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CONFIDENTIAL
Document
Date 20, 2001
August
This report is solely for the use of client personnel. No part of it may be
circulated, quoted, or reproduced for distribution outside the client
organization without prior written approval from McKinsey & Company.
This material was used by McKinsey & Company during an oral
presentation; it is not a complete record of the discussion.
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OVERVIEW OF COMPETITOR ANALYSIS FRAMEWORK
Unit of measure
1. Background information 4. Value chain strategy
• Location • Starting year Focus on
• Registered • Number of • Marketing,
capital employees advertising and
• Management • Era analysis promotion
team • Distribution (channel
• Equity and sales force)
structure
Location
• Based at Finland, with offices in China, e.g. Beijing • Leader in mobile communication
• China is Nokia's strategic location because it is globally and in China
Nokia's second largest market, second only to US
• Al though a relatively later-
Investment
• Invested more than USD1.7 billion in China comer to China, has invested
heavily in its Chinese business
Business
• Two main business units: Nokia network and Nokia • Focused product lines with
mobile
Nokia network offering mobile,
broadband and IP network infra-
Starting
• First office in China in 1985, first JV in China in 1994 structure, and Nokia mobile
offering mobile handsets
Employees
• 60,000 staff in 130 countries
• More than 20 offices in China, 7 JVs, 1 WOFE and 1
R&D center with over 5500 staff
History
• Started business in China since 1950s
• 1985 saw first office in Beijing, supplying fixed line
networks
• Supplied analog NMT 450 system and terminal in
1986
• Supplied transmission system, optical cable and
electric cables in later 1980s
• Supplied analog ETACS system and terminals in
1989
*
• Supplied GSM system and terminals in 1990s
Source:
Source: Nokia Press Release 5
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STRATEGY
Unit of measure
1. Background information 4. Value chain strategy
• Location • Starting year • Focus on
• Registered • Number of – Marketing,
capital employees advertising and
• Management • Era analysis promotion
team – Distribution (channel
• Equity and sales force)
structure
Strategy
• Focuses on mobile communication
Product products and aims to be a total solution
provider in mobile communication
• Regularly introduces consumer-
oriented products with emphasis on
designs and functions Vision
To lead mobile
communication through
the integration of mobility
Value • Builds strong local alliance through JVs with internet and the
delivery with Chinese partners and R&D centers innovation of new service
system with Chinese universities models
• Builds exclusive specialist shops to
bring one-step solutions to end users
• Builds fixed and mobile service stations
with wide geographic coverage
including rural areas
*
Source:
Source: Nokia press Release
7
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NOKIA HAS CAUGHT UP WITH MOTOROLA AS MARKET LEADERS IN
MOBILE HANDSETS SINCE 1999
Unit of measure
Monthly market share development
(Percent of market in units sold)
40
30
Nokia
Motorola
20
10
Siemens
Ericsson
Definition:
23 21 21
Others • New buyer:never
7 7
bought mobile phone
8 before
10 12 12 • Repurchase buyer:
Ericsson bought mobile phone
before
28 29 29
Siemens
31 31 31
Motorola
Nokia
Alcatel Nokia
Alcatel Nokia
Siemens
Siemens
Samsung
Samsung
Ericsson
Ericsson
Motorola Motorola
*
Source:
Source: McKinsey analysis 10
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PRODUCT/MARKET
Unit of measure
1. Background information 4. Value chain strategy
• Location • Starting year • Focus on
• Registered • Number of – Marketing,
capital employees advertising and
• Management • Era analysis promotion
team – Distribution (channel
• Equity and sales force)
structure
• Nokia’s fashion phones are relatively strong in major cities and the
south region; however Nokia is relatively weak in the fourth-tier
cities
*
Source:
12
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MOBILE HANDSET IS NOKIA's BIGGEST PRODUCT OFFERING AND ITS
ESSENTIAL
Unit of measurePART OF TOTAL SOLUTIONS IN MOBILE COMMUNICATION
East region 7
5
South region
5
China average 7
8
Beijing
8
Shanghai
Shenzhen
*
Guangzhou
Source:
Source: McKinsey Analysis 15
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NOKIA IS RELATIVELY WEAK IN THE IMPORTANT 4TH TIER CITY MARKET
Unit of measure
Percent market share, 2000
Ericsson 28 29 30
28
Siemens
31 30 30
24
Motorola
Nokia
35%
30%
25%
20%
15%
Market share
10%
5%
Percent
0%
lia
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Inn He
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i an iao ich Sha g h an i nsuuizho
Gu a n b e ia n b e a
Ji He Sh L S J S Hu G G
*
Source: Province
Source: Retail Audit, McKinsey analysis 17
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VALUE CHAIN STRATEGY
Unit of measure
