Management
Nokia is the world’s largest producer of mobile phones and one of the leaders in the mobile network infrastructure in the market (Park, 2007, p. 3). The competitive strategy of Nokia is based on the combination of technological innovation and putting an emphasis on its core competencies. This can be illustrated on the efforts of the company to expand its technological competencies in digital signal processing, electronics manufacturing, software platforms and architecture (Park, 2007). For the past years, the strategy of Nokia is to develop and expand its technology in the use of GSM in the 1990s. Such move of Nokia in the GSM market was accomplished by emerging with the European telecom market. The company has taken advantage of the industry-wide collective effort by collaborating with other major players in the GSM technology which established its strong competitive position in the market. These efforts can be shown by creating a WAP (Wireless Application Protocol) forum in 1997 and Bluetooth application in 1998 (Park, 2007). Another technological innovation is to expand a new competency in the digital home market. The digital home strategy coincides with the company’s extended mobility vision by expanding consumer multimedia and mobile voice. Nokia has given its users the opportunity to access digital content and services at their convenience. These services include multimedia sharing, internet browsing and digital content download by allowing the users to access e-mail function through the use of their mobile phones. At present, the company has expanded another innovation through the use of the 4G infrastructure and created game sessions in order to compete with the current demands of the consumers.
As part of the company’s competitive strategy in pursuing cost leadership, it had launched various types of new models of mobiles phones in 2004 based on its strong resource capability and to reduce the cost of the mobile units. Nokia offered an identical product and service at a much lower cost than its competitors. This means that the investment of Nokia in terms of scale economics and strict control of costs, including overhead, research and development and logistics (Czinkota, 2012, p. 216). On the part of Nokia, it offered a good functional mobile phone in the market for about half of the price of one of its competitors, Samsung (Mitchell, 2011, p.162). Many of the consumers were pleased with the simplicity of the phones offered by Nokia because they are user-friendly. Nokia dominated the market by reducing the price of their mobile units in order to regain cost leadership among other competitors. As a result, Nokia became a world leader in mobile phones and it became consistently profitable even if the demand relaxes because their cost in in between cheap and expensive (Walker, 2004). The company was able to produce phones which they offer to their customers that is relatively of high value but low in price. This enabled Nokia to produce phones at even lower cost, that has resulted to significant economic returns even when the demand is flat or slacken off.
On the other hand, differentiation is industry wide or focused on a single segment by taking advantage on the marketer’s genuine or perceived uniqueness in elements such as design or after sales service (Czinkota, 2012). In the case of Nokia, it uses its own design of their mobile phones in such a way that they are similar with the features being offered by other mobile phone manufacturers such as Samsung or Apple to hold down manufacturing expenses. This means that Nokia and other mobile phone manufacturers should create mobile phones in the same production line to be able to shift quickly from on model to another in order to meet the demands and requirements of the current market. Differentiation offers a more secure basis for competitive advantage than low cost (Grant, 2010). In the case of a large company such as Nokia, it has sustained high profitability by focusing on differentiation than cost leadership. It has earned above average return on equity by pursuing differentiation through quality, branding and innovation (Grant, 2010).
According to Czinkota (2012), focus strategy is defined by its emphasis on a single industry segment where the orientation is headed toward low cost or differentiation. In the case of Nokia, it focused on mobile communications, coupled with a streamlining of its operations by continuing to win market share in its major markets. Thus, its profitability and revenues increased dramatically in the year 1988. Mendelson and Ziegler (1999) stated that Nokia was able to focus on manufacturing its hit products which allowed it to dominate the GSM market in 1998. In order to achieve this, Nokia was able to control the management of product line which required a processing of information, data and several decisions. The first step is to understand the needs of the consumers. The second step is to integrate new development and production processes into the existing business. The last step involves managing the sales and after-sales process (Mendelson and Ziegler, 1999).
References
Czinkota, M.R. (2012). International Marketing. California: Cengage Learning.
Grant, R. M. (2010). Contemporary Strategy Analysis: Text Only, 7th ed. New York: John Wiley
and Sons.
Mendelson, H, and Ziegle, J. (1999) Survival of the Smartest: Managing Information for Rapid
Action and World. New York: John Wiley and Sons.
Michell, T. (2011). Samsung Electronics and the Struggle for Leadership of the Electronics Industry. Singapore: John Wiley and Sons.
Park, S. (2007). Strategies and Policies in Digital Convergence. Hershey, PA: Idea Group.
Walker, G. (2004). Modern Competitive Strategy. New York: McGraw Hill International.
