Term Paper on Nokia

The rich history of Nokia dates back to more than a hundred years and consists of many stories, events and milestones that were brought along by twists, bumps and turns of the world history and history of industrialization and modernization. It all started in 1865 when an engineer Fredrik Idestam built a wood pulp mill on the banks of the Tammerkoski Rapids in southern Finland and started his business of manufacturing paper. Few years later, he went on by building a second mill but already on the bank of Nokianvirta River – the place that Nokia got its name from. (Story of Nokia) As the consumption of paper was increasing due to the industrial growth in Europe, Nokia’s products soon became of great success and started being exported first to Russia and then to the United Kingdom and France. (The Founding of Nokia)

The hydroelectricity, used by the wood-pulp mill, also attracted the Finnish Rubber Works Group that established their company on the banks of Nokianvirta in 1920s and started using “NOKIA” as their brand name. After the end of World War II the Finnish Rubber Works purchased the majority of the Finnish Cable Works shares, the company that had grown rapidly as a result of the increasing need for telegraph and telephone networks. Soon after, the Rubber Works and the Cable Works companies started working as partners, later in 1967 they merged to form the Nokia Group and started working on development and growth of their new solid company. It was at that time when “the seeds of Nokia’s global success in telecommunications were planted” into Finnish earth. (The Founding of Nokia)

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In the early 1970s when Nokia group started working, most of the telephone exchanges were electro-mechanical analog switches, Nokia back then already showed its innovating side by developing the digital switch (Nokia DX 200), which became a big hit. A very interesting fact is that Nokia’s digital DX 200 switch, was equipped with high-level computer language and Intel microprocessors, and the switch had evolved into the multifaceted platform that still, almost fifty years after, is the basis for Nokia’s network infrastructure. (The Founding of Nokia)

From the very beginning Nokia had put its emphasis on the electronics sector. Early and mid – 1980s in Nokia’s history were marked by the process of rapid acquisition. The company had acquired nearly 20 companies, having its focus especially on three major segments of the electronics industry that were: consumer, workstations, and mobile communications. In late 1984 Nokia acquired two rather big companies Salora and Luxur. Salora was the largest color television manufacturer in Scandinavia and Luxor, was the Swedish state-owned computer firm. Nokia’s strategic step was to combine Salora and Luxor into one single division and concentrate on producing stylish electronic products, and they succeeded because style was of a very big importance with Scandinavian people.

In 1986 Nokia made crucial changes in its management structure in order to simplify reporting efforts and centralize the management. The 11 divisions of the company were grouped into four main industrial segments: “electronics; cables and machinery; paper, power, and chemicals; and rubber and flooring.” (Nokia) In addition to the changes made, Nokia was granted an allowance from the Finnish government to have a greater foreign participation in ownership. That allowance reduced Nokia’s dependence on the Finnish market and opened new horizons in front of the rapidly developing company. (Nokia)

A year later, in 1987, Nokia purchased the consumer electronics operations of Standard Elektrik Lorenz A.G. from Alcatel. The purchase boosted the company’s position in the television market and brought it to be the third largest television manufacturer in Europe. Nokia went on by acquiring the data systems division of the Swedish Ericsson Group in early 1988 that not only contributed to the profits of the company but also took it to an absolutely different level – turning Nokia into the largest Scandinavian information technology business. (Nokia)

At the beginning of 1990s the period of great recession in Finland the telecommunications and mobile phones divisions turned to be the “supporting pillars” of Nokia. After the recession Nokia came back to shape rather quickly by making some major changes in its business strategies again. In May 1992 Nokia came up with a strategic decision to part from its secondary operations and put its major focus on telecommunications and that was definitely a right choice, the sales numbers were amazing. Nokia’s 2100 series phone was an incredible success, the goal was to sell 500,000 units in 1994 when a cell phone was still quite an innovation and a luxury, however Nokia managed to sell 20 million of pieces. (The Founding of Nokia)

Nowadays Nokia is a leading international communications company that focuses mainly on the key growth areas of wireline and wireless telecommunications, it is also a pathfinder in wireless data communications and digital technology. Nokia is the world’s largest manufacturer of mobile phones, having a worldwide market share of about 27 percent. (Nokia) According to the company’s information, a sales network of Nokia spans more than 130 nations, and it generated more than half of its sales in Europe, a quarter of sales in the Americas, and about 22 percent in the Asia-Pacific region. (Nokia)

