Nokia and the Cellular Phone Industry
Abstract
“A mobile user attending an internal product demonstration meeting, take notes with
a Communicator, and snaps a photo with a digital camera. Standing up to a
presentation to his colleagues, hi puts his Communicator in his pocket. In the middle
of the presentation he receives a short message on his communicator. He is
immediately alerted to this message as his watch beeps. The display on his watch
reads “Executive board need an immediately report on meeting progress, Jane”. He
ends his presentation. He transfers the picture from the digital camera to the
communicator, collates the notes and photo, generates an e-mail to the executive
board and prints a hard copy at the local printer
– All without leaving the room, all without wires.”
The ways we communicate are changing from traditional cellular devices to wireless
communication devices.
This paper explores Nokia and the cellular phone industry as the wireless cellular
devices emerge. Today we face new opportunities as digital networks are emerging and
technologies are becoming global standards.
Several analyses of today’s telecommunication industry shows that stable technologies
drive the industry to a new integrated era.
Nokia, a leading mobile cellular manufacturer is facing challenges and opportunities as
the industry rapidly changes.
As indicated in the scenario described above, wireless communications are just entering
our daily lives, in many common situations.
Nokia is facing a situation were they have to define their operations, not to widespread,
not to focused, but something between. This industry are seeking / moving into new
“unfamiliar” areas of the communication business. This can not be done on their own,
but has to be done together with the right strategic partners with core competence in
embedded industries/areas.
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Nokia and the Cellular Phone Industry
Table of Contents
INTRODUCTION .......................................................................................................... 1
THE ORGANIZATION .................................................................................................. 3
The Nordic markets ............................................................................................. 4
The Core Competence ......................................................................................... 5
A Global Winner .................................................................................................. 6
THE GLOBAL CELLULAR MOBILE INDUSTRY: ........................................................... 6
Global Trade Unions and International Agreements ........................................ 7
Market development in the Emerging Markets .................................................. 8
The Standardized Technologies .......................................................................... 9
The New Technology – A Connected World....................................................... 9
The global players .............................................................................................. 10
Motorola ......................................................................................................... 10
L.M. Ericsson ................................................................................................. 11
A THEORETICAL FRAMEWORK OF GLOBAL MARKETING STRATEGY ........................ 11
The competitive strategy .................................................................................... 12
Local versus global ............................................................................................ 13
Centralization versus decentralization .............................................................. 13
What is global strategy? The theoretical lessons we learned. .......................... 14
MAJOR CHALLENGES AND FUTURE RECOMMENDATIONS: ....................................... 15
Moving towards a wireless society .................................................................... 15
The new challenge ............................................................................................. 16
The Information Era ......................................................................................... 17
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Nokia and the Cellular Phone Industry
Introduction
The Nokia Group (Nokia) is the world’s largest mobile manufacturer and a leading
supplier of digital mobile and fixed networks. The company’s increasing focus on
cellular products and wireless services is responsible for the Nokia success during the
last decade. Headquartered in Helsinki, Nokia is the largest and most successful
organization in Finland.
By reviewing the market in the 1980’s, analog telecommunication products and services
dominated the market. In the beginning of 1990, the increase of wireless phone systems
resulted in new standards for future mobile communications. Digital networks where
developed with more potential in traffic rate and roaming capabilities. In the end of
1990 the increased demand is focused on wireless information exchange, connecting
people and computers to interact with different parts of the world.
The Organization
The Nokia Group has during the last decades experienced major organizational changes
and shifted its focus to new market and product segments. In 1994 Nokia consisted of
five business groups; Consumer Electronics, Telecommunications, Cables and
Machinery, Mobile Phones and Other Operations, with its core focus towards
telecommunications. Later Nokia merged the Consumer Electronics and the Cables and
Machinery business groups with the Other Operation business group (Nokia 1997).
There are many elements and organizational factors in the company’s outstanding
success. The company was established in 1865 and has over a long period established
strong relations with different vendors and manufacturers in different parts of the
world. From the early days of the mobile industry, Nokia produced and manufactured
multiple standards and cellular products. The firm acquired a wide base of knowledge
and with its continued research and development (R&D) effort, the result was
production of superior cellular products and wireless services.
