Strategic Formulation of Nokia2

STRATEGIC FORMULATION OF NOKIA --------------------------------------------------------------------------------------------------------------------------------------
CHAPTER 1 INTRODUCTION OF THE PROJECT
1.1 COMPANY PROFILE Nokia is a multinational corporation engaged in the manufacturing of mobile phones devices, in converging internet and communication industries, having about 132,000 employees working world wide. The organization is the Worlds largest mobile manufacturing company and is operational is 150 different countries having an approximate global annual sales revenue of 42 billion and operating profit of 2 billion in the preceding year 2010. The organization has a market share of about 28.9% as of the preceding year 2010 and is still the market leader in the world of mobile phones. Nokia Corporation has a history of 146 years and it wasn't the way it is today, it took Nokia decades to reach at this point. The first Nokia century began with Fredrik Idestam's paper mill on the banks of the Nokianvirta River. Between 1865 and 1967, the company would become a major industrial force, but it took a merger with a cable company and a rubber firm to set the new Nokia Corporation on the path to electronics. From 1968-91, the newly formed Nokia Corporation was ideally positioned for a pioneering role in the early evolution of mobile communications. As European telecommunications markets were deregulated and mobile networks became global, Nokia led the way with some iconic products. In 1992, Nokia decided to focus on its telecommunications business. This was probably the most important strategic decision in its history. As adoption of the GSM standard grew, the CEO put Nokia at the head of the mobile telephone industrys global boom and made it the world leader before the end of the decade. And in the current century Nokias story continues with 3G, mobile multiplayer gaming, multimedia devices and a look to the future
1.2 HISTORY Nokia Oyj is a Finnish multinational communications and information technology
corporation headquartered in Keilaniemi, Espoo, Finland. Its principal products are mobile telephones and portable IT devices. It also offers Internet services
including applications, games, music, media and messaging through its Ovi platform, and free-of-charge digital map information and navigation services through its wholly owned subsidiary Navteq. Nokia has a joint venture with Siemens, Nokia Siemens Networks, which provides telecommunications network equipment and services. Nokia has around 122,000 employees across 120 countries, sales in more than 150 countries and annual revenues of around 38 billion. As of 2012 it is the world's second-largest mobile phone maker by unit sales (after Samsung), with a global market share of 22.5% in the first quarter. Nokia is a public limited-liability company listed on the Helsinki, Frankfurt, and New York stock exchanges. It is the world's 143rd-largest company measured by 2011 revenues according to the Fortune Global 500. Nokia was the world's largest vendor of mobile phones from 1998 to 2012. However, over the past five years it has suffered declining market share as a result of the growing use of smartphones from other vendors, principally the Apple iPhone and devices running on Google's Android operating system. As a result, its share price has fallen from a high of US$40 in 2007 to under US$3 in 2012. Since February 2011, Nokia has had a strategic partnership with Microsoft, as part of which all Nokia smartphones will incorporate Microsoft's Windows Phone operating system (replacing Symbian). Nokia unveiled its first Windows Phone handsets, the Lumia 710 and 800, in October 2011. PRE TELECOMMUNICATION ERA The predecessors of the modern Nokia were the Nokia Company, Finnish Rubber Works Ltd and Finnish Cable Works Ltd. Nokia's history started in 1865 when mining engineer Fredrik Idestam established a groundwood pulp mill on the banks of the Tammerkoski rapids in the town of Tampere, in southwestern Finland in the Russian Empire and started manufacturing paper. In 1868, Idestam built a second mill near the town of Nokia, fifteen kilo meters (nine miles) west of Tampere by the Nokianvirta River,
which had better resources for hydropower production. In 1871, Idestam, with the help of his close friend statesman Leo Mechelin, renamed and transformed his firm into a share company, thereby founding the Nokia Company, the name it is still known by today. Toward the end of the 19th century, Mechelin's wishes to expand into the electricity business were at first thwarted by Idestam's opposition. However, Idestam's retirement from the management of the company in 1896 allowed Mechelin to become the company's chairman (from 1898 until 1914) and sell most shareholders on his plans, thus realizing his vision. In 1902, Nokia added electricity generation to its business activities. Industrial conglomerate In 1898, Eduard Poln founded Finnish Rubber Works, manufacturer of galoshes and other rubber products, which later became Nokia's rubber business. At the beginning of the 20th century, Finnish Rubber Works established its factories near the town of Nokia and they began using Nokia as its product brand. In 1912, Arvid Wickstrm founded Finnish Cable Works, producer of telephone, telegraph and electrical cables and the foundation of Nokia's cable and electronics businesses. At the end of the 1910s, shortly after World War I, the Nokia Company was nearing bankruptcy. To ensure the continuation of electricity supply from Nokia's generators, Finnish Rubber Works acquired the business of the insolvent company. In 1922, Finnish Rubber Works acquired Finnish Cable Works. In 1937, Verner Weckman, a sport wrestler and Finland's first Olympic Gold medalist, became president of Finnish Cable Works, after 16 years as its technical director. After World War II, Finnish Cable Works supplied cables to the Soviet Union as part of Finland's war reparations. This gave the company a good foothold for later trade. The three companies, which had been jointly owned since 1922, were merged to form a new industrial conglomerate, Nokia Corporation in 1967 and paved the way for Nokia's future as a global corporation. The new company was involved in many industries, producing at one time or another paper products, car and bicycle tires, footwear (including rubber boots), communications cables, televisions and other consumer electronics, personal computers, electricity generation machinery, robotics, capacitors, military communications and equipment, plastics, aluminum
and chemicals. Each business unit had its own director who reported to the first Nokia Corporation President, Bjrn Westerlund. As the president of the Finnish Cable Works, he had been responsible for setting up the company's first electronics department in 1960, sowing the seeds of Nokia's future in telecommunications. Eventually, the company decided to leave consumer electronics behind in the 1990s and focused solely on the fastest growing segments in telecommunications. Nokian Tyres, manufacturer of tires, split from Nokia Corporation to form its own company in 1988 and two years later Nokian Footwear, manufacturer of rubber boots, was founded. During the rest of the 1990s, Nokia divested itself of all of its non-telecommunications businesses.
