Nokia Group in Consumer

Electronics – World

September 2010
Scope of the Report Consumer Electronics: Nokia Group © Euromonitor International

Scope
• This profile on the Nokia Group focuses on its operations in mobile phones and also reviews prospects of the
company‟s recent foray into portable computers.

Nokia Group

Portable
Mobile phones
computers

Other portable
Netbooks
computers

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 Consumer Electronics: Nokia Group © Euromonitor International

Strategic Evaluation

Competitive Positioning

Market Assessment

Category and Geographic Opportunities

Brand Strategy

Operations

Recommendations

3
Strategic Evaluation Consumer Electronics: Nokia Group © Euromonitor International

Key Company Facts

• Nokia Group is the world‟s largest mobile phone
Nokia Group
manufacturer and is dominant across the world with
the exception of North America where it has
Headquarters Espoo, Finland
struggled to compete with CDMA-based models
Regional Involvement Worldwide from Samsung Corp and LG Group, among other
manufacturers.
Category Involvement Mobile Phones • Strength in Asia Pacific comes from strong presence
in developing markets: in 2009, 54% volume share
World Mobile Phones share (2009) a 20% in India, 36% in Thailand and 30% in China.
• The company is struggling in CDMA-dominated
Revenue growth (2009) b -19% markets in Asia with a negligible share in South
Korea, and most notably, bowing out from the
Source: a Euromonitor International b Nokia annual report Japanese market in 2009.
• Nokia Group consists of three major divisions:
Nokia Group Mobile Phone 2009 %
• Devices and Services
Volume Share by Region
• Nokia Siemens Networks
40
35 • Navteq
30 • Revenues for Nokia Group in Q2 2010 saw a 1%
25 year-on-year increase from the previous year, but
20 operating profit declined 15% in the same period.
15
10
5
0
Australasia Eastern Western Asia Pacific North
Europe Europe America

4
Strategic Evaluation Consumer Electronics: Nokia Group © Euromonitor International

Division Breakdown
Devices and Services Operating Profit Q2, 2010
• Devices and Services is responsible for the
development, manufacture, marketing and distribution of
mobile devices, and the operation of the online services
portal: The Ovi Store.
• In Q2 2010, despite posting a 3% year-on-year increase
in revenue, Devices and Services‟ operating profit
fell19%. This is largely due to continued price erosion in Devices and Services
the mobile phones market and Nokia Group‟s struggles EUR647 million
in the high-margin smartphone market. (67%)

Nokia Siemens Networks

• Nokia owns a 50% share of the joint venture which Nokia Siemens Network
accounted for 30% of the group‟s revenue in Q2 2010 EUR19 million
(30%)
and is responsible for manufacturing cellular
communication infrastructure hardware.
Navteq
• Navteq provides mapping and navigation data, as well
as development of location-based services.
• The group‟s top performer, Navteq, registered a 71%
year-on-year increase in revenue and a 163% increase Navteq
in operating profit in Q2 2010 as location-based services EUR2 million
become mainstream. (3%)

5
Strategic Evaluation Consumer Electronics: Nokia Group © Euromonitor International

Recent Company News

Acquisition of Motorola Solutions
• The US$1.2 billion deal announced on 19 July 2010 is expected to be completed by the end of 2010.
• This acquisition gives Nokia Siemens Networks a controlling share in Motorola Solutions, a wireless network
infrastructure provider with long-standing relationships with the biggest CDMA network providers in the US: Sprint
and Verizon Wireless.
• The deal includes active CDMA networks in 22 markets giving Nokia a strong foothold globally and in the US.
Motorola Inc‟s decision to sell the division is part of its reorganisation aimed at integrating the in-home and mobile
divisions into a single unit focusing on devices.
Nokia Money
• The Nokia Money pilot launched in India in a tie-up with YES Bank. The service provides mobile banking and mobile-
to-mobile payment options to a nation of 1.2 billion people and 500 million mobile subscribers.
• The service is expected to be in demand: only nearly 5% of households own internet-enabled PCs making the
mobile phone the only gateway to the internet for the vast majority of an immense market where financial card
circulation remains low with only 24 million credit cards in circulation in 2009.

