Category: Nokia

Introduction

Corporations focus on generating revenues. The research centers on Nokia Corporation’s strategy. The research includes analyzing the financial performance of the Nokia Corporation. To survive, Nokia Corporation’s financial performance should be improved.

Corporate Structure

In terms of decision-making authority, the authority to make decisions is segregated among many units. Nokia has many branches strategically located in many countries. The Nokia units include branches in Europe, the Middle East, Africa, and Greater China. The other major branches are strategically located in the Asia Pacific, North America, and Latin America (Nokia Financial Report, (2012).

In terms of corporate organization, the Corporation’s organizational structure is grounded on geography(Hill, 2012, p.30). Each location makes decisions independently of the other branches located in other countries of geographical locations. The North America unit does not seek the advice or permission of the officers of the Latin America unit. In the same light, the European branch marketing managers will not wait for the Middle East manager’s approval before implementing new strategic marketing (Nokia Financial Report, 2012).

In terms of Nokia’s present corporate structure, the Nokia Corporation’s business structure is regularly implements established corporate strategies. The strategies include marketing responsibilities and production responsibilities. The firm’s international operations continue to implement the established market segmentation corporate strategy. Market segmentation centers on one target market. The China branch focuses on current and prospective China customers.

The African branch creates marketing strategies that cater to current and prospective African customers. Lastly, the Latin American branch is prohibited from selling their Nokia products to North American prospective customers (Thompson, 2010, p.265). In terms of what ways does the structure compare with the structure of similar corporations, the Nokia structure is similar to the structure of other corporations. The North American Coca Cola branch focuses on selling coke products to current and prospective North American customers. The New York McDonald’s branch caters to the hamburger needs of the busy New York professional.

Culture and competencies

The Nokia culture is consistent with the company’s current strategies. The sales personnel focus their time and effort to achieve the branch goal’s revenue targets. The Latin American production personnel are trained to generate Nokia products for current and prospective Latin American customers. Likewise, the French Branch manager takes into consideration the European temperament and culture in crafting a successful European marketing strategy (Sadler, 2003, p. 12).

Further, the Nokia Company has core competencies. The company’s first competency is focusing on its devices and services department. The department ensures that the production department maintains the high-quality standards of Nokia products. Besides, the department ensures that high quality is maintained in the after-sales services and marketing areas of all the Nokia branches. Next, the company ensures that its location and commerce competency is retained at all times and in all global branches.

Lastly, Nokia Company retains the high-quality Nokia Siemens Networks department does not drop while Nokia is in existence (Nokia Financial Report,2012). Also, the three Nokia competencies outclass and surpass the competitors’ products and services. With Nokia expert technicians strategically located in many countries, the Nokia name is synonymous with quality products. With the Nokia after-sales personnel, the Nokia name equates with quality after-sales service (Hill, 2012, p. 14).

Finance

In terms of the corporation’s financial analysis, the company’s financial performance is found wanting. The company’s gross profit ratio is 304 percent. The company’s 2011 revenue is 44.69 billion. The company’s 2011 gross profit is 14.69 billion. On the other hand, the company’s net profit ratio indicates an unfavorable – 6.85 percent. The company’s 2011 operations generated a net loss of $-3.06 billion.

The company’s capital structure is corporation based. Investors invest in shares of stocks. In turn, the investors receive dividend income. Since the company generated a net loss for 2011, the investors will not receive any dividend income. Dividend income crops up only if the company generates net income. Since the company generated a net loss, the diluted earnings of each share of stock are $ -0.82 (Shim, 2008, p.93).

In terms of balanced cash flow, the Nokia Company’s major cash inflow comes from selling Nokia cell phones. There is no balance in terms of total cash inflows generated from all Nokia products and services. The cell phones fall under the total devices and services section of Nokia’s marketing management plan. Nokia’s 2011 devices and services marketing plan generated a 27.7 percent gross margin. The ratio is lower than the 2010 marketing plan. The 201 marketing plan generated a higher 29.9 percent gross profit ratio (Nokia Financial Report, 2012).

In terms of emerging trend analysis, the financial analysis shows some global Nokia branches showed unfavorable 2011 sales results. The Greater China branch shows that the 2010 sales volume, 82.6, dropped to the unfavorable 65.8 sales volume in 2011. Likewise, the Europe market segment shows that the 2010 sales volume, 112.7, dropped to the unfavorable 87.8 sales volume in 2011. Similarly, the 2010 North America sales volume, 11.1, dropped to the negative 3.9 sales volume in 2011 (Nokia Financial Report, 2012).

On the other hand, other global branches show favorable sales reports. The Middle East and Africa branches showed that its 2010 sales volume, 83.8 rose to 94.6 during the 2011 accounting period. Similarly, the Latin America branches showed that its 2010 sales volume, 43.7 rose to 46.1 during the 2011 accounting period (p. 7).

In terms of common size statements, there are no significant differences when statements are calculated as common size versus reported dollars. The common size statements convert the dollars to percents. Since the percents are based on the dollar amounts, there is no difference between the ratios of both dollar amounts and the percentage figures (Droms, 2010, p.95).

In terms of trend impacts, the trend has an impact on past performances (Sadler, 2003, p. 5). The trend will explain why prior performances cropped up. The trend will trigger an audit of prior performances. If the trend indicates that the company will generate increasing profits, management will investigate why prior performances run counter to the trend analysis. Likewise, trends significantly influence future performance. The trend will guide management in their decision-making activities. The trend will persuade management to increase future production or reduce future production. The trend increase will indicate management is expected to increase revenues. A trend decrease will dissuade management from increasing production.

In terms of analysis support, the analysis supports Nokia Corporation management’s prior and awaiting strategic decisions. Nokia’s decisions are geared towards increasing the current accounting period’s revenue amounts. The analysis aids Nokia management’s present strategic decision to continue selling the Nokia cell phones and other Nokia products (Walton, 2000, p.279).

Conclusion

Based on the above discussion, corporations prioritize producing revenues. Nokia Corporation’s strategy focuses on increasing profits. The research indicates Nokia’s global operations are mixed. Indeed, Nokia Corporation’s must increase its 2011 annual operating performance results, a net loss.

References

Droms, W. (2010). Finance and Accounting for Nonfinancial Managers. New York: Basic Books Press.

Hill, C. (2012). Strategic Management. New York: Cengage Learning Press.

Nokia Financial Report. (2012). Web.

Sadler, P. (2003). Strategic Management. New York: Kogan Page Press.

Shim, J. (2008). Financial Management. New York: Barron’s Press.

Thompson, F. (2010). Strategic Management. New York: Cengage Learning Press.

Walton, P. (2000). Financial Statement Analysis. New York: Cengage Learning Press.

Nokia, Seen In Isolation, Is Strategically Cashing Its History

This case talks about the world-renowned, Finnish-originated company, Nokia, which boosts its tagline “Connecting people”. This tagline contains within itself the true essence of what Nokia has always strived to do with its products. Since being the producer of mere hardware components was not going to connect people in a truly interactive and engaging way, Nokia started specializing in providing services, which would connect people in real time, in ways other than talking to each other on the cell phone. Some of these ways are multi player game services and swapping personal content like music, audio, video, pictures etc. Other ways of providing that complete personal experience to any buyer of a Nokia handset are the introduction of services like the Nokia Map, which directs and gives complete directions to users of a particular place and online music stores which help users have their favorite ringtones. The top management of Nokia has already decided that making devices is not enough for the type of audience that they cater to. The 21st century is moving at such a fast pace that any company needs to adapt to the changing and new emerging demands of its customers competitively and think proactively as compared to being reactive. Therefore, Nokia very well has used this theory and tried to bring out new ways in which it can make the best use of the advantages it already has by being in the mobile phone market for several years, by being the mobile phone provider to millions of cell phone users, and the huge clientele base it has of the various mobile phone operators.