Networking equipment In the 1970s, Nokia became more involved in the telecommunications industry by developing the Nokia DX 200, a digital switch for telephone exchanges. The DX 200 became the workhorse of the network equipment division. Its modular and flexible architecture enabled it to be developed into various switching products. In 1984, development of a version of the exchange for the Nordic Mobile Telephony network was started. For a while in the 1970s, Nokia's network equipment production was separated into Telefenno, a company jointly owned by the parent corporation and by a company owned by the Finnish state. In 1987, the state sold its shares to Nokia and in 1992 the name was changed to Nokia Telecommunications. In the 1970s and 1980s, Nokia developed the Sanomalaitejrjestelm ("Message device system"), a digital, portable and encrypted text-based communications device for the Finnish Defence Forces. The current main unit used by the Defence Forces is the Sanomalaite M/90 (SANLA M/90).
First mobile phones The Mobira Cityman 150, Nokia's NMT-900 mobile phone from 1989 (left), compared to the Nokia 1100 from 2003. The Mobira Cityman line was launched in 1987. The technologies that preceded modern cellular mobile telephony systems were the various "0G" pre-cellular mobile radio telephony standards. Nokia had been producing commercial and some military mobile radio communications technology since the 1960s, although this part of the company was sold some time before the later company rationalization. Since 1964, Nokia had developed VHF radio simultaneously with Salora Oy. In 1966, Nokia and Salora started developing the ARP standard (which stands for Autoradiopuhelin, or car radio phone in English), a car-based mobile radio telephony system and the first commercially operated public mobile phone network in Finland. It went online in 1971 and offered 100% coverage in 1978. In 1979, the merger of Nokia and Salora resulted in the establishment of Mobira Oy. Mobira began developing mobile phones for the NMT (Nordic Mobile Telephony) network standard, the first-generation, first fully automatic cellular phone system that went online in 1981. In 1982, Mobira introduced its first car phone, the Mobira Senator for NMT-450 networks. Nokia bought Salora Oy in 1984 and now owning 100% of the company, changed the company's telecommunications branch name to Nokia-Mobira Oy. The Mobira Talkman, launched in 1984, was one of the world's first transportable phones. In 1987, Nokia introduced one of the world's first handheld phones, the Mobira Cityman 900 for NMT-900 networks (which, compared to NMT-450, offered a better signal, yet a shorter roam). While the Mobira Senator of 1982 had weighed 9.8 kg (22 lb) and the Talkman just under 5 kg (11 lb), the Mobira Cityman weighed only 800 g (28 oz) with the battery and had a price tag of 24,000 Finnish marks (approximately 4,560). Despite the high price, the first phones were almost snatched from the sales assistants' hands. Initially, the mobile phone was a "yuppie" product and a status symbol. Nokia's mobile phones got a big publicity boost in 1987, when Soviet leader Mikhail Gorbachev was pictured using a Mobira Cityman to make a call from Helsinki to his communications minister in Moscow. This led to the phone's nickname of the "Gorba".
In 1988, Jorma Nieminen, resigning from the post of CEO of the mobile phone unit, along with two other employees from the unit, started a notable mobile phone company of their own, Benefon Oy (since renamed to GeoSentric). One year later, Nokia-Mobira Oy became Nokia Mobile Phones. Involvement in GSM Nokia was one of the key developers of GSM (Global System for Mobile Communications), the second-generation mobile technology which could carry data as well as voice traffic. NMT (Nordic Mobile Telephony), the world's first mobile telephony standard that enabled international roaming, provided valuable experience for Nokia for its close participation in developing GSM, which was adopted in 1987 as the new European standard for digital mobile technology. Nokia delivered its first GSM network to the Finnish operator Radiolinja in 1989. The world's first commercial GSM call was made on 1 July 1991 in Helsinki, Finland over a Nokia-supplied network, by then Prime Minister of Finland Harri Holkeri, using a prototype Nokia GSM phone. In 1992, the first GSM phone, the Nokia 1011, was launched. The model number refers to its launch date, 10 November. The Nokia 1011 did not yet employ Nokia's characteristic ringtone, the Nokia tune. It was introduced as a ringtone in 1994 with the Nokia 2100 series. GSM's high-quality voice calls, easy international roaming and support for new services like text messaging (SMS) laid the foundations for a worldwide boom in mobile phone use. GSM came to dominate the world of mobile telephony in the 1990s, in mid-2008 accounting for about three billion mobile telephone subscribers in the world, with more than 700 mobile operators across 218 countries and territories. New connections are added at the rate of 15 per second, or 1.3 million per day.
1.3 VISION AND MISSION VISION STATEMENT:
Nokias vision is simply Connecting People
MISSION STATEMENT: Nokia Corporation defines its mission to connect people through mobile phone technology andquotes its mission statement as follows: Our strategic intent is to build great mobile products our job is to enable billions of people everywhere to get connected
1.4 OBJECTIVE OF STUDY Every task is undertaken with an objective. Without any objective a task is rendered meaningless. The main objectives for undertaking this project are: The main objective is to study about the future strategic choice of Nokia. To know sustainable and reliable strategy that evaluates the current strategic position, and the recent past strategy development history of the company This project will help me to get in-depth knowledge about the academic theories and concepts used to evaluate the strategic position of a company and to formulate a future strategy for a company. It also helps me to identify the gap between literatures and practice.
1.5 RESEARCH METHODOLOGY Research methodology is a way to systematically solve the research problem. In it, we study the various steps that are generally adapted by a researcher in studying research problem along with logic behind them. It includes the formulating of research problem, study of literature, collecting the data, analyzing that data and making interpretations of that data. Research methodology used: Web sites. Books
CHAPTER 2 STRATEGIC FORMULATION
2.1 INTRODUCTION Strategy formulation is a very basic step for the development of a company as it acts as the blue print for the company and is very significant. The initial phase in the strategic management process is the stage of strategy formulation. Nokia Corporation has developed the following strategy to compete and grow in the market. Strategy formulation is vital to the well-being of a company or organization. There are two major types of strategy: (1) corporate strategy, in which companies decide which line or lines of business to engage in; and (2) business or competitive strategy, which sets the framework for achieving success in a particular business. While business strategy often receives more attention than corporate strategy, both forms of strategy involve planning, industry/market analysis, goal setting, commitment of resources, and monitoring.
