Abstract
This paper examines the developments that have been witnessed in the mobile phone industry with particular attention to those witnessed at Nokia Corporation. A brief history of the Nokia Company and the products it has produced are given in the paper. The operations of Nokia Company in the developed nations and in the developing countries are examined with a focus on the probable course of action.
The paper examines the internal and external factors that can affect the operations of Nokia both at the local and at the international level. The necessary reinforcements and developments that are likely to be adopted by the company are also presented briefly.
Introduction
The current local and international markets are characterized by a lot of competition. The organizations that strive to have a large market should be sensitive and responsive to the changing trend in the market. The understanding of the forces within an organization and those external to the organization are of importance in developing a strategic marketing plan for the organization.
The management of an organization should be in a position to identify the strengths and weaknesses within its premises. It is then important that the management find a way of overcoming the weaknesses as well as capitalizing on the identified strengths of the organization. The management should also focus on the external forces that will influence the operations in the organization.
The competition that is got from other companies providing the same products and services becomes a threat to the organization. On the other hand, what appears to be a weakness on the competitors is an opportunity that an organization should use to gain competitive advantage over the others.
The needs of the customers often change making the market a very dynamic environment that requires constant monitoring. The companies that wish to capture a larger share of the market need to embark on inventive and innovative practices so that they always match the changing needs of the customers. There is a continued need of provision of better quality products and services at considerably lower prices.
Companies are therefore sandwiched between two opposing forces of the need to maximize revenue and that of lowering the prices to capture the customers. Keeping up to-date track of the developments in the market and extensive market and marketing research through innovations will enable an organization to maintain its share in the local and international level.
The mobile phone industry
Various developments have been seen in the mobile phone industry since the use of the first mobile devices in the early 1980s. The early phones that were an improvement on the radio calls were heavy, bigger, and very expensive. Motorola launched the first mobile handset in 1983. This was very bulky, weighing about one kilogram and costing about $4000.
Few individuals could afford this and thus there were not so many subscribers in the world. The mobile phones during this period are termed as the First Generation devices.
They were characterized by analogue technologies with the products developed according to the standards in a particular country (Alcacer et al, 2010, p.3). More developments were seen and towards the end of the decade, there were companies that provided both the mobile network equipments and the handsets. Much of the operational procedures in the mobile industry were under the control of the mobile operators.
The 2nd generation mobile phones developed in the early 1990s as a shift from the analogue technology to the digital technology. There were additional services like messaging, call forwarding, and geographic positioning.
The devices were now developed not according to the local standards in a given region but according to the two internationally recognized standards namely the Global System for Mobile Communications (GSM) and Code Division Multiple Access (CDMA). The introduction of these two standards would later dictate the course of competition in the market.
It turned out that GSM became more popular than CDMA and the companies that first adopted CDMA like Motorola found it had to maintain their position in the market since GSM provided services that were more current (Alcacer et al, 2010, p.2).
This is where Nokia overtook Motorola that had dominated the market in 1980s. The legal provisions by various governments also catalyzed competition in the industry. A significant global growth was recorded in the mobile industry during this period.
The third generation (3G) phones included voice calls as well as data transmission through the mobile devices. It involved the use of internet, sending or receiving videos, pictures and music. This resulted into other developments in the industry. The mobile operators now charged the individual services that were offered rather than the usual monthly fee they used to levy on the users.
There were further regulations from the governments that were reflected onto the users. The introduction of internet-enabled mobile phones attracted the attention of software developers like Google and Microsoft that embarked on developing programs that are compatible with the mobile handsets.
Currently, the mobile phone industry is the second fastest growing industry in the world after the Internet, with mobile phones that were sold in 2008 globally being estimated at 1.3 billion (Lippoldt & Stryszowski, 2009, p.183). The introduction of modern technology across all the sectors of economy has made the ownership and uses of mobile phones become a necessity.
Parents purchase phones for their children to provide an efficient means of communication when the children are away e.g. in school. The industry has undergone significant development in the last two decades. For instance, it has been observed that the market size in the US has grown from 24 million users in 1994 to around 180 million users by 2006 (Chan et al, 2006, p.1).