6
Strategic Evaluation Consumer Electronics: Nokia Group © Euromonitor International

Financial Assessment
% growth • In an effort to catch up to rivals, the company
EUR million Q2/2010 Q2/2009 Y-o-Y Q1/2010 has planned to release a new version of its
Q-o-Q
operating system. The Symbian^3 operating
Net sales 10,005 9,913 1% 9,522 5% system originally due out in April 2010 on the
company‟s new flagship model the N8 was
Operating
660 775 -15% 820 -20% expected to challenge iOS, Blackberry, and
profit
Android in a much more significant way than its
Operating predecessor.
6.6% 7.8% - 8.6% -
margin • However, delays with the release of the N8 took
Source: Nokia Group the company out of competition in the high-end
smartphones leaving the market to Apple, HTC
• The Devices and Services division of Nokia accounted for Corp, Samsung, all of which have since had
EUR6.8 billion of the turnover in Q2, a 3% y-o-y increase; successful launches in the top-tier range.
profitability in the division fell 19% y-o-y. • The delay may also mean a sluggish Q3 in terms
• The company‟s devices have fared well in the low to middle of profits. Rumours surrounding the company‟s
price segments, but declining prices drew down profit plans to launch the MeeGo and Symbian^4
margins. operating systems at some point in late 2010
• Unit shipments in Q2 are estimated to have grown to over along with a new flagship model, the N9, are
110 million units largely due to sales in developing markets likely to significantly hamper demand for the N8,
where the company is strongest. as consumers interested in the model are likely
• Profitability is mainly impacted by the company‟s inability to to wait for later releases.
compete in the developed markets, where the share of • This will further delay Nokia‟s challenge to the
smartphones is rising. Nokia-branded devices have failed to leading mobile operating systems, which are
capitalise on the growth in smartphones due largely to the rapidly developing vast application biospheres
success of competing operating systems: Apple iPhone OS, around themselves thereby building consumer
Blackberry, Android and Windows. loyalty for the long run.

7
Strategic Evaluation Consumer Electronics: Nokia Group © Euromonitor International

SWOT – Nokia Group

Strong presence in Low competitiveness in Declining presence in
Wide product range
developing markets smartphones the US
• The brand is dominant in • Much of Nokia‟s • Nokia‟s high-end E-series • Losing its edge in the
markets like India (54% dominance is due to a and N-series devices have smartphone battle has put
share), as well as low- wide array of devices in been made largely Nokia‟s share under
penetration markets in the the low- to mid-priced irrelevant by Apple and pressure in developed
Middle East and Africa, ranges, where the Research in Motion, which markets, particularly the
which are expected to be company‟s reputation for along with Google have US, where its volume
the fastest-growing quality has helped to developed OS preferred share in mobile phones
markets over the forecast stave off competition from by high-end users. declined to 6.5% in 2009
period. low-cost brands. from 24.1% in 2002.

Strengths Weaknesses
Opportunities Threats
Growing loyalty for
Mobile computing 4G Price erosion
competing OS
• As part of the effort to • The acquisition of • Leading mobile operating • Inability to compete in the
capitalise on the growing Motorola Solutions should systems have a growing high-end device market
demand for data-centric give Nokia an edge in number of applications makes the company
smartphones, Nokia has incorporating 4G around them making the dependent on its low- and
also started manufacturing networking, giving it a market ever harder to mid-priced ranges where
portable computers which much needed boost in penetrate for systems that strong price erosion is
presents a significant competitiveness in the US fell behind: Symbian, Web expected to continue
opportunity in developing market where 4G is set to OS and Windows Mobile. driving down profitability.
markets. grow.
8
Strategic Evaluation
Key Strategic Objectives and Challenges
Establish a presence in mobile computing
• While problems with the operating system have kept
Nokia on the sidelines of the smartphone battle, the
company launched the 3G Booklet running Windows 7
in autumn 2009.
• The product has potential in developing markets where
netbooks are expected to grow dynamically over the
forecast period and the brand is widely recognised due
to its dominance in mobile phones.
• This could also be a sign that Nokia may also be
considering competing OS for some of their phones.
Strong incumbent brands
• In portable computers and smartphones, the company is
facing strong competition from established brands.
• In netbooks, Asus, Acer and HP control 47% of the
global market, with brands like Lenovo and Samsung
rapidly gaining share.
• In smartphones, Apple has been Nokia‟s main rival, as
the Symbian OS was much more successful prior to the
2007 release of the iPhone.
Consumer Electronics: Nokia Group © Euromonitor International
Retain dominance in developing markets
• Nokia‟s continued weakening in the developed markets
could result in it becoming a low-price manufacturer,
putting the company‟s dominance in developing markets
under threat as the markets shift to high-end
smartphones over the forecast period.
• To this end, Nokia is pushing to rework the user
experience with an upgraded OS to regain its footing in
the developed markets.
• Services like Nokia Money are also a step towards
fortifying its share in developing markets.
Regain footing in CDMA
• Nokia has struggled in the US, Japan and South Korea
over the review period as brands like Samsung, LG,
Motorola and Sharp dominate.
• The acquisition of Motorola Solutions gives the Nokia
Group a strong foothold in CDMA network hardware
manufacturing and long-standing relationships with
CDMA service providers like Sprint and Verizon
Wireless.
• With this move, Nokia hopes to re-establish itself in the
CDMA-based device market over the forecast period.
9
 Consumer Electronics: Nokia Group © Euromonitor International

