Contemporary Issues in Nokia's Marketing - Case Study Example

Contemporary Issues in Marketing Introduction Marketing managers, at different periods of time, face a number of issues and challenges beside the usual basic ones of marketing communication, promotion, etc. that are associated and dependent on various factors that are specific to that particular period. These factors can be political, economic, cultural, social or environmental. This report mainly focuses on the issues of the present economic downturn and globalisation, and how these issues affect marketing, with particular reference to the organisation and product Nokia. The report tries to understand the effects globalisation and the economic downturn have on this organisation. The theories and practices related to marketing during an economic downturn are delved into while trying to examine how the organisation responds and deals with the challenges this situation poses. An organisation has to resort to several drastic and innovative measures to survive, maintain and thrive during a period of economic slump. The report examines the strategies adopted by Nokia to sustain during this time. The theories related to globalisation have also been studied with particular reference to Nokia and the process by which and the extent to which the company has undergone internationalisation and the global marketing strategies adopted by the company. The issues of globalisation and economic slump inter-react in different ways and the consequences are varied for different industries and different organisations. While the combined impact of globalisation and the economic downturn is extremely adverse for many organisations in several sectors, it has been possible for some organisations in some sectors to take advantage of globalisation to sail through the storms of recession. The report looks into how Nokia has tried to utilise the advantages of one for withstanding the impact of the other. Marketing during the economic downturn "When the economy heads south, marketing lands on the chopping block" ("Marketing during a downturn," 2008, p.4). During a financial crunch, it is the marketing budget that gets cut first. At the time of presentation of the report, 60% of the large companies were expecting to cut down, if not already done so, their marketing expenditure. The contingent strategy adopted here is shifting from traditional marketing to online marketing whereby the companies are spending more on direct marketing while spending less on branding. Moreover, several marketing professionals feel that it is needless to spend separately on branding and direct marketing, as these goals can be achieved together. Larger companies, which provide larger budgets for marketing, also make the larger cuts during an economic downturn. Smaller companies, which do not have a considerable budget for marketing, obviously do not and cannot resort to any significant degree of cuts in their marketing budgets ("Marketing during a downturn," 2008, p.5). On the other hand, when the buying patterns are not affected much, the marketing budgets may not be slashed. However, in such cases, keeping direct expenditure on the media the same, the budget on marketing overheads that do not directly translate into revenue may be slashed. Companies going through a stage of growth may not cut down on marketing as acquiring their share of the market is crucial for them at this stage. Besides, there are also marketing professionals who opine that it is damaging for companies to cut back during difficult times, as marketing can help companies gain a larger voice and make themselves heard better in the marketplace during difficult times when their competitors are cutting back ("Marketing during a downturn," 2008, p.8). At a time, when the consumers are not willing to spend money on anything that is not an absolute necessity, it would be beneficial to stress on the value of the product and the cost savings associated with buying it. Giving products at lower prices, giving longer free trial periods, giving money back guarantees and such other risk-free offers are some other strategies adopted by marketers to sustain and probably acquire greater market shares. Adopting the right strategies help companies find themselves in a more advantageous position than their competitors when the economy strengthens again. According to an American Marketing Association survey, 60% of the marketers believe that cutting budget on key marketing programs "is the biggest mistake marketers can make in an economic downturn" ("Marketing in an Economic Downturn," 2008). The biggest challenge during an economic downturn is the accountability or the justification of the value of marketing when the sales are going down. Four strategies are provided by AMA to enhance marketing plans during a downturn ("Marketing in an Economic Downturn," 2008). Firstly, refine messages highlighting the value of the product without slashing the price. Secondly, focus on marketing segments that would produce the greatest ROI, and de-market to inappropriate market segments. Thirdly, provide innovative products and services that perform even during difficult economic times, and invest in research and development in preparation for future downturns. Lastly, establish access to executive staff to understand shifts in strategy, match strategy with business objectives to ensure commitment to the bottom line, and qualify and quantify results quarterly and maintain ongoing interaction with executives. Guy Maser (2008) has given seven strategies to make the most out of a company's