The industry has continued to grow following the technological advances witnessed in the related sectors. It is highly competitive and characterized by high level of innovations to counteract the ever-emerging technology.
Essentially, the competition in the industry is generated by certain fundamental factors. Firstly, there is need to lower the prices of the products while improving their quality. The customers in the industry would always desire improved services by the company provided at lower costs. Secondly, it has been observed that most mobile phone users use other applications apart from talking.
Incorporating several functions into a single gadget attracts more customers and is thus a source of the competition seen in the industry. The uses of e-mail, instant messaging, or the internet are some of the desirable applications that attract more customers in the current mobile phone market.
Other applications like camera and radio also add flavor to a given brand. The mobile phone industry is currently in its Mature Life Cycle stage. Almost all the potential customers of the mobile products are in possession of or use the applications (Chan et al, 2006, p.2).
There are several manufacturers in the mobile phone industry with a few companies having the lion’s share of the market. In 2006, Nokia had a third of the world market share with a growth rate of 39.6%. Motorola came the second with 20.3% of the international market (Chan et al, 2006, p.11). Samsung and LG came third and forth respectively with the latter only claiming 6.9% of the total market (Chan et al, 2006, p.12).
The market share of Nokia continued to expand especially in the emerging market and in 2009 the company was the leading in India and China recording 60% and 40% of the market respectively (Alcacer et al, 2010, p.1). The company produces about 500 million mobile handsets annually (Lippoldt & Stryszowski, 2009, p.183).
A brief history of Nokia
The current company Nokia Corporation traces its roots back to a company that was established in the second half of the nineteenth century. The company first started as a paper mill and it was developed into an energy generating company (Alcacer et al, 2010, p.1). The company later acquired some Finnish companies and embarked on the manufacture of rubber and further generation of energy.
The acquisition of the two Finnish firms led to the establishment of the present day Nokia Corporation in 1966. By 1970s, the company had taken a different course in its products and it was mainly concentrated on the electronic products.
The company developed its first computer for industrial use towards the end of the 1970s. Various developments have been registered in the company’s operations and it is currently the largest producer of the mobile phones in the world.
Developments that have been registered at Nokia Company
The kind of developments that have been witnessed at Nokia Corporation since the late 1970s are greatly attributed to the leaders who had the leadership potential and were sensitive to the changing market trends. The company originally confined its operations to four European nations namely Finland, Denmark, Sweden, and Norway (Alcacer et al, 2010, p.2).
As the CEO of the company between 1977 and 1992, Kari Kairamo spearheaded various developments. He saw the company expand its operations within the four European nations and into the other nations within the continent.
The company acquired a larger stake in the telecommunication company managed by the Government of Finland in 1981 and continued to acquire more telecommunication premises throughout the decade (Alcacer et al, 2010, p.2). The large establishment in Finland saw it suffer a great deal from the recession that occurred in the country between 1990 and 1993.
Jorma Ollila took over the leadership in 1992 and channeled his knowledge and expertise towards the further development of the company. A good understanding of the economic principles and background knowledge in engineering enabled him to initiate research and development programs in telecommunications (Alcacer et al, 2010, p.2).
A substantial proportion of the human resource and a significant percentage of the company’s total revenue were set aside for research and development. Ollila saw the company being internationally recognized especially after being the first to realize that mobile phones could also be used to signify an individual’s identity.
Mobile phones were increasingly being attached to the fashion industry. Ollila extended the initiatives developed by his predecessor of foreign establishments that saw the revenue obtained from non-European nations rise from 20% in 1992 to 60% in 2006 (Alcacer et al, 2010, p.2).
The company faced more challenges when Olli-Pekka Kallasvuo took over as the CEO in 2006. Various companies brought into the market mobile devices that had multiple applications integrated in a single device and coupled with lower prices to win more customers.
The introduction of more integrated models by competitors like Motorola, Samsung, Apple and LG and the financial crisis witnessed in 2008 saw the sales at Nokia decline by a substantial percentage (Alcacer et al, 2010, p.2). This prompted the management of the company under the leadership of Kallasvuo to redesign the operations at the organization.
The CEO pointed out that there was an urgent need to set up transformation programs. He asserted that the solutions to the problem that the company was experiencing involved not only an improvement on the quality of the devices but also the introduction of other services that would help attract and retain more customers (Alcacer et al, 2010, p.3). Several changes were made in the organizational structure at Nokia.
