Assignment

On

Nokia Company

Submitted To:
Prof. Naeem

Submitted By:
Sania Saeed
BBA
th
5 Semester
Session 2015-2019

Department of Management Sciences

Superior College Lahore

University Campus Vehari
 Executive Summary

Nokia is a Finnish multinational communications, information technology and consumer

electronics company, founded in 1865 by Fredrik Idestam, Leo Mechelin and Eduard Polón.

Nokia's headquarters are in Espoo, in the greater Helsinki metropolitan area. In 2016, Nokia

employed approximately 101,000 people across over 100 countries, did business in more than

130 countries, and reported annual revenues of around €23.6 billion in 2017. Nokia is a public

limited company listed on the Helsinki Stock Exchange and New York Stock Exchange. It is the

world's 415th-largest company measured by 2016 revenues according to the Fortune Global 500,

and is a component of the Euro Stoxx 50 stock market index.Company sale its products through

direct, brokers and retailer outlets Middlemen have a role in providing information about the

market to the manufacturer. Developments like changes in customer demography, psychography,

media habits and the entry of a new competitor or a new brand and changes in customer

preferences are some of the information that all manufacturers want. Since these middlemen are

present in the market place and close to the customer they can provide this information at no

additional cost. Maintaining price stability in the market is another function a middleman

performs. Channel conflict is company with Apple and Samsung due to innovative products.

Nokia senior management had their own fears which came from what other companies like

Apple and Google were planning to do disrupt the industries and they most certainly felt the

pressure from shareholders to grow their quarterly earnings and sales revenues. Company use

five types of channel flows to reach its customers.

 Introduction

Nokia is a Finnish multinational communications, information technology and consumer

electronics company, founded in 1865 by Fredrik Idestam, Leo Mechelin and Eduard Polón.
Nokia's headquarters are in Espoo, in the greater Helsinki metropolitan area. In 2016, Nokia
employed approximately 101,000 people across over 100 countries, did business in more than
130 countries, and reported annual revenues of around €23.6 billion in 2017. Nokia is a public
limited company listed on the Helsinki Stock Exchange and New York Stock Exchange. It is the
world's 415th-largest company measured by 2016 revenues according to the Fortune Global 500,
and is a component of the Euro Stoxx 50 stock market index. The company has had various
industries in its 152-year history. It was founded as a pulp mill, but since the 1990s focuses on
large-scale telecommunications infrastructures, technology development and licensing. Nokia is
also a major contributor to the mobile telephony industry, having assisted in the development of
the GSM, 3G and LTE standards (and currently in 5G), and is best known for having been the
largest worldwide vendor of mobile phones and smartphones for a period. After a partnership
with Microsoft and market struggles, its mobile phone business was eventually bought by the
former, creating Microsoft Mobile as its successor in 2014. After the sale, Nokia began to focus
more extensively on its telecommunications infrastructure business and on the Internet of things,
marked by the divestiture of its Here mapping division and the acquisition of Alcatel-Lucent.
The company also entered virtual reality and digital health (the latter by purchasing Withings),
and is the owner of scientific research organization Bell Labs. The Nokia brand has since
returned to the mobile and Smartphone market through a licensing arrangement with HMD
Global.

The company is viewed with national pride by Finns, as its successful mobile phone business
made it by far the largest worldwide company and brand from Finland. At its peak in 2000,
during the telecoms bubble, Nokia alone accounted for 4% of the country's GDP, 21% of total
exports and 70% of the Helsinki Stock Exchange market capital.
History

Nokia Corporation is the world's largest manufacturer of mobile phones, serving customers in
130 countries. Nokia is divided into four business groups: Mobile Phones, Multimedia,
Enterprise Solutions, and Networks. The Mobile Phones group markets wireless voice and data
products in consumer and corporate markets. The Multimedia segment sells mobile gaming
devices, home satellite systems, and cable television set-top boxes. The Enterprise Solutions
group develops wireless systems for use in the corporate sector. Wireless switching and
transmission equipment is sold through the company's Networks division. Nokia operates 15
manufacturing facilities in nine countries and maintains research and development facilities in 12
countries.