Nokia, a Tough Competitor for Mobile Phone Operators and Online Major Groups

The efforts that Nokia is making in securing its future, by continuously innovating not just its products market, but also the services market, is indirectly hampering the market and revenues for many other companies and industries. One such industry is that of the mobile operators, who provide telecommunication services and the basic software that would make the Nokia handset hardware worth anything, by ultimately connecting people. Buying a Nokia handset, or any other mobile set company’s cell for that matter, is a one-time investment. But these mobile phone operators charge their bills every month or prepaid credit has to be installed in the phones to receive their services. Since these mobile operators charge a high bill for their services, they have to compensate it by providing many other kinds of services like content provision, whether it is about news, finance, weather, etc. But customers have shown the red signal to these services by mobile phone operators. Rather, the mobile phone operators are now at the mercy of Nokia to make them partners in their service provisions like Nokia maps, game services etc. This partnership will be way more beneficial for the mobile operators than the individual efforts they had made in providing content to its customers. They were at a loss, let alone break even profits. For one of the mobile phone operators, Vodafone, providing an online live content portal was a major disaster since only approximately 15% of its users availed those services. This percentage is not the kind of response expected.

Nokia is also competing with online major groups like Yahoo! And Google, which have been in the web market for decades and are leaders in their market. The fact with these online groups is that they have no control over the phone screens, which are ruling the lives of millions of users and have become essential to fulfill the communication needs of users. Nokia is strategically using this position it has to further step into markets other than its very own, and not just that, but capture it as well.

References

1. Merriden, T. (2001) Cold Calling: Business the Nokia Way. Capstone
2. Steinbock, D. (2001). The Nokia Revolution. The Story of an Extraordinary Company that Transformed an Industry. AMACOM

Outline

The consumer brand selected for this study is Nokia Mobile Phones, which is a Finland-based company and a prominent player in the international mobile phone market. It occupies a clear and recognized brand name, ‘Nokia, Connecting People. Uniqueness is the success factor in the advertising of Nokia. Through smart ways of advertising, they are perceived as innovators in the market and have attained the position of Number1 selling mobile phone brand in the world.

In this study, it is proposed to conduct market research to ascertain what has made Nokia so successful and popular in the world mobile markets. Through questionnaire methods put across to respondents and the market research feedback, it identified that the marketing strategy of Nokia is capable of attracting new customers and retaining the existing customers. The use of celebrities as brand ambassadors for Nokia is also paying dividends. However, certain customers have certain reservations about the designs of mobile phones since they are getting more attractive models from other firms in the mobile industry. Thus Nokia had to seriously reconsider the new design of attractive mobile models for better market and client responses.

Marketing strategy of Nokia Mobile Phones

Nokia adopts different types of advertising as a part of its marketing strategy. Examples of their different advertising strategies are explained below.

For the marketing of Nokia 1100 in the Indian market, Nokia adopted the logo ‘Made for India’. It is with the object of attracting entry-level phone users. The advertisement of Nokia1100 involves the mobile tied to the fender of a truck that obliques the length of India. The implied message in this content is that the phone can prevail over the long journey. While selecting advertisements they intend to apply the human outlook of mobile technology rather than its technical aspects. In the marketing of color display phones in India, Nokia formed the logo ‘Har Jeb Mein Rang’ which means color in every pocket. It helps to create aspire among customers to go for color displays. (In The Top Spot).

The new multimedia model brand of Nokia 7210 is focused on the younger generations. For sustaining as competent in the youth market, advertising has a crucial function. Large amount spends on advertising. In the European region, advertisements are focused on their sense of fashion. It mainly focused on the ability to take pictures. Surprise kiss: priceless was the theme used for the advertisement. The colors are presented as a unique sign of attitude. Such as orange for passion, red for ambition, yellow for intensity, blue for instinct, and grey-green for fashion. In the ads, the bright body colors of the phone are emphasized. (Advertising Leads Nokia Win the Game).

For the marketing of the Nokia N81 Music Phone, the viral website-based advertising campaign is adopted by Nokia. Setting up of online music store with a viral website helped Nokia to attract younger customers. Strange animation depicts on the website was appealing to the youngsters. In the case of the N95 model ad, the logo is there is a thing in my pocket. (Nokia N81 Music Phone Advertising Campaign Makes Use of a Viral Website).

Nokia online viral advertising is intended to attract youth viewers in which music is selected as the base for communication. The music-based advertising campaign in the case of models of ‘Connecting Beats’ and Terminal 9, was highly successful in attracting the younger audience. For marketing, the new model ‘Music Goes Mobile’ Nokia adopts an advertising campaign focused on informing the audience about the features of the new model. The inclusion of Video Tour blogs and the photos taken with their Nokia phones in the websites are capable of appealing to the audience. As a part of internet marketing, Nokia developed its websites with unique features. Along with the logo, an animated Music Goes Mobile Mascot, the speaker bird was created and this was very appealing. The website contains a mixture of unique band content for downloading. Competitions are arranged with amazing prizes as a part of the campaign. The advertising campaign was a huge success as it helps to improve the customer base for the Music Goes Mobile website. After the campaign, the website became a hot topic on music forums and it attracts over two hundred visitors every day during the campaign period. (Nokia: Online Viral Advertising).

The brand representation

Nokia always adopts celebrities for presenting its brand in advertising programs. For presenting the new phone models on the internet, Niki Taylor is selected as the celebrity model. It is to attract the youth audience. (Nokia Connecting People).

In India for marketing, Nokia selects the celebrity actress Priyanka Chopra. They intend to create a deeper connection with its young and style-savvy consumers. The company organized a new campaign of Priyanka Chopra with the tagline, ‘It’s not just a phone, it’s who we are.’ (Priyanka Chopra Signed as the Brand Ambassador for Nokia).

Nokia associated with Priyanka Chopra for its new style Campaign. It is with the object of connecting with style-conscious consumers. In the theme-based campaigns constituted by Nokia, celebrities are selected by considering their fit with the theme. (Cos Roping in Young Celebrities as Brand Ambassadors).

Interview

A questionnaire-based interview is conducted as a part of the research. In this interview, consumers involving in different age groups are involved.

Pro forma Questionnaire

Nationality:

• Specify the nationality

The Age group:

• <21 21-31 31-41 41-51 51-60 >60

Main Profession:

• Business
• Banking
• IT professionals
• Others

Average Annual Income:

• $ 50000 – 200000
• $ 200000 – 400000
• $ 400000 – 600000
• $ 600000

What is the Primary reason for Choosing Nokia Phone?

Would you recommend Nokia to your friends and relatives?

• Yes
• No

How did you find about the Nokia Model?

• Television
• Internet
• Newspaper
• Magazines
• Recommendation/ Friends

Before using the Nokia mobile, have you used devices of other companies?

• Yes
• No

Is the Devices is attractive and reliable:

• Strongly disagree
• Disagree
• Neither agrees nor disagrees
• Agree
• Strongly agree

Is the usage of Nokia devices is simple:

• Strongly disagree
• Disagree
• Neither agrees nor disagrees
• Agree
• Strongly agree

Is the advertising of Nokia is appealing and attractive?

