Nokia

Using different techniques in advertising is one of the most commonly used principles by companies which intend to capture a wider market base. Apparently, having an attractive advertisement module can provide greater prospects in achieving higher returns of profit margin acquisition. The article in references is the news about Nokia and Siemens mergence. The two companies are practically well known in the industry of telecommunications and networking respectively. The article which was published by BBC was actually about the technical aspects of the integration.

Basically, the mergence comprised of the equally established shares for both companies which agreed to have 50% each for the said integration structure. This will allow the two companies to have equal rights and profit acquisition for whatever transaction deals to be implemented in the future. Due to the partnership, experts were estimating for the companies to acquire at least 16 Billion Euros by the end of 2010. The basic reason for the merging of the Nokia and Siemens was extracted from the concept of increasing the Nokia’s capacity towards networking capabilities.

Primarily, Nokia is a self sustaining company and in fact a leader in the telecommunication industry particularly in the division of mobile phones. However, this status is so demanding that it needed to invest more on networking facilities due to the increasing demands of mobile phone owners when it comes to portable and networked communication procedures. The reported deal was actually in terms of infrastructure and not about cell phone handsets (BBC 1).

According to the article, one more offset for the mergence is to counter balance the possible influence of the merger of Alcatel and Lucent Technologies which primarily poses some levels of competition against Nokia. On a personal perspective, I have always positioned the company Nokia to be the pioneer in global mobile phone developments. Even though I am aware that emerging companies such as Motorola and Sony Ericsson are fast catching up in terms of innovation, I can still see Nokia to be at the forefront at least at the commercial segment of the race.

According to Business Week, Nokia captured at least 40% of the overall global market share when it comes to mobile phone sales. This actual figure primarily makes the organization prominent and well performing when it comes to personal analysis. Given my impression of Nokia, the article somehow provided me another perspective towards the company’s actual development. Because of the mergence, I realized that it is not really independent when it comes to delegating success in the market. The story repositioned my thinking that there is no real company which can stand on its own and operate based solely on its traditional business principle.

Nokia may seem to be a very good company in some aspects but actually it will still need some affiliations if it wants to diversify its market share, which is the case in partnering with Siemens for network development since Nokia can’t emerge in the IT market without a reliable network backbone. This prompted me to think that Nokia still needs to undergo large scale affiliations in order to sustain its development. Considering the article about the mergence of Nokia with Siemens, it seems that the news is more of a publication advertisement which promotes awareness.

The people who are going to read the news will definitely acquire the fact that Nokia is actually undertaking plans to improve its services to the consumers. The article also intends to impart knowledge since it precisely informs the readers that the merger is not based on handset partnership but more on infrastructure. This is a good approach since Siemens also has its own line up of mobile phones and that the consumers my just expect to see what kinds of models the merger will offer to the market.

Executive summary

Smartphones have ushered in a new generation of modern communication. The report investigates the computing capabilities of smartphones, and their ability to support several multimedia applications. The report discusses that fact the smartphone industry has rapidly grown over the last two decades. Currently, rapid transformation is taking place and competition to control the lucrative market has increased.
The report considers whether the market segment is controlled by a few major players . The reports investigates patent issues amongst the major players

The PESTLE framework is used to analyse the business environment in the smartphone market. Porter’s Five Forces is also used to evaluate the rivalry and power of the individual players within the smartphone industry.

Introduction

According to Ahson and Ilayas (2006), a smartphone is a form of mobile device that integrates the characteristics of a phone and a PDA. A smartphone offers more advanced connectivity and computing capabilities. Smartphones have the ability to access the Internet and support several multimedia applications. Smartphones achieve the capabilities of a Personal Computer technology and a traditional phone (Ahson and Ilayas, 2006). They enable users to add, install, and delete hundreds of applications. Users can also personalize the interface. They have ushered the present society into an era of ubiquitous information. The report examines the global-local aspects of the smartphone industry, specifically the patent wars. It also provides an analysis of the smartphone industry using the PESTLE framework. The report further provides an evaluation of the rivalry and power among the smartphone players. It discusses the competitive advantage within the smartphone industry.

Global-local aspects of the smartphone industry.

Smartphones; Markets and growth trends

Park, et al (2011) hypothesize that the mobile phone industry has witnessed a significant change in the last 15 years. In the last decade, Nokia was the world’s leading manufacturer of mobile phones. Since then, Nokia has been dislodged from the leading position by the new smartphone companies such as Apple, Samsung, and LG. The success of these companies is due to the introduction of new modern and innovative approaches to the ease of use of hardware and an improved user interface design (Park et al 2011).
Himmelsbach (2013) argues that, in the recent years, the smartphone industry has witnessed radical transformation and altered competitive situation. The major players in the market segment include Samsung, Apple, Huawei, Sony, LG, HTC, Nokia, Research in Motion, Microsoft, and Google (Park et al 2011). . There are also other indirect players such as Qualcomm and Cirrus Logic. The intense competition among the market players has led to large volumes of complex and mostly multi-jurisdiction patent litigation (Himmelsbach, 2013).
The economic downturn caused the traditional global phone market to enter recession (Ahson and Ilayas, 2006). However, the smartphone market has been growing rapidly (Himmelsbach 2013). Major players have expanded their total sales due to the growing number of smartphone users and the reduced prices.
Smartphone industry PESTLE analysis (Henry, 2008).

Factor Analysis

Political analysis

Political environment in some countries enable smartphone markers to flourish
Political challenge in some countries, for instance, China, and India raised security concerns over some features provided by RIM’s BlackBerry.
Roaming fees is relatively high in several countries
Economic analysis The current prices of smartphones devices are fair although devices from some major manufacturers such as Apple are still considered to be expensive
Slow economic growth and recession can affect the sale of smartphone devices
Social analysis Some major smartphones brands symbolize high status.

Innovation is increasing getting hard.

Technological analysis The main rivalry is between Apple’s iOS and Android operating systems.
Innovation is rapidly growing and each day, a new technology is invented.
Environmental analysis Manufacturers are required to comply with various environmental standards.
Legal analysis Patent lawsuits is increasing among the smartphone industry players.