19th-Century Origins

Originally a manufacturer of pulp and paper, Nokia was founded as Nokia Company in 1865 in a
small town of the same name in central Finland. Nokia was a pioneer in the industry and
introduced many new production methods to a country with only one major natural resource, its
vast forests. As the industry became increasingly energy-intensive, the company even
constructed its own power plants. But for many years, Nokia remained an important yet static
firm in a relatively forgotten corner of northern Europe. Nokia shares were first listed on the
Helsinki exchange in 1915.The first major changes in Nokia occurred several years after World
War II. Despite its proximity to the Soviet Union, Finland has always remained economically
connected with Scandinavian and other Western countries, and as Finnish trade expanded Nokia
became a leading exporter.During the early 1960s Nokia began to diversify in an attempt to
transform the company into a regional conglomerate with interests beyond Finnish borders.
Unable to initiate strong internal growth, Nokia turned its attention to acquisitions. The
government, however, hoping to rationalize two underperforming basic industries, favored
Nokia's expansion within the country and encouraged its eventual merger with Finnish Rubber
Works, which was founded in 1898, and Finnish Cable Works, which was formed in 1912, to
form Nokia Corporation. When the amalgamation was completed in 1966, Nokia was involved
in several new industries, including integrated cable operations, electronics, tires, and rubber
footwear, and had made its first public share offering.
In 1967 Nokia set up a division to develop design and manufacturing capabilities in data
processing, industrial automation, and communications systems. The division was later expanded
and made into several divisions, which then concentrated on developing information systems,
including personal computers and workstations, digital communications systems, and mobile
phones. Nokia also gained a strong position in modems and automatic banking systems in
Scandinavia.

Oil Crisis, Corporate Changes: 1970s

Nokia continued to operate in a stable but parochial manner until 1973, when it was affected in a
unique way by the oil crisis. Years of political accommodation between Finland and the Soviet
Union ensured Finnish neutrality in exchange for lucrative trade agreements with the Soviets,
mainly Finnish lumber products and machinery in exchange for Soviet oil. By agreement, this
trade was kept strictly in balance. But when world oil prices began to rise, the market price for
Soviet oil rose with it. Balanced trade began to mean greatly reduced purchasing power for
Finnish companies such as Nokia. Although the effects were not catastrophic, the oil crisis did
force Nokia to reassess its reliance on Soviet trade (about 12 percent of sales) as well as its
international growth strategies. Several contingency plans were drawn up, but the greatest
changes came after the company appointed a new CEO, Kari Kairamo, in 1975.Kairamo noted
the obvious: Nokia was too big for Finland. The company had to expand abroad. He studied the
expansion of other Scandinavian companies (particularly Sweden's Electrolux) and, following
their example, formulated a strategy of first consolidating the company's business in Finland,
Sweden, Norway, and Denmark, and then moving gradually into the rest of Europe. After the
company had improved its product line, established a reputation for quality, and adjusted its
production capacity, it would enter the world market.

Meanwhile, Nokia's traditional, heavy industries were looking increasingly burdensome. It was
feared that trying to become a leader in electronics while maintaining these basic industries
would create an unmanageably unfocused company. Kairamo thought briefly about selling off
the company's weaker divisions, but decided to retain and modernize them.
He reasoned that, although the modernization of these low-growth industries would be very
expensive, it would guarantee Nokia's position in several stable markets, including paper,
chemical, and machinery productions, and electrical generation. For the scheme to be practical,
each division's modernization would have to be gradual and individually financed. This would
prevent the bleeding of funds away from the all-important effort in electronics while preventing
the heavy industries from becoming any less profitable.