Strategic Evaluation

Competitive Positioning

Market Assessment

Category and Geographic Opportunities

Brand Strategy

Operations

Recommendations

10
Competitive Positioning Consumer Electronics: Nokia Group © Euromonitor International

Nokia Group Fails to Keep Up with the Market

Mobile Phone Global Retail Sales (units)
40
Total
35
Nokia Group
30
A
% y-o-y growth

25
20
15
10 B C
5
0
-5
02 to 03 03 to 04 04 to 05 05 to 06 06 to 07 07 to 08 08 to 09

A: Nokia fails to capitalise on B: Nokia recovers with 3G

Brazil
• 2004 saw 100% growth in mobile
phone market volumes in Brazil.
• While Nokia remained the market
leader, brands like LG were able to
take greater advantage of the
growth, with LG Group opening a
plant in Sao Paulo at the end of
2004.
• Adding to share loss was the
popularity of flip-phones, a design
Nokia was late to enter.
adoption
• The company launched several
successful 3G models in 2006 which
helped the company to capture 18%
of the US market.
• The N70, launched globally in Q3
2005, was a major revenue driver
for the company through most of
2006.
C: Nokia struggles in the US
• Failing to capitalise on the growing
demand for smartphones in the US,
Nokia‟s share declined around six
percentage points each in 2007 and
2008, with a majority of the share
going to Apple, which launched the
iPhone in 2007.
• Samsung, LG and Research in
Motion also gained share as
smartphone adoption widened in the
market.
11
Competitive Positioning Consumer Electronics: Nokia Group © Euromonitor International

Leadership Under Threat

Mobile Phones – Top 10 Global Companies by Samsung closing in
Volume, 2005-2009 • While Nokia remains the market leader, Samsung has
been successful in shifting its product assortment
2009 % away from basic models to meet demand for
Company name 2005 2006 2007 2008 2009
share smartphones.
• Samsung‟s success in smartphones allowed it to gain
Nokia Group 1 1 1 1 1 20.4
second place in 2008 and to significantly close the
Samsung Corp 3 3 3 2 2 14.6 gap in 2009.
• Over 2007, Samsung launched several multimedia-
LG Group 4 4 4 4 3 8.5 capable phones with the SGH-D900 among the best
sellers for the year.
Motorola Inc 2 2 2 3 4 5.6 Emerging threats
• As smartphones gained share in the market, Nokia
Sony Ericsson
Group saw the emergence of new competitors in
Mobile
5 5 5 5 5 4.5 Apple and Research in Motion, which gained
Communications
significant market share relying solely on their
AB
smartphone line-ups and have made the top-tier price
Apple Inc 9 6 1.7 range difficult to penetrate for Nokia.
• Nokia‟s lack of competitiveness resulted in a loss of
Research in over 75% of its stock value since it peaked in late
9 8 8 8 7 1.5
Motion Ltd 2007.
Kyocera Corp 7 7 7 6 8 1.3 Old foes resurface
• Going forward, Nokia must expand its presence in the
TCL-Thomson
8 9 9 10 9 1.0 US where Motorola is undergoing restructuring and is
Electronics Corp
likely to experience a resurgence and has already
Sharp Corp 6 6 6 7 10 0.9 been successful with its Droid line-up of smartphones.

