I. Introduction to Nokia Corporation Ltd
II. Swat Analysis of Nokia Telecommunication Ltd
Nokia Corporation is one of the world’s largest telecommunications equipment manufacturers. It has since established a leading brand presence in many local markets, and business has expanded considerably in all areas to support customer needs and the growth of the telecommunications industry. Nokia also produces mobile phone infrastructure and other telecommunications equipment for applications such as traditional voice telephony, ISDN, broadband access, professional mobile radio, voice over IP, wireless LAN and a line of satellite receivers. Nokia provides mobile communication equipment for every major market and protocol, including GSM, CDMA, and WCDMA and it is known globally for its reliable and good quality products.
Founded: Tampere, Grand Duchy of Finland (1865) incorporated in Nokia (1871) Founder(s): Fredrik Idestam, Leo Mechelin
Headquarters: Espoo, Finland
Area served: Worldwide
Key people: Risto Siilasmaa (Chairman), Stephen Elop (President & CEO) Products: Mobile phones, Smartphones, Mobile computers, Network Services: Maps and navigation, music, messaging and media, Software solutions
Nokia has around 105,000 employees across 120 countries, sales in more than 150 countries and annual revenues of around €38 billion. As of 2012 it is the world’s second-largest mobile phone maker by unit sales (after Samsung), with a global market share of 22.5% in the first quarter. It is the world’s 143rd-largest company measured by 2011 revenues according to the Fortune Global 500. Nokia was the world’s largest vendor of mobile phones from 1998 to 2012.
Strategic use of design - As margins have been three times those of its nearest competitors, Nokia has been able to re-emphasize the importance of design to place it literally at the heart of the organization’s operations. This has moved Nokia from being a feature-driven to a design-driven manufacturer. Powerful New Products - Nokia’s innovation roadmap weaves its software and services into a seamless package. Nokia created the N Series to deliver high-end multimedia phones. In addition, its near-ubiquitous camera-phones have provided revenue opportunities from user-generated content. Market Leader in Asia - With overall industry handset volumes growing, Nokia is in the strongest position of any manufacturer. At the lower end of the market, Nokia is the leading brand in China and India and is well positioned for further growth. It continues to lead on process innovation to drive down cost and is opening its tenth factory in India with the capability to turn out 20 million phones a year. Innovative New Alliances & Acquisitions - Nokia is using alliances with the likes of Google and Skype to offer more freedom of choice direct to consumers. In support of the social networking trend, Nokia has formed alliances with partners such as Yahoo to allow users to share photos using its Flickr service. Seeing that location and content services provide major opportunities Nokia bought Navteq, the leading provider of digital map information for over $8 billion. Nokia expects that the truly mobile internet with multiple connectivity options that enable faster access to music, video, TV and mobile navigation and massive multiplayer gaming services will be a major factor in driving further growth. Manufacturing Abilities - Nokia is one of the most efficient manufacturing companies globally. Very few western companies have ever withstood an all-out assault by China Inc., but Nokia, a company from high-cost Finland, has also been for years the world's lowest-cost major producer of phones. Elop's memo acknowledges that cost leadership is now under threat, but it is still an unbelievable accomplishment that continues to be studied in many business school programs around the world. Brand Recognition - Nokia has a strong brand name which is one of its most important strengths. Although intangible, the Nokia name gives the company an advantage when launching new products. Customers equate reliability with a strong brand name like Nokia. Distribution Networks - Global distribution networks allow for products to be easily available for the target customers. In Asia alone, Nokia has over 600 ship-to addresses serving 300 major cities, over a dozen serving Hong Kong, and another dozen serving Taiwan and Korea. Ease of Use Products - Nokia products are easy to use for everyone, even people without the ability to read in developing countries, are able to use Nokia easily. Diversity of Products - Nokia has a high range of products, including top and low end handsets, which is attractive for the customers. Nokia mobile sets have a high resale value as compared to others which is complimentary for Nokia as well as for the customers. WEAKNESSES:
Collaborative Planning Capability – supplier strategies may differ from Nokia – the dynamic market situation requires visibility for sales orders to run smoothly. Material visibility requires supplier systems to be compatible with Nokia’s systems in order for orders and confirmations to be seamless, otherwise the orders may not be filled on time while other orders may fall through the cracks. Inventory Management – this is a challenge around the holidays when demand spikes. Managing around the volatility of demand and reducing it is critical to profitability. Spikes in demand require production to be ramped up which increases the costs of production and decreases the profit margins. Ways of Working (WoW) improvements – there are many moving pieces that all need to work in harmony for the production as well as sales process to be successful and profitable. This is a critical area for making changes to streamline production and inbound / outbound logistics. High Price Points in Some Target Markets - Nokia has high prices as compared to some of its lower end competitors. Nevertheless, the superior quality and reliability of its products compensates for this weakness. Furthermore, the higher cost of its products prevents cost-conscious customers from purchasing Nokia products. Limited Service Centers - Nokia’s sales and service centers are very few therefore it’s after sale service is not impressive. If the customers face the problem in the product then they have to face difficulty.
