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