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STRATEGIC FORMULATION OF NOKIA--------------------------------------------------------------------------------------------------------------------------------------
CHAPTER 1INTRODUCTION OF THE PROJECT
1.1 COMPANY PROFILE
Nokia is a multinational corporation engaged in the manufacturing of mobile phones devices,
in converging internet and communication industries, having about 132,000 employees
working world wide. The organization is the World’s largest mobile manufacturing company
and is operational is 150 different countries having an approximate global annual sales
revenue of ¼ 42 billion and operating profit of ¼ 2 billion in the preceding year 2010. The
organization has a market share of about 28.9% as of the preceding year 2010 and is still the
market leader in the world of mobile phones.
Nokia Corporation has a history of 146 years and it wasn't the way it is today, it took Nokia
decades to reach at this point. The first Nokia century began with Fredrik Idestam's paper
mill on the banks of the Nokianvirta River. Between 1865 and 1967, the company would
become a major industrial force, but it took a merger with a cable company and a rubber firm
to set the new Nokia Corporation on the path to electronics.
From 1968-91, the newly formed Nokia Corporation was ideally positioned for a pioneering
role in the early evolution of mobile communications. As European telecommunications
markets were deregulated and mobile networks became global, Nokia led the way with some
iconic products. In 1992, Nokia decided to focus on its telecommunications business. This
was probably the most important strategic decision in its history. As adoption of the GSM
standard grew, the CEO put Nokia at the head of the mobile telephone industry’s global
boom and made it the world leader before the end of the decade. And in the current century
Nokia’s story continues with 3G, mobile multiplayer gaming, multimedia devices and a look
to the future
1.2 HISTORY
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Nokia Oyj is a Finnish multinational communications and information technology
corporation headquartered in Keilaniemi, Espoo, Finland. Its principal products are mobile
telephones and portable IT devices. It also offers Internet services
including applications, games, music, media and messaging through its Ovi platform, and
free-of-charge digital map information and navigation services through its wholly owned
subsidiary Navteq. Nokia has a joint venture with Siemens, Nokia Siemens Networks, which
provides telecommunications network equipment and services.
Nokia has around 122,000 employees across 120 countries, sales in more than 150 countries
and annual revenues of around €38 billion. As of 2012 it is the world's second-largest mobile
phone maker by unit sales (after Samsung), with a global market share of 22.5% in the first
quarter. Nokia is a public limited-liability company listed on the Helsinki, Frankfurt,
and New York stock exchanges. It is the world's 143rd-largest company measured by 2011
revenues according to the Fortune Global 500.
Nokia was the world's largest vendor of mobile phones from 1998 to 2012. However, over
the past five years it has suffered declining market share as a result of the growing use of
smartphones from other vendors, principally the Apple iPhone and devices running
on Google's Android operating system. As a result, its share price has fallen from a high of
US$40 in 2007 to under US$3 in 2012. Since February 2011, Nokia has had a strategic
partnership with Microsoft, as part of which all Nokia smartphones will incorporate
Microsoft's Windows Phone operating system (replacing Symbian). Nokia unveiled its first
Windows Phone handsets, the Lumia 710 and 800, in October 2011.
PRE – TELECOMMUNICATION ERA
The predecessors of the modern Nokia were the Nokia Company, Finnish Rubber Works
Ltd and Finnish Cable Works Ltd. Nokia's history started in 1865 when mining
engineer Fredrik Idestam established a groundwood pulp mill on the banks of
the Tammerkoski rapids in the town of Tampere, in southwestern Finland in the Russian
Empire and started manufacturing paper. In 1868, Idestam built a second mill near the
town of Nokia, fifteen kilo meters (nine miles) west of Tampere by the Nokianvirta River,
which had better resources for hydropower production. In 1871, Idestam, with the help of
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his close friend statesman Leo Mechelin, renamed and transformed his firm into a share
company, thereby founding the Nokia Company, the name it is still known by today.
Toward the end of the 19th century, Mechelin's wishes to expand into the electricity
business were at first thwarted by Idestam's opposition. However, Idestam's retirement
from the management of the company in 1896 allowed Mechelin to become the
company's chairman (from 1898 until 1914) and sell most shareholders on his plans, thus
realizing his vision. In 1902, Nokia added electricity generation to its business activities.
Industrial conglomerate
In 1898, Eduard Polón founded Finnish Rubber Works, manufacturer of galoshes and
other rubber products, which later became Nokia's rubber business. At the beginning of
the 20th century, Finnish Rubber Works established its factories near the town of Nokia
and they began using Nokia as its product brand. In 1912, Arvid Wickström
founded Finnish Cable Works, producer of telephone, telegraph and electrical cables and
the foundation of Nokia's cable and electronics businesses. At the end of the 1910s,
shortly after World War I, the Nokia Company was nearing bankruptcy. To ensure the
continuation of electricity supply from Nokia's generators, Finnish Rubber Works
acquired the business of the insolvent company. In 1922, Finnish Rubber Works acquired
Finnish Cable Works. In 1937, Verner Weckman, a sport wrestler and Finland's
first Olympic Gold medalist, became president of Finnish Cable Works, after 16 years as
its technical director. After World War II, Finnish Cable Works supplied cables to
the Soviet Union as part of Finland's war reparations. This gave the company a good
foothold for later trade.
The three companies, which had been jointly owned since 1922, were merged to form a
new industrial conglomerate, Nokia Corporation in 1967 and paved the way for Nokia's
future as a global corporation. The new company was involved in many industries,
producing at one time or another paper products, car and bicycle tires, footwear
(including rubber boots), communications cables, televisions and other consumer
electronics, personal computers, electricity generation machinery,
robotics, capacitors, military communications and equipment, plastics, aluminum
and chemicals. Each business unit had its own director who reported to the first Nokia
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Corporation President, Björn Westerlund. As the president of the Finnish Cable Works,
he had been responsible for setting up the company's first electronics department in 1960,
sowing the seeds of Nokia's future in telecommunications.
Eventually, the company decided to leave consumer electronics behind in the 1990s and
focused solely on the fastest growing segments in telecommunications. Nokian Tyres,
manufacturer of tires, split from Nokia Corporation to form its own company in 1988 and
two years later Nokian Footwear, manufacturer of rubber boots, was founded. During the
rest of the 1990s, Nokia divested itself of all of its non-telecommunications businesses.
