Nokia
Denmark
Create a strategic plan for the
evolution of our product
development division
I. Analysis
I. PESTLE
II. Porter’s Five Forces
III. SWOT Analysis
IV. Value Chain
V. JRD Analysis
VI. Financials
VII. Market Share
II. Alternatives
III.Recommendation
IV.Implementation
.
Economic
• Highly competitive
industry with several
global players
Social
• Growing popularity of
smart phones and tablets
• Strong Brand Awareness
• Worldwide spread of
mobile
telecommunications
Technological
• Constant introduction of
new products
• High R & D efforts
Enternal Analysis
New Entrants
- Low threat
- High cost barrier
-High brand identity
-High capital requirements
Suppliers
- Low power
- Low differentiation of
products
- Low cost relative to
total purchase
- High importance of
volume to supplier
Competitive
Rivalry
- High rivalry
- High idustry growth
- High brand identity
- Low switching costs
- Moderate diversity of
competitors
Buyers
- High power
- High cost sensitivity
- High buyer concentration
- High buyer information
- Low product differences
Substitutes
- Low threat
- Low buyer propensity for
substitution
- Moderate relative price
performance
External Anaysis
General Administration
•
•
Quality of the strategic planning system to achieve objectives
Coordination & integration of all value chain activities among all subunits
Procurement
•
•
Procedures for procurement of plant, machinery, and buildings
Relationships with reliable suppliers
•
Soundness of material and inventory control systems
Research &
Development
•
•
Success of
R&D activities
in leading to
product &
process
innovations
Ability of work
environment to
encourage
creativity &
innovation
Manufacturing
•
•
•
Effectiveness
of production
control
systems to
improve
quality and
reduce costs
Productivity
Appropriate
automation of
production
processes
Distribution
•
•
Timeliness and
efficiency of
delivery of
finished goods
Efficiency of
finished goods
warehousing
activities
Marketing
•
•
•
•
Extent of
market
dominance
Effectiveness of
market research
Development of
an image of
quality and a
favorable
reputation
Extent of brand
loyalty among
customers
Profit Margin
Inbound logistics
Internal Analysis
•
•
•
•
•
••
••
•
•
•
•
••
•
•
•
•
Strengths
Strengths
Understand how to combine
Understand how to combine
technological possibilities with
technological
possibilities
commercial
success*
with commercial
success* and
Integrated
high-tech manufacturing
logistics
Integrated high-tech
Largest Nokia development centre
manufacturing and logistics
outside Finland
Largest
development
History
of Nokia
successful
products and
centre outside Finland
technologies
Partnership
Microsoft Office
History ofwith
successful
products
* Distinctive competency
and technologies
Opportunities
Opportunities
Partnership
with Microsoft
Office
Growing demand for
Growing
demand
for
* Distinctive
competency
telecommunications
telecommunications
Growing market
for smartphones
Opportunities
Constant
Growinginnovation
market for
Growing demand for
smartphones
telecommunications
Constant
innovation
Growing market for smartphones
Constant innovation
Weaknesses
Weaknesses
Weaknesses
•• Capacity
Capacityissues
issues
••• Capacity
issues
Distance
Distancefrom
from
outsourcing
outsourcingcompany
company
••• Declining
Distance
fromshare
outsourcing
Decliningmarket
market
share
company
• Declining market share
Threats
Threats
• Strong competitive
• Strong competitive industry
• industry
Reputation of outsourcer
•• New
Reputation
of outsourcer
industry replaces
mobile
Threats
• technology
New industry replaces mobile
• technology
Strong competitive industry
•
•
Reputation of outsourcer
New industry replaces mobile
technology
Internal / External Analysis
• Started in 2007 due to capacity burdens at Nokia Denmark
• Previous supplier of electronic components
• Worlds largest manufacturer of electonic components
• 920,000 employees
• Experienced in optimization of product development processes
Advantages
Disadvantages
• Relevant knowledge and
expertise
• Experience in optimizing
product development
processes
• Helped Nokia engineers
reduce product
development time by 6
months
• Large internal resistance
among Nokia engineers
• Need to micromanage
entire process
• High expenditures due
to the education of
Taiwanese engineers
• Controversial treatment
of employees
Analysis
Income Statement
(All Numbers in EURm)
2010
Net Sales
€ 42.446
Gross Profit
na
Research and Development Costs
€ -5.863
Selling and Marketing Expenses
na
Administrative and General Expenses na
Operating Profit
€ 2.070
Profit Before tax
€ 1.786
Profit
€ 1.850
Return on Capital Employed
na
2009
€ 40.984
€ 13.263
€ -5.909
€ -3.933
€ -1.145
€ 1.197
€ 962
€ 891
2008
€ 51.085
€ 17.277
€ -5.968
€ -4.380
€ -1.284
€ 4.966
€ 4.970
€ 3.889
2007
€ 51.058
€ 17.277
€ -5.636
€ -4.397
€ 1.165
€ 7.985
€ 8.268
€ 6.746
7%
27%
54%
Analysis
Vendor
Nokia
Samsung
LG Electronics
ZTE
Apple
Others
Total
Global Market Shares
4q 2010 (Market Share) 4q 2009 Market Share
30.8%
37.2%
20.1%
20.2%
7.6%
10.0%
4.2%
2.8%
4.0%
2.6%
33.2%
27.3%
100.0%
100.0%
Vendor
Nokia
