Nokia Case Study: How can Nokia maintain its market position in the mature European market?
Term Paper 2006 23 Pages
1. Table of Contents
2. Executive Summary
4. Audit of Nokia
4.1 Environmental Analysis
4.2 SWOT Analysis
4.3 Trend Analysis
5. Consumer Buying Behaviour
6. Brand Profile
6.2 The role of Nokia’s brand
6.3 Brand Equity
6.4 Brand Identity
7. Segmentation, Targeting and Positioning
7.1 Market Segmentation
7.1.1 Geographic segmentation
7.1.2 Demographic, psychographic, behavioural Segmentation
7.2 Market Targeting
7.3 Market Positioning
8. Competitive Nature of Product Category
8.1 Number of Competitors
8.1.1 Key Competitor (Market Challengers)
8.1.2 Other Challengers
8.1.3 Market Followers
8.1.4 Competitive forces
8.2 Market position of key competitors
8.3 Competitor Analysis
2. Executive Summary
Mobile phone market in Europe is going through major changes. Key players are losing market share while new and young companies, mostly from Asian countries, are coming to the market. At the same time the market is slowly expanding when people are buying more phones than ever. The whole process of buying mobile phones has changed in the last few years. People no longer carry the same phone year in year out, but they change their phone every year, some even twice a year. One reason for this change is the fast technological development of the phones. But also consumer’s attitudes towards mobile phones have changed. Mobile phones are no longer seen as expensive, hi-tech products, but they have become accessories like jewellery or a piece of clothing. “Nokia is still the largest mobile phone company in the world, but its long-term dominance is now challenged more than ever. Observers have begun asking whether the cutting edge that has turned Nokia into the No 1 vendor still exists, as Nokia’s market share and revenues have been on the decline. Falling average sales prices (ASPs) and market share have had an impact and forced Nokia to further re-think its strategy towards developed and emerging markets.”
This report gives an overview on what is happening on the mobile phone market today and analyses Nokia’s market position in the mature European market. This report includes a brief introduction to Nokia followed by an environmental analysis, SWOT analysis and trend analysis of the company. Half way through the report you can find information about consumer behaviour, brand profile and segmentation. At the end, this report introduces the main competitors and analyzes the competitive market. Finally we try to make a conclusion of the topics discussed and attempt to give some possible answers to the question at hand.
The company we have chosen to analyse in our project is the Finnish mobile phone giant Nokia. This chapter tells you briefly what Nokia actually is, its company structure and overall view on the size and sales of the company.
Since January 2004, Nokia Group has consisted of four different business groups: Mobile Phones, Multimedia, Enterprise Solutions and Networks. “In addition, there are two horizontal groups that support the mobile device business groups: Customer and Market Operations and Technology Platforms.” In the year 2004 Nokia’s net sales for mobile phones were 18 507 million euro, which went down 12% from 2003. Nokia’s market areas were Europe/Africa/Middle East (55% of net sales), Asian Pacific and China (25%) and Americas (20%). Nokia’s market share in Europe was 45,8% in 2003, in 2004 it was 34,8% and in the third quarter of 2005 it was 36%. The average number of personnel for 2004 was 53 511. At the end of 2004, Nokia employed 55 505 people worldwide. In 2004, Nokia's personnel increased by a total of 4 146 employees. Nokia’s turnover for the third quarter of 2005 was 8403 million euro from which mobile phones brought in 62%, multimedia 17%, Enterprice solutions 2% and Networks 9%. “The year 2004 was demanding for Nokia. In response, the company set five top priorities in the areas of customer relations, product offering, R&D efficiency, demand-supply management and the company's ability to offer end-to-end solutions. Nokia is making good progress in these areas, and is now better positioned to meet future challenges.” “The Nokia Strategy continues to focus on three activities to expand mobile communications in terms of volume and value: expand mobile voice, drive consumer multimedia and bring extended mobility to enterprises.”
4. Audit of Nokia
4.1 Environmental analysis
The market environment of Nokia consists of six forces. These are demographic, economical, natural, social-cultural, technological and political-legal environment.
The Demographical forces
Demographics show the size of the European market by telling the population of each country. Demographics also show if the people in specific country are illiterate or well educated, how old they are, which parts of the country they live in and how do they live. Population of Europe in 2000 was 729.3 million. People live mostly in urban areas. Population is ageing due to falling birth rates. People in Western Europe are generally well educated and literate. There are no huge cultural differences between nations and since almost all countries are members of the EU, it brings the people even closer to one another.
