International Business Strategy: NOKIA on Global Market - Case Study Example

International Business Strategy - NOKIA on Global Market Table of Contents Table of Contents 2 Porters Five Forces of Competition 4 Buyer power 4 Threat of Substitutes 5 Degree of Rivalry 5 Supplier Power 6 PEST Analysis- Nokia 7 Political Factors 7 Economic Factors 8 Social Factor 9 Technological 9 Recommendations 9 Segmenting & Targeting 10 Price 13 Reference 14 Appendix 16 Appendix A 16 Global Mobile Phones Market Value: $ billion, 2007–11 16 16 Appendix B 17 Global Mobile Phones Market Value forecast: $ billion, 2011–16 17 17 Porters Five Forces of Competition Buyer power Rise of the Smartphone has forced retail buyers to stock products in advance while some market players such as Apple, Samsung are filliping forward integration by setting their own online and offline retail sales (Slatter, 2006, p. 125). Buyer power is relatively high due to following reasons. Plenty of alternate brands are available (blackberry, iPhone, Samsung Galaxy, HTC and others) Smart phones are not necessary items hence demand for them is elastic in nature Customers can search capabilities and features of Smartphone by using secondary sources (internet, published data, consumer feed forum) hence chance for retailers to manipulate customer decreases Every companies are gearing up to develop new applications in their Smartphone offering which ultimately decreases scope of creating differentiation for customers Switching cost is low (read absence of low priced offering) because Smartphone makers offers limited incentives to customers (Yu, 2012, pp. 34-35) Threat of Substitutes Fixed line telephones can be classified as distant substitute for mobile phones. This threat is seen as minimal because mobile phones are becoming necessity for human race due to its multi application and wider geographic coverage. Hence it can be inferred that threat of substitutes is low. Degree of Rivalry Smartphone manufacturers are competing with each other in terms of implementing new technologies, gaining access to new market, advertising exposure and many others. Few Smartphone are doing legal battle with each other in terms of feature and application counterfeiting (for example Samsung paid huge amount to Apple after losing legal battle of counterfeiting of design and application of iPhone). Some companies are using Android operating system for their Smartphone’s while others are focusing on windows phone. Market saturation is higher for phones not acquired with contract. Fixed costs associated with smart phone market are high due to requirement of investing in latest technologies. Hence it can be concluded that market rivalry is high. Global Smartphone market condition can be explained in the following manner. (Source: Deloitte, 2012) Mobile manufactures try to establish equilibrium between Smartphone and features. The market segregation can be explained in the following manner: (Source: Deloitte, 2012) In future Nokia will face specific threat from counterfeit products. Mobile manufacturers complemented by low resorce capabilities tend to imititate features and design of Smartphone manufacturered by reputed companies such as Nokia, Samsung and Apple. Impact of such threat will increase in future. Supplier Power Market players rely heavily on suppliers providing software and hardware integration. Influence of low cost Taiwanese suppliers is increasing in the mobile manufacturing industry. Foxconn is the Taiwanese supplier for Apple and HTC. Taiwanese suppliers supply HSPA or High Speed Packet Access, evolution data optimizer and touch screen panels to mid and high end Smartphone manufactures. Component source of Taiwanese Smartphone supply can be depicted by using following diagram. (Source: MIC, 2010) Operating systems such as BlackBerry OS, Windows Phone, Android and iOS are essential gears for Smartphone manufacturers. Smartphone manufacturers are relying heavily on their technological partners such as Google and Microsoft. Hence it can be inferred that supplier power is high. PEST Analysis- Nokia Political Factors Nokia needs to follow respective government rule of different countries in order achieve sustainable business growth and demographic advantage (Zikmund and Babin, 2006, pp. 12-15). Global economy is complemented by international trade rules. Nokia will face tumultuous political situation in Latin America (especially in Colombia, Venezuela) (Nuechterlein, 2000, p. 145). Indian market is getting de regulated day by day hence Nokia has the opportunity to increase amount of FDI in the country. Nokia needs to change their human resource strategy in accordance to