GLOBAL

BUSINESS

MANAGEMENT
ANALYSIS OF NOKIA ROUTES OF GLOBALIZATION

SUBMITTED TO
Prof . Amit kumar

SUBMITTED BY
Suman kumari
FT 09 863
PGDM 09-11

1. Analysis of Nokia Routes of Globalization

NOKIA was established in 1865 as a wood-pulp mill by Knut Fredrik Idestam on the banks
of the Tammerkoski rapids in the town of Tampere, in south-western Finland. The company
was laterrelocated to the town of Nokia by the side of Nokianvirta river which had better
resources for hydropower production. That is where the company got the name that it still
uses today. The name Nokia originated from the river which flowed through the town. The
river itself, Nokianvirta, was named after the old Finnish word originally meaning a dark,
furry animal that was locally known as the nokia, or sable, or later pine marten.Finnish
Rubber Works established its factories in the beginning of 20th century nearby and began
using Nokia as its brand. Shortly after World War I, Finnish Rubber Works acquired Nokia
Wood Mills as well as Finnish Cable Works, a producer of telephone and telegraph cables.
These three companies were merged to form Nokia Corporation in 1967.The new company
was involved in many sectors, producing at one time or another paper products, bicycle and
car tires, footwear (including Wellington boots), personal computers, communications
cables, televisions, electricity generation machinery, capacitors, aluminium, etc.

 Nokia’s first century :1865-1967

The first Nokia century began with Fredrik Idestam's paper mill on the banks of the Nokianvirta
river.Between 1865 and 1967, the company would become a major industrial force; but it took a
merger with a cable company and a rubber firm to set the new Nokia Corporation on the path to
electronics...Fredrik Idestam establishes a paper mill at the Tammerkoski Rapids in south-
western Finland, where the Nokia story begins. Nokia Ab, Finnish Rubber Works and Finnish
Cable works formally merge to create Nokia Corporation.

 The move to mobile:1968-1991

The newly formed Nokia Corporation was ideally positioned for a pioneering role in the early
evolution of mobile communications. As European telecommunications markets were
deregulated and mobile networks became global, Nokia led the way with some iconic products...
 1981: The mobile era begins Nordic Mobile Telephone (NMT), the first international mobile
phone network, is built.
 1984: Mobira Talkman launched Nokia launches the Mobira Talkman portable phone.
  1987: Mobira Cityman – birth of a classic Nokia launches the Mobira Cityman, the first
handheld NMT phone.
 1991: GSM – a new mobile standard opens up Nokia equipment is used to make the world’s first
GSM call.
 Mobile revolution :1992-1999
In 1992, Nokia decided to focus on its telecommunications business. This was probably the most
important strategic decision in its history. As adoption of the GSM standard grew, new CEO
Jorma Ollila put Nokia at the head of the mobile telephone industry’s global boom – and made it
the world leader before the end of the decade...
 1992: Nokia’s first GSM handset Nokia launches its first GSM handset, the Nokia 1011.
 1994: Nokia Tune is launched Nokia launches the 2100, the first phone to feature the Nokia Tune.
 1994: World’s first satellite call The world’s first satellite call is made, using a Nokia GSM
handset.
 1997: Snake – a classic mobile game The Nokia 6110 is the first phone to feature Nokia’s Snake
game.
 1998: Nokia leads the world Nokia becomes the world leader in mobile phones.
 1999: The Internet goes mobile Nokia launches the world's first WAP handset, the Nokia 7110.
 Nokia now :2000-today
Nokia’s story continues with 3G, mobile multiplayer gaming, multimedia devices and a look to
the future...
 2002: First 3G phone Nokia launches its first 3G phone, the Nokia 6650.
 2003: Nokia launches the N-Gage Mobile gaming goes multiplayer with the N-Gage.
 2005: The Nokia Nseries is born Nokia introduces the next generation of multimedia devices, the
Nokia Nseries.
 2005: The billionth Nokia phone is sold Nokia sells its billionth phone – a Nokia 1100 – in
Nigeria. Global mobile phone subscriptions pass 2 billion.
 2006: A new President and CEO – Nokia today Olli-Pekka Kallasvuo becomes Nokia’s President
and CEO; Jorma Ollila becomes Chairman of Nokia’s board. Nokia and Siemens announce plans
for Nokia Siemens Networks.
 2007: Nokia recognized as 5th most valued brand in the world. Nokia Siemens Networks
commences operations. Nokia launches Ovi, its new internet services brand.
 2008: Nokia's three mobile device business groups and the supporting horizontal groups are
replaced by an integrated business segment, Devices & Services.