The economical forces
People in Europe are reasonably wealthy and income distribution between people is relatively even. Growing economy in Europe leads to increasing income of the people. People will buy more luxury goods (such as mobile phones). If the economy in Europe is in a decline, the average income will not increase and is even more likely to decrease. In this case the people will have less money for luxurious goods and will spent less on mobile phones, which would be very negative for Nokia.
The natural forces
Environmental issues are something that has become more important in the last few years. People are becoming more aware of pollution and want companies to do something about that. Nokia knows this growing sense of awareness for the environment and has changed the ways of producing. It has decreased its use of energy and water, it is recycling products and it has changed the materials for producing its products into more environmental friendly materials.
The population of Europe is very diverse. People can be divided into different subcultures that have several ways to spend their money. Subcultures could be different age groups, interest groups and immigrants. They have also different attitudes towards mobile communication.
The technological forces
- technological development of mobile phones
- technological development of substitutes
Technological development of mobile phones is an important technological force, because the technology in the mobile phone business is constantly innovating and developing which can lead to big changes for Nokia. There is a constant research going on within the mobile phone businesses (so also in Nokia) to try to develop new gadgets and new systems for the mobile phones. Nokia has to be aware of these developments, because when the competitors develop a new gadget that Nokia does not have, it means that the competitors will have a comparative advantage over Nokia.
The technological development of substitutes is important, because when there will be a new developed substitute, it can mean that people will buy this product instead of a Nokia mobile phone and so the sales for Nokia will drop along with the profit.
The political- legal forces
- Finnish law
- European law
- Domestic laws in each of Nokia’s foreign markets
- International laws
- Health regulations
Because Nokia is a Finnish company and has its headquarters in Finland, the board of directors has to be run in accordance with The Finnish law. Since Nokia is also an international company, it has to comply with international laws such as the European law. International laws are actually a collection of treaties, conventions and agreements between nations, for example tax treaties, patent protection systems and trademark conventions. In addition to these, Nokia must also comply with every foreign country’s domestic laws, which it is doing business with. Laws affect every aspect of Nokia’s business: product safety, consumer protection, dealing with competition, packaging and labelling and advertising, just to mention a few.
Legislation is useless if it is not enforced. Nokia has to know the legal environment because it constitutes as “the rules of the game”. At the same time, it “must know the political environment because it determines how the laws are enforced and indicates the direction of new legislation.” Health regulations are also important, because of the danger of mobile phone radiation and the way Nokia has to handle with this threat. “In order to protect the population living around base stations and users of mobile handsets, governments and regulatory bodies adopt safety standards, which translate to limits on exposure levels below a certain value. There are many proposed national and international standards, but that of the International Committee for Non-Ionizing Radiation Protection (ICNIRP) is the most respected one, and has been adopted so far by more than 80 countries.”
4.2 SWOT- analysis
We will use the SWOT- analysis to see what the strengths and weaknesses of Nokia are and what its opportunities and threats are.
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One of the strengths of Nokia is their strong brand name and good image. They were one of the first players on the mobile phone market, as it became a new market in the 90’s. Since the beginning, they took a strong grip at the market, through producing user friendly, durable and modern looking mobile phones. The fact that they are also constantly innovating, so they can come with new functions on the mobile phones, is also an important part of their strength. Because they have already been producing mobile phones for over 15 years, they are very experienced in the process of producing and innovating new mobile phones.
Despite the fact that Nokia is still a giant in the phone world, it has a few weaknesses. The originality of the mobile phones is not always as good as of the competitors. For example in 2003 Nokia was too late with clamshell phones, while other companies already had these models. Just after prosperity of these phones, Nokia had to start making these models as well because otherwise they would have lost their market share significantly. Nokia has good new phone models but sometimes there is slightly information about. Consumers are missing information that they could get through advertisement, packaging etc.
 ”Nokia: On the road to recovery?”, 07/2005, <http://www.gii.co.jp/english/kt32528-nokia.html> (18.11.05).
 “Nokia: Financials”, 10.2005, <http://www.nokia.com/A402776> (20.11.05).
 “IDC - Press Release”, 11.03.2005, <http://www.idc.com/getdoc.jsp?containerId=pr2005_03_07_134916>,
 See above footnote No. 2.
 See above footnote No. 2.
 “Europe: Demography”, 2005, <http://www.unhabitat.org/habrdd/trends/europe.html> (01.12.05).
 “Environment”, 2004, <http://www.nokia.com/P11779> (29.11.05).
 V. Terpstra, R. Sarathy, International Marketing, 8. edition (Ohio: Thomson South-Western,2000) 130-135.
 Terpstra 126.
 “Environmental Report of Nokia Corporation”, 2004,