12
Competitive Positioning Consumer Electronics: Nokia Group © Euromonitor International

Smaller Competitors Threaten Leaders

• Market leaders have been unable to keep up with Global Average RSP (y-o-y exg)
market growth rates. With the exceptions of
125
Samsung and LG, leading players have been
losing market share over the review period. 120
• Competition from low-cost producers has put 115
pressure on market leaders in the lowest price

US$
110
segments particularly in developing markets. In
China, TCL, Lenovo (China) and Ningbo Bird 105
accounted for 17% volume share in 2009. In 100
India, private label like Vodafone (Vodafone
95
Essar Ltd) accounted for 6% volume share in the
same year. 90
• At the other end of the spectrum, market leaders 2002 2003 2004 2005 2006 2007 2008 2009
have seen strong competition from Apple and
Research in Motion, which together accounted Market Decentralisation
for a 16% volume share in the US in 2009. HTC
became an emerging threat in smartphones, 1,800
launching the first 4G phone in the US. 1,600
1,400
• This pushed down unit prices across the world as
Million units

1,200
competition has intensified across the price
1,000
spectrum, a trend particularly strong in 800
smartphones. 600
• Rising competition eroded market shares of 400
Nokia and Motorola, the two leading companies 200
in 2002 which accounted for a combined 42% 0
share of the global market compared to 26% in 2002 2009
2009.
Total market Combined sales of top 5 players
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 Consumer Electronics: Nokia Group © Euromonitor International

Strategic Evaluation

Competitive Positioning

Market Assessment

Category and Geographic Opportunities

Brand Strategy

Operations

Recommendations

14
Market Assessment Consumer Electronics: Nokia Group © Euromonitor International

Sales Growth Highly Dependent on Developing Markets

• Asia Pacific is the key opportunity market for Nokia. The region is expected to post an 11% constant value CAGR
and a 9% volume CAGR over the forecast period. The Nokia brand is also dominant in the largest markets like China
(30% volume share in 2009) and India (54%) putting the company in prime position to take advantage of the rapidly
growing markets.
• Middle East and Africa is also poised for growth over the forecast period and Nokia has performed very well in the
region‟s most advanced markets, accounting for 75% of volumes in the United Arab Emirates in 2009. The
company‟s wide selection of economy-priced devices should bring about success in the rapidly growing African
markets.
Regions of Opportunity for Mobile Phones
16
14
Middle East and Africa
% volume CAGR 2009-2014

12
10
Opportunity Zone
8 Australasia Latin America

6 Asia Pacific
North America
4
2 Western Europe
Eastern Europe
0
-2
-50 0 50 100 150 200 250 300 350 400 450
2009 retail sales (million units)
Bubble size represents company share of region, range displayed: 3%- 40%
Nokia’s regional share in Middle East and Africa is estimated based on data from researched markets
15
 Consumer Electronics: Nokia Group © Euromonitor International

Strategic Evaluation

Competitive Positioning

Market Assessment

Category and Geographic Opportunities

Brand Strategy

Operations

Recommendations

16
Category and Geographic Opportunities Consumer Electronics: Nokia Group © Euromonitor International

OS as a Competitive Tool

Symbian Android Windows Phone 7

• Open source system is used most
extensively by the Nokia Group.
Other manufacturers using the
system include: LG, Motorola,
Samsung and Sony Ericsson.
• While this remains the most popular • The system is getting widening
smartphone OS with most sources
pointing to a 50-55% share, it is
giving way to manufacturer-
proprietary systems: iPhone OS and
Blackberry OS.
• Secondary research showed that
volume sales of Symbian-running
devices rose 11% in 2009, while
retail sales of iPhones rose almost
70% and Blackberry sales increased • The Droid is currently the top-selling
49%.
• Google‟s Android and Microsoft‟s
Windows Phone 7 are emerging as
significant challengers to the
superiority of Symbian.
• Google‟s Android was launched in
2008 and is gaining a significant
following in the US and is estimated
to have sold almost seven million
units worldwide in 2009.
acceptance on devices from
Motorola, HTC and Samsung.
• Motorola, much like Nokia, has been
struggling over the review period,
but the introduction of the Android-
based Droid at the end of 2009 has
contributed to 600% y-o-y growth in
the company‟s revenue for the first
half of 2010.
Android-based phone, while devices
running the OS from HTC and
Samsung have also performed well
in the US where Nokia has
struggled.
• This operating system showcased at
the beginning of 2010 is a significant
upgrade of the struggling Windows
Mobile 6 OS, sales of which
declined 10% in 2009 despite being
available on most manufacturers‟
devices.
• The new system is poised for a
launch in autumn 2010, and among
other upgrades will incorporate
Microsoft‟s full line-up of features
like Zune, Bing, Xbox Live and
Windows Market Place.
• Early signs are mixed. On the
positive side, the OS has been well
reviewed in the crucial US market
pointing to a probable resurgence of
Microsoft. On the other hand, the
company‟s branded phones
released in summer 2010 failed due
to a problematic, lacklustre Kin OS
and were taken off the market.

