1. Group 3A

2. Presenters

3. Outline
Situation Analysis in 2001: Finland
Situation Analysis in 2001: Nokia
The Nokia Story
Critical Challenges
Evaluations of Alternatives
Recommendations

4. Situation
Analysis
Situation Analysis in 2001: Finland
Finland - from a sleepy nation to a very competitive one
 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

5. 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

6. Situation
Analysis
Cluster Program
The cluster program had an impact not only on industrial and
technology policies, but also on science, educational and regional
policies
 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

7. Situation
Analysis
Porter’s Diamond Model
Government
Huge investment in
Liberal and less research institutes
Factor
interference Sophisticated education Conditions
Stability Abundance of natural
Assurance of resources
technological neutrality
Demand Conditions Strategy, Structure
Rivalry
High demand for mobile in
Nordic region Industrial message for national
competitiveness
Massive domestic mobile
penetration Growth through acquisition and
alliance
A market of early adopters
Heavy Exports and large FDI
Venture capital forum
Chance Highest public R&D spending
More exports to EU in Europe
due to disintegration Local supply for highly
customized inputs Related and
of Russia
Joined EEA in 1993 Mobile Internet Supporting Industry

8. Situation
Analysis
Porter’s Five Forces Model
MEDIUM
Bargaining • Buyers choose
brand
power of • Low opportunity
customers for suppliers
•Large no of
customers were
loyal to brand
MEDIUM
MEDIUM
Threats of •High investment •More than 100 Threats
capital • No real
local substitutes
new •Non-existent operators available
of
entrants customer loyalty substitutes
•Active local rivalry • Tablets and
•Highly in wireless portable
competitive computers
market communications
LOW
• Large number of
contract Bargaining
manufacturers
dependent upon power of
Nokia
• Long term Suppliers
strategies with
vendors

9. Situation
Analysis
Competitor Analysis
Ericsson Motorola
 Worldwide leader in network  Leading worldwide supplier of
technologies in 1980s and 1990s mobile phone handsets and
infrastructure in 1980s
 Low end product were
manufactured by Taiwanese firms  Controlled almost 25% of world
market in 1990s
 In 2000, lead of over 40% in
infrastructure market  2nd in mobile networks (13%) and
phones (15%) in 2001
 In 2001, served more than 130
markets  Slow to shift from analog to
digital phones

10. The Nokia
Story
Core Competencies of Nokia
 Nokia’s Core Competencies
International operations in
 Personality counts
various fields
 Brand name/ Brand development
Worldwide joint ventures  Research & development
Highly skilled work-force  Mass production
Nordic identity through the
“Nokia way”  Nokia's focus on two key industries
 handsets
Low production cost and short
product development cycle
 network equipment
Broad market: serves distinct
 More than one-third of the total Nokia workforce is in
customer segments with
different needs R&D, and two-thirds of these are based in Finland
Focus on R&D (15 countries, 9%
of its revenue)  Three Nokia’s main market areas
 Europe
Nokia is always ahead of its
 Asia Pacific
competitors
 America

11. Critical
Challenges
Critical Challenges for Finland
The 90’s The 21st Century
 Rising Interest Rates in Europe  Declining growth rates and
 Falling prices of its Main Export
exports
Industry  Downturn of Tele-Communication
 Higher Unemployment
Industry
 Entry of Chinese Low Price
 Higher Inflation
Players
 Scarcity of Skilled Human
What did the Government Do Resources
 Tighten Macro Economic
Policies
 Taxation moderation
 Monetary policy aimed at
increasing Interest rates initially
via government bonds
 Centre of Expertise Program &
Cluster Program

12. Critical
Challenges
Critical Challenges for Nokia
2001 2012
 Evolution of standards  Emergence of Smartphones
 Fast losing ground in feature
 New low cost entrants phone segment as well
 Shut down its last
manufacturing facility in
 PDAs were emerging
Finland on Friday 27th July
2012
 Competitors like Sony were  Shares are at an all time low
horizontally integrating  Shut down its software
devices division,
 Aligned itself with Microsoft to
 Reduction of product life keep Windows on all their
cycle smartphones

13. Evaluation of
Alternatives
Evaluation of alternatives
Finland Nokia
 Tie-ups with education  Promote Finland as an
institutes educational hub
 Hike in R&D expenses  Trade agreements
 Investment in consumer-  Reviving old industries
targeted models  Growth in low-skilled service
sector
 Modification in central wage
policy
 Promotion of tertiary education

14. Recommendatio
ns
Recommendations
For government in 2001
 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

15. Recommendatio
ns
Recommendations
For Nokia in 2001
 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