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IB | SECTION F

EMERGING NOKIA?
Emerging Nokia?
Group No. 7

Group Members:

Thiyagarajan B (PGP/17/353)
Nikhil Chivane (PGP/17/328)
Sreedev Basu (PGP/17/177)
Leeza Manocha (PGP/17/273)
Richa Singh (PGP/17/340)
Meena Yadav (PGP/17/359)
1. What strategy would you recommend for Nokia going forward? Please develop a
complete strategy that addresses the following issues:
a. Choice of scope: does it make sense for Nokia to be in both emerging and
developed markets, or should they choose not to play in certain markets?
b. How integrated should it be into manufacturing, services (apps), software
development, sales, etc?

Nokia adopted both the strategies of product differentiation and cost leadership till 2009.
Supply chain and production processes are their strengths. They enjoyed large market share
by understanding customer requirement and operators need very well. Nokia has been trying
hard to remain competitive but still it lacks as Simonson pointed out that Nokia kept on
justifying its moves rather than looking at competitors actual innovations. Going forward,
Nokia should adopt the strategy explained under following heads.
Choice of Scope
Existing scenario:
Emerging Market Developed Market
Intense Competition, New entrants
Low access to computers/internet,
Need of wireless access through
phones
Mostly first time purchasers
Sold directly to consumers
Focus on services
Tough competition from Apple and
RIM
Rapid technological changes
Demand driven by phone upgrades/
secondary phones
Sold through operators
Focus on phone features/ smart
phones

According to Regional Subscription Data, 2008 in Exhibit 11
Least penetration rate is in Asia Pacific excluding Japan (45.5%) and Middle
East/Africa (58%)
Projected sales over next 4 years is maximum in these two regions for Basic and
Enhanced phones
Selling prices vary across categories in different regions
These projected figures point towards huge untapped opportunity that still exists in emerging
market. Moreover the revenues in Nokia has already excelled in establishing robust
production process and Logistics in these markets. Hence we suggest to focus on Emerging
Market.


Integration
Manufacturing: It needs to remain highly integrated. As it helps to remain cost effective in
very cost sensitive market. Also, Nokia has already invested in understanding the market
needs and established production processes.
Software (platform) Development: It needs to be integrated to maintain hassle free repair
related services in the future. Involving a number of platforms would lead to more complex
and costly post sales services.
App Development: It requires low integration. As it mentions in Exhibit 6 that customer
value increases with use of third party applications. Also it opens up the opportunity to the
world to create innovative and localized application and Nokia need not invest on this.
However, they can keep a quality and security check on these apps.
Sales: It also works as a source of competitive advantage in emerging market and hence need
to be highly integrated. Nokia is generating profit by selling directly to customers.
2. What products should it offer - smart phones, low end phones, etc?
a. Source of advantage: what will be the distinctive competitive advantage
that Nokia will offer?
b. Choice of activities: what choices should Nokia make in all its key
activities, and where will it locate those activities - for e.g. HR policies,
manufacturing, R&D, software development, sales and marketing, etc.
What is the justification for your strategy recommendation?

Market Offering

Nokia should offer both smart phones, low end phones and mid-range phones to stay
competitive in the market and to prevent further deterioration of its market share. However
more focus is to be on the low cost devices since it decides to concentrate more on emerging
markets. It has to acquire product leadership by offering wide variety of product mix based
on customer needs. This can be done by monitoring and understanding the changing
consumer needs, especially with the middle class group growing in markets like India. The
R&D facility in India can then quickly come up with new services and application so as to
increase Nokias stronghold.

Source of Advantage

a. Rapid Customization - It has 3 distinct operating system platforms that can offer and
give the base for wide range of products catering to all economic levels. It has strong
adaptability to reinvent itself and come on top.
b. Multilayered Distribution- Nokia has competitive advantage in reaching the rural
customers (For e.g. India). It also has an extensive Network of Independent customer
service and repair outlets.
c. Reverse Bundling- Operator piggybacking on the handset manufacturer by providing
fixed number of minutes with the handsets.
d. Low-Cost Models and Low Production Cost- 55% of Nokias revenue came from
low-end phones, S40 product line and subscription to associated services. Nokia
offered fewer standard models customized through software (1/3
rd
as compared to the
competitors in emerging markets namely Samsung and LG)
e. Efficient Supply Chain- Nokia has the longest and complex supply chain in the
world. It has the most efficient sourcing, logistics, manufacturing, and distribution of
any company in the world.
f. Internet Services Brand OVI- Nokia offers the OVI Store which is the second
largest app store in the world which is growing 70% per month as per Tero Ojanpera,
Nokias EVP for the Services.
g. Location specific applications and New Initiatives- With the acquisition of Navteq
Corporation, it has a strong presence in the GPS world and provide a wide range of
geographic image support covering almost more than 180+ countries. It also provides
new service initiatives like Life Tools and Nokia Money
h. Global presence- With 9 factories around the world, Nokia shipped its products to
almost every country in the world
i. Strong Presence in Rural Market- In India. Nokia has a strong hold of rural market
with their distribution system handles by HCL Info systems. In Latin America, it has a
dedicated team to manage the relationship with America Movil and Telefonica and to
co-ordinate sales and services across the region.

Choice of activities

Both positioning and resource deployment are critical for enhanced and sustained market
share. Competitive advantage stems from the ability to align positional advantages and
resource-based elements of strategy.

a. HR policies should be locally controlled by the subsidiaries where employed
personnel will get to know the local market in more generic way than others. It should
also be restructured to maintain a pace with the technological changes which would
facilitate coordination between various departments.
b. Manufacturing and R&D should be done on a global scale. This is due to the fact
that there is huge investment in terms of fixed cost in R&D and manufacturing. So
these activities should be concentrated in places where there is easy availability of
resources and talent pool like India and China. This has to be one of the core
activities. Also it should be a customer centered company rather than following a
product centric approach.
c. Software Development should be incorporated as major exercise across all centers
which would help in developing more number of applications to support VAS (Value
Added Services). It should focus on developing its Symbian platform where it can
leverage on its experience; if development requires more time and costs, then shifting
to Android OS or Microsoft Windows can be looked upon as an option. Since
Samsung has its whole category of smart phones running on Android, MS Windows
seems to be a possible differentiator.
d. Sales and marketing should be again location specific so that through marketing
local consumers can be influenced and thus will be motivated to purchase. It should
follow a customer centric approach by targeting both high end as well as low end
customers.

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