Being unsatisfied with “conquering the mobile phone market”, Nokia began pursuing the Internet sector, Nokia started off by introducing the Nokia 9000 Communicator, that was an groundbreaking personal communication device that included everything a person may need such as phone, data, Internet, e-mail, and even fax services. The next step was producing the Nokia 8110 mobile phone that included the ability to access the Internet, moreover, Nokia was the first company who introduced a cellular phone that could be hooked up to a laptop or PC and transmit data over a mobile network. (Nokia)

To help develop further products, Nokia began acquiring Internet technology companies, the same way it acquired television companies a decade ago. Nokia started in December 1997, when it purchased the Ipsilon Networks Inc., a Silicon Valley firm specializing in Internet routing for 120 million dollars. Nokia went on by purchasing the Vienna Systems Corporation, a Canadian firm focusing on Internet Protocol telephony, in 1998 for 85 million dollars. (Nokia)

The fact that Nokia found itself on the top of the wireless world in 1990s maybe be explained by the company’s ability to, without fail, over and over again, come up with high-class, stylish and convenient products superior to those of its competitors and “in tune” with market and consumer demands. The fact that the trend of Nokia’s innovation would continue in the 21st century was never a doubt as the increasing cooperation of wireless and Internet technologies as well as the development of the third generation of wireless technology predicted to open Nokia up to new hights as well as new competitors. (Nokia History)

Nokia’s official manifesto is “The Nokia Way”, Nokia is a flat, networked organization, however some bureaucracy still exists due to the corporation status of Nokia. Nokia strongly emphasizes the importance of the speed and “flexibility of decision-making, equality of opportunities and openness of communication” that are stressed in Nokia, along with such aspects as management leadership and employee participation in the process of creating of Nokia innovative products. (Wikipedia)

Nokia strongly believes that deep effective research and development is vital for holding a decent competition in the mobile communications industry. As of December 31, 2005, there were 20 882 people in research and development for Nokia in 26 countries all over the world, representing approximately 36% of Nokia’s total employee force. As it used to do during the early years, Nokia still invests a vast portion of its revenues in research and development activities within its principal business groups, Technology Platforms, and in the Nokia Research Center. (Nokia Research)

Nokia Research Center plays a very important role in the innovation process at Nokia Corporation, it is a force that drives and maintains Nokia’s technological competitiveness on the world market. Nokia Research Center closely interacts with Nokia business groups and divisions, and supports Nokia’s rapidly developing businesses by such means as “providing expertise in strategically important areas, developing new concepts, ideas, technologies and applications, developing disruptive technologies beyond the current product horizon” and others. (Nokia Research)
Another factor in the success of Nokia Company and one of its major strengths is the organizational culture, Nokia has a very strong corporate culture, its culture cultivates the innovative spirit in the group and persuades initiative of every particular individual. At Nokia, both information and people circulate around the company, shearing knowledge and “assisting internal benchmarking”. As the Nokia website states “the company consequently, learned to focus on research for the future, while generating new technologies useful for the present.” (Nokia Research)

Now I would like to analyze some other strengths and weaknesses of Nokia as a company. Without a shadow of doubt, Nokia is a dominant player in the smart phone market, its position is even stronger due to the majority ownership of Symbian and its proprietary Series 60 user interface which are predicted to embody the majority of the 100M smart phones sold in the next couple of years. Nokia, the largest cell phone vendor, has a 33% market share, which is the double the market share of Nokia’s nearest competitors. Also Nokia’s size, one of its big strengths, enables Nokia to pay off high R&D costs and still get cost advantages. And to sum it all up, Nokia brand position is probably one of the top 20 brands in the world.

However there are some weaknesses, for example being the market leader and having an increased role in Symbian is giving Nokia a bad image, much alike as Microsoft in the PC industry, also Nokia may be late in developing third-generation phones as the competition in that field is very strong. Plus Nokia position in the future can be rather fragile due to the fact that the European market for cellular phones with current technology is nearly saturated. (Wikipedia, Nokia)

Nokia’s products today are divided primarily between four divisions: mobile phones – wireless voice and data devices for personal and business uses, multimedia – home satellite systems, mobile gaming devices, networks – wireless switching equipment used in business networks, and enterprise solutions – wireless systems for businesses. Recently Nokia has agreed to join its network equipment business with that of Siemens Compnay in a joint venture.(Blau)

Nokia is known to use a “push” promotional strategy that makes use of a company’s sales force and trade promotion activities to create a high consumer demand for a product. A good example of Nokia’s push promotion is that Nokia promotes their products via retailers such as Carphone Warehouse. For Nokia personal selling and trade promotions are often the most effective promotional tools, for example Nokia offers fundings on the handsets to encourage retailers to sell higher volumes. Nokia’s business strategies, management style and marketing savoir-faire have earned the company respect and acceptance, the proof to that was the fact that Nokia was chosen by Business World to be “the most respected consumer durables company” in India where the technologies such as mobile phones for example were never of a great popularity. (Abhijit)

