Strategic Plan

BM 3399: Strategic Management

Group: H5
Candidates Numbers: 663336
836796
655775
737828
760242
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Table of Contents
A. E
xecutive Summary ................................ ................................ ................................ .... 2

3,88
E
xternal Analysis ................................ ................................ ................................ ... 3
II. I
ndustry Analysis
I
nternal Analysis ................................ ................................ ................................ . 10
IV. S
ummary................................ ................................ ................................ ............... 13
C. F
uture Situation Analysis ................................ ................................ ......................... 14
I. F
uture Scenarios ................................ ................................ ................................ .. 14
II.Change oI competitive environment in the predicted scenarios........15
III. C
hange in Resources................................ ................................ .............................. 16
IV. F
uture SWOT ................................ ................................ ................................ ...... 16
D. C
urrent Organisational Direction ................................ ................................ ............ 17
E. I
dentifying Strategic options
T
OWS matrix ................................ ................................ ................................ ....... 19
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II. S
electing & Ranking Strategic Options ................................ ................................ . 21
F. R
eflection and Conclusion ................................ ................................ ........................ 26
B
ibliography ................................ ................................ ................................ ............. 27

A. EXECUTIVE SUMMARY

Nokia Corporation (Nokia) is one oI the leading manuIacturers oI mobile phone devices,
telecom equipment and mobile application and soItware services. The company operates
across the Asia PaciIic, Europe, Latin America and North America. Its headquarters are based
in Finland. Nokia`s main advancements span across three segments: devices and services,
Nokia Siemens Networks (NSN) and NAVTEQ. Its devices and services segment is
responsible Ior managing, developing and designing mobile products including application
and content. (Nokia Corporation, 2011)

Mobile phones, smartphones and mobile computers are the core products oI Nokia and
service technology that includes soItware development and Internet services. NSN has been
developed to provide mobile and Iixed network inIrastructure, communications and networks
service platIorms, as well as proIessional services and business solutions, to operators and
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service providers globally. NAVTEQ includes digital map inIormation and related location
based content and services.
Currently the company had drastically changed its strategy direction, priorities, organisational
structure, Iocus and leadership in attempt to respond to the current market trends and the
changing environment and keep its dominant position in mobile phones while improving its
competitiveness in the smart devices market.
This strategic report examines thoroughly Nokia`s current position by analysing its internal
and external environment. Considering diIIerent scenarios it draws a picture Ior the Iuture and
suggest strategic options the company may consider in order to stay competitive in the short
and long-term Iuture.





B. ANALYSIS
I. External Analysis
There are many macro-environmental Iactors that aIIect an organisation`s strategy such as tax
changes, new laws/regulations, trade barriers etc. The Iigure below illustrates these Iactors
and Iurther analyses their impact on Nokia`s environment.
POLITICAL FACTORS
Key Issues Impact On Nokia
N Labour law This has political implications on their Indian Iactories, which have
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had a number oI prolonged employee strikes.

N Export
controls, tariffs
and other fees
Nokia are in a continuous dialogue with the European Union
institutions as net sales and results oI operations could be adversely
aIIected by these
N Access to
capital
Restricted access to capital in some regions has caused network
operators to reduce capital expenditure and produce a stronger
demand Ior vendor Iinancing. Some oI NSN`s competitors may have
stronger customer Iinancing possibilities due to internal policies or
government support. (Nokia Corporation, 2010)
N Government
regulations
Regulations that apply to current or new technologies can aIIect
Nokia`s business adversely. The implementation oI such regulations
or legal requirements can impact their products/services, distribution
channels and timing oI product/services launch as well as their
commercial success. E.g. in US, government regulation is related to
product certiIication, standards, spectrum management, access
networks and competition. (Nokia Corporation, 2010)
ECONOMIC FACTORS
Key Issues Impact On Nokia
N Economic &
Financial crisis
The recession in the major developed countries such as the US, UK
and Germany, is a major threat to Nokia`s brand power. Nokia`s large
market share in developing markets such as India, which has been
shielded Irom the international economic crisis, has in Iact provided
Nokia with a Iinancial advantage over its competitors. However, in
accordance with Nokia`s 2010 annual report, 37 oI sales originate
Irom Europe, which is oI course heavily aIIected by the Iinancial
crisis.
N Rising
competition
Smartphone and tablets segments have experienced a rise in
competition with Apple and Google dominating the market. There is
immense pressure on Nokia to Iorm mutually beneIicial partnerships
with hardware manuIacturers, soItware providers, publishers etc.
where they can exploit secondary resources and bring better products
to the market.
SOCIAL FACTORS
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088:08 Impact On Nokia

N Increased
demand for
social
communication
and networking
Nokia`s problems stemmed Irom being relative latecomers to the
Smartphone market. Apple and Android have already built a
signiIicant relationship and brand image with most oI the developed
world especially the US and Europe.
N Changing
population
demographics
This will signiIicantly aIIect Nokia`s customers as they need to keep
up with latest technology, operating system and networking systems,
catering Ior the needs oI all customers.
TECHNOLOGY FACTORS
Key Issues Impact On Nokia
N Operating
systems
With smartphones currently dominating the market, many Nokia`s
competitors are embracing wide range oI smartphone strategies. For
instance, Google, HTC, LG, Motorola, Samsung and Sony Ericsson
have deployed Android operating systems on their smartphones. Other
companies such as Apple use the iOS operating system, and Research
in Motion (RIM), which deploys Blackberry OS on its mobile devices.
This puts immense pressure on Nokia to improve their operating
systems to oIIer enhanced services on smartphones.
N Increasing
demand for
wireless access
to internet
Success Ior hardware manuIacturers is increasingly shaped by their
ability to build, catalyze or be part oI a competitive ecosystem, where
diIIerent industry participantssuch as hardware manuIacturers,
soItware providers, developers, entertainment providers, advertisers
and ecommerce specialists are Iorming increasingly large
communities oI mutually beneIicial partnerships to bring their
oIIerings to the market.
N Research &
Development
Nokia`s competitors such as Apple was more systematic and
organised in its investments and Iocused entirely on its operating
system. However, Nokia continued to rely on its ineIIective Symbian
operating system and at the same time invested greatly on an
alternative operating system, Meego. Thus it`s more than one,
changing strategies, placed its competitors ahead oI the market.
Development oI Symbian costs double compared to developing the
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iPhone which, implies that Nokia has expensive R&D investment

