Strategic Analysis of

Nokia’s Smartphone Market

Corporate Policy
and Strategic Management
Group A
Content
Content
1. Smartphone – Introduction
Content
1. Smartphone – Introduction
2. Nokia – Description of company
Content
1. Smartphone – Introduction
2. Nokia – Description of company
3. Why Nokia, why smartphones?
Content
1. Smartphone – Introduction
2. Nokia – Description of company
3. Why Nokia, why smartphones?
4. Industry Analysis
Content
1. Smartphone – Introduction
2. Nokia – Description of company
3. Why Nokia, why smartphones?
4. Industry Analysis
5. Porter´s 5 Forces
Content
1. Smartphone – Introduction
2. Nokia – Description of company
3. Why Nokia, why smartphones?
4. Industry Analysis
5. Porter´s 5 Forces
6. Complements
Content
1. Smartphone – Introduction
2. Nokia – Description of company
3. Why Nokia, why smartphones?
4. Industry Analysis
5. Porter´s 5 Forces
6. Complements
7. SWOT Analysis
Content
1. Smartphone – Introduction
2. Nokia – Description of company
3. Why Nokia, why smartphones?
4. Industry Analysis
5. Porter´s 5 Forces
6. Complements
7. SWOT Analysis
8. Strategic Diagnosis of Nokia
Smartphone Industry
Content
1. Smartphone – Introduction
2. Nokia – Description of company
3. Why Nokia, why smartphones?
4. Industry Analysis
5. Porter´s 5 Forces
6. Complements
7. SWOT Analysis
8. Strategic Diagnosis of Nokia
Smartphone Industry
9. Strategy Formulation
Content
1. Smartphone – Introduction
2. Nokia – Description of company
3. Why Nokia, why smartphones?
4. Industry Analysis
5. Porter´s 5 Forces
6. Complements
7. SWOT Analysis
8. Strategic Diagnosis of Nokia
Smartphone Industry
9. Strategy Formulation
10. Q&A
Smartphone - Introduction
 Smartphone - Introduction

No industry standard definition of a smartphone

 Smartphone - Introduction

Mobile phone offering advanced capabilities…

 Smartphone - Introduction

PC-like
functionality
Smartphone - Introduction

a phone that runs complete operating

system software providing a standardized
interface and platform for application
developers
 Smartphone - Introduction

A phone with
advanced
features
Smartphone - Introduction
Nokia
Description of
Company
Nokia – Description of company

Nokia envisions a world where

connecting people to what
matters empowers them the most
of every moment

Olli-Pekka Kallasvuo, Nokia CEO

Nokia – Description of company
Nokia – Description of company
 Manufacturer of mobile devices
Nokia – Description of company
 Manufacturer of mobile devices
 Leader in converging Internet and
communication industries
Nokia – Description of company
 Manufacturer of mobile devices
 Leader in converging Internet and
communication industries
 Wide range of devices
Nokia – Description of company
 Manufacturer of mobile devices
 Leader in converging Internet and
communication industries
 Wide range of devices
 Major consumer segments
Nokia – Description of company
 Manufacturer of mobile devices
 Leader in converging Internet and
communication industries
 Wide range of devices
 Major consumer segments
 Music, maps, media, messaging and
games
Nokia Organization
 Nokia Organization

Devices: Develops and manages the mobile device portfolio,

includes the sources of components.
 Nokia Organization

Services & Software: Develops consumer Internet services

in 5 areas (music, maps, media, messaging and games), and
works to deliver the services in an easily, accessible
manner to consumers.
 Nokia Organization

Markets: Manages supply chains, sales channel, brand and

marketing activities.
 Nokia Organization

Corporate Development Office. Gives operational support

to the units and explores corporate strategic and future
growth opportunities.
 Nokia Organization

Nokia Siemens Network: Provides wireless and fixed network

infrastructure, communications and networks service platforms
and professional services to operators and service providers.
 Nokia Organization

NAVTEQ: Provides digital map data for automotive navigation

systems, mobile navigation devices, Internet-based mapping
applications, and government and business solutions.
Nokia Organization
2008 Facts and Figures
2008 Facts and Figures