Networking equipment
In the 1970s, Nokia became more involved in the telecommunications industry by
developing the Nokia DX 200, a digital switch for telephone exchanges. The DX 200
became the workhorse of the network equipment division. Its modular and flexible
architecture enabled it to be developed into various switching products. In 1984,
development of a version of the exchange for the Nordic Mobile Telephony network was
started.
For a while in the 1970s, Nokia's network equipment production was separated
into Telefenno, a company jointly owned by the parent corporation and by a company
owned by the Finnish state. In 1987, the state sold its shares to Nokia and in 1992 the
name was changed to Nokia Telecommunications.
In the 1970s and 1980s, Nokia developed the Sanomalaitejärjestelmä ("Message device
system"), a digital, portable and encrypted text-based communications device for
the Finnish Defence Forces. The current main unit used by the Defence Forces is
the Sanomalaite M/90 (SANLA M/90).
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First mobile phones
The Mobira Cityman 150, Nokia's NMT-900 mobile phone from 1989 (left), compared to
the Nokia 1100 from 2003. The Mobira Cityman line was launched in 1987.
The technologies that preceded modern cellular mobile telephony systems were the various
"0G" pre-cellular mobile radio telephony standards. Nokia had been producing commercial
and some military mobile radio communications technology since the 1960s, although this
part of the company was sold some time before the later company rationalization. Since 1964,
Nokia had developed VHF radio simultaneously with Salora Oy. In 1966, Nokia and Salora
started developing the ARP standard (which stands for Autoradiopuhelin, or car radio
phone in English), a car-based mobile radio telephony system and the first commercially
operated public mobile phone network in Finland. It went online in 1971 and offered 100%
coverage in 1978.
In 1979, the merger of Nokia and Salora resulted in the establishment of Mobira Oy. Mobira
began developing mobile phones for the NMT (Nordic Mobile Telephony) network standard,
the first-generation, first fully automatic cellular phone system that went online in 1981. In
1982, Mobira introduced its first car phone, the Mobira Senator for NMT-450 networks.
Nokia bought Salora Oy in 1984 and now owning 100% of the company, changed the
company's telecommunications branch name to Nokia-Mobira Oy. The Mobira Talkman,
launched in 1984, was one of the world's first transportable phones. In 1987, Nokia
introduced one of the world's first handheld phones, the Mobira Cityman 900 for NMT-900
networks (which, compared to NMT-450, offered a better signal, yet a shorter roam). While
the Mobira Senator of 1982 had weighed 9.8 kg (22 lb) and the Talkman just under 5 kg
(11 lb), the Mobira Cityman weighed only 800 g (28 oz) with the battery and had a price tag
of 24,000 Finnish marks (approximately €4,560). Despite the high price, the first phones
were almost snatched from the sales assistants' hands. Initially, the mobile phone was a
"yuppie" product and a status symbol.
Nokia's mobile phones got a big publicity boost in 1987, when Soviet leader Mikhail
Gorbachev was pictured using a Mobira Cityman to make a call from Helsinki to his
communications minister in Moscow. This led to the phone's nickname of the "Gorba".
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In 1988, Jorma Nieminen, resigning from the post of CEO of the mobile phone unit, along
with two other employees from the unit, started a notable mobile phone company of their
own, Benefon Oy (since renamed to GeoSentric). One year later, Nokia-Mobira Oy became
Nokia Mobile Phones.
Involvement in GSM
Nokia was one of the key developers of GSM (Global System for Mobile
Communications), the second-generation mobile technology which could carry data as
well as voice traffic. NMT (Nordic Mobile Telephony), the world's first mobile telephony
standard that enabled international roaming, provided valuable experience for Nokia for
its close participation in developing GSM, which was adopted in 1987 as the new
European standard for digital mobile technology.
Nokia delivered its first GSM network to the Finnish operator Radiolinja in 1989. The
world's first commercial GSM call was made on 1 July 1991 in Helsinki, Finland over a
Nokia-supplied network, by then Prime Minister of Finland Harri Holkeri, using a
prototype Nokia GSM phone. In 1992, the first GSM phone, the Nokia 1011, was
launched. The model number refers to its launch date, 10 November. The Nokia 1011 did
not yet employ Nokia's characteristic ringtone, the Nokia tune. It was introduced as a
ringtone in 1994 with the Nokia 2100 series.
GSM's high-quality voice calls, easy international roaming and support for new services
like text messaging (SMS) laid the foundations for a worldwide boom in mobile phone
use. GSM came to dominate the world of mobile telephony in the 1990s, in mid-2008
accounting for about three billion mobile telephone subscribers in the world, with more
than 700 mobile operators across 218 countries and territories. New connections are
added at the rate of 15 per second, or 1.3 million per day.
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1.3 VISION AND MISSION
VISION STATEMENT: Nokia’s vision is simply
“Connecting People”
MISSION STATEMENT:
Nokia Corporation defines its mission to connect people through mobile phone technology andquotes its mission statement as follows:
“Our strategic intent is to build great mobile products our job is to enable billions of people everywhere to get connected”
1.4 OBJECTIVE OF STUDY
Every task is undertaken with an objective. Without any objective a task is rendered
meaningless. The main objectives for undertaking this project are:
The main objective is to study about the future strategic choice of Nokia.
To know sustainable and reliable strategy that evaluates the current strategic position,
and the recent past strategy development history of the company
This project will help me to get in-depth knowledge about the academic theories and
concepts used to evaluate the strategic position of a company and to formulate a fu-
ture strategy for a company.
It also helps me to identify the gap between literatures and practice.
1.5 RESEARCH METHODOLOGY
Research methodology is a way to systematically solve the research problem. In it, we study
the various steps that are generally adapted by a researcher in studying research problem
along with logic behind them.
It includes the formulating of research problem, study of literature, collecting the data,
analyzing that data and making interpretations of that data. Research methodology used:
Web sites.
Books
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CHAPTER 2STRATEGIC FORMULATION
2.1 INTRODUCTION
Strategy formulation is a very basic step for the development of a company as it acts as the
blue print for the company and is very significant. The initial phase in the strategic
management process is the stage of strategy formulation. Nokia Corporation has developed
the following strategy to compete and grow in the market.