2. Economic & Various other Environments

Nokia, is an international organization which requires to focus on macro environmental factors.
Macro Environmental factors comprise Political, Economical, Society and Technology, viz.,
PEST Analysis. In view of the different culture and different external factors between different
countries, Nokia has to adjust its strategic plan in order to develop international market.

 Political Factors
It is important of a company to acquire certain kind of policies from its government, such as the
economic policy, and science and technology policy. Finnish policies assist Nokia to advance its
products. The Finnish policies are the most important factors behind Nokia’s success. To operate
efficiently, a modern knowledge- and technology-based economy that is highly specialized,
internationalized and undergoing rapid structural change requires active support from the public
sector. In its widest sense industrial policy and science and technology (S&T) policy comprise
all those measures by which the public sector shapes the operating environment for business and
thus fosters public welfare. Both policies pursued by Finnish government and the Parliament are
crucial for the development of both, the Finnish Economy and of national information society.
General macroeconomic stability, low interest rates, stable currency conditions and the
international competitiveness of the tax system form the foundation for the growth of business
and improvement in employment. As the result of this, not only Finnish Government but also
international companies, such as Nokia, have to play very important roles to develop their
information society and national technology strength.

 Economic Factors

According to the fact that Russian Federation was collapsed in early 1990s and it clashed
withFinnish economics. Nokia also faced problems, and changed its functions from single
market and overall products to global market and focusing mobile phone market.
During the first half of the year 2001, Nokia continued to perform strongly in the global mobile
communications market and was able to strengthen its leading market position. However, the
general economic slowdown in the US has recently shown signs of extending to other regions
and to the wireless telecommunications industry as a whole. The slowdown could be a result of
general market deterioration - driven by economic uncertainty, the ongoing technology transition
and less aggressive marketing by the operators.' In a press release on June 12,2001 it was quoted
that ‘Nokia saw slower market growth affecting second quarter results and was to take up
actions to expand leadership while maintaining strong profitability’.
Nokia will continue to take determined actions in all areas of the business to align its operations
with the changing market conditions. Previously announced moves to increase the company’s
efficiency and competitiveness include operational changes to further enhance customer focus in
Nokia Networks. While market deterioration has had an inevitable impact on Nokia's sales
growth, their products have remained strong, their market position has strengthened and they
have been able to find further efficiencies through tight control of their own performance.
Nokia has countered changing market conditions by accelerating ongoing programs and
generating efficiencies and cost savings. This, in combination with the current financial health
and proven performance, should enable them to exit the current slowdown in a stronger position
than before.

 Social
At Nokia, their whole business is based around communication and connecting people. One of
Nokia's aims is to make it as easy as possible for their people to be satisfied working with them.
Thus, it keeps various stakeholders interests in mind. Nokia develops products and services that
encourage communication and learning among people and societies. They are using their
strengths - connecting and communicating - to help make a difference. It complements the core
business and their vision to be involved with the youth and education issues around the world,
preparing young people for their future. The goal is to be a good corporate community member
wherever they operate, as a responsible and contributing member of society. Sharing in the belief
that prevention is better than cure, they take part in long-term projects aimed at helping young
people to create a firm foundation for themselves and to find their place in the world.

 Technological Factors

In the 1980s, there was a trend towards microcomputers and Nokia tried to match this tendency
by producing its main products as computers, monitors and TV sets. Due to the changes in
1990s,Nokia also changed its functions to mobile phone market.Sustainable development and
environmental protection have various effects on the operation of the innovation system.
Innovation also creates new opportunities for promoting sustainable development. Nokia always
improve their product line through Research and development process, beside this Nokia also has
multimedia compatible improvement with mobile at the same time, such as, GPRS and WAP
Service. Nokia has numerous technologies which can satisfy those end-users need, such
as, Bluetooth, Symbian, SYNCML, M2M, Wireless LAN and Java. Nokia employed more than
17,000 people in R&D department over fourteen countries worldwide. They also provided
customers to choose the features and service that they personally want and need. It means Nokia
does not develop only their product line, but they also improve their service process to provide
the most appropriate service to those customers efficiently.