1. Background information 4. Value chain strategy
• Location • Starting year • Focus on
• Registered • Number of – Marketing,
capital employees advertising and
• Management • Era analysis promotion
team – Distribution (channel
• Equity and sales force)
structure
• While its retail shops are growing rapidly to approximately 900 around the
country, Nokia also develops exclusive specialist shops in order to provide “one-
step” solutions to end users
• Nokia implements a highly efficient customer service system with 250 service
stations and mobile service stations for rural areas. It provides good pre- and
after sales service
*
Source:
19
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NOKIA IS STRONG AT MARKETING, SALES AND SERVICE, BUT WEAK AT
TECHNOLOGY
Unit of measure
Manufac- Marketing
Sales and
R&D turing and and Service
distribution
supply chain branding
Strengths • Established R&D • Scalable local • Strong brand • Country-wide • Highly efficient
center in 98/99 in production awareness and distribution customer service
Beijing for China • Optimized preference channels and system with 250
market, with 150 logistics • Promotes strong channel service stations
research staff “technology based management and mobile
• Strong in low end on people” • High retailers service stations
development preference for rural areas
• Good product • Good pre- and
quality and design after sales
service, e.g. “one
hour repair”
service
Levers for
improvement • Weaker position in • Awareness and • Lower rating of
high end segment preference lower retail support
and high end than Motorola • Retailer
technology • Brand in young preference not
• Position in low end market under translating into
* under attack higher market
attack
Source: share
• Low technology
20
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NOKIA HAS REPUTATION GAP AS TECHNOLOGY LEADER, AND TARGET
DIFFERENT
Unit of measureCUSTOMER SEGMENTS FROM MOTOROLA
Motorola always
….on technology Nokia is second to introduces new
leadership and upgrade products technology to the
innovation market first
Nokia has
….on design good product
Motorola products
are more formal
designs
… on typical
loyal users Nokia phones
Loyal user
are for female or
is white-collar
younger people
worker
*
Source:
21
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NOKIA DISTRIBUTES THROUGH SIX FIRST-TIER RESELLERS AND
DEVELOPS
Unit of measureEXCLUSIVE SPECIALIST SHOPS
Nokia Channel Structure
Rationales
Vendor
• Nokia has 7JV and 1 WOFE in China, among which Nokia Beijing
and Nokia Dongguan are manufacturing mobile handsets. Nokia
Beijing has annual production capacity of 30 million units in 2001.
• The main drivers for Nokia to setup JVs and WOFEs in China
include building local alliances, localizing manufacturing to meet
domestic market demand and increase exports, and technology
transfer encouraged by the Chinese government
*
Source:
24
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NOKIA HAS 7 JVs AND 1 WOFE IN CHINA, AMONG WHICH 2 JVs ARE
DEVOTED TO MOBILE HANDSETS
Unit of measure
Product offering • GSM • Mobile • GSM • Mobile • Wireless • Digital • GSM base
system and handsets 900/1800 switches applications multimedia station
equipment network solutions terminals • Cellular
* • Mobile services and network
handsets services transmission
Source: products
25
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NOKIA's ORGANIZATION IS MAINLY PRODUCT FOCUSED WITH
A NARROW
Unit of measurePRODUCT PORTFOLIO AND COORDINATED SALES
AND MARKETING
Nokia
international
Nokia Nokia
Nokia
China Nokia Fujian mobile Nokia Nokia Nokia
Nokia Beijing Nokia Suzhou Nokia
office Dongguan communic- Beijing Dongda Zhongxin
China mobile telecom Chongqin
mobile phone ation Hangxing telecom digital
office communi- telecom
technology telecom technology technology
cation
• GSM system and • Mobile • GSM • Mobile • Wireless • Digital • GSM base
equipment handsets 900/1800 switches applications, multimedia station
• Mobile handsets network solutions terminals • Cellular
* services and services network
Source: transmission
products
26
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FINANCIAL PERFORMANCE
Unit of measure
1. Background information 4. Value chain strategy
• Location • Starting year • Focus on
• Registered • Number of – Marketing,
capital employees advertising and
• Management • Era analysis promotion
team – Distribution (channel
• Equity and sales force)
structure
• Nokia’s sales in China grew 31% and its operating profit grew 26% in 2000,
among which, mobile handsets contributed to 59% of the sales and 70% of
the profit.
*
Source:
28
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NOKIA SEES 30% GROWTH IN SALES AND OPERATING PROFIT WHERE
MOBILE HANDSETS CONTRIBUTE MORE THAN 50%
Unit of measure
USD millions
Revenues in China Operating profit in China
31% 2,697
2,052
1,597
1,114
262 356
26%
512
406
Mobile Mobile
handsets handsets
1999 2000 1999 2000
*
Source:
Source: Nokia Press Release, IDC, McKinsey Analysis 29