• Yes
• No

Is the Celebrities add value to Nokia in the market.

• Yes
• No

How satisfied are you with the products of Nokia?

• Highly satisfied
• Satisfied
• Not satisfied

Comment on the Pricing of Nokia?

• Low priced
• Reasonable priced
• Expensive
• Very expensive

Are you satisfied with the services of Nokia?

• Highly satisfied
• Satisfied
• Not satisfied.

Outline of the Final report

In the final report, information collected from various advertisements of Nokia and its analysis is included. The report on an interview with customers is also included in the final report. Analysis of the strengths and weaknesses of the marketing strategy of Nokia is also discussed in the final report.

Report on collection

Innovative and creative ideas are the success factor in Nokia’s marketing. This helps them to retain their market strength by attracting a large number of targeted consumers. It is said that advertising leads Nokia to win the game. Suitable advertisement programs are the success factor in Nokia’s marketing. Nokia presents its ads as more entertaining than informative and it attaches the consumers to the brand. For presenting new models of the brand, Nokia used the services of the most appealing celebrities. Nokia’s ads always include localized theme matter. In the marketing of color display phones in the Indian market, Nokia used the logo ‘Har Jeb Mein Rang’ in the national language Hindi, which means color in every pocket is the best example for their localization strategy. The localized advertising strategy helps Nokia to attain customer appealing.

Through the advertising programs, Nokia objects to strengthen the connection between the customers and the brands. Thus the advertising is a way for communicating with customers to informing them about the brand. Nokia considers its product as a style statement. Thus the advertisement is based on this concept. Through advertising based on localized communication, Nokia can reinforce its brand strength among the local customers. Advertising campaigns are organized in the marketing of Nokia phones with the object of educating the customers about the brand utilities. The appointment of younger brand ambassadors is always helpful for reaching the younger group of customers. While presenting their new models targeting to the youth Nokia adopts the most suitable way of advertising, through appointing celebrities. The theme-based advertising campaigns organized with celebrities are also helpful to inform a large group of targeted consumers. From this, it is clear that advertising is the competent factor of Nokia in mobile phone marketing.

Results of Interviews with customers

From the interview with different age groups of consumers, it identified that the primary reason for choosing Nokia is its comparatively low price with brand publicity. The positive response to the recommendation of Nokia to friends and relatives shows that they are highly satisfied with the products and services of Nokia. Out of the total 5 individuals, two consumers get information about the brand from their friends. One of them is informed from the television ads and the remaining two are informed from the Nokia website. Out of the five individuals interviewed, 3 are primary users of mobile phones with Nokia. The remaining two are used other brands before trying Nokia. All of the interviewed customers have the opinion that the Nokia model is simple too but it is also attractive when compared to other brand products. Of the five interviewed consumers, three individuals expressed that the advertising strategy of Nokia is appealing. Two of them are not satisfied with the ads of Nokia. Interviewed consumers have the view that the celebrity model should add value to Nokia in the market. They are satisfied with the Pricing of Nokia. Most of them are satisfied with the products and services of Nokia. Out of the total 5 people interviewed, 4 of them are expressed their satisfaction. The remaining one person involved in the IT field is not satisfied with the features of the brand.

Strengths and weaknesses of the marketing strategy of Nokia

From the market research, it identified that the marketing strategy of Nokia is capable of attracting new customers and retaining the existing customers. The theme-based advertising campaigns of Nokia are highly successful in attracting the youth audience. The entertainment-based advertising programs adopted by Nokia are capable of acceptance among the targeted customers. The market research shows that Nokia model designs are not capable of competing with its competitors as they are highly advanced than Nokia in modeling their products. Thus customers considering the designs of mobile phones will not be satisfied with the Nokia model as they get more attractive models from other firms in the industry. Thus Nokia had to consider designing the models more attractively.

Works Cited

Advertising Leads Nokia Win the Game. Mega Essays. 2009. Web.

Cos Roping in Young Celebrities as Brand Ambassadors. Business Line: Business Daily from the Hindu Group of Publications. 2008. Web.

In The Top Spot. 2009. Web.

Nokia: Online Viral Advertising. Deepend: Design Strategy and Creative Solutions. 2009. Web.

Nokia Connecting People. BWGREYSCALE.com. 2009. Web.

Nokia N81 Music Phone Advertising Campaign Makes Use of a Viral Website. HTLounge.net. 2009. Web.

Priyanka Chopra Signed as the Brand Ambassador for Nokia. Bollywood Hungama. 2009. Web.

Background and Introduction

With increased technology, individuals and businesses are increasingly using laptops for various personal and business functions. Laptops are electronic gadgets with a microprocessor that depends on power supply to function. Solar energy is freely available and can be tapped for charging laptops; the technology can be adopted for use in laptops. Secondly with globalization and the growth of tourism industry, there is need for a reliable devise that can be relied upon to undertake computer services and offer video recording services. When with the product, a customer only need to buy one product that covers computer and video needs. Numerous advantages can be derived from using solar charged laptop with video recording components; its invention is likely to form a niche market for the innovator. Nokia is an international electronics company that has the potential of meeting the demands of the above mentioned niche market. This report discusses the implication of developing the new products in the market to the market from a managerial accounting point of view.

Manufacturing Company Information

This report will discuss the cost and revenue implication of adding solar charged laptops with video recording devices in the line of Nokia products. In the analysis, it will focus on the following areas:

• Expected sales price and sales budget: this is the price that the laptops will be retailing
• variable costs and fixed costs: it will use cost accounting methods like activity based costing, breakeven points, job costing and process costing approaches
• Profit planning or profit maximization approaches; was thorough which profits will be maximized will be discussed

Historical information about Nokia

The international Phone industry is advancing fast with both multinational and domestic companies in the market; among the main players include Apple Inc. Samsung, Dell, HP, Acer, Nokia, and Lenovo. Nokia is an international electronics company listed in New York Stock Exchange and Frankfurt Stock exchange, with its headquarters in Finland; according to the company’s website, the company in 2010 enjoyed a market share of about 37%,. It aims at increasing the market share to over 40% by the end of 2011; other than in the phones segment, the company has diverted to fast growing Smartphone’s, musical gadgets and some electronics accessories.

In the efforts of using its brand name (brand extension strategy), the company has the potential of diversifying to laptops with a better touch; solar charged laptops. It has a strong brand all over the world, the companies positioning statement is “technology connecting people”. The company’s headquarters are located in Keilaniemi, Espoo. One of the strongest points that the company has is a strong and effective human resources capital distributed in the various countries that the company operated: currently it has a total number of employees over 123,000 distributed in various countries. It has it presence as a selling point of full branch in over 120 countries. In the year 2009, the company was able to make a profit of €1.2 billion this was over 10% than what it had recorded the previous year. In 2010, the company’s operations increased to record a revenue of €42 billion and operating profit of €2 billion; the main driver of this profits are sales of phones, which in 2010, the segment enjoyed an average of 32% of worlds phone market. Other than the phone assembling, the company offers financial services with the target customer as people on transit. The idea of the company was started in 1865 however; it became a telecommunication company in 1960’s.