17
Category and Geographic Opportunities
Moving into Mobile Computing
Netbooks
• The Nokia Group has already produced and launched
the Nokia Booklet 3G at the end of 2009. Retailing at
US$599 in the US (without a data plan, US$299 with a
2-year AT&T data plan), the netbook commanded a
premium over the US$400 average unit price in the
market at the time.
• Although the high price and late launch of the product
has made Nokia a largely irrelevant brand in netbooks in
2009, this was an important first step into the growing
market of mobile computing.
• In the long run, Nokia has a real opportunity to capitalise
on its high profile in the developing markets to gain a
significant share in netbooks.
Consumer Electronics: Nokia Group © Euromonitor International
Other portable computers
• While Nokia was one of the latest entrants into the
netbook market, other portable computers remains an
area of opportunity for being one of the first. Growth in
the category is currently driven by touchscreen mobile
internet devices, with Apple‟s iPad being the only device
widely available in H1 2010.
• Demand for mobile internet devices has been strong
over the initial launch and the market is expected to
grow dynamically in 2011 and 2012, generating
significant sales in developed markets.
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Category and Geographic Opportunities Consumer Electronics: Nokia Group © Euromonitor International

Strategies in Mobile Computing

• Developing markets like China are likely to become key growth drivers for netbooks in 2011 and going forward, as
developed markets are likely to see a shift away from netbooks in favour of other portable computers.
• However, reliance on developing markets means that demand will be highly price-elastic meaning that Nokia
netbooks will have to include low-cost models.
• While Nokia‟s netbooks must be focused on suiting consumers in developing markets, other portable computers
should be developed with the American and Western European consumer in mind.
• This is particularly true in the US, where sales of other portable computers are expected to reach almost five million
units in 2010.

Netbooks vs Other Portable Computers % Volume Sales

100%
90%
80%
70%
60%
Volume

50%
40%
30%
20%
10%
0%
2010 2011 2010 2011 2010 2011
China Western Europe USA

Netbooks Other portable computers

19
Category and Geographic Opportunities Consumer Electronics: Nokia Group © Euromonitor International

Most Prospective Markets for Mobile Phones

Based on volume CAGR, mobile phones are projected to post China
the fastest growth in South Africa, China, India and Ukraine – 2009 population: 1,328 million
markets where Nokia currently occupies leading positions. 2009 Nokia share: 30%
Disposable income per capita US$
2009: 2,025 2014: 3,355
Mobile subscription penetration:
2009: 53% 2010: 57% 2014: 68%
Ukraine 09-14 CAGR volume: 11%
2009 population: 46 million 09-14 CAGR value: 16%
2009 Nokia share: 51%
Disposable income per capita US$
2009: 1,722 2014: 2,895
Mobile data subscription penetration:
2009:122% 2010:124% 2014: 129%
09-14 CAGR volume: 9%
09-14 CAGR value: 14%

South Africa: India

2009 population: 50 million 2009 population: 1,169 million
2009 Nokia share: 32% 2009 Nokia share: 54%
Disposable income per capita US$ Disposable income per capita US$
2009: 3,285 2014: 4,140 2009: 823 2014: 1,423
Mobile data subscription penetration: Mobile data subscription penetration:
2009: 37% 2010: 36% 2014: 36% 2009: 39% 2010: 46% 2014: 66%
09-14 CAGR volume: 14% 09-14 CAGR volume: 11%
09-14 CAGR value: 11% 09-14 CAGR value: 7%
20
Category and Geographic Opportunities Consumer Electronics: Nokia Group © Euromonitor International

Difficult Markets: USA

• In the US, the Nokia Group has lost its leadership position mainly due to lack of demand for its smartphone line-up.
Competition from devices running more popular operating systems has kept the Symbian-based smartphone a niche
player. Nokia‟s share loss accelerated towards the end of the review period as diffusion rates of smartphones
accelerated.
• The company‟s problems have been exacerbated by strong competition in the low-price segment from brands like
Samsung, LG, Motorola and Kyocera.

USA Mobile Phones Leading Brand Shares 2002-2009

40

35

30
% volume share

25

20

15

10

0
2002 2003 2004 2005 2006 2007 2008 2009

Samsung LG Motorola Kyocera Blackberry iPhone Nokia

21
Category and Geographic Opportunities Consumer Electronics: Nokia Group © Euromonitor International

Difficult Markets: Japan

• Nokia‟s failure in Japan is due largely to the same reasons Japanese phones are unsuccessful abroad. The user
interface on Japanese phones made for the domestic market is profoundly different from that of, for example, Sanyo-
branded phones for the US market.
• Japanese phones also use some of the most advanced feature sets in the world, incorporating features not available
anywhere else. NTT Docomo, for example, is the first to incorporate augmented reality into its GPS navigation
feature on mobile phones. Therefore, devices intended for the world market are a rare success in Japan.
• The Nokia Group struggled to maintain its 2% volume share in the Japanese market over 2003-2008 and opted to
exit the market late in 2008.