2.2 STRATEGY OF NOKIA Nokia Corporation has created an alliance with the Microsoft Company through which it has gained the opportunity to launch new mobile phones in the market which would be based on Windows 7 operating system. Nokia Corporation has basically adopted the strategy of New Product Development and Horizontal Integration Strategy through which Nokia Corporation plans to launch new mobile phones with core 2 duo processors and about 1.0-1.5 GB of Ram and full HD 1080p video recording cameras and in anew slim design and will use Windows 7 operating system as its basic operating system and these cell phones will contain all the features of an official Windows 7 which already has a great acceptance in the World to compete in the market against other mobile phone manufacturers in the world as well as the growing Android (OS).
2.3 IMPORTANCE OF STRATEGY The formulation of a sound strategy facilitates a number of actions and desired results that would be difficult otherwise. A strategic plan, when communicated to all members of an organization, provides employees with a clear vision of what the purposes and objectives of the firm are. The formulation of strategy forces organizations to examine the prospect of change in the foreseeable future and to prepare for change rather than to wait passively until market forces compel it. Strategic formulation allows the firm to plan its capital budgeting. Companies have limited funds to invest and must allocate capital funds where they will be most effective and derive the highest returns on their investments. On the other hand, a firm without a clear strategic plan gives its decision makers no direction other than the maintenance of the status quo. The firm becomes purely reactive to external pressures and less effective at dealing with change. In highly competitive markets, a firm without a coherent strategy is likely to be outmaneuvered by its rivals and face declining market share or even declining sales. The formulation of sound strategy may be seen as having six important steps: 1. The company or organization must first choose the business or businesses in which it wishes to engagen other words, the corporate strategy. 2. The company should then articulate a "mission statement" consistent with its business definition. 3. The company must develop strategic objectives or goals and set performance objectives (e.g., at least 15 percent sales growth each year). 4. Based on its overall objectives and an analysis of both internal and external factors, the company must create a specific business or competitive strategy that will fulfill its corporate goals (e.g., pursuing a market niche strategy, being a low-cost, high-volume producer). 5. The company then implements the business strategy by taking specific steps (e.g., lowering prices, forging partnerships, entering new distribution channels).
6. Finally, the company needs to review its strategy's effectiveness, measure its own performance, and possibly change its strategy by repeating some or all of the above steps.
2.4 STRATEGIC MISSION The strategic mission of an organization embodies a long-term view of what sort of organization it wishes to become. The value to management is of having a lucid mission statement. The second step in strategy formulation can be in rendering tangible the firm's long-term course and in guiding decisions toward a rational design. Among the elements that are key to a good mission statement are a statement of corporate values and philosophy, a statement of the scope and purpose of the business, an acknowledgement of special competencies, and an articulation of the corporate vision for its future.
2.5 STRATEGIC OBJECTIVES Clearly stated strategic objectives, the third step of strategy formulation, outline the position in the marketplace that the firm seeks. Performance targets state the measurable milestones that the firm needs to reach or obtain to achieve its strategic objectives. Some strategic objectives relate to the positioning of goods and services in the competitive marketplace while others concern the structure of the company itself and how it plans to produce goods or manage its operations. Typical strategic objectives involve profitability, market share, return on investment, technological achievement, customer service level, revenue size, and diversification. In order to make strategic planning work, the goals, missions, objectives, performance targets, or other hopes of top management must somehow be made real by others in more distant locations down the organizational chart. Merely communicating to each member of the business the vision that top management has for the firm is not sufficient. Strategic
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objectives and performance targets should penetrate every corner of the organizational chart. There should be a hierarchy of strategic formulation starting with the highest levels of the firm, from which it is consistently translated from level to level so that each department knows what its contribution to the overall mission of the firm is to be. This process should end with each individual in the firm having strategic objectives and performance targets tailored to their specific role in the firm. 2.6 ORGANIZATION-WIDE STRATEGY LEVEL. This is top management's plan for achieving its aims. These strategies are for the entire organization and should not concern the specific affairs of individual business units. Organization-wide strategy requires schemes for overseeing the extent and combinations of companies' assorted actions in order to achieve a superior corporate performance. When numerous activities are being managed simultaneously, there are interactive effects in managing the group of activities as a whole. Such a group of activities is often referred to as the "business portfolio." Proper management of the business portfolio demands actions and decisions about how and when the firm should enter new ventures and what areas the firm needs to exit. Further, in all management, timing is crucial. Top management needs to set the timetable for business entry, exit, growth, and downsizing. Often a sound strategy goes awry when management attempts to move too quickly, too slowly, or just fails to set any timetable for action allowing for little temporal coordination of the firm's efforts. Further, organizationwide strategy should address the balance of resources across the firm's various activities. These resources need to be allocated to direct the company's activities toward the strategic objectives of the organization. Through these activities at the corporate-wide level, decisions about balancing business risks can maximize security for the firm. 2.7 BUSINESS STRATEGY The fourth step in strategy formulation requires developing the business or competitive strategy. Business strategy refers to the strategy used in directing one coherent business unit or product line. The most crucial question business strategy should address is how the unit
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plans to be competitive within its specific business market. Important logistical issues to consider include (1) what role each of the functional areas within the business unit will play in creating this competitive advantage in the marketplace; (2) what the potential responses are to prospective changes in marketplace; and (3) how to allocate the business unit's resources between its various divisions. The overall competitive strategy should take into account three main factors: (1) the status, make-up, and prognosis of the industry as a whole and its market(s); (2) the firm's position relative to its competitors; and (3) internal factors at the firm, such as particular strengths and weaknesses. 2.8 INDUSTRY ANALYSIS. An industry or market analysis should consider the structure of the industry, the forces compelling change within the industry, the cost and price economics of the industry, elements critical to success in the industry, and imminent problems and issues in the industry. A review of the industry's structure should evaluate factors such as these:

the size of the total market the growth rate of the market profitability of the firms in the industry whether the industry is producing at capacity or there is excess capacity already in place the entry barriers to the industry whether the industry's products are commodity goods or highly unique
Change in an industry may occur along several lines, and the direction of change often has major implications for the competitive strategy. In an obvious example, if a manufacturing industry is facing in the medium term a massive technological overhaul due to phase-in of environmental regulations, it would probably make little sense to bring a major new factory on line using the older technology, even if for the moment it is still more widely used. Other noteworthy industry changes to consider include what stage of development the industry and its market are at (developing, mature, declining), what technological advances could impact