The Nokia Group is represented with sales in 130 countries. Most of the company’s
executive management and board are with Finnish origin. In each country the company
is represented with a local management, which is responsible for various operations in
its country. Due to the majority of Finnish leadership, it resolves similarities to an
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organization with polycentric management with geocentric operations (Keegan 1998:1116; Rahul 1996).
Nokia has increased total sale with more than 60 percent since 1994. The mobile phone
group’s share of the total sale has increased from 35 percent in 1994, to 56 percent in
1997. The profit from the group has increased from 44 percent, to 61 percent the same
period. The net profit of the total sale has more than doubled since 1995, to 12 percent
in 1997. The R&D costs have increased 2 percent for the same period, to 9.3 percent of
the total sale in 1997.
The Nordic markets
As the most successful organizations in the history of Finland, Nokia is successful in
different markets. In 1996 it estimated 6 % of net sales and a 46 % penetration rate in
the Finnish market for cellular mobile products. In Scandinavia, the market penetration
rate reached 44 % in Norway and 29 % in Denmark. Sweden was ranked as Nokia’s 8
major market with sales estimated to 8 billion FIM (Nokia 1997). As the company
increased its knowledge in telecommunications in the late eighties, it entered the
European and world arena. All these indications demonstrate the local adaptation and
usage of the cultural differences Nokia adopted in the Nordic countries during the
eighties and nineties.
Today, Norway is the only Scandinavian country that not is a member of the European
Union (EU). The other Scandinavian countries, Sweden and Denmark, have been
members since 1995 and 1974. Finland became a member in 1994. The importance of
Finland’s participation in the EU is obvious to the global localization of the Nokia
Group today. Nokia is represented with sales offices in every European country, US and
in Asia. Nokia has production facilities in Europe, Asia and the US and R&D
departments in 11 counties. The organization’s economic development resolved in
heavy foreign capital investment and is today represented in European and US stock
exchanges. In some respects, Nokia as a Finnish company could be identified as a Baltic
country, rather than the belongings to the western European culture and economy
(Guttman 1994; Rahul 1996; Nokia 1997).
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The Core Competence
Part of Nokia’s core competence is the knowledge and experience in the wireless cellular
and network services industry. By focusing on superior products and services, Nokia has
gained several national and international awards. Introducing new product modifications
and technological enhancements is part of the company’s product leadership. With a
wide range of products, Nokia has applied products independently of technical standard
or geographical location. Nokia also participates in developing new global standards for
future telecommunication needs and trends. With its leading position as mobile phone
manufacturer and supplier of digital mobile networks, Nokia’s participation in
development of future technologies enables them to deliver excellent products for the
next decade.
The Nokia products are targeting to specific market segments. The Nokia design on
portable cellular phones is characterized by lifestyle, freedom, opportunities of choice,
technology and urbanization (Nokia 1997).
The product design both emphasizes
consumer behavior and technical industry standards.
Nokia was the first cellular mobile manufacturer who adopted models for new ways of
thinking into their marketing operations. The general management urged marketing
managers to think of companies as repositories of skills, rather than portfolios of
products. A marketing team from Nokia went to Venice Beach in California and the
King’s Road in London, to observe the way that mobile phones were becoming fashion
accessories (Economist March 1997:77).
This unusual approach resulted in a superior product design and control of consumer
segment. Nokia attached a unique value of trends, lifestyles, freedom, power, and
technology among others, into their products. This unique value perceived by the
customers resulted into a leading brand well-positioned (Keegan 1999:8-7; Quelch and
Kenny 1994:153-154 and 158-160).
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The Unique Value
Nokia saw that the customer preferences were starting to change, and applied these
changes to their products. To spot the needs in the market, and to tell the customers
that this is the phone they need, are some of Nokia’s strengths.
Nokia has for many years had a focus on design, customer adaptation, and user
friendliness. This has turned out to be a success, as they passed Motorola in 1998 as the
world-leading supplier of mobile phones (Nokia 1998).
The unique value seen by consumer’s is identified in
the products unique value. The unique value can be
Value =
Benefit
Price (-tax)
viewed as the customer’s perception on its benefit
preferences divided by actual price (Keegan 1998:205;
Figure 1-1 – Unique Value (Keegan 1999:4-5)
Salomon 1996:142-143).
