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Mobile Phone Companies Analysis

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Nokia is a leading mobile device manufacturer globally and has a high market share. Maximum population in India prefers using Nokia handsets as it is user friendly. It can use its customer’s goodwill and loyalty to diversify in the mobile network market in India.

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The communications sector in India has transformed into a multi-player and multi-product market that has diverse market size and segments. In order to diversify in to new market, Nokia needs to develop a marketing plan which will give them the idea what factors to be considered before entering the mobile network sector. The marketing plan includes all the factors that need to be undertaken. They are market analysis, competitor analysis, and environmental analysis, and customer analysis, internal and external factors.

The mobile network market is growing rapidly and has good opportunities for new entrants to enter market and gain market share. Though there is much opportunity in this market, there are some threats such as threat from existing competitor, high customer churn rates, etc. After conducting a Porter’s 5 forces model on Nokia, I felt a PESTLE analysis would analyse the macro environment of Nokia.

These are all the external forces that are out of Nokias’ control but have a significant effect on how the company operates and the strategic decision they make. This model looks at the Political, Economical, Social, Technological, Legal and Environmental factors relating to Nokia and the industry they operate in. To understand the macro environment more this article will study each section in depth. After the completion of planning stage of marketing plan, an organization has to go through next stage which is strategic options. It deals with various key issues that a firm needs to look at. They are marketing objectives, Strategic objectives, Marketing mix, STP (Segmentation, Targeting, Positioning) process, Distribution process and Value chain. Nokia was founded over 140 years ago in Finland, and since then has become a global organisation that operates in over 120 countries worldwide.

Nokia has also become a market leader in the mobile telecommunications industry and is most known for their mobile phones and Smartphone’s. Although recent competition has affected the market share that Nokia has in the telecommunication industry they still hold a strong 29%(2011) of the market share in a forever changing industry The micro environment is the internal factors that are affected by the customers, staff, shareholders and competitors. The best model for evaluating the micro environment of Nokia is Porter’s 5 forces as this takes into consideration the competitors, customers, suppliers and new entrants.

Company Overview:

The company was founded in 1865 by Frederick Idestam. The company began a paper mill in Tammerkoski in southern Finland. Frederick Idestam then built another mill by the Nokiavirta River where he gave the name Nokia to the mill in 1871. Originally, the Nokianvirta River was named after a dark furry animal, locally known as the Nokia – a type of marten. Following a major industrial force, the company merges with a cable company (founded by Eduard Polon) and a rubber firm (founded by Arvid Wickstrom) which sets Nokia on the new path of electronics. Nokia’s first electronic device was a pulse analyzer designed for use in nuclear power plants in 1962.

Their interest in telecommunication systems began in 1963 when they started developing radio telephones for the army and the emergency services, prior to the manufacturing of televisions, radio phones, data transfer equipment, radio link, analyzers and digital telephone exchange. Nokia will change its production and focus on the telecommunication expertise until it becomes the core of its future work.

To move to mobile:
In 1979 Mobira Oy was the first phone maker. They begin life as a joint venture between Nokia and leading Finnish television Salora. The Mobile phone revolution started in 1981 with the launch of the first Nordic Mobile Telephone (NMT) service. The phone industry began to expand rapidly and Nokia introduces its first car phones followed by the portable in 1986.

Mobile revolution:
In 1992, Nokia decides to focus on its telecommunications business. This happens when Jorma Ollila becomes CEO of Nokia and he chooses to concentrate on telecommunication industry. In the 1990’s, the rubber, cable, and consumer electronics divisions, were therefore sold. Nokia’s only business turned towards the manufacturing of mobile phones and telecommunications systems. The strategy of Jorma Ollila was to create a new era of telecommunication on a long term vision.

1. PESTLE Analysis of Nokia

Political:

The Political factors relates to the factors which the government also affects such as government instability or rules and regulations which the business must follow. Nokia have recently moved one of its manufacturing facilities to India, and because of this it is important that Nokia follow the rules and regulations that are set in India, so that they can operate as efficiently as possible.

