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Nokia Case Study Problem

1. Table of Contents

2. Executive Summary

3. Introduction

4. Audit of Nokia
4.1 Environmental Analysis
4.2 SWOT Analysis
4.3 Trend Analysis

5. Consumer Buying Behaviour

6. Brand Profile
6.1 Facts
6.2 The role of Nokia’s brand
6.3 Brand Equity
6.4 Brand Identity

7. Segmentation, Targeting and Positioning
7.1 Market Segmentation
7.1.1 Geographic segmentation
7.1.2 Demographic, psychographic, behavioural Segmentation
7.2 Market Targeting
7.3 Market Positioning

8. Competitive Nature of Product Category
8.1 Number of Competitors
8.1.1 Key Competitor (Market Challengers)
8.1.2 Other Challengers
8.1.3 Market Followers
8.1.4 Competitive forces
8.2 Market position of key competitors
8.3 Competitor Analysis

9. Conclusions

10. Bibliography

11. Appendices

2. Executive Summary

Mobile phone market in Europe is going through major changes. Key players are losing market share while new and young companies, mostly from Asian countries, are coming to the market. At the same time the market is slowly expanding when people are buying more phones than ever. The whole process of buying mobile phones has changed in the last few years. People no longer carry the same phone year in year out, but they change their phone every year, some even twice a year. One reason for this change is the fast technological development of the phones. But also consumer’s attitudes towards mobile phones have changed. Mobile phones are no longer seen as expensive, hi-tech products, but they have become accessories like jewellery or a piece of clothing. “Nokia is still the largest mobile phone company in the world, but its long-term dominance is now challenged more than ever. Observers have begun asking whether the cutting edge that has turned Nokia into the No 1 vendor still exists, as Nokia’s market share and revenues have been on the decline. Falling average sales prices (ASPs) and market share have had an impact and forced Nokia to further re-think its strategy towards developed and emerging markets.”[1]

This report gives an overview on what is happening on the mobile phone market today and analyses Nokia’s market position in the mature European market. This report includes a brief introduction to Nokia followed by an environmental analysis, SWOT analysis and trend analysis of the company. Half way through the report you can find information about consumer behaviour, brand profile and segmentation. At the end, this report introduces the main competitors and analyzes the competitive market. Finally we try to make a conclusion of the topics discussed and attempt to give some possible answers to the question at hand.

3. Introduction

The company we have chosen to analyse in our project is the Finnish mobile phone giant Nokia. This chapter tells you briefly what Nokia actually is, its company structure and overall view on the size and sales of the company.

Since January 2004, Nokia Group has consisted of four different business groups: Mobile Phones, Multimedia, Enterprise Solutions and Networks. “In addition, there are two horizontal groups that support the mobile device business groups: Customer and Market Operations and Technology Platforms.”[2] In the year 2004 Nokia’s net sales for mobile phones were 18 507 million euro, which went down 12% from 2003. Nokia’s market areas were Europe/Africa/Middle East (55% of net sales), Asian Pacific and China (25%) and Americas (20%). Nokia’s market share in Europe was 45,8% in 2003, in 2004 it was 34,8% and in the third quarter of 2005 it was 36%.[3] The average number of personnel for 2004 was 53 511. At the end of 2004, Nokia employed 55 505 people worldwide. In 2004, Nokia's personnel increased by a total of 4 146 employees. Nokia’s turnover for the third quarter of 2005 was 8403 million euro from which mobile phones brought in 62%, multimedia 17%, Enterprice solutions 2% and Networks 9%. “The year 2004 was demanding for Nokia. In response, the company set five top priorities in the areas of customer relations, product offering, R&D efficiency, demand-supply management and the company's ability to offer end-to-end solutions. Nokia is making good progress in these areas, and is now better positioned to meet future challenges.”[4] “The Nokia Strategy continues to focus on three activities to expand mobile communications in terms of volume and value: expand mobile voice, drive consumer multimedia and bring extended mobility to enterprises.”[5]

4. Audit of Nokia

4.1 Environmental analysis

The market environment of Nokia consists of six forces. These are demographic, economical, natural, social-cultural, technological and political-legal environment.