marketing expenditure during difficult times (taken from Hill, 2008). The first and foremost strategy is to make sure that the company's marketing efforts and expenses are not spent targeting the wrong audience. To do this, employ professionals to find and target the right market segment. Instead of using different media outlets, use a single outlet that gives maximum exposure in different markets. Use money on proven pursuits leaving experimentation for better times. Use both push and pull marketing, i.e., while using direct mail, email marketing, etc., find also a media partner who already has the company's target audience captive and advertise with them. While not slashing down price, emphasise more on the value or quality of the product. Pay experts to do online marketing. According to O'Brien (2009), cutting down on marketing expenses during an economic slump is like deciding not to buy gasoline as the price is too high but continuing to drive anyway. Eventually, the car is going to run out of gas. According to the author, it would be more prudent to market now more than ever. The reason is that during bad times, the consumers tend to get more selective and would rather buy from a company they have heard about than from one that they have not. Like many large organisations, Nokia Corp. also faces adverse consequences from the present economic downturn. "Nokia reported fourth-quarter sales down about 19 per cent year on year" (Ricknas, 2009). Last year the company sold fewer phones than they did the year before. The company's market share has dropped. Sales for the last three months of 2008 amounted to EUR 12. 7 billion which is lower than what was earlier estimated. Though Nokia is still making profits, they are much decreased as compared to its earlier performance. The company made a net profit of EUR 576 million as compared to a net profit of EUR 1.8 billion the year before (Ricknas, 2009). The company sold 113.1 million phones during the fourth quarter which is 15% less than the year before and less than those sold in the third quarter, which totalled 117.8 million. According to Ricknas (2009), the company plans to reduce costs by more than EUR 700 million by 2010. This will include staff cuts. According to officials of the company, the company plans to expand the definition of smartphone and combine hardware and service offers to introduce smartphones in the sectors that are yet not covered, offering products at different price points (Ricknas, 2009). This, hopefully, will help maintain its leading position in the market. Nevertheless, according to this report, Nokia expects a continued decline in sales in the first quarter of 2009. As part of facing the challenges of the economic slump, Nokia plans a sizeable staff cut from its total of 128,400 employees worldwide ("Global downturn," 2009). Nokia Corp. plans to lay off 1,700 employees worldwide in the hope to cut costs. Of these job cuts, 700 would be in Finland. It is expected that such measures will be taken in the United States and Britain as well ("Global downturn," 2009). In addition to this, Nokia Corp. is also seeking 1,000 voluntary resignations to help meet costs during this economic slump. The worldwide resignation package is expected to be effective from March 1 and will increase short-term paid leaves and sabbaticals ("Nokia to accept 1000 resignations," 2009). The company has also requested its employees to accept holiday time as pay in lieu of cash. The company officials hope that the voluntary resignations will help lower the necessity for compulsory redundancies. Applications for voluntary resignation package will be accepted by the company until May 31, 2009, after which the scenario regarding layoffs will be much clearer. The package is a kind of golden parachute which will provide the employees "some sort of financial compensation and/or benefits when an employee exits the company" (Emigh, 2009). In addition to the dismal economic circumstances, the cuts have also been due to the Symbian acquisition (Blandford, 2009). This is because of duplication between Symbian and Nokia in certain areas such as marketing and operations. The job cuts will be in sales, marketing and technology management in the company's Devices and Markets units, in its Corporate Development Office and in its global support functions ("Nokia announces," 2009). In an effort to cut costs, Nokia also totally shut down its mobile phone production in Bochum, Germany. The plant's production has been shifted to Romania. The move cut down more than 2,000 jobs ("Nokia shifts," 2008). In an attempt to reduce costs, Nokia has temporarily stopped using outside contractors for the production of mobile device engines (Ewing, 2009). Nokia outsourced 17% of its engines, which is the software and circuitry that form the core of the handset, last year. This could be in anticipation of an estimated 10% reduction in sales (Ewing, 2009). This built-in system that helps production adjustments with the help of outsourcers will help Nokia tide over the slump until recovery. The Nokia Siemens Network, however, is looking at the brighter side of things and has identified several areas where producers can focus their investments during this slump period (Warwick & Commsday, 2008). According to the report, the company will look at total cost of ownership (TCO) across their capex (capital expenditures) and opex (operational expenditure) and consider favourably vendors who could help them achieve these goals (Warwick & Commsday, 2008). The ABI forecasts that Nokia's performance will not be too bad in spite of the economic