Nokia is one international company that has a simple and straightforward mission statement as “Connecting People”. Its vision statement is “Our strategic intent is to build great mobile products” (Nokia Official website, 2011), this vision statement has more focus on the phone section of the company as the main business segment that the company has. The main purpose of the company is “Our job is to enable billions of people everywhere to get more of life’s opportunities through mobile” (Nokia Official website, 2011). To ensure that the company fulfils its vision, mission and purpose, it operates under marketing values and principles; they include innovation, products development, respect for the people and respect for research and development projects (Nokia Official website, 2011).

New product Identification

Justification of the proposed project

Technology is on the rise, there is a shift from the old office business where employees were required to report in offices to do their jobs, today home based working has taken preference. People are using desktops, teleconferencing technology and laptops for this noble task of serving their employer when at home; alternatively with the growth of the tourism industry, there are a number of people who are moving to paces of leisure where they need computers and video recorders;

Solar power is relatively cheap than electricity; this will reduce power bill budget and ensure. If they are adopted by a company, they will reduce a proportion of electricity bill in trading profit and loss account. This will lead to an increased profits and money for expansion will be availed. Large amounts of revenue from business results in increased government revenue through taxes; this will lead to developmental projects being implemented for the betterment of the users (Lucey & Lucey, 2002).

Some places do not have reliable supply of electricity but they enjoy sunlight’s that can be used with the laptops; other than the un-reliability, the company will tap a niche market of people who travel a lot for long distances; when they are using solar charged laptops, then they will go on with their business uninterrupted. Take the case of tourists who go deep in the juggle, they need laptops to record some findings as well as connect with the outside world, when such laptops have been developed, they will be a blessing to such people.

Another opportunity that the company will benefit from is the notion and the perception that current market of laptop has on the prevailing ones, they feel they are not doing them much justice since one has to charge the battery that hardly lasts for three hours. When a reliable solar charged laptop is developed, then the company can win a potion of the existing market as well as upcoming market (Zi-Lin, Kwanghui & Pho-Kam, 2006).

The solar Charged Laptops project

To start the project, the company will have to make an additional plant that will be used as the assembly point for the laptops; this will call for incurring of some expenses that will be accounted for, as fixed assets for the company and others will be amortized (Horngren, Srikant & George 2006). The initial costs that cannot be expensed either as fixed or variable expenses, but will be in the balance sheet are:

• Cost of buildings: there will be the assembly point to be constructed
• Research and development costs
• Cost of land (this will be subject to whether an additional land will be acquired for the project)
• Plants and machinery (Sadler, 2003)

Segment Budget

Expected sales (sales forecast and sales budged)

Assuming that the project will start on 1 January 2012, the expected quarterly sales from the company will be as follows:

When the project has started running, the company will have to incur some costs in respect to the project, costs can be classified as fixed or variable costs:

Fixed costs

Fixed costs are costs that do not relate to any production but exists as long as a business is there. They include license fees, rent, management salaries and security costs among others. When calculating the cost of an item, they are spread all over the products produced to determine the particular cost. The following are the fixed costs that will be incurred in the project:

• administrative expenses
• Factory rent (if any)
• Legal fees and licenses
• Utilities
• Insurance
• Payroll salaries (Horngren, Srikant & George, 006).

The budget for fixed costs will be as follows:

(Please note the fixed costs are expected to remain constant throughout the period)

Quarterly Budgeted fixed costs

The costs will be incurred whether a production has taken place or they it has not taken place.

Variable cost

Variable cost takes a broader perspective than fixed cost; a cost that pertain a specific process or batch or one that can directly be associated with a certain unit produced. It also includes marginal production costs analysis, process costing and batch costing.

The following are the variable costs that will be incurred:

• Costs of direct labor and casuals costs
• Cost of materials
• Packaging costs

• Transporting costs (Lucey & Lucey, 2002).

The costs will only be incurred when a certain production has been made from the plant:

The following diagram shows the relationship between fixed and variable costs:

From the above diagram, it can be seen that variable costs are increasing when the units produced increase but fixed costs remain constant.

To determine costs, the company will be using Activity based costing method; activity based costing is a cost estimation and allocation method that allocates specific costs to a certain product not only in batch numbers but also in units form. Nokia should consider using the method for budgeting and pricing strategies as it offers a chance to the management to establish linkages and areas that are not efficient; it ensures that certain cost can be attributed to certain commodities especially when a company is dealing with more than one product. When dealing with more than one product: some fixed costs, though incurred by the entire company as a whole, relate more to some products: when accounted for using activity-costing method actual cost to be attributed to a commodity can be precisely known. This makes costs incurred by a certain product to be approximated more precisely. The price set for a commodity by management is an element of costs incurred when producing the commodity; activity cost methods offers a more precise cost of a product thus manages the price given on the product (Lucey & Lucey, 2002).

The following budget represents the variable costs per unit:

At least for the first year, the costs are expected to remain constant and not change.

Pricing for the commodity

Since the company has the idea new in the market, the company should use premium pricing method to set the prices of the commodities; the approach adopted by premium pricing models is selling of products at relatively high prices than that offered by the competitor (in this case the competitors will be other electricity charged laptops in the market). The strategy is particularly effective with unique or new products in the market (Carlon, 2009).

The cost of one unit of the solar charged laptop will be $800.

Breakeven analysis

Break even analysis is a cost management strategy that determines level at which fixed are covered by the sales made from a certain products. When calculating the amount of products that needs to be produced by a firm to cover its costs as well as the ones needed to make a certain profit, project managers use breakeven methods; it can be calculated using mathematical interpolations as well as through the use of a diagram (Noreen, Brewer & Garrison, 2011). The diagram below shows how breakeven point can b calculated by a graph:

The following are the uses of a break-even graph:

• To advise the company on the amount of products that need to be produced to have the total costs and total revenue be the same; at this point, the profit of the firm is nil
• The approach can be used to calculate the amount of profit or loss that can be attained if a certain business was to operate at a certain level or a certain output is made from the process.
• It is used to interpolate sales revenue and production costs for an effective management.

The management should understand that for an effectively managed business, there should be cost management strategies as well as improving the sales of the company; the two management principles will be the main areas of concern in the company. Occasionally, the company will be undertaking internal and external analysis to assist in establishing areas that can be improved to increase the company efficiency and competitiveness (Noreen, Brewer & Garrison, 2011).

In the case of Solar charged laptops at Nokia, the breakeven point will be subject to the budgeted sales and the fixed costs as well as variable costs; it is calculated as follows:

• Breakeven point then total fixed costs = total revenues from sales

Alternatively:

• Formulae: break even = fixed costs/contribution per unit

The break-even points in the above:

• The fixed costs for the three periods will be 64,000,000
• At breakeven at every quarter, then quarterly fixed cost = the quarter’s total collection
• 64,000,000 + 400x = 800x (where X represents the number of laptops to be incurred to break even)
• Then 400x= 64,000,000
• When the above equation has been solved then X = 160,000 units every quarter.

From the above projected sales, it can be seen that the company will only start making a profit after the third quarter.

Alternatively, the breakeven points for the whole year will be as follows:

• = (64,000,000*4) + 400X = 800X ((where X represents the number of laptops to be incurred to break even)
• = 64,000,000= 100X
• X= 640,000 units

This shows the net effect after the end of the year will be a net loss since the budgeted units are 570,000 but breakeven units are 640,000. This creates a deficit of 70,000 units.