Strategy formulation is vital to the well-being of a company or organization. There are two
major types of strategy: (1) corporate strategy, in which companies decide which line or lines
of business to engage in; and (2) business or competitive strategy, which sets the framework
for achieving success in a particular business. While business strategy often receives more
attention than corporate strategy, both forms of strategy involve planning, industry/market
analysis, goal setting, commitment of resources, and monitoring.
2.2 STRATEGY OF NOKIA
Nokia Corporation has created an alliance with the Microsoft Company through which it has
gained the opportunity to launch new mobile phones in the market which would be based on
Windows 7 operating system. Nokia Corporation has basically adopted the strategy of
“New Product Development” and “Horizontal Integration Strategy” through which Nokia
Corporation plans to launch new mobile phones with core 2 duo processors and about 1.0-1.5
GB of Ram and full HD 1080p video recording cameras and in anew slim design and will use
Windows 7 operating system as its basic operating system and these cell phones will contain all
the features of an official Windows 7 which already has a great acceptance in the World to compete in
the market against other mobile phone manufacturers in the world as well as the growing
Android (OS).
2.3 IMPORTANCE OF STRATEGY
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The formulation of a sound strategy facilitates a number of actions and desired results that
would be difficult otherwise. A strategic plan, when communicated to all members of an
organization, provides employees with a clear vision of what the purposes and objectives of
the firm are. The formulation of strategy forces organizations to examine the prospect of
change in the foreseeable future and to prepare for change rather than to wait passively until
market forces compel it. Strategic formulation allows the firm to plan its capital budgeting.
Companies have limited funds to invest and must allocate capital funds where they will be
most effective and derive the highest returns on their investments.
On the other hand, a firm without a clear strategic plan gives its decision makers no direction
other than the maintenance of the status quo. The firm becomes purely reactive to external
pressures and less effective at dealing with change. In highly competitive markets, a firm
without a coherent strategy is likely to be outmaneuvered by its rivals and face declining
market share or even declining sales.
The formulation of sound strategy may be seen as having six important steps:
1. The company or organization must first choose the business or businesses in which it
wishes to engagen other words, the corporate strategy.
2. The company should then articulate a "mission statement" consistent with its business
definition.
3. The company must develop strategic objectives or goals and set performance objectives
(e.g., at least 15 percent sales growth each year).
4. Based on its overall objectives and an analysis of both internal and external factors, the
company must create a specific business or competitive strategy that will fulfill its
corporate goals (e.g., pursuing a market niche strategy, being a low-cost, high-volume
producer).
5. The company then implements the business strategy by taking specific steps (e.g.,
lowering prices, forging partnerships, entering new distribution channels).
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6. Finally, the company needs to review its strategy's effectiveness, measure its own
performance, and possibly change its strategy by repeating some or all of the above
steps.
2.4 STRATEGIC MISSION
The strategic mission of an organization embodies a long-term view of what sort of
organization it wishes to become. The value to management is of having a lucid mission
statement. The second step in strategy formulation can be in rendering tangible the firm's
long-term course and in guiding decisions toward a rational design. Among the elements that
are key to a good mission statement are a statement of corporate values and philosophy, a
statement of the scope and purpose of the business, an acknowledgement of special
competencies, and an articulation of the corporate vision for its future.
2.5 STRATEGIC OBJECTIVES
Clearly stated strategic objectives, the third step of strategy formulation, outline the position
in the marketplace that the firm seeks. Performance targets state the measurable milestones
that the firm needs to reach or obtain to achieve its strategic objectives.
Some strategic objectives relate to the positioning of goods and services in the competitive
marketplace while others concern the structure of the company itself and how it plans to
produce goods or manage its operations. Typical strategic objectives involve profitability,
market share, return on investment, technological achievement, customer service level,
revenue size, and diversification.
In order to make strategic planning work, the goals, missions, objectives, performance
targets, or other hopes of top management must somehow be made real by others in more
distant locations down the organizational chart. Merely communicating to each member of
the business the vision that top management has for the firm is not sufficient. Strategic
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objectives and performance targets should penetrate every corner of the organizational chart.
There should be a hierarchy of strategic formulation starting with the highest levels of the
firm, from which it is consistently translated from level to level so that each department
knows what its contribution to the overall mission of the firm is to be. This process should
end with each individual in the firm having strategic objectives and performance targets
tailored to their specific role in the firm.
2.6 ORGANIZATION-WIDE STRATEGY LEVEL.
This is top management's plan for achieving its aims. These strategies are for the entire
organization and should not concern the specific affairs of individual business units.
Organization-wide strategy requires schemes for overseeing the extent and combinations of
companies' assorted actions in order to achieve a superior corporate performance. When
numerous activities are being managed simultaneously, there are interactive effects in
managing the group of activities as a whole. Such a group of activities is often referred to as
the "business portfolio." Proper management of the business portfolio demands actions and
decisions about how and when the firm should enter new ventures and what areas the firm
needs to exit. Further, in all management, timing is crucial. Top management needs to set the
timetable for business entry, exit, growth, and downsizing. Often a sound strategy goes awry
when management attempts to move too quickly, too slowly, or just fails to set any timetable
for action allowing for little temporal coordination of the firm's efforts. Further, organization-
wide strategy should address the balance of resources across the firm's various activities.
These resources need to be allocated to direct the company's activities toward the strategic
objectives of the organization. Through these activities at the corporate-wide level, decisions
about balancing business risks can maximize security for the firm.
2.7 BUSINESS STRATEGY
The fourth step in strategy formulation requires developing the business or competitive
strategy. Business strategy refers to the strategy used in directing one coherent business unit
or product line. The most crucial question business strategy should address is how the unit
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plans to be competitive within its specific business market. Important logistical issues to
consider include (1) what role each of the functional areas within the business unit will play
in creating this competitive advantage in the marketplace; (2) what the potential responses are
to prospective changes in marketplace; and (3) how to allocate the business unit's resources
between its various divisions.
The overall competitive strategy should take into account three main factors: (1) the status,
make-up, and prognosis of the industry as a whole and its market(s); (2) the firm's position
relative to its competitors; and (3) internal factors at the firm, such as particular strengths and
weaknesses.