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the industry, what regulatory changes are new or on the horizon, and whether there are major patents about to expire that will allow cheaper entry into the market. It is also important to examine in detail the economics of doing business in a particular industry. One area of particular concern is the cost structure. For instance, industries characterized by a high percentage of fixed costs are subject to extreme price wars during competitive times in the market. Airlines are an example of a high-fixed-cost industry. Industries with high variable costs tend to have smaller swings in their pricing structure. Cost structure also has implications for capital and cash flow requirements, as well as for the overall entry barriers to participating in the industry. Production costs tend to decline over time in proportion to the total quantity of goods produced. This is mainly due to two factors: learning and experience. Each has its own curve, the "learning curve" and the "experience curve." While each of these effects might be diagnosed separately, the end effect of both may be the same: the firm that produces the most goods in the industry tends to have the lowest cost of production in the long term. All things being equal, this will give that firm the long term cost advantage in the industry for the life of the product. In a typical scenario, being the low-cost producer allows the firm to receive not only the greatest margin on its products when all firms in the market participate in an established price structure, but when price competition arises the low-cost producer can make a profit or break even on its goods, while its competitors lose money. This is a key strategic advantage. This is why many firms during the development of a new and potentially large long-term market will forgo a profitable, small, prestige niche strategy for a less profitable market penetration strategy that demands heavy investment and expansion of production. This second strategy can yield a long-term advantage in the industry by allowing the firm to gain from the learning and experience effects. Competitors later may not be able to catch up since they lack the cumulative production experience and assets of the pioneer in the industry.
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One alternative to the low-cost strategy is a high value strategy, in which customers pay more but also expect to receive a product or service somehow better than that offered by the lowcost supplier. The improvement may be tangible in durability and features, or it may be an appeal to status, image, or lifestyle that makes the product or service more compelling to some consumers. However, even industry leaders must guard against complacency; they might be on top in the traditional market paradigm, but there may be a new paradigm emerging that will make them obsolete if they fail to change. The accumulation of learning and experience does little good if these assets are directed at the wrong vision of the market. This has strategic implications not only for the market leader, but also its competitors, who may be able to benefit from the leader's slow rate of change. 2.9 COMPETITORS. A fundamental part of developing a business strategy is to understand in detail who the main competitors are and where their strengths and weaknesses lie. Competitors can be analyzed by the type of goods they produce, their price, markets served, or channels of distribution used. Many industries have clear niching, with each firm or group of firms avoiding direct competition through some combination of product differentiation or market segmentation. Other industries are characterized by large-scale head-on competition. Coca-Cola and Pepsi, in the soft drink industry, are a highly visible example. Not all future competition originates from present competitors, however. New market entrants are most often found lurking on the sidelines of the firm. For example, suppliers are often looking to forward integrate into an industry. Suppliers of the raw materials that go into a product may have a competitive cost advantage through such vertical integration. Suppliers are often motivated in such moves by the assurance of having a guaranteed market for their output. On the flip side, customers may decide to backward integrate into business. Customers considering backward integration usually first attempt to establish their own "private labeled"
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product prior to integration. When customers put considerable time and effort into their private label version of a product, it may well be a sign of a growing intent to backward integrate. The notion of private label is most associated with retailing, where, for example, grocery stores have house labels, but may or may not actually manufacture the products bearing their labels. However, similar practices exist in many other lines of business. Firms that produce either substitutes for a product or complementary goods to a product may also be a competitor. These firms have experience in the market, and a competitor's product niche in the market represents a simple product line extension for their firm. Often the threat of competitive retaliation into these firms' product areas is useful in deterring such moves. Barriers to market entry are often responsible for setting the level of competition in an industry. Historically, retail has tended to be a competitive industry due to the relatively low costs of entry into the market (although this has changed somewhat as large chains consolidate and have significant price and marketing advantages over smaller competitors). But compared to manufacturing heavy industrial goods, retail still has relatively few barriers. American auto manufacturers probably worry very little about other American firms entering the market of passenger automobiles, because both the financial and regulatory barriers to entry are far too high. Not all barriers are financial. Drug firms enjoy oligopoly status due to their abilities to interface with the U.S. Food and Drug Administration in getting new drugs approved. New firms would have great difficulty in developing the same working relationships. Military suppliers also enjoy an oligopoly status due to political barriers to entering the market. Each firm must analyze what factors keep its competitors at bay when assessing the potential for others to want to share in their profits. 2.10 IMPLEMENTING STRATEGIES A strategy is of course only as good as its implementation. A company may have an impressive strategy for conquering the market, but if it fails to take the right steps the strategy is meaningless. The means of implementing strategies are called tactics. The tactical execution, while crucial to the success of any strategy, is not a traditional part of the
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formulation of that strategy. However, many firms have been successful in discovering successful tactics and building their strategies about "what works." The implementation experience, whether favorable or unfavorable, also directly informs the strategy revision process or any new strategies, as the company will take into account its successes and failures when choosing future paths. 2.11MONITORING AND ASSESSMENT Strategy formulation should be done on a regular basis, as often as required by changes in the industry. Firms need to track the company's progress, or lack thereof, on the key goals and objectives outlined in the strategic plan. The company must be objective and flexible enough to realize whether the strategy is no longer appropriate as it was first conceived, and whether it needs revision or replacement. In other cases, the strategy itself may be fine, but the communication of the strategy to employees has been inadequate or the specific steps to implementation haven't worked out as planned. This evaluation and feedback of the strategy formulation, the final step, provides the foundation for successful future strategy formulation
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CHAPTER 3 aUDIT 3.1 Internal Audit Internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization's operations
RESOURCE BASED VIEW One of the most significant elements that shows the capacity and capability of a company to proceed in the future is its resources as without having sufficient resources and proper and efficient utilization of resources it would not be able to survive in the market. These resources are categorized in the different groups namely Physical, human and organizational resources.