Head office in Finland

 2008 Facts and Figures

World’s #1 manufacturer
of mobile devices
2008 Facts and Figures

39% share of global device

market in 2008
 2008 Facts and Figures

Mobile device volumes

468 million units
2008 Facts and Figures

Net sales EUR

50.7 billion
 2008 Facts and Figures

Operating profit EUR 5.0 billion

2008 Facts and Figures

128,445 employees
at year end
 2008 Facts and Figures

R&D investment EUR 6.0 billion

 2008 Facts and Figures

Sales in more than 150 countries

2008 Facts and Figures
Strategic Objectives
Strategic Objectives
 Irresistible solutions and vibrant
ecosystems
Strategic Objectives
 Irresistible solutions and vibrant
ecosystems
 Direct and continuous consumer
relationships.
Strategic Objectives
 Irresistible solutions and vibrant
ecosystems
 Direct and continuous consumer
relationships.
 Best devices
 Broadening their geographic reach
 Broadening their device base will grow
their service business
Strategic Objectives
 Irresistible solutions and vibrant
ecosystems
 Direct and continuous consumer
relationships.
 Best devices
 Broadening their geographic reach
 Broadening their device base will grow
their service business
 Smart services
 Creating relevant and personalized
services
 Target: 300 million people using their
smart services by 2012
Why Nokia, Why
Smartphones?
Why Nokia, why smartphones?
 Why Nokia, why smartphones?

Smartphone segment is one of the rapidly growing segments

in the mobile handset industry
Why Nokia, why smartphones?
 Why Nokia, why smartphones?

Manufacturers Market Share YoY Growth Rate

Nokia 44.3% 10.4%

Rim 20.9% 77%

Apple 13.7% 62.6%

Though Nokia is a market leader in the entire mobile industry,

its performance in smartphone market is abysmal in comparison
with its competitors
Why Nokia, why smartphones?

Nokia
Why Nokia, why smartphones?

Nokia
Why Nokia, why smartphones?

 Strategy for
Nokia Nokia to jump to
Star Category in
BCG Matrix
Why Nokia, why smartphones?

 Strategy for
Nokia Nokia to jump to
Star Category in
BCG Matrix
 Focusing on
external
atributes
Industry Analysis
Porter’s 5 Forces
Porter’s 5 Forces

Competitive Rivalry
(Intense)

• Rivalry is intense among existing players

• No much differentiation in product features
• Exit barriers have to be evaluated in
correlation with value chain analysis
Porter’s 5 Forces

Bargaining Power of Suppliers

(Moderate)

• Software provider
• Hardware provider
Porter’s 5 Forces

Bargaining Power of Customers

(High)

• More choice of product and limited

differentiation
• Elastic demand
• Less asymmetric information
• Less switching costs
Porter’s 5 Forces

Threat of New Entrants

(Low)

• Huge capital requirements

• Economies of scale
• Product differentiation
• Distribution channel
• Absolute cost advantage
• Governmental and legal barriers
• Retaliation
• Brand
Porter’s 5 Forces

Threat of Substitute Products

(Moderate)

• Depends on the impact of substitute products

• Variety of functions
• Other substitute products: notebooks, PDAs,
tablet PCs
Porter’s 5 Forces
Complements (Moderate)
Complements (Moderate)
 Email
Complements (Moderate)
 Email
 Maps & GPS
Complements (Moderate)
 Email
 Maps & GPS
 Applications
 Music & other media related
applications
 Utility applications
 Internet based
…
 SWOT Analysis
Strengths Weakness
• Brand Awareness • Not good at software
• Technology leader in • Performance of Symbian OS
Manufacturing Mobiles is lackluster
• Market leader • Increasing dissatisfaction
• Presence across 150 levels with its smartphone
countries • Very weak market share in
US
Opportunities Threats
• Huge loyal customer base • Rapidly changing industry
• Huge presence in • Chances of missing
developing countries Inflection point is high
• Can use its infrastructure • Threat of entry from new
business (Nokia Siemens players, Microsoft might
Network) to reduce the enter smartphones market.
bargaining power of mobile Google has just entered the
operators market with Nexus One.
Strategic Diagnosis of
Nokia Smartphone
Industry
Product Analysis
Product Analysis
Product Analysis
 Nokia’s N97 is
feature-richer
than iPhone
Product Analysis
 Nokia’s N97 is
feature-richer
than iPhone
Product Analysis
 Nokia’s N97 is
feature-richer
than iPhone

BUT:
Product Analysis
 Nokia’s N97 is
feature-richer
than iPhone

BUT:
 Nokia sold 1st qtr
of launch: 500,000
phones
Product Analysis
 Nokia’s N97 is
feature-richer
than iPhone