Japan Mobile Phones Leading Brand Shares 2002-2009

30

25
% volume share

20

15

10

0
2002 2003 2004 2005 2006 2007 2008 2009

Sharp Fujitsu Panasonic Toshiba Sony Ericsson Casio

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 Consumer Electronics: Nokia Group © Euromonitor International

Strategic Evaluation

Competitive Positioning

Market Assessment

Category and Geographic Opportunities

Brand Strategy

Operations

Recommendations

23
Brand Strategy Consumer Electronics: Nokia Group © Euromonitor International

Nokia as a Brand: A Look Back

Dominance in the early stages
• As mobile phones gained
acceptance across developed
markets in the late 1990s and early
2000s, communication giants like
Motorola and Nokia were vastly
dominant in the global market.
• The rapidly growing market for
mobile phones in 1998-2002 and
Nokia‟s dominance therein
established Nokia as a dominant
brand over the review period but this
dominance has been eroding since
2002.
Nokia Volume Share 2002
(%)
Success in developing
markets hurts image
• As developed markets became
saturated over the latter part of the
review period, growth was
booming in developing countries.
• Nokia‟s strength in these markets
came from a wide selection of low-
cost, simple but durable models.
However, the brand‟s focus on low-
cost models combined with a low
innovation rate have cost it market
share in crucial markets like the
US.
2002/2005 Market Share
Difference
0
Percentage points
First signs of inertia
• As mobile phones became a
commodity, a number of new entrants
came into the market and expanded
their share by focusing on innovation.
Nokia, however, took a much more
reactive approach to innovation. In
2003, when flip-phones were entering
the market, Nokia continued to focus
on candy-bar designs allowing
manufacturers like LG and Samsung
to gain significant share. A similar
approach to smartphones left space
for Apple and Research in Motion to
capture the smartphone market.
Share of NA and WE in
Nokia's Global Sales (%)

60
Australia -5
50
-10
40
UK -15
30
-20 20
Singapore
-25 10
USA -30 0

0 50 100
24
Brand Strategy
Reshaping the Nokia Brand
Sub-brands
• As the image of the umbrella brand
became associated with low-cost
models, Nokia launched N-series
and E-series sub-brands in 2005 for
its higher-priced models.
• Under the N-series, the company is
marketing high-end, consumer-
orientated multimedia phones, while
the E-series encompasses
business-orientated devices.
• While this has been an important
first step in reshaping the company‟s
brand image, it is still largely seen
as inferior to other devices in the
highest price range.
• Much of the problem lies, as
previously discussed, with the OS.
Therefore, the company‟s future
largely rests on the success of its
Symbian^4 and MeeGo systems
due out in 2010.
Consumer Electronics: Nokia Group
Cross-promotion with fashion
brands
• One area where the Nokia Group
has been more proactive has been
cross-branding with major fashion
labels like Armani and Dolce &
Gabbana. This was largely a
strategy to lift the image of Nokia‟s
brand as a low-cost device
producer.
• The success of these efforts can be
described as limited at best. The
products have had limited success
among elites in developing markets
but failed in raising the brand‟s
image overall. The strategy proved
entirely unsuccessful in developed
markets where high-end consumers
are much more interested in
functionality, and high-fashion
brands have much less appeal than
in developing markets.
© Euromonitor International
Ovi online services
• A big part of the success of
competing smartphone operating
systems is the biosphere of online
content and services available for
the particular OS. This biosphere
largely consists of third party
applications like content feeds,
games and location-based services.
• As a response, Nokia launched its
Ovi online services platform in 2009,
but the launch was plagued with
problems and Apple‟s platform has
been getting significantly more
attention from high-profile search-
and game-application developers.
• Nokia has one significant advantage
over competing platforms in that it
offers maps free of charge
worldwide, but the reactive
approach may have put Nokia too
far behind in the race.
25
Brand Strategy Consumer Electronics: Nokia Group © Euromonitor International