The types of things they will have to be aware of is the minimum wage, the maximum hours a week employees can work and especially the Health and Safety regulations; this is to avoid any bad press or revolt from employees that will ultimately damage the reputation of Nokia both short term and long term. As well as foreign government it is vital that Nokia have a good relationship with their government in Finland, as any political instability such as a change in government or coalition may result in new laws being implemented, which will affect Nokia a lot

Economical:

Nokia are vital to the Economy in Finland as it currently occupies a third of the market on the Helsinki stock exchange. The organisation is so important to the economy of Finland that the government had to step in when the business, earlier this year Nokia planned job cuts in Finland and with fears of what that would do to the economy the Finnish government stated they were prepared to help find jobs for those who are sacked (Reuters, 2011).

Nokia will also have to be aware of changes in exchange rates, as they operate on a global scale and drastic changes in rates can have a devastating effect on the financial operations of the company if the business do not take appropriate steps to ensure the effects are minimum.

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The threat of recession on western economy has also had an effect on the interest rates in banks, which means the cost of borrowing money for business activities has increased and Nokia will need to be aware of the changes in interest rate.

Social

With Nokia mainly operating in the Western market it is important for them to fully understand the social factors in these markets and the main factor they need to understand is the culture of the society; which is to have the latest and most up to date phone, is considered a key fashion icon. Consumers are always after the most innovative and best looking Smartphone because in today’s culture people are judge on how fashionable they are by their choice of mobile phone. The increasing trend in Smartphone means when consumers purchase new mobile phones less and less consumers are choosing the standard mobiles phones over Smartphone because of the social trend in today’s society. Nokia will be aware of this and may now spend the majority of their efforts developing a Smartphone that can compete with their rivals’ products, in order to keep up with the trends of their consumers.

Technological:

The technological advances in the industry are vital to the success of any new Smartphone in the market that is continually growing, as the level of competition rises Nokia must ensure that their Smartphones are at the highest level of innovation. With functions such as camera, internet, social networking and email all necessities on Smartphones Nokia will have to think of other functions to help differentiate and stand out from its rivals.

As well as function more and more consumers are looking at the software running all the functions as a key indicator of the success and quality of the Smartphone, so Nokia’s alliance with Microsoft for their latest Smartphones seems a very good move as everyone are aware of the technological capabilities of Microsoft and the value they can add to any technological product. In the past Nokia were the market leaders in innovation in the mobile phone industry, however in recent times they have seemed well off the mark and struggle to compete with their rivals. This is why Nokia must consider their position in the industry and attempt to once again become the market leader by offering a new innovative capability and get to the market before its rivals.

Environmental:

In today’s culture it is very important for organisations to be seen as environmentally friendly and ethical with its manufacturing, because of the global effect it has on global warming so Nokia must ensure that they operate in an appropriate manner. With mobile phone recycling organisations becoming more and more popular, this demonstrates how important people are regarding it. The main issue with mobile recycling is the disposal of the batteries in the phones as these can become dangerous if not disposed of appropriately.

Legal:

Intellectual property is the key to any technological business and must be cared for and protected to the fullest amount to ensure the business does not lose out to rivals. Nokia operate in an industry where it is very difficult to have a product that is different to its competitors, when they do release a product with an innovative capability it is vital to protect the rights to it through patents, copyright, trademarks or design to ensure they are not “stolen” by their competitors.

Not only are competitors a threat of intellectual, but Nokia must ensure they do not fall victim to counterfeiters who claim to be a Nokia products but are cheap knock-offs. As Nokia have manufacturing plants in a various countries it is extremely important that they abide by the laws and regulations set by the different countries as the laws will differ depending on the country, these can be employments laws, Health and Safety or even trade restrictions.

2. Marketing strategy of Nokia

Nokia is a leading mobile device manufacturer globally and has a high market share. Maximum population in India prefers using Nokia handsets as it is user friendly. It can use its customer’s goodwill and loyalty to diversify in the mobile network market in India.

The communications sector in India has transformed into a multi-player and multi-product market that has diverse market size and segments. In order to diversify in to new market, Nokia needs to develop a marketing plan which will give them the idea what factors to be considered before entering the mobile network sector. The marketing plan includes all the factors that need to be undertaken. They are market analysis, competitor analysis, and environmental analysis, and customer analysis, internal and external factors.