 loopholes
No doubt that the products from the Finnish company, Nokia, are some of the very best in the
world, but the company still hasn’t found a profitable way to market its goods. The very reason
that other mobile phone companies are fast eating up Nokia’s market share is their superior (yet
simple) marketing practices.
Motorola and Samsung must now be in the FUW (frequently used words) list in Nokia’s
board meetings. These companies have made Nokia pay dearly for its rudimentary approach in
marketing its phones. The aggressive marketing practices followed by Motorola have hit Nokia
very hard and it is losing very crucial global market share every month to its American
competitor. Nokia, quite alarmed by the dropping sales of its phones, is now putting all its
weight behind the N-Series range. The N-Series is packed with multimedia features and Nokia
believes that these phones might woo the ostumers back to the big daddy of the mobile phone
world. But Espoo, we have a problem!! (Nokia is headquartered at Espoo, Finland). While
Motorola (quite intelligently) gives a dashy-flashy name to every phone it brings into the market,
Nokia tends to do the exact opposite. Nokia from the very start has relied on numbers rather than
names. This strategy worked very well in the past, but only because there wasn’t much
competition back then. But times have changed. Every month the market sees at least a dozen
new handsets from an equal number of manufacturers. Consumers now have more than they can
choose. Consumers are more attracted by names because they can thus easily relate to the
features of the phone. This is evident from the success of the MotoRazr, MotoSlvr, MotoRizr and
MotoKrzr. These phones are not packed with heavy multimedia features like the N-Series; still
they are selling like hot cakes. Just by reading the name of the handset, one gets a broad idea
what the phone looks like or what its features are. Nokia advertises more than Motorola. Still its
market share is dropping. Motorola does not need to spend much money for the promotion of its
products and it doesn’t have to worry about the marketing of these phones; it just simplifies its
job by naming its products right. Take the example of Apple. It did not have to do much to
promote its iPhone.

3. FDI Flows
 Nokia’s role

Nokia’s rapid growth has had positive effects on the development of main national economic indicators,
such as exports, GDP and total R&D expenditure. The most visible impact of Nokia on the Finnish
economy is through its contribution to growth, (Fig. 5). According to figures calculated by the Research
Institute of the Finnish Economy (ETLA), in the peak year 2000 Nokia’s share in the Finnish economy
was 3.1% and it contributed 1.6 percentage points to overall GDP growth of 5.1%.However, with the
slowdown due to the global economic downturn and saturation of markets in western countries, the
contribution to GDP decreased in 2001-2003. In the late 1990s, exports of radio, television and
communication equipment and apparatus, mostly Nokia’s, grew more than an average rate of 37% a year,
but between 2001 and 2003 exports shrank by over 8%. While the share of radio,television and
communication equipment and apparatus reached 22.6% in the total value of exports in 2000, it fell to
18.6% in 2003.Nokia invests heavily in R&D and carries out the bulk of its research in Finland. Etla
(2001) estimated that in 2000 roughly 54% of Nokia’s R&D expenditure was done in Finland. This
percentage has fallen somewhat during recent years as Nokia

has expanded more rapidly overseas than in Finland. The estimate for 2003 is around 45%. This means
that in 2003 Nokia accounted for 50% of all R&D expenditure carried out by the business sector. Overall,
Nokia’s share in total R&D expenditure was roughly 35%. These values are only indicative, as Nokia
does not publish R&D expenditures by country breakdown for business secrecy reasons. In this way,
Finland has been above the 3% reference value of R&D expenditures per GDP set in Lisbon targets since
1999, as Nokia’s average growth rate in R&D expenditures in Finland amounted to around 17%. With
roughly 22 600 employees in Finland, i.e. accounting for 1% of total employment, Nokia’s direct impact
on employment is actually relatively small. However, due to the network of sub-contractors and partner
companies, the company’s impact on overall employment is far greater. In 2000, Nokia employed more
than 18 000 employees in its sub-contractors and partner companies. The corresponding number is
estimated to be around 15 000 in 2003. However, Nokia’s overall effect on the Finnish economy is
difficult to quantify accurately, because the network consists of many layers of sub-contractors and
partners, there is a significant impact on other industry sectors (e.g., transportation and retail sales).

