Abstract

Corporations involved in the production of mobile phones have started to diversify their businesses to keep up with the changing business environment characterized by digitalization and stand out in this competitive industry. Nokia has not been left out in this move as it joined the Internet and communications business recently. Nokia products are reasonably priced, and this has helped the company gain a strategic position in the market. In response to changing external business environment, Nokia is continuously improving its product features to match the market demand. One key strategy that has helped the firm gain a competitive edge is product differentiation where the company offers both products and services. To improve its business operations, Nokia should adopt cost leadership and focus strategies. This way the firm will be able to maintain a position in the highly competitive consumer electronics and information technology industry. This paper intends to discuss the strategic management analysis of Nokia Corporation. The report evaluates both external and internal environments. The external environment comprises of opportunities and threats, political, technology, and sociocultural issues that are likely to face the company. On the other hand, the internal environment consists of the firm’s strengths and weaknesses. The paper also intends to review the company’s strategic position.

Introduction

Nokia is a multinational corporation involved in the production of mobile phones. The firm has recently joined the internet and communication business. The company’s mission statement is ‘connecting people.’  Nokia is committed to fulfilling this mission statement by producing updated to date mobile phone devices that satisfy consumer needs. Technology is the soul of the consumer electronics sector which is highly competitive (David and David 2016, p. 35). Companies should, therefore, adopt the market standing strategies to respond to market changes.

Nokia’s Strategic Position

A strategy refers to a primary characteristic which matches an organization to its success about its environment. Nokia faces opportunities, strengths, weaknesses as well as threats. It is essential to understand the level of a business, its tactics, corporate level, and defensive mechanism to analyze its strategic position. First, the entity’s trade level strategy is founded on leadership cost. Nokia products are generally acceptable to many consumers in the international market (Ansoff et al. 2019, p. 294). Nokia mobile phones are produced based on the current technology, and are of high quality and reliable.

The firm has an active consumer and employees’ loyalty hence its high reputation. Nokia Company embraces, the principle of rationality. The management understands that consumers are rational beings who are willing to spend low income to satisfy their needs. Thus, the company tries to maintain a low cost for their commodities through the implementation of various cost management techniques (Wheelen et al. 2019, p. 55).

Second, the firm has superior defensive mechanisms. Nokia competes with other giant companies such as Apple and Samsung. When blackberry and iPhone were introduced in the market, the company produced Nokia 5800 touch screen in response. Notably, this enabled the firm to remain competitive in the international market. The company’s aggressive tactic is based on its locality. The entity has set out strategies to enable it lead in market sales. For instance, Nokia has heavily invested in Europe, Asia-pacific regions, and China. Finally, at the corporate level, the firm embraces the growth strategy. The company’s growth strategy is based on acquisitions. Recently, the firm acquired businesses with innovative technology and competencies thus improving its competitive position (Elbanna and Fadol 2016, p. 80).

Analysis of Internal and External Environment

Both the internal and external environmental factors are essential for a company’s development. The PESTEL and SWOT analysis will help to understand Nokia’s ecological situations.

PESTEL Analysis

Political Factors

Nokia sells its products globally. When governments change their import and exportation laws, Nokia’s sales are affected. Political instability may also affect the company’s performance in different countries. During the political riots in Egypt and Libya, for instance, Nokia significantly decreased its market size in these two countries (Deslatte, Swann, and Feiock 2016, p. 420).

Economic Factors

Economic factors are essential for any entity. During the global economic recession of 2008, the company’s market significantly reduced particularly in the USA and Europe.

Social and Environmental Factors

There are certain codes of ethics that govern the production process of companies. Unethical practices may severely affect the progress of a given business. Some unethical practices are not illegal while others are illegal. Nokia has significantly lost its market share in China and Asia. Notably, this is linked to the fact that these countries produce cheaper phones. Since consumers are rational beings, they opt to purchase the cheaper phones thus affecting the total sales for Nokia products. One of Nokia’s main competitor, Apple, has implemented measures to enable it be a green company. The company is encouraging its consumers to recycle their products to conserve the environment. Nokia Corporation is yet to embrace such a policy (Newcomer and Brass 2016, p. 85).

Technological Factors

The consumer electronics industry mostly relies on technology. Nokia has highly adopted technology changes thus it is able to meet consumer demand. The firm remains committed to improving its devices’ smooth touch-screens, music, camera, among other features.

Legal Factors

Most businesses aim at maximizing profits while minimizing inputs. But these companies should also consider legal constraints. Companies should comply with rules and regulation of the host nation. Nokia strictly adheres to legal requirements and this explains the company’s success in various economies around the world.

SWOT Analysis

Strengths

Nokia’s strengths reflect its internal factors. One of the company’s strength is that it is a leading business in information technology sector, particularly in England. The firm produces high quality and competitive products hence attracting more customers. The entity has experienced and skilled personnel who are concerned to see production of internationally accepted products. The company’s board of management is accommodative.

