Nokia: Business Interests Vs German Pressures:
What are the trends in the mobile handset industry?
Several years ago, the handset industry had healthy margins, but since 2001 the situation changed. Problems such as cost pressure, weak profitability and ongoing consolidation began to appear. The growth was getting slower. The U.S. and Europe markets were saturated. What to do then? Industry focused towards markets of Middle East, South Asia, Africa, China and India, where there was a high growth. Therefore, we can summarize the situation of the industry as follows: * Outsourced manufacturing of handsets
* Demands in the developed markets like US & Europe has saturated * Significant growth has been noticed in the Middle East, Southeast Asia, Africa, China, India and South Korea * Demands of low cost phone in the emerging market has increased * Average selling prices fell by 35%, which is directly impacting the revenue
What is Nokia’s strategy?
As an overview, Nokia was following a strategy based on these points: * Change High cost manufacturing to low cost manufacturing regions * Get a Dominant position in emerging markets such as Brazil, Russia, India and China. * Get a High growth of in Middle East, South East Asia, Africa, China and consecration on low cost countries * Moving to the locations where government is more supportive in granting huge subsidies Nokia needed a low cost manufacturing. Why? The level of costs had increased; there was a decrease in prices and high competitiveness. What to do then? Relocate its factory to Romania.
There, Nokia would have the following advantages:
* Much lower labor cost than in Germany
* Higher competitiveness
* Simple taxes
How has globalization changed its way of operation?
The impact that globalization has had on business has been tremendous. Technological advancements, particularly with the communication and information milestone of the Internet, have made...
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