A Global Winner
The outstanding growth and success of Nokia can be summarized as the overall
performance, focus and strategic decisions made in the early days of the mobile strategic
decisions made in the early days of the mobile cellular industry.
Nokia is characterized as a global winner for several reasons (Appendix I);

Product leadership

The success in own country

The operational excellency by the

Keeping
top Management

Identification
processes
of
from
the
global
focus
on
segments.
the
internal
production
to
distribution (TQM)
As the company grew, they identified new need, for a maturing markets and created
customer needs as the products where launched (Lamb et al. 1994:728-740).
The Global Cellular Mobile Industry:
The global mobile phone industry is based on many different manufacturers and
operators. The industry is based on advanced technology and many of the
manufacturers are operating in different industries, where they use their technological
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skills, distribution network, market knowledge and brand name. Three large
manufacturers of mobile phones are today dominating the global mobile phone
industry; Nokia, Eriksson and Motorola. In addition to these companies there are many
manufacturers that operate globally and locally. This report focuses on the competition
among these organizations.
Global Trade Unions and International Agreements
When operating in a global market, there are a lot of elements to consider, like
boundaries and barricades, legislation and regulations. In Europe many countries have
joined the European Union (EU). EU founded the Single European Market in January
1993, which allows mobility of goods, people, services and capital between the
countries. Another trade organization in Europe is the European Free Trade
Association (EFTA). This organization was founded as an alternative to the EU to
ensure the negotiation power with EU and to agree on common tax and tariff rates
among the members. The United States, Canada and Mexico signed a free trade
agreement (NAFTA) to establish an open market between the countries. South and
Central America (El Salvador, Guatemala, Honduras and Nicaragua) signed the Central
American Common Market (CACM). The Latin American countries (Argentina, Bolivia,
Brazil, Chile, Colombia, Ecuador, Mexico, Paraguay, Peru, Uruguay and Venezuela)
formed Latin American Integration Association (LAIA, formerly the LAFTA). In Asia
the ASEAN (Association of South East Asian Nations) countries has signed the
Agreement on the Common Effective Preferential Tariff (CEPT) scheme for AFTA,
but this will not be in use until the year 2008.
These new open markets are made to protect manufacturing and business within the
area. For global companies located outside these markets, this may lead to higher import
tariffs (Bradley 1995:172-173). It is estimated that 60 % of the world trade is going to be
tariff free early in the next century (World Trade Organization 1997).
The World Trade Organization
131 governments are members of the World Trade Organization (WTO), which
succeeded the GATT in January 1995. WTO emphasizes an effort order and
predictability in international relations, based on three principles; nondiscrimination,
open markets and fair trade.
In many countries, the fixed telephone service is still a public sector monopoly. Last
year WTO agreed on that the monopolies should be removed to ensure competition in
these markets. This resolution is a result of the agreement by the countries of the EU to
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create a single market for telecommunication services (The Economist, September 13 th
1997). The step away from monopolies will probably lead to lower prices on using the
mobile phones. A decrease on these prices will again lead to increased demand for
mobile phones (Parkin and King 1995:327-331).
The trade unions and organizations are often responsible for defining technological
standards for its area. The World Intellectual Property Organization (WIPO) and the
WTO have agreed on a joint initiative to provide technical cooperation for developing
countries. Good timing and early innovation combined with better knowledge about
customers, competitors and markets than other players in the industry, may lead to a
competitive advantage (Larsen 1998). The increased importance of being the innovator
or having the best technology may lead to more focus on affecting the decisions on
defining technological standards (Porter 1985:5; Porter 1990:35)
Stable governments are more likely to ensure continuity in government policy as it
affects business. Stable systems allow companies to plan their affairs with some degree
of certainty. To be aware of what to consider in each country or region, organizations
should do an analysis of the global environment (Bradley 1995:162).
Market development in the Emerging Markets
Many countries in Eastern Europe are still operating under communistic governments
and different reforms (Onkvisit and Shaw 1997:141), but these governments are moving
towards the western standards. Some of the Eastern European countries are trying to
become members of the EU. These countries have a population of almost 100 million
people, and the mobile phone penetration in the countries is low.