One can take a look at Nokia’s distribution strategy from the example of India where Nokia appeared not that long ago. As part of its distribution strategy in India, Nokia has ensured that it is present in 2,000 cities and towns that have cellular coverage. According to the sources, Nokia’s distribution network is almost double as that of other mobile companies. One of the best strategic ideas of Nokia is that the company introduces phones at all price ranges, from the mass-market phones, to the mid-market color and camera phones and also to the high-end exclusive phones, so all the segments of market are fairly targeted. (Abhijit). Moreover, unlike other mobile phone companies, Nokia is aiming its promotional strategies at the low-end consumer. Nokia’s slogan is that “the phone still works at the end of the long, hot, dusty, journey.” (Abhijit). Nokia’s advertisement strategies usually dwell on the human angle of the technology and not on empathizing the technological aspects or high technology growth and that what caused the company to have such a success. (Abhijit)

In just over a decade, Finland’s Nokia Corporation has transformed itself from the little paper factory to the world’s largest supplier of high-tech mobile phones, creating way a groundbreaking culture that cannot be compared to the culture of any other high-tech company. Of course in order to maintain and develop the spirit that brought the organization to such a success, Nokia has established a set of values and behaviors across all units and ingrained them directly into its hiring processes. A key component of Nokia’s human-value strategy is the focus not only on technical skills but also on the personal behavioral skills of an individual. (Nokia Fostering Innovation)

Today, Nokia is finding itself at the crossroad, the market that Nokia used to have at its fingertips is adopting different rules, ones that it the company may not fully understand. According to Betsy Burton, the editor in chief of powerhouse vendors, the situation Nokia faces may be similar to the period in the PC industry when Dell Computer surpassed perennial leaders IBM, Hewlett-Packard and Compaq Computer.” Nokia’s strengths are well understood by its competitors, as well as they are well targeted, and that may in the future lead to some serious challenges. Burton also thinks that it is also possible that “as the mobile situation is constantly shifting some of Nokia’s strengths and core beliefs may no longer be valid.”(Burton)

Nokia was before and still is open for ideas no matter how absurd they may sound, and a number of such absurd ideas later turned out to be a star product on the market. (Nokia Fostering Innovation) Nokia is a company with great potential and has a lot of opportunities ahead of it, however it will have to fight for those opportunities with its main rivals that are such companies as Motorola, Samsung, Siemens, Sony Ericsson and LG Group.

Work Cited

The Founding of Nokia, Nokia Info and Web Community,NokiaInfo.net, http://www.nokiainfo.net/nokiahistory.php, 09.03.2007
Story of Nokia, Nokia Connecting People, www.nokia.com, http://www.nokia.com/A4303003, 10.03.2007
Nokia Corporation, http://www.fundinguniverse.com/company-histories/Nokia-Corporation-Company-History.html, www.fundinguniverse.com, International Directory of Company Histories, Vol. 38. St. James Press, 2001,09.03.2007
Nokia History, http://www.connectmobiles.com/nokia_history.htm, www.connectmobiles.com, 10.03.2007
Nokia Research, http://www.nokia.com/A4126508, www.nokia.com, Copyright ©2007 Nokia. All rights reserved, 09.03.2007
Abhijit, Joshi, In the Top Spot, Strategy, http://ibef.org/download/inthetopspot.pdf, 10.03.2007
Blau, John, At Nokia temperament is a core competence.(Corporate Strategy), Research-Technology Management, July-August 2003, http://www.allbusiness.com/human-resources/employee-development/597569-1.html, 09.03.2007
Nokia Fostering Innovation, http://www.icmr.icfai.org/casestudies/catalogue/Human%20Resource%20and%20Organization%20Behavior/Nokia-Fostering%20Innovation.htm, Case Code: HROB023, Case Length : 14 Pages, Period : 1997 – 2002, published 2003, 10.03.2007
Burton, Betsy, Nokia Confronts New Market Rules, http://www.gartner.com/pages/story.php.id.3570.s.8.jsp, www.gartner.com, 10.03.2007
Blau, John, IDG News Service, Nokia Recognizes into Four Divisions, Friday, September 26 2003 @ 11:59 PM PDT, http://www.thestandard.com/article.php/736, 10.03.2007
Nokia, Wikipedia, http//en.wikipedia.org, http://en.wikipedia.org/wiki/Nokia, 10.03.2007.

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