M&A Activity Highlights

• Navteq acquired by the Nokia Group in 2008 is
one of the world‟s major navigation map Nokia Group: Main Acquisitions
providers. The Navteq maps are the key value
offering for the Ovi platform offering Nokia users Date Name Core area of operations
free map downloads.
Development of the Vision
• The acquisition is also a part of the group‟s April
Novarra Inc mobile internet browser and
efforts to capitalise on the growing importance of 2010
related services
location-based services (LBS) in the mobile
communication and computing markets as Geographic search and
April
Navteq has been successful in enterprise and MetaCarta Inc reference tools like Geo-tagging
2010
consumer-orientated LBS. and Geo-searching
• Development of location-based marketing and
Software development focused
advertising platforms within Ovi is a likely next Feb
bit-side GmbH on social networking and
step for the Nokia Group. 2009
location-based services
• Another major area of expansion has been
cellular networking infrastructure. In 2007, Nokia Development of the open-source
Dec
Siemens Networks was formed as a joint venture Symbian Ltd Symbian mobile OS used by
2008
between Siemens AG and Nokia Group (50/50 Nokia phones among others
share) and is currently the world‟s largest
provider of telecommunications products. Nokia- OZ Software development focused
Nov
branded devices have historically struggled to Communications on integrating e-mail and mobile
2008
gain acceptance by CDMA operators which has Inc messaging into mobile devices
contributed to the lack of success in the US, and
Provider of maps for mobile
in an effort to capture a larger share of the
July devices and location-based
CDMA market Nokia Group has announced the Navteq
2008 services, covering 78 countries
planned acquisition of Motorola Solutions in
as of July 2010
2010.

26
Brand Strategy
Main Competitors and Threats They Pose
Microsoft Corp, Apple Inc, Google Inc and
Research in Motion Ltd
• These companies have a virtual stranglehold on the OS
market particularly in the US. Early indications are that
Research in Motion may lose market share in 2010 as
private consumers increasingly prefer user experiences
offered by the iPhone OS and Android.
• A negligible proportion of current Blackberry users plan
on switching to a Nokia device making it unlikely that
Nokia will be able to capitalise on the weakness of one
of its main competitors.
Samsung Corp and LG Group
• While high-end manufacturers like Research in Motion
threaten Nokia‟s smartphone business and local brands
can only compete in the low-price ranges, Samsung and
LG have a wide variety of devices running on Symbian,
Android and Windows operating systems.
• Therefore, the Korean manufacturers, as they have
been over the review period, pose a serious global
threat across all price categories.
Consumer Electronics: Nokia Group © Euromonitor International
Local Brands
• As previously shown, Nokia is becoming increasingly
reliant on developing markets for growth but the
emergence of strong low-cost, local brands in crucial
developing markets like China, India and Thailand could
threaten prospects within those markets.
• One example is Thailand where Samart I-Mobile has
almost caught up with Nokia, holding a 33% share
compared to Nokia‟s 36% in 2009, with low-cost mobile
phones. As developing markets mature and new
competitors emerge, Nokia may find growth hard to
sustain.
Motorola Inc
• A company with a history very similar to that of Nokia‟s
in the mobile phone competitive landscape. Motorola, a
former market leader, has struggled globally and in its
home market the US, where its volume share has
declined from 35% in 2006 to 16% in 2009. However,
the company is undergoing reorganisation and has had
success with its Droid smartphone at the end of 2009.
• The Droid line-up is likely to be successful over 2010
riding on the wave of popularity of the Android OS it runs
on.
27
 Consumer Electronics: Nokia Group © Euromonitor International

Strategic Evaluation

Competitive Positioning

Market Assessment

Category and Geographic Opportunities

Brand Strategy

Operations

Recommendations

28
Operations Consumer Electronics: Nokia Group © Euromonitor International

Production Facilities
• Nokia Group‟s production facilities as of 1H 2010 include key locations in emerging markets such as India where the
company is expected to continue to focus on.

