Nokia Operation in China

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Question1,

In the late 1990s, Nokia emerged as the leader of the global mobile phone industry. However, by 2003, the company faced several problems. Discuss Nokia's rise to the top and its eventual downfall.

Analysis of Nokia Business in China

This case discussed the operations of Finland-based telecom major, Nokia in China. Nokia entered China in 1985, and initially supplied network equipment to Chinese manufacturers. Nokia entered into joint ventures with local companies, which helped it understand the local market better. The vast experience of GSM experience from Europe was fully utilized in China local business strategy. Furthermore, the Chinese government has provided a lot of support during their early set up.

Competencies

The core competencies of Nokia was unique, it gathered the strengths from technology know-how, facilities, finance and system. Nokia had built their strengths before entering to China market. The vast experience in Europe market for network services, equipments, mobile phones technology etc had given Nokia a fruitful result in 1990s.

In pursuing advantages in China’s business, Nokia went into other joint ventures. In 1991, Nokia’s main business came from Post and Telecommunication Administrators or PTA in Beijing and Fujian provinces, for it undertook network expansion services and bundled with handsets. In 1990s the start-off subscriptions had a quick and rapid take off after the economy opened for FDI and trade in China since mid 1990s. In 1992-1995, the number of subscriptions grew by 400%. The rapid growth of a new middle class is also a sign for mobile phone manufacturers. Later on, the ministry of Post of Telecommunication (MPT) had also announced supporting development for wireless solutions instead of developing landlines, which boosted the market for both network and later on mobile phone sales. In end 1990s, Nokia continue its GSM investment in China. The action had gained them the fruitful result. By the end of the 1990s, China emerged as Nokia’s 2nd largest market after the USA, but Motorola continued to be market leader in China.

Business Environment Changed (2003-2004)

Nokia's dominance continued into the first few years of the 2000s, but it suddenly came under threat in 2003-2004, when smaller Asian vendors started making their presence felt with better products at lower prices. The company's problems also had internal causes and one of the reasons could be that it had become too complacent with its success and lost its agility in reading and responding to market signals. The traditional strengths or advantages were melting and in reversing side.

The impact after relaxing licensing regulations

By end of 1990s, the actions of Chinese government encouraged their local players, mandated a licensing system for local manufacturers of mobile phones. This has really created a huge impact to the Nokia business in later time. Most of the local manufacturers were copying Nokia’s styles and designs in no time and selling them at much lower price. These had brought the toughest challenge to Nokia’s business until today.

New competitors

The competition with multi-national brand Motorola was always the tough one for Nokia. They were at one stage captured almost the same market shares in China territories. In early 2000s, the increased of rivalry Asian manufacturers like LG and Samsung were quick to respond to the demand and they came out with several new models had created a huge impact to Nokia’s sales as well.

Also, the Chinese manufacturers like Ningbo Bird, Amoi, TCL etc were not far behind, and they also introduced new model phones at better prices. These had adverse repercussions for the company's market share. Nokia was locked by own strategies. Most of the models were tied up exclusively with some of the local operators due to bundling services with the handsets sales. These companies built an efficient distribution network to reach the rural...
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