Nokia in the UK Telecommunication Market

NB: We do not resell your papers. Upon ordering, we do an original paper exclusively for you.

NB: All your data is kept safe from the public.

Table of Contents

Market environment analysis
PESTEL Analysis
Five Forces analysis
SWOT analysis
References

Market environment analysis

The global market for telecommunication equipment is mature as well as that of the United Kingdom. This has resulted from an increment in the number of companies which have ventured into the industry. One factor that have contributed to the rapid growth in the UK telecommunication equipment industry relate to the emergence of smartphone technology.

For instance, it is projected that the growth of the industry will increase to reach a peak of 9365.3 million pounds by 2012 (MBD, 2008, par.3). The following is a comprehensive analysis of UK telecommunication equipment market environment through three key analysis tools: PESTEL, Porter’s Five Forces and SWOT analysis.

PESTEL Analysis

Political

Nokia Company has been in operation within UK market since 1984. As a result, the firm derives substantial revenue from this market. The company’s success in UK market depends on the prevailing political environment. UK has been politically stable for a considerable time due to the incorporation of a good governance system. Such a politically stable environment has enabled Nokia to increase its sales revenue in UK market.

For example in 2009, the company’s sales revenue from UK market averaged 7,500 million Euros (Arthur, 2010, p.1). In addition, Nokia is affected by the policies imposed by the UK authorities on telecommunication equipment industry. In 2000, the government started to accept bids from firms that operate a license to merchandise next-generation mobile phones (Bichta, 2001, pp.48-50). The huge sums required for the licensing has been a major barrier for other companies wanting to operate in the UK market.

Economic environment

The UK has a very strong economy that has continued to grow over the years. The UK government is also committed at implementing various economic drivers with an aim of stimulating the British economy. Some of these measures involve reformulation of monetary policies, taxation policies, as well as interest rate policies.

Such measures can positively affect firms in various economic sectors. UK economic growth has led to the increment in consumers’ purchasing power contributing to the revenue increase for Nokia (Cuthbertson & Nitzche, 2005, p.7). Although the company sales have been declining, much of the revenue is derived as a result of the economic stability in the region.

Socio-cultural

According to Daniel, Baron, a renowned strategic management specialist, businesses in different economic sectors are affected by changes in the social environment. The effect may either be positive or negative (Baron, 2005, p.207). United Kingdom is one of the most populous countries in the world. According to Butler (2010), the number of mobile connections was twice that of landline connections. At present, more than 50 million mobile phones are registered in UK making the product the most successful ever.

Currently, consumer preference for using mobile devices has never been so high due to convenience and reliability (Ofcom, 2011, p.250). These devices have found application in many context thus making them part of daily activities. However, mobile phones have triggered a rise in criminal activities compelling the firms associated to implement methods that prevent the use of stolen phones.

Technological

In the telecommunication equipment market, technology is perhaps the most significant factor that firms like Nokia must take into consideration. The company must keep up with all new technological advances such as camera or motion capture phones. This is the only way the company can capture the biggest share of the market and position better in the competition. The development of 3G systems is a big success for Nokia as it enhances the delivery of a wide range of services for the mobile devices.

Environmental

All UK based manufacturers are required to show commitment to environmental sustainability. Nokia is expected to dispose waste in ways that does not pollute the environment and ensure high standard of safety and hygiene. However, Nokia has managed to be environmentally friendly and has done nothing to raise environmental concern (Nokia, n.d, 1). This is among the reasons that the company has popular brands of mobile phones.

Legal

The UK government is committed at implementing an effective lethal system. In regard to communication, the government has been enacting laws and implementing legal reforms since 1949s.

Some of the legal reforms undertaken relate to economic matters such as trade, corporate governance and taxation. Nokia Company has significantly benefited from the UK legal system due to the earlier establishment. New entrants are usually faced by extra requirements from the government and thus discouraging many of them to the advantage of Nokia.

Five Forces analysis

According to renowned marketing specialists Robert Lussier and David, Kimball (2011, par. 1), different industries are characterized by varying intensity of competition. The competiveness of Nokia is illustrated below using Porters five forces analysis.

Rivalry

The UK telecommunication industry is characterized by key players such as Vodafone, Siemens, Samsung, Apple, Motorola as well as other new firms from China and other growing economies. The rivalry among these competitors is intense as every firm aims to control a substantial share of the market.

The differentiation in terms of product features for Nokia is getting diminished; yet players are constantly differentiating their products in terms of services offered and applications. In addition, exit barriers are low for firms holding smaller parts of the value chain against those occupying most of the chain. For Nokia, the UK market share is substantial, about 29% and can be considered to be a key player (BBC News, 2011, par.2).

Threat of new entrants

The license fee required to enter the UK market is a key barrier to the entry of foreign companies. This is accompanied by the fact that the consumption behavior for mobile phones is changing in all market of the world (De Mooij, 2010, p.71). In this regard, most firms would prefer to invest in other markets that have low entry costs and promising future.

Indeed, Nokia and Apple have absolute cost advantage with operating margins above 30% while that of other smartphone manufacturers is below 15% (Nokia Inc, 2010, p.32). In addition, the high cost of establishing a production facility for mobile phones bars local business from entering the market. However, the economic stability and speculated growth might attract new firms into the market in future. New firms in an industry lead to an increment in the intensity of competition (Varga, 2010, p. 5).