With each division financing its own modernization, there was little or no drain on capital from
other divisions, and Nokia could still sell any group that did not succeed under the new plan. In
the end, the plan prompted the machinery division to begin development in robotics and
automation, the cables division to begin work on fiber optics, and the forestry division to move
into high-grade tissues.

Rise of Electronics: 1980s

Nokia's most important focus was development of the electronics sector. Over the course of the
1980s, the firm acquired nearly 20 companies, focusing especially on three segments of the
electronics industry: consumer, workstations, and mobile communications. Electronics grew
from 10 percent of annual sales to 60 percent of revenues from 1980 to 1988.

In late 1984 Nokia acquired Salora, the largest color television manufacturer in Scandinavia, and
Luxor, the Swedish state-owned electronics and computer firm. Nokia combined Salora and
Luxor into a single division and concentrated on stylish consumer electronic products, since style
was a crucial factor in Scandinavian markets. The Salora-Luxor division was also very
successful in satellite and digital television technology. Nokia purchased the consumer
electronics operations of Standard Elektrik Lorenz A.G. from Alcatel in 1987, further bolstering
the company's position in the television market to the third largest manufacturer in Europe.

In early 1988 Nokia acquired the data systems division of the Swedish Ericsson Group, making
Nokia the largest Scandinavian information technology business.

Although a market leader in Scandinavia, Nokia still lacked a degree of competitiveness in the
European market, which was dominated by much larger Japanese and German companies.
Kairamo decided, therefore, to follow the example of many Japanese companies during the
1960s (and Korean manufacturers a decade later) and negotiate to become an original equipment
manufacturer, or OEM, to manufacture products for competitors as a subcontractor.

Nokia manufactured items for Hitachi in France, Ericsson in Sweden, Northern Telecom in
Canada, and Granada and IBM in Britain. In doing so it was able to increase its production
capacity stability. There were, however, several risks involved, those inherent in any OEM
arrangement. Nokia's sales margins were naturally reduced, but of greater concern, production
capacity was built up without a commensurate expansion in the sales network. With little brand
identification, Nokia feared it might have a difficult time selling under its own name and become
trapped as an OEM.In 1986 Nokia reorganized its management structure to simplify reporting
efforts and improve control by central management. The company's 11 divisions were grouped
into four industry segments: electronics; cables and machinery; paper, power, and chemicals; and
rubber and flooring. In addition, Nokia won a concession from the Finnish government to allow
greater foreign participation in ownership. This substantially reduced Nokia's dependence on the
comparatively expensive Finnish lending market. Although there was growth throughout the
company, Nokia's greatest success was in telecommunications.Having dabbled in
telecommunications in the 1960s, Nokia cut its teeth in the industry by selling switching systems
under license from a French company, Alcatel. The Finnish firm got in on the cellular industry's
ground floor in the late 1970s, when it helped design the world's first international cellular
system. Named the Nordic Mobile Telephone (NMT) network, the system linked Sweden,
Denmark, Norway, and Finland. A year after the network came on line in 1981, Nokia gained
100 percent control of Mobira, the Finnish mobile phone company that would later become its
key business interest as the Nokia Mobile Phones division. Mobira's regional sales were vastly
improved, but Nokia was still limited to OEM production on the international market; Nokia and
Tandy Corporation, of the United States, built a factory in Masan, South Korea, to manufacture
mobile telephones. These were sold under the Tandy name in that company's 6,000 Radio Shack
stores throughout the United States.

In 1986, eager to test its ability to compete openly, Nokia chose the mobile telephone to be the
first product marketed internationally under the Nokia name; it became Nokia's "make or break"
product. Unfortunately, Asian competitors began to drive prices down just as Nokia entered the
market. Other Nokia products gaining recognition were Salora televisions and Luxor satellite
dishes, which suffered briefly when subscription programming introduced broadcast scrambling.

