Case Study Of Nokia Production Relocation - Essay Example

The decision produced a real shock in Germany, both in the unions’ and the politicians’ circles, who both called for boycotting the Nokia products. Nokia is trying to sell another line of business in Bochum, involving personalized cell mobile solutions for cars, to Sasken Technologies, with the help of the private investment fund Equity Partners GmbH and the former manager of Nokia's automotive mobile division, Razban Olosu. At that time, Romania seemed to be a better choice, as it would have fulfilled Nokia’s policy for cost-effectiveness and feasibility.

The level of payments for the employees definitely was one of the main reasons, as well as the costs implied by the establishment of the factory. The official opening of the first production line in Romania has an echo also in Austria, where Der Standard wrote that “while the employees in Bochum still try to save themselves, Nokia is opening a new factory in Romania”. Romania is described in the same article as being “a country with cheap labor force”. Since the inauguration, the Finish in Nokia did not give any time period for their operation in Romania.

In 2010, the Sr. Vice President of Nokia, Juha Putkiranta said that “We do not know how long we will be in Romania, but we hope to be a long term investment, especially that Romania is very close to the markets we wish to serve through this factory”. According to the National Statistics Institute in Romania, in the first three months of 2010, the mobile phones produced at Jucu placed second in the total export. Hence, the mobile phones recorded a 50% increase compared with 2009, reaching a total export of Eur 300 million.

The over 3,000 employees in the Nokia factory at Jucu have been called for a meeting, and the Nokia management team for Europe announced that the factory in Cluj will be closed by the end of 2010. The Romanian Senator Marius Nicoara, former President of the Cluj County Council is the man who negotiated the opening of Nokia at Cluj and he declared that the Finish representatives have some complaints. The Senator claimed not to be aware of Nokia intention to close the factory in Cluj, but he knew just that the Finish asked for a new air lane of 3,500 meters and a cargo terminal at Cluj Airport.

The two requirements have not been accomplished. Nokia wanted to have the possibility to accommodate big planes for inter-continental transport at Cluj Airport. The cargo terminal has been abandoned, and the air lane is in progress, but still too small to satisfy the initial requirements and specifications. Despite the initial advantages offered by Romania, Nokia did not consider enough the political and foreign investment background existent in the country. The apparently lower costs blurred the bureaucracy existent in Romania, the corruption at all levels and the impediments of the existent infrastructure.

After 2 years of operation in Romania, Nokia came to the decision that the investment is not profitable anymore for long term. Even if the sales recorded increase, the economic collapse which affected most of the European countries could not be ignored, and Romania was never in the position to be economically stable. After a year or two, people lose interest in a product, even if it is good or feasible; Romania is a