Nokias Marketing Strategies - Case Study Example

Marketing Assignment INTRODUCTION Nokia is a large Multinational telecommunications firm based in Finland. It was established in 1865 and has grown to be famous for telecommunication gadget manufacturing, together with the converging of the internet and telecommunication industries. It has a widespread market in about 120 countries throughout the world. This paper provides a market analysis of Nokia’s operations (Bussenius, 2011). NOKIA’s PESTEL ANALYSIS Political Factors: According to Shukla (2005), the politico-legal environment is often viewed a single entity because of being enforced by the government of the country in which the business operates. It is a significant issue for Nokia’s business because various nations and their governments end up offering different politico-legal environments. Nokia is a global company but must always work basing on the frameworks of local regulations and rules in the different markets where it is hosted in the world (Spulber & Gick, 2008).  Lillie (2011) explains that for this reason, Nokia always works in cooperation with authorities in order to maximize its advantage in capturing the target national market. Economic Factors: The economy in which a business operates has the greatest role in determining the consumption and production of goods and services. In the case of Nokia, economic systems are important as they can dictate what the company is to manufacture, ways in which the production will take place and the kinds of final buyers (Proctor, 2011). Mimoun (2009) suggests that for Nokia, a global supplier, knowledge about the nation’s economic situation, for instance the form of economic system that exists, unemployment levels and inflation rates among others is also important in the pursuit of future plans and enhancement of entrepreneurship. Spulber & Gick (2008) further explain that when incomes are on the rise, people end up having more disposable incomes, and this makes consumers much more selective in their choice of mobile phones. Social Factors: The social-cultural aspect deals with the ways in which Nokia manages to blend with the host societies. These include social class, culture demographic, psychological and lifestyle-related factors that make up the society’s characteristics. Nokia’s operations are based in a diverse number of cultural settings and every level of social class irrespective of differences in religion, race, beliefs, income status or nationality (Steinbock, 2010). Armstrong & Kotler (2011) explain that even if these differ, there are always variations in the product that ensure that everyone has a type that he or she can choose. Klemens (2010) adds that the growth of an information society has led to an increase in the importance of telecommunications to consumers, both in relation to leisure and work. Mobile phone users have greater awareness about the choices that they can make in mobile handsets. Technological Factors: Technological change determines how human beings manage to perform tasks and is therefore a process, in this case for mobile phones through which people make contact with one another. It not only helps in shaping culture but tends to change other characteristics both at Nokia as a corporation and outside. For instance, there is periodic need for the upgrading of equipments so as to improve manufacturing processes of end products (Plunkett, 2009). According to Bhatt (2006), Nokia’s success is the result of a constant effort at innovation in human technology. Through the enhancement of communication and exploration of new approaches to information exchange, Nokia enables its users to have more out of life. PORTERS’ FIVE FORCES ANALYSIS Threat of Entry: There are aspects such as high costs of manufacturing and high research and development costs in addition to a constant need to innovate and get new products into the market. Fixed costs are also high, necessitating economies of scale in order to ensure increased profit margins (Majumdar, 2006). According to Bussenius (2011), the bargaining power of consumers is growing, making product differentiation necessary. There is also the issue of government regulations in most places and competition is stiff. There is therefore the likelihood of heavy retaliation against any new entrant, considering the latter’s disadvantaged position. Current players in the market have adequate financial clout to keep it closed to entrants. Supplier Power: According to Steinbock (2010), suppliers in the industry are of two categories; software and hardware. For software providers, there are numerous many such suppliers. Because of the wide open options for the company, software providers’ bargaining power tends to be low. For hardware providers, bargaining power is also not high. This is because they are similarly many. For instance, there are always three options, TI, Qualcomm and Intel. Substitutes: Substitutes have limited power. This is generally moderate and dependent on the effect of substitute products. Phones are of different types, with smartphones gaining a greater share of the market with time. Any product which performs any of the functions apart from calling and texting also constitute substitutes to Nokia products. Tablet PCs, notebooks and PDAs also fall into the category