The Future of Nokia (Case #21, Notes)
Overview
Nokia cannot approach the global market as they used to with mass production and minimal customization. We have seen two prevalent markets emerge and different strategies must be developed for each. Nokia has an advantage with established manufacturing prowess, which it can leverage, in developing markets. Its technology focus must be on ways to help network operators reduce costs and add flexibility to their equipment and cell phones. This is in direct contrast to mature markets where the focus is on investing in converging technologies and building the brand name. Whereas Nokia is positioned well to offer economies of scale to the huge potential in the developing markets, it must find a better balance in mature, developed markets by moving towards outsourcing to ODMs (original design manufacturers) in order to stay competitive.
The cell phone industry is moving towards a horizontal structure, which means that establishing relationships with operators and specialized vendors will be integral to Nokia's future success. Nokia cannot ignore the rise of these players as we have already seen the trend towards "co-branding" between operators and handset makers. Fortunately, Nokia has been able to insulate themselves from these shifting trends in the global cell phone market long enough to gain such a substantial lead in market share. The cell phone industry is evolving, and the winner will be the company that can sustain profitability in mature markets with decreasing growth long enough to carry over its success into the emerging ones.
Discussion Questions
1. How can Nokia position itself in Developing Markets to capture future market share (while maintaining economies of scale)?
2. What must Nokia do to better position their mobile phone business in Developed Markets?
3. Can Nokia maintain economies of scale in the Developed Markets? Should it use outsourcing as part of its new strategy?