Case study on Nokia - Essay Example

?CASE STUDY: NOKIA Introduction 2 Situation Analysis 3 Market Analysis 3 Company Analysis 3 Product Line Analysis 3 Nokia Lumia 4 Smartphones 4 Symbian Belle 4 Mobile Phones 4 Accessories 4 Customer Analysis 4 Competitor Analysis 5 Source: Stephanidis,C.(2011).HCI international 2011. Springer 6 Source: Stephanidis,C.(2011).HCI international 2011. Springer 7 Corporate Aspects 8 Vision Statement 8 Mission Statement 8 The Strategic Plan-Core Proposition-Penetration into the Smartphone Market 9 The Problem 9 Strategic Solution 9 Competitive Positioning 9 Marketing Strategy 9 Marketing Objectives 10 Strategic Model-S.W.O.T Analysis 11 S.W.O.T Analysis 11 Strengths 11 Weaknesses 12 Opportunities 12 Threats 12 PEST Analysis 13 Economic 13 Social 13 Technological 14 Reason for Choosing S.W.O.T Model 14 Reason for not choosing PEST Analysis 15 Tactical Marketing Plan 15 Assumptions 17 Basis of Assumptions 18 Economic Assumptions 18 Competitive Assumptions 18 Conclusion 18 References 19 Introduction Nokia is a multinational corporation based in Finland. Its headquarters are in Keilaniemi, Espoo. They are one of the leading manufacturers of mobile handset in the world. Nokia also produces mobile phone communications and other telecommunications kit for functions such as traditional telephonic service, ISDN, access of broadband, mobile radio, wireless Local Area Network and satellite receivers. Situation Analysis Market Analysis According to Informa Telecoms & Media, the global mobile phone sales are going to decline sharply in the next 5 years. The forecast says that total sales will be down by as much as 14% all around the world. Previously the expectation was that 7.43 billion devices would be purchased between 2011 and 2013; however that figure was lowered down to 6.39 billion. This downturn in the sales of mobile devices will be a major reason for handset manufacturers to turn their attention to the smartphone market, in order to maintain and increase the targeted sales value. Company Analysis Nokia provides cellular phone communication apparatus for all critical market, including WCDMA, GSM and CDMA. Its recent venture into the smartphone industry has been somewhat mediocre. However, the organisation began as a manufacturer of pulp, rubber and cable. The organisation was founded by Fredrick Idestam in the year 1865. The company has strong research and development activities in over 10 countries and device manufacturing units in nine countries. The company sells its products in more than 150 countries around the globe. Product Line Analysis The current product line analysis of Nokia is: Nokia Lumia Nokia Lumia is an innovative new venture of Nokia in partnership with Windows. The UK market currently has the models 800 and 710. The models have features like instant updates, super-fast mobile internet and innovative design. Smartphones Nokia’s Smartphones consists of business tools, social tools and navigation systems. It includes real time emails, calendar and document sharing features, sharing files in social networking sites, and most importantly GPS navigation systems. Symbian Belle The Nokia 700 and 600 are categorised under the Symbian Belle consisting of eye catching design, NFC sharing, faster browsing, six home screens, live widgets and pull down taskbar. Mobile Phones Other than Smartphones the general products can be typed based on features like touch, type, touch and type and keyboard. There is the E series, Asha range, C series, X series and N series. Accessories This consists of NFC sharing Bluetooth, cases and covers and travel in-car equipment. Customer Analysis Nokia is the largest manufacturer of mobile phones in the world. The success of handset manufacturers amidst this high rate of competition depends on successful market segmentation. Following are the segmentation variables of Nokia: Hi-fliers-This segment is concerned with the business executives and corporate honchos for whom cell phones are a device to co-ordinate and increase efficiency and productivity if business. In most cases their organisation sponsors the handset for them. Therefore their key concentration is the functionality, and that is their basis of purchase decision. Trendsetters- The tech geeks or early adopters fall in this category. Their decision making primarily depends on innovativeness. They are always on the lookout for new features. They are also the trendsetters and opinion leaders for others. Social Contacts- This segment uses mobile phone for its sole purpose i.e. staying in touch. This segment is price sensitive and consists of the middle and lower middle class. Assured- This segment consists of high profile individuals like ministers, celebrities or CEO’s for whom mobile is both a necessity as well as a reflection of themselves. Price is not a consideration for this segment. Positioning is the crucial factor. They make their purchase decision based on the perceived value of the brand. Competitor Analysis Nokia is still the market dominator closely followed by Samsung. Following is the global market share data of the year 2010. The total market share is 33.3%, however the year on year market share reduced by 2.5%. In case of Samsung, the year on year market share has increased by 17.3%, LG and Motorola dipped by 9.7% and Sony Ericsson by 23.3% Figure 1: Global Mobile Shipment and Market Share Data 2010 Source: Stephanidis,C.