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Finland And Nokia Creating The Worlds Most Competitive Economy Case Solution

Solution Id Length Case Author Case Publisher
1553 1386 Words (5 Pages) Michael E. Porter, Orjan Solvell Harvard Business School : 702427
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Finland was not a prominent country until the World War II. Many years after its independence Finland faced many crises and had very slow growth rate but in 2001 Finland became one of the fastest growing economies of the world. Pulp and paper were historically the major business in the country, and one of the pulp producers were Nokia, established in 1865. The growth in telecommunication sector was slow. In 1967 Nokia merged its business with a Suomen Kaapelitehdas (Telecommunications Cable Corporation|) and with many other electronics business, in 1970’s it merged with Televa. In 1981 Nordic Mobile Telephone (NMT) network launched analog NMT system; it pioneered roaming technology which was open standard due to which it could be used by any company. By its launch Nordic region became the world’s largest single mobile market at the time.

Following questions are answered in this case study solution

  1. Introduction and Problem Statement

  2. Analysis

  3. Strategic Alternatives

  4. Recommended Action Plan

Case Analysis for Finland And Nokia Creating The Worlds Most Competitive Economy Case Solution

Nokia and Salora created a 50-50 owned joint venture in 1979 named Mobira to market and developed radio technology for the devices, especially for the new NMT phones. Before 1980 Nokia easily sold the almost whole of the production to Nordic markets. During the 1980s, Mobira further allied itself with different distributors and mobile operators all around the world, and the company finally became a global consumer brand. 

After rapid growth through acquisitions and alliances, however, Nokia faced financial crisis. In 1988 with the CEO’s death, a new CEO came to handle the situation. Company’s employment fell by around 15,000 between 1989 and 1992. By 2001 Nokia was among the top three mobile phone manufactures internationally, with sales of 30.4B Euros. The company had total employees around 60,000 people and production locations in 10 countries as well as its R&D in 15 countries and sales in over 130 countries.

Although Nokia was growing very fast but the overall economy of Finland was in bad condition. Country's major export was pulp, but internationally its prices were declining. With growth in the telecommunication sector, the competition among rivals was getting intense and, profits were getting low. Finland's education rates were low due to which Nokia Corp. was lacking in skilled labors, engineers and scientists. Overall unemployment of unskilled labors was increasing.

2. Analysis

One of the most important tools for industry analysis is Porter Five Forces Model (Hill). The threat of new entrant is very low because it takes a huge investment to enter in mobile phone industry. Thus, Nokia has low threat of new entrants in this industry. The power of suppliers is moderate in case of Nokia because there are a number of hardware suppliers available to Nokia but among these high numbers of suppliers’ experts are in a somewhat moderate number of suppliers. When it comes to the power of buyers, then we can evaluate that the buyers have high power because there are a number of competitors already existing in the market with a variety of models of mobile phones with different price ranges.

The threat of substitute is also low because cell phones have now become a necessity of life. No other product we can find in the market which has all functions such as call, messaging, taking pictures, access of internet and web surfing all on a single device. So no matter what consumers are going to buy cell phones from any of their favorite brands. The last thing in this analysis is the threat of competitor, which in the case of mobile phone industry is very high. As there is high rivalry among mobile phone manufacturers with in Finland and all around the globe, therefore, Nokia has to be very keen observer of the trends of its competitors. In 2001 Nokia was among three top mobile phone competitors with sales of 30.4Billion Euros.

SOWT analysis is developed to understand a business’ internal and external position (Carlock). Nokia's biggest strength was its continuous focus on the growth and expansion which ultimately made it the market leader in mobile phones in 2001. It never relays on old technology instead it strengthens its R&D by associating it with leading universities and research centers. Nokia always valued its customers, and its marketing campaigns were developed to build emotional ties with its customers. 

In 1980’s Nokia invested huge capital in acquisitions of electronics companies such as TV due to which it faced huge loses. These crises made Nokia suffer not only regarding capital but also it sold its different business units and expelled 15000 employees in 1982-1992. In this time a lot of attention was given only to cut costs to bring firm out of the crisis. Another problem in the way of its growth was difficulty in establishing a common standard in the industry for the software development for PDA. Nokia had to overcome these weaknesses.

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