Samsung
LG Electronics
ZTE
Apple
Others
Total
SmartPhone Market Share
4q 2010 (Market Share) 4q 2009 Market Share
28.0%
38.6%
16.1%
16.1%
14.5%
19.9%
9.6%
3.3%
8.5%
4.5%
23.3%
17.6%
100.0%
100.0%
Analysis
•
•
Potential Growth
Entrepreneurial Spirit
Highly decentralized and organized to encourage creativity,
entrepreneurship, and responsibility
•
Mission Statement
“Empower everyone to share and make the most of their life
by offering irresistible personal experience”
•
•
Ease of aligning projects with organization
Financial Justification
Analysis
Alternative #1
Alternatives #2
Scale-up JRD with Foxconn
Phase out JRD with
Foxconn
Alternative #3
Continue parallel
organizational structure
Alternatives
Alternative
Advantages
Disadvantages
• Lack of control
• Necessity for
micromanagement
Scale-up JRD with
Foxconn
• Enable focus on
creativity
Phase out JRD with
Foxconn
• More control
• Financially justified
• Highly integrated
value chain
• Reduces possible
information loss
Continue parallel
structure
• Little growth
• No increase to
potential
capacity requirements • Necessity for
micromanagement
• Increased capacity
requirements
Alternatives
Alternatives
Scale up JRD with
Foxconn
Key Success Factors
Phase out of JRD
with Foxconn
Continuation of
Parallel Structure
Rating
Rank
Total
Rank
Total
Rank
Total
Potential Growth
,25
4
1,00
4
1,00
3
,75
Entrepreneurial Spirit
,25
1
,25
5
1,25
3
,75
Mission Statement
,20
2
,40
3
,60
2
,40
Ease of aligning projects
with organization
,20
1
,20
5
1,00
2
,40
Financial Justification
,10
1
,10
2
,20
3
,30
Total
1.0
1,95
4,05
2,60
Ranking Scale
1. The alternative does not effectively address this criterion.
2. The alternative may contribute to addressing this criterion.
3. The alternative provides an average solution to this criterion.
4. The alternative provides an above average solution for this criterion.
5. The alternative effectively addresses this criterion.
.
Analysis
Alternative #2
Phase out Joint Research &
Development agreement with Foxconn
Recommendation
• Phase out JRD agreement with Foxconn
• Reduce number of mobile phones developed each year
• Concentrate in growing smartphone market share
• Cultivate partnership with Microsoft
• Continue innovation in-house
Recommendation
%
50
45
40
Global Market Share
35
Smart Phone Market
Share
30
25
20
2009 2010 2011 2012 2013 2014 2015
Implementation
2009
Smartphones
53,9 Million
(38,6% captured)
2010
Smartphones
100,9 Million
(28,0% captured)
2020
Smartphones
&
High-end
Mid-priced
Mid-priced
Mid-priced
Low-end
Low-end
Low-end
Recommendation
Short-Term
What
Who
Establish plan for phasing out JRD
Executive Staff
Determine and cut product focus to fewer devices
Board / Executive Staff
Bring back priority items from Foxconn
Entire staff
Implement company image mitigation
Public Relations
Relocation of ex-patriot employees
HR / Management
Cut in-house items according to strategic plan
Entire staff
Coordinate precise approach to cultivate Microsoft
partnership
Executive Staff /
Management
Implementation
1 month
3 month
6 months
9 months
1 year
Establish plan for phasing
out JRD
Determine and cut
product focus to fewer
devices
Bring back priority items
and phase out Foxconn
Implement company
image mitigation
Relocation of ex-patriot
employees
Cut in-house items
according to strategic
plan
Coordinate precise
approach to cultivate
Microsoft partnership
Milestone Review
Implementation
Long-Term
What
Who
Evaluate/create plan to incorporate services into
devices
Product Development
Market to emerging markets
Marketing
Evaluate utilization of mobile technology and tablets
Product development
Implement mobile/tablet strategic plan
Entire staff
Phase out products with small market share
Entire staff
Continue innovation into new products
Entire staff
Implementation
1 year
2 years
3 years
4 years
Evaluate/create plan to
incorporate services
into devices
Market to emerging
markets
Evaluate utilization of
mobile technology and
tablets
Implement
mobile/tablet strategic
plan
Phase out products
with small market
share
Continue innovation
into new products
Milestone Review
Implementation
Risk
Foxconn refuses to
continue supplying
components
Level
Mitigation/Contingency
Low
Switch suppliers
Unable to meet capacity
Moderate
Expand capacity
Continue research into process
improvements
Lack of skilled workers
Moderate
Establish internship program
Expand training program
Implementation
Risk
Foxconn refuses to
continue supplying
components
Level
Mitigation/Contingency
Low
Switch suppliers
Unable to meet
capacity
Moderate
Expand capacity
Continue research into process
improvements
Lack of skilled workers
Moderate
Establish internship program
Expand training program
Implementation
Risk
Foxconn refuses to
continue supplying
components
Level
Mitigation/Contingency
Low
Switch suppliers
Unable to meet capacity
Moderate
Expand capacity
Continue research into process
improvements
Lack of skilled
workers
Moderate
Establish internship program
Expand training program
Implementation
Phase out Joint Research &
Development agreement with Foxconn
.
Nokia
Denmark