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Nokia Mobile Phones & the Chinese Market – Managing Culturally Based Strategic Nets

Jan-Åke Törnroos Åbo Akademi University Department of Business Administration Henriksgatan 7, FIN-20500 Åbo, Finland. Phone +358-2-2153266, Fax: +358-2-2154806 jtornroo@abo.fi

Abstract In the new global world economy the telecom sector has a central role to play. In the virtualised marketplace Mobile Phones have since the mid-1990s had a tremendous growth curve and spread across the global Triad. The emergence of technological innovations and growth started in Northern Europe, the U.S and Japan and has thereafter spread to many other parts of the world. Core technologies and R&D functions are spreading to new locations as the firms in the lead (Nokia, Motorola, Samsung, SonyEricsson and Siemens) have developed global sourcing and production systems. The markets for final products and services are global as well. China is one of the new key markets for growth when the first-mover markets have reached a more saturated stage. Due to China’s policy concerning FDI and the opening up of its’ markets for foreign products China is now (together with its impressive growth figures) an interesting area for FDI for Mobile Phone producers. This paper looks at how Nokia Mobile Phones has penetrated the Chinese market and how it has developed its position in the growing market through FDI and other investments. The study focuses on which investments have been made so far and what are undergoing development at present through a strategic network perspective. This paper forms a part of the VALUENET research project funded by the Finnish Research Foundation. Key words: Mobile phone markets, Nokia, China, Foreign direct investment, Globalization, Business networks

INTRODUCTION Mobile phone business has come to a new developmental trend in today’s global market. The market shows a sign of a first mature phase when the spectacular growth figures from the mid1990s to 2000 has come to a halt since and the sales have decreased (see enclosed figures in table III below). New players have entered the scene and the global economic downturn is playing a role as well. Many possible future developments can therefore materialise. In a situation like this the leading mobile phone producers are stepping into new and emerging markets. East Asia and notably China seem to play a leading role in this development. China has a vast market potential and its economy is growing. Millions of people are willing to become consumers of electronics, white goods and home appliances. Mobile phones are a moving target for willing consumers in China (Business Week June 17, 2002). Nokia is the current global market leader of mobile phones. It has invested into China in many ventures and in production units. China is the next largest market for Nokia after the U.S. in the first Quarter of 2002. In moving into China and when developing its business strategy Nokia is forced to build up specific networks of relationships with locals. To build its strategic networks for the future – and for the production of current needs, especially in the Asian markets – Nokia has to take into consideration the culturally specific conditions that prevail in the Chinese market. China is also what can be labelled as a “transition economy”, because the country is in a massive way transforming its Maoist past with heavy flows of FDI and new technology development with Western firms. One key technology is the Mobile telephony and its development (World Development Report 1996). The future is hard to study in a market like this due to access problems and coming uncertainties. Some key questions posed in the paper are the following: What is the role of China in the current global mobile phone business? What investments to the Chinese market have been made so far from mobile phone firms, especially Nokia? How can the role of relationships and networks be used when developing strategic nets in the Chinese...
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