2.8 INDUSTRY ANALYSIS.
An industry or market analysis should consider the structure of the industry, the forces
compelling change within the industry, the cost and price economics of the industry, elements
critical to success in the industry, and imminent problems and issues in the industry.
A review of the industry's structure should evaluate factors such as these:
the size of the total market
the growth rate of the market
profitability of the firms in the industry
whether the industry is producing at capacity or there is excess capacity already in place
the entry barriers to the industry
whether the industry's products are commodity goods or highly unique
Change in an industry may occur along several lines, and the direction of change often has
major implications for the competitive strategy. In an obvious example, if a manufacturing
industry is facing in the medium term a massive technological overhaul due to phase-in of
environmental regulations, it would probably make little sense to bring a major new factory
on line using the older technology, even if for the moment it is still more widely used. Other
noteworthy industry changes to consider include what stage of development the industry and
its market are at (developing, mature, declining), what technological advances could impact
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the industry, what regulatory changes are new or on the horizon, and whether there are major
patents about to expire that will allow cheaper entry into the market.
It is also important to examine in detail the economics of doing business in a particular
industry. One area of particular concern is the cost structure. For instance, industries
characterized by a high percentage of fixed costs are subject to extreme price wars during
competitive times in the market. Airlines are an example of a high-fixed-cost industry.
Industries with high variable costs tend to have smaller swings in their pricing structure. Cost
structure also has implications for capital and cash flow requirements, as well as for the
overall entry barriers to participating in the industry.
Production costs tend to decline over time in proportion to the total quantity of goods
produced. This is mainly due to two factors: learning and experience. Each has its own curve,
the "learning curve" and the "experience curve." While each of these effects might be
diagnosed separately, the end effect of both may be the same: the firm that produces the most
goods in the industry tends to have the lowest cost of production in the long term. All things
being equal, this will give that firm the long term cost advantage in the industry for the life of
the product.
In a typical scenario, being the low-cost producer allows the firm to receive not only the
greatest margin on its products when all firms in the market participate in an established price
structure, but when price competition arises the low-cost producer can make a profit or break
even on its goods, while its competitors lose money. This is a key strategic advantage. This is
why many firms during the development of a new and potentially large long-term market will
forgo a profitable, small, prestige niche strategy for a less profitable market penetration
strategy that demands heavy investment and expansion of production. This second strategy
can yield a long-term advantage in the industry by allowing the firm to gain from the learning
and experience effects. Competitors later may not be able to catch up since they lack the
cumulative production experience and assets of the pioneer in the industry.
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One alternative to the low-cost strategy is a high value strategy, in which customers pay more
but also expect to receive a product or service somehow better than that offered by the low-
cost supplier. The improvement may be tangible in durability and features, or it may be an
appeal to status, image, or lifestyle that makes the product or service more compelling to
some consumers.
However, even industry leaders must guard against complacency; they might be on top in the
traditional market paradigm, but there may be a new paradigm emerging that will make them
obsolete if they fail to change. The accumulation of learning and experience does little good
if these assets are directed at the wrong vision of the market. This has strategic implications
not only for the market leader, but also its competitors, who may be able to benefit from the
leader's slow rate of change.
2.9 COMPETITORS.
A fundamental part of developing a business strategy is to understand in detail who the main
competitors are and where their strengths and weaknesses lie. Competitors can be analyzed
by the type of goods they produce, their price, markets served, or channels of distribution
used. Many industries have clear niching, with each firm or group of firms avoiding direct
competition through some combination of product differentiation or market segmentation.
Other industries are characterized by large-scale head-on competition. Coca-Cola and Pepsi,
in the soft drink industry, are a highly visible example.
Not all future competition originates from present competitors, however. New market
entrants are most often found lurking on the sidelines of the firm. For example, suppliers are
often looking to forward integrate into an industry. Suppliers of the raw materials that go into
a product may have a competitive cost advantage through such vertical integration. Suppliers
are often motivated in such moves by the assurance of having a guaranteed market for their
output.
On the flip side, customers may decide to backward integrate into business. Customers
considering backward integration usually first attempt to establish their own "private labeled"
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product prior to integration. When customers put considerable time and effort into their
private label version of a product, it may well be a sign of a growing intent to backward
integrate. The notion of private label is most associated with retailing, where, for example,
grocery stores have house labels, but may or may not actually manufacture the products
bearing their labels. However, similar practices exist in many other lines of business.
Firms that produce either substitutes for a product or complementary goods to a product may
also be a competitor. These firms have experience in the market, and a competitor's product
niche in the market represents a simple product line extension for their firm. Often the threat
of competitive retaliation into these firms' product areas is useful in deterring such moves.
Barriers to market entry are often responsible for setting the level of competition in an
industry. Historically, retail has tended to be a competitive industry due to the relatively low
costs of entry into the market (although this has changed somewhat as large chains
consolidate and have significant price and marketing advantages over smaller competitors).
But compared to manufacturing heavy industrial goods, retail still has relatively few barriers.
American auto manufacturers probably worry very little about other American firms entering
the market of passenger automobiles, because both the financial and regulatory barriers to
entry are far too high. Not all barriers are financial. Drug firms enjoy oligopoly status due to
their abilities to interface with the U.S. Food and Drug Administration in getting new drugs
approved. New firms would have great difficulty in developing the same working
relationships. Military suppliers also enjoy an oligopoly status due to political barriers to
entering the market. Each firm must analyze what factors keep its competitors at bay when
assessing the potential for others to want to share in their profits.
2.10 IMPLEMENTING STRATEGIES
A strategy is of course only as good as its implementation. A company may have an
impressive strategy for conquering the market, but if it fails to take the right steps the strategy
is meaningless. The means of implementing strategies are called tactics. The tactical
execution, while crucial to the success of any strategy, is not a traditional part of the
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formulation of that strategy. However, many firms have been successful in discovering
successful tactics and building their strategies about "what works." The implementation
experience, whether favorable or unfavorable, also directly informs the strategy revision
process or any new strategies, as the company will take into account its successes and failures
when choosing future paths.