The sales of mobile phones in the South and Latin America have increased rapidly, but
it is estimated that half of the regions 490 million people have never used a phone. The
region is benefiting from an improved governmental stability and a trend towards
privatization (Motorola 1997:10). The market for mobile phones in Asia is also
increasing rapidly, and the potential sale is enormous due to the number of people living
in the area. The local operators have to develop the infrastructure for mobile phones to
ensure the application and sale of mobile phones in the area.
The crises in Asia this year has spread to most of the world. It has been reflected in
stock markets world wide, and many branches, markets and companies have been
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through a rough period (Appendix II). The result is governmental changes in many
countries. This lead to a more uncertain political arena on the global mobile
manufacturer market. Even though the price is low, the risk for large investments in
these countries is considerable.
Mobile manufacturers have invested a lot of time and money in R&D and product
development. This is their core strengths when facing possible entrants to the industry
(Thompson and Strickland 1995:42). There are, at the time, no substitutes to the mobile
phones. The potential sale is sky high, especially in un developed countries like China,
India, Brazil, Indonesia, and other 3rd world countries with high population rate (Bradley
1995:242-250).
The Saturn Markets
In some highly developed countries, especially the Nordic countries, there seems to be a
saturation of mobile phones. The future sale will primarily be based on repurchase
(McDaniels and Gates 1995:324). For the mobile operators and manufacturers this
means that the end-users needs and preferences most certainly is going to change. The
situation is similar to other high penetration mobile cellular markets.
The Standardized Technologies
Generally the global market is moving from an analogue system towards different digital
systems or platforms. Europe and parts of Asia are based on the GSM technology.
North America is primarily based on the CDMA technology, but small local installations
of GSM technology are in service and future investments of satellite networks are in
progress. With coverage in Europe, Asia and North America, GSM has a widely
coverage in global cellular phone markets.
The New Technology – A Connected World
There are two new types of systems in development, each of which will provide a range
of innovative services (Evans et al. 1998);

Global Mobile Personal Communication Services (GMPCS) that will offer voice,
fax, low rate data, and messaging services to mobile handsets similar to those used
today. Iridium, Globalstar and ICO are the main GMPCS systems. All are expected
to be in full service by early 2000.
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
Broadband Satellite Services (BSS) is intended to provide flexible capacity on the
demand for high-volume telephony, video conferencing, broadcast video, and high
speed Internet data services. They operate globally, but use fixed or bulky portable
terminals rather than mobile hand-held devices. BSS systems are still in development
and will not be operational until 2001 at the earliest.
The investments of new wireless telecommunication continue, more rapidly, than ever
before. Satellites are about to emerge as a powerful force in communications, as they
have already done in television broadcasting (Evans et al. 1998:8-9).
This fast growth is development driven by a combination of liberalization and
technological innovation (The Economist, September 13th 1997). The liberalization has
sent prices for long-distance and international calls to a less expensive level. This trend
will continue as local operators begin to charge prices based on the actual cost of
providing value-added services. The monthly charge for an account is likely to rise to
comply with an EU directive that forbids operators from subsidizing currently
unprofitable business with “high-margin long-haul traffic” (Beardsley 1998:32).
The global players
Motorola
Motorola is one of the leading supplier of wireless communication, semiconductors and
advanced electronic systems. Since 1993 they have been the worlds largest mobile
manufacturer, as a result of their strong position in their large home market. Motorola
has lost their leading position in their home market to Nokia, which in fact has become
the world’s largest mobile manufacturer this year (Nokia 1998). The American company
is decentralized with six sectors reporting to the office of the CEO. Motorola employs
more than 150.000 people worldwide (Motorola 1997).
Strategic Cost Analysis (Thompson & Strickland 1995) shows that Motorola has
problems with their productivity compared to their main competitors (Appendix V-VI).
Motorola is facing a stagnation of the sale per employee and the net profit in percent of
sale has decreased from 7 % in 1994 to 4 percent in 1997 (Appendix VI).
The customers preferences and needs have changed during the 1990’s. Motorola has
failed in adopting to these changes in their product development and design, and in
their communication towards the market.
