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The History of the Nokia Company

by Alexandra Barokova (Author) Miroslava Jergušová (Author)

Seminar Paper 2012 26 Pages

Business economics - Economic and Social History

Excerpt

Table of content

Table register

Illustration register

Abbreviation register

1. Introduction

2. Situation today
2.1. Nokia's market share and brand strength
2.2. Nokia Business Units
2.3. Nokia and its major competitors

3. History of the Nokia Company
3.1. Pulp mill and paper production start
3.2. Rubber production
3.3. Cable production
3.4. Merger into the Nokia Corporation
3.5. The Era of Information Technology and Telecommunications

4. Nokia in the Finnish Society and Economy
4.1. Nokia´s impact on working culture
4.2. Nokiazation of Finland
4.3. The impact of Nokia on GDP of Finland
4.4. The impact of Nokia on R&D expenditure
4.5. Nokia´s impact on employment
4.6. Nokia´s impact on productivity

5. Management strategy and factors that influenced the success of Nokia

6. Personalities of Nokia

7. Conclusion
7.1. Future of Nokia-led Finland
7.2. Future of Nokia

8. List of References

Table register

Table 1: „The one-firm economies“ 17

Illustration register

Figure 1: The Evolution of Nokia

Figure 2: Cityman - Nokia’s first mobile phone

Figure 3: Exports of electric and electronic products as percentage of Finland´s industrial exports and the total exports in FIM billion

Figure 4: R&D expenditure by private enterprises in Finland, 1990-1999

Abbreviation register

Abbildung in dieser Leseprobe nicht enthalten

1. Introduction

The aim of this seminar paper was to describe the history of Nokia company, which is a wellknown Finnish manufacturer of mobile devices. Nokia employs around 139.000 people across 120 countries and it is present in more than 150 countries around the world. This is actually an admirable achievement for a company that started its business as a small riverside paper mill in Finland. As well as this Nokia is doing business for more than 135 years. (Official website of Nokia, Our company 2012)

Although Nokia is a leading multinational enterprise, a major part of its business is located in Finland, where the company has its headquarters in Keilaniemi of Espoo (Official website of Nokia, Our company 2012). As a result, Nokia´s success or failure is crucial for Finnish economy. Besides Nokia´s electronics, the company is also worldwide known for its „Nokia- Connecting People“ slogan, its Nokia Tune ringtone or its spectacular Snake game. This seminar paper handles the business history of Nokia, its impact on Finnish economy and employees, the most important personalities of Nokia and factors that have been responsible for Nokia´s success and the general contribution of Nokia company to business history.

2. Situation today

2.1. Nokia´s market share and brand strength

Nokia Corporation is the world´s second largest manufacturer of mobile phones, with global market share of about 19,2 per cent in the third quarter of 2012 (Statista 2012). The South Korean multinational electronics Samsung is holding the number one position on the world´s mobile phone market since the first quarter of 2012 as the latest market analysis indicates that Samsung shipped some 93 million phones compared with 83 million by rival Nokia (Sandle 2012).

However, the Finnish enterprise Nokia was the world´s largest vendor of mobile phones from 1998 to 2012 (Häikiö 2002, 24). Unfortunately, the market share of Nokia is declining notably as a result of the growing use of smartphones from competitors like Apple or Samsung running for example on iOS or Google´s Android operating system. In the first quarter of 2008 the global market share held by Nokia stood at 39,1 percent compared to this year´s market share of approximately 20 per cent (Statista 2012). According to the worldwide Brandirectory, the brand of Nokia is loosing its strength as well, falling from the 94th position in 2011 to 192nd position in 2012 (Brandirectory 2012).

2.2. Nokia Business Units

Nokia´s business consists nowadays of four business groups in order to diversify risks and generate profits: Mobile Phones, Multimedia, Enterprise Solutions and Networks. Approximately two-thirds of the company´s net sales are generated by the major business group Nokia Mobile Phones. Nokia Networks which is a leading global supplier of infrastructure for mobile, fixed, broadband and IP (Internet Protocol) is another important business group of this enterprise. This business unit is reponsible for about 30 per cent of Nokia´s net sales. Furthermore Nokia´s network spans more than 130 nations. The majority of Nokia´s sales are generated in Europe, a quarter in America and approximately 20 per cent of sales come from the Asia-Pacific countries. (International Directory of Comany Histories 2001)

2.3. Nokia and its major competitors

During recent years, Nokia has been very successful on the low and medium end mobile phone market, where Nokia has eliminated many of its competitors. They were actually unable to match the fierce competition of Nokia and they decided to focus on smartphones instead. Nokia has also eliminated many of its competitors in regions like South America, Africa, China, India and Russia. This means, that Nokia concentrated on markets experiencing financial growth and the corporation was able to achieve a unique market position in these markets. (Strand Consult 2012)