 Future prospects

The prospects for the future seem somewhat cloudy as more and more of ICT production is moving out of
Finland to countries where production costs are cheaper, in particular to China and Estonia. The key
challenge for Finland is how to reap the benefits from the increasing globalisation of markets; in other
words, how to keep the high value added input of research and development in Finland and hold on to the
remaining parts of the ICT manufacturing in Finland. According to market surveys, Nokia has recently
lost market shares and is estimated to do so in future as

well in the face of tougher competition from various Asian companies. This means that other sectors of
ICT, i.e. computer and related activities and telecommunications, have to strengthen in order to maintain
the current levels of production as domestic electronics manufacturing is estimated to decline in the
future. Overall, to encounter these challenges the government will continue to pursue economic and
industrial policies that promote growth and secure an internationally competitive environment for
business and industry. Moreover, the government programme acknowledges that Finland’s economic
growth and competitiveness will continue to rely mainly on knowledge and utilisation of new technology.
Therefore, continued high R&D funding is essential.

 Conclusion

The ICT sector has had a distinct impact on the Finnish economy from the early part of the 1990s when
Nokia emerged as the world leader in mobile communications and contributed to the growth in the rest of
the sector. The emergence of the ICT sector also meant that the Finnish economy now had three
strongholds, ICT, metal and paper industries, not only two as previously. Furthermore, without the ICT
sector Finland would have most likely continued to drag on in the recession longer.

In fact, the ICT sector helped Finland to get out of the recession and experience strong growth rates in the
economy during the latter part of 1990s. Even so, the contribution from Nokia has fallen during the early
part of this decade, the overall value-added share of ICT in GDP has remained at over 10% of GDP as
compared with the average of 8% between 1995-2000. This indicates that the sector has a strong base in
Finland, even though some ICT manufacturing will relocate to countries with lower labour costs. The key
challenge for Finland is how to keep the high value-added sectors such as research, development and
design in the country also in the future. To meet this challenge, the government has, for example,
promised to maintain R&D funding high on the agenda and introduced a capital and corporate taxation
reform to forestall relocation of businesses to low-corporate taxation countries. Moreover, the
government will continue to pursue economic and industrial policies that promote growth and increase
competitiveness.

4. Various Strategies & Structures

Nokia’s corporate responsibility strategy is to engage, improve and be accountable. They
constantly measure and review their performance in economic, environmental and social issues.
They engage in stakeholder dialogue and form partnerships that serve the areas they want to
improve upon. They pursue focused and practical improvement programs in relevant
organizational or geographical areas as part of business operations - this involves business
planning, internal communications, training. They increase accountability to stakeholders
throughreporting, and informative internal and external communications activities.
What makes them unique is the way they do it. Based on the same approach that guides the rest
of their activity – ‘The Nokia Way’ - their corporate responsibility is developed through logical
steps, with much of the work concentrated inside the company, much of the work built on
existing programs, and many stages taken forward in parallel.
According to them it is essential to drive corporate responsibility through the company-wide
strategy process, support issue owners in building business cases for ethical improvement and
implementation, and increase accountability to both internal and external stakeholders.
For them, corporate responsibility is an integral and continuous part of decision-making in all
parts of their business; taking responsibility for the consequence of their actions. It’s a belief that
by focusing on issues over which they have most influence and which their stakeholders consider
important, they will be able to mobilize more of company resources, be more proactive, and
ensure long-term programs. The Nokia Strategy continues to focus on three activities to expand
mobile communications in terms of volume and value:
 Expand mobile voice
 Drive consumer multimedia
 Bring extended mobility to enterprises

To achieve their business objective, their strategy focuses on: being the preferred provider of
solutions for mobile communications; creating personalized communication technology; driving
open mobile architecture enabling a non-fragmented global mobile services market;
strengthening and leveraging Nokia, the trusted brand; and expanding our business and market
position on a global basis.
 Mobile Communications— The aim is to position Nokia as the preferred provider of
products and solutions for mobile communications by providing leading communications
networks that enable end-to-end service delivery for both cellular and broadband
networks. They develop leading high-capacity cellular networks, platforms and user
applications for the mobile Internet, end-to-end broadband access solutions and
Professional Mobile Radio systems.
 Personalized Technology— They want to strengthen their leadership position in
converging
personal digital terminal solutions. They build on their core competencies in various key
areas, including design and product innovations, brand development, and effective
demand/supply network management, to bring new product concepts and associated
services to market.
 Driving Open Mobile Architecture— Nokia’s key commitment is to create a global and
open mobile software and services market. They aim to achieve this through strong
partnering with customers, suppliers and industry participants, and solid focus on end-toend
solutions in all their development activities.
 Strengthening the Brand-- According to a variety of consumer surveys, the Nokia brand
is
associated with well-designed, high quality and technologically advanced products and
customer services that are also user-friendly. Having invested considerable resources in
establishing the Nokia name as the leading brand in mobile communications, they intend
to sustain and enhance the brand through aggressive advertising, sponsorship and other
marketing activities in all of their principal markets. It’s a belief that the leading market
position provides significant opportunities for Nokia to better understand and respond to
the usage patterns of end users, and thus enhance the Nokia brand.
 Expanding The Business-- For more than a decade, they have actively expanded their
business globally. They, therefore benefit from strong economies of scale throughout the
organization. Nokia’s strategy is to continue focused pursuit of global business
opportunities by cultivating a strong local presence in all growing markets and pursuing
partnering and acquisition opportunities in order to obtain complementary technologies
and market positions.
5. Operation Management Related Issues in
International Business
 High Price – Nokia offers a good range of high quality products at high prices Though
the high prices may be justified in terms of the costs to the company but this can act as a
weakness in certain sections of the market e.g the middle-low income group people.
Demand is skyrocketing but the price pressure is high.
 New product developing problems – Although Nokia provided colour screen mobile
phones in September 2002, this was late as compared with its competitors such as Sony
Ericsson and Samsung. This acted as a weakness as the people had already accepted the
range introduced in the market and didn’t want to switch.