The mobile network market is growing rapidly and has good opportunities for new entrants to enter market and gain market share. Though there is much opportunity in this market, there are some threats such as threat from existing competitor, high customer churn rates, etc.

MARKETING OBJECTIVES
It is defined as, ‘marketing goals that the business must achieve in order to meet its wider business objectives’. Some of the main marketing objectives of an organization are to increase its market share, differentiate its products from competitors, develop brand value among its customers, and introducing new products or services in the market. The strategic objectives of an organization can be measured with the help of BCG matrix. BCG matrix helps to measure an organizations business units or product lines.

CUSTOMER ANALYSIS
At present, almost everyone uses cell phone. Therefore, the target segment for this market cannot be specific. Nokia needs to target population according to their usage by providing customize service plans so that the customer can select the plan which meets their requirements. They can also segment customers regionally as the usage is much more in urban market.

MARKETING MIX

It is the most famous marketing term and is used by all organization to target its customers. The elements of marketing mix are the basis of a
marketing plan. It includes 4 P’s for products and 7 P’s for services. They are Product, Price, Place, Promotion and extended P’s i.e. Physical evidence, People and Process for services.

Product

A product is a tangible thing that is sold by an organization to its customers in order to gain market share. To gain market share a firm needs to differentiate its products from competitors, be innovative, and eliminate the products which are not doing well in the market. In case of Nokia, it is a market leader in cell phone market. To gain market share and increase its customer base, Nokia is diversifying into SIM cards market. To differentiate its product from the competitors it has to use various strategies such as mass marketing. The product offered by Nokia i.e. SIM cards can be described with the service that they can offer.

Price

Price refers to the amount a customer is willing to spend. It is determined by a number of factors such as market share, growth rate, competitor pricing, etc. Nokia has to keep its SIM card prices low in order to penetrate into the mobile network market. They need to offer service plans as per the usage of the customers. While pricing, Nokia needs to keep in mind different segments that they are targeting. For instance, different plan for youngsters, corporate, businesses, SBUs. They also need to constantly update its pricing in order to compete with its competitors.

Place

It refers to geographical area where the product is placed. It also includes outlets, distribution channel. Nokia needs to make available its SIM cards both in rural and urban areas. It can also use its geographical reach to untap the rural markets which is still not properly covered by the existing competitors. Nokia can also use its customer care centres to sell its SIM cards. Apart from this, they can provide its SIM cards to retailers and dealers.

Promotion

It represents all the marketing activities that are carried to promote a product in the market. There are various mediums to promote products such as advertisements, hoardings, etc. Nokia can use various mediums to promote its SIM cards. It can use celebrities, advertisements, hoardings, sponsoring events, etc. They can also spread awareness about its SIM cards by using canopies outside colleges.

SWOT ANALYSIS

Strengths:
Huge market share: Nokia has huge market share in the cell phone sector and therefore can use its image to be successful in the service provider market. World-class technology: Nokia can make use of its world class research and development team to design better network coverage for its sim-cards. Geographical Reach: As Nokia is one of the renowned brands globally, its presence in the market is very high and can use this to provide its sim-cards service to majority of population.

Weakness:

New in the market: As Nokia is new in the service provider market, it will be difficult to attract customers towards its sim-cards and service plans. High customer churn rate: Due to many competitors in the market and less margin to differentiate the service from competitors, customers switch from one service provider to other if they are not satisfied with its service.

Opportunities:

Untapped Market: Nokia is new to the service provider market and has an opportunity to explore the market. High market growth rate: As the number of people using mobile phones is increasing rapidly. There is high growth rate in the market. Increase Market Share: Nokia can increase its market share by untapping the service provider market and increasing its customer base.

Threats:

Competitors threat: Nokia face competitors threat from market leaders such as Airtel, Vodafone and also from new entrant Aircel which has been successful to gain market share within a short period. Global recession: It led to less amount of disposable income with the customers. Hence, customers think twice before investing his money. Market Saturation: It poses as another threat if the service provider market saturates due to financial crisis caused by recession.