The Demographical forces

Demographics show the size of the European market by telling the population of each country. Demographics also show if the people in specific country are illiterate or well educated, how old they are, which parts of the country they live in and how do they live. Population of Europe in 2000 was 729.3 million.[6] People live mostly in urban areas. Population is ageing due to falling birth rates. People in Western Europe are generally well educated and literate. There are no huge cultural differences between nations and since almost all countries are members of the EU, it brings the people even closer to one another.

The economical forces

People in Europe are reasonably wealthy and income distribution between people is relatively even. Growing economy in Europe leads to increasing income of the people. People will buy more luxury goods (such as mobile phones). If the economy in Europe is in a decline, the average income will not increase and is even more likely to decrease. In this case the people will have less money for luxurious goods and will spent less on mobile phones, which would be very negative for Nokia.

The natural forces

Environmental issues are something that has become more important in the last few years. People are becoming more aware of pollution and want companies to do something about that. Nokia knows this growing sense of awareness for the environment and has changed the ways of producing. It has decreased its use of energy and water, it is recycling products and it has changed the materials for producing its products into more environmental friendly materials.[7]

The Social-Cultural

The population of Europe is very diverse. People can be divided into different subcultures that have several ways to spend their money. Subcultures could be different age groups, interest groups and immigrants. They have also different attitudes towards mobile communication.

The technological forces

- technological development of mobile phones
- technological development of substitutes

Technological development of mobile phones is an important technological force, because the technology in the mobile phone business is constantly innovating and developing which can lead to big changes for Nokia. There is a constant research going on within the mobile phone businesses (so also in Nokia) to try to develop new gadgets and new systems for the mobile phones. Nokia has to be aware of these developments, because when the competitors develop a new gadget that Nokia does not have, it means that the competitors will have a comparative advantage over Nokia.

The technological development of substitutes is important, because when there will be a new developed substitute, it can mean that people will buy this product instead of a Nokia mobile phone and so the sales for Nokia will drop along with the profit.

The political- legal forces

- Finnish law
- European law
- Domestic laws in each of Nokia’s foreign markets
- International laws
- Health regulations

Because Nokia is a Finnish company and has its headquarters in Finland, the board of directors has to be run in accordance with The Finnish law. Since Nokia is also an international company, it has to comply with international laws such as the European law. International laws are actually a collection of treaties, conventions and agreements between nations, for example tax treaties, patent protection systems and trademark conventions.[8] In addition to these, Nokia must also comply with every foreign country’s domestic laws, which it is doing business with. Laws affect every aspect of Nokia’s business: product safety, consumer protection, dealing with competition, packaging and labelling and advertising, just to mention a few.

Legislation is useless if it is not enforced. Nokia has to know the legal environment because it constitutes as “the rules of the game”. At the same time, it “must know the political environment because it determines how the laws are enforced and indicates the direction of new legislation.”[9] Health regulations are also important, because of the danger of mobile phone radiation and the way Nokia has to handle with this threat. “In order to protect the population living around base stations and users of mobile handsets, governments and regulatory bodies adopt safety standards, which translate to limits on exposure levels below a certain value. There are many proposed national and international standards, but that of the International Committee for Non-Ionizing Radiation Protection (ICNIRP) is the most respected one, and has been adopted so far by more than 80 countries.”[10]

4.2 SWOT- analysis

We will use the SWOT- analysis to see what the strengths and weaknesses of Nokia are and what its opportunities and threats are.

illustration not visible in this excerpt

Strengths

One of the strengths of Nokia is their strong brand name and good image. They were one of the first players on the mobile phone market, as it became a new market in the 90’s. Since the beginning, they took a strong grip at the market, through producing user friendly, durable and modern looking mobile phones. The fact that they are also constantly innovating, so they can come with new functions on the mobile phones, is also an important part of their strength. Because they have already been producing mobile phones for over 15 years, they are very experienced in the process of producing and innovating new mobile phones.

Weaknesses

Despite the fact that Nokia is still a giant in the phone world, it has a few weaknesses. The originality of the mobile phones is not always as good as of the competitors. For example in 2003 Nokia was too late with clamshell phones, while other companies already had these models. Just after prosperity of these phones, Nokia had to start making these models as well because otherwise they would have lost their market share significantly. Nokia has good new phone models but sometimes there is slightly information about. Consumers are missing information that they could get through advertisement, packaging etc.

