Industry Analysis of Nokia in Finland (Essay Sample)

Industry Analysis of Nokia in Finland
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Industry Analysis of Nokia in Finland
The Nokia Company was started in Finland in the 1980s. Indeed, “At the turn of the 1980s and the 1990s, Nokia Corporation faced a severe crisis and was forced to make a corporate turnaround” (Lamberg, 2019, p. 4). During this time, Finland was in the process of transitioning from an investment-driven economy to an innovation-centred one, hence provided a stable economic base for Nokia. “At the turn of the 1980s and the 1990s, Nokia Corporation faced a severe crisis and was forced to make a corporate turnaround” (Lamberg, 2019, p. 4). When Finland became a member of the European Union, it acquired fiscal stability. Overall, the government of Finland played a significant role in the companies in the country. As for Nokia, it contributes to 80percent of the export clusters in the country. According to Daveri and Silva (2004, p.118), “the world leader in cellular phone production, directly and substantially contributed to enhance productivity growth in Finland.” Despite the challenge of the shortage of engineer Nokia still managed to have a grasp of the market mainly because the government was consistent in investing in the Telecommunications and IT sector. As Finland's economy stabilized towards the end of the 1980s, it started spending more finances on the R &D (Research and development). With time, it grew to become one of the leading telecommunication handset and equipment manufacturers in the globe (Parker, 2007). Since its establishment, it has established a leading brand presence around the world. Nokia's contribution was pivotal. Towards the end of 1999, Finland's GDP rose to 5 percent, with Nokia's contribution to this growth being close to 2 percent. By 2001, Nokia had become an international success story, hence deemed as the pride and national symbol of Finland. Its sale stood at EUR 30.4 billion in the year 2000 with an operating profit of EUR 5.8 billion. It also had an employee base of 60,000, with 24,000 of them being from Finland. It had already established its position as a world leader of digital mobile phones with a market share of 31 percent. Overall, it had the most expansive line of phones, meaning that it covered the entire market segment. In 2001, it had penetrated ten countries. Eventually, Nokia went into a crisis after its inability to immerse itself in the smartphone production in the 2000s.
Five forces analysis
The threat of New Entrants
During the late 1990s, Nokia faced a high threat of new entrants into the market, considering that the technology and telecommunication sector in Finland was booming. The brand was not in a position to monopolize its operations; hence investments from outside were made on other small firms. It was feared that, with the booming telecom business in Finland, a competitor would rise. Consequently, Nokia invested heavily in technology and development such that barriers of new entrants would be protected. Small companies would require high capital to reach the level of production of the company
The power of suppliers
The bargaining power of suppliers was very low, considering that a large number of contract manufacturers relied on Nokia. The suppliers did not have any authority to control over the market seeing as Nokia had driven the growth of these specialized suppliers. Instead, they established manufacturing units in China and the USA.
Power of buyers
The company served millions of customers globally. Because Nokia was the leading manufacturer of mobile phones, most of its customers were loyal to it. The bargaining power of customers was overall low because the customers had no other options for gadgets to choose from. Nokia gadgets were the only available option. However, “The Nordic countries had a long history of cooperation and therefore the main goal was to enable services for their users using a closed network”(Holtmanns et. al, 2018, p.245). Better services would increase the purchasing power.
Threat of substitutes
The threat of Nokia substitutes was comparatively high seeing as technological changes were being introduced into the system, and innovations would be embraced. The customers and producers would adopt new digital standards which would, in return, render Nokia's GSM network outdated. In cases that Sony Ericson and Motorola strategically positioned themselves in the market, they would have a fair share of the current Nokia's market.
SWOT analysis
Towards the end of the 2000s, Nokia had set itself based on the need-based positioning, which provided a sophisticated demand for innovation in the telecommunication industry. It focused on areas such as flexibility, quality, services, and cost to remain ahead of the competition and supply the European and Nordic market. However, its positioning exposed it to some internal and external challenges.
Strengths
Innovation would be deemed as the greatest object of Nokia's success at that particular period. From the start, Nokia was interested in innovative strategies that kept revolutionizing the mobile gadget to make it successful in the market. It embraced the changes in science and technology to maintain its operations afloat in the market. Later in 1999, the company partnered with Ericson and Motorola to develop the Wireless Application Protocol (WAP) facility that would enable the internet access facility in mobile phones. Nokia became the first brand to introduce the first WAP mobile gadget in the year 1999. Nokia also joints efforts with Sony to develop Bluetooth, a connectivity standard used for short ranges. The culture of continuous learning, coupled with the R&Ds, propelled the company into new production heights. Nokia also enjoyed the market leader position, which allowed it to immerse itself effortlessly in global economies. In the early 1990s, Nokia controlled a whopping 12 percent of the worldwide market for mobile devices. It enjoyed the economies of scale, which allowed it to sell mobile gadgets in every segment and at all the spheres of the globe. In 2000, it controlled 12 percent of the world handset market. By the year 2000, Nokia was already the dominant manufacturer of equipment in Finland, creating both infrastructure and handsets. Increasing sales was also another factor that gave Nokia a firm foot in the business. Because of the diversified production, Nokia sales expanded exponentially. By 2001, it was organized into three business groups' namely mobile phones, Nokia ventures, and GSM network. Nokia made and sold phones for every segment and market, meaning that its sales were phenomenal. As of 2000, the company controlled 25 percent of the world revenue. It also owned 12 percent of the global handset market.
Weaknesses
Its greatest weakness was the fact that it could not create a monopoly owing to the excessive control of the government. If it had become a monopoly in Finland, it would have enjoyed economies of scale as well as a competitive advantage. Instead, the government control of the private firms hindered its ability to do so. Another weakness was its inability to tap into smartphone production technology. Despite having been a sole pioneer of mobile phones and infrastructure, it was taken over by other brands due to its slow transition.
Opportunities
There was emerging telecommunication in third world countries; hence Nokia stood a chance to invest heavily in such countries. It had to tap into the market and become the leading supplier of gadgets and infrastructure in those countries. It also had an opportunity to invest in those countries by establishing physical plants in them. Another opportunity that stood to benefit Nokia was the availability of an international market. Nokia also stood a chance to benefit from the technological advancements made by Finland and countries across the globe.
Threats
The downturn in the telecommunication sector stood to hurt the company gravely as it would hinder the production of such gadgets. This trend would also affect sales significantly as the industry would be underdeveloped and underfunded altogether. Another threat that faced the company regarded the joint venture of Sony and Ericson. This would enable the production of better and more advanced gadgets which would eventually take over the existing Nokia market. Motorola's moves in the market infrastructure also promised to hurt the market of Nokia on a global scale as its new gadgets were competitive too.
PESTEL analysis
Political
The political atmosphere in 1989 caused companies to invest. The re-regulation that followed allowed institutions to borrow, thus causing an increase in interest rates (Lesser 2008). The fall of the Soviet Union was also decisive as the Soviets was a tremendous trading partner of the country. At that time, the Finnish government had the semi-presidential form of government that enabled it to form foreign relationships with outside countries. Also, the model of the Nordic neighbors post the war allowed it to invest heavily in public infrastructure and social welfare. The government's involvement in the private sector was also pivotal in Finland's success seeing as through its investment and mergers with top companies; it influenced the wealth and ownership structures of different companies across the region. The period around the 1980s was characterized by strong regional financial market regulations which in return caused the liberalization of the markets at that time. In return, this aspect made l...