Patents in the smartphone industry.

According to Hill et al (2014), the smartphone industry has experienced patent litigation for several years. In the past, voice telephony services such as speech compression technologies, network management and radio transmission were the main focus of patent litigation. More recently, patent litigation has broadened across a wider range of cellphone and mobile computing technologies. The major market players are continuously suing each other over a variety of smartphone patents.
The role of patents in the smartphone industry is to protect a company’s investment in research and development (Hill et al 2014). After an examination of a patent, the owner is granted a monopoly license for the patented invention which is usually 20 years. Patents provide incentive to the owner company for its effort of bringing the innovative technology out of the research lab and into the market after an expensive and risky business.
The Network Patent Analysis method indicates that large portion of the patent portfolio is held by Apple (Ferell and Fraedrich, 2014). Apple is slightly ahead of IBM and Microsoft. According to NPA, 16 out of the 20 patent are owned by Apple. NPA reveals several of the smartphone patent lawsuits are within the 16 unique clusters of inventions that are related.
Hill, Jones and Schilling (2014) note that the majority of smartphones patent wars are related to mobile data access, touch screens and transmission of mobile data. Among the three clusters, each has different company or manufacturer dominating the patent portfolio. According to Hill, Jones and Schilling (2014), the mobile data access cluster is dominated by Research in Motion, while the touch screen cluster is dominated by Apple.
Evaluation of the competitiveness (rivalry) and power of the individual players within the smartphone industry using Porter’s five forces.
Smartphone devices have become part of many people’s lives. The market has been largely fractionalized. The transformation of the smartphone market has led to increased competition and rivalry. Different players are producing devices tailored for different market segments.
Porter’s Five Forces can be used to understand the forces affecting the smartphones market from the manufacturers and users perspectives.
The five components of Porter’s framework in relation to the smartphone industry is as follows.

The threat of new entrants is low because the investment on the required technology needed to compete in this industry is high. Consumers purchase phones from incumbent companies with good reputation. This explains why Apple, and Samsung smartphones are the most popular in the market.
The threat of substitutes is low because smartphones contain added functionalities from other digital electronic devices such as watches, digital cameras, cell phones, pager, and organizers, and laptops. The service provided by smartphones are sufficient as expected from a mobile device.
The bargaining power of buyers is rated to be medium because the present smartphones market contains a variety of products from major brands for consumers to choose. The prices of smartphones have become relatively low.
The bargaining power of suppliers is medium because of the reliance of mobile phone manufacturers on their suppliers. The manufactures acquire quality components from suppliers at competitive prices. Some smartphone operating systems such Android is open source.
The smartphone industry is competitive with a few strong competitors (Boyes and Melvin, 2012). New entrants find it challenging to compete and gain in the market share which is dominated by major brands. However, some new smartphones manufacturers such as Sony and ZTE are rapidly gaining popularity and market share.
Competitive advantage within the smartphone industry.
The smartphone market is highly competitive, and it has experienced dramatic changes in the recent past. In 2007, Apple defeated BlackBerry from the leading position as the dominant smartphone maker Laffey (2011). Smartphone market competition has also been based on the two main operating systems, Google’s Android and Apples’ IOS (Park et al 2011).
Apple has managed to take the leading position in the market because of its high specification products, integrated operating system and quality hardware (Laffey, 2011). Apple’s success is also attributed to its luxury brand image established during the reign of Steve Jobs Apple provides the eco-system of apps available online on Apple’s app-store platform (Park et al 2011).
The Kindle Fire, an Amazon product is expected to challenge Apple by offering readerse new opportunities to access to Amazon’s online e-books store (Laffey, 2011). Amazon’s relationship with content providers will enable it secure the delivery of its apps and video content providing a new competition across the market segment (Laffey, 2011).
The difference in pricing between Android and IOS phones has impacts on competition (Laffey, 2011). Most Android smartphones are affordable while some devices from Apple are less affordable. Apple benefits from a higher income from this (Laffey, 2011).

Conclusion

In summary, the current smartphone is no longer exclusive for early adopters. Streamlining of new innovations has led to increased competition and patent litigation. It is evident that the smartphone market is controlled by a few major smartphones makers. Smartphones have heralded a new era in the communication industry and changed several aspects of human lifestyle. New software makers need to develop an operating system to make a unique distinction in the current market.

References

Ahson, S. and Ilayas. (2006) Smartphones [online]. Intl. Engineering Consortium. Available from: http://books.google.co.uk [Accessed 4 April 2014]

Boyes, W., and Melvin, M. (2012) Macroeconomics. Cengage Learning. Available from: http://books.google.co.uk[Accessed 4 April 2014]

BBC (2010) ‘Leading mobile phone lose market share’, 10 November. Available from http://www.bbc.co.uk/news/business-11725411 [Accessed 4 April 2014]

Egham (2012) ‘Gartner says worldwide smartphone sales soared in Fourth quarter of 2011 with 47 percent growth’. Garner [online]. 15 February. Available from: http://www.gartner.com/newsroom/id/1924314 [Accessed 4 April 2014]

Ferell, O., C., and Fraedrich, J. (2014) Business Ethics: Ethical Decision Making & Cases [online]. Cengage Learning. Available from: http://books.google.co.uk[Accessed 4 April 2014]

Henry, A. (2008) Understanding Strategic Management [online]. Oxford University Press. Available from: http://books.google.co.uk [Accessed 3 April 2014].