2.11MONITORING AND ASSESSMENT
Strategy formulation should be done on a regular basis, as often as required by changes in the
industry. Firms need to track the company's progress, or lack thereof, on the key goals and
objectives outlined in the strategic plan. The company must be objective and flexible enough
to realize whether the strategy is no longer appropriate as it was first conceived, and whether
it needs revision or replacement. In other cases, the strategy itself may be fine, but the
communication of the strategy to employees has been inadequate or the specific steps to
implementation haven't worked out as planned. This evaluation and feedback of the strategy
formulation, the final step, provides the foundation for successful future strategy formulation
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CHAPTER 3aUDIT
3.1 Internal Audit
Internal auditing is an independent, objective assurance and consulting activity designed to
add value and improve an organization's operations
RESOURCE BASED VIEW
One of the most significant elements that shows the capacity and capability of a company
to proceed in the future is its resources as without having sufficient resources and proper and
efficient utilization of resources it would not be able to survive in the market. These resources
are categorized in the different groups namely Physical, human and organizational resources.
1. PHYSICAL RESOURCE
These resources of a company can be seen in the form of building, land, equipment
and factories.
Nokia in this respect may be based in Finland but it has its branches and
production units all over the world.
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Also the company’s financial statements for the year 2010 shows that the
company hastotal assets of worth 39,123 million Euros which shows that the
organization is verystrong financially.
Nokia has largest network of distribution and selling as compared to other mobile
phonecompany in the world and its sales are operational in about 150 countries.
2. HUMAN RESOURCE
It’s the count of all the skilled or unskilled staff a company hires to work for them. Nokia
do hire highly skilled staff due to its nature of technology work and provide them with
training to keep them update and create opportunities for program developers who can
work from home to compete in a competition to win prices and even offer them jobs.
Nokia Corporation had almost 132,430 employees by the end of year 2010
working in120 different countries which ensures diversity and more creativity.
The proportion of women has grown to 41 percent of all employees, with 13.8
percent holding senior management positions, which again ensures diversity
and creativity.
Also according to the statistics of 2010 Nokia had R&Ds in 16 countries and
employed 35,870 people in research and development sector.
3. ORGANIZATIONAL RESOURCE
All the resources other than physical and human resources are categorized as organizational
resources. Nokia Corporation has the following organizational resources.
Nokia has many trademarks which are worth a lot.
Nokia has a very strong name among his competitors and loyal customers and a brand
value of$29,495 million. Nokia is known as a brand which is the trend setter in
the mobile industry.
With approximately 29% market share and 461,318 thousand units sold in the year
2010 Nokia Corporation is the market leader in the mobile phone industry.
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The savvy in manufacturing and logistics that allows the Finnish giant to churn out
900,000 handsets a day also gives it a strategic edge and also Nokia Corporation due
to mass production achieves the economies of scale.
Nokia Corporation has the most efficient production technology through which it
can produce massive number of mobile devices at low prices. The average production
cost of a handset at Nokia is $88 and the average selling price is $130 which provides
a margin of about 33% gross profit to the organization.
Nokia being the largest and the oldest Mobile phone manufacturer has very high
brand equity and loyal customers and the increasing number of sales is the guaranty of
this as the sales (2009-2010) increased from 40,984 to 42,446 Million euros in the last
year.
ORGANIZATION CULTURE
Nokia Corporation being one of the largest multinationals in the world and being the 7 th most reputable company in the world is sure to have a strong organizational culture, but above that there are many other indicators that guaranty Nokia’s Strong Culture. Nokia's official corporate culture manifesto ‘The Nokia Way’ emphasizes the speed and flexibility of decision-making in a flat, networked organization, although the corporation's size necessarily imposes a certain amount of bureaucracy. The company has its own values which makes it different from all other organizations.
As said by the current CEO of Nokia Corporation thatOur values are defined by our employees; they serve as a foundation for our evolving culture and are the basis for our way of working. Living them out on a daily basis is our shared philosophy´
STRONG CULTURAL INDICATORS
Nokia Corporation has been one of the largest innovators of the world as it was the
first organization to introduce mobile phone technology and even now Nokia
Corporation and its employees are committed to its quest of bringing changes and
innovation. Of the 50Most Innovative Companies, 2009 Nokia had been ranked at the
9th Spot which proves Nokia’s Struggle for bringing changes.
In fact Nokia Corporation has spent almost $3.9 billion on its research and
development department which is almost more than 3 times of the average money
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spent by other mobile manufacturing companies, which proves the commitment of
Nokia towards a strong innovative culture.
Employees at Nokia are provided with a sound and healthy environment where they
are allowed to express their ideas freely and work accordingly, maintaining a high
employee satisfaction level and employee morale. In fact in the year 2009 &2010,
based on employee surveys and employee work experience, Nokia Corporation had
been entitled as one of the 40 Best Companies to Work for in New York.
Also Nokia Corporation has been ranked at the no 5 in the Global 100 Most
Sustainable Corporations (Corporate Knights, 2010) based on high employee salaries
and satisfaction, leadership diversity and productivity levels and the organizations
social responsibility which one again guaranties a strong culture at Nokia
Corporation.
Nokia Corporation has created Nokia Beta Labs where not only the employees of the
organization but also the consumers are allowed to come and build various
applications and provide suggestions to make things better and through this way
Nokia continues in its quest to find new ways to connect people and also engage
people in its work.
The Nokia Way emphasizes on the quality of production rather than quantity so it
allow sits employees to work in a flexible environment, Mostly employee’s review of
the company states clearly that they often work at home and that the Nokia way
provides a great work and life balance which increases the employee’s satisfaction
level and their productivity.
FUNCTIONAL ANALYSIS
N C T I O N A L A N A L Y S I SA functional analysis provides a high level representation of critical functions for each of the
major work areas in the organization. These functions are the ones that ensure timely, high
quality, least cost services or good are provided.
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1. MANAGEMENT DEPARTMENT AUDIT
Nokia Corporation is a multinational organization with many other companies competing in
the same industry so there is no room for such companies that don’t follow the concept of
Strategy development, implementation and Evaluation.
Since Nokia Corporation is technology based company, its strategy was always
about investing in and ensuring Nokia’s future. Recently Nokia has redefined its
strategies and goals which outlined its new strategic direction, including changes in
leadership and operational structure to accelerate the company’s speed of execution
in a dynamic competitive environment which has the potential to become strength of
the company.
All the new objectives of the company are very well defined and measureable as the
major elements of the strategy include
Plans for a broad strategic partnership with Microsoft to jointly build a new
winning mobile ecosystem.