strategy and this poses a threat to their market share.
ENVIRONMENTAL FACTORS
Key Issues Impact On Nokia
N Climate change,
energy and
resource use
Increased pressure on Nokia to adhere to the principles oI United
Nations Environment Programme (UNEP). To adopt a precautionary
approach to environmental challenges, promote greater environmental
responsibility and encourage the
development and distribution oI environmentally Iriendly
technologies.
N Health and
safety of
product use
With increasing amount oI guidelines and health and saIety
regulations, Nokia needs to ensure that impact oI mobile products and
NSN base stations operate in line with international exposure
guidelines and limits that are set by public health authorities.
LEGAL FACTORS
Key Issues Impact On Nokia
N !,90398
N .03.08
Nokia is prone to inIringe patent license agreements as it may not
cover Nokia`s Iuture businesses, changes in corporate structure and
newly acquired businesses may have existing terms diIIerent to
Nokia`s license agreements. These risks may impose expensive
litigation costs, increased licensing Iees, penalties, restrictions on
using speciIic products, costly disputes, damaging reputation amongst
suppliers, customers and partners, and divert management and
technical personnel Irom their main business objectives. Further, iI
Nokia is deemed to have inIringed third part intellectual property
rights or breach patent license agreement, certain products can be
restricted Irom sale thus causing Nokia to incur material losses oI
proIits, in turn, aIIecting their business perIormance, sales and
proIitability
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N Technology
Infringement
Rights related to use oI technology are becoming more complex and
challenging and consequently more likely to result in an increasing
amount oI claims oI inIringing intellectual property rights. Such use
oI third party technologies by Nokia can result in increased licensing
costs, breach oI contract, restrictions on their ability to use certain
technologies in their products and costly and time consuming
litigation which could in turn have a negative impact on their day to
day operations, business and Iinancial results

II. Industry Analysis
Nokia`s operations spread into three major industries telecommunication devices, digital
navigation and telecommunication inIrastructure industry. The devices industry includes
business units such as mobile phones, Smartphones and their applications and operation
systems. Nokia`s Navteq is a major player in the navigation system industry, while the joint
venture with Siemens comprises an important Iorce in the telecommunication inIrastructure
industry. The Iollowing part will examine the attractiveness, the development and the nature
oI the competition in the industries Nokia competes in.
1. Industry Attractiveness
Assessing the attractiveness oI the industry is an essential Iirst step in understanding the
competitive Iorces aIIecting the organisation`s strategy. Using Porter`s Five Forces
Iramework the Iollowing table examines the power oI the buyers and suppliers within Nokia`s
industries, the threat companies Iace Irom substitutes Irom other industries, the entry barriers
and the nature oI the competition within the diIIerent sectors. The arrows within the table
show the increasing or the decreasing eIIect diIIerent Iactors have on each oI the Iactors.
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Industry Rivalry Threat of New

Entrants
Threat of Substitutes Power of Buyers Power of Suppliers
Telecommunic
ation
Devices
Industry

MEDIUM - HIGH
Dominated by Iew big global
players along with emerging
smaller entrants
Maturing basic mobile phone
industry, shiIting Iocus to
production optimization and
lowering costs
Patents wars in smartphone
sector Ior protection oI
intellectual property
Exit and entry barriers increase
due to the high Iixed costs and
R&D expenditures , but many
players utilize their resources
and technological know-how in
other electronics industries,
causing an adverse eIIect on the
barriers
MEDIUM
High capital, R&D
requirement
High economies oI
scale
Increasing
environmental and
public health
regulations
High brand loyalty
Economies oI scope-
achievable Irom related
industries
Public availability oI
components, such as
complete mobile
chipsets and content,
such as Android
operation system
LOW
Products like laptops, e-
readers, note pads and
tablets IulIill similar
Iunctions, but they are
considered complimentary
goods, not substitutes
Landline phones are not a
threat since mobile devices
are becoming primary tool
Ior communication. In
developed countries rate oI
landline use is decreasing
and in transition and
developing where landline
inIrastructures are not
reliable, the use oI mobile
devices increases too
MEDIUM
Small number oI global
suppliers dominating the
market setting trends and
introducing technological
innovations
Mobile devices - oI
extreme importance Ior
buyers
Buyers include network
providers and independent
retailers, which amount to
a small number in each
market
Backward integration by
the many network
providers oIIering owned
branded mobile devices,
Low switching costs
MEDIUM - HIGH
Few numbers oI global
buyers controlling suppliers
with environmental, social and
ethical assessments, decreasing
suppliers` power
Trend oI mobile device
manuIacturers to create
ecosystems with their
suppliers, increasing the
dependency in the system
Buyers depend on company
speciIic components and high
quality oI the inputs
High switching costs Ior
components such as operation
system and applications
Digital
Mapping/
Navigation
Industry
MEDIUM
Intensive rivalry with big
competitors, government
entities and local competitors



MEDIUM
Entry barriers are
degreasing with the
increase oI available
data Ior Iree,
encouraging new
entrants
LOW

Traditional paper maps
and navigation documents
are not considered a threat
MEDIUM
Variety oI buyers
Demand in the industry
depends on demand and
success oI its buyers`
industries
LOW

Power oI suppliers oI
components is relatively
low
Telecommunica
tion
InIrastructure
Industry
HIGH
Maturing industry, big players
consolidations, Iocus on cost
reductions and operations
eIIiciency, new entrants Irom
emerging markets and other
industries
high pricing pressures
LOW-MEDIUM
high entry barriers
due to high investment
requirement
Industry consolidation
New entrants Irom
other industries, e.g. IT
LOW