3. Porter’s Analysis

I. Threat of new entrants:

● The mobile phone industry is already a well established market and the threat of a new entrant is quite low, as the technology needed to rival the devices already available is quite advance if they want to differentiate from them.

● The barriers to entry in the mobile phone industry is high because any new entrants will need high investments in R&D, technology and marketing in order to compete with the established organizations. ● New entrants want to take market share from the larger organisations but Nokia hold 29% of the market share in the industry, the highest market share in the industry. (BBC News, 2011) The threat of new entrants into the mobile phone industry is very unlikely as the start up cost of entering into the market at a high level needs a lot of investments and time to be considered a respectable competitor of the already established organisations.

Nokia currently hold a 29% of the entire mobile phone market worldwide and for a new competitor to obtain some of their market will take either a very long term plan or something that is truly innovative and unseen before. This is because realistically the new entrant will need very high investment for R&D and marketing, and would not be able to publish positive result for a long time as they try to build a customer base and a name for itself in an established market. In conclusion the threat of new entrants is very low and not a factor which Nokia will have to worry about in the near future.

II. Power of suppliers:
● Although Nokia rely on its suppliers to supply equipment for their advanced mobile phones there are actually a number of large equipment makers, which Nokia could switch to.
● The software suppliers for their Smartphones are now Microsoft, who will have a very high bargaining power.
● As the leading mobile phone company in the industry they are in a very strong position when bargaining with their suppliers. Nokia are in the position where they can bargain and negotiate with any mobile phone hardware maker because there is a high number of equipment suppliers that are readily available to them should their current suppliers attempt to bargain for more money with them.

Nokia’s main argument would be the fact that they are a global organisation that has the highest market share in the industry, so the suppliers would not want to lose such an illustrious organisation. On the other hand, Nokia have recently created an alliance with Microsoft for their software which would be considered a major coup for Nokia more than Microsoft. As a result, Microsoft will have a lot of power when negotiating a price and share because the deal is more beneficial to Nokia than Microsoft. In conclusion, there is a moderate threat from the powers of suppliers because although the hardware suppliers have a very low power, Microsoft’s power over the software is very high because they’re very few other organisations who have the expertise and skills to rival Microsoft.

III. Powers of buyers:
● The power that customers have is rising because of the increasing number of choices in the mobile telecommunication industry.
● With a lot of the Nokia competitors all offering similar packages (e.g. unlimited texts and calls) the industry is very price sensitive with customers seeking out the best value for money.
● Many of the consumers will also be tied into long term contracts so switching from one handset to another will be difficult and expensive for the consumer, as a result they may not want to change until the contract is finished.

The mobile phone industry is a competitive market where the number of choices is very wide, resulting in the consumer having a lot of power because they can choose to go to one of Nokia’s many rivals if they feel Nokia are not good enough. As Nokia do not have a direct store to sell to their consumers, intermediaries such as Carphone warehouse or network stores such as Orange also have other handsets readily available for the consumers, which makes it difficult for Nokia to have a direct impact on the selling of their handsets. As a result this has created a very price sensitive market because consumers will always be on the lookout for the best deals. In conclusion, the buyers have a high amount of power because of the other handsets they can purchase instead of Nokia.

IV. Threats of substitute’s products:

● Mobile phones are an everyday essential in people’s lives today and people would find it hard to replace, as customers would not be able to be in constant contact when away from the house.
● On the other hand, it could be said that customers would be able to contact people through others types of media such as social networking websites, email and home telephones. Although staying in constant contact would be hard in customers’ day to day life.
● However, smart phones are capable of a lot of functions so there are many substitutes if the substitute focuses on one of the functions, e.g. digital camera can take better photos then smart phones, notebooks can surf the web just as effectively and PDAs can plan a day the same way a smart phone can. Mobile phones have become an everyday necessity in peoples’ lives because of the important functions that they can do and are all available in just one handset.