MM
MM

MM

Devices
Network infrastructure equipment
Both
M Assets from acquisition of Motorola
Solutions
29
Operations
Production: Recent Developments
Closing of device manufacturing in Bochum,
Germany, in 2008
• The plant closure resulted in 2,300 job losses, which
Nokia argued were becoming too expensive for the
company to stay competitive.
• The lay-offs caused a major backlash against the brand
among German politicians and trade unions, which
accused the Nokia Group of “caravan capitalism” as
production was moving to Romania.
• The move cost the company a significant amount of bad
press and scolding from political leaders, but only one
percentage point in market share in 2009.
Operations in Chennai, India
• Production started in January 2006 with 800 workers
expanding to 8,000 by the end of 2009.
• At the end of Q1 2010, the company reported that the
facility produced 350 million mobile phones since
operations began.
• In early July 2010 there was a temporary halt in
production due to a strike as trade unions demanded
higher pay. The exact production loss has not been
disclosed, but by mid-July, a long-term labour
agreement had been reached and production resumed.
Consumer Electronics: Nokia Group © Euromonitor International
Scaling down in Jyvaskyla, Finland, over 2009
• As demand slowed, Nokia sought to increase
operational efficiency by closing down its R&D and
marketing centres in Jyvaskyla and moving operations
to Salo, Oulu, Tampere and Helsinki.
• To the same end, the manufacturer scaled down
production at its facility in Salo, laying off 20-30% of the
approximately 2,500 workforce at a time on a rolling
basis due to slowing demand for the company‟s high-
end devices the plant specialises in.
Shifting production to Romania
• In February 2010, Nokia started production at its facility
in Cluj, Romania, with about 500 employees, growing to
4,000 at the end of H1 2010.
• The facility opened as production moved from the
Bochum factory to the lower-cost Romania, but originally
produced only basic phone models.
• At the end of H1 2010, the company indicated that the
facility will be shifting capacity towards high-end
smartphones, a move which could potentially mean
further lay-offs in Finnish factories.
30
Operations Consumer Electronics: Nokia Group © Euromonitor International

Nokia Group: Structure

Nokia Group

Nokia Siemens
Networks

Mobile Solutions Mobile Phones Markets Navteq

Development and Development and

management of the management of the Maps and location-
Marketing, distribution based services for
company‟s company‟s basic and logistics
smartphone portfolio mobile phone range mobile devices

31
 Consumer Electronics: Nokia Group © Euromonitor International

Strategic Evaluation

Competitive Positioning

Market Assessment

Category and Geographic Opportunities

Brand Strategy

Operations

Recommendations

32
Recommendations
Diversification and Differentiation to Drive Growth
Do not let the success of Symbian determine the
success of Nokia
• While Apple and Research in Motion have been
successful in generating post-purchase revenues with
proprietary OS, Symbian may have fallen too far behind
the competition.
• Developing devices running on Windows and Android
OS alongside Symbian-based units to hedge against the
risks of Symbian and MeeGo failing and dragging down
Nokia-branded smartphones may be the way to go.
Such practices have been successfully carried out by
Samsung (Bada) and Palm (webOS) .
Portable Computers
• As low-cost manufacturers are threatening Nokia‟s
share in major developing markets, it is essential to
utilise the brand‟s presence in these markets to
capitalise on the 100% volume growth in global demand
for netbooks expected over the forecast period.
• Development of mobile internet devices along
smartphones for the developed markets is a strategy
currently pursued by Apple and Research in Motion, and
Nokia cannot afford to once again fall too far behind.
Consumer Electronics: Nokia Group © Euromonitor International
Further development of sub-brands
• The N- and E-series sub-brands were an important step
towards differentiating the company‟s high-priced
devices from the economy range products it is known for
in the developing markets.
• The next step is the simplest of changes: removing
numbers from the naming conventions of smartphones.
Alpha-numeric model designations are associated with
gray, mundane devices while names like Droid, Galaxy,
imply that the device is revolutionary, goes beyond the
norms of the past.
4G: the Next Opportunity
• With the acquisition of Motorola Solutions, the Nokia
Group is in a much better position to expand its
presence in CDMA-based devices at a time when 4G is
emerging in the US where the Nokia brand has
struggled.
• 4G devices running on an array of the most popular OS
are the best way for Nokia to break into the US market
of high-end smartphones. This in turn should give the
company a headstart when 4G expands globally.
33
Report Definitions Consumer Electronics: Nokia Group © Euromonitor International

Definitions
• Historic value data is given in US$ year-on-year exchange rates, unless otherwise stated.
• Forecast value data is given in real (constant), US$ terms using fixed 2009 exchange rates, unless otherwise stated.
• Historic volume data is given in „000 units, unless otherwise stated.
• Profile coverage:
• Computers and Peripherals
• Portable Computers
Netbooks: a portable computer with keyboard, battery life of over 4 hours and screen size less than 12".
Other Portable Computers: includes mobile web-enabled devices that do not fit the definitions for Laptops and
Netbooks capable of multimedia playback and running software applications.
• Portable Consumer Electronics
• Mobile Phones: any device capable of telecommunication over a cellular network of base stations or a satellite
network. Mobile phones can come with functions including camera, video and internet access.

34

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