Himmelsbach, T. (2013) A Survey on Today’s Smartphone Usage [online]. GRIN Verlag. Available from: http://books.google.co.uk[Accessed 4 April 2014]

Hill, C., Jones, G., and Schilling, M. (2014) Strategic Management: Theory & Cases: An Integrated Approach [online]. Cengage Learning. Available from: http://books.google.co.uk[Accessed 4 April 2014]

Laffey, D. (2011) Strategic issues in Tablets and Smartphones: An Agenda (Non-referred research note). Journal of Strategic Management Education 7(4): 287-290

Park, J., Yang, L., and Lee, C. (2011) Future Information Technology: 6th International Conference on Future Information Technology, FutureTech 2011, Crete, Greece, June 28-30, 2011. Proceedings [online]. Springer. Available at: http://books.google.co.uk [Accessed 4 April 2014]

INTRODUCTION

Nokia is a well known brand in the world of mobile communication and it is the world leader in the industry because of its history, name, reliability and unique products and provision of protected solutions. It is one of the most well-known companies and it has offices all over the world. The main product of Nokia is mobile phones and it also deals in household items. Nokia recognizes its corporate responsibility and states that “in all parts of business it makes corporate responsibility a part of decision making’’.

Mission statement: Nokia is “CONNECTING PEOPLE”

Goal: The goal of Nokia “In every business place where WE operate to be a good corporate citizen and be an accountable and causative member of society and serve young people to structure their own place in the world”.

Target market: The is spread widely. The demand of Nokia products is worldwide and it has given first choice on other cellular companies of the world. If we compare the rates of Nokia with other similar companies then it come to know that Nokia has low rates compared to others, and the performance of Nokia products is very good and have many interesting features so most people prefer Nokia. Nokia products have big market place in Asia, America and the Middle East. Due to manufacturing of Nokia products in GSM and AMPS technologies, it meets requirement of every kind of customers.

MICRO AND MACRO ENVIRONMENTAL FACTORS:

Marketing environment: The factors outside the market which affect the capability of marketing management in developing and continuing successful transactions within target customers.

Categories of marketing environment:

1. Micro environment

2. Micro environment

Micro environment:

The following factors are micro environmental and affect the organization:

Dealers
Consumers
Competitor
Marketing rules
General public

Macro environment:

The following factors are macro environmental and affect the organization:

Trade and industry environment
Political environment
Cultural environment
Technological environment
Demographic environment

THE COMPETITORS OF NOKIA:

Nokia has huge market and demand, but we can consider some companies as competitors of Nokia which include the following:

Samsung
Motorola
Ericson
Sony
Siemens

When we analyze these companies separately, we can conclude that these companies have also big market but when we compare it with Nokia we can conclude that these companies do not have same level of market.

Social factors

Every employee of Nokia is influenced by Nokia performance and status which result in problems such as problems of physical condition, protection, safety, relationship among employees, human rights and corporate citizenship.

Business environment

Nokia competes in both general and particular level. It competes generally in global telecommunication and particularly in mobile industry and all its products have fast growth, change and union.

WHY CHANGE?

Why organizations need to make change or changesPrior to deciding about the change, all organizations must recognize the causes for change. The organization is the place where different people working together to arrive at the expansion for the business. Therefore, an organization is the brain of business. The collective aim of all employees is the success of the business and they collectively think for some possibilities on how to bring success in life. The organization is main part of the business. It consists of different inventive brains and if the ideas are not sufficient, the organization starts the brainstorming sessions. Some changes are bad for the organizations and some changes are good for the business. Changes invite the employees to share new ideas.

ORGANIZATIONAL CHANGE IN NOKIA

Some organizations make change regularly to keep in business and competitive. Nokia started its business by producing tools and equipments which were used to cut down woods in Finland. Then it changed its business paper, from paper change itself into paperless office related to IT and from there it changed its business into mobile telephone. Nowadays as a world leader of the mobiles, Nokia is going to drive the transformation and playing main role in joining the industries. The Nokia manufactures lot of devices which contain services and software from which people can play music, watch videos, TV, make photos, play games, business transaction by using mobile and much more. They focus on providing the consumer internet services and company solution. It is observed that the company consider the change and rearrange the management every year.

THE AIMS OF NOKIA:

1.Nokia intends to start Nokia research centre (NCR), which concentrate on long-term research activities and focus on stronger research areas.

2.The company is planning to change its place for their activities on more suitable areas.

3.For operations in all over world, company is also planning workers change.

ORGANIZATIONAL CHANGE APPROACH:

In strategic planning model there are two change approaches that are normally used by Nokia in creating their efforts. There are many kinds of models but we have taken two models for suspicious assessment.

1.Alignment model

2.Scenario planning model

1.Alignment model

The strong position among the mission of the company and its resources for effectively running the organization can be ensured by this alignment model. This model is helpful for those companies that want to amend their planning regularly and discover the causes for not working. This approach can also be applied by organizations facing huge number of problems in domestic efficiencies. This model may include the following steps:

1.1.The organization’s mission, programs, resources and support needed by the organizations is summarized by the planning group.

1.2.Recognition of procedures working well and those needing modification

1.3.Recognize how the modifications can be made.

1.4.Strategies should also be included in the strategic planning for modification.

2.Scenario planning model

This approach is not necessary to use separately, it can be used in combination of other models. The purpose of this model is to ensure that the deliberate thoughts are carried out by planners for classification of planned problems and goals. This is an effective model and consists of the following steps.

2.1.Many external factors causes change and these changes affect the whole organization.

2.2.Describe unusual potential organizational situations which occur in organization due to modification. The analysis of unfavorable scenario may annoy motivation to make modification in the organization.

2.3.From the description of the situations to respond the modification, the change management team may develop suggestion for what the company may do.

2.4.Change management team shall identify approaches for addressing the response to modification from exterior factors.

2.5.Identify the external factors that cause the modification which affected the company, and describe the approaches that the organization can use to respond to the change.

IMPORTANCE OF CHANGE MANAGEMENE IN GENERAL

Change management is a very important issue in information technology, and it’s very essential for mobile companies like Nokia because the needs of the mobile users are changing day by day and there is lot of increase in technology. Change management is part of the business of the Nokia but due to increase in technology this issue has become serious. Information technology includes all the components which are essential for effective functioning of the business approaches which may be prevented by the technological issues and other problems. For meeting the needs and choices of the customers it is very important to make the modification and some interval of time. The rule of the change is first of all its very important for businessmen to change their attitude towards change management. The sign of good change management system is that the management always takes up new ways for success in business. For making modification in the organization when we use change management system. This system is not only to implement new approaches to make changes in organization but it is the rules and regulation of the information technology infrastructure management in which changes are carried out with more organized, consistent, accurate and discipline approach.