Thread oI substitutes is
relatively low
MEDIUM
Buyers are mainly big
corporations
Customer relations and
retention is important
High switching cost
LOW- MEDIUM
Many suppliers with diIIerent
size and strategies
Big buyers exercise quality and
integrity control
Collaboration and outsourcing
to suppliers increase the
dependency on them and their
power
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2. Industry Development
Understanding the dynamics oI an industry the company operates in is essential Ior
determining how the competitive Iorces aIIect the company`s current strategy and its
direction Ior the Iuture. Industry LiIe Cycle is a popular tool Ior representing the
development oI the industry. The telecommunication devices industry can be traced back to
1980s, when it entered its development stage with the introduction oI the Iirst device in the
USA. AIter 1990s when 2G devices were introduced to the market the industry started its
growth stage, characterized with many product innovations and heavy R&D investments. For
the past Iive years the global handsets industry has grown both in value and volume (8.5
and 10.7 respectively) and is expected to continue growing slowly in the Iuture.
(Datamonitor 2010. However, currently most oI developed markets have reaches almost
100 average per capita penetration (Marchi, G. & Giachetti C., 2010). Lowering costs and
optimizing manuIacturing processes have become important Ior Ieatures phones
manuIacturers. This would suggest that the industry is entering its maturing stage. The same
trend can be observed in the telecommunication inIrastructure industry, where price and
economies oI scale have become the major Iocus.
However, the model does not take into consideration the complexity oI the industry and its
trends. In 2010 the smartphone market alone has score an impressive growth oI 72 and it is
predicted to dominate the industry with 60 in 2015 (PrNewswire 2011). The LiIe Cycle
model is does not capture the dynamic changes in the telecommunication industry, such as
shiIt in core activities, relationships with suppliers and modes oI competition. McGahan
(2004) classiIies this change trajectory as intermediating and suggests an alternative liIe cycle
model that considers these Iactors .It includes the Smartphone market as an emerging
segment, quickly converging within the global handset industry and currently coexisting with
the rest oI the mobile devices and its Iorecasted dominance within the industry in the Iuture.
(Figure). The Iigure also represents the development oI the digital mapping industry, which is
currently in its growth stage, with increasing R&D investments Irom major players and
strong Iocus on innovation, quality and precision oI the mapping content.
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3. Competitive Environment
Understanding the composition oI the competition is a key Iactor in analyzing an industry
environment. The industries Nokia`s SBUs belong to are composed oI players serving
diIIerent market segment and Iollowing diIIerent strategies. The Iollowing diagram deIines
the strategic groups within the industries according to the players` geographical reach and
their oIIerings. The current dominance oI the company is obvious, however the close
competition with other big global players and the threat Irom oI competitors Irom emerging
markets that have started internationalizing or buyers with vertical integration should be
considered when designing a Iuture direction Ior the company.






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Internal Analysis
How a company would respond to its external environment depends also on its strengths and
weaknesses. Conducting internal analysis is thereIore vital Ior determining what makes the
company better than its rivals and what needs improvement across the diIIerent strategic
business units. Part one shows the units comprising Nokia Corporation separated by the
nature / technology oI their operations and their geographical scope. Value chain analysis
will help identiIy Nokia`s primary and supportive activities that create value and build up the
perIormance oI the company. (Pitts & Lei, 2006) The Iinal part oI the internal analysis
presents an overview oI Nokia`s internal resources and using the Hierarchy oI Resources tool
examines those resources and capabilities that construct its competitive advantage.

1. Strategic Business Units IdentiIication

2. Value Chain Analysis
The value chain analysis indicates that Nokia has built a strong value network around one oI
its product line mobile devices. This is the real key to its success. It has learned to bring the
best customized mobile phones to market, as quickly as possible and at the lowest possible
price. The value chain presented below clearly shows that Nokia has Iocuses on technology
development mainly. Symbian operating system is used in most Nokia`s Smartphones. It used
to be the most popular system that took 27 market share. Even considering the current
trends Nokia` Smartphones still take a big share, but since the sharp growth oI competition,
Nokia needs more Iocus on technology development to catch pace.


Technology

Customer
Groups
Mobile
Phones
Smartphones Mobile Software/
Services/Applications
Digital
Location
Content
Telecommunication
Infrastructure
Retail

Corporate

Government/Public
Sector

3/:8078

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72317,897:.9:70
(1) Headquarter located in Finland
(2) Operations managed by the Nokia Leadership Team, New leadership team and operational structure, Improve time to
market oI products and innovations, Focus more on speed, results and accountability
:2,37084:7.08
(1) Personnel selection system
N Nokia not only examines employees` personality, quality and indiv idual character but also seeks people who Iit the
company`s culture and share its values. .
(2) 3 steps training system
N Induction: allow employees to get used to new environment and receive training.
N Encourage employees to internal rotation: allows new skills acquisition and personal development
N Local personnel training: Local employees have the advantages in language, culture and understanding oI local market.
(3) Incentives
N Material incentives'rewarded by bonuses, stock options and perIormance shares. Relating employees` salaries to
Nokia`s results to build employees` loyalty to Nokia
N Spiritual incentives: providing employees chance to practice develop environmental awareness and social
responsibility.
(4) Global occupational health and saIety unit
N Develop health and saIety strategy and annual action plans
(5) Encourage employees to use Nokia products to ensure their mobility
Technology development
Internal development technical (secure Nokia`s diIIerentiation) Two Aspects:
N SoItware, applications and system technical levels
N Wireless technical levels Etc. 3G, LTE, WIMAX and Bluetooth.
(2) Formulated standard, established Iramework and interIacing technical (the most important technical to IT
industry)
N By these standards, Nokia is able to allow its supporters to develop by cooperation.
(3) Nokia purchases mobile component Irom competitors to reduce cost.
(4) Smart Devices Team
N Update soItware oI Symbian system used in new phones
N Develop Meego Program
N Development oI windows phone
(4) Location & commerce team: Develop NAVTEQ: digital mapping and automotive navigation system
(5) Nokia screen Reader
N New application designed Ior elderly customers which converts words and texts displayed into speech
(6) R&D oI biomaterials - Renewable natural resources are used to reduce greenhouse gas emission
!74.:702039
(1) Multi-sourcing - Dual sourcing Ior baseband chips: Reducing supply chai n risk
(2) Sustainable sourcing
N Integrating sustainable practices into our business
N Close cooperation
N Continuous improvement
(3) Strong tie with component markers
(4) Nokia Siemens networks - Share assembly networks
Inbound
logistics