labour law of various countries. For example, factory of Nokia was shut down in China due to labour strike and industry analysts believe that on that situation Nokia violated labour laws (read law regarding working hour) of the country (Chan, 2010, p. 137). Global mobile market is more or less regulated by governments of respective countries hence Nokia needs to be careful on deciding entry strategy for particular market (Sjøvaag and Eliassen, 1999, p. 174). Nokia is banking on China in order to increase their global footstep. China and India have emerged as largest mobile market in recent years. Nokia needs to open more manufacturing units in China in order to fulfil demand of Chinese customers. Nokia has established more than thirty offices in China and also second largest mobile phone supplier in the country (Törnroos, 2002). • Market share of Nokia has decreased almost 75% within one Year in China and it is a big cause of concern for the company. Sales volume of the company has decreased due to following reason. • Android phones are becoming popular in China but Nokia is still relying on old operating systems • Nokia has not established any kind of strategic partnership with local telecom carriers such as China Telecom in order to increase penetration in market Economic Factors World Bank data shows that the world is facing threat of high unemployment rate for last three few years. Adverse weather condition in Asia has dampened financial growth of countries like India, Nepal and Myanmar. A global player like Nokia needs a sustainable in order to ensure smooth run of its business cycle. Siemens (major partner of Nokia) has allocated huge amount of investment on renewable energy in order to achieve long term boom. Cost of research and development has increased by 13 percent in recent years hence Nokia need to design a cut down investment on R&D in order to survive in volatile market (Reuters, 2012). Social Factor Multidimensionality of world population gives opportunity to mobile manufacturers to reshape their offering. Blackberry has emerged as hot cake for business persons while Apple becomes popular among students and opinion leaders (Rogers, 1995, p. 293). Technological Companies such as Samsung, Apple, RIM and others are trying to upgrade OS in order to develop new products in accordance with predefined segmenting strategy (Cravens, 2009, p. 121). Companies are banking on Android OS to edge to diversify product line (Firtman, 2010, pp. 76-78). Web OS has emerged as latest development in the field of Smart phone while analysts believe telemetric system will be the next big thing. Recently Microsoft has launched Windows 8 hence it will be interesting to see whether smart phone manufacturers adopt Windows 8 in their offering. Nokia has already launched Windows phone backed by integrated marketing communication (Nokia Lumia) in the market (Belch, 2003, p. 198-200). Recommendations Nokia needs to focus on their Windows phone backed by advertising campaign and need to add more application in addition to MS Office application (Black, 2011, p. 139). They need to offer colourful range of Windows phone in order to generate interest among customers. The company needs to piggyback their already developed OS technology in order to decrease cost regarding investing money on developing new OS. They need to bank on offline as well online sales channel in their next offering in order to segregate their offering from their competitors (Reponen, 2003, pp. 52-62). The company need to increase depth of product offering by customizing the design of the phone in accordance with requirement of multi segment customers rather than designing the phone for specific segment. Nokia need to create multi application platforms like jawbone’s audio gear, easy file-sharing (Apple has already incorporated such features in their iPhone) in the windows phones. Management of the company needs give importance on implementing stable quad-core processor (for example, Samsung Galaxy is using such processor) in their smart phones. Product design should more focus on creating metallic look and polycarbonate framework for Windows phone in order to attract customers (study shows that Asian and Scandinavian customers prefer metallic look of mobiles). Segmenting & Targeting The company needs to design segment specific strategy for fulfilling requirement of all the customers. Nokia needs to maintain equilibrium between segmentation strategy for niche market and target strategy for mainstream market. In real world practice niche segmentation emphasizes on smaller customer group with particular product demand. Occupation Target Market Features need to