BUT:
 Nokia sold 1st qtr
of launch: 500,000
phones
 iPhone sold 1st
week of launch:
1,000,000 phones
Smartphone Satisfaction

Platform Satisfaction Index

iPhone 92%
Android 77%
Palm Pre 77%
Blackberry 73%
Palm Treo 70%
Symbian (Nokia) 66%
Windows 66%
Smartphone Satisfaction

Platform Satisfaction Index

iPhone 92%
Android 77%
Palm Pre 77%
Blackberry 73%
Palm Treo 70%
Symbian (Nokia) 66%
Windows 66%
Segmentation Analysis
Segmentation Analysis
 Entertainment
Users
 N Series
Segmentation Analysis
 Entertainment
Users
 N Series
 Communication
Users
 E Series
Segmentation Analysis
 Entertainment
Users
 N Series
 Communication
Users
 E Series
 Information
Users
Segmentation Analysis
 Entertainment
Users
 N Series
 Communication
Users
 E Series
 Information
Users
Global Internet traffic
through smartphones
Global Traffic September 2009 October 2009
By Platform Share Share

Apple iPhone 43% 50%

Symbian 29% 25%
(Nokia)
Android 10% 11%
RIM BlackBerry 8% 7%

Windows Mobile 5% 3%

Others 5% 4%
Global Internet traffic
through smartphones
Global Traffic September 2009 October 2009
By Platform Share Share

Apple iPhone 43% 50%

Symbian 29% 25%
(Nokia)
Android 10% 11%
RIM BlackBerry 8% 7%

Windows Mobile 5% 3%

Others 5% 4%
Product-line analysis
Product-line analysis

Broad
range of
products
 Product-line analysis
NSeries launched since
2007: N76, N77, N81,
N92, N93i, N95
2008: N78, N79, N85, N96
2009: N86, N97, N97 Mini
 Product-line analysis
NSeries launched since
2007: N76, N77, N81,
N92, N93i, N95
2008: N78, N79, N85, N96
2009: N86, N97, N97 Mini

In that same period,

Apple released only
one Smartphone:

iPhone
Product-line analysis
ESeries launched since
2007: E51, E61i, E65, E90
2008: E63, E66, E71
2009: E52, E55, E72, E75
Product-line analysis
ESeries launched since
2007: E51, E61i, E65, E90
2008: E63, E66, E71
2009: E52, E55, E72, E75

In that same period,

Blackberry
has launched far
fewer phones than
Nokia.
Product-line analysis
Product-line analysis
Product-line analysis
 Product-line analysis
Product embraced by
the right consumer
Product-line analysis
Product embraced by
the right consumer
 Product-line analysis
Product embraced by
the right consumer

Sufficient consumers in
each segment
Product-line analysis
Product embraced by
the right consumer

Sufficient consumers in
each segment
Product-line analysis
Product embraced by
the right consumer

Nokia
is doing
Sufficient consumers in
each segment
neither
Product-line analysis
Product embraced by
the right consumer

Nokia
is doing
Sufficient consumers in
each segment
neither
Value Chain
Value Chain
Telecom operators
exert control
Value Chain
Telecom operators
exert control

Telecom operators
influence the total
sales of
smartphones
Value Chain
Voice ARPU is going
down
Value Chain
Voice ARPU is going
down

The future is DATA!

Value Chain
Value Chain
Strategy
Formulation
Product differentiation
Product differentiation
 Applicactions are the product
differentiatior
Product differentiation
 Applicactions are the product
differentiatior
 Nokia’s OVI Store
Product differentiation
 Applicactions are the product
differentiatior
 Nokia’s OVI Store
 Projection: in 2014 6.67 billion
applications would be downloaded
Product differentiation
 Applicactions are the product
differentiatior
 Nokia’s OVI Store
 Projection: in 2014 6.67 billion
applications would be downloaded
 Increase User Satisfaction Index
Product differentiation
 Applicactions are the product
differentiatior
 Nokia’s OVI Store
 Projection: in 2014 6.67 billion
applications would be downloaded
 Increase User Satisfaction Index
 Alliance with software developers
Product differentiation
 Applicactions are the product
differentiatior
 Nokia’s OVI Store
 Projection: in 2014 6.67 billion
applications would be downloaded
 Increase User Satisfaction Index
 Alliance with software developers
 Increase community strengh of Maemo
Product differentiation
 Applicactions are the product
differentiatior
 Nokia’s OVI Store
 Projection: in 2014 6.67 billion
applications would be downloaded
 Increase User Satisfaction Index
 Alliance with software developers
 Increase community strengh of Maemo
Cost differentiation