Contribution

The contribution margin of a product is calculated as the difference between the sales price and the fixed costs: when calculating the breakeven point, it can be used as follows:

break even = fixed costs/contribution per unit (Noreen, Brewer & Garrison, 2011)

In this case, the contribution margin is: $800- $400 = $400

Breakeven using contribution margin =

Per quarter: 64,000,000/400

= 160,000

Per year: (64,000,000*4)/400

= 640,000

External and internal analysis

The strength of this segment will undoubtedly be engineered by Nokia’s internal managerial mechanisms. In order to have a competitive edge in selling its product, and services it will be advisable for the company to take advantage of its ability to compete favorably with equal players in the market; it should take advantage of brand extension strategy for an effective market entry. A strategic marketing plan is the only way out. Through this arrangement, the company will be able to adopt different modalities and outreach programs of reaching out to its consumers. In a market mostly controlled by the efficiency and the affordability of the products as well as quality, it will be an open strength for the company to explore more on innovations. In retrospect, strategic marketing plan should be in a position to document explicitly the various channels that can be used by the company to allocate more resources towards improving quality (Noreen, Brewer & Garrison, 2011).

The company is likely to face some obstacles that may deter the company from progressing towards a particular direction. One of the weaknesses is attitude that customers have upon new things introduced in the market. Laptops are expensive commodities, which no one would be willing to have a try and test method. When discussing the concept of strategic market planning, we discover that resources are vital for an organization to effect significant changes. Another area of inevitable weakness is an expansion plan that entails diversifying the level of the company activities. This may take different forms. A critical look at geographical expansion depicts a glaring possibility of other stringent market uncertainties. Right at the onset, strategic planning will demand strategic resources, both human and financial, to make any significant move. Besides, implementation of the proposed market research will require mutual consent from all the affected divisions in the company. This will not only consume time as decisions are being made, but many uncertainties abound especially on the verdict of the company (Noreen, Brewer & Garrison, 2011).

To have a sustainable competitive advantage, there is need to improve the products with time. The company will have a research and development team that will be mandated to survey the market and advice the management on measures to take to ensure that it remains competitive. Another way is the use of appropriate advertising and marketing strategies. Promotions are done in the effort to either introduce a new product or increase the market segment. To engage in a promotion, the first thing to understand is the availability of the target customers. Where are they likely to be found? Are they free in the mornings is it in the afternoon? After realizing their availability and the fact that they can give you time to sell your products, and then know the age of the market. If the promotion is for the introduction of a new product, then a lot should be invested in assuring the client of better quality than that offered by the competitor. The existence of opinion leaders should be evaluated. The customers are likely to follow the opinion leaders in making their decisions. The existence of groups in the society and their matching lifestyles can also be of great use. The way the consumers react is that they will follow the others. Investment should be made in this. If the promotion is for an already existing product in the market, the approach should be from the angle that we are thanking our customers. If the customer feels appreciated and recognized he will develop loyalty and influence other to follow his way (Noreen, Brewer & Garrison, 2011).

The following is Nokia’s financial ration analysis

To show the Nokia’s financial strength that can be used to finance the new project, the following are the relevant financial ratios for 2010:

Current Ratio

Current ratio calculates the rate at which a company can meet its short-term financial obligations: it thus evaluates the strength and management of working capital: it is calculated as follows:

Nokia current ration 2010 is 1.6 (see the companies attached financial statements)

Debt to Equity Ratio

The ratio measures a company’s financial advantage, it compares the ration between owner’s equity and the amount of borrowed capital, and it is calculated as follows:

Nokia Debt to Equity Ratio 2010 is 0.29 (see the companies attached financial statements)

It is important to calculate the financial advantage of the company, high financial advantage are an alarm call.

Dividends payout ratio

The ratio calculated the portion of earnings that were given to the shareholders: it calculates the rate of return that investors should expect from the company:

Nokia Debt to Dividends payout ratio 2010 $0.487504 (see the companies attached financial statements)

Earnings per share

EPS is the amount of earning in an organization that can be attributed to a single share; it is calculated as follows

Nokia Earnings per share (DILUTED) ratio 2010 is 0.29 (see the companies attached financial statements)

0.62

Price Earnings Ratio

The ratio evaluates the strength of a certain share in the company and compares it with the earning per share: it is calculated as follows:

• Market Value per Share
• Earnings per Share (EPS)

Nokia Debt to Price Earnings Ratio 2010 is 22.7% (see the companies attached financial statements) (Carlon, 2009).

Conclusion

Laptops are gadgets whose use is on the rise in the recent changing world of technology; Nokia can use brand extension marketing method to venture in the segment in the business. They use electric power to operate; solar energy is freely available energy source that can be tapped to charge laptops; this new invention has not been implemented in the world. The company has the financial capability to make the expansion in the market; in the first year, the company first year the company may not breakeven however, with an increased sale and marketing, the company is likely to enjoy an increased sales and profits at a result.

References

Carlon, S. et al. (2009). Accounting: Building business skills. New York: John Wiley & Sons.

Horngren, T., Srikant M., & George F.(2006). Cost accounting: A managerial emphasis. Boston, MA: Pearson Prentice Hall.

Lucey, T. , & Lucey, T. (2002). Costing. London: Cengage Learning

Noreen, E., Brewer, B., & Garrison, H. (2011). Managerial accounting for managers. New York: McGraw Hill.

Nokia Corporation.(2011). Nokia.

Sadler, P., (2003). Strategic Management. Binghamton: New Down Press.

Zi-Lin, L. , Kwanghui and Pho-Kam, W. (2006). Entry and Competitive Dynamics in the Mobile Telecommunications Market. Research Policy. 35(8), pp. 1147-1165

Situation analysis

According to Shields (2012), the sales of Nokia’s Windows-powered Lumia smartphone have gotten off to a slow start. Data acquired from a straw poll by mobile indicate that the Lumia phone acquired approximately a fifth of online smartphone market share sales in November. This executive summary is about a marketing plan for improving the sale and productivity of the newly launched Lumia smartphone by Nokia Corp. by the end of 2012.

Nokia Corporation has current forecasts margins of -3% in the first quarter. This is different from its earlier estimates of “breakeven.”Nokia’s operation in the second quarter is expected to be “similar to or below the first quarter 2012 level”. (O’Reilly, 2012a, para. 7). According to O’Reilly (2012b, para. 13), there was a 21 % drop in Nokia’s revenue for the fourth quarter of 2011 to 10 billion Euros. This was in spite of making sales of over a million pieces of Lumia devices in the same phase.

According to Steven Elop, Nokia’s President and CEO, the first quarter of 2012 has been disappointing in terms of financial results for devices and services offered by Nokia, including the Lumia smartphone. The CEO further observes that the projected sales of the second quarter of 2012 show that Nokia Corporation is still in the transition phase. This transition has been a result of the recent partnership between Nokia and Microsoft that has seen Nokia concentrating on the Windows Phone operating system rather than its own Symbian OS (O’Reilly, 2012a, para. 8).

Marketing objectives

The Nokia Corporation is hopeful of broadening the market of the Lumia series to attract new segments like the lower end of the market, traditionally the stronghold of Nokia with Symbian handsets and feature phones (O’Reilly 2012a, para.2). Through this approach and as exemplified by the recent launch of the lower-end Lumia 610, Nokia is optimistic that it will succeed in pushing down the price of the Windows Phone device. According to Steven Elop, Nokia’s president and chief executive, “there will be more devices of a similar pricing range to come” (O’Reilly 2012a, para.5).

