phone operators (Vodaphone, Orange, T-mobile and

O2 in the United Kingdom)

Nokia: a Great Company in a Turbulent act as the hub between customers, handset makers
Market and content providers. Many
In its November 2002 special report on Nokia versus of them are saddled with huge debts after paying
Microsoft, the Economist reported billions for 3G licences.
that in 2002: 400 million phones were sold (10 per Success in 3G will depend on finding ways of selling
cent with built-in mobile cameras), content and services:
there were now more than 1 billion mobile phone both the media companies and the banks could
users, more mobile enter the market as ‘mobile
phones than fixed-line phones, and the number of virtual network operators’ (MVNOs). Currently
internet-connected phones is BskyB, Vodaphone and 3 are bidding
overtaking the number of internet-connected PCs. for the rights to show ninety-second clips of premier
The latest phones, with colour football matches (Times,
screens, cameras, music players and downloadable 6 August 2003).
games, have as much computer
power as the desktop computer did ten years ago. But 3G is also an opportunity for the Japanese and
Yet ‘the troubled switch to 3G Korean manufacturers to enter
technology means the mobile telecom industry is in Europe and for the Europeans to enter Japan.
turmoil’: Ericsson is teaming up with Sony
and Toshiba with Siemens. Samsung, already
• The market for handsets is saturated after nearly a dominant in Korea and America,
decade of double-digit has a track record of producing reliable, easy-to-use
growth. Seventy per cent of Europeans and 50 per phones. And on the UK high
cent of the US population street Phones 4U is launching a high-street price war
now own a mobile phone. aimed at rivals Carphone
Warehouse and the Link in a drive to become market
• Revenues from voice calls are flat – so companies leader (Times, 4 August 2003).
are looking to new services Nokia is the major player in the mobile phone
such as photo messaging, gaming and location-based market. Its share of the global
information for revenue market increased from 36 per cent in 2002 to 39 per
growth. cent in 2003 (50 per cent in
Europe) – it outsells its three closest rivals combined.
• Wireless Application Protocol (WAP), a cut-down, It now has annual sales of
simple application of the Web, US$30 billion across 130 countries, selling five
has failed to excite users or generate revenue phones every second. It has core competences
streams. in radio technology, digital signal processing,
electronics manufacturing,
• 3G services have been delayed everywhere and are software platforms and architecture. According to
only just appearing in the Economist, Nokia’s Series 60
Europe. software could yet emerge as the mobile equivalent
of Microsoft’s Windows. The
So who are the key players in this complex and company has a track record of design innovations,
turbulent industry? including user-changeable
Nokia, Motorola, Siemens, Sony, Ericsson and handset covers, scroll-down text bars and predictive
Samsung make about 80 per cent text messaging. It introduced
of the phones. They also have a joint venture in thirty-four new phones in 2002 and is heading for a
Symbian software, an open and similar number in 2003. Forty
flexible standard that permits compatibility and per cent of its employees are involved in R&D, which
constant innovation. There are other accounts for a steady 10 per
alliances such as the Mobile Processor Interface cent of sales and an annual spend of US$3 billion in
Alliance and the Digital Home 2002.
Working Group which are also promoting
compatibility and ease of use. The mobile Since 1999 Nokia has presented itself as the world’s
leading design house
for mobile communication, launching its model 8210 Nokia is in the European Fortune ‘top ten’ companies
during the 1999 Paris fashion to work for, and the Nokia
week and portraying its phones in the media as way comprises a set of values and a strategic
cultural artefacts and icons. planning process that encourages
Surveys show that consumers rate Nokia above all participative contribution, a clear sense of direction
other mobile phone brands, its and disciplined execution.
customers are more loyal to Nokia than to their A new HR director has introduced upgraded
mobile phone operator, and in 2002 performance management and
Nokia was the world’s sixth most valuable brand reward processes. However, its mobile telecom
valued at some US$30 million equipment business (where Nokia
(Interbrand). Club Nokia enables it to keep close to competes against Ericsson, Lucent, Nortel and
its customers and sell units Motorola) is loss-making because
and accessories that would normally go via the of capital spending cuts by the telecoms operators.
telephone operator or retailer. Nokia is also playing catch-up
in the CDMA market (the digital standard
The company has a flat, non-hierarchical structure championed by Qualcomm of San Diego
based around Nokia Mobile and adopted by most US cellular operators), the
Phones, Nokia Networks, Nokia Ventures fastest-growing sector in the United
Organization (including an Insight and States and Asia, of which its share is less than 10 per
Foresight team which seeks out disruptive cent.
technologies, new business models
and promising entrepreneurs) and Nokia Research Nevertheless the Economist predicts an interesting
Centre. Its mobile phone battle, concluding that ‘Nokia
business has been further divided around nine has achieved its dominance not through ownership
business segments, including one of proprietary technology but
focused on CDMA networks, an entry product group from its ability to innovate around open standards,
aimed at emerging markets, from its strong brand and from
an imaging group producing camera phones, a its impressive logistics’(23 November 2002).
gaming and entertainment
group (responsible for the N-gage games machine)
and a business devices group
(responsible for a new phone, mobile e-mail and
messaging machines). Sources: ‘The Internet untethered’, Economist, 11
Jorma Olla has been with the company since 1985 October 2001; ‘Nokia v.
and since 1990 has led the Microsoft: the fight for digital dominance’,
turn-round and growth strategy with four close Economist, 23 November 2002;
colleagues. ‘Almost every assignment ‘Computing’s new shape’, Economist, 23 November
is given to a team, and managing the company is no 2002; ‘Calling for a renewable
exception.’ Collaborative future’, Fastcompany 70, May 2003; ‘Ten great
working is encouraged, and Nokia is involved in a companies to work for’, Fortune, March
wide range of joint and 2002; ‘What makes Nokia so good?’ Fortune, May
collaborative ventures aimed at growing the market 2000.
and making life easier for the
consumer. Now half the employees are outside QUESTIONS
Finland, leading Fortune to quote one 1 To what extent is this an attractive market to be
of Nokia’s American directors: ‘Nokia is in the unique in?
position that it has got a 2 What are Nokia’s main strengths, weaknesses,
group of managers that have been working together threats and opportunities?
for years – and now they’ve got 3 From Nokia’s perspective, produce a best and
a lot of senior people from outside who can shake worst case scenario
things up’ (Fortune, May 2000). for 2007.