The company's expansion, achieved almost exclusively by acquisition, had been expensive. Few
Finnish investors other than institutions had the patience to see Nokia through its long-term
plans. Indeed, more than half of the new shares issued by Nokia in 1987 went to foreign
investors. Nokia moved boldly into Western markets; it gained a listing on the London exchange
in 1987 and was subsequently listed on the New York exchange.

Crises of Leadership, Profitability in the Late 1980s and Early 1990s

Nokia's rapid growth was not without a price. In 1988, as revenues soared, the company's profits,
under pressure from severe price competition in the consumer electronics markets, dropped.
Chairman Kari Kairamo committed suicide in December of that year; not surprisingly, friends
said it was brought on by stress. Simo S. Vuorileto took over the company's reins and began
streamlining operations in the spring of 1988. Nokia was divided into six business groups:
consumer electronics, data, mobile phones, telecommunications, cables and machinery, and basic
industries. Vuorileto continued Kairamo's focus on high-tech divisions, divesting Nokia's
flooring, paper, rubber, and ventilation systems businesses and entering into joint ventures with
companies such as Tandy Corporation and Matra of France (two separate agreements to produce
mobile phones for the U.S. and French markets).

In spite of these efforts, Nokia's pretax profits continued to decline in 1989 and 1990,
culminating in a loss of $102 million in 1991. Industry observers blamed cutthroat European
competition, the breakdown of the Finnish banking system, and the collapse of the Soviet Union.
But, notwithstanding these difficulties, Nokia remained committed to its high-tech orientation.
Late in 1991, the company strengthened that dedication by promoting Jorma Ollila from
president of Nokia-Mobira Inc. (renamed Nokia Mobile Phones Ltd. the following year) to group
president.Leading the Telecommunications Revolution: Mid-1990s and Beyond Forbes's
Fleming Meeks credited Ollila with transforming Nokia from "a money losing hodgepodge of
companies into one of telecommunications' most profitable companies." Unable to find a buyer
for Nokia's consumer electronics business, which had lost nearly $1 billion from 1988 to 1993,
Ollila cut that segment's workforce by 45 percent, shuttered plants, and centralized operations.
Having divested Nokia Data in 1991, Nokia focused further on its telecommunications core by
selling off its power unit in 1994 and its television and tire and cable units the following
year.The new leader achieved success in the cellular phone segment by bringing innovative
products to market quickly with a particular focus on ever smaller and easier-to-use phones
featuring sleek Finnish design. Nokia gained a leg up in cellphone research and development
with the 1991 acquisition of the United Kingdom's Technophone Ltd. for $57 million. The
company began selling digital cellular phones in 1993.Ollila's tenure brought Nokia success and
with it global recognition. The company's sales more than doubled, from FIM 15.5 billion in
1991 to FIM 36.8 billion in 1995, and its bottom line rebounded from a net loss of FIM 723
million in 1992 to a FIM 2.2 billion profit in 1995. Securities investors did not miss the
turnaround: Nokia's market capitalization multiplied ten times from 1991 to 1994.In late 1995
and early 1996, Nokia suffered a temporary setback stemming from a shortage of chips for its
digital cellular phones and a resultant disruption of its logistics chain. The company's production
costs rose and profits fell. Nokia was also slightly ahead of the market, particularly in North
America, in regard to the shift from analog to digital phones. As a result, it was saddled with a
great number of digital phones it could not sell and an insufficient number of analog devices.
Nevertheless, Nokia had positioned itself well for the long haul, and within just a year or two it
was arch-rival Motorola, Inc. that was burdened with an abundance of phones it could not sell,
analog ones, as Motorola was slow to convert to digital. As a result, by late 1998, Nokia had
surpassed Motorola and claimed the top position in cellular phones worldwide.