A renewed approach to capture volume and value growth to connect the
next billion to the Internet in developing growth markets.
Focused investments in next-generation disruptive technologies.
A new leadership team and organizational structure with a clear focus on speed,
results and accountability.
Nokia Corporation has a formal and appropriate and well defined organizational
structure. The organization is subdivided into four business units that are
Mobile Phone
Smart Devices
NAVTEQ
Nokia Siemens Networks
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The Job satisfaction level and employee morale is very high at Nokia Corporation as
it has been entitled among the best 40 organizations of New York based on employee
surveys of the organizations which is a major strength of the organization.
Nokia Corporation had almost 132,430 employees by the end of year 2010 working
in120 different countries of which the proportion of women is 41 percent of all
employees, with 13.8 percent holding senior management positions which ensures
diversity and more creativity and is one of the core competencies of the organization.
Employees are hired with great care and a series of interviews are conducted to
ensure the capabilities of the employees and also experience is counted as a fruitful
ingredient, which means that the organization has basically very skilled and
experienced staff that has the potential to lead Nokia Corporation in the future. At
the time of staffing the principle of Diversity is always considered at Nokia to
enhance creativity and productivity of the overall organization.
As in the words of Timothy McDonald (Management Employee) at Nokia
Corporation, ‘The working environment is highly motivating and the people here are
brilliant. My manager has encouraged and organized for me to participate in extra
management training courses. In addition to that, I have a personal coach, with
whom I catch up with on regular basis; he guides me with career planning and keeps
things well focused and on track´ also pours out light on the behavior of the
management of the organization and that managers delegate well with their
employees.
2. MARKETING DEPARTMENT AUDIT
The marketing Department performs the major activities of the business so it is really
very important to analyze an organization’s marketing strengths and weaknesses. Nokia
Corporation in this case has the following strengths and weaknesses.
Nokia being the largest mobile phone company in the world and having a history
of about 146yearshas a strong Brand Recognition.
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As per the Interbrand’s Best Global Brand Rankings, Nokia Corporation is
ranked at no 8th and has a brand value of $29,495 million. And as per brand value
the ranking of Nokia Corporation is 43rd round the globe.
Nokia Corporation is still the market leader in the industry of mobile phones with a market
share of 28.9% in the year 2010.
With 461,318,000 units sold in the year 2010 Nokia Corporation has many loyal
customers and has a strong brand position.
With Nokia Siemens Network, NAVTEQ, Mobile Phones and Smart devices on
its side Nokia Corporation has a strong and diversified portfolio.
With a wide variety of different cell phones Nokia Corporation has a strong
product line with almost 13 different categories of mobile phones where each
category has many different models for each class of users.
Nokia Corporation’s rising sales graph shows that the company’s sales force is
very effective as the sales rose from 4 billion euros to 4.2 billion euros in 2010.
Nokia Corporation is spending about £175m on global advertising which may
lead to increased sales in the future and is strength for the company.
Nokia Corporation with a variety of different mobile series has segmented its
mobile phones very efficiently on the basis of economy and customers life styles.
Nokia has largest network of multichannel distribution and selling as compared to
other mobile phone companies in the world and its sales are operational in
about 150 countries.
3. FINANCIAL DEPARTMENT AUDIT
The finance Department provides the basic financial resources to other departments
and is responsible for allocating budgets to the company so it is really very important
to analyze an organization’s financial strengths and weaknesses because all the
operations of the business are dependent on them. Nokia Corporation in this case has
the following strengths and weaknesses.
Nokia Corporation has a Net Working capital of $3.18 billion which is above
of what any organization in the industry maintains so it gives Nokia a
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Financial strength to tackle any sort of uncertainty in the market and also
gives the chance to grab any temporary opportunity in the market.
Also the company’s financial statements for the year 2010 shows that the
company has total assets of worth 39,123 million Euros which shows that the
organization is very strong financially.
Nokia Corporation reported sales of about 4.2 billion euros in 2010 which has
risen from the sales figure in 2009 which is again a strong financial strength
as it is greater than its biggest competitors such as Motorola which reported
sales of 1.9 billion euros.
The Nokia Corporation is weak than its competitors in terms of net earnings
per share as Nokia Corporation’s average EPS is 0.628 whereas Motorola
Inc’s average EPS is 0.805which makes it less attractive for investors as
compared to its investors.
Also Motorola Inc. is more efficient in making its short term payments with a
current ratio of 1.99, as compared to Nokia Corporation which has a current
ratio of 1.6.
Nokia Corporation’s five year average of total debt to equity ratio is about
0.25 which shows that for each $1 borrowed from shareholders the company
has 25 cents from its creditors which tells us about the investment decision of
Nokia Corporation that it does not rely mostly on debt and the firm faces a
fewer risk which is a strength for the company.
Nokia Corporation has an interest coverage ratio of 7.4 times which means
that it generates enough income in an accounting period to pay off 7.4 times
of its debts which again reduces the chances of Nokia Corporation’s
Bankruptcy and is in its favor.
On average of the last 5 year record Nokia Corporation has a net profit
margin of 8.1%which ensures availability of greater amount of finance at the
time of need for the organization.
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4. PRODUCTION DEPARTMENT AUDIT
Just like other departments, the production department of a company is also of great
importance as it also plays a vital role in the development of an organization. An organization
with a powerful and innovative production technology can be very beneficial for an
organization and a poor production unit may also become an organizational weakness.
Unlike other mobile manufacturing companies Nokia Corporation uses a Life Cycle
Concept ´ in the manufacturing of mobile phones and devices. The manufacturing
process is carried out into two phases. In the first stage, Nokia builds the innards of
phones. Whereas in the second, fast-turnaround stage, called "assembly to
order," Nokia pumps orders from specific carriers into its production system and
transforms the raw "engines" into tens or even hundreds of thousands of built-to-order
phones in a matter of days.
Nokia Corporation has 10 production units in the world which are very productive
and have large production capacities. These units are in Brazil, China, Finland, Great
Britain, Hungary, India, Mexico, Romania, South Korea and Germany.
In its factories around the world, mobile-phone giant Nokia will churn out
approximately325 million handsets each year that is 900,000 phones per day which is
one of the core competencies of Nokia Corporation.