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L.M. Ericsson
Ericsson is another leading supplier of analog and digital mobile systems, mobile phones
and terminals, energy systems and defense electronics. The company has more than
100.000 employees, but according to Dagsrevyen (1998) the company is dismissing
about 10.000 of its employees. Ericsson’s small home market made them look towards
the international markets. Their sales of ordinary telecommunication equipment made it
possible for them to build a global distribution network at an early stage. This has
become an important strength for the company. Ericsson has been able to integrate
their overall knowledge with the future development of the mobile phone industry. This
has lead to a 27 % average annual growth in total sales since 1994, with a 35 % growth
in 1997. Even though they have grown fast the recent years, they have managed to
improve their profitability from 8 % in 1994 to more than 11 % in 1997 and increased
their sale per employee from 154 to 237 the same period (Appendix V-VI).
Ericsson has an average spending of 15 % of their sales on Research and Development
(R&D) investments (Appendix IX). This is high compared to Nokia and Motorola,
which is spending 8 to 9 % on R&D.
In the early days of the digital mobile development, Ericsson was the main provider of
the TDMA system in the US, and does not supply mobile phones for the competing
CDMA standard (Finstad 1998). Due to this, they have lost potential sale in the US
market.
A theoretical framework of Global Marketing Strategy
“Global Marketing Strategy” has achieved great attention all across the world, both
among the academicians and practitioners. It has been argued that worldwide
marketplace has become so homogenized that multinational organizations can market
standardized products and services all over the world, with identical strategies, that leads
to lower costs and higher margins.
The standardization of customers, importance of scale economies of standardized
products and markets, can be argued when adapted to global markets. This issue has
generated an important discussion on the effects of the globalization trends on company
strategy (Keegan 1998: 1-4; Buzzel et al. 1995:2-9; Usunier 1996: 177; Solberg 1997;
Subhash 1989:70; Quelch and Hoff 1986: 59-60).
This section presents a theoretical perspective of the most influential framework of the
present situation.
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The competitive strategy
“The railroads did not stop growing because the need for passenger and freight
transportation declined. That grew”, Levitt (1960) explores the blindness of major
business industries caused by narrow industry identification. The cellular phone industry
is facing similar challenges today. There are hardly any cellular devices that only enable a
phone conversation. New cellular devices are launched into the market with capability
to collaborate information, exchange text messages, connect to corporate information
sources etc. The railroad example and the cellular phone industry face similar
identification threats, as the industries continues the rapidly expansion. The Marketing
Myopia (Levitt 1960) is often refereed to as the marketing disciplines most quoted and
reprinted paper that demonstrates the need for a broad interpretation of the marketing
function. The article strongly argues for avoiding the myopia of narrow, product
oriented industry definition.
During the 1970s, the globalization of world business started for full (Jain 1989).
American, European and Japanese organizations established subsidiaries and joint
ventures all over the world. Theodore Levitt (1983) followed the globalization of
business and emphasizes the focuses on the technology as a driving force towards a
converging commonality in proletarianized communication, transport and travel.
“Almost everyone everywhere wants all the things they have heard about, seen, or
experienced via the new technology” (Levitt 1983:1). The new reality forces
organizations to emergence the global markets, but the multinational and the global
organizations are not the same. The globalization of markets (Levitt 1983) explains how
the same standardized product needs different analysis in different geographical
segments in the global marketplace. The different analysis approaches are reflected in
the organization’s orientation towards a multinational or the global company.
“Globalization of markets” (Levitt 1983) is an expression which relates first to demand.
Tastes, preferences and price are becoming increasingly universal in customer demands.
Secondly, it relates to the supply side of the market. Products and services tend to
become more standardized and competition within industries reaches a worldwide scale.
Thirdly, it relates to the way organizations, mainly multinational companies, try to
design their marketing policies and control systems. These efforts are done to retain its
winner position in the global competition of global products, for global consumers.
