KEY ISSUE

1. Why Nokia as the market dominator of the global handset business?

2. Could Nokia manage to revive from the fall in its sales in 2001?
3. Why has Nokia managed to keep margins up in the business while the other
could not do so?
4. Why does the Street still love Nokia?
5. Had the offer to license the nokia cell phone software been worthy?
6. What was the strategy of nokia?

Strategic Issues and Case Analysis

• The leading move of NOKIA of that time was to license the software of Nokia
cell phone devices to others. Our analysis shows that it was a great move taken
by Jorma Olilla. The reason is that, Nokia is the market leader in the global
handset business. They also have great support from Nokia network devices
which helps them to capture the operators. On this situation if they license their
software to other companies, it will help them to retain the market and capture
new market share. The scope and use of cell phone had been developing for a
long time and many experts believe this market has still a long way to go.
Today, the world is using cell phone devices as necessity goods which they
even use for daily transaction medium, for booking the airplane sets and many
more.

• Nokia has always tried to keep in pace of the cell phone devices with the
improvement of Network devices. Network device and cell phone device are
complimentary to each other. It is obvious that with the development of
network operators, the demand for network devices would increase and along
with that the demand for cell phone devices would also increase. The first
generation countries’ operators today provide complete solution to their
customers. In this way, the business of network device along with cell phone
device had been a great strategic advantage for Nokia.

• The development of GSM network system had been the milestone for Nokia.
This network system had been globally accepted and that has clicked Nokia
Network to their best. The U.S. giant mobile operators like AT&T and
Cingular had been accepting this technology. Today GSM is the worldwide
accepted technology for network operators and it has gained significant
advantage over CDMA and other network operation technology.
• They have put emphasis on the style, design and better communication, most
of all on the satisfaction of the customer. Nokia had significant amount of their
investment on their research setup. They have always captured their market
with quick and innovative design, style and communication ease.

• Nokia’s net sales in 2001 increased by 3% compared with

2000 and totaled EUR 31,191 million. Sales in Nokia Networks decreased by 2% to
EUR 7534 million and grew in Nokia Mobile Phones by 6% to EUR 23,158 million
Sales decreased in Nokia Ventures Organization by 31% to EUR 585 million.
Operating profit in 2001 decreased by 42% and totaled EUR 3,362 million. Operating
margin was 10.8% (19.0% in 2000). Operating profit in Nokia Networks decreased to
an operating loss of EUR 73 million (operating profit EUR 1,358 million in 2000)
and in Nokia Mobile Phones decreased 7% to EUR 4,521 million (EUR 4 879 million
in 2000). Operating margin in Nokia Networks was -1.0% (17.6% in 2000) whiles the
operating margin in Nokia Mobile Phones was 19.5% (22.3% in 2000). Nokia
Ventures Organization showed an operating loss of EUR 855 million (operating loss
of EUR 387 million in 2000). Common Group Expenses totaled EUR 231 million
(EUR 74 million in 2000). During 2001, operating profit was negatively impacted by
non-recurring items totaling EUR 1 573 million, which consisted of goodwill
impairment of EUR 518 million, restructuring charges of EUR 261 million, increases
in reserves for Telsim and Dolphin receivables of EUR 714 million, and impairment
of minority investments of EUR 80 million.

• Nokia entered into several new initiatives with other

industry leaders during 2001. In November, Nokia announced its commitment to the
Open Mobile Architecture initiative together with 18 industry leaders, laying a
foundation for the smooth transition to a global multimedia services market. The
companies participating in the joint announcement were AT&T Wireless, Cingular
Wireless, MM02, NTT DoCoMo, Telefonica Moviles, Vodafone, Fujitsu, Matsushita,
Mitsubishi Electric, Motorola, NEC, Nokia, Samsung, Sharp, Siemens, Sony, Sony
Ericsson, Toshiba and Symbian.

• The street still love to buy Nokia, because the company has
weathered tech downturn far better than most and looks set to soar again in the
coming year. They have economies of scale. They are willing to take chances. They
are introducing brand-new products to the market, which has always meant share gain
and margin expansion for the company. Of the 29 analysts, who track the stock, 12
have strong buy ratings on the stock and 14 have buy ratings. The other three rate it a
hold.