Abstract

This report gives an overview on what is happening on the mobile phone market today
and analyses Nokia’s market position in the mature European market. This report
includes a brief introduction to Nokia followed by an environmental analysis, SWOT
analysis and trend analysis of the company. Half way through the report you can find
information about consumer behaviour, brand profile and segmentation. At the end, this
report introduces the main competitors and analyzes the competitive market. Finally we
try to make a conclusion of the topics discussed and attempt to give some possible
answers to the question at hand.

Excerpt (computer-generated)

NOKIA

Case Study-
How Can Nokia Maintain its Market
Position in the Mature European Market?

Project in Markeing Management

1. Executive Summary

Mobile phone market in Europe is going through major changes. Key players are losing
market share while new and young companies, mostly from Asian countries, are coming
to the market. At the same time the market is slowly expanding when people are buying
more phones than ever. The whole process of buying mobile phones has changed in the
last few years. People no longer carry the same phone year in year out, but they change
their phone every year, some even twice a year. One reason for this change is the fast
technological development of the phones. But also consumer’s attitudes towards mobile
phones have changed. Mobile phones are no longer seen as expensive, hi-tech products,
but they have become accessories like jewellery or a piece of clothing. “Nokia is still the
largest mobile phone company in the world, but its long-term dominance is now
challenged more than ever. Observers have begun asking whether the cutting edge that
has turned Nokia into the No 1 vendor still exists, as Nokia’s market share and revenues
have been on the decline. Falling average sales prices (ASPs) and market share have had
an impact and forced Nokia to further re-think its strategy towards developed and
emerging markets.”1

This report gives an overview on what is happening on the mobile phone market today
and analyses Nokia’s market position in the mature European market. This report
includes a brief introduction to Nokia followed by an environmental analysis, SWOT
analysis and trend analysis of the company. Half way through the report you can find
information about consumer behaviour, brand profile and segmentation. At the end, this
report introduces the main competitors and analyzes the competitive market. Finally we
try to make a conclusion of the topics discussed and attempt to give some possible
answers to the question at hand.

2. Table of Contents

1. Executive Summary ... 2

2. Table of Contents ... 3

3. Introduction ... 4

4. Audit of Nokia ... 5

4.1 Environmental Analysis ... 5
4.2 SWOT Analysis ... 7
4.3 Trend Analysis ... 8

5. Consumer Buying Behaviour ... 9

6. Brand Profile ... 9

6.1 Facts ... 9
6.2 The role of Nokia’s brand ... 10
6.3 Brand Equity ... 10
6.4 Brand Identity ... 10

7. Segmentation, Targeting and Positioning ... 11

7.1 Market Segmentation ... 11
7.1.1 Geographic segmentation ... 12
7.1.2 Demographic, psychographic, behavioural Segmentation ... 12
7.2 Market Targeting ... 13
7.3 Market Positioning ... 13

8. Competitive Nature of Product Category ... 13

8.1 Number of Competitors ... 13
8.1.1 Key Competitor (Market Challengers) ... 14
8.1.2 Other Challengers ... 14
8.1.3 Market Followers ... 14
8.1.4 Competitive forces ... 15
8.2 Market position of key competitors ... 15
8.3 Competitor Analysis ... 16

9. Conclusions ... 18
10. Bibliography ... 19

11. Appendices ... 21

3. Introduction

The company we have chosen to analyse in our project is the Finnish mobile phone giant
Nokia. This chapter tells you briefly what Nokia actually is, its company structure and
overall view on the size and sales of the company.

