Problems of Nokia’s Performance

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Table of Contents

Implementation of Strategic Choices
Overcoming its Current Issues
Recommendation
Conclusion
Reference List

Implementation of Strategic Choices

When going over the case data, it becomes immediately apparent that the primary strength of Nokia is its capacity to exploit economies of scale which enable the company to not only produce enough handsets to meet global demand but also enables the company to sell them at a lower cost (Sengul & Gimeno, 2013).

It can be seen that despite Apple, Samsung and various Android based phones being the pre-dominant smart phone/smart phone in the global marketplace, the fact remains that smart phones as a whole are expensive and, as such, manufacturers of such devices would have a considerable amount of difficulty in penetrating developing countries where the limited income of the local consumers would result in low levels of demand (Clercq & Lianxi, 2014).

While it is true that Nokia has actively pursued First World markets in the past, as evidenced by the ubiquitous nature of the Nokia brand, the fact remains that its traditional markets are overly saturated which prevents the company from gaining a sufficient foothold (Kern, 2014).

It is based on this that one potential strategy of the company would be to expand into Third World economies by providing cheap yet effective mobile phones (Barrett, 2004).

From a market penetration perspective, this strategy would enable the company to encompass a much larger user base as compared to companies such as Apple that focus solely on the development of technology that appeals to middle to high income consumers (Besanko & Wu, 2013).

For instance, markets in Central Africa such as Cameroon and Ghana have a considerable amount of potential phone users in what is a generally untapped market for mobile devices (Subramanian, 2013). The reason why the proposed strategy would be effective is related to the limited telecommunications infrastructure in third world countries and how this factors into the ability of Nokia to create a substantial market share (Ojo, 2009).

First and foremost, based on the red ocean – blue ocean strategy, Nokia is able to leverage its current product lineup as compared to other phone manufacturers simply because various iterations of mobile phones produced by Nokia are not as dependent on highly prolific 3G and 4G network infrastructures.

It is important to note that smart phones, by their very nature, require a relatively robust network to function properly (Zhu, Singh & Manuszak, 2009). Without such a network, they are relegated to being nothing more than a very expensive phone whose capabilities are severely limited by the lack of a data networking (Zhang, Song & Qu, 2011).

Within many developing third world countries, it is far more important to have a functioning and affordable phone rather than one they cannot afford and can barely utilized.

It is along this line of reasoning that is more than likely that Nokia would be quite successful in various countries where the network infrastructure can only support mobile devices that are not as demanding when it comes to their data needs (Kawasaki, Lin & Matsushima, 2014).

Overcoming its Current Issues

When examining the SWOT, Value Chain, etc. that were utilized early on in this paper, what is immediately obvious is that despite the current capabilities of Nokia, the current global marketplace is rife with many potential competitors with sufficient capital that can go to China, make a contract with a local company and they would be able to have their own phone model with its own distinctive branding which would run on the free Android operating system (Schmidt, 2013).

One example in which companies can develop their own products utilizing outside help can be seen in the case of the company Polaroid who used to be popular for their instant cameras yet, due to a lack of sufficient foresight, have lost a vast majority of their market share (Cennamo & Santalo, 2013).

However, as of late the company has made a surprising move wherein it has actually entered into the Android based tablet industry and have actually been moderately successful selling tablets that were made in China by a third party supplier yet bore the Polaroid brand.

A similar strategy could potentially be utilized by various competitors with the prospective third world economies that Nokia may attempt to penetrate in the future (Dennehy, 2010). The barriers to entry that used to exist such as having to build a factory and developing a supply chain are no longer an issue which has resulted in a proliferation of different types of mobile phone brands (Sung, 2014).

Recommendation

It is with this in mind that one way in which Nokia could address its current issues with regard to market penetration would be to create a phone that is both incredibly affordable yet usable in locations where mobile phone service is somewhat lacking.

Nokia has the technological capacity to accomplish this which its various rivals that buy their phones from China cannot given the generic nature of the mobile phones that are produced by third party suppliers that do not have specialized technologies (Ahn & Breton, 2014).

Not only that, more prominent phone companies such as Apple and Samsung are less likely to develop affordable phones that have good serve quality in low signal areas given their current approach towards expanding into industrialized countries where such a situation is not an issue at all (Kaufman, 2013; Rubin, 2014)).