Additionally, Nokia has the ambition to repeat the accomplishment of its sponsored DeadMau5 light projection show in the UK at Millbank Tower in November, Overman adds, as it seeks to make events that will attract people to share. So far, more than three million people have already watched the event video on YouTube (O’Reilly 2012b).

Strategies and tactics

As part of its strategy to compete in the lower market ends of the smartphones, Nokia Corporation is toiling to speed up the tempo at which it can influence the price of Windows Phone devices. This was the reason behind the recent launch of the lower-end Lumia 610 model (O’Reilly 2012a, para.6).

In spite of astonishing projections to incur losses during the first half of the financial year, in the midst of harsh competition in emerging markets, Nokia strategically announced its intention to speed up the production and sales of new Lumia models. Much of the next iteration of Nokia’s global marketing strategy will center on inviting consumers to share content they have made or experienced via their smartphones, which could potentially feature in upcoming campaigns. To exemplify this change of strategy, Nokia recently crowdsourced every part of the imagery on Nokia’s Mobile World Congress stand (O’Reilly, 2012b).

Co-creation is the new strategic approach for Nokia as consumers are invited to join forces with the company’s marketing team and, through motivation from some of its accepted promotions in new market segments to generate more excitement about the Lumia brand (O’Reilly, 2012b, para.2). According to O’Reilly (2012b), in October 2011, Nokia changed its marketing strategy to embrace youthfulness. This happened at the same time that Nokia was launching its first Windows Phone series, Lumia, with the intention of reclaiming its position as the market leader in smartphone production.

Nokia is also “reversing the innovation flow” when it comes to marketing and will be rolling out successful campaigns that originally emerged from its developing markets to Western territories, rather than the more traditional opposite approach. This could result in the launch of similar campaigns in the UK like the “Qwerty” campaign, which was launched in Mexico and Indonesia to promote the launch of Nokia’s Asha range. In the “Qwerty” campaign, customers gave their suggestions and challenges to the “Qwerty Man,” who was the brand ambassador with the responsibility of carrying out all the suggestions and taking videos of the best ones. The best suggestions were also published on social media and televised in sports (O’Reilly, 2012b).

Financial considerations

As can be seen from the table above, there was a decline in the first quarter of 2012 in all regions on net sales of Devices and Services on a year-on-year basis. The drop in sales was especially more severe in China, mainly due to the industry dynamics of competition that negatively impacted the net sales of both Mobile phones and Smart Devices. Apart from North America, which showed a 75% growth in sales, there was a decline in all regions in the net sales of Devices and Services on a sequential basis.

North America reordered an increase in sales by virtue of the recent introduction of the Nokia Lumia 710 with T-Mobile. This shows that there is a need to invest in the marketing of the Devices and Services in all regions, particularly for the Lumia series, especially in China.

Implementation timetable

References

Nokia (2012). Nokia Corporation Q1 2012 Interim Report. Web.

O’Reilly, L. (2012a). Nokia steps up Lumia marketing. Web.

O’Reilly, L. (2012b). Nokia reveals ‘chapter two’ of new strategy. Web.

Shields, R. (2012). Online sales poll indicates slow start for Nokia Lumia. Web.

For the current report two companies, Nokia and Motorola have been selected from the mobile phone industry. Both companies are considered as leading mobile phone manufacturers which have global operations and have major business groups other mobile phones such as multimedia and enterprise solutions and devices (Nokia). These companies have experienced tremendous growth over the years however with new competition arising from Chinese and Taiwanese manufacturers is surely putting up greater challenges for both companies and poor economic conditions have even led to negative returns in the case of Motorola (Motorola Inc.). The following table provides important financial ratios which would form the basis of conclusions regarding both companies.

Figures used from Nokia and Motorola Annual Reports 2008.

The above table presents an important insight into the liquidity, profitability and solvency of both companies. Based on various important ratios and data regarding the company’s share price we could suggest important findings regarding the financial position of both companies under the identified categories of ratios. Liquidity ratios determine a company’s ability to meet its current obligations. Ratios under this category include a current ratio of 1.20 and 1.63 for Nokia and Motorola respective. A current ratio of more than 1 suggests a healthy sign for both companies to pay off the current liabilities from current assets.

A lower quick ratio that ignores the inventory of Nokia as compared to Motorola suggests that Nokia was holding a larger inventory in 2008. The average collection period of Nokia is 68 days as compared to 42 days for Motorola which implies that Nokia may be offering longer credit duration or having problems with receivables collection. However, inventory age is lower for Nokia than Motorola which suggests Nokia has an efficient operation and is more quickly converting into sales as indicated by the inventory turnover ratio.

Solvency ratios calculated for this report assert companies’ capital structure. The debt ratio suggests debts are 58% of total assets lower than 66% of Motorola. Furthermore, Nokia is earning almost 27 times its interest payments while Motorola posted a loss in its income statement.

For both companies, fixed asset turnover and asset turnover ratios remain quite high however Nokia has better results as compared to Motorola for both ratios. The EPS of Nokia is EUR1.07 whereas Motorola has a negative EPS of $1.87 indicating an operating loss. Du Pont Analysis presents findings such as that ROI of Nokia is 10.08% which is quite low compared to total assets turnover. While on the other hand, Motorola has a negative return.

Furthermore, the ROE of Nokia is 24.15% and that of Motorola is negative 44.64%. Nokia shares are trading at a high P/E multiple of 8.06x which could attract investment whereas Motorola P/E is negative because of negative EPS. The Market/Book Ratio of Motorola is higher than Nokia which suggests that stocks of Motorola are overpriced, and it’s suggested to sell the stock to benefit from capital gain which could be depleted under the current economic conditions. Nokia does not have a par share value therefore figure of share capital given in the financial statement is used for calculating MVA of €32,018 that is much higher than that of Motorola which is only $12,591 in comparison.

Overall, Nokia is performing better than Motorola and it has been involved in capital expenditure to improve its operations, logistics, and innovation processes.

Works Cited

Motorola Inc. Motorola Inc Annual Report 2008. New York: Motorola.

Nokia. Annual Report 2008. Finland: Nokia, 2008.

Yahoo! Finance. Motorola Inc. (MOT). 2009. Web.

Yahoo! Finance. Nokia. 2009. Web.

In the year 2009, Nokia’s net sales decreased by 19% from EUR 50,710 million to EUR 40, 984 million (Nokia, “Nokia Group 2005-2009, IFRS” 64). Operating profits reduced by 76% from EUR 4,966 million to EUR 1197 million. The company’s profit before tax was reduced drastically by 81%. In the same year, Europe led in the sales percentage, accounting for 37% of the total sales. It was followed by Asia-Pacific while China came in at a third place. North America was last accounting for only 4% of the company’s sales. China remains the best market for Nokia leading in the list of markets in which Nokia generated the greatest net sales. The country was still at the top of the list in 2008 while India held the second position in both 2008 and 2009 results.

The company’s gross margin was 32.4%, a decrease from 2008 which registered a gross margin of 34.3% (Nokia corporation and subsidiaries 10). The operating margin was on a downward trend as it dropped from 9.8% to 2.9 %. Its devices and services operating profit shed off 43% from EUR 5,816 million in 2008 to EUR 3,314 million (Nokia, “Financial results review by board or directors” 3). The company’s operating cash flow was EUR 3,247 million, a rise from EUR 3,197 million in 2008. This is perhaps from a strengthened portfolio of mobile phones and other products with new models in the market during the period.