Aiding this surge was the November 1997 introduction of the 6100 series of digital phones. This
line proved immensely popular because of the phones' small size (similar to a slim pack of
cigarettes), light weight (4.5 ounces), and superior battery life. First introduced in the burgeoning
mobile phone market in China, the 6100 soon became a worldwide phenomenon. Including the
6100 and other models, Nokia sold nearly 41 million cellular phones in 1998. Net sales increased
more than 50 percent over the previous year, jumping from FIM 52.61 billion ($9.83 billion) to
FIM 79.23 billion ($15.69 billion). Operating profits increased by 75 percent, while the
company's skyrocketing stock price shot up more than 220 percent, pushing Nokia's market
capitalization from FIM 110.01 billion ($20.57 billion) to FIM 355.53 billion ($70.39 billion).
Not content with conquering the mobile phone market, Nokia began aggressively pursuing the
mobile Internet sector in the late 1990s. Already on the market was the Nokia 9000
Communicator, a personal all-in-one communication device that included phone, data, Internet,
e-mail, and fax retrieval services. The Nokia 8110 mobile phone included the capability to access
the Internet. In addition, Nokia was the first company to introduce a cellular phone that could be
connected to a laptop computer to transmit data over a mobile network. To help develop further
products, Nokia began acquiring Internet technology companies, starting with the December
1997, $120 million purchase of Ipsilon Networks Inc., a Silicon Valley firm specializing in
Internet routing. One year later, Nokia spent FIM 429 million ($85 million) for Vienna Systems
Corporation, a Canadian firm focusing on Internet Protocol telephony.

Acquisitions continued in 1999, when a further seven deals were completed, four of which were
Internet-related. Meanwhile, net sales increased a further 48 percent in 1999, while operating
profits grew by 57 percent; riding the late 1990s high-tech stock boom, the market capitalization
of Nokia took another huge leap, ending the year at EUR 209.37 billion ($211.05 billion).
Nokia's share of the global cellular phone market increased from 22.5 percent in 1998 to 26.9
percent in 1999, as the company sold 76.3 million phones in 1999.

Nokia's ascendance to the top of the wireless world by the end of the 1990s could be traced to the
company being able to consistently, over and over again, come out with high-margin products
superior to those of its competitors and in tune with market demands. The continuation of this
trend into the 21st century was by no means certain as the increasing convergence of wireless
and Internet technologies and the development of the third generation (3G) of wireless
technology (which followed the analog and digital generations and which was slated to feature
sophisticated multimedia capability) were predicted to open Nokia up to new and formidable
competitors.

Perhaps the greatest threat was that chipmakers such as Intel would turn mobile phones into
commodities just as they had previously done with personal computers; the days of the $500
Nokia phone were potentially numbered. Nevertheless, Nokia's 25 percent profit margins were
enabling it to spend a massive $2 billion a year on research and development and continue to
churn out innovative new products, concentrating on the various standards being developed for
3G wireless networks.

A Two-Pronged Approach in the 21st Century

Mobile communications developed along two broad fronts during the first years of the century,
both of which played to Nokia's advantage, ensuring that the company remained the leader of its
industry. The evolution of handsets into multimedia devices ushered in by 3G technology meant
that Nokia could continue to rely on marketing expensive, sophisticated handsets. The days of
the $500 Nokia phone gave way to the days of increasingly more expensive phones, such as the
Nokia N90, a unit featuring a camera with Carl Zeiss optics, video-recording capabilities, and
Internet access. Nokia could count on a substantial share of the high end of the market, a
segment that continued to thrive midway through the decade, but the company's greatest strength
was in the lower end of the market. In countries such as China, Brazil, and India there was a
tremendous demand for inexpensive mobile phones, with analysts expecting 50 percent of the
one billion handsets sold between 2005 and 2010 to be sold in developing economies. Industry
observers believed there were only two companies in the world that could seriously compete for
the estimated 800-million-unit-per year market for inexpensive handsets: Motorola and Nokia.
Rivals such as Samsung, Sony Ericsson, and LG Electronics preferred to confine their activities
to the high end of the market, while emerging low-cost producers lacked the manufacturing
efficiencies enjoyed by Nokia and Motorola.

