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Two and a half years into Apple’s iTune Music Store dominating the global market, Nokia is finally challenging its status quo. This day saw Nokia Music Store opening its door to music lovers in Australia – the eighth media store after Britain, Ireland, Germany, Italy, Finland, The Netherlands and Singapore. The Nokia Music Store contains millions of tracks from both global and local artists and users will be able to download songs to their computer supported by Windows XP or Vistas PC and transfer them to their mobile phones be it Nokia or other brands7. Songs can also be downloaded directly to specific Nokia mobiles such as the N81 and N827. More importantly, the service allows users to download unlimited number of tracks with a $10 monthly subscription fee7.
Apart from the music store, other innovation initiatives by Nokia include three new phones to be launched in the third Quarter of 2008 in Asia – the Nokia 6600 fold, 6600 slide, and 3600 slide10. These phones come with facial contours, tap-sensitive response, and background noise cancellation10. Other features include an integrated Maps application which holds more than 15 million points of interest, autofocus camera, and the ability to connect to television sets10. Nokia has also launched a series of high-end fashionable mobile phones under Vertu and L'Amour label that come with sapphire crystals, polished ceramics keypads, gold and stainless steel housings, and diamond and leather ascents to cater to the fashion-conscious consumers9.
Nokia started in 1865 in Finland16. Throughout the nineteenth century to late twentieth century Nokia had its business in electric cable, rubber boots, tires, toilet paper and radio telephony utilities16. By the 1980s, Nokia was close to bankruptcy due to the collapse of the Soviet Union which was Finland’s main trading partner1. In 1992 Jorma Ollila became the President and CEO and decided to venture out of all its other businesses to focus on telecommunications systems and mobile phones16. Ollila is charismatic and entrepreneurial1. He saw the opportunities in mobile phones for the younger generations of the Nordic countries and decided to position Nokia to consumers in terms of functionality, design and performance1. This was at a time when Motorola, the leader in telecommunications was targeting at industrial, governmental and business users1. Nokia’s first GSM (Global System for mobile telecommunications) mobile phone was launched in 199216. Further break-through from Nokia was
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Nokia’s business and strategy
By 2000, Nokia has established itself as the market leader ahead of Motorola who was leading prior to 200011. By 2007, Nokia has established itself as the fifth most valued brand in the world3. Presently, Nokia occupies the largest mobile phone market share at 39% followed by Samsung (15.9%), Motorola (9.4%), LG Electronics (8.4%) and Sony Ericsson (7.6%) (CMP TechWeb, 25 April 2008, viewed 27 April 2008, Factiva database). Research and development stands about 36% (about 21,000 employees) of the company’s total workforce9.
“Nokia’s core competencies come in three main fields – mobile handsets, network technology and middleware. When deciding on the development and manufacturing of new products, speed is the critical element in this rapidly changing technological environment. For example, when deciding whether to collaborate on a product or software development, we will consider if we are able to produce the product alone fast enough and do we have the competencies to produce it within a short time frame. If it is a core product, that is mobile telephony, Nokia will produce it internally because it is much more efficient and the end product will also be of better quality. But on the other hand if the new product is not within our competency and core product range, our next step will be to decide on the form of collaboration or outsourcing with a company that can produce it fast enough. And if a new technology emerged and is not produced by Nokia, Nokia will collaborate and outsource for the technology” (A manager at Nokia Group)6
For example, in 2000 Nokia initiated SyncML – a standard for universal of synchronising remote data and personal information across multiple networks, platforms and devices, while a variety of companies sponsored for the standard6. These companies include Ericsson, IBM, Lotus, Matsushita, Motorola, Operwave, Starfish Software, and Symbian while the technology is supported by numerous leading wireless companies6.
Outsourcing to external vendors however is not a popular choice within Nokia and prior to 2002, this activity contributed only about 15 to 20 percent2.
A new President
In 2006 Olli-Pekka Kallasvuo joined the board officially as Nokia’s new CEO16.
‘Nokia’s business is about connecting people and its success story is built on constant innovation. Our very human technology is all about enhancing communication and exploring new ways to exchange information. Nokia will continue to develop affordable mobile devices that can contribute to increased economic growth and quality of life’16.
In January 2007, Nokia and Siemens officially merged to become Nokia Siemens Networks (NSN) in a 50-50 joint venture13. Following the merger, Nokia undertook a series of reorganisation and reinvention. The original business units comprising of Mobile Phones, Multimedia and Enterprise Solutions are now integrated to become Devices and Services which is sub-divided into three business units namely Devices, Services and Software, and Markets15. Nokia started offering internet services and to position itself towards wireless telecommunications18. Companies acquired by Nokia in 2006 include Intellisync Corp. (a leading provider of platform-independent wireless messaging and applications for mobile devices), LCC International's U.S. Deployment Business, Gate5 AG (leader in mapping, routing and navigation software and services), and Loudeye Corp (a global leader in digital music and digital media distribution services)12. In 2007 further acquisitions include Twango (provider of media sharing solutions such as photos, videos and personal media), Enpocket and Avvenu12; while the most recent acquisitions by Nokia being Navteq, Trolltech and Apertio. With Navteq, Nokia planned to build location-aware services on mobile devices which allow the company to extend its product line5.