Nokia Corporation has the best production technology savvy which produces at an
unmatchable speed and also due to mass production Nokia Corporation enjoys
economies of scale and on average, it costs Nokia $88 to make a phone, and on
average it sells phones for $129 leaving a gross margin of nearly 33%, better than its
rivals can muster.
5. RESEARCH AND DEVELOPMENT AUDIT
R&D is one of the most vital parts of a company and for an industry based on technology its
importance goes sky high. Nokia Corporation also being a technology based company
realizes the significance of R&D and is devoted to take effective measures to search out new
ways to connect people. The following strengths and weaknesses make up the research and
development department of Nokia Corporation.
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One of the basic values and belief of Nokia Corporation is that they are committed
to bring innovation in the market and are always making efforts more than their
competitors to be the first to introduce new technology in the market. For this Nokia
Corporation spends a lot of money on its R&D. The R&D budget for the year 2010
was $3.9 billion which is about 3 times more than other mobile manufacturing firms.
Also according to the statistics of 2010 Nokia has R&Ds in 16 countries by the name
of Nokia Research Centers and it employs 35,870 people round the globe.
These sectors are working very hard and are creating changes and developing new
technology as Nokia Research Center has developed Indoor Navigator to provide
precise indoor location information on a handset, without needing GPS on Apr 2011.
Similarly another application is developed, Nokia Shoot & Tag which is a clever
video application developed by Nokia Research Center, Beijing that automatically
creates scene chapters in your video while recording. This innovative tagging
technology was created to provide a convenient playback experience when viewing
videos.
Another creation of Nokia Research centers is Nokia Diexie which is a unique
Chinese character handwriting input technology designed specifically for smaller
touch screen phones where writing out a full sentence just won't fit on a small screen.
Nokia Diexie allows users to simply write a full sentence one character over another
in a stacking style with using your pointer finger as a pen. All of these designed
applications show us clearly the picture of Nokia Corporation’s R&Dµs effective
work considering every small detail and recreating things.
6. MANAGEMENT INFORMATION SYSTEM AUDIT
Management information system is basically used tocollect store and analyze data and
information but this is not the sole reason. It is now days also used a source of
communication or as a communication channel between different department of an
organization so an effective and up to date management information system is a
strength of an organization and if an organization does not have such a resources then it
may count as a weakness of the firm.
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The management information system used in Nokia Corporation is known as
ACM-MIS Lite which is a power integrated system developed by the
Association of Computer Machinery (ACM), the world’s largest educational and
scientific computing society, through which various departments of Nokia
Corporation interacts with each other, which results in time saving and efficient
utilization of resources.
John Clarke is the CIO at Nokia Corporation who is very well qualified and
experienced person in the field of Information Technology which goes basically
in the favor of Nokia Corporation to have such skilled employees.
Data is updated regularly via automatic computer systems to keep the employees
notified and up-to-date regarding the latest technology and information.
The ACM-MIS has a very user friendly graphical user interface (GUI) which is
very easy to use and understand and all employees of the organization are
provided with a user id and password of their own to access the information
system.
One of the vital and significant weaknesses of this management information
system is that it can be accessed only through Internet Explorer 5.x and
Netscape Navigator 7.x browsers.
3.2 EXTERNAL AUDIT
The External Analysis examines opportunities and threats that exist in the environment. Both
opportunities and threats exist independently of the firm and are the external forces that have
a strong impact on the performance of the company either in the good way or the bad way so
a company should always be ready to identify new opportunities in the market and to tackle
with the threats.
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CHAPTER 4SWOT ANALYSIS
STRENGHTS
Nokia Corporation has identified the opportunity to manufacture new mobile phones in the
market with Windows 7 as the primary operating system but to in cash this opportunity Nokia
Corporation has to utilize its strengths such as
Nokia Corporation is the market leader in the industry with a strong market share of
28.9% and strong brand recognition with a value of $29,495 million and is currently
ranked as the 8th best brand in the world (2010) that ensures Nokia that people round the
globe will try its mobile phones and with these new features Nokia Corporation will
regain its lost markets.
Nokia Corporation is very strong financially as the company has a working capital
of almost ¼ 3.18 million and assets of ¼ 39,123 million which will provide Nokia the
ability to finance its new project.
Nokia Corporation has 132,430 employees working worldwide in 120 countries
which is also a strong resource that ensures that the company will succeed in
achieving its strategic goals.
Nokia Corporation has the world’s most advanced production technology and is
referred as the Mobile Giant with production units in 10 countries round the globe
and with a production capacity of 325 million handsets per production unit which
tells us that Nokia Corporation will face no difficulty in manufacturing the
new mobile phones.
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OPPORTUNITIES
As Nokia Corporation is a technology based company and the world is now days progressing
very rapidly in this particular field, which opens many doors for Nokia corporation to lead its
way to success and to maintain its position as the world’s largest mobile phone company and
to achieve a higher market share. Nokia Corporation has the following opportunities available
in the market to grab.
The telecommunication industry is the most rapidly growing industry in the world
with almost 5.3 billion people who subscribe daily for various handsets. These 5.3
billion people account for about 77% of the whole world’s population. This enormous
growth is led by China and India where Nokia Corporation can penetrate and grab a
huge market share and to compete against its competitors in the market.
GSM and CDMA are competing wireless technologies with GSM enjoying about
82%global market share, this opens many doors to telecommunication companies
such as Nokia Corporation that produces wireless mobile phones to strengthen their
roots.
Nokia Corporation’s mobile phone devices are known best for their quality and
technology and the only problem that these handsets face is the problems with
software malfunctions which has a strongly negative impact on the revenues of the
company and to overcome this problem Nokia Corporation has formed alliance with
Microsoft and is soon to release a new series of Windows phone 7 through which
Nokia Corporation gains the opportunity to target new markets and increase its market
share along with competing with all the other companies in the industry.
Nokia Corporation will add swiping and wireless identification features in updates to
its new line of Symbian smartphones to compete with Google Inc's fast-developing
Android platform and to support the declining acceptance of its existing Symbian
mobiles.
Even as it puts Microsoft software in smartphones, Nokia continues to spend on its
MeeGo open-source platform in hopes of developing a proprietary ecosystem
for handsets, tablets, and netbooks. Any payouts or incentives to continue MeeGo
development emphasize that Nokia's eggs are not all in Microsoft's basket when it
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comes to smartphones thus provides Nokia Corporation the opportunity to diversify
its product line.