of substitutes (Masterson & Pickton, 2010). Buyer Power: The bargaining power of buyers is generally high. This is because of a wider choice of products, coupled with a considerably limited extent of differentiation in the products. Elasticity of demand is also high. Demand for phones is highly sensitive in relation to the economy. When economic times are tough, buyers tend to delay the purchase of new phone models. Buyers also generally have access to all the information which they require. In addition, there are low switching costs, depending on their country and structure of mobile plans that are offered by mobile providers (Plunkett, 2009). Rivalry: Plunkett (2009) explains that there is an intense rivalry between existing market players. Product differentiation in terms of features is also decreasing. However, the players continue differentiating the products along services and applications offered. Exit barriers are less for manufacturers who occupy their own part of the value chain more than manufacturers who occupy the most part of the value chain. MARKETING MIX (7 Ps) Product: Nokia tries to produce more for its market. Its main objective is to have attractive phones that are light, slim and are fashionably designed in order to attract its customers. Good examples here include the uniquely curved touch screen Nokia Lumia 800 and Nokia N9. There is also an increased focus on smartphones and extension of the OVI store together with Microsoft which will add value through its advantages such as office computer application (Marketing Week, 2011). The company designs a broader range of phone models. This is meant to avail greater choice to the buyers basing on hobbies, age and personal characteristics. The building of more service centres across the countries of presence will also help to meet, handle and solve any needs that customers may be having (Steinbock, 2010). In addition, Products are expected to be ‘green’. For instance, it is ensured that phones have an eco-design while adapters are to be as energy-saving as possible. Packaging materials are always in line with environmental responsibility as this is a major global issue currently (Kurtz, 2011). Price: Nokia seeks to put in value-added services in order to differentiate its company’s products from the rest, unlike others who use a purely pricing approach to promotion. This is in addition to offering support to higher prices rather than the lowering of prices in order to beat the competitors. There is also provision of products and services that are of good quality at fair prices and discounts for customers during special occasions for instance Christmas. In addition, there are price cuts for trade-in of products. Customers who are buying new phones for instance can be charged less when they give in their old phones. In addition, they are encouraged to both purchase the products and actively protect the environment (Gruunewalder, 2008). Place: Nokia tries to expand further on the currently available branches in its potential markets both within the United Kingdom and elsewhere. Such identified markets include for large cities (Gillett et al., 2011). Further investment is pursued because cities such as Manchester and London are the most popular and developed UK cities, and they also attract a large number of people from other places worldwide. There is much focus also on direct sales of products to customers through online sites so as to cut down labour and distribution costs. Franchising is a good way of enhancing sales (Kurtz, 2011). Promotion: Nokia seeks to establish closer alliances with major providers that have up to date technologies. For instance, in the UK, these include Orange and T-Mobile, both of which have already set up 3G services. Advertising of new Nokia products through various media for instance Television, websites, magazines, newspapers and Microsoft products facilitates brand promotion. The signing in of famous soccer clubs is also expected to help in the effort. Creation of outdoor advertising images and videos is quite effective in promotion. These are often for instance situated in public transport facilities as they are likely to reach the most numbers of people. E-mails, text messages and phone calls made to prospective customers to inform them about products is an applicable approach in the effort too (Marketing Week, 2011). People: The Company continues with the training of staff towards becoming even more customer-friendly. This implies having positive attitudes towards them and being able to share their skills and expertise whenever required. The recruitment of locals wherever the company operates helps in knowing the expectations and attitudes of the target market better. The training and encouragement of their dealers to handle customers well is also aimed at ensuring greater customer loyalty (Steinbock, 2010). Process: The setting up of processes for the handling of complaints and suggestions by customers, processes that identify consumer requirements and needs and those for handling customer orders are also pursued. The possession of well planned processes for availing services to customers, checking their accounts, withdrawal and deposit are supposed to be strengthened further in trying to improve processes (Bhatt, 2006). Physical Evidence: There