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Michael E. Porter (1979) focuses on a different approach towards a competitive or
differential advantage, by identifying the different competitive forces that exist within a
competitive market. Knowledge of the underlying forces can shift a corporate focus on
their collective strengths and identify the collective weaknesses. Organizations must
increase its effort on how to influence the different forces in a corporate favor. Porter
also contributed with several books, which entitles organizations to develop an
approach to gain strategic or differential advantages and identifying the organizations
value chain.
Local versus global
Organizations operating in a global environment use the economic strengths of low
production costs and standardization of organizational policies.
Consumption is becoming global, artificial entry barriers tend to disappear. Global
markets remain more apparent than real, when one looks at consumption patterns
(Sheth 1986). The general discussion emphasizes how products and market strategies
can be globalized under the fierce pressure of the globalization of competition and the
resistance of the consumer’s globalization movement (Usunier 1996:187).
Before the classic article of Buzzel (1968), “Can you Standardize Multinational
Marketing”, natural entry barriers related to culture were seen as very high, commanding
adaptation to national markets and offsetting the potential advantages of scale
economies. Buzzel clearly showed that with the decrease of purely artificial trade
barriers, large international organizations could create natural entry barriers unrelated to
culture through economies of scale. There have been numerous texts, which have
sought to advice business people and academicians how to make the best choices
between standardization and adaptation of marketing policies to foreign markets
(Solberg 1997; Hout et al. 1982; Hamel and Prahalad 1985, Quelch and Hoff 1986;
Ghoshal 1987).
Centralization versus decentralization
During the 1970s and 1980s the debate on centralization versus decentralization of
multinational organizations intensified. Organizations began to think that there would
be a trend towards more standardized products which was delivered by standardized
organizations. It soon became evident that any large-scale centralization of assets,
resources and responsibility would be both organizationally difficult and strategically
difficult (Buzzel et al. 1995).
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The globalization of consumption was presented as unquestionable postulate, because it
was much easier to adopt to the recentralization policy within the organization.
Kashani (1989) gives the example of Lego, the Danish toy company facing a leading
competitor in the US, Tyco, which sold its toys in plastic buckets instead of Lego’s
elegant see-through cartons, standardized worldwide. When asked by the US
management to package in buckets as the competitor, who was gaining market share,
the head office rejected the request. After two years and massive loss of share on the US
market, Lego’s headquarters in Billund decided to create a newly designed bucket. Not
only was the share erosion in the US stopped, the bucket was introduced worldwide and
proved to be a great success. This case demonstrates that the relationship between the
headquarters and subsidiaries for defining marketing strategies is complex. Too much
autonomy results in purely local solutions with little economies of scale and an absent of
worldwide coordination, especially when strong actions are needed.
What is global strategy? The theoretical lessons we learned.
Global marketing strategy is forcing organizations to rethink their strategy, redesign
their organizations, seek new partnership, and open their minds as well as their
boundaries. Global strategies differ a lot from other international terms in business
literature. “Export markets,” meant excess production or obsolete inventory in
countries not yet accustomed to standards of the home market. “Offshore production”
meant cheap unskilled labor. “International management“ meant a separate division of
an organization (Kanter 1994). Global strategy on the other hand involves all the
company’s markets and operations together, viewed through an integrated framework
(Hamel and Prahalad 1989; Hout et al. 1982; Bartlett and Ghoshal 1992; Solberg 1997).
Countries can be grouped into regions for administrative convenience. This grouping
sometimes makes a difference. One American company worked on an Asian strategy,
without acknowledge the vast differences existed between Hong Kong and Malaysia or
Indonesia and India (Kanter 1994). Similar assumptions where made in Europe and
companies gained efficiency by creating “Eurobrands”, but they still have to deal with
many jurisdictions and local distributors (Bartlett 1983; Keegan 1998:86-107; Ohmae
1995:119-125).
Globalization requires new relationships both across companies and in companies. To
compete effectively in the global economy, organizations must strengthen their unity as
well as become more adept as external learning (Bartlett and Ghoshal 1988; Ohmae
1989 #1; Keegan 1998:543-576; Kanter 1994:231). Business managers emphasize the
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importance of considering all markets together when determining the opportunities for
sharing or maintain difference. Global competitiveness often requires greater internal
cooperation.
