedded in the routines of the organization and are not easily documented as proceduresand thus are difficult for competitors to replicate.The firms resources and capabilities together form its distinctive competencies. Thesecompetencies enable innovation, efficiency, quality, and customer responsiveness, all ofwhich can be leveraged to create a cost advantage or a differentiation advantage.
  14. 14. Cost Advantage and Differentiation AdvantageCompetitive advantage is created by using resources and capabilities to achieve either a lowercost structure or a differentiated product. A firm positions itself in its industry through itschoice of low cost or differentiation. This decision is a central component of the firmscompetitive strategy.Another important decision is how broad or narrow a market segment to target. Porter formeda matrix using cost advantage, differentiation advantage, and a broad or narrow focus toidentify a set of generic strategies that the firm can pursue to create and sustain a competitiveadvantage.Value CreationThe firm creates value by performing a series of activities that Porter identified as the valuechain. In addition to the firms own value-creating activities, the firm operates in a valuesystem of vertical activities including those of upstream suppliers and downstream channelmembers.To achieve a competitive advantage, the firm must perform one or more value creatingactivities in a way that creates more overall value than do competitors. Superior value iscreated through lower costs or superior benefits to the consumer (differentiation).Recommended ReadingPorter, Michael E., Competitive Advantage: Creating and Sustaining Superior PerformanceIn Competitive Advantage, Michael Porter analyzes the basis of competitive advantage andpresents the value chain as a framework for diagnosing and enhancing it. This landmark workcovers: The 10 major drivers of the firms cost position Differentiation with the buyers value chain in mind Buyer perception of value and signals of value How to defend against substitute products
  15. 15. The role of technology in competitive advantage Competitive scope and its impact on competitive advantage Implications for offensive and defensive competitive strategyCompetitive Advantage makes these concepts concrete and actionable. It rightfully has earnedits place in the business strategists core collection of strategy books.Product differentiationProduct differentiation in smartphone is achieved thought lost of application, service andproduct experience . As one manufacturer of mobile phones or mobile phones, Nokia is oneof the favorite and best-selling products, especially in our country Indonesia. So Im sureeverything is familiar with and knew even have a phone that simple.As comparison, NokiaOvi Maps will probably provide a richer experience to you, but sometimes a little bit over thetop even if only to discover that the address in the map is clear.Nokia Ovi Mapve announced that they will free navigation service that staying navigationservice will compete with Google Maps Navigation (on the device Android). But is thisenough to make the dedication of Ovi Maps is able to invite all users to use a Nokia mobilephone and use its services?Paseban test Ovi Maps on your Nokia E72, a QWERTY phone that has a screen size of 26.3inches. One drawback of this service is where this service has the distinction depends on whatdevice is used. Cell phones are used by Paseban, Nokia E72 is a phone that has GPScapabilities, but offers no benefits from this large screen size. Before installing them, youalso need to consider several things, including if you try to use it might at least have animpact on the experience of GPS devices on mobile . also comprehensive maps, which offerquality 2D and 3D views. Options to connect to several menu options available such asWeather, Events, Lonely Planet and Michelin, is an attractive option indeed, but you need toremember is these menus will incur roaming charges if you are abroad.
  16. 16. The Symbian platform was created by merging and integrating software assets contributedby Nokia, NTT DoCoMo, Sony Ericsson and Symbian Ltd., including Symbian OS assets atits core, the S60 platform, and parts of the UIQ and MOAP(S) user interfaces.In December 2008, Nokia bought Symbian Ltd., the company behind Symbian OS;consequently, Nokia became the major contributor to Symbians code, since it then possessedthe development resources for both the Symbian OS core and the user interface. Since thenNokia has been maintaining its own code repository for the platform development, regularlyreleasing its development to the public repository. Symbian was intended to be developed bya community led by the Symbian Foundation, which was first announced in June 2008 andwhich officially launched in April 2009. Its objective was to publish the source code for theentire Symbian platform under the OSI- and FSF-approved Eclipse Public License (EPL).The code was published under EPL on 4 February 2010; Symbian Foundation reported thisevent to be the largest codebase transitioned to Open Source in history. However, someimportant components within Symbian OS were licensed from third parties, which preventedthe foundation from publishing the full source under EPL immediately; instead much of thesource was published under a more restrictive Symbian Foundation License (SFL) and accessto the full source code was limited to member companies only, although membership wasopen to any organisation.In November 2010, the Symbian Foundation announced that due to a lack of support fromfunding members, it would transition to a licensing-only organisation; Nokia announced itwould take over the stewardship of the Symbian platform. Symbian Foundation will remainthe trademark holder and licensing entity and will only have non-executive directorsinvolved. On February 11, 2011, Nokia announced a partnership with Microsoft which wouldsee it adopt Windows Phone 7 for smartphones, reducing the number of devices runningSymbian over the coming two years. As a consequence, the use of the Symbian platform forbuilding mobile applications dropped rapidly. A June 2011 research indicated that over 39%of mobile developers using Symbian at the time of publication, were planning to abandon theplatform. By April 5, 2011, Nokia ceased to open source any portion of the Symbian
