nokia and finland_international management
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TRANSCRIPT
Group 3A
Presenters
Outline
Situation Analysis in 2001: Finland
Situation Analysis in 2001: Nokia
The Nokia Story
Critical Challenges
Evaluations of Alternatives
Recommendations
Finland - from a sleepy nation to a very competitive one
Situation Analysis in 2001: Finland
Government Policies Huge investment in R&D Open Market Policy Joined EEA (European Economic Area) in
1993
2001 Declining GDP growth Increased unemployment among the low
skilled labors Telecommunications cluster accounts for 6.9%
of GDP Shortage of skilled Finnish workers
Situation Analysis
Summary of Situation in 2001: Nokia
Nokia was the leader of the Telecom industry Market share: handsets 31%, Infrastructure 10%
Motorola lost mobile phone leadership to Nokia Market share: handsets 15%, Infrastructure 13%
Severe downturn in the Telecom Slow/Delayed transition to 3G system Nokia stock fell 38% during 2001 Revenue grew by 9% in 2001 (compared to 43% in 2000)
Shortage of skilled Finnish workers Nokia foreign employment grew 4 times faster than Finnish
employment
Finnish suppliers produce highly customized inputs
Situation Analysis
Cluster Program
Unmanageable Macroeconomic policies Deepest recession GDP fell by more than 10% in 1991–93 Unemployment rate had risen to almost 20%. Weaknesses in production and export structures
Urgent need to study competitiveness and its origins
Cluster goal: Strengthen Finnish competitiveness
83,000 employees, >4,000 firms, 6.9% of GDP
R&D focused on technology and telecommunications
The cluster program had an impact not only on industrial and technology policies, but also on science, educational and regional
policies
Situation Analysis
Porter’s Diamond Model
Huge investment in research institutes
Sophisticated education
Abundance of natural resources
Industrial message for national competitiveness
Growth through acquisition and alliance
Heavy Exports and large FDI
High demand for mobile in Nordic region
Massive domestic mobile penetration
A market of early adopters
Venture capital forumHighest public R&D spending in EuropeLocal supply for highly customized inputsMobile Internet
Demand Conditions Strategy, Structure Rivalry
Liberal and less interferenceStabilityAssurance of technological neutrality
Factor Conditions
Related and Supporting Industry
Government
More exports to EU due to disintegration of RussiaJoined EEA in 1993
Chance
Situation Analysis
Porter’s Five Forces Model
•More than 100 local
operators
•Active local rivalry in wireless
communications
MEDIUM
• Buyers choose brand
• Low opportunity for suppliers
•Large no of customers were loyal to brand
MEDIUM
• No real substitutes available
• Tablets and portable computers
LOW
• Large number of contract manufacturers dependent
upon Nokia
• Long term strategies with vendors
MEDIUM
•High investment capital
•Non-existent customer loyalty
•Highly competitive market
Bargaining power of
customers
Threats of new
entrants
Bargaining power of Suppliers
Threats of
substitutes
Situation Analysis
Competitor Analysis
Leading worldwide supplier of mobile phone handsets and infrastructure in 1980s
Controlled almost 25% of world market in 1990s
2nd in mobile networks (13%) and phones (15%) in 2001
Slow to shift from analog to digital phones
Ericsson Motorola
Situation Analysis
Worldwide leader in network technologies in 1980s and 1990s
Low end product were manufactured by Taiwanese firms
In 2000, lead of over 40% in infrastructure market
In 2001, served more than 130 markets
Core Competencies of Nokia
International operations in various fields
Worldwide joint ventures
Highly skilled work-force
Nordic identity through the “Nokia way”
Low production cost and short product development cycle
Broad market: serves distinct customer segments with different needs
Focus on R&D (15 countries, 9% of its revenue)
Nokia is always ahead of its competitors
Nokia’s Core Competencies Personality counts Brand name/ Brand development Research & development Mass production
Nokia's focus on two key industries handsets network equipment
More than one-third of the total Nokia workforce is in R&D, and two-thirds of these are based in Finland
Three Nokia’s main market areas Europe Asia Pacific America
The Nokia Story
Critical Challenges for Finland
The 90’s Rising Interest Rates in Europe Falling prices of its Main
Export Industry Higher Unemployment Higher Inflation
What did the Government Do Tighten Macro Economic
Policies Taxation moderation Monetary policy aimed at
increasing Interest rates initially via government bonds
Centre of Expertise Program & Cluster Program
The 21st Century Declining growth
rates and exports Downturn of Tele-
Communication Industry
Entry of Chinese Low Price Players
Scarcity of Skilled Human Resources
Critical Challenges
Critical Challenges for Nokia
Evolution of standards
New low cost entrants
PDAs were emerging
Competitors like Sony were horizontally integrating devices
Reduction of product life cycle
Move towards business solutions
Emergence of Smartphones Fast losing ground in feature
phone segment as well Shut down its last
manufacturing facility in Finland on Friday 27th July 2012
Shares are at an all time low Shut down its software
division, Aligned itself with Microsoft to
keep Windows on all their smartphones
2001 2012
Critical Challenges
Evaluation of alternatives
Tie-ups with education institutes
Hike in R&D expenses Investment in consumer-
targeted models
Promote Finland as an educational hub
Trade agreements Reviving old industries Growth in low-skilled service
sector Modification in central wage
policy Promotion of tertiary education
Finland Nokia
Evaluation of Alternatives
Recommendations
Use Porter’s Diamond approach to evaluate each determinant and its dependent relationship
Encourage immigration of high-skilled professionals to join the work force
Encourage more global firms to open R&D centers in Finland by providing tax incentives
Incentives for Skilled People Entry into Finland
Making Demand Conditions in favor of local players (Nokia)
Global Outsourcing of Components to achieve cost benefits
For government in 2001
Recommendations
Recommendations
Continue creation of stylish but short life cycle mobile handset
The market for South East Asia had a low penetration of mobile phones, and can concentrate their sales in this region
With increased importance of email communication on the go, improve WAP technology to enable data services
Finland should market Global IT & Telecommunication specialized universities to attract more foreign students
NOKIA should get skilled labor from its global existing markets to cope up with skilled labor shortage
For Nokia in 2001
Recommendations
THANK YOU