(2011).HCI international 2011. Springer The mobile sales data of April to June 2011 however shows Nokia’s market share dipping to 25%, an all time low since 1999; and Apple taking over the worldwide smartphone market. Apple also has the fourth position in total market share after Samsung and LG. Figure 2: UK Mobile Market Share Data (April-June 2011) Source: Stephanidis,C.(2011).HCI international 2011. Springer A detailed analysis of the main competitors if Nokia are as follows: Samsung- It entered the mobile phone market in the year 2000; the CEO is Mr. Yoon Woo Lee. The company’s revenue is USD 900 million. Following are the product lines of Samsung mobiles: Smartphones, Mobile Phones, and Tablets. The types of recent mobile phone models are – Bar, Slider, Touch Screen, Qwerty. There are 3 types of Smartphones- Android OS, Bada OS and Windows OS. And the Tablets comprises of the Samsung Galaxy Tab range consisting of Wi-Fi, 8.9, 10.1 Wi-Fi, Wifi+3G versions. The organisation’s target is to reach $400 billion sales revenue by the year 2020. This is also known as its Vision 2020. The company’s average sales revenue growth rate is 17% over the last 3 years. The brand value is $12.8 billon. The current operating profit the third quarter of 2011 is $2.3 billion. Apple- In the next five years Apple’s iPhone will be the main threat for Nokia in the smartphone sector. The main competitive barriers will be its user friendliness, browser, App Store and innovative marketing strategy. The company’s target sales is $27.3 million for this year, its latest iPhone 4S being sold at $99. Its iPhone sales recently grew by 141.2%, which is 12 times the global market sale. Whereas the market share for Nokia, LG and other mobile companies have decreased this year, Apple seems unaffected by this. Apple will not be affected by the global decrease in the sales of mobile devices in the next five years, since it has got a very high profit margin for its iPhones. Corporate Aspects Vision Statement The company’s vision statement is to build a word where everyone everywhere remains connected to each other Mission Statement The company believes in creating a trust and value based relationship with its customers. The path for creating such relationship is providing the best of devices and the best of services in this highly competitive market. The Strategic Plan-Core Proposition-Penetration into the Smartphone Market The Problem The strategy for next five years would be successfully penetrating the smart phone market in UK. Nokia’s venture into the smartphone market in UK has so far been unsatisfactory. Nokia’s Symbian 3 is continuously losing market share to customers and Nokia still has got a long way to make a mark in the smartphone industry. In the third quarter of 2011, Nokia’s sales YOY fell by 37 percent (from 26.5 million to 16.8 million). Strategic Solution A broad strategic partnership with Microsoft can help Nokia frame a difference and add value to their products in the smartphone market. Nokia announced its alliance with Microsoft in February 2011. The key to redemption of Nokia in the smartphone industry will be to use this partnership and generate market buzz to attract smartphone geeks towards the revolutionary functionalities of their product. Competitive Positioning Differentiation will be a key strategy for Nokia to capture the smartphone market. Applications like Nokia Live View can be a turnaround for the organisation in the smartphone market. Marketing Strategy The marketing strategies for Nokia in the next five years are as follows: Smartphones- The core strategy is delving into the smartphone market and emerge as a market leader via differentiation and strategic alliance. The next billion- Around 3.2 billion people in the world are yet to use mobile phones. Nokia’s target will be to achieve the next billion customers. The next Generation- Delving into the next generation mobile phone market i.e. 4G and 5G. The 4th generation mobile phone is also termed as beyond 3G. The purpose is to provide wireless broadband connection with nominal data charge of 1 Gbit/s to devices that are stationary and 100Mbit/s to fast moving devices (the definition of such devices are given by ITU Radio Communication Sector of the International Telecommunication Union). Innovation- Playing a key role in ground breaking innovations in the mobile industry in the next five years. Internal Structure- Improving and strengthening the internal environment by motivation, leadership and a working environment that promotes speed efficiency and value. Investments- Directing the investments in development or acquisition of next generation technologies. Marketing Objectives The marketing Objectives of Nokia in the next five years are as follows: Maintain the leading position in terms of market share in UK. (Current market share is 43%) Develop Online Interactive Abilities- Online App Stores Achieve a strong presence in every mobile phone segment Introduce better Operating stage over MAEMO, Symbian Introduce Concept Phones in the market Renovate promotional strategy from storytelling to trailer advertisements Increase the market share by at least 5% per annum in the next five years Invest into R&D for developing innovative technologies Increase the smartphone sales volume by 5% every year Reduce the price of Lumia series Introduce eco-friendly handsets to compete Samsung in their Blue dream strategy Strategic Model-S.W.O.T Analysis S.W.O.T Analysis Strengths Nokia is largest global mobile phone vendor Nokia