This particular approach would definitely conform with the “red ocean – blue” strategy that was mentioned earlier since it would allow Nokia to dominate a niche market that other competitors simply could not penetrate due to a lack of technological capability or are simply disinterested in penetrating such markets in the first place given the low level of demand for complex smart phone devices in such regions (Pitcher, 2002).

This presents itself as a good opportunity for the company since it ensures that potential rivals to its new markets would be limited in size and scope.

Conclusion

Overall, while it can be seen that Nokia, despite being one of the largest companies in the world, is being overwhelmed through the sheer amount of competitive forces that are in the market. It has to deal with the competitive pressures from Apple and Samsung as well as the proliferation of cheap smart phones through the open source Android operating system.

Success for the company will be determined in the next few quarters as it attempts to penetrate new markets with its current phone lineup. Whether or not the company will succeed with such a plan has yet to be determined, however, with its superb development team and supply chain it is likely that the company will definitely put up a tough fight.

Reference List

Ahn, J, & Breton, R 2014, ‘Securitization, competition and monitoring’, Journal Of Banking & Finance, vol. 40, pp. 195-210

Barrett, L 2004, ‘Nokia’s rivals getting too close for comfort’, Marketing Week, vol. 27, no. 18, pp. 20-21

Besanko, D, & Wu, J 2013, ‘The Impact of Market Structure and Learning on the Tradeoff between R&D Competition and Cooperation’, Journal Of Industrial Economics, vol. 61, no. 1, pp. 166-201

Cennamo, C, & Santalo, J 2013, ‘Platform competition: Strategic trade-offs in platform markets’, Strategic Management Journal, vol. 34, no. 11, pp. 1331-1350

Clercq, D, & Lianxi, Z 2014, ‘Entrepreneurial Strategic Posture and Performance in Foreign Markets: The Critical Role of International Learning Effort’, Journal Of International Marketing, vol. 22, no. 2, pp. 47-67

Dennehy, K 2010, ‘Google or Nokia: Who Will Win LBS War?’, GPS World, vol. 21, no. 5, p. 50

Kaufman, B 2013, ‘The Optimal Level of Market Competition: Neoclassical and New Institutional Conclusions Critiqued and Reformulated’, Journal Of Economic Issues (M.E. Sharpe Inc.), vol. 47, no. 3, pp. 639-672

Kawasaki, A, Lin, M, & Matsushima, N 2014, ‘Multi-Market Competition, R&D, and Welfare in Oligopoly’, Southern Economic Journal, vol. 80, no. 3, pp. 803-815

Kern, BR 2014, ‘Innovation Markets, Future Markets, or Potential Competition: How Should Competition Authorities Account for Innovation Competition in Merger Reviews?’, World Competition: Law & Economics Review, vol. 37, no. 2, pp. 173-206

Ojo, B 2009, ‘Nokia finally wakes up – to unrelenting rivalry’, Electronic Engineering Times (01921541), vol. 1570, p. 22

Pitcher, G 2002, ‘Uneasy lies the head that wears the crown..’, Marketing Week, vol. 25, no. 44, p. 33,

Rubin, PH 2014, ‘Emporiophobia (Fear of Markets): Cooperation or Competition?’, Southern Economic Journal, vol. 80, no. 4, pp. 875-889

Sengul, M, & Gimeno, J 2013, ‘Constrained Delegation: Limiting Subsidiaries’ Decision Rights and Resources in Firms That Compete across Multiple Industries’, Administrative Science Quarterly, vol. 58, no. 3, pp. 420-471

Schmidt, R 2013, ‘Price competition and innovation in markets with brand loyalty’, Journal Of Economics, vol. 109, no. 2, pp. 147-173

Subramanian, A 2013, ‘Product Market Competition, Managerial Compensation, and Firm Size in Market Equilibrium’, Management Science, vol. 59, no. 7, pp. 1612-1630

Sung, N 2014, ‘Market concentration and competition in OECD mobile telecommunications markets’, Applied Economics, vol. 46, no. 25, pp. 3037-3048

Zhang, C, Song, P, & Qu, Z 2011, ‘Competitive Action in the Diffusion of Internet Technology Products in Emerging Markets: Implications for Global Marketing Managers’, Journal Of International Marketing, vol. 19, no. 4, pp. 40-60

Zhu, T, Singh, V, & Manuszak, M 2009, ‘Market Structure and Competition in the Retail Discount Industry’, Journal Of Marketing Research (JMR), vol. 46, no. 4, pp. 453-466

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