(1)Suppliers
Ior 35
countries.
(2) Close co-
operation
(3) Industry
collaboration
Operation
(1) Production units
NMobile devices and
technology
NNetwork technology
- Focus in EU and
Asia
(2) ManuIacturing in
Asia
NSkilled labor with
low cost
(3) Siemens`s
relationship with
Nokia
NReduces assembly
costs, since two
companies shared
similar assembly
plants that were
rarely Iully utilized

Outbound
Logistics

(1) New
supply chain
launched
Reduce
transportatio
n cost
(2) Nokia
telecom
park
Exports to
more than
50 countries
Marketing and Sales
(1) Advertising marketing
NSegmentation (most successIul):
According to diIIerent level oI
customers, Nokia developed diIIerent
applications to meet their customers.
NAdvertising: Nokia advertised their
diIIerent levels mobiles using
diIIerent styles oI advertising
(2) Internet marketing
NNokia established its own network
company in 2007.
NNew network service brand called
OVI in August.
NOpening Online music store
NInternet game though mobiles
(3) Create pages on major popular
social networking sites such as
Facebook, Twitter.
NLow cost advertising
NClose relationship with customers
$07;.08

(1)Set recycling points

in stores Ior old
phones, battery,
component and
packaging.
(2)Support service on
Nokia Facebook page
and website
(3)Provide simple
solutions on the
Nokia.com to tackle
problems that
commonly met, as well
as contact details.
(4)Leave messages on
social networking sites
pages Ior more speciIic
troubles, which will be
replied in a short
period oI time.
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3. Internal Resources Analysis
Physical assets

N Production IacilitiesGlobal inIrastructure (NA/SA/EU/EU/AS)

N Symbian & Linux Operating system
N Large product range oI both mobile phones & Smartphones
(Lumia 800)
N Navteq SoItware
Financial assets N Total assets include $49 billion Q.3 201
:2,37084:7.08 N New Board oI directors / New leadership team
N Acquired MicrosoIt Expertise
N Employ over 100,000 staII worldwide
3900.9:,,88098

N Over 48 years oI experience in the telecommunications industry
N Know how to manuIacture mobile devices
N Future R&D and technology
#05:9,943,,88098 N Strength oI Nokia Brand















Core Resources
Breakthrough Resources
Base Resources
Peripheral Resources
Co
mp.
Ad
van
tag
e
Heavy investments in Iuture technologies e.g. Lumia
800- 27 workIorce R&D
Factories present in emerging markets
Strong reputation in emerging markets (14
th
most
valuable brand in World)
Partnership with MicrosoIt Ior operating system

Quick time to market

In-house knowledge operating systems &
Development team Linux & Symbian(Franchise
platIorm)

Knowledge in production oI mobile phones &

Smartphones (Hardware)

Peripheral Resources Navteq mapping

soItware
Nokia online app store OVI
Nokia Siemens network

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Breakthrough resources -
Breakthrough resources: These are the resources that should be selected when analysing
Iuture scenarios as it is what Nokia should try to be pushing.
The diagram below highlights the positive aspects that Nokia`s partnership with MicrosoIt
will provide to all areas oI Nokia`s business.










' Summary of the analysis
AIter exploring the external Iorces aIIecting Nokia and analysing its internal activities,
resources and capabilities, the Iollowing table summarizes the strengths and weaknesses oI
the company and the opportunities and weaknesses iI Iaces Irom its environment.

STRENGTHS WEAKNESSES
Brand awareness and strong brand image
(S1)
W Technology leader in manufacturing
mobiles,LTE technologies high quality
navigational data collection (S2)
W Presence across 150 countries (S3)
W The industry`s largest distribution
network (with more than 650 000 000
points of sale globally) (S4)
W Global production network and large
scale of operation (S4)
W After purchase revenue stream (OVI
store)(S5)
W Heavy R&D investment (S6)
W Successful joint ventures (NSN) and
acquisitions (Navteq) (S7)
W Competitive strategic culture with role
segregation and separate business units
Lower quality oI soItware (W1)
PerIormance oI Symbian OS is
lackluster(W2)
Increasing dissatisIaction levels with its
smartphone (W3)
Very weak market share in the US, UK and
Germany only 13 stock value compared to
36 in emerging markets (W4)
Late to the smartphone race (W5)
Weak presence in the US smartphone market
currently the biggest in value (W6)
Less diversiIied portIolio oI smart devices
than competitors (W7)
Increased dependency on application
developers and partners (W8)
Due to the new strategy signiIicant
reduction oI key workIorce (W9)
Lack oI consumer awareness about windows
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$

phone platIorm compared to Apple &
Android (W10)
!!#%&%$ THREATS
Huge loyal customer base (O1)
W Huge presence in developing countries
(O2)
W Can use its infrastructure business (NSN)
to reduce the bargaining power of mobile
operators (O3)
W New smartphone could raise visibility in
the US (O4)
W China becoming the leading Smartphone
market by volume (O5)
W Tax breaks and increased manufacturing
productivity in Indian factories (O6)
W Development of G4 technology (O7)
W Partnership with Microsoft and 3
rd
party
collaborations may enhance Nokia`s
competitive position and access to new
opportunities (O8)
W Potential success of the new strategy and
company reorganization (O9)

Rapidly changing industry (T1)
Currency Iluctuations (T2)
Very small Windows market share compared
to iOS and Android (T3)
Competitors with a greater brand image,
Iirst-mover advantage, higher demand (T4)
Strong customer loyalty to big Smartphone
competitors in developed markets (T5)
Recession in the major developed countries is
a major threat to the industry(T6)
Emergence and rapid growth oI competitors
Irom developing markets (T7)
Decreasing product liIe-cycle (T8)
Failure oI Symbian OS may lead to loss oI
brand image, reduced demand Ior Nokia`s
products (T9)
Reducing the global workIorce as part oI the
new strategy may negatively impact
employees` moral and satisIaction, which
may aIIect productivity and corporate image
(T10)
Increased concentration on Smartphones may
shiIt management attention Irom other
business units (T11)
Threat oI limited supplies (T12)
Low credit rating (T13)
Increased government interventions (T14)