Since January 2004, Nokia Group has consisted of four different business groups: Mobile
Phones, Multimedia, Enterprise Solutions and Networks. “In addition, there are two
horizontal groups that support the mobile device business groups: Customer and Market
Operations and Technology Platforms.”2 In the year 2004 Nokia’s net sales for mobile
phones were 18 507 million euro, which went down 12% from 2003. Nokia’s market
areas were Europe/Africa/Middle East (55% of net sales), Asian Pacific and China (25%)
and Americas (20%). Nokia’s market share in Europe was 45,8% in 2003, in 2004 it was
34,8% and in the third quarter of 2005 it was 36%.3 The average number of personnel for
2004 was 53 511. At the end of 2004, Nokia employed 55 505 people worldwide. In
2004, Nokia′s personnel increased by a total of 4 146 employees. Nokia’s turnover for the
third quarter of 2005 was 8403 million euro from which mobile phones brought in 62%,
multimedia 17%, Enterprice solutions 2% and Networks 9%. “The year 2004 was
demanding for Nokia. In response, the company set five top priorities in the areas of
customer relations, product offering, R&D efficiency, demand-supply management and
the company′s ability to offer end-to-end solutions. Nokia is making good progress in
these areas, and is now better positioned to meet future challenges.”4 “The Nokia Strategy
continues to focus on three activities to expand mobile communications in terms of
volume and value: expand mobile voice, drive consumer multimedia and bring extended
mobility to enterprises.”5

4. Audit of Nokia

4.1 Environmental analysis

The market environment of Nokia consists of six forces. These are demographic,
economical, natural, social-cultural, technological and political-legal environment.