No other product has the ability to make phone calls, send messages, surf the web and many more in one device. The idea of being in constant communication with someone at anytime and anywhere makes the mobile phone a very important device to people. On the other hand, a mobile phone can be dissected into the key function where there are substitutes for the functions, such as the camera function on a mobile phone can be substituted for a digital camera which can do a better job than the camera in a mobile phone.

In conclusion, the threat of a substitute product is very low due to the fact a mobile phone is no longer just for making calls but for all the other function as well are expected on all mobile phones. So, the only real substitute is to buy all the functions of a mobile phone in the individual products which would not be plausible to carry all around on a person at the same time. Without mobile phones consumers would find it very difficult to replace, as it can offer so much to the consumers all in one device, no matter what the needs of the consumer are. Consumers rely on mobile phones a lot and would not be able to find a substitute that has all the function of a mobile phone.

V. Competitive rivalry:

● Nokia rivals have moved to smart phones and androids while Nokia have only just recently released their first smart phones leaving them trailing their rivals such as Apple and HTC.
● There is also very little differentiation between the competitors which means any new smart phones in the market, like Nokia Lumia, will find it difficult to tempt existing iphone and HTC customers to switch.
● Intense competition from large companies such as; Apple, HTC, Blackberry, Sony Ericcson and LG, ect. Nokia operate in an industry where the competition is extremely fierce with high investment in R&B and marketing to compete with some of the biggest organisations in the world. This year Nokia’s market share has dropped to 29% and it is forecast to continue to fall because of the rising popularity of the Apple Iphone.

After Nokia’s slow move into the Smartphone market it has left them trailing their rivals, and has just released their Lumia range which will find it difficult to compete and win over consumers from their Iphones. In conclusion, competitive rivalry is very high and Nokia must be aware of the threat that competitors have on their business especially with the growing popularity of the Apple iphone and RIM blackberry. The competitive rivalry is the biggest threat to Nokia because in the Smartphone market they are considerably behind and to increase their market share will take a lot of work in a market where some of the biggest names in business operate in such as Apple and Sony.

Competitive environments of Nokia
For more than a decade, Nokia has been the iconic leader in the industry. However, the iPhone revolution (as well as the growth of a fully vertically integrated and higher next important step in this process of assessing the external environment will be to show the current picture of Nokia’s competitors. Hardware: hly diverse group like Samsung) has disturbed the industry.

The latest data clearly highlighted several crucial points: Firstly, Nokia reported smartphone sales of about US$ 3.4 billion for Q2 2011, while Apple’s iPhone revenue totaled US$ 13.3 billion; this makes Apple the leader of the industry as it shipped 20 million iPhones. It is also important to understand that the average sale price (ASP) of an iPhone is more than US$ 600, while Nokia reports a smartphone ASP of around US$ 200. Secondly, Nokia was previously the market share leader, having more than one-third of the worldwide smartphone market in Q2 2010. However, one year later, this figure has decreased to only 15.7% and Nokia is the only brand that has lost market share, reporting a negative growth of 30%.

The chart above shows the operating profits from the sale of mobile phones among the main vendors. During the second quarter of 2011, Nokia, Motorola, Sony-Ericsson and LG saw losses and did not manage to generate a profit by selling phones. During the same period, RIM and Samsung saw their shares slightly decrease but Apple grew substantially and this company now represents two-thirds of the industry with operating profit of 66.3%.

From the same graph, we can also confirm that Motorola and LG are frequently making losses; this may explain why Google bought Motorola last month and why LG is considering exiting the industry before the end of 2011. The chart above clearly confirms that Nokia’s problems are not recent; it shows the change in profit share over a four-year period and we can see that Nokia has slowly lost profits and market shares to Apple. As of September 2011, Apple is currently taking 84% of the profits generated by modern smartphones; this means that Nokia’s main source of revenue is the low-end classic mobile phone.

Software: The OS

The previous section highlighted the fact that Nokia saw its market share and profits decrease over the last four years, and during the same period, Apple and the iPhone took 84% of the overall profits. By studying the operating system (OS), as well as the applications that are developed by the industry, we will be able to understand how its new competitor, Apple, surpassed the previously successful Nokia. Symbian

Symbian v9 was launched in 2005 and in December 2008, Nokia bought Symbian Ltd., the company behind Symbian OS and made it an open source system. Nokia’s Symbian platform market share increased to 47% but in 2010 it started to plateau and is now declining sharply, currently representing less than 16% of new mobile phone operating systems. Symbian was mostly used by the Nokia Group and other manufacturers like LG, Motorola, Samsung and Sony Ericsson.