C. FUTURE SITUATION ANALYSIS

Scenario Planning
Scenario Planning is useIul Ior perceiving assumptions about how and why the environment
and the industry may evolve in the Iuture. It creates learning orientation and adaptive
organisational mind-set.
The Iollowing part examines a variety oI uncertainty Iactors that might cause changes in the
external environment and aIIect Nokia`s current and Iuture strategy. The most relevant
Iactors were selected and combined in three diIIerent possible scenarios Ior the Iuture.
The changing Iuture can aIIect the Iorces characterising the industry the company competes
in. Understanding how its key resources and competitive advantages might be aIIected by changes
in the Iuture is also essential in order to improve the company`s ability to anticipate change and tailor
its strategic direction accordingly. ThereIore, the Iollowing part examines how Porter`s Five
Forces shiIt in the three identiIied Iuture scenes and how Nokia`s resources change using the
VRIN- Iramework

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1. Uncertainty Factors:

2. Technological
- Rise of information society`
- Increasing demand for smart devices and latest
technologies
- Smartphones dominate the mobile devices market
- Increasing backwards integration Irom mobile devices
retailer in manuIacturing their own products and building
ecosystems with suppliers oI operation soItware directly
- Forward integration oI operation systems providers in the
manuIacturing oI devices.
- Further consolidation oI big companies in order to reduce
costs and acquire know-how
- Fast pace of technological innovation from emerging
countries, China in particular
- Increasing dominance oI IT companies in the
telecommunication sector
2. .4342.
- Collapse of the euro zone, devaluation of countries`
currencies
- Foreign currency Iluctuations
- Growth of unemployment in developed countries
- Decrease in disposable income in developed countries
with reduction of consumers` demand
- Slowdown oI growth in developing countries such as India
- Negative eIIect oI India economic and industrial
development due to recent corruption scandals, increasing
interest rates, drop in domestic demand and increased
inIlation
- Increasing costs oI raw materials, such as metals Ior
manuIacturing oI electronics
- Growth of China as an economic power
3. !49.,
- Growing demand Irom developing markets, but increased
government protection and support Ior local competitors
- Political turmoil in developing nations
0,
- IneIIectiveness oI patent laws and decreasing protection oI
intellectual property

Environmental
- Increased CO2 and other hazardous gases reduction
targets, enIorces by UN conventions
- Environmental issues change the traditional supply chain
activities aiming at reduction oI energy and resources used
- Increasing awareness about climate change and social
pressure Ior sustainable operations/products
- EnIorced legislation on recycling and e-waste
management due to the decreasing liIe-cycle oI electronic
products
$4.,
- Rise of Chinese consumers` demand for smartphones
and new technologies
- Strong consumer loyalty Ior current smartphone leaders
and unwillingness to switch brands in the Iuture
- Change in consumers` brand perception oI Nokia
- Nokia`s brand image will be negatively aIIected by its
many workIorce reductions
- Aging population in the developed nations
- Health concerns about mobile devices causing
electromagnetic Iields

Future Scenarios
N Decline in European economy, characterised by aging population, euro-crises,
decrease in income, increase oI unemployment
N Fast pace technological innovation caused by demand Ior high-tech devices,
increased income, society that wants latest product, mobile and connected Iuture
N Dominance of emerging markets as producers and consumers caused by
deregulation in developing countries, increase oI FDI and trade, wealthier society,
demand Ior goods increases, local competitors that continue to grow and globalise

II. Change of competitive environment in the predicted scenarios
Current (average
from all industries)
Scenario 1

Scenario 2 Scenario 3
Threat of Entrants Medium Low High High
Treat of Subs Low Low Medium Low
Power of Buyer Medium High High Medium
Power of Sups Medium Medium High Medium
Rivalry High High High High

! , 0

Changes in Resources

Decline in
European Market
Fast Pace
Technological
Innovation
Dominance of
Emerging Markets
as Producers and
Consumers
Resources ' # ' # ' #

Future
Technology R&D


Factories
established in
emerging markets


Reputation in
emerging markets


Partnership with
Microsoft

0
V Valuable R Rarity I Non-Imitable N Non-Substitutable
Positive Impact Neutral EIIect Negative E

IV. Future SWOT
Decline of European
Economy
Fast pace
technological
innovation
Dominance of
emerging markets as
producers and
consumers
Strengths

W Concentrate Iocus in
emerging markets (S1)
Enable Nokia to
become more eIIicient
and cost eIIective (S2)
Best practice Ior
emerging markets (S3)


Established experience
in technology
development(S4)
Improved network
inIrastructure (S5)

Concentration oI
manuIacturing in
emerging markets (S6)
Established brand
image, distribution
channels (S7)
Existing knowledge and
expertise (S78)
FDI improves
reputation in the host
countries (S9)
0,308808

W Increased production,
internal and external
costs (W1)
Less attractive to
investors (W2)
High costs in the short
term (W4)
Too much Iocus on new
technologies as
emerging markets may
Increased reliance on
partners and strategic
alliances (W6)
Susceptible to licensing
and patent
! , 0

Loss oI reputation (W3) not require as such (W5) inIringements (W7)

55479:3908

W Potential gains in other

markets, e.g. US and
emerging markets (O1)
BeneIitting Irom lower
interest rates (O2)

Possibility to keep up or
overtake market leaders
(O3)
Potential to create new
and original ideas that
the market desires (O4)
Large potential returns
Irom risk (O5)
Due to late arrival to the
Smartphone market,
with RD brings the
opportunity to leapIrog
the competition (O6)
New markets
opportunities (O7)
Access to more
consumers (O8)
Existing products in
new markets (O9)
Growing skilled labor in
emerging countries
(O10)
%70,98

