Executive summary
Technological innovations play a crucial role in boosting the competitive advantage of business entities. As such, companies operating in the mobile industry seek to gain market dominance by continuously releasing new smartphones into the market and imitating others’ products to confuse unsuspecting customers. Nokia Corporation has dominated the mobile phones industry for decades by capitalizing on its strengths such as strong brand image, constant innovation, product differentiation, and ownership of production and manufacturing facilities. A SWOT analysis on the corporation reveals the company’s slow response to technological changes, leading to brand switching by its customers. The company faces a number of internal weaknesses and external threats that threaten its survival such as increased preference for China’s low-cost products, poor after-sales services and use of generic brand personality. However, opportunities still abound for Nokia to embrace superior technology and become a trendsetter in smartphone production.
Introduction
Nokia Corporation focuses on providing network infrastructure, location-based solutions, and technology developments. Its headquarters is in Espoo, Finland. The company employs about 57, 000 workers (Nokia par. 2). The company started as a mill in South-Western Finland in 1865. In 1967, the Nokia Corporation was formed by the merger of the mill, a rubber company, and a cable company. By 1996, Nokia had divested its other businesses and made telecommunications its primary focus. Over the years, the Corporation grew into a leader in the global mobile phone industry. However, the emergence of strong competitors such as Samsung marked the beginning of its decline. These competitors offer low-cost and more versatile products that appeal to customers. The major cause of Nokia’s decline is its inability to provide cutting-edge mobile phones superior to those produced by competitors. Consequently, the corporation lags behind in adopting new technological trends, leading to high rates of brand switching by customers. In a bid to revamp its market share, the corporation sold its devices and services department to Microsoft in 2014. Nokia aims at combining the expertise possessed by both companies to produce smartphones that will compete vigorously against its competitors.
SWOT Analysis and evaluation
The SWOT analysis evaluates the internal and external environments that affect the operations of Nokia. The internal environment analyzes Nokia’s strengths and weaknesses while the external environment analyzes its opportunities and threats.
Strengths
Nokia’s strengths include strong brand name, constant innovation, product differentiation, global presence, and production and manufacturing facilities (Grunewalder 11). Nokia’s strong brand name stems from the durability, reliability and versatility of its products. For instance, the battery life of Nokia product is longer than competitive brands. In addition, the company produces mobile phones in several colors, shapes, designs and sizes that appeal to customers. Nokia’s commitment to innovation is evident in its dealings with technological partners such as Siemens, NAVTEQ, and Microsoft. The company engages in product differentiation by customizing different mobile phones for different customers depending on their income level and technology preference. For example, Lumia 610 targeted students while Lumia 800 and Lumia 900 targeted high-end users and techno-savvy customers. Furthermore, the company has a presence in emerging markets with manufacturing facilities in more than 12 countries.
Weaknesses
The weaknesses of Nokia include generic brand personality, poor after-sales services, slow response to industry trends and lack of promotions focusing on low-end users. Nokia uses generic descriptions in marketing its products rather than a specific value proposition. As a result, customers only know the general benefits of Nokia phones such as durability. Hence, they are attracted to competitors who emphasize specific mobile phone applications that their products offer. The company has few service centers, hindering customers’ access to after-sales services. The company entered the modern smartphone industry after its competitors had already established their operations. Furthermore, its promotions focus on high-end customers who perceive smartphones as a symbol of status and technological competence. Thus, it ignores low-end users who might bring in revenues in the form of new purchases.
Opportunities
Nokia has viable opportunities that if exploited, they may revamp the company’s market share. These opportunities include the Microsoft deal, improving the versatility of its products and investing in emerging markets. Nokia’s partnership with Microsoft saw the adoption of windows as the operating system (OS) for Nokia phones, shifting competition from ‘a battle of devices to that of operating systems (Ropot 5). Instead, the company focuses on the sales of services in addition to selling devices. The company can also revamp its technological innovations in mobile phones such as unique applications and clear displays. Emerging markets such as Africa and Asia provide new markets for investment by the company. These markets are critical because people’s income is rising steadily after the recession, giving them more disposable funds to purchase mid-range products.