On the other hand, Apple and the Android devices have been very successful in markets that have experienced the latest financial recession. For this reason, the biggest competitors of Nokia in the smartphone sector are the so called Android devices and Apples iPhone in markets, where consumers are increasingly interested in new technology and use the devices as a symbol of their lifestyle. The current mobile manufacturer leader, Samsung, is running on Android operating system. Apple, the second largest competitor of Nokia, uses iOS systems in its devices. (Eaton 2011)

As Nokia has not been able to create a serious alternative to the iPhone until today, the smartphone sector is still responsible for declining market share of Nokia. Nokia took the first step in February 2011, when the company announced a collaboration with Microsoft in order to strengthen its position in the smartphone market. The aim of the strategic partnership was to adopt the new Windows 7 operating system and to establish the next ecosystem to compete against iOS and Android. (Official website of Nokia, Our company/The Nokia story 2012) Recently Nokia decided to battle the competitors introducing the „most innovative mobile device in the world“, Nokia Lumia 920, which is running on Microsoft Windows 8. In spite of the highly innovative features of Nokia Lumia, the timing will make it difficult to compete against the major smartphone leaders, as the competitors are already highly recognized and valued on the global market. Unfortunately Windows Phone and Nokia were both late to the current smartphone era. (Tofel 2012)

In order to maintain its position or to become the leader in mobile phone market again, Nokia will have to invest more in research and development so as to able to come up with attractive innovations sooner than its competitors and understand its consumers better than the competition as well.

3. History of the Nokia Company

Despite of the fact that many mobile phone users know the company Nokia as a young company and also as one of the biggest market leaders producing high quality mobile phones and equipment, the roots of it go back to 19th century. The company underwent many changes during its presence firstly on the Finnish but later even on the world’s market. It transformed from a small forest industry enterprise, through rubber and cable production into manufacturing computers, especially monitors, and later mobile phones (Stolle 2006, 1 ff.). Besides of this the Nokia Company has since its establishment a significant impact on the Finnish economy, as it developed into one of the major market leaders in the telecommunication area (Ali-Yrkkö 2000, 10). The aim of this chapter is to describe all important milestones of the Nokia history step by step in a chronological order.

3.1. Pulp mill and paper production start

The roots of the Nokia Company go back to the year 1865, when the mining engineer Fredrik Idestam set up his own wood pulp mill. It was located at the Tammerkoski Rapids in southwestern Finland (Official website of Nokia, Our Company 2012). Two years later in 1867 it was also awarded at the Paris World Exposition. In 1871 Fredrik Idestam opened the second mill on the banks of the Nokianvirta River. The name of the river inspired him to call the company Nokia Ab in the same year (Sahlberg 2011, 117). During these years, the company was successful in producing paper and cardboards (Nokia, Business History of Nokia 2008). It is important to emphasize at this point, that already in this era of the company, Nokia has been focusing at the production of one of the most important communications technologies of all times - the paper. From 1895 the son-in-law of Frederik Idestam, Gustaf Fogelholm, led the company (About Nokia, Nokia History 2012). Nokia developed into a leader in the area of paper and cardboards production and was also able to introduce some own new methods of the production. The reaction towards a high energy intensity was setting up the own power plants (Pederson 2001, 328 ff.). Problems came together with the beginning of the First and later as well the Second World War. The years of war resulted in closing the foreign markets, which were very crucial for the company. Most significantly it was suffering from closing the Russian market, where the business relations were established well and running smoothly (Stolle 2006, 2). After the war Nokia was able to recover from the so-called post war crisis and come back to its international business. Despite of lying practically next to the Russian Federation, it focused on the business with other Scandinavian countries together with Western Europe (Pederson 2001, 328 ff.). Changes in this field of business were done in 1970, where the company needed to take steps in order to maintain its position towards the competitor Serlachius, so it also began to produce crepe paper. The head of the Nokia forest industry Kari Kairamo increased the investments together with an implementation of some acquisitions. In 1977 Nokia and its competitor Serlachius became the owners of British Tissue Ltd and later Nokia bought Serlachius. Besides of these facts, the management on the one hand started to complain about this area of business and on the other hand it was a target of large investments. That’s why the company started to look for new opportunities as well as new acquisition possibilities in this field of business (Stolle 2006, 2 f.).