Global strategy brings new skill for companies and their managers. In “Managing Across
Borders” (Bartlett and Ghoshal 1991) the authors have shown that world-wide product
managers, world-wide functional managers and regional geographic managers must each
maintain focus on their dimension of the business while coordinating closely with the
others.
The balancing acts required for effective execution of global strategies represent one
more force for organizational change. Less bureaucracy and more communication will
characterize the global competitor of the future. Vertical control and a hierarchy
command will be replaced by more horizontal, peer-oriented relationship building
across borders and boundaries (Day 1992; Kashani 1989:96; Mintzberg 1991; Yip 1992;
Bartlett and Ghoshal 1997; Keegan 1998:545-558 and 562-564)
Global marketing strategy is about thinking in an integrated way about all aspects of the
business - its suppliers, production, markets and competition.
The true meaning of global is holistic - not international.
Major Challenges and Future Recommendations:
Moving towards a wireless society
As we are moving into the next millennium, the world has become a global playground.
People, markets, governments and organizations are continuously communicating
across borders and exchanging information. The liberalization and technological
invention is the main driving forces in the wireless telecommunication. Mobile cellular
devices are widely accepted in the main markets; Europe and North America, with over
120 million subscribers and units sold, and still growing rapidly.
Since 1989, Nokia has reorganized its organization from providing everything from
electronics, cables and machinery, paper and chemicals, rubber and floorings to a lean a
focused organization in the telecommunication industry (Lipasti 1989 and Quelch 1989).
This organizational change enabled Nokia to focus on its core competence and be the
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superior manufacturer in the telecommunication industry. Nokia identified the
opportunity trends in the market development of mobile cellular products at an early
stage of the wireless revolution.
Mobile cellular devices are today an integrated peripheral of our daily surroundings. In
the Nordic countries the mobile devices are almost as natural as personal watches.
The connection between consumer fashion and high technological mobile phone
devices made wireless communication devices more available.
Nokia has established the “Nokia Mobile Phones Group” as a leading company
delivering consumer oriented cellular devices. The products relate to customer lifestyles,
freedom, and independence with the newest technology available. Following the trends
in the different local markets enables Nokia to understand consumer preferences and
develop superior products.
Nokia Telecommunications is a leading supplier to local operators. By providing
superior equipment to different standards, Nokia are delivering large systems for
infrastructure. The Nokia Group is a global winner with its strong market position and
influence in future development in wireless telecommunications.
The new challenge
The telecommunication industry is dramatically changing. As the modernization
increases in the telecommunication and networks are becoming wireless, new areas are
covered by the industry. The fast growing segments of the Internet are probably the
main driving force for the expansion of the wireless industry (Evans et al. 1998:13).
Today we explore a high growth in networks applications and the establishment of
Virtual Private Networks (VPN). The next generation mobile cellular devices are
characterized as mobile devices, not mobile phones. This generation devices will operate
as a communication center, integrating Internet technologies and different network
applications for universal collaboration and communities.
To follow the rapid changes in the industry, several leading organizations are preparing
for the new reality. Several joint ventures are established among the world’s leading
manufacturers of mobile cellular devices, telecommunications operators, database
operators and content providers.
Symbian is such a joint venture between main manufacturers Motorola, Nokia,
Eriksson, Philips and Psion. Other technology partners like Oracle, Sybase, JavaSoft,
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Nokia and the Cellular Phone Industry
Lotus, DEC, and NEC among others. Symbian is established to develop a new
standardized platform for the new wireless communication platform. Nokia also
participates in the Bluetooth joint venture, a cooperation mainly withn Eriksson.
The importance for strategic alliances is becoming crucial as the competition increases
(Ohmae 1989 #2). The joining forces we experience today, are indications towards
alliances in the fast growing industry. There are many alliances established in the various
industries.
The Information Era
Many of the world’s biggest companies will challenge Nokia in the future. Organizations
like Microsoft, CNN, SUN Microsystems, AT&T, Cisco and 3Com among others, are
all players in the new era of telecommunications and wireless information exchange
(Evans et al. 1998:13; Eugster et al. 1998:92). The key issues for further success is; 1) the
establishment of the core network, where data and voice networking do not reside on
functionality; 2) creating the unique product platform, not just offer the unique
platform, but also bundles with partners to provide and influence the “killer”
applications; 3) delivering the platform, enable solutions based products I.E ecommerce and management information systems; 4) increasing organizational skills
among employees and partner alliances.