 Threats in PC Markets - Due to fierce competition in mobile phone market it has caused
new technology compatible with PC computer. Sony Ericsson specializes on PC
computer now. Sony applied their computer system into mobile phone as well as PC
computer on hand at the same time. Furthermore, nowadays people are interested in
advance of computer as similar as mobile phone market. In this sharp competition, it is
going to be harder for Nokia to grasp customers’ attention and they will have to focus on
outstanding imagination and creativity in their marketing plans.
 Fluctuations in Euro exchange rates – Most of the European countries have joined the
European Union and thus because of the varied economic conditions, the currency will
fluctuate a lot finally effecting the profits of the company.
 Blurring of product boundaries – This implies new entrants in the same industry like
Sony, Motorola etc. who are producing almost the same product range as Nokia and thus,
 there is a need to change their models. Keeping in mind the weaknesses and threats, Dan
Steinbock in an article called the ‘Nokia revolution’ outlines the secrets behind the
success of Nokia. Apart from the SWOT analysis, the effectiveness of Nokia’s strategies
can also be analysed looking at the environment in which it operates.
 SEGMENTATION AND TARGETING:-
 Entry level: (Rs 1,200-3,000) :- Nokia targeted low income people and first time mobile
buyers in this series. Sets include are 1200, 1208, 1100, 1110, 1112 etc
 Classic Series: (Rs 7,000-17,000) :- Nokia targeted decent people in this series. Sets
include in this series are 6300,6233,6120,3120 etc
 N gage Series: (Rs 8,000-16,000) :- Nokia targeted game lovers in this series .These sets
include game like play station, PSP and Xbox
 N- Series: (Rs 7000-35,000):- Nokia targeted the young generation who wanted to
possess mobiles with the latest technologies such as a 5 MP camera, a decent music
player, GPRS,etc. This series is also called multimedia computer. Named as one step
ahead multimedia. Sets include N72, N81, N95, N96, N97, etc
 E-Series: (Rs 10,000-60,000):- These mobiles were launched for people who needed
mobile computing on the go especially business people. These phones are enabled with
word, spreadsheet and presentation software. They also are equipped with GPRS/ EDGE
technologies thus functioning as a palmtop. Sets include E90, E75, E61, E62, etc
 Xpress music Series: (Rs 6,000-20,000):- Nokia launched this series basically for the
people who loved music. Good Dolby digital earphones and long battery life are the
features of these mobile phones. Sets include 5800, 5610, 5320, 5310, 5220, etc
 Premium Series:(Rs 80,000-1,500,000):- In this series Nokia targeted people who show
visual status. Sets include in this series are Sephiraarte, 8800Gold, 8800arts etc
 POSITIONING :-
Positioning of a product refers to creating an image about a particular product. Nokia has
been very successful in this strategy.
Nokia has created a distinct position in customer mind by:-

 Nokia logo:

Slogan:
 Know your past.create the future
 Standard Ringtone
 Standard message tone.
 Long battery backup.
 User friendly mobiles.
 The specific message that is conveyed to the customers in every advertisement is:
  “Nokia enable you to get more out of life”.
These specific aspects have been embedded into the mindset of the consumer in such a way that
every time they saw the logo or heard the ringtone they associate it with a Nokia product. Hence
Nokia has been very successful in positioning it products in the market.