1. PHYSICAL RESOURCE These resources of a company can be seen in the form of building, land, equipment and factories. Nokia in this respect may be based in Finland but it has its branches and production units all over the world.
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Also the companys financial statements for the year 2010 shows that the company hastotal assets of worth 39,123 million Euros which shows that the organization is verystrong financially. Nokia has largest network of distribution and selling as compared to other mobile phonecompany in the world and its sales are operational in about 150 countries.
2. HUMAN RESOURCE Its the count of all the skilled or unskilled staff a company hires to work for them. Nokia do hire highly skilled staff due to its nature of technology work and provide them with training to keep them update and create opportunities for program developers who can work from home to compete in a competition to win prices and even offer them jobs. Nokia Corporation had almost 132,430 employees by the end of year 2010 working in120 different countries which ensures diversity and more creativity. The proportion of women has grown to 41 percent of all employees, with 13.8 percent holding senior management positions, which again ensures diversity and creativity. Also according to the statistics of 2010 Nokia had R&Ds in 16 countries and employed 35,870 people in research and development sector.
3. ORGANIZATIONAL RESOURCE All the resources other than physical and human resources are categorized as organizational resources. Nokia Corporation has the following organizational resources. Nokia has many trademarks which are worth a lot. Nokia has a very strong name among his competitors and loyal customers and a brand value of$29,495 million. Nokia is known as a brand which is the trend setter in the mobile industry. With approximately 29% market share and 461,318 thousand units sold in the year 2010 Nokia Corporation is the market leader in the mobile phone industry.
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The savvy in manufacturing and logistics that allows the Finnish giant to churn out 900,000 handsets a day also gives it a strategic edge and also Nokia Corporation due to mass production achieves the economies of scale. Nokia Corporation has the most efficient production technology through which it can produce massive number of mobile devices at low prices. The average production cost of a handset at Nokia is $88 and the average selling price is $130 which provides a margin of about 33% gross profit to the organization. Nokia being the largest and the oldest Mobile phone manufacturer has very high brand equity and loyal customers and the increasing number of sales is the guaranty of this as the sales (2009-2010) increased from 40,984 to 42,446 Million euros in the last year. ORGANIZATION CULTURE Nokia Corporation being one of the largest multinationals in the world and being the 7th most reputable company in the world is sure to have a strong organizational culture, but above that there are many other indicators that guaranty Nokias Strong Culture. Nokia's official corporate culture manifesto The Nokia Way emphasizes the speed and flexibility of decisionmaking in a flat, networked organization, although the corporation's size necessarily imposes a certain amount of bureaucracy. The company has its own values which makes it different from all other organizations. As said by the current CEO of Nokia Corporation that Our values are defined by our employees; they serve as a foundation for our evolving culture and are the basis for our way of working. Living them out on a daily basis is our shared philosophy
STRONG CULTURAL INDICATORS
Nokia Corporation has been one of the largest innovators of the world as it was the first organization to introduce mobile phone technology and even now Nokia Corporation and its employees are committed to its quest of bringing changes and innovation. Of the 50Most Innovative Companies, 2009 Nokia had been ranked at the 9th Spot which proves Nokias Struggle for bringing changes. In fact Nokia Corporation has spent almost $3.9 billion on its research and development department which is almost more than 3 times of the average money
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spent by other mobile manufacturing companies, which proves the commitment of Nokia towards a strong innovative culture. Employees at Nokia are provided with a sound and healthy environment where they are allowed to express their ideas freely and work accordingly, maintaining a high employee satisfaction level and employee morale. In fact in the year 2009 &2010, based on employee surveys and employee work experience, Nokia Corporation had been entitled as one of the 40 Best Companies to Work for in New York. Also Nokia Corporation has been ranked at the no 5 in the Global 100 Most Sustainable Corporations (Corporate Knights, 2010) based on high employee salaries and satisfaction, leadership diversity and productivity levels and the organizations social responsibility which one again guaranties a strong culture at Nokia Corporation. Nokia Corporation has created Nokia Beta Labs where not only the employees of the organization but also the consumers are allowed to come and build various applications and provide suggestions to make things better and through this way Nokia continues in its quest to find new ways to connect people and also engage people in its work. The Nokia Way emphasizes on the quality of production rather than quantity so it allow sits employees to work in a flexible environment, Mostly employees review of the company states clearly that they often work at home and that the Nokia way provides a great work and life balance which increases the employees satisfaction level and their productivity.
FUNCTIONAL ANALYSIS NCTIONAL ANALYSIS A functional analysis provides a high level representation of critical functions for each of the major work areas in the organization. These functions are the ones that ensure timely, high quality, least cost services or good are provided.
