Market strategy of Nokia

Market strategy of Nokia This report concentrates on the performance of Nokia in the year 2009 and the strategies which led to the same. The report begins with a brief introduction of the company and follows with PEST-G and SWOT analysis for the same. In addition to this a competitor analysis has been done to compare Nokias performance to its competitors and thereby analyzing its market share. Nokia seems to outperform its competitors due to a larger market share it enjoys. As we go further, a more detailed discussion of its marketing strategies can be seen. Nokia faces more competition today than a few years ago. The invasion of Android operating systems are more preferred than Nokias Symbian operating system. Targeting, positioning and segmentation have been analysed on the basis of a few key models. The report finally concludes with the evaluation of these strategies adopted by Nokia and how effective they have been or will be in the future. INTRODUCTION Around 1.2 billion (17%) people in the world connect through Nokia every day thereby proving their claim of, Connecting People. Nokia is a public limited company that is listed on three stock exchanges: NYSE, FWB and OMX. Nokia was founded in 1865 on the banks of the Nokianvirta River in Finland to produce a product very different from what it is commonly known for. It evolved from manufacturing paper to rubber to cables to electronics and then finally the mobile phone. The company owes its diversification and entry into mobile communications to its former President and CEO, Jorma Ollila who decided in 1992 to capitalize on the potential of this upcoming and growing sector. He decided to move out of their other businesses to focus on the development of communication products which was more profitable than their other business ventures. (Nokia online) THE MARKET ENVIRONMENT Nokia is a multinational company headquartered in Finland. It employs a total of 123,553 people worldwide and sells its products in over 160 countries. Nokia has Research Development Departments in 16 countries with 17,196 employees. Its major markets are in China, India and UK. From 2008-09, Nokias market share increased in China but decreased in India and UK. The reason for its declining market shares is possibly due to increase in competitors in India and the markets already being saturated in UK. Nokia produces technological products like mobile phones and smart phones, mobile computers and networks. PEST-G Analysis Under this section, the environmental factors affecting Nokia will be highlighted. The Competition Nokias top competitors in mobile devices are Samsung, LG, RIM and Sony Ericsson but in its smart phones, they face competition from Apple and RIM. According to the 1Q reports in 2010 (table 1.1appendix), Nokia shows declining market share. Samsungs share increased in India, one of Nokias top markets. RIMs market share also went up while LG and Sony Ericssons market shares declined in value. (Gartner online) Nokia may enjoy the larger share of the market but being complacent may have its adverse effects on the firms profitability. The operating system Symbian used by Nokia is user-friendly but has very limited applications. Whereas, the operating system Android being adopted by most of its competitors is an open system that allows its users to have access to a large number of applications. Also, the operating systems of RIM and I-Phones are quickly eating up Nokias market share. The Company Increasing competition and saturation of markets is causing Nokias sales to decline causing a major decline in its profits. Source (Annual reports) Drawn on the basis of table 1.2 appendix In 2009, Nokia predicted slight improvement in their market share in 2010 but were faced with negative outcomes. According to the 3Q report of 2010, Nokias shares have fallen to about 30%.The downward trend of profits is of great concern to the company. (Total Tele online) Nokia is the manufacturer of mobile phones but it does not sell directly to its end users. It engages in transactions between businesses (B2B), for instance it sells its products to wholesalers and retailers locally and internationally. This allows Nokia to make higher volumes of transactions. This chain of distribution is explained in greater detail under the marketing mix. SWOT Analysis Nokias internal and external factors can be summarized as below Internal Strengths: Market Dominance: Its market share is more than its top 3 competitors combined Good brand name and brand loyalty Takes into account customer preferences Nokia ranks 41st in Fortunes Worlds Most Admired Companies (http://money.cnn.com/magazines/fortune/mostadmired/2010/snapshots/6652.html) Reliable good quality products Value for money and has good resale value Weaknesses: Playing catch up with its competitors failing to bring differentiated products with a high level of competitive advantage to the market It has failed to make a brand of their models. For example, there is Samsung Galaxy S, LG Chocolate, Apple I-phone while Nokia is still using serial numbers to name its models. Their market share is declining constantly due to lack of innovative products and failure to capture the first mover advantage Insufficient marketing as opposed to its competitors Their software Symbian is under great criticism EXTERNAL Opportunities: Emerging markets like India and China hold great potential Middle East and Northern African nations are potential markets New innovative products with high competitive advantage Secure weakening position by entering into contracts with network operators to expand market share Acquire better software systems Threats: Direct competitors and threat from companies not considered as competition Their software system is no match to the Android and I-Phone software. Recession Smart phones are not competitive enough Brand image weakening/boring image Imitation (fake) and cheap products claiming to be Nokia can damage brand Nokias Marketing Strategy Based on several similar characteristics Nokia can segment their market: Demographic Features: Age and Gender: Nokia products appeal to most age groups and are more unisex. They are now introducing mobile phones with vibrant colors that would appeal to women and also the younger generations Income: Low Eg- C-series and dual sim phones Middle to High -Eg- N-series, E-series, Communicators Very High Eg- Vertu Phones Occupation: Businessmen they need phones that look professional and have multiple features: 3G technology, web access on-the-go, support organizing functions and connecting with clients. The Nokia E-series, N-series and Communicators are targeted at satisfying certain needs of businessmen. Students social networking, gaming features, and music options are the