Nokia: a Great Company in a Turbulent Market In its November 2002 special report on Nokia versus Microsoft, the Economist

reported that in 2002: 400 million phones were sold (10 per cent with built in mobile cameras!, there were now more than 1 billion mobile phone users, more mobile phones than fi"ed line phones, and the number of internet connected phones is overtakin# the number of internet connected $%s& 'he latest phones, with color screens, cameras, music pla(ers and downloadable #ames, have as much computer power as the desktop computer did ten (ears a#o& )et *the troubled switch to +, technolo#( means the mobile telecom industr( is in turmoil-: . 'he market for handsets is saturated after nearl( a decade of double di#it #rowth& /event( per cent of 0uropeans and 10 per cent of the 2/ population now own a mobile phone& . 3evenues from voice calls are flat 4 so companies are lookin# to new services such as photo messa#in#, #amin# and location based information for revenue #rowth& . 5ireless 6pplication $rotocol (56$!, a cut down, simple application of the 5eb, has failed to e"cite users or #enerate revenue streams& . +, services have been dela(ed ever(where and are onl( 7ust appearin# in 0urope& /o who are the ke( pla(ers in this comple" and turbulent industr(8 Nokia, Motorola, /iemens, /on(, 0ricsson and /amsun# make about 90 per cent of the phones& 'he( also have a 7oint venture in /(mbian software, an open and fle"ible standard that permits compatibilit( and constant innovation& 'here are other alliances such as the Mobile $rocessor Interface 6lliance and the :i#ital ;ome 5orkin# ,roup which are also promotin# compatibilit( and ease of use& 'he mobile phone operators (<odafone, =ran#e, ' Mobile and =2 in the 2nited >in#dom! act as the hub between customers, handset makers and content providers& Man( of them are saddled with hu#e debts after pa(in# billions for +, licenses& /uccess in +, will depend on findin# wa(s of sellin# content and services: both the media companies and the banks could enter the market as *mobile virtual network operators-

(M<N=s!& %urrentl( ?sk(?, <odafone and + are biddin# for the ri#hts to show ninet( second clips of premier football matches ( Times, @ 6u#ust 200+!& ?ut +, is also an opportunit( for the Aapanese and >orean manufacturers to enter 0urope and for the 0uropeans to enter Aapan& 0ricsson is teamin# up with /on( and 'oshiba with /iemens& /amsun#, alread( dominant in >orea and 6merica, has a track record of producin# reliable, eas( to use phones& 6nd on the 2> hi#h street $hones 42 is launchin# a hi#h street price war aimed at rivals %arphone 5arehouse and the Bink in a drive to become market leader (Times, 4 6u#ust 200+!& Nokia is the ma7or pla(er in the mobile phone market& Its share of the #lobal market increased from +@ per cent in 2002 to +C per cent in 200+ (10 per cent in 0urope! 4 it outsells its three closest rivals combined& It now has annual sales of 2/D+0 billion across 1+0 countries, sellin# five phones ever( second& It has core competences in radio technolo#(, di#ital si#nal processin#, electronics manufacturin#, software platforms and architecture& 6ccordin# to the Economist, Nokia-s /eries @0 software could (et emer#e as the mobile eEuivalent of Microsoft-s 5indows& 'he compan( has a track record of desi#n innovations, includin# user chan#eable handset covers, scroll down te"t bars and predictive te"t messa#in#& It introduced thirt( four new phones in 2002 and is headin# for a similar number in 200+& Fort( per cent of its emplo(ees are involved in 3G:, which accounts for a stead( 10 per cent of sales and an annual spend of 2/D+ billion in 2002& /ince 1CCC Nokia has presented itself as the world-s leadin# desi#n house for mobile communication, launchin# its model 9210 durin# the 1CCC $aris fashion week and portra(in# its phones in the media as cultural artifacts and icons& /urve(s show that consumers rate Nokia above all other mobile phone brands, its customers are more lo(al to Nokia than to their mobile phone operator, and in 2002 Nokia was the world-s si"th most valuable brand valued at some 2/D+0 million (Interbrand!& %lub Nokia enables it to keep close to its customers and sell units and accessories that would normall( #o via the telephone operator or retailer&

'he compan( has a flat, non hierarchical structure based around Nokia Mobile $hones, Nokia Networks, Nokia <entures =r#aniHation (includin# an Insi#ht and Foresi#ht team which seeks out disruptive technolo#ies, new business models and promisin# entrepreneurs! and Nokia 3esearch %entre& Its mobile phone business has been further divided around nine business se#ments, includin# one focused on %:M6 networks, an entr( product #roup aimed at emer#in# markets, an ima#in# #roup producin# camera phones, a #amin# and entertainment #roup (responsible for the N #a#e #ames machine! and a business devices #roup (responsible for a new phone, mobile e mail and messa#in# machines!& Aorma =lla has been with the compan( since 1C91 and since 1CC0 has led the turn round and #rowth strate#( with four close collea#ues& *6lmost ever( assi#nment is #iven to a team, and mana#in# the compan( is no e"ception&- %ollaborative workin# is encoura#ed, and Nokia is involved in a wide ran#e of 7oint and collaborative ventures aimed at #rowin# the market and makin# life easier for the consumer& Now half the emplo(ees are outside Finland, leadin# Fortune to Euote one of Nokia-s 6merican directors: *Nokia is in the uniEue position that it has #ot a #roup of mana#ers that have been workin# to#ether for (ears 4 and now the(-ve #ot a lot of senior people from outside who can shake thin#s up(Fortune, Ma( 2000!& Nokia is in the 0uropean Fortune *top tencompanies to work for, and the Nokia wa( comprises a set of values and a strate#ic plannin# process that encoura#es participative contribution, a clear sense of direction and disciplined e"ecution& 6 new ;3 director has introduced up#raded performance mana#ement and reward processes& ;owever, its mobile telecom eEuipment business (where Nokia competes a#ainst 0ricsson, Bucent, Nortel and Motorola! is loss makin# because of capital spendin# cuts b( the telecoms operators& Nokia is also pla(in# catch up in the %:M6 market (the di#ital standard championed b( Iualcomm of /an :ie#o and adopted b( most 2/ cellular operators!, the fastest #rowin# sector in the 2nited /tates and 6sia, of which its share is less than 10 per cent& Nevertheless the Economist predicts an interestin# battle, concludin# that

*Nokia has achieved its dominance not throu#h ownership of proprietar( technolo#( but from its abilit( to innovate around open standards, from its stron# brand and from its impressive lo#istics- (2+ November 2002!& Sources: *'he Internet untethered-, Economist, 11 =ctober 2001J *Nokia v& Microsoft: the fi#ht for di#ital dominance-, Economist, 2+ November 2002J *%omputin#-s new shape-, Economist, 2+ November 2002J *%allin# for a renewable future-, Fastcompany K0, Ma( 200+J *'en #reat companies to work for-, Fortune, March 2002J *5hat makes Nokia so #ood8- Fortune, Ma( 2000& QUESTIONS 1 'o what e"tent is this an attractive market to be in8 2 5hat are Nokia-s main stren#ths, weaknesses, threats and opportunities8 + From Nokia-s perspective, produce a best and worst case scenario for 200K&