Network and Infrastructure – moving westward in China to create balance is a large opportunity for Nokia, and will help to create better information flow. The inland region of China is still in a very developing status – while this creates a lot of challenges, it also will allow Nokia have first mover advantage since many other global companies are not making those same investments. Security – securing the IP of Nokia is critical. Ensuring truck and transportation security is an area of improvement for Nokia. Currently, Nokia outsources transport of its products, 3rd party trucks are responsible for delivery of not only supplies but the products themselves. Making certain that those 3rd party vendors are bound by a strict code of confidentiality and that the trucks are secure is essential. Planning Accuracy and Forecasting – eliminating volatility in the production process reduces increased costs and will help Nokia run smoothly. Import / Export Improvements – streamlining the export/import process is vital to the success of a global company such as Nokia. While this area is difficult to control because of the external factors, it is one which can have much impact on the profitability. Minimize Delivery Process – since the mobile / smart phone industry is highly competitive having products on the shelf is extremely important. If products are not delivered on time customers have many alternatives and will chose another phone to purchase. Shelf presence is very important. Since vendors often wait until the last minute to place orders or as a result of demand volatility orders may be hasty. Ensuring that those orders are completed and delivered on time is critical. However, haste orders are more expensive. Saturday or overnight delivery is more costly than regular delivery. Minimizing cost in the delivery process is also a source of opportunity for Nokia. Increased Market Concentration – especially in the form of partnerships. Partnerships are a great way for Nokia to grow and increase profits while spreading the risk associated with new product launches. Increased market concentration, especially in underdeveloped regions, is very important for Nokia. If Nokia can get into those regions and create a need for their product, sales will increase. Increased sales will in essence increase profits. Market Expansion - Nokia can expand its market share by introducing products into new markets and with the existing variety of phones they can better cater to these new target markets. Price Point Adjustments – With their manufacturing abilities and high profit margins, Nokia can capture more market share and attract more customers in existing markets by changing price points and introducing new products with innovate new features.