CAUSES OF CHANGE

The basic reason for the change management is some occurrences or customer requirements or technological advancement. When the demand of the products becomes low, then the profits start to reduce and also results in reduction of market. Other reason is when the company reduces its costs and marketing budgets then the opportunity cost for bringing capital and resources presents other favorable opportunity. This will result in two options, one is selling the current operations and the other is stopping the production. This is the result of increase in new products in market which will fulfill the same need, or there may be change in the habits of the customers purchasing style, the investment and labor has been utilized at new business activities. This is the common cause of the organizational change.

Amalgamation and acquisition: the amalgamation is the process of combining or merging two companies and both companies centralize their system for efficiency in decision making. By doing this the departments and processes of both companies can be merged, decline in cost, use of accessible resources. It can result in big organizational change.

Change in structure: The modification also comes from new administrative approaches. When company introduces technology system in organization, replace old system with new system, old software and hardware updated in new version, manual system converted in automated system, these all will result in training the employees for operating new system.

Procedure dependency: if any organization redesigns its procedures for its operations, it also results in change management. When Nokia changed its policies and procedures, it caused in huge changes in company and result in big resistance.

DECREASE IN PROFITS OF NOKIA RESULT IN CHANGE

When the profits of the Nokia have started to decrease from the third quarter 2009, the management of the company decided to restructure the organizational ranks of the management. Nokia separated its entities which are mobile phone division and the division for smart phone. In this division the chief financial officer (CFO) of Motorola Rick Simonson was appointed. He has good knowledge about business and finance. The CEO of Nokia Olli-Pekka allasvuo said that from 2001 to 2004, Rick Simonson has remained as CFO. Now as a Head of Mobile Phones division, Rick will work hard with full responsibility for carrying out the products out side the division. In the third quarter of 2009, Nokia reported in their quarterly financial statement a decline in profits. If we compare the profits for this quarter and same quarter of last year, it shows that the profit of Nokia falls to 391 million pounds, but in the same quarter last year it was about to 1.3 billion pounds. And the sales also decrease by 20 percent to 9 billion pounds.

CHANGE MANAGEMENT PROCESS

This change management is good in implementing the change with low resistance. There are many other approaches but results of this approach are satisfactory as compare to others. It is divided in three parts. First one is prepare for change, second is managing change, third and last one is reinforcing change.

Prepare for change: This step is designed to get ready for change before implementing change. This part provides the solution of at what level the project requires the change. This helps in obtaining knowledge for implementing change effectively. The results of this step are change in profile of individuals, obtain profile for organization characteristics, prepare change management plan, select members for change management team and assign them roles for change.
Managing change: This part of the change management process help in forming policy for project actions. The results of this step are to make plan for communication, arrangement for training, arrangement for coaching, and the main function of this step is to plan the policy for resistance management.
Reinforcing change: This part of the change management process assists the project team in making policies for confirming that the process of modification is continued. This step also helps project teams in making actions and methods for verifying that the change has taken place, and observing that the employees are working in new way and celebrating effective implementation of the change. The results of this step are reinforcing methods, remedial act policy, individual and organizations approaches for respect, celebration on effective implementation, review work after implementation of the change.

Through change management process, you can supervise the factors for change within our organization. Through use of this change management process, the examination and direction would be easy in identifying what level of change can take place in organization. It may also help in how change can be implemented by use of approvals and reviews of stake holders. The phases for supervising change are also included in change management process. Through the use of change management process, you can recognize the factors that require change, authenticate the possibility of each change, help in controlling the change, and also supervise in modification approval.

ANALYSIS OF STAKEHOLDERS

Stakeholders are those who have an interest in the organization’s activities and are affected by the events and judgment, actions and decisions of the company. These peoples have interest in the organization and extensively affected by the activities of the organization. The company should consider the interest of the stakeholders, what they want, there choices, how they can be facilitated etc. for effective implementation of the change the company should discuss the factors of the change and about the implementation of the change with the stakeholders. Obtain suggestions and decide accordingly. In deciding about the change the organization should take into consideration both the factors and the suggestions of the stakeholders. If the stakeholders resist the proposal for change, let them know about the benefits of the change and what the stakeholders can get after the effective implementation of the change.

RECOMMENDATIONS:

Nokia is the world’s largest mobile phone company. It has competent features and services but after consideration of this report some of the recommendations would help the company in achieving targets of the company.

The prices of the sets should be decreased so that everyone can easily purchase the sets. This may result in market raise and profits may also increase.
The availability of spare parts should be in every country so customers can purchase without any difficulty.
Warranty should also be provided for defects.
For saving the huge amount of entertainment material, the amount of capacity of the memory should be raised.
Training should be provided to employees when there is any change in technology and company want to make use that technology.
Customer care centers should be open at main areas of the country in order to provide good services and facilities to customers.
The terms and conditions for claiming warranty should be consumer oriented.
There should be increase in advertisement.
Open franchise at those places where the products of competitors are not available.
CONCLUSION:

Nokia is the leader of all the companies which deal in similar products, because of its experience, innovation; it provides easy and protected solutions. The main product of Nokia is mobile phone and its offices are located all over the world. The mission statement of the Nokia is very attractive “CONNECTING PEOPLE”. The demand of the Nokia products is high as compared to same products of other companies and its products are highly preferable all over the world. There is also effect of the market environment on the company. Market environment can be classified in two categories. One is microenvironment and other is macro environment. Both categories effect the organization. Some of the factors of both categories are such as customers, suppliers, political environment, technical environment, social environment etc. The competitors of Nokia may include Samsung, Motorola, Ericson and so forth. The employees of an organization are influenced by social as well as environmental factors. Change is very essential in organization. Change is unavoidable everything continuously need changes. Prior to making any changes, the organization should identify the causes for change and plan accordingly. Some of the changes are not good for the organization and some are good. The good change is one which pressurizes the employees for sharing new ideas.