Against the backdrop of favorable market trends supporting Nokia's entrenched position, the
company experienced a rare event in its modern history: a change in leadership. After a decade-
and-a-half at the helm, CEO Ollila announced his retirement, effective June 2006. His
replacement was a 25-year Nokia veteran named Olli-Pekka Kallasvuo, a lawyer by training
whom Fortune, in that magazine's October 31, 2005 issue, described as so taciturn that "he can
seem like an extra from an Ingmar Bergman movie."

Kallasvuo, who was promoted from his position as the head of the handset division, inherited an
impressively capable company whose greatest challenge was contending with Motorola for the
low end of the market and beating back competitors for control of the high end of the market.
"Nokia is a dynamic company in a fast-changing and fluid environment," Kallasvuo said in a
November 29, 2005 interview with the South China Morning Post. "I look forward to working
together with our team to help Nokia shape the future of mobile communications at a pivotal
time for the industry."

Company profile

Board of Directors

 Risto Siilasmaa (Chairman);

 Olivier Piou (Vice Chairman);
 Vivek Badrinath
 Bruce Brown
 Louis Hughes,
 Simon Jiang
 Jouko Karvinen;
 Jean Monty

Nokia channel structure

Channel Functions

 Middlemen have a role in providing information about the market to the manufacturer.
Developments like changes in customer demography, psychography, media habits and
the entry of a new competitor or a new brand and changes in customer preferences are
some of the information that all manufacturers want. Since these middlemen are present
in the market place and close to the customer they can provide this information at no
additional cost.
 Maintaining price stability in the market is another function a middleman performs.
Many a time the middlemen absorb an increase in the price of the products and continue
to charge the customer the same old price. This is because of the intra-middlemen
competition. The middleman also maintains price stability by keeping his overheads low.
 Middlemen finance manufacturers’ operation by providing the necessary working capital
in the form of advance payments for goods and services. The payment is in advance even
though the manufacturer may extend credit, because it has to be made even before the
products are bought, consumed and paid for by the ultimate consumer.
 Most middlemen take the title to the goods, services and trade in their own name. This
helps in diffusing the risks between the manufacturer and middlemen. This also enables
middlemen to be in physical possession of the goods, which in turn enables them to meet
customer demand at very moment it arises
 The producer can concentrate on the production function leaving the marketing problem
to middlemen who specialize in the profession. Their services can best utilized for selling
the product. The finance, required for organising marketing can profitably be used in
production where the rate of return would be greater.
Channel Flows

Channel conflict

Nokia channel conflict is with apple and Samsung due to android phone Nokia senior
management had their own fears which came from what other companies like Apple and Google
were planning to do disrupt the industries and they most certainly felt the pressure from
shareholders to grow their quarterly earnings and sales revenues. Even though the top managers
sometimes acknowledged the threats publicly, fear of losing internal momentum and external
sales in the short term prompted them to emphasise the quality of Nokia’s products and internal
developments and, thus, downplay somewhat, at least in relative terms, the competitive threats to
larger internal and external audiences. As a consequence, middle managers’ fears toward the
competitors and concern over Nokia’s future were reduced. However, to ensure that Nokia
would both match the short-term financial goals and succeed in the long-term against the rising
competitors, top managers tended to put heavy pressure on subordinates to deliver more and
faster, not accepting “no” for an answer, thereby increasing their subordinates’ fears of reporting
honest feedback. The top managers also subconsciously alleviated their own fears of losing to
rising competitors by accepting optimistic reports by middle managers and not questioning the
validity of the good news.

Suggestions

 As a result, managers of various departments focused more on internal competition for

resources and higher social status and were less fearful of competitors.
 Company should attacking competitors by developing radically new products.
 Company should make co-optation to resolve conflict.
 Legal resource

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