Nokia Case Study on Mobile Phone Market Trends

TABLE OF CONTENT

1. Evolution of the Mobile Phone Market
2. Trends & Future of the mobile phone market
3. Nokia’s Marketing Strategy
4. CompetitorsCompetitor’s Strategies (especially Motorola and Ericsson)
5. Summary and conclusions

The mobile phone market

The birth of the mobile communication industry resulted of a professional need, which means that people on the move sometimes had to be contacted urgently. AT&T’s Bell laboratories made it possible in 1979 in the Unto permits permitted thousand of people to switch messages in thbandwidthiny bandwith.

The Nordic area was also one of the pioneers, establishing cellular services in 1978 with the Nordic Mobile Telephone.

In 1982 was introduced theSpecialroupe Spcial Mobile) by France Telecom Research & development established a European standards system. In 1985, the European Commission decided to impose this standard, and in 1987 thirteen countries signed a memorandum concerning the implementation of the GSM, which become 1989 the “Global System for Mobile Communications”.

The goals of this system consisted of mobiles:

IMobile phones are standardized and wooperator’srnetworkor’ networks.

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The American market had also it’s standard which is called “TDMA”.

By the beginning of 1993 cellular service was in place in more than 90 countries, resulting in several kinds of products like cellular phones obviously, but also pagers and PDAs( personal digital assistants). Pagers can receive short messages in data and voice, and PDAs consisted in sending facsimiles and e-mail, and eventually voice communication. But our interest will be focused on cellular phones because first, they have the advantage to provide instant confirmation of receiving messages, and secondly, the main activity of Nokia is to produce them.

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Even if we will also pay attention to the activity of operating systems, because it’s an important field for Nokia who wants to become the number one in the world, and also because it’s the main activity of Ericsson, one of the most competitor of Nokia.

*Main producers in 1993

The European market was already dominated by the Nordic region suppliers, which were the Swedish L.M.Ericsson and the Finnish Nokia Mobile Phones. But the world leadership was Motorola, of course, because of the importance of the American market. At the end of 1993, the world market shares were represented by 36% for Motorola, 20% for Nokia, and 10% for Ericsson. The other European producers were Siemens and Technophone Ltd, but they were especially focused on their markets, which weretheseveralwere the several Germany and the United Kingdom. There were also other small companies like Storno and Cetelco, and Majors like Philips and Bosch which were under original equipment manufacturer agreement.

In the rest of the world (Asia for example), we could find Japanese producers like Panasonic (representing 4% of the world market in 1993) and Nec. This period was really difficult for small producers, because the time of life for a phone model was very short, between six months and a year, because of a new more sophisticated version. The three largest firms innovated in a very fast way compared to the small ones, which couldn’t be managed to follow. The consequences were that those firms disappeared or were bought out by others.

*Evolution of the demand between 1993 and 2001

During this period, it was also difficult because of the situation concerning the operators. Those were usually state-owned and then resulted in monopolistic markets, with high prices for calling because of the absence of competition.

At the end of 1993, several subscribers around the world became somewhere after 1994, with the operators deciding to reactglobal because they had made a lot of investments and they wanted to obtain feedback. So they made agreements with cellular phone producers which consisted in providing a free cellular phone to the customers when they signed a service contract. This system had good results in Europe and the US, but also new markets emerging like Asia and Eastern Europe countries, and it’s still the same today (you can obtain a mobile-only for 1 Euro if you subscribe to a contract). Now, everybody in well-developed countries has a mobile phone, and a lot of people don’t even have anymore fixed phones. This market grew up between 1994 and 2001. Cellular phone producers made a lot of research and innovations, and phones became more and more efficient, smaller, and easier to use. It’s the second generation of cellular phones.

So nowadays, the market is satisfied and the demand is quite stable. It becomes even more difficult to make profits for manufacturers and they accumulate loss on loss, except for Nokia (from the beginning of January to the end of March in 2001, Nokia gained on average 38 euros by selling cellular phones, while Ericsson lost a record of 101 per sold mobile phone). The sector is ripe for reorganization and an in-depth concentration. The perspective market of mobile telephony is made of mature countries, but there are still some countries that are leaning out. These last ones (African countries for example) are still markets marginally explored, of big potentiality for the future, and still for the second generation of phones. The key to success for producers is then the segmentation and adapting their offer to the market.