The traditional business groups were replaced by functional units that would work together towards the improvement of services. A proper coordination would be ensured so that all the functional groups like the marketing, supply chains, and brand management are closely associated in every decision making in the organization.
Nokia partnered with another company Siemens to form Nokia Siemens Network, a joint venture that was aimed at providing better quality services owing to the technological advances that were emerging.
Nokia in the developed markets
The sales of the products of Nokia have been seen to decrease in the developed countries. For instance, it was observed that in the United States, the company had lost the market and could only sell 10% of its mobile gadgets in 2009 as compared to about 33% that had been recorded in 2002 (Alcacer et al, 2010, p.1).
The company also recorded a significant decrease in sales of its product in the European nations in the last quarter of that year. It had also stopped two-decade operations in Japan owing to the emerging competitors leading to a decrease in sales.
Nokia has been receiving stiffer competition in the developed nations since the subscribers in these regions can afford high-end devices manufactured by competitors like Apple and RIM that had registered significant increases in the market share in the US.
Nokia in the emerging markets
The markets in the developing countries are competitive as most organizations strive to utilize the arising opportunities. In doing this, the organizations often apply different global strategies namely Aggregation, Adaptation and Arbitrage commonly referred to as AAA Triangle. Aggregation refers to the attempts by an organization to improve its economy of scale through standardizing its operations.
This is achieved through extensive research and development (Ghemawat, 2007, p.4). Adaptation refers responding to the needs of the local markets by providing the relevant products and services. It is aimed at gaining competitive advantage and thus improving the market share.
It is then facilitated through advertisements and promotions to increase the awareness among the consumers (Ghemawat, 2007, p.3). Arbitrage involves examining the differences that occur between regional or national markets and noting regions that have low cost of production. Parts of supply chain like those that require much labor can then be located in the regions that have cheap labor (Ghemawat, 2007, p.4).
There is need to consider not only the internal integration but also external integration with other partners. The application of the three strategies my not be practical but a combination of two is often achievable. The differences that are witnessed across the borders will be very essential in determining which strategy to apply.
Nokia has been doing pretty well in the emerging markets due to the application of the above mentioned strategies at different times, as the business progresses. Adaptation to the changing market conditions has enabled Nokia to survive in these emerging markets.
According to Anderson and Markides (2006), consumers in the emerging markets have relatively low incomes and therefore low-priced products are more favorable to them.
In addition, such consumers have challenges accessing conventional advertising media, so they may not be aware of new products, and in the event that they are made aware of the new products, most of them are reluctant to change, as they are always suspicious of products that they do not have prior experience on (Anderson and Markides, 2006, p. 10).
Nokia has also applied aggregation as a strategy at certain points. The market research and the research and developments carried out on the products enable the company to produce goods and services that meet the local and international standards. This was evidenced earlier through the adoption of the GSM standards. Its strategy of providing products of all prices has enabled it survive in these emerging markets.
In the emerging markets, the company has been sensitive on price-performance ratio by producing phones that are culturally acceptable; this is through eliminating some features or producing relatively smaller phones that will be delivered at low prices in order to boost acceptability and affordability (Anderson and Markides, 2006, p. 3).
This reduced competition from other companies like Apple and Samsung that produced middle to high-end devices (Alcacer et al, 2010, p.7). External integration like the joint venture with Siemens also enabled the company to proceed well in the emerging markets. Over the last decade, much of the revenue was derived from the emerging markets and the trend is likely to continue.
The capability of Nokia in the global context
The capability of the Nokia Corporation can be examined through the analysis of the internal and external forces that influence its operations.
Strengths at the company
One of the challenges that can face any organization is lack of enough capital. The inventive and innovative procedures necessary for the developments of products and services that meet the growing needs of the customers often require a lot of funds that may not be available. However, Nokia has managed to escape such a financial bondage through the large market share that it has recorded in past.
The consumers are the most precious assets and so the most important capital that an organization has (Chan et al, 2006, p.10). The availability of capital to carry out inventive and innovative research will enable the firm to meet the timely needs of the customers.