downturn, according to Abramovich (2008). The report states that "in terms of market share, Nokia has passed the 40 percent threshold for the first time (Abramovich, 2009). Nokia's overall market share is likely to hold with its renewed portfolio in the mid-tier and high-end categories and, in addition, Nokia has more or less cornered the ultra-low cost handset market. The carriers also did well in the second quarter. Nokia believes that its advantages of scale, leading brand, superior logistics, low cost, and broad product portfolio are competitive advantages that will enable the company "to distinguish themselves from the competition in a challenging 2009," according to CEO Olli-Pekka Kallasvuo ("Nokia cuts shipments," 2008). Marketing and globalisation Globalisation is the emergence of a global market. The global business environment as regards an organization is "the environment in different sovereign countries, with factors exogenous to the home environment of the organization, influencing decision making on resource use and capabilities" ("An overview," 2004, p.5). The global business environment is comprised of the external and the internal environment. These include the social, political, economic, cultural, legal and technological environments over which an organisation has no control. An organisation's success, however, is dependent on how well it can adapt to the external environment. Since the organisation has no control over the external environment, the success of the organisation almost entirely depends upon its ability "to design and adjust its internal variables to take advantage of the opportunities offered by the external environment" ("An overview," 2004, p.5). In the absence of the barriers of trade and investment, an organisation can benefit by conducting its operations in different efficient locations. In addition, through globalisation, a company has the option to concentrate on its core competencies and outsource all other processes and functions. However, the organisation has to constantly innovate, making its own products and services obsolete as competition will always provide similar and more cost-effective products ("Process of globalization," 2004, p.5). Organisations have to create an awareness of their products among customers. Moreover, organisations should also study, understand and meet the expectations of the customers. This in turn gains customer loyalty for the organisation. The global market has to be segmented based on similarities so as to help plan the right marketing strategy ("Segmentation," 2005). Similarly, products should also be classified on the basis of their features such as usage, durability and tangibility. Product design plays an important role in the success of global marketing. The other factors that are important for the success of an organisation at the global level include excellent customer service and efficient operations ("Product decisions," 2005). Takeovers, joint ventures and contractual agreements are some of the strategic approaches that organisations can resort to, to gain international capabilities in research and development as well as other sectors. Moreover, brand value is highly essential for any organisation and therefore branding has to be at the heart of its main business activity ("International branding,".2005). An organisation should make use of good brand-building strategies and attain global brand leadership. Another important process included in international marketing is pricing. The factors influencing pricing decisions are "inflation, nature of product or industry and competitive behaviour, devaluation, revaluation, market demand, and transfer pricing" ("Pricing in international markets," 2005, p.200). In addition to the above features, promotional processes play a very, if not the most, significant role in international marketing. Promotional processes include advertising, direct selling, personal selling, sales promotion and public relations. Syed Ehtesham Ali has made a study on the elements of marketing mix and brand reputation of Nokia with the goal of measuring how the former affects the latter. The determinants for the marketing mix for this survey were product or quality, price or affordability, promotion including advertising and communication, and place or availability. The determinants for brand reputation were favourability, public recognition, reliability and consistency (Ali, 2008, p.21). The study indicated that an increase in the rating of product quality and promotion caused an associated increase in brand reputation. Internationalisation of firms is an essential feature of globalisation. Traditionally, this was achieved through extensions of in-house activities through foreign investments. However, the recent trend in international business reveals an increase in cross-border strategic alliances which have proved to complement in-house activities (Palmberg & Pajarinen, n.d.