The oil crisis in the 1970s had a strong negative impact on the company, which was caused mainly due to previous extensive business relationships with the Soviet Union. After many years of successful business between Finland and the Soviet Union, Finland was able to take the advantage of special trade agreements, such as lumber products, which were exchanged for Soviet oil. But as the prices for oil during the oil crisis were rising, the purchasing power for all of the Finnish companies including Nokia has decreased. (International Directory of Company Histories 2001)

As a result, Nokia couldn’t rely on its business with Soviet Union any more, which made about 12 per cent of its overall sales before the oil crisis. The change came together with the new CEO Kari Kairamo in 1975 and the company decided not solely to focus at the domestic market, but to expand its focus also internationaly. There were two opposite opinions towards the paper industry. On the one hand the CEO Kari Kairamo wanted to invest in the business but on the other hand the other managers preferred selling it off. They feared, that focusing on the electronics business while also maintaining the other industries would end in remaining unfocused and unmanageable. The CEO decided to keep the paper industry and modernize it. This would strengthen the position of Nokia in stable markets (International Directory of Company Histories 2001). The paper industry moved into the production of high-grade tissues, but the half of it was sold off in 1989. In 1990-1991 the other half was sold off, so that Nokia ended its involvement in the forest industry. This was done due to Nokia’s decision to operate in the electronics business (Stolle 2006, 3).

3.2. Rubber production

Another crucial part of Nokia’s history was its rubber production. In 1898 Eduard Polón has established the Finnish Rubber Works. It has later become Nokia’s rubber business, producing a huge range of rubber products, literally from galoshes to tires (Official website of Nokia, Our Company 2012). From 1920 the Rubber works used the brand name Nokia. This happened after the acquisition with Nokia Ab, which consisted of both the wood and the rubber industries. In this time the company also started with the production of industrial parts, rubber bands or raincoats (About Nokia, Nokia History 2012). It became very popular in the country, so that almost every Finnish family was a proud owner of Nokia Rubber Works products. Mostly the production of shoes was so successful that it could compete against the Russian imports (Nokian Jalkineet, The Story).

This success was the basis for the company to expand its business also into foreign markets. In 1960s the company started to export winter tires and footwear and in the 1980s the tire industry got the name Nokian Renkaat Oy because of its cooperation with Renkaat Oy. Also in 1988 the cooperation still was prolonged until the years 1988-1991, where the rubber industry was sold off step by step. (Stolle 2006, 3 f.)

3.3. Cable production

In 1912 Arvid Wickström founded the Finnish Cable Works in Helsinki, which had its focus in the cable and electronics business (Nokia official website, Our Company 2012). Because of the development of telephones and telegraphs there was a high demand for cable products at the beginning of the 20th century. The most important products of the Finnish cable works were telephone, telegraph and electric cables (Stolle 2006, 4). One of the main raw materials was rubber produced by the Finnish Rubber Works. The main customers of the company were other industrial companies which bought electrical cables and wires (Stadler 2011, 122). But it’s also necessary to mention the Ministry of the Soviet Union, which was on the one hand a demanding but nevertheless very important customer (Ali-Yrkkö 2000, 26).

Also the cable production has been hardly hit by the World War I and its negative impacts, because of the increased raw material prices. Despite of these facts, the cable production could expand the business in 1920s and 1930s and became very strong in the Finnish market (Stadler 2011, 122 f.).

In the 1950s the Finnish Cable Works could take the advantage of the new inventions - radios and TVs - and could produce not only telephone cables, but also coaxial cables. It was also able to penetrate the foreign markets in Europe as well as the Middle East. With computers coming on the market in the 1960s, the company focused also on their production and sales and expanded its business in this direction. One part of the computer division was also the R&D department working on launching Nokia’s own products. After the merger of three independent industries into the Nokia Corporation, which will be described in the following chapter, the cable production remained the most profitable business area of Nokia. It generated more revenue than the other industries did together. The history of the Nokia’s cable production continued with many acquisitions and the establishment of offices in many countries in the 1980s. Unfortunately the Finnish recession has weakened the company, which resulted in selling off the cable production division in 1996. Finally it’s important to emphasize that the cable production was very important for the Nokia Company, because as already mentioned, it was the most successful division. Without it Nokia couldn’t develop in a way it did. (Stolle 2006, 4 f.)

3.4. Merger into the Nokia Corporation

The year 1967 was very important for the company, as Nokia Ab, Finnish Cable Works and Finish Rubber Works merged into the Nokia Corporation. It consisted of five businesses at that time: rubber, cable, forestry, electronics and power generation (Official website of Nokia, Our Company 2012). The target of the merger was to create a more international and liberal company from three companies that have already been under the same ownership for a certain period of time (Stolle 2006, 5).

Figure 1: The Evolution of Nokia

Abbildung in dieser Leseprobe nicht enthalten

In order to better understand Nokia’s history, figure 1 demonstrates the evolution of the company, which began with running three independent companies, Nokia Forest and Power, Finnish Rubber Works and Finnish Cable Works. Later were all of them in the ownership of the Finnish Rubber works until the above-mentioned merger in 1967.

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Details

Pages
26
Year
2012
ISBN (eBook)
9783668299108
ISBN (Book)
9783668299115
File size
497 KB
Language
English
Catalog Number
v340144
Institution / College
University of Vienna – Institut für Betriebswirtschaftslehre
Grade
1
Tags
Nokia business history Finnish economy electronics mobile phone industry

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Title: The History of the Nokia Company