W Economic uncertainty
(T1)
Increased inIlation rates
(T2)
II emerging market
sales Iail, then Nokia
would not want to rely
on the declining EU
market (T3)
Potential patent and
license inIringements
with competitors (T4)
Threat oI substitutes
(T5)

Intensive rivalry (T6)
Unstable economic
environment (T7)
Not able to meet the
demand (T8)
Long lead times (T9)

D. CURRENT ORGANISATIONAL DIRECTION
IdentiIying Nokia`s organizational direction requires thorough understanding oI its mission,
organizational core and Iuture vision.
8843
From its entrance in the telecommunication industry in 1980s till present date Nokia is
devoted to the mission oI 'Connecting People (Nokia, 2011)
'843
Understanding why a company exists and what it believes it, along with where it wants to be
in the Iuture Iorms the overall long-term vision oI the organisation. (Collins & Porras, 1996).
Nokia`s purpose, core values and Iuture goals outline the company`s current direction.
a) Purpose
Nokia`s purpose, or its reason Ior existence, is devoted to making a change and helping
people around the world enjoy what liIe oIIers using the potential oI the mobile technology.
(Nokia, 2011)
b) Organisational Culture and Values
! , 0

Throughout its 150 years oI operations, Nokia has valued:

c) Future Goals
According to Nokia`s corporate website (2011) the company is devoted to the Iollowing
visionary goals:






3. Current Strategic Direction
Recently Nokia underwent several major transIormations at corporate level change oI
leadership and managerial Iocus concentrated on smart devices mainly and the partnership
with MicrosoIt. The radical change also included reduction and transIer oI workIorce along
all oI Nokia`s strategic units, organisational restructuring and shiIt oI resource allocation to
accommodate the new changes.


IDENTIFYING STRATEGIC OPTIONS

TOWS Matrix
E Creativity , Empowerment, Openness, Collaboration, Honesty and Consideration Ior
the people and the environment`
E Being a human in everything it does`
E Operating in a socially and environmentally responsible manner
E Diversity oI its workIorce
E Cultivation oI Ilexible culture that embraces the uniqueness oI everyone's liIe`
(Nokia, 2011)

E Achieve a global leadership position in the Smartphone market

E Through its newly established partnership with MicrosoIt increase its product range,
geographic scope and strengthen its brand image
E Increase its customer base, especially in emerging markets
E Invest in innovation and new technologies
E Improve perIormance by Iocusing on speed oI decision-making, innovation and
product introduction
(Nokia, 2011)

! , 0

CURRENT SWOT
WEAKNESSES
W4: Weak market share in US,UK, Germany,
compared to emerging markets
W5: Late to the Smartphone race
W6: Weak presence in US Smartphone market
the biggest in value
W8: Increased dependency on application
developers and partners
W9: Due to the new strategy signiIicant
reduction oI key workIorce
W2: PerIormance oI Symbian OS is lacklustre
STRENGTHS
S1: Brand awareness and strong brand image
S4: Global production network and large scale oI
operation
S6: Heavy R&D investment
S7: SuccessIul joint ventures and acquisitions
S8: Competitive strategic culture with role
segregation and separate business units
S3: Presence across 150 countries
S2: Technology leader in manuIacturing
mobiles,LTE technologies high quality
navigational data collection
OPPORTUNITIES
O6: Tax breaks and increased manuIacturing
productivity in Indian Iactories
O2: Increasing presence in developing countries
O9: Potential success oI the new strategy and
company reorganization
O8: Partnership with MicrosoIt and 3
rd
party
collaborations may enhance Nokia`s competitive
position and access to new opportunities
O4: New products could raise visibility in the US
O5: China becoming the leading Smartphone
market by volume
N Capture the US market with new products
(O4 W4 W6)- .47547,90
N Develop Smartphone devices Ior the growing
Chinese market (O2 O5,W5)
N Reallocate employees to diIIerent business
units based on their experience and skills (O9
W8W9)
N Increase quality control measures to maintain
brand reputation( W8 W5 O8)

N Anticipate market trends and introduce new
products development (S4 S6O8)
N Reduce costs by eIIectively managing
resources, expanding production in developing
countries and maintaining Iocus oI
management on speciIic business units
-:830880;0 (O6O2 O9.S4S7)
N Open branded stores, oIIering a diversiIied
portIolios oI products, e.g. smartphones,
tablets (O8, S1)- business level
THREATS
T10: Reducing the global workIorce as part oI the
new strategy may negatively impact employees`
moral and satisIaction, which may aIIect
productivity and corporate image
T4: Competitors with a greater brand image, Iirst-
mover advantage, higher demand
T14: Increased government interventions
T4: Competitors with a greater brand image, Iirst-
N Invest more in developing current mobile
phone platIorms to upgrade services provided
to traditional customers to maintain innovative
quality oI their products.( T11 W2 T4)
N Reduce threat oI staII de-motivation by
replacing staII across speciIic business units.
(W10 T9)
N Reduce dependency on suppliers and external
developers by internally developing
N Rregulate and modiIy beneIits schemes and
compensation plans and take other measure to
retain skilled personnel (T10 S7)
N Adopt business practices and code oI conduct
that leads to global harmonisation. (S8 S3
T14)
N Explore new opportunities by collaboration to
access new markets, without which local
production is impossible ( T4 T7 T14 S4
! , 0

mover advantage, higher demand

T7: Emergence and rapid growth oI competitors
Irom developing markets
T11: Increased concentration on Smartphones may
shiIt management attention Irom other business
units
technologies

S7)
N Open branded stores, oIIering a diversiIied
portIolios oI products, e.g. smartphones,
tablets (S2, S1, T4)- business level