[...]



[1] ”Nokia: On the road to recovery?”, 07/2005, <http://www.gii.co.jp/english/kt32528-nokia.html> (18.11.05).

[2] “Nokia: Financials”, 10.2005, <http://www.nokia.com/A402776> (20.11.05).

[3] “IDC - Press Release”, 11.03.2005, <http://www.idc.com/getdoc.jsp?containerId=pr2005_03_07_134916>,

<http://www.idc.com/getdoc.jsp?containerId=pr2005_11_21_103107> (19.11.05).

[4] See above footnote No. 2.

[5] See above footnote No. 2.

[6] “Europe: Demography”, 2005, <http://www.unhabitat.org/habrdd/trends/europe.html> (01.12.05).

[7] “Environment”, 2004, <http://www.nokia.com/P11779> (29.11.05).

[8] V. Terpstra, R. Sarathy, International Marketing, 8. edition (Ohio: Thomson South-Western,2000) 130-135.

[9] Terpstra 126.

[10] “Environmental Report of Nokia Corporation”, 2004,

<http://www.nokia.com/NOKIA_COM_1/About_Nokia/Environment/nokia_ymparistoraportti_2004.pdf >

(29.11.05).

Nokia Case Study

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Nokia: A Phone for Every Segment

"While practically everybody today is a potential mobile phone customer, everybody is simultaneously different in terms of usage, needs, lifestyles, and individual preferences," explains Nokia's Media Relations Manager, Keith Nowak. Understanding those differences requires that Nokia conduct ongoing research among different consumer groups throughout the world. The approach is reflected in the company's business strategy:

We intend to exploit our leadership role by continuing to target and enter segments of the communications market that we believe will experience rapid growth or grow faster than the industry as a whole....

In fact, Nowak believes that "to be successful in the mobile phone business of today and tomorrow, Nokia has to fully understand the fundamental nature and rationale of segmentation."

THE COMPANY

Nokia started in 1865, when a mining engineer built a wood-pulp mill in southern Finland to manufacture paper. Over the next century, the company diversified into industries ranging from paper to chemicals and rubber. In the 1960s, Nokia ventured into telecommunications by developing a digital telephone exchange switch. In the 1980s, Nokia developed the first "transportable" car mobile phone and the first "handportable" one. During the early 1990s, Nokia divested all of its non-telecommunications operations to focus on its telecommunications and mobile handset businesses.

Today, Nokia is the world leader in mobile communications. The company generates sales of more than $27 billion in a total of 130 countries and employs more than 60,000 people. Its simple mission: to "connect people."

The mission is accomplished by understanding consumer needs and providing offerings that meet or exceed those needs. Nokia believes that excellence in three areas-product design; services such as mobile Internet, messaging, and network security; and state-of-the-art technology-is the most important aspect of its offerings.

THE CELLULAR PHONE MARKET

In the 1980s, first generation (1G) cell phones consisted of voice-only analog devices with limited range and features that were sold mainly in North America. In the 1990s, second generation (2G) devices consisted of voice/data digital cell phones with higher data transfer rates, expanded range, and more features. Sales of these devices expanded to Europe and Asia. In the twenty-first century, Nokia and other companies are combining several digital technologies into third generation (3G) communication devices that reach globally and feature the convergence of the cell phone, personal digital assistant (PDA), Internet services, and multimedia applications.

The global demand for cell phones has increased significantly over the years-from 284 million in 1999 to 410 million units in 2000 to 510 million units in 2001.

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Producers of first and second generation cell phones used a geographic segmentation strategy as wireless communication networks were developed. Most started with the U.S. and then proceeded to Western Europe and Asia. However, each market grew at different rates. By 2001, Asia had the largest number of handsets-170 million units. Western Europe was a close second at 167 million units, followed by North America at 90 million units. Latin America had sales of 42 million units while the rest of the world had sales of 38 million units. In terms of market share, Nokia led all producers with 32 percent in 2000 and 35 percent in 2001. Motorola and Ericsson, the second and third share leaders respectively, each had less than 20 percent of the market in 2001.