Threats
The threats facing Nokia include stiff competition and global economic recessions. Nokia mainly concentrates on big competitors such as and iPhone. For years, it considered small competitors to be insignificant. This assumption had costly impacts on the company when small competitors slowly chipped away at its market share. In addition, Asian companies emerged which sold imitations of Nokia’s products at lower prices (Ungson 365). Latest statistics indicates that Chinese companies such as Huawei and ZTE took up 30% of all Android phone shipments made during the third quarter this year (Danova par. 8). Global economic slumps usually erode the purchasing power of consumers by lowering wages and income. In such periods, customers cut their luxury spending, causing a decrease in mobile phone sales.
Evaluation
In its early years, the corporation made several pioneering innovations that fuelled its growth. These include being the first company to manufacture mobile phones with internal antenna, built-in camera, and a modifiable face. Its product differentiation strategy worked well for a number of years, manufacturing products to suit the needs and income levels of customers. For instance, upscale consumers purchase premium mobile phones with several multimedia applications while low-end customers seek economical handsets. The company has an efficient distribution network consisting of mobile service operators, independent retailers, and electrical suppliers. Despite these strengths, the company has not regained its previous market share but continues to lag behind mobile phone innovations.
The Lumia phones were produced under its partnership with Microsoft to launch Nokia’s new strategy as a market challenger. There exist four Lumia models in the market: 610, 710, 800 and 900. Lumia 610 targeted students while the 800 and 900 models targeted high-end customers and techno savvy people. The 710 targeted young professionals in employment. Despite the popularity of these models in some markets, the Lumia phones did not have any superior innovation that could create product differentiation from those of competitors. Instead, they were criticized for lower application ranges, dimmer displays, lower camera quality and battery life, lack of front cameras and absence of memory card slots among others. Android, Samsung galaxy, and Android offer more versatile products with the aforementioned features.
Recommendation
The company should invest intensively in research and development in order to produce cutting-edge mobile phones with superior features. Instead of reacting to the strategies of competitors, Nokia should instead take a leadership role by initiating new technologies that appeal to customer needs. The company has the potential to increase its market share as highlighted by the revival of windows-based mobile phones in Europe.
Conclusion
Nokia is a global participant in the mobile phone industry, offering flagship products such as the Lumia models under the partnership. Its strengths include strong brand name, global expansion and operational capabilities. Stiff competition and Nokia’s slow response to innovation trends in the market has made the company a significant proportion of its market share. Despite these challenges, the company has opportunities to grow and reinvent itself as a market challenger through technological advancements.
Work cited
Danova, Tont. "The State Of The Smartphone Industry." Business Insider. N.p., 4 Sept. 2014. Web. 22 Nov. 2014. <http://www.businessinsider.com/the-state-of-the-smartphone-industry-2014-9>.
Grünewälder, Arend. Analysis of Nokia's Corporate, Business, and Marketing Strategies. München: GRIN Verlag GmbH, 2008. Web. 22 2014. <http://books.google.co.ke/books?id=dAd9BAAAQBAJ&pg=PA8&dq=Nokia+marketing+strategy&hl=en&sa=X&ei=fdZwVOCGCaT8ywPS_oDIAw&redir_esc=y#v=onepage&q=Nokia%20marketing%20strategy&f=false>.
Nokia. "Our company." Nokia. N.p., 2014. Web. 22 Nov. 2014. <http://company.nokia.com/en/about-us/our-company>.
Ropot, Janin. Nokia's Marketing Strategy Analysis and Recommondations. Munich: GRIN Verlag GmbH, 2013. Web. 22 2014. <http://books.google.co.ke/books?id=Xf_ZAQAAQBAJ&pg=PA5&dq=Nokia+marketing+strategy&hl=en&sa=X&ei=fdZwVOCGCaT8ywPS_oDIAw&redir_esc=y#v=onepage&q=Nokia%20marketing%20strategy&f=false>.
Ungson, Gerardo R, and Yim-Yu Wong. Global Strategic Management. Armonk: M.E. Sharpe, 2008. Web. 22 Nov. 2014. <http://books.google.co.ke/books?id=-Mv7U69x9mcC&pg=PA364&dq=reasons+for+Nokia%27s+fall+in+the+market&hl=en&sa=X&ei=INlwVNrrCoukygOYtoDYBg&redir_esc=y#v=onepage&q=reasons%20for%20Nokia%27s%20fall%20in%20the%20market&f=false>.