Nokia started its business by producing tools and equipment which can be used to cut down woods in Finland. Then it changed its business paper, from paper change itself into paperless office related to IT and from there it changed its business into mobile telephone. Today it’s the leader of all the mobiles. Nokia is going to drive the transformation and playing main role in joining the internet and communication industries. For modification in the organization the Nokia uses two approaches, one is Alignment model and other is Scenario planning model. By alignment approach the strong position among the mission of the company and its resources for effectively running the organization can be ensured. And by scenario planning approach the deliberate thoughts that are carried out by planners can be ensured.

The scenario planning approach is also useful for classification of planned problems and goals. Nokia also made analysis of its stakeholders. Before making any change the company should discuss the matter under consideration with stakeholders, collect information, analyze factors for change and then make decision after taking careful consideration of these factors. The phases included in change management process are preparing for change, managing change and reinforcing change. For increasing the market share and profit and increasing the demand of its products Nokia should decrease the cost f its products, make available its spare parts in every market, increase memory capacity of its products, training should be provided to employees, customer care centers should be opened at main areas of the country, terms and conditions should be customer friendly, franchise should be opened and increase the advertisement for competition. The business of Nokia is mainly related to technology so changes must be made at regular level to satisfy the customer’s needs and requirement.

Introduction of Nokia

Nokia, one of the leading brands in mobile phones, was started by a mining engineer, Fredrik Idestam, in 1865 by making paper from wood pulp mill; a second paper mill was built on Nokianvirta river that gave birth to the present name of this company-Nokia.

The company then started different business and mergers and then finally started mobiles business in 1968. Its head office is in Espoo, Finland and currently has almost 132,000 employees worldwide. Its main products (mobile phones, smartphones, mobile computers, Networks) and services (Maps & Navigation, media software solutions, music, messaging) are in the field of Telecommunication, Internet & computer software. Nokia is selling its products to almost 150 countries globally with annual revenue of over 42 billion euro with 2 billion operating profits and global market share of nearly 35% in 2010. (nokia.com)

Nokia did many innovations and has credit to be the world’s No 1. in many of its products and services e.g. world’s first portable NMT car telephone (Nordic Mobile Telephone-NMT) built by Nokia, GSM call, Nokia Tunes, satellite call, brings Internet on mobile. It introduces First 3g Phone, digital hand portable phones supporting data, fax and the Short Message Service, integrated wireless payphone, dual mode AMPS/TDMA phone, high-speed data terminal for wireless networks, WAP handset, introduced the industry first multimedia messaging solution, first 3GPP compliant WCDMA/GSM dual mode phone, first TDMA handsets with full-color displays, mobile handset with a 4GB hard disk which can store up to 3000 tracks, Nokia N95 was the world’s first device combining GPS and wireless broadband (HSDPA/WLAN). From January 2010, high-end car and pedestrian navigation is available for free on Nokia smartphones. (Zacks research, 2011)

One can imagine its success and popularity from the fact that till 2005, 2 billion mobiles were sold worldwide and Nokia alone sold its billionth phone in that year.

According to Nokia Corporation, ‘Nokia’s story continues with 3G, mobile multiplayer gaming, multimedia devices and a look to the future…’ (nokia.com) and “Nokia’s mission is simple; Connecting People. Our strategic intent is to build great mobile products. Our job is to enable billions of people everywhere to get more of life’s opportunities through mobile.” (nokia.com)

Currently, with the invention of many smart & android phones, Nokia is facing stiff competition in mobiles market as its sales figures are moving downward. But they are now making changes in their structure and operations that is depicted by their statement, “Nokia has recently outlined its new strategic direction, including changes in leadership and operational structure to accelerate the company’s speed of execution in a dynamic competitive environment.” (nokia.com)

Critical Discussion of Recent Past Performance – Financial Ratio Analysis

Financial analysis helps in establishing a relation between various financial statements’ elements which can then be compared with other information about the business. This also determines the future prospects of the company and the area that needs improvement. The basic purpose is to analyze the current financial position & performance of the company according to which a judgement can be made regarding future performance of the business. (Dyson. J.R, 2007)

Financial analysis from the point of view of an investor is mostly concerned with the profitability of the company and also the returns what the company pay to their stock holders in the form of dividends and/or right shares and increase in the stock value. (CIMA, 2000)

One has to look carefully to the annual accounts of the company and the yearly growth trend in terms of revenues, profit and its market share. For the analysis purpose, consolidated accounts of Nokia i.e. Income Statement, Balance Sheet, Cash Flow Statement for the last four years from 2007 to 2010 is taken into account and theses figures obtained from the company’s website are given below:

From this income statement, it is observed that Sales are having a decreasing trend from 2007 to 2009 but shows a slightly increase in 2010 and cost of sales, operating profit, earnings per share and the net profit has also the same trends. It means that profitability of Nokia was much better in 2007 that is 6.7 billion euro as compared to 260 million euro in 2009, but it again shows signs of improvement in 2010 and net profit become 1.3 billion euro.

Tot Lib & Eq 37,599 39,582 35,738 39,123

(nokia.com)

The balance sheet gives an idea to investor that how much business is invested by the shareholder’s equity and how much debt is owed. (Dyson. J.R, 2007)

It is depicted from these balance sheets of Nokia that approximately 45% business is financed by the equity in 2007 but for the next three years this figure is reduced to around 41%. This shows that company owes more in 2010 as compared to 2007 and its financial position was much better in 2007 compared with 2010.

Consolidated Cash Flow Statements of Nokia for the Year Ended (EURm)

2007 2008 2009 2010

• Net Income 6,7463,889 260 1,343
• Depreciation 1,2061,6171,7841,771
• Cash from Op Act7,8823,1973,2474,774
• Cash from Invest -710-2,905 -2,148 -2,421
• Cash from Finance-3,832 -1,545 -696 -911
• Net Change in Cash 3,325-1,302378 1,666

(nokia.com)

The analysis of Cash flow statement gives true information about profit of a company as it relies on real cash transactions. Income statement can sometime mislead because of insufficient cash flows figures showing on the statement. Investors are mostly interested in cash flow statements before making decision to have a clear picture of the company’s cash transactions. The company’s with plenty of cash availability mostly have fewer problems for expansions or investments for growth, paying off debts or to buy back their own stocks.

