Nokia Case Analysis
The problem
The issues faced by Nokia Company include introduction of new innovations in the smart phone market that have led to reduction in its Smartphone’s market share from 49% in 2007 to 25% by 2011. This has resulted to a negative press and takeover rumors reducing its share prices by 19% to $ 6.70 and its market value. There is also a reduction in the non smart phone market share due to other companies that have come up in Asia.
Environmental scan
The factors demonstrating the kind of industry Nokia operates in include;
Social Change
The people’s attitudes towards the Smart phones market have an effect in the market since people are seeking for devices that elevate their social status. They also look for products that can serve diverse purposes and are worth the price they are willing to pay. There is hence an increasing ready market for Smart phones and a reduction for the non smart phones and one of the reasons why the cell phone market is flooded with a wide range of smart phones from various companies (Ali-Yrkkö et al., 2013).
Demographics
There is a continuing increase in the number of people using smart phones from all age groups, genders and diverse backgrounds. By the year 2010, about 82% of adults in America owned a cell phone. The teens between the ages of 12 and 17 were found to text five times more that adults by May 2010. Women are also found to make fewer calls per day than men where 26% of men were found to receive about six to ten calls per day while 20% of women receive a similar number of calls. There is 87% of Hispanics speaking English and African Americans who own a phone as compared to 80% of the whites (Lenhart, 2010).
Economic conditions:
These are concerned with issues such as rate of inflation, recession and income levels of different people in different countries that may affect the purchasing power of the consumers. In America the average level of income in 2008 was $ 49,000 but the rate of its increase is very minimal, the rate of inflation and recession has also been affecting the economic conditions in many markets by reducing the purchasing power of many individuals. Some segments of the market are also more attractive than others. For example in U.S, the power of women in the market is high, they bring more than half income to households, own private wealth and control 51.3% in the U.S as well as control 80% of the spending in their homes. Individuals whose age fall between the years 1946 to 1964 are also among the largest population who have the highest spending power of $ 2 trillion (Ali-Yrkkö et al., 2013).
Competition
There is stiff competition in the industry where some companies have already established themselves in the Smart phone market making it hard for others to gain entry easily. The other competing products include, Apple Samsung and Blackberry, these products were focused more on software development and new innovations to keep them ahead of the competition (Ali-Yrkkö et al., 2013).
Technology
New technologies have emerged in the industry allowing manufacture of new cheap smart phones such as the Google’s Android used by a number of companies like Samsung and iOS used by Apple. However, technologies like the Symbian and Mee Go that belong to Nokia have proved inappropriate with time. Research and development is continuously being done as well adding more innovations to existing software to enhance the performance in the future (Sadowski, Dittrich and Duysters, 2003).
Political & legal
There are laws and regulations within the industry that protect consumers, businesses, and society as well as govern implementation of new technologies. The state and federal government agencies that impose laws and regulations include; Federal Communications Commission that provides licenses and allocates radio frequency bands; the U.S. Food and Drug Administration influences the industry to make devices that are free from potential health risks to the users; Cellular Telecommunications Industry Association is another nonprofit body that does not impose regulations but influences those making policies to come up with guidelines for the industry (Miller n.d).
SWOT Analysis
This involves the strengths, weaknesses, opportunities and threats existing for Nokia Company.
Strengths
Nokia is currently under capable leadership of Stephen Elop as the C.E.O, he has proper qualifications for his job. Nokia has for a long time been one of the biggest mobile phone manufacture with a factory that is well equipped to manufacture in huge quantities. It had been performing well financially to the extent of being able to contribute about 21% of Finland’s corporate tax revenue. Nokia is still the largest maker of simpler and non-smart phones that are sold in India and China despite the reducing sales due to new competitors in this market. The employees are loyal and dedicated making it hard for other Companies in the industry to poach them.
Weaknesses
Poor previous management that saw Nokia adopt some wrong strategies specifically from the year 2007 where the Company continued to use its homemade Symbian software and took time to enter into Smart phone market unlike its competitors who had better innovations. The innovations launched by the Company could also not help it in its future growth such as Mee Go that had to be abandoned at some point. The employees had previously not been given a good opportunity to assist in growth of Nokia through management failure to engage them fully. Poor marketing strategies were used which saw the Nokia developed app store Ovi to be ignored by developers unlike the Apple’s iPhone which led to development of 500,000 apps for iphone and 50,000 apps in the case of Nokia.
Opportunities
The deal with Microsoft Company provides an opportunity for Nokia to utilize both companies’ resources in the right way to come up with highly superior products. The agreement that Nokia can build on the Windows 7 software provides an opportunity to come up with new features and application for Windows 7 phone. Also, the plan to continue with its innovations brings in the possibility of developing new products that it fully owns.
Threats
The other companies providing smart phones offer stiff competition, which makes it hard for Nokia to increase its share of the market. Non-smart phones from Nokia sold to emerging and yet to emerge markets like Asia and Africa are faced with a problem of low cost phones from China companies.
Alternative Strategies
One alternative course of action is to introduce new Smart phone products in the markets that will compete effectively with its major competitors in the industry. This will be possible through the new deal that has happened between the Nokia and Microsoft which will see the introduction of windows 7 phone. The advantages in this alternative are that the partnership will offer more combined technological skills and expertise. There is a possibility of an increase of about 19.5% in market share by the year 2015. The disadvantage is that it will take some time before the new products reach the market and gain loyal customers and the company could first reduce its market share to 14% by 2012 before it starts increasing again. The partnership is also likely to develop some problems like conflicts which will lead to failure of the efforts to turn around Nokia.
The other alternative course of action is increasing research and development within the company which will enable Nokia to come up with other innovations that will surpass those already in the market. The advantage is that the developed software will be owned fully by Nokia and this will give it the liberty to do with it as it wishes since it is its own intellectual property. The disadvantage is that Nokia will have to spend high investments in the research and development and it will be a long-term solution, which does not solve Nokia’s problems in the short run (Sadowski, Dittrich and Duysters, 2003).
Course of Action
The recommended course of action is to the introduction of new Smart phone products to the market through innovations to compete with other smart phone products from other companies. This course of action will also be enhanced by new deal with Microsoft Company allowing Nokia to manufacture a Widows 7 phone as well add more innovations on the Windows 7 software. The course of action will help in increasing its smart phone market share with time, leading to an increase in stock prices as well as end the takeover rumors when the strategy is successful.
References
Ali-Yrkkö, J., Kalm, M., Pajarinen, M., Rouvinen, P., Seppälä, T. & Tahvanainen, A. J. (2013). Microsoft Acquires Nokia: Implications for the Two Companies and Finland. ETLA Brief, 16(3).
Lenhart, A. (2010). Cellphone and American Adults. Retrieved from http://www.pewinternet.org/2010/09/02/cell-phones-and-american-adults/
Miller, S. (n.d). Who Regulates Cell Phone Companies. Retrieved from
http://www.ehow.com/facts_6154016_regulates-cell-phone-companies_.html
Sadowski, B. M., Dittrich, K. & Duysters, G. M. (2003). Collaborative strategies in the event of technological discontinuities: the case of Nokia in the mobile telecommunication industry. Small Business Economics, 21(2), 173-186.