Several aspects of the financial results remained the same such as the company’s expenditure on research. Its costs represented 14.4% of the company’s net sales up from 11.8% in the previous year (Nokia, “Nokia in 2009” 2). At the end of the year 2009, the company employed over 37,000 people in their research and development projects in 16 different countries. As a result of constrained finances, the company tried to reduce some of its expenses. Selling and marketing expenses were reduced from EUR 4,380 in 2008 to EUR 3,933 million. Its administrative expenses were also reduced from EUR 1,145 million to EUR 1,284 million in 2008. Group function expenses went down to less than half the figure in 2008, from EUR 396 million to EUR 134 million (Nokia, “Consolidated financial statements” 21).

The company’s numbers downward trend was largely attributed to the economic global crisis which saw many countries’ economies deteriorate. Many regions experienced weaker consumer and corporate spending which negatively affected sales (Nokia, “Financial results review by board or directors” 3). The 2008-2009 period also suffered problems with credit availability as sources became constrained. As a result, it was hard for businesses to borrow reducing their expenditure and consumption levels. The company couldn’t access expansion funds easily and as a result, had to cut its expenditure and hold some projects which would have been influential in sales. Many markets were going through volatile currencies making it hard for Nokia to plan and roll out sales and promotion programs. Even though the markets started picking up by the end of the year and the demand environment improved, the damage was already too much on Nokia’s financial books as reflected on the year’s results.

It is also notable that the company completed its acquisition of NAVTEQ whose results before 2008 are not put into consideration in the financial analysis. The company has definitely enjoyed a positive growth since 2005 registering EUR 34,191 million, EUR 41,121 million and EUR 51, 058 million in 2005, 2006 and 2007 respectively. It is also expected that the company will register positive growth this year since the markets are more stabilized. The company has continued to roll out new products in the last year, targeting the low-end markets with very affordable mobile phones. It has also invested much in its technology and business model and has been named the world’s most sustainable technology company by the 2009-2010 edition of the Dow Jones Sustainability Indexes (Nokia, “Financial results review by board or directors” 3).

Works cited

Nokia Corporation and subsidiaries. Consolidated Statements of Financial Position, IFRS. Nokia, 2009. Web.

Nokia. Consolidated Financial Statements. Nokia, 2009. Web.

Nokia. Financial Results Review by Board or Directors. Nokia, 2009. Web.

Nokia. Nokia Group 2005-2009, IFRS. Nokia, Web.

Nokia. Nokia in 2009. Nokia, Web.

Introduction

Nokia is a leading smartphone company in India that has an e-waste management policy. It implemented its e-waste management policy in 2009, at a time when most of its competitors had no approach to mitigating waste management issues. Nokia introduced drop boxes as a collection center for used phones and mobile phone accessories in its first phase. The significance of the e-waste policy was collecting brands irrespective of their manufacturer (Parameswari et al., 2015). The second phase in implementing the policy was done in 2009 an incorporated the general public living in four major cities in India. They adopted a campaign approach that involved advertising their e-waste policy in newspapers to create awareness.

Nokia India’s E-Waste Management Policy

Prior to 2009, Nokia had not implemented an e-waste policy, and it was not making any effort to minimize waste disposal. In 2007, after Google initiated its Android operating system, it became clear that the smartphones had been rendered a simple “window to the cloud” (Ramachandra et al., 2018). As such, the Symbian software developed by Nokia would not achieve the desired competitive advantage that was earlier intended and called for urgent action (Thi et al., 2015). Consequently, Nokia worked faster throughout its departments leading to an unsuitable emotional business environment. In particular, the managers started optimistic reporting that resulted in increase for demand and sale of Nokia’s smartphones, which increased poor waste disposal across its markets.

Conclusion

In conclusion, India has implemented e-waste recycling and disposal policies well. Its strategy targeted domestic e-waste as an ideal approach to addressing the problem of waste management. The legislation in India is focused on proper and safe handling of waste disposal, and it requires all electronics manufacturers to be held accountable for their products’ impact. This policy, commonly referred to as EPR, has been strictly observed by Nokia. The main challenge to the successful implementation of EPR law was limited capacity and clear guidance on its implementation. As such, the law has lacked accountability, and manufacturers have failed to implement its provision to the latter.

References

Parameswari K., Padmini T. & Mudgal B. (2015). Assessment of soil contamination around municipal solid waste dumpsite. Indian J. Sci. Technol., 8(1):36.

Ramachandra T., Bharath H., Kulkarni G. & Han S. (2018). Municipal solid waste: Generation, composition and GHG emissions in Bangalore, India. Renew. Sustain. Energy Rev., 82(1):1122–1136.

Thi N., Kumar G. & Lin C. (2015). An overview of food waste management in developing countries: Current status and future perspective. J. Environ. Manag. 157(1):220–229.

Background of the Organization

Brief history of the company

Nokia Corporation is one of the most prosperous electronic firms in the world. This firm was started in 1865 by two Finnish scientists, Fredrik Idestam, and Leo Mechelin. These two individuals were business enthusiasts.

They were interested in turning their skills in engineering into a large business unit. Fredrik Idestam was an astute engineer with a keen interest in ground pulp mill.

This was the first line of business that this firm engaged in. Fredrik Idestam was a smart engineer who managed to develop systems that could make the company run with a lot of ease.

On the other hand, Leo Mechelin was a statesman who was able to finance the company and bring on board individuals with the capacity of transforming the firm. Change within this organization was witnessed in those early years of its development.

As the company developed, Idestam became the chairman of this company.

Based on his experience and the connections he had both with the government and other non governmental institutions, Mechelin was convinced that the firm would make more profits if it ventured into the electricity industry.

However, this move was strongly opposed by Idestam who was the chairman then. He did not understand the need to change the product line of the firm or diversify, while the current product was considerably profitable.

Upon his retirement in 1896, Mechelin became the chairman of the firm. He was able to convince other members to consider diversification of the products by entering into the electricity industry.

That was the first attempt that this firm made towards change. The expansion of this firm in those early years was basically due to conglomeration. In 1967, Nokia Corporation had expanded and had the capacity to sell its products outside the home country of Finland.

The firm entered the electronic industry in the mid 1960s as a division of the electric department.

This division expanded very first, and would later become the main department of this firm in the world market.

Nokia developed its first cellular phone in 1981, which gained a lot of popularity in 1980s. This developed this industry, and currently, it is considered one of the leading electronic firms in the global market.

Organizational context for change

The world is changing, and with it comes a number of changes in the organizational setting. According to Adams (75), change is one of the factors that cannot be avoided within the organization.

It defines an organization and the society at large. As Anderson (73) puts it, change is the most constant factor in human’s life, and to any organization.

One of the main changes that this firm has undertaken in the recent past was the signing in of Stephen Elop as the chief executive of the firm. He created a strategic alliance between Nokia and Microsoft.

This agreement has enabled Nokia diversify its products in the market. The firm has been able to make a shift from Symbian to Windows OS in their phones. Under his leadership, Nokia has also shifted its focus from regular phones to Smartphone is more popular in the current market.

This is a clear indication that the entire firm, from the top management, to the junior most employees appreciates the need for change within an organization. It is therefore, intriguing that most stakeholders would try to oppose change.

People would feel uncomfortable changing the set structures. A manager who is used to a certain way of doing things will feel challenged when forced to use a different strategy due to the pressures of change.