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1. MANAGEMENT DEPARTMENT AUDIT Nokia Corporation is a multinational organization with many other companies competing in the same industry so there is no room for such companies that dont follow the concept of Strategy development, implementation and Evaluation. Since Nokia Corporation is technology based company, its strategy was always about investing in and ensuring Nokias future. Recently Nokia has redefined its strategies and goals which outlined its new strategic direction, including changes in leadership and operational structure to accelerate the companys speed of execution in a dynamic competitive environment which has the potential to become strength of the company. All the new objectives of the company are very well defined and measureable as the major elements of the strategy include Plans for a broad strategic partnership with Microsoft to jointly build a new winning mobile ecosystem. A renewed approach to capture volume and value growth to connect the next billion to the Internet in developing growth markets. Focused investments in next-generation disruptive technologies. A new leadership team and organizational structure with a clear focus on speed, results and accountability. Nokia Corporation has a formal and appropriate and well defined organizational structure. The organization is subdivided into four business units that are Mobile Phone Smart Devices NAVTEQ Nokia Siemens Networks
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The Job satisfaction level and employee morale is very high at Nokia Corporation as it has been entitled among the best 40 organizations of New York based on employee surveys of the organizations which is a major strength of the organization. Nokia Corporation had almost 132,430 employees by the end of year 2010 working in120 different countries of which the proportion of women is 41 percent of all employees, with 13.8 percent holding senior management positions which ensures diversity and more creativity and is one of the core competencies of the organization. Employees are hired with great care and a series of interviews are conducted to ensure the capabilities of the employees and also experience is counted as a fruitful ingredient, which means that the organization has basically very skilled and experienced staff that has the potential to lead Nokia Corporation in the future. At the time of staffing the principle of Diversity is always considered at Nokia to enhance creativity and productivity of the overall organization. As in the words of Timothy McDonald (Management Employee) at Nokia Corporation, The working environment is highly motivating and the people here are brilliant. My manager has encouraged and organized for me to participate in extra management training courses. In addition to that, I have a personal coach, with whom I catch up with on regular basis; he guides me with career planning and keeps things well focused and on track also pours out light on the behavior of the management of the organization and that managers delegate well with their employees. 2. MARKETING DEPARTMENT AUDIT The marketing Department performs the major activities of the business so it is really very important to analyze an organizations marketing strengths and weaknesses. Nokia Corporation in this case has the following strengths and weaknesses. Nokia being the largest mobile phone company in the world and having a history of about 146yearshas a strong Brand Recognition.
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As per the Interbrands Best Global Brand Rankings, Nokia Corporation is ranked at no 8th and has a brand value of $29,495 million. And as per brand value the ranking of Nokia Corporation is 43rd round the globe. Nokia Corporation is still the market leader in the industry of mobile phones with a market share of 28.9% in the year 2010. With 461,318,000 units sold in the year 2010 Nokia Corporation has many loyal customers and has a strong brand position. With Nokia Siemens Network, NAVTEQ, Mobile Phones and Smart devices on its side Nokia Corporation has a strong and diversified portfolio. With a wide variety of different cell phones Nokia Corporation has a strong product line with almost 13 different categories of mobile phones where each category has many different models for each class of users. Nokia Corporations rising sales graph shows that the companys sales force is very effective as the sales rose from 4 billion euros to 4.2 billion euros in 2010. Nokia Corporation is spending about 175m on global advertising which may lead to increased sales in the future and is strength for the company. Nokia Corporation with a variety of different mobile series has segmented its mobile phones very efficiently on the basis of economy and customers life styles. Nokia has largest network of multichannel distribution and selling as compared to other mobile phone companies in the world and its sales are operational in about 150 countries. 3. FINANCIAL DEPARTMENT AUDIT The finance Department provides the basic financial resources to other departments and is responsible for allocating budgets to the company so it is really very important to analyze an organizations financial strengths and weaknesses because all the operations of the business are dependent on them. Nokia Corporation in this case has the following strengths and weaknesses. Nokia Corporation has a Net Working capital of $3.18 billion which is above of what any organization in the industry maintains so it gives Nokia a
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Financial strength to tackle any sort of uncertainty in the market and also gives the chance to grab any temporary opportunity in the market. Also the companys financial statements for the year 2010 shows that the company has total assets of worth 39,123 million Euros which shows that the organization is very strong financially. Nokia Corporation reported sales of about 4.2 billion euros in 2010 which has risen from the sales figure in 2009 which is again a strong financial strength as it is greater than its biggest competitors such as Motorola which reported sales of 1.9 billion euros. The Nokia Corporation is weak than its competitors in terms of net earnings per share as Nokia Corporations average EPS is 0.628 whereas Motorola Incs average EPS is 0.805which makes it less attractive for investors as compared to its investors. Also Motorola Inc. is more efficient in making its short term payments with a current ratio of 1.99, as compared to Nokia Corporation which has a current ratio of 1.6. Nokia Corporations five year average of total debt to equity ratio is about 0.25 which shows that for each $1 borrowed from shareholders the company has 25 cents from its creditors which tells us about the investment decision of Nokia Corporation that it does not rely mostly on debt and the firm faces a fewer risk which is a strength for the company. Nokia Corporation has an interest coverage ratio of 7.4 times which means that it generates enough income in an accounting period to pay off 7.4 times of its debts which again reduces the chances of Nokia Corporations Bankruptcy and is in its favor. On average of the last 5 year record Nokia Corporation has a net profit margin of 8.1%which ensures availability of greater amount of finance at the time of need for the organization.
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4. PRODUCTION DEPARTMENT AUDIT Just like other departments, the production department of a company is also of great importance as it also plays a vital role in the development of an organization. An organization with a powerful and innovative production technology can be very beneficial for an organization and a poor production unit may also become an organizational weakness. Unlike other mobile manufacturing companies Nokia Corporation uses a Life Cycle Concept in the manufacturing of mobile phones and devices. The manufacturing process is carried out into two phases. In the first stage, Nokia builds the innards of phones. Whereas in the second, fast-turnaround stage, called "assembly to order," Nokia pumps orders from specific carriers into its production system and transforms the raw "engines" into tens or even hundreds of thousands of built-to-order phones in a matter of days. Nokia Corporation has 10 production units in the world which are very productive and have large production capacities. These units are in Brazil, China, Finland, Great Britain, Hungary, India, Mexico, Romania, South Korea and Germany. In its factories around the world, mobile-phone giant Nokia will churn out approximately325 million handsets each year that is 900,000 phones per day which is one of the core competencies of Nokia Corporation. Nokia Corporation has the best production technology savvy which produces at an unmatchable speed and also due to mass production Nokia Corporation enjoys economies of scale and on average, it costs Nokia $88 to make a phone, and on average it sells phones for $129 leaving a gross margin of nearly 33%, better than its rivals can muster.