This cash flow statement shows that Nokia has good position as regard to the cash flow during the year 2007, but it comes to negative figure in 2008 because of losses from investments and finances, but it recovers again in 2009 and makes good progress in 2010. It overall shows that although Nokia had a hard time in 2008 but it picked up again in the subsequent years.

Financial Ratios

Some financial ratios are calculated as regard to profitability, asset turnover, short term and long term liquidity ratios based on the figures outlined in the Income Statement and balance sheets given above for four years from 2007 to 2010. These ratios and their explanations are given as under:

Profitability Ratios:

• Gross Profit Margin 33.84%34.26%32.36%30.20%
• Op Profit Margin 16.19%9.80% 2.34% 4.21%
• Net Profit Margin 13.24%7.63% 0.63% 3.21%

Profitability ratios compare components of income with sales and provide an idea of what makes a business’s income and is expressed as a portion of each sales unit i.e. euro in case of Nokia. These profit margin ratios are different only in terms of numerators and reflect and evaluate performance of different aspects of the company. These all profitability ratios explain the Nokia’s ability to generate the earnings and coverage of its expenses and other costs for the same period (Dyson. J.R, 2007)

For Nokia, we observe that Gross profit margin (Gross Profit/ Sales) remains almost equal (30.2% to 34.2%) for the four years in observation, but the operating profit and Net profit margin shows a great fluctuations ( 2.3% to 16.1% in case of op profit and 0.6% to 13.2% for net profit). This means that Nokia has more operating expenses i.e. selling, marketing, R&D and administration expenses. Secondly, if we see vertically, in year 2007, the difference between Gross profit and net profit is less (33.84%-13.24%= 20.6%) as compared to subsequent years e.g. in year 2009, the difference is 32.63%-0.63%= 31.73; this shows that in this year there is more operating expenses. But this situation improves a little in 2010 and net profit becomes again 3.21%.

Return Ratios:

• Return on Assets17.94%9.82% 1.00% 3.90%
• Return on Capital 54.8% 27.2% 6.7% 7.02%
• Return on Equity 53.9% 27.5% 6.5% 8.67%

Return ratios are also important profitability ratios. These measures the efficiency with which a business employed its assets, capital and equity for profit generation i.e. amount of profit in relation to investment of total assets.

For Nokia, these ratios show that assets are employed more efficiently in the year 2007 and then it has a decreasing trend till 2009 and shows a better position for 2010 as compared to 2009.

Activity Ratios:

• Tot Asset TO 1.4x 1.3×1.1×1.1x
• Fix Asst TO 29.0×25.5x 22.5x 23.1x
• Inventory TO 17.8×20.0x 22.0x 16.8x

Activity ratios measures how well the business assets are used i.e. the benefit produced by the company’s assets or how effectively the business investment is being used. The greater the turnover, more effectively the assets are being used (Dyson. J. R, 2007)

Liquidity Ratios or Credit Ratios:

• Current Ratio 1.5:11.2:1 1.5:11.5:1
• Acid Test Ratio 1.23:1 0.86:1 1.13:1 1.15:1

These two liquidity or credit ratios measure whether a business can pay off debts or bills from its resources over the next twelve months. Acid test ratio (current assets-inventories/current liabilities) gives a clearer picture than current ratio (current assets-current liabilities) because it shows that business is capable to pay off its current liabilities without selling the inventory because sometimes it becomes difficult to sell the inventory at the time of solvency.

Nokia has a good result for these ratios, and shows that the business can easily pay its debts in case there arise any problem.

Long Term Solvency

Debt/Equity Ratio 1.17 1.39 1.42 1.41

This debt equity ratio is greater than one, means that Nokia’s most assets are mainly financed by debt than shareholder’s equity (Dyson. J. R, 2007)

This ratio shows that how much Nokia is relying on debt. From these figures, it reveals that Nokia is depending more on debt as compared to the equity and this has an increasing trend from 2007 onwards.

Share Holder’s Ratio:

Earning /share 1.85 1.07 0.24 0.50

The investors have a keen interest in this ratio as this shows that how much business earns in terms of share of stock because if the business earns more, then it can give more to their shareholders.

Nokia’s earning per share is 1.85 in 2007 which decreases to 0.24 in 2009 but again shows a good performance in 2010 therefore E/Share increased to 0.50.

Other Issues to be Considered in Pursuit of a Potential Investor

A potential investor has to do a full market research about the company and the trends of its growth, market reputation, its competition, development & growth within the company and within the industry along with the complete examination of the financial statements because an investor not only needs a return on the investment but also wants safety of its funds invested. For financial analysis, one has to consider the revenue generation, operating income from operations, net income, return on equity, balance sheet strength and the competitive advantage over a period of years and also its trend along with the trend of the industry.

As far as Nokia Corporation (NOK) is concerned, it is the largest manufacturer of the mobile phones in the world and is the market leader in most of its innovations since 1990’s.

But due to the significant increase in the use of smartphones and android phones in the past recent years, Nokia is facing some difficulties for maintaining its same market share as it was before.