has no dearth of revenues. Their cash flow is quite strong for undertaking revolutionary projects. Their wide network coverage and loyal customer base provides a strong base for expansion and promotion. Excellent product quality and versatility in product functionality as well as price is strength of Nokia. They have a good integrated cost reduction and information technology system Nokia has successfully conducted niche marketing and therefore penetrated various market segments. They have good human resources maintaining loyal employee base. Weaknesses Although currently there is no dearth in financing resources, however in the next five years problems may arise due to limited availability of future debt finance. Ambiguity in the Symbian Operating System Nokia’s growth plans are very ambitious. This may reversely affect their staff motivation, if, due to altering market environmental reasons the growth target are not met. Nokia has been slow in the adoption of new design innovations, as in the case of clamshell or flip phones. Opportunities Nokia’s UK market is in mature stage; however the company has lots can increase its profit margin by targeting to increase the usage rate. They can increase their presence in the CDMA market There is opportunity for diversification into new products like GPS navigators, etc. Threats Although mobile phones have now become a necessity, yet the recessional pressures were also felt in the mobile market. The market is highly saturated and competitive, which is a major threat for the company. The environment is becoming more dynamic and therefore it is becoming more and more difficult to track the changes in customer preferences. PEST Analysis Political The political regulations such as G3 restrictions barriers to price increase, etc will affect the handset manufacturers operations in UK. The legislation policies regarding quality standards, safety and human resources are of prime importance. UK requires high standards of employee safety and insurance. Such policies should be adhered to while doing business there. Economic Mobile phones, although nearly a necessity in developed economies, are subjected to disposable income of consumers. Their purchase rate depends on general income conditions (especially for devices like Smartphones). Current economic conditions of UK and the recessional pressures may lead to a downward trend in mobile phone purchase. And such trends may affect large manufacturers like Nokia. Social The social trends and preferences are crucial in the industry. This influences the feature demands and the functionality demands from a handset. The attitude towards cell phones is also important. In many developed economies there is increasing concern on the over use of gadgets and devices and its adverse health effects. Certain researches regarding mobile phone radiations have also been undertaken. Technological Technology will be the key factor that can lead the company to their product differentiation goal. In the handset market, technology is the key determinant of purchase for the early adopter consumer segment. The company needs to strive towards innovativeness by investing more in Research and Development and recruiting the best brains in the market. Reason for Choosing S.W.O.T Model For the strategic marketing plan of Nokia for the next five years in United Kingdom, the S.W.O.T Analysis Model has been chosen. This strategic marketing plan is a forecasted plan, and therefore is based on certain assumptions, mainly regarding the external environment (for more details refer to the assumptions section). These assumptions introduce some amount of firmness in the external environment, since all the dynamic changes for a future period cannot be anticipated. However, there are some factors that can be roughly forecasted or anticipated, and therefore the marketing plan should take those factors into account. Combined with the external environment, is the internal environment, which is comparatively less dynamic and controllable. However, the internal environment should be operated so that it can adjust the firm’s operation on context of the changing external environment, in such a manner, that the organisation’s goals are achieved. S.W.O.T Analysis (which is an acronym for Strengths, Weaknesses, Opportunities, and Threats) is one of the most commonly used strategic marketing and auditing tool. The main function of S.W.O.T Analysis is to recognise strategies that will help the firm in realising its goals with optimal resources in the context of the changing external environment. The S.W.O.T Analysis is a complete tool because it allows a complete scanning of both internal and external environment. Whereas, models like PEST Analysis and Five Forces are only internal environmental tools. The Strengths and Weaknesses are the analysis of the internal environment, whereas Opportunities and Threats are the analysis of the external environment. Therefore SWOT Analysis is a more appropriate strategic analysis tool for the strategic marketing plan. Reason for not choosing PEST Analysis PEST Analysis is the acronym for Political, Economic, Social and Technological Analysis. PEST analysis is solely the analysis of an organisation’s external environment. It helps in identifying the current environmental scenario and helps to strategise business plan accordingly. However, for this marketing plan, the analysis of current environment is of little use, since this plan is for a