is the periodic provision of articles or reports that generate interest about Nokia’s services and products. This is in addition to the provision of after-sales advice and service for the customers in order to make them comfortable as they gain more understanding about the products they have purchased. Lastly is ensuring continued compliance with guidelines on product quality, safety and health in all manufacturing processes (Mimoun, 2009). SWOT ANALYSIS Strengths: According to Lillie (2011), one of Nokia’s major strengths is the fact that it is the biggest cellular company in the world. It has its strongest expansion and sales, considering that the large number of competitors. It generates annual revenues of about 42 billion Euros and about 2 billion Euros as operating profit. Its employees number approximately 132,000 serving it across the globe. Such a large size and strong revenue flows enable access to resources and therefore competitive strength. Vendor Shipment(millions) Market share 2011   Vendor Shipments 2011 (millions) Market share 2011 Nokia 417.1 27.0%   Nokia 417.1 26.9% Samsung 329.4 21.3%   Samsung 327.4 21.1% Apple 93.2 6.0%   Apple 93.0 6.0% LG Electronics 88.1 5.7%   Others 713.9 46.0% ZTE 66.1 4.3%         Others 552.1 35.7%         Total 1,546 100%   Total 1,551.4 100% Source: Mobithinking.com Fig 1. A table Showing the Positioning and Performance of Nokia as at 2011 The company has a strong and well funded Research and Development department. This is represented in the various countries of operation and has led to a lot of innovation and market leadership. For instance, considerable market segments for the mobile industry for instance GSM, W-CDMA and CDMA are serviced by Nokia through its preparation of different devices and protocols. Its broad variety is not being rivaled by any other network in the market (Grant & Meadows, 2008). Nokia has a specialized subsidiary called Navteq. This offers navigation and digital mapping as its products, leading to a diversification in the market and therefore strength in revenues. In addition, the company possesses an effective and focused Human Resource Development Department. This is staffed with highly skilled recruits. The department is always working towards the company’s expansion and consistent, improved services as its objectives. Nokia’s products are well-priced. They have a good price range and are accessible to people from different social classes (Adam, 2010). The tailoring of products to needs of the target markets has led to a growing popularity of the brand. Nokia phones are popular because of their high levels of reliability. This leads to relatively higher resale prices when compared to other brands. As a result, spreading of the brand within the market is always on a high scale (Lillie, 2011). Weaknesses: Nokia’s service centres tend to be located in the developed countries more than they are in the developing countries. This makes the latter rather distanced from access to the benefits that they require. Nokia’s marketing strategy has also over time moved away from a focus on pricing. Its promotions tend to be oriented towards higher technology gadgets rather than lower prices. This is a source of concern, especially considering that with difficult economic times, the sensitivity of buyers to price is likely to be greater (Mimoun, 2009). According to Gruunewalder (2008), some products that were designed in past years have not been able to experience the desired sales. Some of the phones for instance were not user friendly and as this was discovered in the markets, buyers have tended to stay away from them. Country codes are hard to uncode in some high-profile Nokia phones. Opportunities: Nokia already stands at an advantage above the other players in the market. The competitors will require making a lot of effort before they can seriously contest the market share. The advantage should however not be a reason to slow down, but rather seek even greater success (Angwin et al., 2011). In addition, Nokia has the best chance of fully entering and dominating the emergent economies of the world, beginning with India. The company has been intensifying its marketing campaigns in different regions. If kept consistent and well-facilitated, the promotions that are being offered are likely to cause a further increase in Nokia’s market share (Klemens, 2010). There is the opportunity of endearing the Nokia brand among price sensitive buyers. Through more innovation and lower prices, it will be possible to improve Nokia’s market further. The impressive brand image which Nokia built through advertising has continued texpanding its sales. In addition, there is the opportunity of gaining more through strategic alliances. This is the trend for future successful companies, and Nokia has made a step towards this by entering an alliance with Microsoft. This is aimed at adding Windows 7 operating system into Nokia’s mobile windows (Lillie, 2011). Threats: While efforts are being made at promoting Nokia, competitors have also stepped up their efforts. Major competitors for instance Motorola and Sony Eriksson have introduced marketing strategies that are likely to enhance their own brand promotions. In addition, Nokia’s pricing has not been flexible with circumstances. This is likely to threaten