The total number of worldwide wireless subscribers reached 1 billion in 2001 and is expected to increase to 2.3 billion by 2005. Demand should increase due to the growing demand by teens for high-speed handsets that will provide Internet and multimedia applications. According to the Cellular Telecommunications& Internet Association (CTIA), U.S. wireless subscribers spend an average of $45 per month on calls.

HOW NOKIA SEGMENTS ITS MARKETS

According to Debra Kennedy, Director of America's Brand Marketing at Nokia, "Different people have different usage needs. Some people want and need all of the latest and most advanced data-related features and functions, while others are happy with basic voice connectivity. Even people with similar usage needs often have differing lifestyles representing various value sets. For example, some people have an active lifestyle in which sports and fitness play an important role, while for others arts, fashion and trends may be very important."

Based on its information about consumer usage, lifestyles, and individual preferences, Nokia currently defines six segments: "Basic" consumers who need voice connectivity and a durable style; "Expression" consumers who want to customize and personalize features; "Classic" consumers who prefer a traditional appearance and web browser function; "Fashion" consumers who want a very small phone as a fashion item; "Premium" consumers who are interested in all technological and service features; and "Communicator" consumers who want to combine all of their communication devices (e.g., telephone, pager, PDA).

NOKIA'S PRODUCT LINE

To meet the needs of these segments, Nokia has recently introduced several innovative products. For example, for the Communicator segment, Nokia's 7650 features a built-in digital camera, an enhanced user interface, large color display, and multimedia messaging (MMS) functionality that allows users to combine audio, graphic, text, and imaging content in one message. Once the user has selected a picture, written text, and included an audio clip, a multimedia message can be sent directly to another multimedia messaging-capable terminal as well as to the recipient's email address.

Nokia's 6340 phone allows Classic consumers to roam between various global networks; has a new wallet feature that stores the user's credit and debit card information for quick wireless Internet e-commerce transactions; supports voice-activated dialing, control of the user interface, and three minutes of voice memo recording; and includes a personal information manager (phone book and calendar).

To target the Basic segment, Nokia provides very easy-to-use, low-priced phones that are likely to be used primarily for voice communication. They are designed for consumers who are buying their first cell phone. "We want it to be a very easy choice for the consumer," explains Kennedy. Products designed for the Expression segment are still in the low price range but allow young adults to have fun while communicating with friends. Nokia recently introduced the 5210, a cell phone that offers a youthful and vibrant style with improved durability, for this group. Features include a removable shell, a built-in stopwatch, a thermometer, downloadable game packs, a personalized logo, and a personal information manager.

Nokia also designs phones for the Fashion segment-people who want a phone to "show off." The Nokia 8260 and 8390 products are in this category. They provide basic communication and other features but are not designed for heavy use. One of Nokia's television commercials for fashion phones showed two people sitting on a couch trying to talk to each other at a loud party-so they call each other on their phones! In addition, Nokia offers phones for the Premium segment-people who also want a distinctive and elegant design, but as a fine item to appreciate rather than to show off. The Nokia 8890, a phone with a chrome case and blue back light, was designed for this group. In addition, Nokia recently introduced the all-in-one 5510, which features an MP3 player that can store up to 2 hours of music, an FM radio, a messaging machine with full keyboard, a game platform with game controls for two hands and keys located on either side of the screen, and of course, the cell phone.

THE FUTURE FOR NOKIA

A fast-growing segment for wireless mobile cell phones is the automobile. According to the ARC Group, the number of cars with "telematic" systems will increase from 1 million units to 56 million units by 2005. Ford, Nissan, and other automobile manufacturers have recently introduced systems in selected models. One reason for the expected popularity of these devices is their "hands-free, voice-activated" operation, which is designed to reduce cell phone-related automobile accidents. The CTIA has recently developed a public service announcement (PSA) to curb this dangerous behavior and forestall legislation designed to eliminate cell phone use in the car entirely.

Nokia Executive Vice President Olli-Pekka Kallasvuo is so optimistic he recently commented that "our ambition should be extremely high," as the company has set its sights on capturing 50 percent of the worldwide mobile-phone market.



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