Weaknesses

The consumer electronics and information technology market is highly saturated. Besides, various countries have imposed high import duties thus affecting Nokia’s total revenue. The supply chain cost is also high. Additionally, employees are currently demanding high wages. With high salaries, increased import duties, and high supply chain cost, the price of Nokia products is likely to rise sharply.

Opportunities

Nokia should advance its current technology to improve its products. These changes may be targeted to production of 4G supporting devices, advanced picture messaging, smooth touch-screens and high-quality cameras. The company should use innovation to re-invest their commodities and offer differentiated products and services.

Threats

China has developed handsets which resemble the Nokia brand and this has led to unhealthy competition in the international market. High import charges in China serve as a threat to the company.

An Analysis of Nokia’s Response to External and Internal Challenges

The company’s strength is based on constant innovation and upgrade of product features to match market demand. Nokia is taking a relatively lower time to improve its products compared to other companies’ devices such as the iPhone and Blackberry. The company produces flexible products, unlike its rivals who produce complex devices making it difficult for older adults or less skilled person to use. Nokia’s products are used across different age groups, including the youths and the seniors in society. The company uses the same level of technology as its rivals, but its products are less expensive. The low prices attracts more customers hence increased consumer loyalty (Agamuthu and Masaru 2014, p. 96).

Since the market is highly saturated, Nokia Corporation ought to re-launch its outdated models. Notably, this will help to increase the competitive capacity of the firm. The entity should recently started using state-of-the-art machines in an effort to increase its productivity while cutting the cost of operations. Increasing the number of machines has significantly reduced the number of employees and cut down recurrent expenditures. The company should invest in various countries and take advantage of foreign direct investment policies.

Nokia’s Competitive Advantage

An added advantage refers to the position that one entity has in relation to its rivals thus assisting the company in question to generate more revenues and to reduce employee turnover rate. Nokia has several competitive advantages over its competitors. The company continuously improves its products hence gaining popularity. Besides, Nokia embraces product differentiation by providing both products and services thus defeating the rivals in the service sector. Additionally, the firm’s products are exceptionally of high-quality. Due to the high quality, the customers remain loyal to Nokia Corporation, and as a result, the firm has earned a vast market share in both developed and developing nation. The company’s brand value is also a key competitive advantage which is linked to its organizational culture and beliefs.  Nokia produces the latest product designs based on its research development investment. Research is essential in the development of measures which enables the firm to remain competitive in the saturated electronics market (Ginter, Duncan, and Swayne 2018, p. 147).

Nokia’s Strategic Options

Nokia Corporation has various strategic options which assist it in increasing its competitive position and improving the quality of its products. The firm is one of the leading companies in the information tech industry. However, more pressure is being exerted by its rivals such as Motorola and Samsung. Indeed, this justifies the need for strategic options. It is imperative for the firm to implement a grand strategy. Notably, this is a growth strategy which can reinforce the firm’s competitive position. The plan focuses on Nokia’s products and services such as PCs and consolidation with the Internet.  The competitive generic strategy is also a key strategic option for the firm. Indeed, this approach leads to a realization of a greater market share. Primarily, this policy concentrates on building advantages in the market competition. Such strategies enable the firm to gain high profits above the average level.

Cost Leadership Strategy

Nokia operates on a low fixed and a high variable business model. The model ensures that the cost of Nokia’s products is kept low. However, the cost leadership policy may disadvantage the company based on the competitive price of rivals’ products. The financial gain of Nokia Corporation would significantly reduce (Ginter, Duncan, and Swayne 2018, p. 149). The low cost-benefit enjoyed by the consumers may also be affected by technological changes. Differentiation Strategy

This involves delivery of varied products from rivals with the aim of achieving a competitive advantage. The information technology industry is profoundly changing to coup up with changes in consumer taste and preferences. These changes are also linked to improvement in technology which has critically transformed the electronics and information tech sector. In this case, Nokia products need to vary with the changing trends.

Focus Strategy

This is a primary strategic option where the firm targets a specific region market, product segment markets, and consumer group. The approach empowers Nokia Corporation’s to penetrate into the market. The focus strategy should concentrate more on the customers rather than the competitors. Notably, this calls for the firm to focus more on the quality of the products as well as consumer expectations.

Conclusion

In conclusion, the information tech and consumer electronics industry is highly saturated due to the current large number of mobile phone production companies. Nokia has to invest more in research to develop policies that could enable it to remain competitive. Technological progress is paramount in this sector since consumer tastes and preferences keep on changing. Nokia has built strong customer loyalty due to its high-quality products. Political instability profoundly affects businesses. The reduction in the market size of the company’s product in Egypt during the rioting season significantly reduced the profitability of the firm.

References

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Wheelen, T.L., Hunger, J.D., Hoffman, A.N. and Bamford, C.E., 2017. Strategic management and business policy (p. 55). Boston: pearson.