*Main producers results in 2001 and the situation of the market today

In 2001, Nokia is the leader in the world in producing mobile phones. It’s the only firm that has increased its sales and its profitability. For example, the turnover of the company is now 8 billion Euros (an increase of 22%), and they produce a wage of 20.7%. To compare this number to the competitors, Motorola produces a wage of -17.6% and Ericsson has the record of the lowest one with -80%. Even in operating the GMS systems, the main activity of the Swedish company, her wage is 4% while Nokia’s one is 18%.

The other smaller competitors registered such a lot of losses, like the Sagem’s turnover which has decreased by 22.5%, or the producers like Alcatel and Philips, which lost respectively 100 and 118 million Euros for turnovers of 350 and 372 million Euros.

Trends in the mobile phone market

We can say that we are now entering the third generation of cellular phones, and the producers must now change their business policy in the well-developed countries, because on one hand, technology improve more and more, and on the other hand, the expectations of the customers have changed because of the evolution of the technology. At first, when it became possible for everyone to get a mobile phone, the people were so excited to be able to call from everywhere and not only at home. But now, consumers are used to it and with all the technological progress, expect more about their mobile phones. The world of telephony, the world of computer science, and the world of the video are about to converge, and the first one is certainly between telephony and computer science. We don’t use anymore the traditional word “telephone” but more a definition of the mobile handset.

And Nokia, as the first producer of cellular phones in the world, gives us a really good example of what will be the handsets in the future with its new 6650 handsets. It’s the first mobile phone to work on both the third-generation networks (3G) as well as the more conventional second-generation networks of Europe. There is a camera that can shoot both still images and short video clips that be displayed on the phone itself or sent to other compatible phones or e-mail addresses. You also can use a wireless headset to make and receive calls. But the problem is that 3G services haven’t been really rolled out across Europe yet, and providers have spent already tens of billions of euros to get licenses. Even if those services should start to take off in Europe soon. For example, Hutchinson should do it during the next few weeks in Britain and Italy, and Mobilkom too in Austria.

To conclude, we could think that 3G services will start to appear all around Europe during the next year

Nokia 6650

Marketing Philosophy

“Developments in communications technologies are rapidly changing. The way people behave and communicate throughout the world changes from day to day.

In the future, people will be able to communicate in a variety of ways regardless of place or time. Nokia will not only be participating in this transformation but will also be helping to shape and guide it through Nokia’s ideas and expertise”.

Jorma Ollila , CEO of Nokia.

Right scheme:

• Values = what Nokia thinks is important
• Competencies = what Nokia can do (expertise, production capacity, etc.)
• Together with the Operational Mode that comes from the Strategy they create: ‘the Nokia Way’.

Left scheme:

The strategic Intent speaks for itself.

*PRODUCT STRATEGY

Nokia’s portfolio can roughly be divided into 3 subcategories

• Nokia Mobile phones
• Nokia Communication products
• Nokia Networks

*NOKIA MOBILE PHONES

Nokia Mobile Phones is the core business for Nokia and is the world’s largest mobile phone manufacturer with nine factories spread across three continents and sales in over 130 countries worldwide.

Nokia is global the somewheremarketbecamemarkebecome became com leader in the mobile phone industry and can be proud to find itself in an extremely strong position in the market, besides, Nokia is currently the only Mobile phone producer who succeeded in making a profit.

However the market is nearly satisfied in the developed markets now, and growth will have to be realized in the developing countries outside of Europe and the USA. The mobile phone sector is a typical example of a ‘Milky Cow – business’ in the Boston Consultancy Group Index.

*NOKIA COMMUNICATION PRODUCTS

Nokia Communications Products consists of two units:

1. Nokia Multimedia Terminals and
2. Nokia Display Products.
3. Nokia Multimedia Terminals:

Nokia is a pioneer in digital terminals for interactive multimedia applications and digital broadcasting via satellite, cable, and terrestrial networks.

The main function of this unit is to Design, Produce and then Test new Technology that can be brought into the market for Nokia in the future.

2. Nokia Display Products:

Is one of Europe’s leading companies when it comes to Advanced computer and workstation Monitors.

*NOKIA NETWORKS

Nokia Networks develops and manufactures a broad range of advanced infrastructure solutions to advanced infrastructure solutions to advanced infrastructure solutions to

customers. For example, these could be including fixed operators, mobile operators, and Internet service providers (ex: movies).

*NOKIA PRODUCT POLICY

1. Nokia Research Centers, Most important R+D center from Nokia where all products are being tested, Evaluated, All products must first go through the R+d center before they can arrive on the market. Its main objective is to enhance the company’s technological competitiveness.
2. Nokia venture Organisations, explore new business areas facilitating future growth and boosting Nokia’s products, and long-term business development.