Nokia Siemens Networks completed the acquisition of wireless network infrastructure
assets of Motorola Solutions by paying US $975 million in cash on 30th April 2011
where Motorola Solutions is a leading provider of mission-critical communication
products and services for enterprise and government customers. This acquisition has
provided Nokia Corporation with approximately 6900 employees and it takes on
responsibility for 50operator customers in 52 countries strengthening the company’s
portfolio and also providing opportunity to increase its profits. To further strengthen
its portfolio Nokia Corporation has acquired Motally Inc. on Sep 1st 2010 which
operates as a mobile analytics company.
Nokia is more than doubling the size of its direct venture investment fund with an
injection of $150 million, with a view to putting some of the money to use in China
and the company has the opportunity to increase its hold in the market.
THREATS AND WEAKNESSES
Through this strategy Nokia plans to overcome the following threats and weaknesses.
A major weakness of Nokia Corporation is that it has been dependent on the same
Symbian operating system for more than a decade and now days Symbian based
mobile phones are experiencing a decline in the global market share (44.6% -34.6%)
which is a major threat to the organization as it greatly relies on the Symbian
Software.
Also through this strategy Nokia Corporation plans to compete against the new
Android operating system which is a major threat to Nokia Corporation as it has
gained popularity and acceptance in the world and also this Android system is the
most rapidly growing operating system that the world has captured a huge market-
share in just a single year that is 25.5% global market share. And also many of
Nokia’s competitors have adopted the Android operating system as their basic
operating system and thus Nokia Corporation is experiencing a global decline in the
market share.
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The mobile phone manufacturing companies are gaining more and more market share
and the list of these competitors are topped by Google
Huawei
Samsung
HTC
Motorola
LG
With Samsung Corporation adopting the new Android technology, Nokia’s
acceptance in the Western Europe has also declined and it has lost its position as the
no 1 smart phone manufacturers and Samsung Electronics Co Ltd has raised to the
No. 1 spot in the Western European cell phone market in the first-quarter, overtaking
long-term market leader on its home turf with Samsung’s market share 29% and
Nokia’s market share 28%which tells that Nokia Corporation has to face a strong
competition in the market.
Nokia Corporation has also been experiencing a fall in the U.S. market share as the
market share in 2010 slipped to about 35% and Android Phones account for almost
49%of the market share in U.S and 4Gs are considered as the Kings this is also a
major threat to the Company.
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CHAPTER 5RECOMMENDATION
Nokia should concentrate on following areas:
As Nokia Corporation is a technology based company and the world is now days progressing
very rapidly in this particular field, which opens many doors for Nokia corporation to lead its
way to success and to maintain its position as the world’s largest mobile phone company and
to achieve a higher market share. Nokia Corporation has the following opportunities available
in the market to grab.
The telecommunication industry is the most rapidly growing industry in the world
with almost 5.3 billion people who subscribe daily for various handsets. These 5.3
billion people account for about 77% of the whole world’s population. This enormous
growth is led by China and India where Nokia Corporation can penetrate and grab a
huge market share and to compete against its competitors in the market.
GSM and CDMA are competing wireless technologies with GSM enjoying about
82%global market share, this opens many doors to telecommunication companies
such as Nokia Corporation that produces wireless mobile phones to strengthen their
roots.
Nokia Corporation’s mobile phone devices are known best for their quality and
technology and the only problem that these handsets face is the problems with
software malfunctions which has a strongly negative impact on the revenues of the
company and to overcome this problem Nokia Corporation has formed alliance with
Microsoft and is soon to release a new series of Windows phone 7 through which
Nokia Corporation gains the opportunity to target new markets and increase its market
share along with competing with all the other companies in the industry.
Nokia Corporation will add swiping and wireless identification features in updates to
its new line of Symbian smartphones to compete with Google Inc's fast-developing
Android platform and to support the declining acceptance of its existing Symbian
mobiles.
Even as it puts Microsoft software in smartphones, Nokia continues to spend on its
MeeGo open-source platform in hopes of developing a proprietary ecosystem
for handsets, tablets, and netbooks. Any payouts or incentives to continue MeeGo
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development emphasize that Nokia's eggs are not all in Microsoft's basket when it
comes to smartphones thus provides Nokia Corporation the opportunity to diversify
its product line.
Nokia Siemens Networks completed the acquisition of wireless network infrastructure
assets of Motorola Solutions by paying US $975 million in cash on 30th April 2011
where Motorola Solutions is a leading provider of mission-critical communication
products and services for enterprise and government customers. This acquisition has
provided Nokia Corporation with approximately 6900 employees and it takes on
responsibility for 50operator customers in 52 countries strengthening the company’s
portfolio and also providing opportunity to increase its profits. To further strengthen
its portfolio Nokia Corporation has acquired Motally Inc. on Sep 1 st 2010 which
operates as a mobile analytics company.
Nokia is more than doubling the size of its direct venture investment fund with an
injection of $150 million, with a view to putting some of the money to use in China
and the company has the opportunity to increase its hold in the market.
CHAPTER 6CONCLUSION
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Through adopting this strategy Nokia Corporation has the opportunity to gain access of the
lost market share and to maintain its position as the # 1 mobile phone manufacturer in the
world and to compete against the other mobile phone manufacturing companies operating in
the world. Following are the main strategic goals of this strategy
Nokia would develop new mobile phones that will be just equal to a mini laptop as the
operating system would be Windows 7 which is the most acknowledged operating
system in the world and thus through this Nokia will regain its lost market share.
Through applying this strategy Nokia Corporation would be able to minimize its
dependency on the Symbian software and thus would provide its customers with a
new a fast operating system.
Also through adopting this strategy Nokia Corporation would be able to efficiently
compete against its competitors in the market and with the new Android operating
system that is currently the world’s fastest growing and acknowledgeable mobile
phone operating system.
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BIBLIOGRAPHY
http://www.utube.com
www.wikipedia.com
http://www.enotes.com/strategy-formulation-reference/strategy-formulation
http://www.managementstudyguide.com/strategy-formulation-process.htm
http://nptel.iitm.ac.in/courses/IIT-MADRAS/Management_Science_I/Pdfs/9_1.pdf
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