Competition – Apple, among others, will be a critical player for Nokia to contend with. If Nokia wants to remain competitive and remain a key player in the market (especially the mobile phone market) the company will need to remain innovative and continue to invest in R&D. In terms of the smart phone market, Nokia is behind. Since this market is growing rapidly, Nokia will need to devote itself to staying in the game because in the long run the smart phone market may replace the mobile phone market. Import and Permit Duties – duties, fees, licenses, and permits are a large part of importing / exporting. Politics can certainly play a big role in this area and political upheaval or disaccord among country leaders can make it difficult for companies to conduct business internationally. Import tariffs on imports from China, for example, is one way how the US government can hurt the prosperity and success of a company like Nokia who is exporting phones from China to the US market. Compliance Issues – there are different rules for different importers – creating one set of universal rules for all importers is challenging since not all importers have the same capabilities (joint venture, enterprise, university, co-op) but is the easiest way to ensure compliance amongst all players. International Trade – there are many different types of international trade – general, manufacturing, and exhibit / show. Ensuring that the correct niche is addressed and marketed can be challenging especially in an international realm where cultures, politics, and economies come into play. In terms of customer preferences this is a huge area for Nokia to focus on. Not all people are created equal and creating specific phones for specific people is a critical aspect for success. Customs System / Process – the customs process can be very challenging and cumbersome, most of it is a paper process, clearance differs by city/region, and the formalities get in the way of time sensitive orders and deliveries. Delays are often caused by the bureaucratic nature of this area. Increased Market Competition - As the telecommunication industry is growing, not only are opportunities increasing for Nokia but also the threats are equally increasing with increased competition. More and more competitors are entering into the market as well as the risk for cloning which is a big threat for Nokia. Increase of WLL Networks - The growth of WLL networks pose a problem because Nokia provides CDMA cell phones and has yet to enter into the WLL markets. CHALLENGES AND SOLUTIONS:
Products - One of the main challenges that Nokia will face is with respect to Apple and the rapidly growing iPhone and iPad markets. During the November 21st, 2011 presentation Nokia shared that currently the company only controls about 18% of the smart device market. The primary target areas for the smart phones will include Japan and the US, while the mobile (simple) phone focus will continue to expand in areas such as Europe, Mexico, China, and the Middle East where smart devices are not dominating the markets yet. Symbian operating system - In order to combat Apple, the company is moving away from the Symbian operating system and into the Windows based OS. According to studies performed by Nokia, the Windows based system is more user-friendly and resembles that proprietary system used by Apple more closely. This will allow for Apple users to have a more seamless transition from an iPhone to a Nokia smart phone. In this regard, Nokia and Microsoft intend to jointly create market-leading mobile products and services designed to offer consumers, operators and developer’s unrivalled choice and opportunity. As each company focuses on its core competencies, the partnership will create the opportunity for rapid time to market execution. Additionally, Nokia and Microsoft plan to work together to integrate key assets and create completely new service offerings, while extending established products and services to new markets. Lacking Holistic Design - The same manufacturing-driven culture that turns out great, cheap feature phones by the dozen, breaks down when asked to craft an intricate smartphone in which overall system integration is the most important feature. Nokia designs phones using a manufacturing-like process in which different groups create features in parallel. So (to make up an example) one group might do the user interface, another the mail app, and another the browser. That's very efficient for creating large quantities of phones quickly, but inevitably it also brings forth the difficulty of integrating all of the pieces together closely so they produce a great user experience. The best smartphones, like the iPhone, are designed holistically, with all of the pieces coordinated together. A product manager controls the process and can enforce compliance with the product vision. This process is much slower and less efficient than Nokia's, but when creating a product with complicated and diverse software, it helps to ensure that all of the components work together well. Apple has been successful with this less efficient process because it produces one phone at a time. Nokia has 89 different phone models available currently in Europe consequently making the Apple approach unsuccessful. Improving Service and Repair Facilities - Nokia is also creating specialized repair and return facilities to create an exclusive Nokia experience with knowledgeable staff servicing their phones. Furthermore, Nokia is focusing on in-house capabilities to produce their phones, rather than outsourcing. Such a move will help improve quality and eliminate the potential of errors and faulty devices which is something that Apple has been prodigious at controlling their devices. Maintain Existing Customer Base - Nokia’s challenge is to maintain its position in a world increasingly converged and dominated by the likes of Google and Microsoft. However, while these companies have strong brands and interesting plans for the future, they do not have control over the handset. Nokia is bundling great services with tailored, user-friendly hardware. With a billion customers and relationships with hundreds of operators around the world, Nokia may well manage to hold its place. Improve Planning Accuracy for Incoming Raw Materials – Nokia is pushing its suppliers in the utilization of SAP (to manage business operations and customer relations). Currently over 60% of Nokia’s suppliers are on automated inventory systems. Planning accuracy can be drastically improved through the implementation of Kanban, which is a scheduling system that dictates what to produce, when to produce it, and how much to produce. Further improvements can be achieved through the introduction of the Japanese process of Kaizen, which refers to activities that continually improve all functions of manufacturing, and involves all employees from the CEO to the assembly line workers. It also applies to processes (such as purchasing and logistics) that cross organizational boundaries into the supply chain. By improving standardized activities and processes kaizen aims to eliminate waste and improve productivity.