Global mobile phone sales totalled 269.1 million units in 1st qtr of 2009, decreased 8.8% from 1st qtr of 2008. Smartphone sales were 36.4 million units, an increase of 12.7% from the same time last year. Nokia continued to lead the mobile phone market, but its market share dropped from 39.1% to 36.2% in the 1st qtr of 2008 to 1st qtr of 2009. Smartphones sales are 13.5% of all the mobile devices sold in 2009. (Gartner, May 2009)

5 Year Stock Charts for Nokia Corporation- US (NOK) ( As on 22-04-2011)

Source: Businessweek.com

Industry Analysis-Year to Date (As on 22-04-2011)

Nokia (NOK)

Source: Businessweek.com

As the consumers are using more smartphones and android phones now a days, therefore its market share are increasing and also the future expectations to use these phones, as is shown in the figures below:

Smart Phone Market Share with OS (March, 2011)

Source: The Nielson Company (http://tech.fortune.cnn.com)

Next Desired Operating System (Consumers planning on getting a new smartphone in the next year)

Source: The Nielson Company (http://tech.fortune.cnn.com)

Nokia has lost its market share in profitable smartphone segment because of Apple’s iphone and Google’s android phone. In the last few years consumers are moving towards most modern Android phones from Samsung, HTC and prefer less to use the old symbian platform used by Nokia. The Gartner, one research firm expects that android will replace Symbian, and will become the world’s most widely used smartphone this year. Its global market share is expected to be 38.5% as compared to symbian 19.2%. (The Wall Street Journal, Apr 2011)

According to Gartner “By the end of 2011, Android will move to become the most popular operating system (OS) worldwide and will build on its strength to account for 49 percent of the smartphone market by 2012” ( Gartner, Apr 2011)

Their prediction table is given below:

Worldwide Mobile Communications Device Open OS (Operating System) Sales to End Users by OS ( Thounds of Units)

Source: Gartner (April, 2011)

In pursuit of fierce competition from other companies like Samsung, Motorola, Apple, Google, HTC and others, some recent developments made by Nokia:

Nokia has entered in a fifty-fifty joint venture with Siemens AG after receiving Chinese regulatory clearance in acquiring the wireless network infrastructure assets of Motorolla Solutions Inc.
Nokia started using Windows Mobile 7 software in all of its smartphones. (Zack research, 2011)
Nokia made a definitive agreement with Microsoft Corp for the development of a smartphone ecosystem. (BBC, 2011)
In the first quarter 2011, net revenue was $14,214 million that is increased by 9% year over year. This increase was due to the stronger demand, average selling prices and higher volume sales in most of the regions. (Zack research, 2011)

Gartner says, that after Nokia replacing symbian with Microsoft Windows phone operating system, it will not only be able to cut operating cost but also proving better products & services to its customers. In 1st qtr of 2011, Nokia’s smartphone share in the global market fell down to 26% from 41% one year ago. The company is also expecting that its 2nd year will also be challenging, but because of the deal with Microsoft ‘there is less uncertainty for investors about the company’s future prospects’ (The Wall Street Journal, Apr 2011). This deal will also help Nokia in clearing the hurdles in the way of commercializing the new Windows smartphones as quickly as possible.

In the 1st quarter 2011, Nokia’s quarterly revenue was up 9% year over year. The increase was attributable to higher volumes in most regions driven by stronger demand and higher average selling price (ASP). However, gross margin was 29.1% compared with 32% in the last quarter. (Zack Research, Apr 2011) Also Hudson securities said (Apr 2011) that Nokia reported strong results for its 1st quarter 2011 with revenue & earning per share more than expectations.

According to International human press newswire, Nokia’s global presence is still significant as 1.3 billion people using the Nokia’s phone for connecting every day. The Nokia’s deal with Microsoft seemed to be another “Blockbuster”, its sales will increase and the prices could go back to 2007. (ITHP, Feb 2011)

Conclusion

Nokia (NOK), a Finland based multinational company, is the biggest name in the mobile communication technology. Earlier it was involved in many businesses but from 1992 it concentrated on its communication segment and soon became the market leader in many of its innovations. Nokia’s phones are loved by every sector of the consumers, not only because of their reliability but also because that it is providing the cheapest mobiles with most basic functions and also high quality phones with all the latest functions. Its market share remains above 40% globally till last few years. In 2005, 2 billion mobiles were sold worldwide and alone Nokia sold its billionth mobile in that year.

There is a fierce competition in the mobile communication market. Main competitors are Nokia, Apple, Samsung, Google and HTC. All suppliers are making innovations and trying to provide new & extra functions or services in the mobiles therefore expectations of the consumers are increasing day by day and in this race many companies are providing new & innovative mobiles periodically.

From the financial statements of Nokia and the ration analysis, it is examined that Revenues, operating income, profit margin, return on equity, earning per share from 2007 has a decreasing trend till 2009 but all these shows positive developments again from 2010. Current ratio, Quick ratio is also in favour of Nokia. Also, in first quarter 2011, Nokia did very well and more than expectations. Although its overall market share is somewhat decreasing due to the Apple’s iphone and Google’s android phone. But as Nokia did a deal with Microsoft recently for using its windows 7 and producing an ecosystem in mobiles, and also it is doing re-organization of the company, it is expected that it will be able to gain its market share again, still 1.3 billion people are using Nokia worldwide. Therefore, one can invest in Nokia but also need to keep an eye on the growth and development it is making with the passage of time.

References

1. BBC News, “Nokia and Microsoft form partnership“. 11 Feb 2011, online, assessed on April 20,2011, available from http://www.bbc.co.uk/news/business-12427680
   Business week, April 22, 2011, ‘Information Technology Sector, Communications Equipment Industry’, online, assessed on April 22, 2011, available from http://investing.businessweek.com/businessweek/research/stocks/earnings/earnings.asp?ticker=NOK:US CIMA. (2000)
2. Management Accounting Official Terminology. London: The Chartered Institute of Management Accountants
   Dyson, J.R. (2007) Accounting for Non-Accounting Students. Seventh Edition, England: FT Prentice Hall
   Fortune, CNNmoney.com,‘Nielsen: Android gains, iPhone slips’ April 26, 2011, online, assessed on Apr 26, 2011, available from http://tech.fortune.cnn.com/2011/04/26/nielsen-android-gains-iphone-slips/
3. Gartner Research, May 20, 2009, ‘Gartner Says Worldwide Mobile Phone Sales Declined 8.6 Per Cent and Smartphones Grew 12.7 Per Cent in First Quarter of 2009’, online assessed on Apr 26, 2011, available from http://www.gartner.com/it/page.jsp?id=985912
4. Gartner Research, April 7, 2011 ‘Gartner Says Android to Command Nearly Half of Worldwide Smartphone Operating System Market by Year-End 2012’, online, assessed on Apr 26,2011, available from http://www.gartner.com/it/page.jsp?id=1622614
5. ‘Hudson Securities Reports Strong 1Q11 Results For Nokia’ April 21, 2011, online assessed on Apr 27, 2011, available from
6. http://origin.benzinga.com/analyst-ratings/analyst-color/11/04/1023585/hudson-securities-reports-strong-1q11-results-for-nokia