  17. 17. software and reduced its collaboration to a small group of pre-selected partners in Japan.Source code released under the EPL remains available in third party repositoriesWhatsApp Messenger is a cross-platform mobile messaging app which allows you toexchange messages without having to pay for SMS. WhatsApp Messenger is available foriPhone, BlackBerry, Android and Nokia and yes, those phones can all message each other!Because WhatsApp Messenger uses the same internet data plan that you use for email andweb browsing, there is no cost to message and stay in touch with your friends.In addition to basic messaging iPhone, Android, Nokia and BlackBerry WhatsAppMessenger users can send each other unlimited images, video and audio media messages.Cost differentiationThe operating profit of all the leading mobile manufacture isNOKIA 30.7APPEL 36.4SAMSUNG 13.3RIM 15.4LG 4.2HTC 5.1MOTOROLA 0.1SONNY ERICSSON 0.1A Strategy for Competitive AdvantageCost analysis has traditionally focused on attention to the value added by the occurrence oferrors and that it is the only area where companies can affect costs.Value added is becoming obsolete with the reasons:1. The existence of different treatment between raw materials and the purchase of some otherinput.2.Value added can not signify the things that potential to be associated with a view to
  18. 18. reducing costs or creating product differentiation.3. Competitive advantage can not be used fully with the interaction between the rawmaterials purchased by other costs. ConclusionsNokia has built a strong value network around one of its product lines, namely mobilephones.This is the real key to its success. It has learned to focus on its core competencieswhile partnering with best-in-world players in selected areas to bring the best customizedmobile phones to market, as quickly as possible and at the lowest possible price. Activitiesalong the product value chain are performed by the organizations with the very best know-how and expertise. The overall coordination and optimization of the product value chain is,however, ultimately the responsibility of the Finnish manufacturer.Nokia seems to ride rather smoothly over today‟s three competitive forces since itdemonstrates: (i) a strong focus on knowledge-based activities while practising the art of “coopetition” (ii) an ongoing concern with velocity that results in a balancing act between the nimportance of physical proximity and reliance on electronic means for virtual activities performed in geographically dispersed regions; (iii) a well-thought-out market strategy where the mobile phone is positioned as ahightech, high-fashion and personalized device which gives final customers specialized, customized services.The Finnish company performs well in a highly dynamic environment. To some extent, it hasalready shaped the future of mobile devices (and consequently PCs). Will its leadershipposition be challenged within the next decade? Competition among industry leaders willundoubtedly be fierce.As we have shown, Nokia must rethink its strategies if it is to remain successful. The recenteconomic slowdown coupled with impending market saturation and the demand for increasedfunctionality, is beginning to dramatically change the handset market.
  19. 19. Nokia should take aggressive measures to resist commoditization if it is to grow and continuebeing profitable. We have outlined some ways that it can accomplish this. Its brand hasproven to be one of its most valuable assets, and Nokia should continue building it. Nokiamust also thoroughly research evolving customer needs and provide a positive impetus forbrand differentiation. Finally, by forming strategic alliances with industry and serviceproviders, Nokia can ensure and maximize its visibility to the end- user.Nokia also needs to bring new products to market, and, as the market is showing signs ofsaturation, shift its focus onto the replacement market. This means developing data-drivenservices and appropriate partnerships with content providers. There simply needs to be anincentive for existing handset owners to purchase a new Nokia handset.Finally, Nokia should secure its long-term position by placing more R&D and marketingemphasis on CDMA, as opposed to its current core market of TDMA. CDMA will form thebasis of third-generation mobile technology, and it would be an advantage to be seen as an apriori leader in this domain.While Nokia‟s future – and indeed that of the entire mobile communications industry – isgrowing more uncertain, Nokia is not doomed yet. As long as Nokia is open to reworking itsmarketing strategies, it stands a good chance of remaining the dominant player in the handsetmarket and perhaps even generating larger revenues.It can be concluded, that the methodology to create and use value chain includes the steps of: 1. Identifying the value chain of the industry, then make a list of costs, revenues, and assets for each activity 2. Identify cost drivers are set each value activity. 3. Building sustainable competitive advantage, either by controlling the cost drivers better than competitors or with rekonfiguration value chain.Finally in closing, value chain perspective can be used to reduce some of the followingviews: Value chain analysis as a first step of understanding how the companys position in the industry Once the value chain is fully articulated, strategic decisions are critical to more clearly Value chain analysis helps to measure the power supplier with manghitung percentage of total profits attributable to the supplier
  20. 20. Value chain framework to explain how the companys products according to buyersvalue chainIn the final analysis, the simultaneous achievement of low cost and differentiationdepends on an adequate understanding of the drivers of cost, income, and assets ineach value activity and interdepedensi among value activities.