eye-catching characteristics sought by this demographic class. The N-series and Xpress Music models are quite popular in this segment. Level of Education: The user-friendly aspect of Nokia phones makes it easy for even illiterates to operate the phones. For those who like to read and use their phones aside from their communication functions, the latest Nokia phones like the N900 and other smart phones would be of great interest to them. Behavioural and Psychographic: Benefits Sought: Most Nokia products provide its users value for money as they satisfy multiple needs. For instance the Xpress Music models not only allow you to stay connected but also keep you entertained with its walkman features. Usage: Suitable for heavy or light usage. Perception and Personality: Customers perceive Nokia as a reliable and user friendly brand. Varying models for different personalities and tastes. Targeting And Positoning After Nokia has segmented its market, they develop a differentiated strategy for different segments. They aim to increase their market share by catering to all the segments. Even though their history of past products show their suitability for all age groups, recently launched products seem to be targeting the younger generation with a high level of involvement in this field. Nokia alongside its competitors Samsung, LG and Sony Ericsson offer its users a wide range of products at higher prices. They are able to charge such prices because of their brand image and benefits received by the customers in relation to the price they pay to obtain it. RIM and Apple also sell their products at high prices but they focus only on a narrow range of products. There strategy contradicts the former group as they focus on generating high revenues on the basis of the success of fewer product ranges. Nokia already enjoys a good position in relation to its competitors. Their brand is a self promoting tool. They like to market themselves as a brand that prioritizes its customers and adds value to their products. Nokia benefits by being an all-rounder in the manufacturing of mobile devices and the perception of being one of the best reliable brands in this industry. By supplying products of all ranges, low income to high income, professional to gaming, fancy to elegant, premium luxury to necessity the brand clearly displays its presence and dominance. MARKETING MIX The marketing mix consists of 4 elements (Product, Price, Place and Promotion), each of which will be discussed in detail below: Product No longer is the mobile phone a mere means to make phone calls but to perform more diverse functions like access the web, click photographs, share data, enjoy music, connect with friends through social networking sites, play games etc. Nokia manufactures a large number of differentiated handsets to cater to their wide and diverse target segments.Their products vary according to their features and serial numbers. They have successfully sold the Nokia C-series, N-series, E-series, Xpress Music models, Communicators and other mobiles with the power of their brand name. Recently they have launched the Ovi Stores which enable its users to download applications of their interest online. The most notable feature of the Ovi stores is their Ovi maps. In order to compete with their competitors, they are reducing their reliance on the Symbian operating system and developing models with the Maemo and Maego Operating Systems which are more open and allow users to develop their own games and share it with the rest of the world online. Product Life Cyle The N900 can be considered to be in its growth stage where the company has already reached its Break-Even-Point and is generating profits. Phones like the N97 and N91 have already matured and are generating constant returns and competing against its rivals. The Nokia Communicators are in the decline stages as the demand for older versions has fallen and competitors are offering better alternatives. In order to grow their market share, Nokia goes for product development i.e. launching new products in existing markets. Applying the BCG matrix (Boston Consulting Group), Nokia can be classified as the Cash Cows as they hold a greater share of the market but are not growing at the same pace as the growth of the market. As the market is growing, their share is reducing. This leads to implementing strategies to defend their position. Price Nokia adopts 2 pricing strategies. They price their products on the basis of: Market skimming technique i.e. setting high prices at the launch of the product and gradually reducing the prices when competitors enter the market. Competitors price they price their products more or less at the same price as their competitors. Place Nokia does not sell directly to its end users. It uses indirect channels through which it distributes its products to the mass population. They are engaged in Business-to-Business transactions. For example, Nokia sells their products to Sharaf DG, Axiom Mobiles, Jumbo, Jackys, etc in the UAE who then sell it to its end users. Promotion Nokia promotes itself mainly through advertising and sponsoring events. They use strong brand ambassadors like Priyanka Chopra and Shahrukh Khan in mass media advertising through Televisions. They develop effective and catchy advertisements where their brand name is the main selling point. Evaluation of Nokias Strategies Nokia has performed remarkably well in securing the position it enjoys today of being the market leader. But the real challenge they face is securing and maintaining this position. Being the dominant player, it should have been able to easily drive away the competition in the Smartphone market and grabbed the first mover advantage. Whereas it is playing catch up with RIMs BlackBerry and Apples I-Phone. Their efforts need to be more effective and their products more competitive as they have not been able to launch a product recently that can be classified as a paradigm shift. Conclusion: Nokia has performed well in the year 2009, however failure to overcome technologies of other smart phones can lead to a big damage to Nokia. Even though the brand name Nokia is sufficient to drive sales, the aggressive marketing and advertising strategies undertaken by its rivals can cause sufficient damage to their cash flows. Hence they need to focus more on not only advertising their brand but also their competitive advantages over its rivals. None the less, it is by far the most preferred brand of consumers according to a survey conducted in the UAE (Arabian business online) APPENDIX Table 1.1 Market Share of Top 5 Mobile Vendors from 2009-10 Table 1.2 Sales and Profit of Nokia for the past 5 years YEAR 2005 2006 2007 2008 2009 Sales 34191 41121 51058 50710 40984 Profit 3616 4306 7205 3988 891