*PRICE STRATEGY

Two Golden Rules in the pricing strategy:

1. Everyone must be able to buy a Nokia Phone or product
2. The price strategy is not a strategy in itself but is the result of other strategic decisions.

*Explain how the price for Nokia products is generally calculated from the info on the slides, (Use an example).

*DISTRIBUTION POLICY

As mentioned before, Nokia is available in over 130 countries on 3 continents and has an impressive list of customers so they can not be too selective about which retailers they will use. The most important things are that Nokia products are decently represented and the retail stores have a high number of visitors. When this is the case Nokia will have no problems supplying the store. For example, you will be able to buy Nokia supplies in, Supermarkets, Toystores audio/video stores, clothing stores, Airlines, warehouses, photo shopsphotoshopsbecame com, and sometimes even schools.

We can subdivide the retailers into 3 segments

Wholesalers: Large stores, Large assortments, and great quantities

The advantage is that they have space for a stand, billboard, or other in-store sales promotions.

Retail Chains: consist of stores owned by a sole trader, usually located in a shopping center

Using a franchise formula, therefore enjoy the benefits of awareness with the public and is easy to reach.

Sole Traders: Small independent stores that are particularly common in markets outside of Europe and the US, which are now the markets where growth can be realized.

*PROMOTIONAL STRATEGY:

Sales Promotion: Of all the mobile phone manufacturers Nokia takes the most care in the Sales promotion strategy of their products, which is an amazing performance if you consider the fact that Mobile phones are among the three most advertised products worldwide And so it is not surprising that Nokia has the highest brand awareness of all the mobile phone manufacturers globally and is even one of the most recognized brands worldwide. Which is according to Nokia one of the foundations of their success

Different kinds of promotion:

1. Traditional Advertisement: is usually done on TV cause this has proven to be the most effective medium, the style of the commercial differs on the target group and the model

Nokia usually promotes one model at a time and rarely promotes all the portfolio or several products at a time.

2. Or in combination with phone service operators. In such a case there will be a subscription offered, in combination. With a Nokia phone, these partnerships between Nokia and Phone operators have proven to be quite successful for Nokia in the past, and make out for an increasing percentage of turnover.
3. Agents and Sales Reps are used for the promotion in the Network and Communication product sector.

Examples:

For young consumers: Club Nokia (Ringtones, Games, Prizes, etc.).

For Business: PR goes through the agents, dinner parties, golf tournaments, and invitations to sports matches.

*BUDGET:

High Sales Promotion Expenses tend to occur in Highly competitive, saturated markets and this is the case in the mobile phone market. Which is among the top 3 industries that spend the most on advertising and sales promotion.

However Nokia realizes that it needs advertising to survive and considers brand awareness as an important basic value of its success therefore, Nokia spends about 30% of its revenues on Promotional Activities, and it is a very important expense for Nokia.

However, Nokia is forced to keep up with this level of budget expenses because the competition also increasing their sales promotion efforts rapidly.

But all the efforts have paid off and today Nokia is among the most recognized brands in the world, and they have become com a household name in virtually any market in which they are active.

*SPONSORSHIP:

One of the points in which the Promotional strategy distinguishes itself from its competitors is the Sponsorship, Nokia is proud to be the sponsor of many different events that are targetted particularly to young people, among the events are:

Nokia TMF awards, X-games, Free bike project in Vienna, World Cup snowboarding, Various Golf events, various Festivals and events in Finland, Snowboard Cup in Ischgl

*CORPORATE RESPONSIBILITY:

Corporate Responsibility refers to the way Nokia deals with the world around which the company exists. Nokia takes its corporate responsibility very seriously and has even made a real policy, a real budget, and objectives. In this Nokia distinguishes itself from other competitors and shows an amount of character and compassion that is unique for such a big company.

The Corporate responsibility policy can be roughly divided into 3 segments:

1. Workplace Environment
2. Environmental policy
3. Charity actions

Summary and Conclusions

• Nokia is the market leader in the mobile phone industry.
• Nokia holds a strong position in the market based on an impressive rate of brand awareness, a healthy financial posi,tion, and know-how.
• The transformation from a small clothing company in Finland to an international giant in Mobile and telecommunication is an abs success story-story.
• Nokia has shown character and compassion in their “Corporate Responsibility” policy
• Nokia’s products are for everyone!
• The key word in Nokia’s marketing mix is “all-round”.

Recommendations -Expansion into other markets, for example, Household electronics, Computer hardware, or even cars.

• Remain position in the mobile phone market.
• Nokia needs a constant flow of new and fresh opinions, for example, internationalization of staff and/or acquisition of new companies would help to achieve this goal.