5. RESEARCH AND DEVELOPMENT AUDIT R&D is one of the most vital parts of a company and for an industry based on technology its importance goes sky high. Nokia Corporation also being a technology based company realizes the significance of R&D and is devoted to take effective measures to search out new ways to connect people. The following strengths and weaknesses make up the research and development department of Nokia Corporation.
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One of the basic values and belief of Nokia Corporation is that they are committed to bring innovation in the market and are always making efforts more than their competitors to be the first to introduce new technology in the market. For this Nokia Corporation spends a lot of money on its R&D. The R&D budget for the year 2010 was $3.9 billion which is about 3 times more than other mobile manufacturing firms. Also according to the statistics of 2010 Nokia has R&Ds in 16 countries by the name of Nokia Research Centers and it employs 35,870 people round the globe. These sectors are working very hard and are creating changes and developing new technology as Nokia Research Center has developed Indoor Navigator to provide precise indoor location information on a handset, without needing GPS on Apr 2011. Similarly another application is developed, Nokia Shoot & Tag which is a clever video application developed by Nokia Research Center, Beijing that automatically creates scene chapters in your video while recording. This innovative tagging technology was created to provide a convenient playback experience when viewing videos. Another creation of Nokia Research centers is Nokia Diexie which is a unique Chinese character handwriting input technology designed specifically for smaller touch screen phones where writing out a full sentence just won't fit on a small screen. Nokia Diexie allows users to simply write a full sentence one character over another in a stacking style with using your pointer finger as a pen. All of these designed applications show us clearly the picture of Nokia Corporations R&Ds effective work considering every small detail and recreating things.
6. MANAGEMENT INFORMATION SYSTEM AUDIT Management information system is basically used tocollect store and analyze data and information but this is not the sole reason. It is now days also used a source of communication or as a communication channel between different department of an organization so an effective and up to date management information system is a strength of an organization and if an organization does not have such a resources then it may count as a weakness of the firm.
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The management information system used in Nokia Corporation is known as ACM-MIS Lite which is a power integrated system developed by the Association of Computer Machinery (ACM), the worlds largest educational and scientific computing society, through which various departments of Nokia Corporation interacts with each other, which results in time saving and efficient utilization of resources.
John Clarke is the CIO at Nokia Corporation who is very well qualified and experienced person in the field of Information Technology which goes basically in the favor of Nokia Corporation to have such skilled employees.
Data is updated regularly via automatic computer systems to keep the employees notified and up-to-date regarding the latest technology and information. The ACM-MIS has a very user friendly graphical user interface (GUI) which is very easy to use and understand and all employees of the organization are provided with a user id and password of their own to access the information system.
One of the vital and significant weaknesses of this management information system is that it can be accessed only through Internet Explorer 5.x and Netscape Navigator 7.x browsers.
3.2 EXTERNAL AUDIT The External Analysis examines opportunities and threats that exist in the environment. Both opportunities and threats exist independently of the firm and are the external forces that have a strong impact on the performance of the company either in the good way or the bad way so a company should always be ready to identify new opportunities in the market and to tackle with the threats.
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CHAPTER 4 SWOT ANALYSIS
STRENGHTS Nokia Corporation has identified the opportunity to manufacture new mobile phones in the market with Windows 7 as the primary operating system but to in cash this opportunity Nokia Corporation has to utilize its strengths such as Nokia Corporation is the market leader in the industry with a strong market share of 28.9% and strong brand recognition with a value of $29,495 million and is currently ranked as the 8th best brand in the world (2010) that ensures Nokia that people round the globe will try its mobile phones and with these new features Nokia Corporation will regain its lost markets. Nokia Corporation is very strong financially as the company has a working capital of almost 3.18 million and assets of 39,123 million which will provide Nokia the ability to finance its new project. Nokia Corporation has 132,430 employees working worldwide in 120 countries which is also a strong resource that ensures that the company will succeed in achieving its strategic goals. Nokia Corporation has the worlds most advanced production technology and is referred as the Mobile Giant with production units in 10 countries round the globe and with a production capacity of 325 million handsets per production unit which tells us that Nokia Corporation will face no difficulty in manufacturing the new mobile phones.
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OPPORTUNITIES
As Nokia Corporation is a technology based company and the world is now days progressing very rapidly in this particular field, which opens many doors for Nokia corporation to lead its way to success and to maintain its position as the worlds largest mobile phone company and to achieve a higher market share. Nokia Corporation has the following opportunities available in the market to grab. The telecommunication industry is the most rapidly growing industry in the world with almost 5.3 billion people who subscribe daily for various handsets. These 5.3 billion people account for about 77% of the whole worlds population. This enormous growth is led by China and India where Nokia Corporation can penetrate and grab a huge market share and to compete against its competitors in the market. GSM and CDMA are competing wireless technologies with GSM enjoying about 82%global market share, this opens many doors to telecommunication companies such as Nokia Corporation that produces wireless mobile phones to strengthen their roots. Nokia Corporations mobile phone devices are known best for their quality and technology and the only problem that these handsets face is the problems with software malfunctions which has a strongly negative impact on the revenues of the company and to overcome this problem Nokia Corporation has formed alliance with Microsoft and is soon to release a new series of Windows phone 7 through which Nokia Corporation gains the opportunity to target new markets and increase its market share along with competing with all the other companies in the industry. Nokia Corporation will add swiping and wireless identification features in updates to its new line of Symbian smartphones to compete with Google Inc's fast-developing Android platform and to support the declining acceptance of its existing Symbian mobiles. Even as it puts Microsoft software in smartphones, Nokia continues to spend on its MeeGo open-source platform in hopes of developing a proprietary ecosystem for handsets, tablets, and netbooks. Any payouts or incentives to continue MeeGo development emphasize that Nokia's eggs are not all in Microsoft's basket when it
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comes to smartphones thus provides Nokia Corporation the opportunity to diversify its product line. Nokia Siemens Networks completed the acquisition of wireless network infrastructure assets of Motorola Solutions by paying US $975 million in cash on 30th April 2011 where Motorola Solutions is a leading provider of mission-critical communication products and services for enterprise and government customers. This acquisition has provided Nokia Corporation with approximately 6900 employees and it takes on responsibility for 50operator customers in 52 countries strengthening the companys portfolio and also providing opportunity to increase its profits. To further strengthen its portfolio Nokia Corporation has acquired Motally Inc. on Sep 1st 2010 which operates as a mobile analytics company. Nokia is more than doubling the size of its direct venture investment fund with an injection of $150 million, with a view to putting some of the money to use in China and the company has the opportunity to increase its hold in the market. THREATS AND WEAKNESSES Through this strategy Nokia plans to overcome the following threats and weaknesses. A major weakness of Nokia Corporation is that it has been dependent on the same Symbian operating system for more than a decade and now days Symbian based mobile phones are experiencing a decline in the global market share (44.6% -34.6%) which is a major threat to the organization as it greatly relies on the Symbian Software. Also through this strategy Nokia Corporation plans to compete against the new Android operating system which is a major threat to Nokia Corporation as it has gained popularity and acceptance in the world and also this Android system is the most rapidly growing operating system that the world has captured a huge marketshare in just a single year that is 25.5% global market share. And also many of Nokias competitors have adopted the Android operating system as their basic operating system and thus Nokia Corporation is experiencing a global decline in the market share.