Analysts’ comments on Trolltech’s acquisition
Jennifer Schenker, Business Week:
“Nokia is responding to tetonic market shifts. These days, when consumers buy digital content, they want to be able to pay for it once and move it easily between different devices they own. Furthermore, consumers’ expectation for software on phones has changed dramatically since the launch of Apple’s iPhone. Trolltech Qtopia (Qt) technology allows for easy operation of programs, services and content on various devices and achieving a consistent look and feel simultaneously. This should align Nokia’s users experience closer to Apple’s software interface.” 17
“Trolltech deal is also a major issue for Motorola as it uses Qt software in all of its Linux-based phones. By acquiring the Norwegian company, Nokia gains greater control over the software supply chain and may cost Motorola a key supplier.” 17
Current issues and competition
Nokia faces intense competition in the market. Besides the mobile phone companies – LG Electronics, Motorola, Samsung, and Sony Ericsson; competitors also include electronics suppliers such as Apple, Dell, Hewlett-Packard, Microsoft, Palm, Research In Motion (RIM) and Sony9. The most recent and greatest challenge especially in America is the launch of iPhone by Apple. iPhone with its user friendly and smooth interface features has encouraged more users to access its mobile entertainment content than many other phones, as according to Jupiter analyst Michael Gartenberg "There's absolutely strong interest in the notion of the phone being a media and entertainment-centric device. It's just that a lot of the efforts to date have not been very good from the hardware side, software side, services side and pricing or business model side."3
Nokia also noted a dip in its average selling prices of mobile phones from $131 to $1254. “Nokia is coming under a furious attack in the high-end market from Samsung and LG large displays and 5-megapixels camera phones” says analyst Tero Kuittinen, from RealMoney.com columnist4.
While sales and earnings particularly from the emerging markets such as India, China and Indonesia have gone up, the North America business is dropping8. “North American market share has plunged from 20% to 7% in the last two years, and part of the reasons is due to the poor relationship Nokia has with the U.S. operators and its lacklustre CDMA handset portfolio in America.” Neil Mawston, director of Strategic Analytics suggested8. On top of that, Nokia also allocated the situation to a weakening U.S. economy and possibly economic slowdown in Europe8. Nevertheless Mark Louison, President of Nokia Inc. is determined to turn the situation in North America around through customised products for carriers such as AT&T and T-Mobile USA18.
“Nokia wants to be the market leader” says Louison18.
Appendix A: Structure of NSN
Reference to case study
1: Abetti, PA 2000, ‘Critical success factors for radical technological innovation: a five case study’, Creativity and Innovation Management, vol. 9, no. 4, pp. 208-221, Blackwell database
2: Berggren, C & Bengtsson, L 2004, ‘Rethinking outsourcing in manufacturing: a tale of two telecom’, European Management Journal, vol. 22, no. 2, pp. 211-223
3: Bruno, A 2008, ‘Handset heat’, Billboard, vol. 120, no. 14, pp. 33-34, viewed 26 April 2008, Business Searching Interface (EBSCO) database
4: Carson, P 2008, ‘Nokia delivers sales, earnings, volumes; but flat forecast for market’s value sends stock tumbling’, RCR Wireless News, vol. 27, no. 11, viewed 27 April 2008, Factiva Database
5: Datamonitor 2007, Industry Update, Datamonitor, viewed 26 April 2008, Business Searching Interface (EBSCO) database
6: Dittrich, K & Duysters, G 2007, ‘Networking as a means to strategy change: the case of open innovation in mobile telephony’, Product Innovation Management, vol. 24, pp. 510-521, Blackwell database
7: Frith, D 2008, ‘Nokia plans online music challenge to iTune’, The Australian, 22 April, pp. 40, viewed 27 April 2008, Factiva database
8: Gardner, D 2008, ‘Nokia’s earnings up, but its market share drops in North America’, Information Week, 17 April, viewed 22 April 2008,
9: Global Market Information Database 2007, Nokia group – consumer electronics – world, Global Market Information Database, viewed 23 April 2008,
10: Jones, KC 2008, ‘Nokia’s new phones: built for comfort and speed’, Information Week, 28 April, viewed 30 April 2008,
11: Leinbach, TR & Brunn, SD 2002, ‘National innovation systems, firm strategy, and enabling mobile communications: the case of Nokia’, Royal Dutch Geographical Society KNAG, vol. 93, no. 5, pp. 489-508, Blackwell database
12: Nokia 2008, Acquisition, Nokia, Finland, viewed 2 May 2008,
13: Nokia 2006, Nokia and Siemens announce top executives for Nokia Siemens Networks, Nokia, Finland, viewed 2 May 2008,
14: Nokia 2008, Nokia firsts in telecommunications, Nokia, Finland, viewed 21 April 2008
15: Nokia 2008, Quarterly and Annual Information, Nokia, Finland, viewed 2 May 2008,
16: Nokia 2008, Story of Nokia, Nokia, Finland, viewed 22 April 2008,
17: Schenker, JL 2009, ‘Nokia's Trolltech grab hurts rivals’, Business Week Online, 29 January, viewed 26 April 2008, Business Searching Interface (EBSCO) database
18: Smith, B 2008, ‘Nokia re-invents itself amid radical change’, Wireless Week, 1 April, viewed 26 April 2008, Business Searching Interface (EBSCO) database
Summary of Discussion questions
1. Evaluate Nokia’s strategic approaches and business from its beginning. As far as possible, identify any emergent strategies and/or changes in its strategic direction.
In your own opinion, how successful are these policies/strategies?
2. Using Porter’s Five Forces model and the SWOT analysis, assessed Nokia in terms of:
a) Intensity of competition
b) Strengths and weaknesses
c) Opportunities and threats
3. Identify the various corporate-level strategies adopted by Nokia and evaluate how, by undertaking these steps may help the company.
4. From the case study, what kind of functional-level strategy do you think Nokia is pursuing?
From your own analysis, have the strategies been able to give Nokia a competitive advantage against its competitors?