Given the stability of the Internet standard, this consolidation is likely to continue,
meaning that ultimately there will be fewer seats at the table for today’s organizations
and a higher demand in personal sectors. At the same time, networked applications will
drive the growth.
Finally, the battle for the edge will be reached by stable focus on the superior solutions
and customer relationship.
Final paper – MRK 9843
International Marketing Strategy
Nokia and the Cellular Phone Industry
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Nokia and the Cellular Phone Industry
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Final paper – MRK 9843
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Nokia and the Cellular Phone Industry
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Final paper – MRK 9843
International Marketing Strategy
Nokia and the Cellular Phone Industry
Appendixes
Appendix I. Keegan, Warren J. Guest Lecture 10.14.1998
Appendix II. Garfield, Andrew. Japan, Asia, then Russia. Who’s next? 04.09.1998.
Handouts in class
Appendix III. Mobile Sale & Profit in % of Total.
Appendix IV. Net sale per employee, Nokia.
Appendix V. Sale per employee.
Appendix VI. Profit in % of Net Sale.
Appendix VII. % Increase of Net Sale.
Appendix VIII. Total R&D Costs.
Appendix IX. R&D of Total Sale
Final paper – MRK 9843
International Marketing Strategy
Nokia and the Cellular Phone Industry
Guest lecture with Warren Keegan 10.14.98:
What characterize a global winner:
Creates a unique value  Value =









Benefit
price (-tax)
Success in own country
Operational excellent
TQM (Total Quality Management)
Just in time
Product leadership
Identify new needs as you go (The needs has to be the right needs)
Focus globally on segment  go global
Not diversify in every country
Create good products to the needs
Final paper – MRK 9843
International Marketing Strategy
Nokia and the Cellular Phone Industry
Net sale per employee Nokia
Net sale per
employee Mobile
phones ($1000)
500
400
Net sale per
employee Total
($1000)
Net sale per 300
employee (in
200
$ 1000)
100
0
1997
1996
1995
1994
Total R&D Costs for Nokia, Ericsson and
Motorola
3500
3000
$ Mill
2500
R&D Nokia
2000
R&D Ericsson
1500
R&D Motorola
1000
500
0
1997
1996
1995
Total R&D Costs for Nokia, Ericsson and
Motorola
3500
3000
$ Mill
2500
R&D Nokia
2000
R&D Ericsson
1500
R&D Motorola
1000
500
0
1997
Final paper – MRK 9843
International Marketing Strategy
1996
1995
Nokia and the Cellular Phone Industry
Profit
% increase
in % ofofNet
NetSale
sale
14 %
50 %
45 %
12 %
40 %
10 %
35 %
30 %
8%
% of
25
% net sale
6%
20 %
15 %
4%
10 %
2%
5%
0%
0%
1997
1996
1997
Net
profit inof%net
of total
%
Increase
sale
sale Nokia
Nokia
Net
profit inof%net
of total
%
Increase
sale
sale Ericsson
Ericsson
Net
profit inof%net
of total
%
Increase
sale
sale Motorola
Motorola
1996
1995 1995 1994
1994
R&D in % of total sale
R&D Nokia
18 %
R&D Ericsson
16 %
14 %
R&D Motorola
12 %
% of total sale
10 %
8%
6%
4%
2%
0%
1997
1996
1995
Sale per employee
300
Nokia (Net sale per
employee ($1000))
250
Ericsson (Net sale per
employee ($1000))
Motorola (Net sale per
employee ($1000))
$ 1000 per
200
employee
150
100
1997
1996
Final paper – MRK 9843
International Marketing Strategy
1995
1994
Nokia and the Cellular Phone Industry
Sale Mobile Phones in % of Total Sale
60 %
50 %
40 %
30 %
20 %
10 %
0%
1997
1996
1995
1994
Net Profit Mobile telephones in % of Total
Net Profit
80 %
60 %
40 %
20 %
0%
1997
Final paper – MRK 9843
International Marketing Strategy
1996
1995
1994