FUTURE SWOT
WEAKNESSES
W1: Increased internal and external costs
W3: Loss oI reputation
W4: High costs in the short-term
W6:Incresed reliance on partners and strategic
alliances
STRENGTHS
S1: Focused on emerging markets
S3: Use best practice Ior emerging markets
S4: Established experience in technology
development
S6: Concentrated manuIacturing in developing
countries
S7: Established brand image in developing market
S8: Established knowledge and expertise
S9: FDI improves image in host countries
OPPORTUNITIES
O1: Potential high gains in other markets- US
O4: Potential to develop creative ideas to meet the
desires oI the market
O5: Large potential returns Irom higher risk
O7: Market opportunities in emerging markets
08: Access to bigger consumer base
O10: Growing skilled labor in emerging countries
N Introduce existing products in emerging
markets and reduce dependence on partners
(W6 O7)
N Develop internally intellectual capabilities
(O10 O7 W6)
N Move production to emerging markets to
reduce cost and increase proximity to market
(W1 W3 O1)
N Invest in new technologies/research new
products (W4 O4)
N Develop new generation products and
introduce them to new emerging markets (S4
O4 O5) diIIerentiation strategy
N Develop strong brand image in emerging
markets to capture biggest market share (S9
S1 S7 O1 O7)
N Smartphone production Iacilities in emerging
markets (O7 O8 O10 S8 S6)
%#%$
T1: Economic Uncertainty
T4: Potential license and patent inIringement
T5: Threat oI substitutes
T6: Intensive rivalry
T8: Not able to meet demand in emerging markets
T9: Long lead times
N Acquisition oI local suppliers/ competitors to
improve position in emerging markets (W6,
T6, T8) SA take-over strategy
N Consolidate with big European companies (T1
T6 W1)
N New product development to existing markets
second mover advantage (S4 T4 T5)
N Production concentration in emerging markets
(S1 T8 T9 T1)
N Brand reputation management actions to
strengthen image and increase loyalty (T6
S9 S7)
! , 0

II. Selecting & Ranking strategic options - FSA matrix

Using the TOWS matrices three short-term and Iour long-term options were selected. These
were chosen as most appropriate Ior the company and most compatible with Nokia`s current
direction and mission. The portIolio oI options includes corporate and business unit level
strategies possessing diIIerent level oI risk. The short-term and long term strategies were
also chosen in a way that they do not contradict but rather complete each other.
1. Short-term Options









Option 1: Capture the US market with new products
Feasibility: Penetrating the US market is very Ieasible option since Nokia has already the
needed resources to develop new products, such as smart devices and capture a signiIicant
share oI the biggest market in value. However, the success oI such strategy will depend on
the relations it builds with distributors and retailers and the customer perception oI the brand
Suitability: Developing smart devices will match the industry growth stage. However,
Nokia`s current strategy is primarily Iocused on capturing their home European
Smartphone market and increasing mobile connectivity in developing countries. The US
market is oIten seen as saturated with high customer loyalty to competitors` brands.
Acceptability: Capturing a share in the biggest in value market will certainly add value to
Nokia`s stakeholders. As a market penetration strategy, it is a low-risk option. However, the
Short and medium term
strategies
F

S A

Total and
Rank
Strategic Option 1 : Capture
the US market with new
products
4 3 4 11
2
nd

Strategic Option 2 : Explore
new opportunities by
collaboration to access new
markets, without which local
production is impossible
5 4 3 12
1
st

Strategic Option 3 : Open
branded stores, oIIering a
diversiIied portIolios oI products
2 3 3 8
3
rd

! , 0

intense competition and the possibility oI market stagnation make this strategy less
acceptable.
Option 2: Collaboration in emerging markets
Feasibility: Due to Nokia`s presence and expanding resources, new production sites, such as
the Iacility in India and its past success in building partnership and alliances, this option is
considered highly Ieasible.
Suitability: This strategy Iits Nokia`s current direction and objective to connect the next
million` (Nokia 2011). Furthermore, the option will capture the growing trend Ior mobile
connectivity in the emerging markets. Collaborating with local partners, suppliers or
distributors will also increase Nokia`s local market competencies and improve its ability to
adapt and respond to the local tastes and preIerences.
Acceptability: Market volatility, Iuture uncertainties unstable economic environment,
regulations and policies in most developing countries add a certain level oI risk when
pursuing this option. However, the risk is balanced with the possibility to generate new
sources oI revenue.
Option 3: Own branded store with diversified portfolio of products
Feasibility: In order to develop a diversiIied products portIolio to match and over -perIorm its
major competitors, Nokia is highly dependent on the partnership with MicrosoIt. OIIering
new products, such as tablets, requires utilizing new technological capabilities and over-
relying on its soItware provider.
Suitability: This option will certainly improve signiIicantly Nokia`s brand image and
enhance end-users loyalty. It will also make the company less reliant on its distributor and it
will gain a higher level oI control.
Acceptability: This option is associated with incurring new costs and acquitting resources
and capabilities previously held by Nokia`s distributors. It also involves a certain level oI risk
perceived by investors, however it will certainly add value to other stakeholders, such as
customers by providing them easier access and better post-purchase service.
2. Long-term options

! , 0

Option 1: Invest in new technologies/research new products
Feasibility - The technological capability oI Nokia is suIIicient to heavily invest in new
technologies and research new into developing products Nokia already have suitable
resources that would allow this to be Ieasible within the organisation
Suitability - This option will prevail iI a decline in European market as will need to capture
the competitive market share. Fast pace technological innovation means Nokia have to stay
competitive and iI not better, then match competitors within the industry. The potential
dominance oI emerging markets in the Iuture will mean they have to meet and satisIy
whatever the markets may demand in the Iuture.
Acceptability - This is a highly acceptable strategy as this a requirement within the Mobile
Phone industry. Mobile phones/Smartphones have relatively short product liIe cycles
thereIore Nokia have to remain competitive and seek to continually develop and produce new
Decline in European
Market

(Score out of 5)
Fast Pace Technological
Innovation

(Score out of 5)
Dominance of Emerging
Markets as Producers and
Consumers
(Score out of 5)
Total and
Rank
Future Scenarios




