February 27, 2011
This case study will examine the development and implementation of corporate strategy of the Nokia Corporation. This case study will examine in particular recent events involving Nokia’s cellular phone business.
Nokia is a Finnish company that is the world’s largest manufacturer of mobile devices. In addition, Nokia offers communication services, software, as well as, phone and internet based content. Nokia includes a network management segment called Nokia Siemens Networks which offers network based products and services. This case study will focus primarily on the mobile device market.
II. Porter Five Force Analysis
Rivalry Among Existing Competitors
Nokia has the largest piece of the mobile device market but has seen very strong challenges by RIM’s Blackberry, Apple’s iPhone and a myriad of smartphones running Google’s Android. Nokia’s Symbian operating system is showing its age compared to these newer smartphone offerings. During 2010 Nokia went from 36.6% of the mobile phone market to 27.1%. In the fourth quarter of 2010 Nokia’s Symbian OS was replaced by Android as the most widespread platform (Nagamine, 2011). The top three competitors to Symbian are beginning to take a serious bite of Nokia’s smartphone market share. Table 1 below shows a comparison of 2009 vs. 2010 smartphone OS market sales. Nokia took a big hit to its market dominance to due increased competition from Android and Apple (iOS) sales (Sandstrom, 2011).
Table 1: 2010 smartphone sales by Operating System, units in thousands
|OS |2010 |2010 Mkt Shr |2009 |2009 Mkt Shr |Chg | |Symbian |111,577 |37.6% |80,878 |46.9% |-9.3% | |Android |67,225 |22.7% |6,798 |3.9% |18.8% | |RIM |47,452 |16.0% |34,347 |19.9% |-3.9% | |iOS |46,598 |15.7% |24,890 |14.4% |1.3% | |Microsoft |12,378 |4.2% |15,031 |8.7% |-4.5% | |Others |11,417 |3.8% |10,432 |6.1% |-2.3% |
Threat of Substitute Services
Threat to the mobile device industry is low as an untethered communication device is a growing choice of phone users across the world. Although the mobile device market saw declines in 2009, there was significant growth in 2010. It is anticipated that the largest market segment, Asia-Pacific, will see a volume growth of 98.7% by 2014 compared to 2009. This equates to a market value of almost $97 billion (Nagamine, 2011).
Threat of New Entrants
The mobile device market is made up primarily of large multinational companies with a few smaller domestic competitors. There is a high cost to entry as the mobile device industry is putting out new and increasingly more advanced products quarterly (Datamonitor: Mobile Phones, 2010). These new devices require a significant amount of investment capital to develop and support. In addition, mobile devices require access to networks. A company either has its own network or must enter into partnerships with network providers. Both avenues are costly as well.
Bargaining Power of Suppliers
The bargaining power of suppliers is low with respect to Nokia. As cellphone and smartphones become more prevalent the number of hardware and component vendors is increasing. The suppliers are primarily in China which means buyers can solicit multiple component vendors without expending significant resources. There are few single-source commodities so it is difficult for individual vendors to apply significant pressure to buyers (Doz & Kosonen, 2008). One discriminator...