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The mobile phone manufacturing companies are gaining more and more market share and the list of these competitors are topped by Google Huawei Samsung HTC Motorola LG With Samsung Corporation adopting the new Android technology, Nokias acceptance in the Western Europe has also declined and it has lost its position as the no 1 smart phone manufacturers and Samsung Electronics Co Ltd has raised to the No. 1 spot in the Western European cell phone market in the first-quarter, overtaking long-term market leader on its home turf with Samsungs market share 29% and Nokias market share 28%which tells that Nokia Corporation has to face a strong competition in the market. Nokia Corporation has also been experiencing a fall in the U.S. market share as the market share in 2010 slipped to about 35% and Android Phones account for almost 49%of the market share in U.S and 4Gs are considered as the Kings this is also a major threat to the Company.
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CHAPTER 5 RECOMMENDATION Nokia should concentrate on following areas: As Nokia Corporation is a technology based company and the world is now days progressing very rapidly in this particular field, which opens many doors for Nokia corporation to lead its way to success and to maintain its position as the worlds largest mobile phone company and to achieve a higher market share. Nokia Corporation has the following opportunities available in the market to grab. The telecommunication industry is the most rapidly growing industry in the world with almost 5.3 billion people who subscribe daily for various handsets. These 5.3 billion people account for about 77% of the whole worlds population. This enormous growth is led by China and India where Nokia Corporation can penetrate and grab a huge market share and to compete against its competitors in the market. GSM and CDMA are competing wireless technologies with GSM enjoying about 82%global market share, this opens many doors to telecommunication companies such as Nokia Corporation that produces wireless mobile phones to strengthen their roots. Nokia Corporations mobile phone devices are known best for their quality and technology and the only problem that these handsets face is the problems with software malfunctions which has a strongly negative impact on the revenues of the company and to overcome this problem Nokia Corporation has formed alliance with Microsoft and is soon to release a new series of Windows phone 7 through which Nokia Corporation gains the opportunity to target new markets and increase its market share along with competing with all the other companies in the industry. Nokia Corporation will add swiping and wireless identification features in updates to its new line of Symbian smartphones to compete with Google Inc's fast-developing Android platform and to support the declining acceptance of its existing Symbian mobiles. Even as it puts Microsoft software in smartphones, Nokia continues to spend on its MeeGo open-source platform in hopes of developing a proprietary ecosystem for handsets, tablets, and netbooks. Any payouts or incentives to continue MeeGo
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development emphasize that Nokia's eggs are not all in Microsoft's basket when it comes to smartphones thus provides Nokia Corporation the opportunity to diversify its product line. Nokia Siemens Networks completed the acquisition of wireless network infrastructure assets of Motorola Solutions by paying US $975 million in cash on 30th April 2011 where Motorola Solutions is a leading provider of mission-critical communication products and services for enterprise and government customers. This acquisition has provided Nokia Corporation with approximately 6900 employees and it takes on responsibility for 50operator customers in 52 countries strengthening the companys portfolio and also providing opportunity to increase its profits. To further strengthen its portfolio Nokia Corporation has acquired Motally Inc. on Sep 1st 2010 which operates as a mobile analytics company. Nokia is more than doubling the size of its direct venture investment fund with an injection of $150 million, with a view to putting some of the money to use in China and the company has the opportunity to increase its hold in the market.
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CHAPTER 6 CONCLUSION Through adopting this strategy Nokia Corporation has the opportunity to gain access of the lost market share and to maintain its position as the # 1 mobile phone manufacturer in the world and to compete against the other mobile phone manufacturing companies operating in the world. Following are the main strategic goals of this strategy Nokia would develop new mobile phones that will be just equal to a mini laptop as the operating system would be Windows 7 which is the most acknowledged operating system in the world and thus through this Nokia will regain its lost market share. Through applying this strategy Nokia Corporation would be able to minimize its dependency on the Symbian software and thus would provide its customers with a new a fast operating system. Also through adopting this strategy Nokia Corporation would be able to efficiently compete against its competitors in the market and with the new Android operating system that is currently the worlds fastest growing and acknowledgeable mobile phone operating system.
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BIBLIOGRAPHY
http://www.utube.com www.wikipedia.com http://www.enotes.com/strategy-formulation-reference/strategy-formulation http://www.managementstudyguide.com/strategy-formulation-process.htm http://nptel.iitm.ac.in/courses/IIT-MADRAS/Management_Science_I/Pdfs/9_1.pdf
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STRATEGIC FORMULATION OF NOKIA --------------------------------------------------------------------------------------------------------------------------------------

CHAPTER 1 INTRODUCTION OF THE PROJECT