Long term
strategies

F $ $ $
1. Invest in new
technologies / research
new products
3 2 2 4 5 5 4 3 4 32 (3
rd
)
2. Acquisition oI local
suppliers / competitors
to improve position in
emerging markets and
take over strategy
4 5 4 3 2 3 4 5 4 34 (2
nd
)
3. Develop new
generation oI products
and introduce them to
new emerging markets
DiIIerentiation
strategy
4 3 4 5 4 4 4 5 5 38 (1
st
)
4. New product
development to existing
markets 2
nd
mover
advantage
4 4 4 5 4 4 1 2 2 30 (4
th
)
! , 0

products. Changing market needs and the emergence oI new markets means it is essential iI
Nokia are to not only gain but maintain market share.
Option 2: Acquisition of local suppliers/competitors to improve position in emerging
markets
Feasibility - Due to decline in European market, Nokia need to extend its market to emerging
market by acquisition oI local suppliers and competitors improve in emerging markets. And
also, emerging market acting as producers and consumers allow Nokia to make costs lower
Irom transportation and lower labour cost in developing countries such as India.
Additionally, new inIormation and products can be delivered directly and quickly, which
helps Nokia to Iollow the Iast pace oI technological innovation.
Suitability - Strategy two perIectly suits the trend oI decline demand oI Nokia in European
market and dominance oI emerging markets as producer and consumers, because acquisition
oI local supplier and competitor in emerging markets brings Nokia more eIIicient inIormation
Irom competitors that help Nokia to better understand the emerging market. Additionally,
close supplier brings Nokia cheaper raw materials and local labour with better ability to get
used to working environment costs lower.
Acceptability - This strategy is highly accepted as this a decline trend within the mobile
industry in Europe. Taking the mover advantage, Nokia enters emerging markets with low
risk. Based on lower costs, there is a high proIit margin.
Option 3: Develop new generation of products and introduce them to new emerging
markets providing a differentiation strategy
Feasibility - Nokia have the necessary resources and competencies to develop what
consumers will desire Irom a Smartphone in the Iuture. As the European market declines and
emerging markets begin to dominate demand Ior Smartphones, it is entirely Ieasible Ior
Nokia to get ahead oI their competitors by specializing in emerging markets.
Suitability - This option has become the strongest Ior Nokia, as it Iits their strategic plan. II
the European market is declining it provides a Iocus on the vastly expanding developing
markets. By exploiting Nokia`s brand name and production capabilities, then this option will
allow Ior the mass sales oI Nokia products. II Nokia break the emerging market, then this
! , 0

will be an almost certain way to wedge their Ioot Iirmly in the door and remain the largest
and most dominant presence in the mobile phone industry in developing markets.
Acceptability - The option is acceptable and the gains heavily outweigh the risks involved.
Nokia`s shareholders would agree that with the encroaching popularity oI smart phones
within developing countries, it is more than worthwhile to provide a speciIic product range.
In terms oI value creation, through diversiIying their products, Nokia would gain a
competitive advantage over their competitors who simply wish to relay their out-
dated/declining models.
Option 4: New product development to existing markets - 2
nd
mover advantage
Feasibility - Within existing markets the points oI sale and distribution networks are already
in place; thereIore it is Ieasible Ior Nokia to develop and sell new products to existing
markets. However iI there is a decline in existing markets and a dominance oI the emerging
markets Nokia may not be able to split valuable internal resources into a declining European
market.
Suitability - Highly suitable; in terms oI changing market needs within existing markets. II
Nokia aim to keep the market share within these markets new product development will be
crucial. More so by the Iact that existing markets such as Europe are highly saturated in terms
oI smart phone use and demand the latest technologies available. However iI the emerging
markets continue to dominate Nokia may be better suited to allocating their resources to these
growing markets, as potential gains are Iar higher.
Acceptability - It is oI great importance Ior Nokia to maintain their market presence within
Europe (their home market) thereIore it is acceptable Ior them to develop new products to
existing markets This may also show Iocus within US markets as likely to be established
within next 5 years. However, iI European markets are declining signiIicantly and the
emerging markets are dominating global sales and growth then Nokia`s Iocus should switch
to the new markets.
! , 0

REFLECTION & CONCLUSION

Analysing strategy can be a very dynamic process. When it involves a global technology
company in transIormation process this becomes even more challenging. Strategy does not
exist in isolation. From this report it is clear how it is aIIected by internal, industry and
external Iorces, and especially in the telecommunication industries the environment changes
tremendously Iast. Executing the research, conducting the analysis and predicting the Iuture
Ior Nokia Corporation revealed how complex, unstable and risky guiding a company`s
direction can be.
Nokia is currently in a very delicate state. The recent radical strategic transIormations could
be an important stepping stone in the Iuture success oI the company. Although the many
negative consequences, such as job cuts and shiIt oI Iocus, the partnership with Nokia seems
as a logical solution to capture the Iast-changing market trends. However, Iuture is uncertain
and there are many internal and external Iactors that would inIluence the success oI this union
and Nokia`s role in it. Recent history has shown that the percentage oI partnership Iailure is
huge due to risk Iactors, incompatibility, organisational diIIerences and external environment
changes. Furthermore, Iollowing the extensive internal analysis oI this report it is clear that in
a market where the mind` oI the devices is the core oI the product Nokia may become highly
dependent on MicrosoIt competences. And company are protective oI their resources and
know-how. Could this dependency lead to inability oI Nokia to operate alone? Could
MicrosoIt be overprotective and as other competitors in the industry buy out this partnership?
Could MicrosoIt see the acquisition oI the other Nokia`s SBUs as attractive strategic
opportunity Ior knowledge and resources extension and cost reductions?
The high possibility oI these outcomes raises the questions about the Ieasibility oI Nokia`s
current strategy especially in the long term. As concluded Irom the analysis Nokia has the
resources - competent workIorce, global production and distribution networks, technological
know-how and in-house applications inIormation, such as navigation- to build on its
competitive advantage alone. As already late to the Smartphone race enhancing its Symbian
platIorm could have be a less risky and successIul strategy.
In all scenarios the Iuture success is highly dependent on shiIts in the environment and
thereIore organisations need to Iollow their mission with the right strategic direction but
consider diIIerent paths in the Iuture that could help them adjust and react to changes in a
competitive manner.
! , 0

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