ITHP, International human press newswire, ‘Invest in Nokia?, Feb 2011, online, assessed on Apr 26, 2011, available from http://www.ithp.org/articles/nokia.html
Nokia website, online, assessed on April 15, 2011, available from http://www.nokia.com
Reisinger. D, Cnet news, April 26, 2011, ‘ Nielsen: Android gains, iPhone slips’, online, assessed on April 26, 2011, available from http://news.cnet.com/8301-13506_3-20057445-17.html
The Wall Street Journal, 21 Apr, 2011, ‘Nokia Lifts Itself Out of the Doldrums’, online, assessed on Apr 26, 2011 available from http://money.uk.msn.com/wall-street-journal.aspx?cp-documentid=157142938
Zacks Research, Business News, ‘Nokia Surprises in 1Q11’ 21-02-2011, online, assessed on April 17, 2011, available from http://www.favstocks.com/nokia-surprises-in-1q11/2148356/

Total quality management summarizes the essential points in managing a business effectively. Effective business management means providing excellent service or products to the consumers, maintaining good atmosphere among workers and making the business dynamic and growing.

Dr. W. Edwards Deming can be considered as the one who started this concept.  He began the idea by changing a lot of beliefs and philosophy in business that most employees and employers are used to. The whole idea of Dr. Deming is to improve a certain industry by creating something new or by innovating, focusing on the quality of the product, changing the “old” system by which workers are managed, putting the consumers at the topmost priority and concern, and having the drive to improve and not remain stagnant (Hunter, 2008).

Dr. Deming also wrote the “Seven Deadly Disease” which discusses the constraints in the improvement of a business or the whole industry, itself. What he included in there are simple points and activities most companies are guilty of which unconsciously lowers the quality of how they manage the company. Getting rid of those can be very helpful for the company (Value Based Management, 2008).

The ideas of Dr. Deming had been adapted by the Japanese businessmen and it really improved the quality of their products and services. One Japanese company is Honda, makers of cars, which has been inspired by those ideas. The company has started to manufacture cars in as early as 1950’s. The Honda cars were successful to penetrate the world market and get a huge following all over the world. Honda gave outstanding car models and their cars can be seen in all streets everyday in many countries including the US.

Honda also received numerous awards because of the quality products and services they have for the consumers. They have been recognized not only in Japan but by other countries as well. In terms of quality management, Honda is one of the top companies in the world (Honda Motor, Co., 2008).

The company considers working with a good atmosphere within their offices. The company has started to put their office at the center of their headquarter rather than at the top level so they could easily reach out to their employees. They also provide excellent training among their employees (Heller and De Bono).

The Honda Company is, undeniably, innovators when it comes to cars. They have presented their hybrid cars, cars which drive using water and cars with outstanding features. The very thing which made the company get into the world market is their outstanding types of cars. Honda Company is good at working on different features and models. The features are what many consumers look up to before they purchase a product. Honda was able to introduce great features in their cars to the public. This is what Dr. Deming was saying when he said that there must be a drive for constant improvement and making quality as the top concern of all businesses to stay in their businesses. It is important to know what the consumers need and from there, start an idea on how to satisfy those needs. Most of the time, the consumers do not really know what they need. They just realize that they need something or have a certain problem when they are faced with the solution or the answer. It can also be possible to “create” a need. It is making the people believe that there is a need for that product or service. Cell phone companies are very successful when it comes to that. They have emphasized the need for easier and fast communication by showing examples of situation when the need for a fast and easy contact with the police and hospitals, co-workers or relatives. They have stressed the help that cell phones can do in cases of emergency. They have made the public believe that people needs cell phones and now, cell phones are not just purchased because the consumers think that they’ll be needing it for emergencies. They buy cell phones because they know they need it everyday. Today, even children in pre-school have their own cell phones.

Many cell phone companies have taken their part in that industry. Competition among those companies is tight and the best buys depend on the features and models.

Nokia has been very excellent in improving their products. Their previous models were just phones with a four-liner screen, monotonic ring tones and games. Now, they have incorporated radio, music player, a T.V. and a computer into their cell phone products. The consumer would have to dispose their old models of phones to buy a more stylish phone with outstanding functions (Nokia, 2008).

Definitely Honda and Nokia are not guilty of any of those seven deadly diseases of business companies because, if they do, they won’t be able to survive the tight competition in the market. And these companies are not only surviving. In terms of performance and sales, they stand out from their competitors.

Total quality management involves not only the consumers and the business, for when it is only business, the concern is just profit and sales. Total quality management involves the consumers, the employees, the managers and other officers, the product and services and the system by which the business is run. It is not concerned on the sales the company can have. It is focused on driving the company to having more sales and keeping the company in its business. To do so, the company would have to make quality as their number one concern. The concept of quality must be taught to all employees and employers so they could attain their goal together. It may be difficult to attain, though, because the first step to having a total quality management is to make constant improvement in products and services, and that includes innovation. To be innovative requires skills and talents. But, getting there means getting the company to the top level and ensuring that the company can still be participating in the market.

References:

Heller, E. and E. de Bono. 2008. Honda management has successfully established an Eastern-style corporate culture into its organisation. Thinking Managers. Retrieved December 11, 2008 from http://www.thinkingmanagers.com /companies/honda.php.

Honda Motor, Co.  2008. The Challenging Spirits of Honda. Retrieved December 11, 2008 from http://world.honda.com/history/.

Hunter, John. 2008. Curious Cat: Deming on Management. Retrieved December 11, 2008 from http://curiouscat.com/deming/

Nokia, 2008. Retrieved December 11, 2008 from http://www.nokiausa.com/phones.

Value Based Management. 2008. The Deming Cycle. Retrieved December 11, 2008 from http://www.valuebasedmanagement.net/methods_demingcycle.html.