be offered Professional Young men and women working in office and they also need on the applications in phone MS office, instant messaging, e mail and Blackberry messenger like features Students Undergraduate and Management students. They need use PowerPoint presentation as a part of their study. Students prefer to hear music and like to play games. Nokia music gallery and iPod like features needed to be incorporated in Smartphone. PDF reader and power point making software. Entrepreneur They need specialized software which can schedule contact details Wireless calendar access, wireless appointment checkers Medical Users Doctors and hospital authorities Cloud computing facility and wireless data scheduler can help them to reduce burden of paperwork. Segment Purchase Pattern Strategy Tech Evangelists These customers use advanced applications and features of the Smartphone. Customers belong to these group prefer to purchase product complemented with latest technology. Nokia needs to add more technological features in order to attract Tech Evangelists Impulse Buyers They purchase product to satisfy instant gratification. Customers belong to this group can be attracted with innovative advertising. Nokia need to launch low end Smartphone for attracting impulse buyers Experimental Adopters These customers get influenced by the media exposure and peers. Customers belong to this group purchase Smartphone in accordance to personal status High end design of the Smartphone is needed Pragmatic Purchasers They purchase Smartphone after doing cost benefit analysis and detailed product research. These customers purchase product from the view point of functionality of the device Nokia need to implement point of difference applications in the Smartphone. Applying Web OS technology can be a game changer Green Buyers Purchase decision is directed by ecological impact of the mobile device Nokia needs to decrease carbon footprint and use of polythene in the Smartphone Disengaged Functionalists These customers give importance on functionality of the mobile device instead of design and style. Nokia needs to manufacture low end Smartphone low on style but high on quality. Price Apple Samsung Nokia Blackberry Sony iPhone 5 is priced at £620.00 Samsung Galaxy S3 is priced at £383.00 Nokia Lumia 800 is priced at £160.00. Price comparison shows that Nokia need use competitive pricing in order to survive in the Market. They need to launch product complemented with new features in the price range of £200 to £300 in order to decrease Cost of Goods sold in near future. Blackberry Curve is priced at £135.00 Sony Xperia is priced at £135.00 Reference Belch, G. E., 2003. Advertising and Promotion. 6th ed. New York: McGraw-Hill Education. Black, K., 2011. Business Statistics: For Contemporary Decision Making. Hoboken, New Jersey: John Wiley & Sons. Chan, C. K. C., 2010. The Challenge of Labour in China: Strikes and the Changing Labour Regime in Global Factories. London: Routledge. Cravens, D. W., 2009. Strategic Marketing. 8th ed. New York: McGraw-Hill Education. Deloitte., 2012. Open Mobile: The growth era accelerates. [pdf] Available at: [Accessed 24 November 2012]. Firtman, M., 2010. Programming the Mobile Web. Sebastopol, CA: OReilly Media, Inc. Marketline., 2012. Global - Mobile Phones. [online] Available at: [Accessed 14 November 2012]. MIC., 2010. Component Supply Chain Profile of Taiwanese Smartphone Industry. [pdf] Available at: [Accessed 24 November 2012]. Nuechterlein, D. E., 2000. America Recommitted: A Superpower Assesses Its Role in a Turbulent World. Kentucky: University Press of Kentucky. Reponen, T., 2003. Information Technology Enabled Global Customer Service. Hershey, Pennsylvania: Idea Group Inc. Reuters., 2012. Siemens CEO to cut jobs, close offices as profits shrink. [online] Available at: [Accessed 24 November 2012]. Rogers, E. M., 1995. Diffusion of Innovations. 4th ed. New York City: Simon and Schuster. Sjøvaag, M. and Eliassen, K. A. European Telecommunications Liberalisation. London: Routledge. Slatter, J., 2006. 100 Best Stocks You Can Buy. New York: Adams Media. Törnroos, J. A., 2002. Nokia Mobile Phones & the Chinese Market – Managing Culturally Based Strategic Nets. [pdf] Available at: [Accessed 24 November 2012]. Yu, F. T., 2012. Entrepreneurship and Taiwans Economic Dynamics. Berlin: Springer. Zikmund, W. G. and Babin, B. J., 2006. Exploring Marketing Research. Stamford, Connecticut: Cengage Learning. Appendix Appendix A Global Mobile Phones Market Value: $ billion, 2007–11 {Source: Marketline, 2012} Appendix B Global Mobile Phones Market Value forecast: $ billion, 2011–16 {Source: Marketline, 2012} Read More