Technology itself is a change, and many firms have failed due to their inability to adapt to the changes brought about by technology. Kodak was displaced by Fuji Film as the market leader due to its inability to implement changes that were brought forth by technology.

It is therefore, an obvious fact that change cannot be ignored. It should be embraced in order to gain a competitive advantage in the firm.

The driving forces of change and type of strategic renewal

Change is driven by a number of factors, and as Adams (94) notes, the drivers of change can broadly be categorized as external or internal factors.

A transformation can be driven by the macro or micro factors within an environment. In order to have a clear understanding of the external drivers of change, PESTEL analysis would be appropriate.

Political environment is an external driver of change. As Bradford (98) observes, if there is a radical change in the political structure of a country, the effect will definitely be felt within the organization.

Economical status of the external environment will also act as an agent of change. For instance, the economic recession of 2008/2009 was a serious change driver.

Because of the recession, firms were forced to come up with a changed management structure to suite the prevailing market conditions within the environment.

The social structure of a society will always act as an agent of change. The societal changes can be caused by the changing trends in the society. This will act as a driver of change within the society for it will be forced to adjust in order to be in line with the prevailing societal conditions.

Technology is probably the biggest driver of change. The world is changing due to the changes brought about by technology. Scientists are under constant pressure to make life easier and more entertaining, and as Anderson (88) notes, they have not disappointed.

The internal drivers of change within an organization are the stakeholders whose actions will have a direct impact on the organization.

The internal drivers of change may also be considered as the agents of change. The agents of change are the forces that would carry out the change. The recent changes that have taken place within Nokia Corporation clear demonstration of what internal forces can do in order to bring change within an organization.

Risto Siilasmaa has been both an agent for a negative and positive change within this firm. When appointed as the chairman of this organization, there was an unprecedented fall in the profitability because he failed to offer approach of leadership that was expected by various stakeholders. This was until he came to understand this industry and the firm in particular.

Risto Siilasmaa became an agent of positive change within this firm. He came up and challenged all the existing structures within the organizations, and fostered new approaches regardless of the opposition that was given by various stakeholders within the firm. This resulted in an upward trend in the profitability of the organization.

The agents of change will include the top management of an organization, as was in the case of Nokia Corporation, the middle level or junior employees, or the shareholders of the firm.

These agents will work as a unit to ensure that they achieve the ultimate goals of the organization despite the changing environmental factors.

The stakeholders involved and implications of change for them

As mentioned above, there are a number of stakeholders who are always involved in change within the organization. These stakeholders can be categorized as internal stakeholders and external stakeholders.

The employees, shareholders the and management form the internal stakeholders of the firm. Employees are the wheels upon which change can be implemented within the firm.

The implication of change on them is that they will be forced to adapt to the new strategies brought about by the change.

The management is the engine through which change can be realized within an organization.

The shareholders offer the necessary finance that will fuel the firm to manage changes that take place in the market.

Culture of Nokia Corporation

The original culture

Culture is very important within an organization. According to Cummings (117), organizational culture helps defines the approach through which an organization will always approach a number of issues in the market.

Nokia has had a culture which has defined the approach of managing various issues in the market. The original organizational culture of Nokia was a little rigid towards change. This culture defined the relationship between the management and the employees.

There was a strict hierarchical flow among the employees. It was not possible for an employee of a lower rank to bypass the immediate boss to a more senior officer. That was regarded as insubordination and an employee could be punished for that.

Cultural changes over the years

This rigid management structure has changed over the years. The management of Nokia has become very flexible and sensitive to changes taking place in the environment.

The firm has changed its organizational culture to reflect on the current dynamic world. It has dropped the bureaucratic leadership style that was commonly used before.

Employees can express their thoughts to senior management without fear of punishment. The culture has also embraced dynamism brought about by the emerging technology. The firm is very keen on adapting to the new technological changes in the market.

How the culture helped or hindered the change effort

As was witnessed, rigid organizational culture has negative impact on change. It inhibits the possible changes that may help the firm in the market. This was a hindrance to Nokia.

However, when Nokia changed this culture to a more flexible one, it became easier to manage change with minimal effort. As Bradford (114) notes, the ability of a firm to manage change directly depends on the organizational culture it embraces.

The adaptive nature of the change

Firms should find a way of adapting to change. Nokia was able to adapt to the emerging market trends when it changed its organizational culture, a move that saw it become one of the largest electronic firms in the world.

The external market forces are never static, and for a firm to be successful, it is vital that it develops strategies that are sensitive to change in order to help it manage market forces.

The Change Effort Itself

Evaluating the change effort using a model

Lewin’s three staged change management model is one of the simplest and most common change models that are in use in the current business environment. The model is also popularly known as unfreeze, change and freeze model.

This strategy proposes a scenario where if a firm plans for a change, it should accept that change is necessary.

It should drop some of the long term strategies that may hinder change. The firm should then introduce change within the system.

After this, it should make all the relevant stakeholders understand this change in a process called freezing.

This process has both positive and negative impacts. Change brings positive impacts to a firm because it allows it create an environment where it can easily adapt to the emerging technologies.

However, it may be an expensive venture, especially if it massively affects the firm. It will force the management to overhaul part of it and even subject their employees to intensive training.

In assessing effectiveness of change, it is always necessary to look at the way employees have altered their output over a certain period. Embracing change involves incurring some costs.

These costs must translate into profitability for the firm. For this reason, the effectiveness of change can directly be determined by looking at the productivity and profitability of the firm before and after initiating change.

Leadership of the Change Effort

Change can only be realized if there is a proper leadership structure within the firm.

A change effort would always demand for a proper management for there to be a clear direction towards successful change management.

According to Cummings (90), change will always start from the management. This fact was confirmed when the first chairman of Nokia, Fredrik Idestam, resisted change.

It is only upon his retirement that Nokia was able to bring a number of changes in management structure, and product offerings. As such, the leadership should always be looked at as the engine that drives change within a firm.

It is therefore, important for leaders to display core characteristics of leadership change when managing the employees. The extent to which this should be done will always depend on the nature of change that is needed.

In case change needed may have a serious impact to the firm, it is necessary for the management to get deeply involved in the change, from the top management to junior management.

However, there are some changes that are considered minor, and therefore, should be left in the hands of junior managers of the firm.

Summary

Using a balance scorecard, it is clear that Nokia has been successful in its recent operations in the market. Analysis done using financial and nonfinancial measures clearly indicates that this firm has been successful in the market over the recent years.

The balance scorecard approach points out to the major financial and nonfinancial strides this firm has made in the market. It is clear from the above discussion that change is very important for firms in the current business environment. The business environment has become so competitive that only those firms that are dynamic can survive.

Nokia has realized the importance of dynamism, and its leadership has been keen to embrace it. This firm has developed an organizational culture and leadership structure that allow employees to exploit their potential and express their innovativeness within the firm.

It is this flexibility and sensitivity towards change that scholars have recommended for firms that wish to remain competitive in the market.

Works Cited

Adams, John. Organization Development and Change. Washington: National Training and Development Service, 1974. Print.

Anderson, Donald. Cases and Exercises in Organization Development & Change. Los Angeles: Sage, 2012. Print.

Bradford, David. Reinventing Organization Development: New Approaches to Change in Organizations. Hoboken: John Wiley & Sons, 2005. Print.

Cummings, Thomas. Organization Development & Change. Australia: Cengage Learning, 2009. Print.

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

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