The Demographical forces

Demographics show the size of the European market by telling the population of each
country. Demographics also show if the people in specific country are illiterate or well
educated, how old they are, which parts of the country they live in and how do they live.
Population of Europe in 2000 was 729.3 million.6 People live mostly in urban areas.
Population is ageing due to falling birth rates. People in Western Europe are generally
well educated and literate. There are no huge cultural differences between nations and
since almost all countries are members of the EU, it brings the people even closer to one
another.
Preface
Nokia's became in a few decades a global player and market leader in the mobile
phone sector, its achievement is based on exclusive strategy decisions which this working
paper attempts to explore. Nokia managed to overcome its path dependency and
redefined itself continuously until it became a world leader in its core businesses; mobile
phones and network equipments. Nokia started its evolvement as wood company for
nearly 150 years and Nokia's business portfolio covered amongst others power, cable,
rubber, toilet paper, televisions, radiophone, radar et cetera until Nokia focused on its
core businesses. The question we try to explore in this paper is; what were the strategic
key success factors which enabled Nokia to become a world leader in telecommunication.
The examination starts with the adaptive strategy process of Nokia and how the market
circumstances leveraged Nokia's rose and success in the communication industry in the
90s. In the next step we identify Nokia's competitive advantage based on knowledge
integration and strategic capabilities. In the course of the knowledge integration we
analyse Nokia's network strategy and its ability to understand early inflection points to
survive the slowdown in 2000. Finally, we consider some hazards for Nokia and proof its
sustainability through its latest innovative progress.
Nokia's Strategy Process
Nokia's roots go back to the year 1865 in Finland, when it was founded as Forest
Company. Later on, the Finnish Rubber Works (1898) and the Finnish Cable Works
(1912) joined and assembled the Nokia Group in 1967 (Häikiö, 2002). During this period
Nokia changed its core businesses and strategy several times to divest from unprofitable
and invest in more lucrative businesses. Engine of Nokia's evolutionary strategy process
was their dynamic strategy process and their refuse of the linear strategy process
(Chandler, 1962; Cannon, 1968) where the world is rational and can be changed by the
company/ management. Rather was Nokia's strategy approach adaptive to the complex
and changing environment and to assess the environment to benefit from emergent
opportunities and risks (Chaffee, 1985). Thus Nokia challenged their paradigms,
overcame its path dependency and evolved from a forest company to a global leading
mobile phone producer. And still, Nokia is generating new worlds -conjecture strategy
(Chaffee, 1985)- through its innovations in their handsets which customers use in
Page 5
4
unpredictable forms. For instance the Snake game in handsets became so popular that
competitions are organised with rankings of the best scores. Further innovative features
in handsets are: Short Message Service (SMS), video/ -camera, MP3 Player, Internet
access, calendar et cetera which opened new markets for Nokia. This innovative and
adaptive strategy approach helped Nokia finally to grow and succeed in the technology
sector.
Nokia's Rise in the Telecommunication-Sector
Nokia's focus and victory in mobile phones and infrastructure is based on internal
decisions as well as external conditions; which gave rise to Nokia's competitive
advantage. As main external reasons for Nokia's success in the telephone sector
identifies Häikiö (2002):
N the early deregulation of the Finnish telecommunication market
N the from Nokia developed pan-European GSM (Global System for Mobile
Communication) mobile phone standard network expanded very fast
N the innovation of the cellular telephone and its triumphant launch as mass product
Through Finland's early deregulation of the telecommunication sector in the 80s
Nokia was able to make first experiences in telecommunication commercialisation and to
develop innovative telecommunication technology. The new developed cellular
technology consists mainly of the networks and of the handsets. The infrastructure is sold
to the operator and the handset to the end-user. Nokia produced, designed and marketed
successful these products in Finland. Basically is Nokia's image built on its mobile phone
marketing but its infrastructure business was sometimes more successful than the handset
business. The reason is that Nokia set up the first GSM network in Finland in 1991
(Häikiö, 2002) and as the telecommunication deregulation in other European countries
and America followed had Nokia already the latest technology and introduced it
internationally. As the new network equipment and phones were based on the GSM
technology, the GSM innovation became self-reinforcing (Porter, 1990); the need on the
one hand and the constantly development on the other hand pushed the innovation
process and helped Nokia to gain continuously market share.
The second major and today more essential business of Nokia is the mobile phone
unit. At the beginning of the area in 1987 it was a niche market for businessmen but
EFFIE® Awards
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EFFIE AWARDS
BRIEF OF EFFECTIVENESS
Nokia: Personalization
Brand Name: Nokia
Product Type or Description: Mobile phones
Category for this Entry: Telecom services
Campaign Title: Personalization
Agency: The Richards Group
Client: Nokia Mobile Phones
Marketing Challenge
In 1996, Nokia Mobile Phones was the #1 manufacturer of digital wireless phones in the world but
was the #3 brand
in the U.S., behind Motorola and Ericsson. For the next 3 years, Nokia USA chipped away at the
competition,
increasing sales and awareness steadily until the end of 1998. At that point, Nokia became the #1
manufacturer of
