Nokia Pricing Strategy

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  • Topic: Nokia mobile phones, Smartphones, Pricing
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“Pricing Techniques”

Studied in- Mobile Industry

Company- Nokia

Background of the study:
Pricing Techniques: are the methods adopted by a firm to set its selling price. It usually depends on the firm's average costs, and on the customer's perceived value of the product in comparison to his or her perceived value of the competing products. Different pricing methods place varying degree of emphasis on selection, estimation, and evaluation of costs, comparative analysis, and market situation. It takes into view factors such as a firm's overall marketing objectives, consumer demand, product attributes, competitors' pricing, and market and economic trends. The term pricing technique is also called cost plus because it attempts to secure the firm against a loss by imbedding marginal and fixed costs into the price consumers pay. The term plus refers to markup, which may ensure some strictly positive profit. If, the firm sets markup = 0, the firm breaks even because the price equals the average total cost.

Objective of the study:
The objective of the study is to see the different pricing strategies used by Nokia for its different products. Nokia started by making paper – the original communications technology Nokia was founded in 1865 by Fredrik Idestam in Finland as a paper manufacturing company. In 1920, Finnish Rubber Works became a part of the company, and later on in 1922, Finnish Cable Works joined them. All the three companies were merged in 1967 to form the Nokia Group.

In the late 1970s, Nokia started taking an active interest in the power and electronics businesses and by 1987, consumer electronics became Nokia's major business. Nokia created the NMT mobile phone standard in 1981 and launched the first NMT phone, Mobira Cityman, in 1987. The company delivered the first GSM network to Radkilinia, a Finnish company in 1991, and in 1992, Nokia 1011 - a precursor for all Nokia's current GSM phones - was introduced. In the 1990s, Nokia provided GSM services to 90 operators across the world. Another significant move of the company during this period was the divestment of its non-core operations like IT. The company focused on two core businesses - mobile phones and telecommunications networks. Between 1992 and 1996, the company exited from the rubber and cable businesses as well. Nokia in India

Nokia entered the Indian market in 1994. The first ever GSM call in India was made on a Nokia 2110 mobile phone on its own network in 1995. When Nokia entered India, the telecom policies were not conducive to the growth of the mobile phone industry.

The tariffs levied on importing mobile phones were as high as 27%, usage charges were at Rs.16 per minute and, at these high rates, consumers did not take to mobile phones. Nokia also had to face tough competition from other powerful global players like Motorola, Sony, Siemens and Ericsson.

Scope of the study:
Nokia has emerged as one of the most recognized brands in India, surpassing some of the Indian business conglomerates in terms of revenues. Nokia considers India as one of the most important markets for its future growth; the company has been facing stiff competition in the recent years from Korean players like Samsung and LG. After cutting prices to restore lost market share, Nokia has reverted to its old pricing strategy of maximizing profit and cash generation. Nokia has made the pricing transition amid expectations that the Finnish group has stopped the slide in its market share. Nokia Corporation slowed down its effort to slash prices. In Europe, Nokia maintains its leadership on "ease of use" and reliability, but in the U.S. market, all brands are now considered equal. "The key risk for Nokia in continuing to play on prices is that it could be further pushed toward the low end of the market". Nokia can sustain a price war for longer than any of its competitors. Earlier this week, Nokia said it expects to invest $100 million to $150 million in...
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