Symbian remains the most used OS due to its very large installed based (more than 500 million mobile phones). However, Google’s Android has emerged as a significant challenger to the superiority of Symbian by providing a developer-friendly OS combined with better innovative functionalities, a better user interface and coming from a consumer-friendly brand (Android by Google). Android

Google’s Android was launched as a free and open source operating system in 2008 and within two years, it grew from having 0% to 21% of the market share. As of 2011, Google’s Android operating system is installed on 130 million devices and it is used extensively by leading smartphone manufactures like Samsung, Motorola and HTC.

Windows Phone 7

The Windows Phone 7 was showcased at the beginning of 2010 and represented a significant upgrade to the struggling Windows Mobile 6 OS. Early signs were mixed but the OS was generally well received and Microsoft also created important new features like Zune, Bing, Xbox Live and Windows Marketplace. However, the Windows Phone arrived late on the market in comparison to the Apple iOS or Android and the OS was not free and fully open source.

In August 2011, during his keynote speech at the 2011 Microsoft Worldwide Partner Conference, Microsoft CEO Steve Ballmer admitted that Microsoft simply hasn’t gained any traction and that Microsoft has failed. Based on the latest figures from Nielsen, Windows Phone 7 sales only represent 9% of the market, compared to 38% for Android and 27% for the iPhone. In order to picture this incredible landscape modification in terms of the OS, both graphs below show how the top smartphone platform has moved from Symbian to Android in fewer than 4 years.

Mobile applications:
The previous sections described how the Nokia ecosystem Symbian failed to compete with Apple or Google. In this section, we will see how this issue also affected the developer community and therefore the applications available on Nokia’s mobile phones and smartphones. Firstly, by analysing the number of applications available in the Nokia application store (called OVI) we can see from the graph below that OVI has only 46,000 applications when Android or Apple have over 300,000 applications. However, we can also see from the same graph that the trend is slowly growing, confirming the idea that some developers remain interested in developing applications on Nokia’s Symbian platform, even though this platform is less competitive than Android or Windows Phone 7.

Conclusion:

Nokia’s strategy to diversify from cell phone manufacture to Nokia mobile network will be a great success. Moreover, it can use its goodwill and loyalty of people towards Nokia cell phone to use its sim-cards. As majority of service provider’s focus on urban areas, Nokia can use its geographical reach to uncap the rural market.

In order to diversify its business in to mobile network market, Nokia needs to make use of its leading mobile phones manufacturer image. As Nokia has build loyalty among its mobile phone users, it can use this for attracting customers towards its SIM cards and thereby gain market share. Also with its world class R & D department, it can offer many services to its customers which will help them to differentiate in their service offering from its competitors. For instance, video calling, free roaming, outgoing call restriction, etc.

By focusing more on rural market which is untap to a certain extent, Nokia can satisfy its customers in rural areas which most of the existing players are not successful. Also by offering customize service plans to its customers such as offering SmS package, unlimited internet package, Free Hello tune, and so on with minimum price. Nokia can also make tie-ups with existing players such as Airtel, Vodafone, Aircel in order to gain larger market share.

It can also offer better deals to customers who are buying Nokia handsets on its SIM cards which will increase its sales as well as customer base. This will help them to develop loyalty among its customers. In order to diversify in to SIM cards segment, Nokia needs to use mass marketing by implementing various promotion strategies such as Advertisements, Hoardings, Sponsoring events, canopies outside colleges and so on. Nokia also needs to plan its distribution strategy in order to reach to maximum people. They can also use their ‘Connecting People’ tagline in its SIM card, thereby giving additional meaning to it.

Thus, to diversify in to SIM card market is a better option for Nokia to increase its market share and revenue. Also this will help them to build larger customer base which will ultimately result in one of the leading brands in the telecommunications industry.

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