Supplier power

For Nokia, there are many software providers as well as hardware manufacturers. The company has as many options as it wishes to use in sourcing supplies. Many foreign suppliers are looking for places to market their products while others are seeking partnerships in order to sustain their businesses. At the same time, there are many UK suppliers who market their products outside the region and would consider working with Nokia as an opportunity. In this respect, the bargaining power of the suppliers is very low.

Buyer power

The bargaining power of the buyers is determined by the switching costs. The fact that UK telecommunication equipment market has high competition indicates that customers can get products from many different manufacturers. Also, UK consumers have all the required information about the intense competition and will select the best firms to buy products from.

The demand for telecommunication equipment is highly sensitive to economy and buyers can delay buying Nokia’s new models. Therefore, the bargaining power of UK customers is very high and Nokia would be required to focus on customer satisfaction initiatives.

Substitutes

The power of alternative products was low initially but has kept on rising as new technological advances emerge. Mobile phones were initially used for communication purposes but the growth of technology has enabled multiple applications. Therefore, products like personal computers, PDAs and notebooks have emerged to be strong substitutes of smart phones. But the novel purpose of communication limits this threat of alternative products.

SWOT analysis

Strengths

To survive in the long term, it is critical for a firm to develop its competitive advantage (Harrison & John, 2009, p.61). One of the ways through which a firm can achieve this is by enhancing its strengths. Nokia brand has a strong presence in the UK market such that 80% of active mobile phone users have owned a Nokia phone at least once. This is reflected in the 29% market share that the company had in 2011(BBC News, 2011, par.2).

The company also has a solid and active research and development team across the world which can be focused on the UK market to bring results. In addition, the company has been a technology leader for a long time indicating its potential to innovate. More important, Nokia is a market leader in terms of mobile phone units sold across UK. This indicates that the consumers are aware of the quality associated with the products.

Weaknesses

The major weakness for Nokia is the continued decline in sales and market share especially in the segment of smartphones. The company has historically dominated the UK market but has been outdone by Google and Apple in the smart phone segment.

Statistics indicate that Android holds a share of 47% of smartphones in UK while the Symbian (Nokia) has only 7.2% left after losing 19% in year 2010 (JiWire Mobile, 2011, p.7). The major reason could be the late entry of the company into this market segment which gave room for the competitors to establish. More so, Nokia is not very good in software development and this has led to increasing dissatisfactions levels with their smartphones.

Opportunities

As noted earlier, the UK economy is expected to grow and thus increasing the buying power of the consumers (National Audit office. 2009, p.8). Nokia can use the partnering opportunities arising from foreign suppliers to enhance its software and win the confidence of the consumer in UK. In addition, there are new technologies that can enable the company to differentiate the products according to benefit sought by the consumers.

The strong financial position and R&D team is a good strength to exploit the emerging opportunities. Furthermore, the stern regulations posed by UK government on communication companies are an opportunity for the company to penetrate the UK new market segments ahead of the competitors.

Threats

Increasing competition posed by key market players on certain segments is a major threat for Nokia (Wallace, 2001, p.859). In fact, the company has lost a significant share to just few competitors indicating that more firms might push the company out of the UK market arena.

This threat is intensified by the fact that the competitors have shown to be more technologically savvy than Nokia. This might compel the company to invest in much research and development at the cost of declining sales. Nonetheless, new firms from china might enter the UK market with their cheap products. Though these products might lack the quality expected by UK consumers, the technology integration and cheap prices are big attractions.

References

Arthur, C. 2010. Nokia’s revenue and profit trends point to its key problem: commoditization. The Guardian. Web.

Baron, D., 2005. Business and its environment. Journal of Policy Analysis and Management. Vol. 13, issue 1, pp. 205-208. New York: Prentice Hall.

Bichta, C. 2001. The UK telecommunications industry. Web.

Butler, J. 2010. Forensic analysis of mobile phones. White paper. Web.

Cuthbertson, K. & Nitzche, D. 2005. Quantitative Financial Economics: Stocks, Bonds and Foreign Exchange. New York, NY: John Wiley & Sons.

De Mooij, M. 2010. Consumer Behavior and Culture: Consequences for Global Marketing and Advertising.Thousands Oak, CA: SAGE.

Harrison, J. S. & John, C. H. 2009. Foundations in Strategic Management. Florence, KY: Cengage Learning.

Hedley, S. 2006. The law of electronic commerce and the Internet in the UK and Ireland. Florence, KY: Routledge.

JiWire Mobile. 2011. JiWire Mobile audience insights report. Web.

Lussier, R., & Kimball, D., 2011. Five competitive forces in sport business environments. Web.

Market & Business Development (MBD). 2008. Press release: UK telecommunication equipment market development report. Web.

National Audit office. 2009. UK Trade and Investment: Trade Support. London, UK: The Stationery Office.

Nokia Inc. 2010. Nokia 2010. Web.

Nokia Inc. Nokia environment North America. Web.

Ofcom. Communications market report: UK. Web.

Reynard, M., Ritchie, W., & Fornaciari, C., 2008. Secondhand goods, firsthand knowledge: An organizational structure exercise. Journal of Business Case Studies. Vol. 4, issue 7. Florida: Florida Gulf Coast University.

Varga, M., 2010. Analyzing the Australian fashion industry according to Porter’s five forces. New York, NY: GRIN Verlag.

Wallace, P. D. 2001. Ency. Of Ecommerce. New Delhi, India: Sarup & Sons.

Click Here To Order Now!