[b], p.483). Nokia is considered as an organisation prominent in the alliances activity. According to a report by Yunker (2004), Nokia launched its first fully global advertising campaign in 2004. The slogan was "1001 reasons to have a Nokia imaging phone." The advertisement was planned to reach Europe, Asia, Africa, and the US through print, broadcast and web sites. The success of Nokia's global advertising campaigns and promotions after thorough research into customer needs is now history. The ad campaign had a local flavour depending on the ethnicity and culture of the different regions. An important driving force behind using the global ad campaign was reduction of costs by using less number of ad agencies for the campaign around the world. The company relied on two firms only for the whole campaign, one for Asia and one for EMEA. Nokia now commands 75% of the cell phone market in India, which has been possible through careful study of the customer needs, of how the customer uses the phone, etc. Nokia is following its customers into their homes and workplaces, watching how the people hold their phones, how they charge them, how the illiterate interact with them, etc. (Ray, 2009). The company makes in-depth studies on how their own assumptions differ from the users'. Nokia sees to it that the quality remains the same for all products whatever be the price point. Backed by such strategies, India is projected to become Nokia's second largest market by 2010. Another innovation adopted by Nokia in the Indian market, which has a total of 22 official languages, is its localising for 9 languages. In addition, the Nokia 1100 in 2003, was introduced with a flashlight to use in the dark, dust-proof casing, and a non-slip casing to resist sweat. This was possible through extensive research into customer needs. One of the biggest implications of globalisation is "the task of balancing standardization and customization" (Roll, n.d.). It has been the practice of some of the world's bigger brands to try their tested products in the new markets. This has produced successful results in the past due to the authenticity of the products; however, the present trend has changed to global companies making in-depth studies about consumer needs, their lifestyles and their economic and cultural conditions. This has brought about remarkable results for the companies. Nokia' dust-resistant, antislip grip and in-built flashlight was first targeted at truck drivers and later to a wider segment of rural consumers, which became an almost instant success. Nokia's genuine commitment to taking care of local consumer needs helped in endearing the brand to the Indian consumer (Roll, n.d.). Nokia is a clear example pointing to 'glocalisation,' i.e., maintaining the brand logo and the underlying philosophy and localising the brand elements to give the consumers a local feel, as a sure-fire route to winning customers in diverse markets (Roll, n.d.). In order to standardise technological and product interfaces, Nokia had already been involved in international alliances in the early phases of the standardisation of GSM mobile telecommunications system (Palmberg & Pajarinen, n.d.[a], p.79). The activity of Nokia, according to the report, projected a rapid growth in the number of newly formed international alliances. Effects of globalisation and recession on each other Traditional systems of operational savings are not enough in the present global business environment. There is increasing need to add more value through innovation. The most important decisions to be made in this context is what to offshore and what to outsource. "Offshoring is the movement of business activity to exploit differentiating skills or cost differentials, whereas outsourcing is shedding non core business activities" (Pickering, 2008). As part of its efforts to increase efficiency, Nokia Siemens Networks opened the Global Network Solutions Center with the purpose of outsourcing its network management. The new company reinforces India as its global services hub (Channelworld Bureau, 2009). This is part of the company's efforts at improving constantly its global centres and remaining close to its customers. Rapid globalisation has enhanced Nokia's competencies and capabilities internally and externally. According to Steinbock (2004), 99 percent of Nokia's revenues come from the foreign markets, even though most of its R&D remains in Finland (p.11). The impact of Nokia has led to improved productivity, which in turn has resulted in enhanced innovation and emergence of new businesses. Conclusion Like many large organisations, Nokia Corp. also faces adverse consequences from the present economic downturn. As part of facing the challenges of the economic slump, Nokia plans a sizeable staff cut from its employees worldwide. Nokia also totally shut down its mobile phone production in Germany, shifting production to Romania. Moreover, the company has cut down on outsourcing. The company plans to expand the definition of smartphone and combine hardware and service offers to introduce smartphones in new sectors at different price points. However, over time, rapid globalisation has enhanced Nokia's competencies and capabilities internally and externally. Nokia's example proves that 'glocalisation,' i.e., maintaining the brand logo and the underlying philosophy and localising the brand elements to give the consumers a local feel, is a guaranteed route to winning diverse customers in a global market. References Abramovich, G. (2008). Mobile handset market holds firm in economic downturn. Retrieved April 6, 2009, from http://www.mobilemarketer.com/cms/news/manufacturers/1445.html Ali, S. E. (2008). Marketing mix and the brand reputation of Nokia. Retrieved April 6, 2009, from www.pafkiet.edu.pk/dnnbeta/LinkClick.aspxfileticket=yCqBRq7rXHM%3D&tabid=390&mid=1266 An overview of the global business environment. (2004). In Global Business Environment. Hyderabad, India: ICFAI Center for Management Research. Blandford, R. (2009). Nokia cuts jobs in marketing and technology management. Retrieved April 6, 2009, from http://www.allaboutsymbian.com/news/item/9158_Nokia_cuts_jobs_in_marketing_a.php Channelworld Bureau. (2009). 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