The other strength of the Nokia Company is the presence of qualified professionals in the Human resource department. There is, therefore, the expertise that is necessary during the product improvement. The organizational structure that allows for communication and consultation between departments is fundamental to the success of the organizational operations.
The management has been able to respond to the changes in the market trend and mitigate the recurrence of any such misfortune. Coupled with the financial assurance, the presence of the qualified personnel enables the company to develop business that is more profitable.
Besides, the company provides products that are user-friendly with most of the applications that attract many potential users. The products are also available in a wide range of prices thereby accommodating different categories of customers within the market. A proven record of brand positioning has also been witnessed as one of the key contributors the developments seen at the Nokia Company (Alcacer, 2010, p.1).
The organization has been seen to develop marketing strategies that allows its product be evaluated by the customers above the other available products. The company has been seen to redesign and reinvent new products since its establishments depending on the market needs (Alcacer, 2010, p.1).
This ability to respond to the market forces and develop new products is likely to enhance the survival of the company in the local and global market. The adoption of the slogan “Connecting People” was an effective brand positioning strategy that saw Nokia being among the top five highly valued brands in the world by 2000 (Alcacer et al, 2010, p.2).
Its weaknesses
Even though the company provides a variety of products with a wide range of prices, some of the products that have desirable features and application are not affordable by many individuals in the societies. Besides, some of its modern applications are not friendly to a common man with low education level.
The company is not well established in some of the emerging markets. There are no well-established service centers in these regions creating an opportunity for the competing organizations in these regions.
The opportunities
The company has enjoyed the greater portion of the market and it is still set to have the advantage owing to the wide range of products and different prices recorded. The economic developments that are witnessed in the developing countries like India provide the company an opportunity to expand its business operations into these areas since the growth recorded in the developed nations is very slow (Ewing, 2008).
The economic growth witnessed in these developing countries has led to an improvement in the living standards of the people thereby increasing their purchasing power for the mobile phones.
Threats
The industry is characterized by high rate of competition. Nokia receives stiff competition from other companies like Motorola and Samsung. Competition is catalyzed by lowering of the prices of products, providing after sales services like a one-year product warranty, and integrating new modern features in the mobile devices.
An example of competition as a threat was witnessed in 2004 when the company’s sales reduced significantly due to the introduction of clamshell phones in the industry.
The management at Nokia did not foresee that the model first developed by Motorola would be popular in the market and be the favorite model of the majority in the market (Alcacer et al, 2010, p.2). The organization is thus required to be updated on the current trends in the market and make the appropriate adjustment s they are needed.
Conclusion
The developments that have been seen at Nokia Corporation correspond to that observed in the entire mobile phone industry. The challenges that have been met are typical of the challenges that are encountered in a competitive market.
Besides, the management at the organization has shown a commitment to carrying out research and product development to meet the changing needs of the customers. It is also observed that Nokia is likely to experience more competition in the developed markets as compared to competition in the emerging market.
Therefore, the organization needs to continue operating in the developed and the developing countries but with much emphasis in establishment in the emerging markets and encourage further research and developments in order to provide quality services that are affordable by the individuals in the developing companies.
The organizational structure that has been developed by the leaders is likely to promote this innovative research and the company will be able to compete with others even in the developed markets. Meanwhile, the management should be focused on utilizing the opportunities that are constantly created by the developing economies.
The products offered by the companies will range from the low-end to high-end devices. They need to incorporate several favorite features in one device for all the categories of customers.
Other than the price consideration, the organization will have to develop products and services that are appropriate in different conditions. There is likely to be a large drift into the information services other than hardware productions.
References
Anderson, J. and Markides, C. (2006). Strategic Innovation at the base of the Economic Pyramid. Web.
Alcacer, J. et al. (2010). Emerging Nokia. NY: Harvard Business School.
Chan, J. et al. (2006). Cell Phone Industry Analysis. Web.
Ewing, J. (2008). Nokia Brings the Web to Emerging Markets. Business Week Online. Web.
Ghemawat, P. (2007). Managing Differences: The Central Challenge of Global Strategy. Harvard Business Review. Web.
Lippoldt, D. and Stryszowski, P. (2009). Innovation in the Software Sector. Paris: OECD Publishing.