its performance in the market in future. Nokia’s prices have always remained stable over long periods of time. The competitors on the other hand have been bringing new phone models into the market while lowering those of the older models (Adam, 2010). Lastly, mobile phone manufacturers are trying to cope with the rising demand for Wireless Local Loop (WLL) technology. This involves the manufacture of CDMA phones which cost less and are not in Nokia’s main line of production. If this is not changed, Nokia sales might eventually drop (Gruunewalder, 2008). RECOMMENDATIONS As a manufacturer, Nokia has to deal with the question of how it can maintain its growth in the markets for long. It already has advantages in its name recognition, economies of scale and experience in markets. However, it still has the challenge of adjusting to a highly dynamic market. Nokia should avoid commoditization of its product. According to Bussenius (2011), this is the trend in which mobile phones are taking up the trends of typical consumer electronics namely a shift towards phones having lower prices and improved features. At the same time, there are other manufacturers who are committed to provide cheaper handsets to cater for the mass market, as has been mentioned in the case, one of these is Ericsson. As Nokia’s position stands now, it will have to make a number of strategic positions which will determine the approach it takes in business. These include whether it should continue to build on its brands even when there is the likelihood of the phones being produced changing completely in future. There is also the question of whether it should adopt a purely-cost based competitive strategy. Third is the kind of customers it needs to focus as its main target, whether new or replacement buyers. Lastly is the kind of technology that it needs to focus its resources on as a way of adapting to the unknown future markets. Although commoditization is a trend, Nokia should try to slow it down. Its market share as a brand is enough to give it a strong competitive advantage. Through continuous building of its brand, Nokia will manage to leverage itself both in short-term sales and long-term business. Nokia needs to strengthen its brand by both pull and push marketing. The company has the chance to take up some of the supplier power that has been mentioned in the five forces analysis. This can be done if Nokia seeks for long-term contracts with service providers to ensure that Nokia as a brand-name remains on phones. Service providers also face a lot of competition. With Nokia having a strong brand, customers are likely to specifically ask for Nokia phones. On its pull-side marketing, Nokia needs to strengthen its direct advertising. This would include product placements and sponsorships. The company is at an advantage over the service providers in terms of placements as it capable of showing a tangible product which people will want to buy. In its short-term, Nokia’s handsets are presented as cutting edge and stylish, and therefore customers are likely to continue paying for the added brand value that is perceived. In the long term, while Nokia diversifies into other areas such as internet services, it will be likely to succeed in leveraging the brand as customers will associate the name with positive traits. The company should focus more on the replacement market. As mobile phones penetrate the mass market, the selling of more mobile phones and sustaining growth might become even tougher. This is especially applicable for market leaders such as Nokia. As the market approaches saturation, the replacement market is likely to grow and become choosier about its next phones, especially in relation to added features. Nokia should therefore concentrate more efforts on the convincing of current users about why they should buy its next generation of phones. One way through which this can be effectively achieved is through segmentation of its customers basing on their shared characteristics and use different approaches to marketing when dealing with the different target groups. When thinking of the replacement market, one easily thinks of two main customer groups. These are the professionals and the young people. For the young people, the Nokia handset should for instance have, as a must, a greater emphasis on the provision of entertainment-related features. These would include Short Messaging Service, MP3 music players, mobile gaming and chatting facilities. In addition, still for the youth market, the designers of phones will need to be keener on its appearance and outlook. Young adults and teenagers will tend to avoid purchasing a phone if it does not have a stylish and attractive look. For professionals on the other hand, Nokia will need to offer a user the ability to access stored data remotely through the mobile phone handset. Conference schedules, calendars, PowerPoint presentations and word-processing documents need to be possibly viewed at the touch of a button on the phone, at least at the corporate site if not anywhere. Considering the trends in technological development, the phones may not be at their best in terms of memory capacity. There will be need for the Research and Development department to continue making efforts at changing this. Nokia also needs to offer a way