Mobile Operating
Manufacturer Profits
Nokia 30.7
Apple 36.4
Samsung 13.3
RIM 15.4
LG 4.2
HTC 5.1
Motorola -0.1
Sony Ericsson -0.1
Cost differentiation
 Nokia can set an
Mobile Operating industry
Manufacturer Profits benchmark for
Nokia 30.7 operating profits
Apple 36.4
Samsung 13.3
RIM 15.4
LG 4.2
HTC 5.1
Motorola -0.1
Sony Ericsson -0.1
Cost differentiation
 Nokia can set an
Mobile Operating industry
Manufacturer Profits benchmark for
Nokia 30.7 operating profits
Apple 36.4  Pressure on
Samsung 13.3 competitors
RIM 15.4
LG 4.2
HTC 5.1
Motorola -0.1
Sony Ericsson -0.1
Cost differentiation
 Nokia can set an
Mobile Operating industry
Manufacturer Profits benchmark for
Nokia 30.7 operating profits
Apple 36.4  Pressure on
Samsung 13.3 competitors
RIM 15.4  Cost leadership
LG 4.2 an invincible
HTC 5.1 position against
Motorola -0.1 competitors
Sony Ericsson -0.1
Cost differentiation
 Nokia can set an
Mobile Operating industry
Manufacturer Profits benchmark for
Nokia 30.7 operating profits
Apple 36.4  Pressure on
Samsung 13.3 competitors
RIM 15.4  Cost leadership
LG 4.2 an invincible
HTC 5.1 position against
Motorola -0.1 competitors
Sony Ericsson -0.1  Fight head-on
with Apple
Cost differentiation
 Nokia can set an
Mobile Operating industry
Manufacturer Profits benchmark for
Nokia 30.7 operating profits
Apple 36.4  Pressure on
Samsung 13.3 competitors
RIM 15.4  Cost leadership
LG 4.2 an invincible
HTC 5.1 position against
Motorola -0.1 competitors
Sony Ericsson -0.1  Fight head-on
with Apple
Competitive Strategy

NOKIA
Mass
Market Broad
Low cost mass differentiation
market strategy strategy

Niche
Market Focus
Low cost niche differentiation
market strategy strategy
Cost Product
Advantage Differentiation
Competitive Strategy

NOKIA
Mass
Market Broad
Low cost mass differentiation
market strategy strategy

Niche
Market Focus
Low cost niche differentiation
market strategy strategy
Cost Product
Advantage Differentiation
Competitive Strategy

NOKIA
Mass
Market Broad
Low cost mass differentiation
market strategy strategy

Niche
Market Focus
Low cost niche differentiation
market strategy strategy
Cost Product
Advantage Differentiation
Functional Strategy
Functional Strategy
 Reduce product portfolio
Functional Strategy
 Reduce product portfolio
 Opportunity for targeting
information users
Functional Strategy
 Reduce product portfolio
 Opportunity for targeting
information users
 Target specific customers and
specific lifestyles
Functional Strategy
 Reduce product portfolio
 Opportunity for targeting
information users
 Target specific customers and
specific lifestyles
 Connect emotionally with the target
Functional Strategy
 Reduce product portfolio
 Opportunity for targeting
information users
 Target specific customers and
specific lifestyles
 Connect emotionally with the target
 Define roadmap of Operating Systems
(Symbian or Maemo)
Functional Strategy
 Reduce product portfolio
 Opportunity for targeting
information users
 Target specific customers and
specific lifestyles
 Connect emotionally with the target
 Define roadmap of Operating Systems
(Symbian or Maemo)
 Tight vigil on inflection points
Functional Strategy
 Reduce product portfolio
 Opportunity for targeting
information users
 Target specific customers and
specific lifestyles
 Connect emotionally with the target
 Define roadmap of Operating Systems
(Symbian or Maemo)
 Tight vigil on inflection points
Corporate Strategy
 Continue divestments
 Concentrate resources and energy in
smartphone business
Corporate Strategy
 Continue divestments
 Concentrate resources and energy in
smartphone business
Q&A