digital wireless phones in the US, surpassing Motorola. At the heart of this rapid succession to the
top was a
distribution deal struck between Nokia and AT&T, the largest wireless carrier in the US, in 1997.
This agreement
allowed Nokia to be the exclusive handset for a major push behind AT&T's Digital One Rate
service plan. While in
many ways the AT&T deal was the core of Nokia's explosive sales growth in the late 1990s, the
Nokia Marketing
Team was quickly realizing that the deal was both a blessing and a curse. Being the focus of your
largest
customer's sales and marketing efforts had huge benefits to sales – AT&T spent roughly
$60,000,000 on the plan –
but the Nokia brand itself was being muted. Quite simply, the carriers dominate the handset
brand communication
to consumers. With competition getting fierce among the service providers, the handset brand
took a backseat to
that of the carrier. The phone was becoming a bland, black box that had no meaning without the
carrier.
This created two problems. First, it conveyed to consumers that all handsets were basically the
same. Second, the
handset brand became virtually invisible. It merely was a functional tool for the "real" product –
wireless service.
This often played out in qualitative research. When customers were asked to identify the brand of
their phone, the
typical response was "I think it is an AT&T."
The client and agency brand team agreed that these problems would be addressed through a
two-step brand
differentiation process. The overall objective: Position Nokia as the "personal" brand of wireless
technology.
The first step rested in the hands of the client: The Nokia Design Center recast the entire line of
Nokia handsets, the
star of which would be the new 5100 series with interchangeable faceplates.
The second step fell upon the agency: Develop advertising that did more than leverage product
attributes; leverage
the benefits of personalized technology as well.
EFFIE
Campaign Objective
The overall objective of the campaign was simple – make the Nokia brand stand out from the
clutter of the carriers
and the noise of other leading handset brands like Motorola and Ericsson.
Advertising would be used as a multiplier for what was already happening in pop culture and in
the Nokia product
line. Our aim was to position Nokia as the personal brand of mobile technology.
Translating the objectives into trackable measures, our goals were to:
1. Increase spontaneous top-of-mind brand awareness from 12% to 20% (which would surpass
Motorola, the
category leader, by two points).
2. Achieve category leadership on brand attribute measures most closely linked to “personal" and
"distinctive."
These attributes were “dynamic," "stylish/elegant," "individualistic," and "stands out from the
crowd."
Target Audience
Previous advertising focused on the everyday business user of mobile phones, who until 1998
represented the
highest volume of new and replacement handset sales.
In 1998 a customer segmentation study revealed two emerging segments: Highfliers and
Trendsetters. We learned
that these leading-edge business and personal mobile phone users had an enormous influence
on their mainstream
peers. They were the technology category equivalent of the urban youth target in athletic shoes.
Our thinking at the
time was: “If we win them (men and women in their late teens or 25-45 years old in high
disposable households)
over, our new brand positioning will be secured."
Creative Strategy
With Nokia’s successful launch of the 5100 and a growing line of mobile phones with distinct
designs (including the
new 8800 chrome phone), it was now the role of advertising to move Nokia from being a
company that
manufactures personalized products to a brand that stands for the most personal technology. Out
of this objective
came the creative strategy statement: Nokia mobile phones are a reflection of your personal
style.
Other Communications Programs
Creating TV and print ads alone would not make Nokia the most personal brand of mobile
technology. The key to
owning this positioning was to execute it in all Nokia Communications. This new Nokia personality
and voice had to
be consistently communicated at every point of customer contact. Sales, Trade Marketing,
Accessories, Internet
and Customer Service all had to believe in this strategy and execute it in their respective
disciplines in order to
affect the brand the way the brand team had hoped.
Media Strategy
Since broad reach was critical, network television was a major focus. Because we were trying to
reach consumers
who were historically light users of television, top-tier prime-time programming was the best tactic
for TV.
Programming included the 1999 Emmy’s, The Practice, Michael J. Fox’s last episode of Spin
City, and Fox’s Time
of your Life.
In print we sought unique ideas that meshed with our strategic goals. Two examples of these
opportunities were
securing product placement in the “Personal Style” section of Vogue, and sponsoring and
adversarial on "Famous
Conversations” in Rolling Stone.
212-687-3280 Fax: 212-557-9242
.2001: The information available through effie.org is the property of the New York American Marketing Association and is protected by copyright and
other intellectual property laws. This
brief may be displayed, reformatted and printed for your personal use only. By using this site, you agree not to reproduce, retransmit, distribute, sell,
publicly display, publish or broadcast
the information to anyone without the prior written consent of the New York American Marketing Association.

Top-of-Mind
Awareness 2nd Quarter 2000
Nokia 12% 22%
Motorola 19 17
Ericsson 3 5
Our second objective was to establish Nokia as the more “personal” phone brand by imbuing the
brand with a
dynamism and imagination that consumers themselves associated with the promise of
technology. We succeeded
here as well, growing scores in Imaginative by 15% and Dynamic by 17%.
Brand
Attribute
Nokia
(Q2 1999)
Nokia
(Q2 2000)
Motorola
(Q2 2000)
Imaginative 38% 53% 33%
Stylish/Elegant 31 48 29
Dynamic 23 40 38
Fast Growing 37 50 30
Individualistic 33 40 30
1st w/ New Ideas 21 36 39
Prestigious 29 44 42
Good Value 24 39 36
Stands Out 27 48 34