of transferring any stored information from its phones to a target PDA or computer. Professional users may be likely to even pay extra prices in order to get premium prices. The company should therefore fully exploit the opportunity to improve its incomes, especially if it manages to offer the seamless access of data. Also importantly, Nokia should continue with its attempts at ensuring sensitivity to cultures. This is because with the extensive number of countries that it operates and will be operating in future, there is the possibility of diversity growing further and therefore need to adapt. Nokia has a well established partnership with Hewlett Packard, especially in the production of smart phones. This therefore gives the company a good chance to compete. Nokia is likely to remain a strong feature in the competition. If its price is not set reasonably and ends up seeming oppressive to end-users however, the company might not be able to attain its long term goals well. Reasonability in its prices is the best way through which Nokia can both get maximum customer satisfaction and profitability. CONCLUSION Nokia is a considerably successful business globally. However, it should rethink its strategies in order to continue with its market leadership. It should resist the commoditization of mobile phones and invest more in the building of its brand name. While the future of the communications is generally volatile and dynamic, Nokia has not shown any indication that it might be doomed. As long as it manages to work hard on its marketing strategies, there is the possibility of its retaining the position of a dominant market player in mobile handset markets and even achieving even more revenues. Source: Bussenius (2011) Fig.2 A Table Showing the Market Shares of Competitors as at 2010 Source: Elmer-Dewitt (2010) Fig.3 A pie Chart showing the number of Units sold and Share of Industry Profits gained in 2010 NOKIA NET SALES BY GEOGRAPHIC AREA, EUR million (10-12/2010, 10-12/2009 and 1-12/2010 unaudited, 1-12/2009 audited) Reported 10-12/2010 Y-o-Y change, % 10-12/2009 1-12/2010 Y-o-Y change, % 1-12/2009 Europe 4 528 - 4 543 14 652 -1 14 790 Middle-East & Africa 1 607 5 1 528 5 518 -2 5 605 Greater China 2 191 31 1 668 7 620 19 6 429 Asia-Pacific 2 587 1 2 606 8 946 - 8 967 North America 553 -8 602 1 953 -5 2 061 Latin America 1 185 14 1 041 3 757 20 3 132 Total 12 651 6 11 988 42 446 4 40 984 Source: Bussenius (2011) Fig. 4 a table showing Nokia’s Sales per Geographic Area by end of 2010 BIBLIOGRAPHY Adam, C, 2010, Nokia SWOT Analysis, Retrieved on 17 February 2012 from http://www.freeswotanalysis.com/telecommunication-companies-swot-analysis/9-nokia- swot-analysis.html Angwin, D, Cummings, S and Smith, C, 2011, The Strategy Pathfinder: Core Concepts and Live Cases, Wiley:Amazon Publishers. Armstrong, G and Kotler, P, 2011, Marketing: an Introduction, Pearson Publishers : New Jersey Bhatt, P, 2006, Internationalisation and Innovation: A Case Study of Nokia PR Vision, Journal of Business Perspective, Amazon Publishers New York City. Vol. 6: 121 - 129 Bussenius, C, 2011, Industry Analysis – The Global Telecommunications Industry, GRIN Verlag: Amazon Publishers New York City. Elmer-DeWitt, P., 2010, Pie Chart: Apple's Outrageous Share of the Mobile Industry's Profits, Retrieved on 20 February 2012 from http://tech.fortune.cnn.com/2010/09/21/pie-chart-apples-outrageous-share-of-the- mobile-industrys-profits/ Gillett, A, Lovell, H and Holmes, S, 2011. Integrated Communication Plan - for the UK Mobile Phone Market, Pan Books Publishers , London Grant, A and Meadows, J, 2008, Communication Technology Update and Fundamentals, Focal Press/Elsevier Publishers, Amsterdam Gruunewalder, A, 2008, Analysis of Nokia's Corporate, Business, and Marketing Strategies, Prentice Hall Publishers : Harlow City. Klemens, G, 2010, The Cell-phone: the History and Technology of the Gadget that Changed the World, McFarland: Cambridge Publications. New York City. Kurtz, D, 2011, Contemporary Marketing, Mason: South-Western Cengage Learning  Lillie, J, 2011, Nokia's MMS: A Cultural Analysis of Mobile Picture Messaging, New Media Society, Amazon Publishers. New York City. Majumdar, Ramanuj, 2006, Marking Research: Text, Applications and Case Studies, Wiley Publishers: Indianapolis Marketing Week, 2011, Nokia Communicates Brand Strategy through its Stores. Marketing Week, Vol 34 (49):9 Mimoun, K, 2009, A Strategic Exploration of Nokia's Success: A Brief Overview, Edward Elgar: Cheltenham Mobithinking. (2012). There were 11.1 percent more mobile devices sold in 2011 compared to 2010, Retrieved on 17 February 2012 from http://mobithinking.com/mobile-marketing-tools/latest-mobile-stats Plunkett, J, 2009, Plunkett's Telecommunications Industry Almanac 2009, Plunkett Research Ltd, New York Proctor, T, 2004, Strategic Marketing: an Introduction, Routledge: London Steinbock, D, 2010, Winning Across Global Markets: How Nokia Creates Strategic Advantage in a Fast-Changing World, John Wiley & Sons: Hoboken Shukla, A, 2005, Case Studies in Marketing Management, Sarup & Sons: New Delhi Masterson, R and Pickton, D, 2010, Marketing: an Introduction, SAGE Books Publishers : London Spulber, D and Gick, W, 2008, Global Competitive Strategy, Journal of economic Geography, Vol. 8: 828 - 829 Read More