future time frame, rather a forecasted plan. The implementation of this plan would not depend on current political or economic trends, but on the predictable and unpredictable future trends. A major disadvantage of PEST analysis is that a lot of the inferences are based on assumptions. It considers the external environment only, and does not concentrate on the inter relationship between the organisational environment and the external environment. Tactical Marketing Plan The tactical marketing plan would deal with the direct implementation and therefore consists of the following analysis: Product- Nokia is working on a future mobile technology called “Scentsory”. This new device will be an ultimate technological breakthrough, since it will create a multisensory environment by combing the sense of smell, touch, and hearing. The goal should be to commercialise such innovations and penetrate market using these as competitive advantage and establish the brand as a pioneer of mobile handset technology. Price The new Lumia range is being sold at a high price in UK market. The current prices are $365 (?232) and $567 (?360). However, since Nokia has not established itself in the smartphone market and its overall market share has declined in the current fiscal. The goal should be to practise penetration pricing instead of skimming pricing over the next five years to increase market penetration. Place The current marketing plan is concerned with the UK market. UK as a whole has high cell phone usage and therefore any further regional segmentation is not necessary. Promotion The promotional strategy for the next five years would concentrate on promotion via non personal media as well as direct interactions in non traditional media. A major flaw of Nokia in Smartphones promotions has been delivering too much information and killing the suspense. Nokia needs to do divulge from the story telling method to creating trailer ads to boost the craze and speculations. Also the product should not be launched too late, as was in the case of N8. If the product is launched after months of promotion, then the craze dies and the company loses share. Assumptions There are two types of assumptions for this strategic marketing plan to be implemented. These are: Competitive Assumptions- The competitive assumptions has been formulated primarily regarding Samsung and Apple, who will be the two main threats for the application of this strategic plan. Samsung is a threat due to its increasing market share and Apple due to its leadership in the smartphone industry. In the year 2011, Samsung has net sales of $220.1 billion, net assets of $343.7 billion, liabilities $202.6 billion and net income $21.2 billion. Its market share in UK is 20.5%, next to Nokia. However, Apple is still far behind in terms of market share, and iPhone data does not give us a stable pattern for forecast. Therefore, our forecast is mainly based on Samsung. The assumptions made are: Samsung’s mobile handset sales volume in United Kingdom will amount to 99million units by 2015 Samsung will target a market share of 38% by 2015 Economic Assumptions The economic assumptions are required for the strategic marketing plan to be written, because, mobile phones being a luxury item, their sales depend on the disposable income of consumers. The assumptions are: No more financial recession will hit the market The sales volumes of mobile phones will drop by 14% in the next five years The consumer trend will shift towards Smartphones However, the sales volume for Smartphones will remain constant Total Market Penetration rate for Smartphones will be constant The global phone market will grow by 11.3% Basis of Assumptions Economic Assumptions The bases of the economic assumptions are: The data forecasted from the research conducted by Informa Telecoms & Media. Smartphone sales trend in UK in the last 3year Competitive Assumptions On an average 28% of total sales of Samsung are from the Telecommunication sector. The assumptions were made on the following basis The Year on Year data shows that Samsung has, on an average, a target market share increase of 17% in UK per year The Year on Year sales volume data shows that Samsung, on an average has a 5million increase in sales volume per year. Conclusion The only reason Nokia is not being able to penetrate the smartphone market is because it is employing the promotional tactics used in the general mobile market in the smartphone market. The main target for the smartphone market is the early adopters. Therefore, there is no need to detail the cellular features in the promotional videos. Just giving the information in brief will work. Because unlike the general customer segment, the element of surprise and brainstorming regarding “what else could be new” is what motivates tech geeks to talk about the product. An indirect effect is lot of buzz in the social media. Thus restructuring the promotional technique should be the primary focus of Nokia for stabilising its sales in the next five years of downtrend in the mobile handset market. References Steve Lohr.( November 8, 2011). Nokia’s Comeback Strategy in Smartphones.[Online]. http://bits.blogs.nytimes.com/2011/11/08/nokias-comeback-strategy-in-Smartphones/.[December 8, 2011] Nokia.(2011).Featured Products.[Online].http://www.nokia.co.uk/gb-en/products/featured-phones/belle-nfc-phones/.[December 8, 2011] Nokia - Press Release.(November 23,2011). 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