Question1, In the late 1990s, Nokia emerged as the leader of the global mobile phone industry. However, by 2003, the company faced several problems. Discuss Nokia’s rise to the top and its eventual downfall. Analysis of Nokia Business in China This case discussed the operations of Finland-based telecom major, Nokia in China. Nokia entered China in 1985, and initially supplied network equipment to Chinese manufacturers. Nokia entered into joint ventures with local companies, which helped it understand the local market better.
The vast experience of GSM experience from Europe was fully utilized in China local business strategy. Furthermore, the Chinese government has provided a lot of support during their early set up. Competencies The core competencies of Nokia was unique, it gathered the strengths from technology know-how, facilities, finance and system. Nokia had built their strengths before entering to China market. The vast experience in Europe market for network services, equipments, mobile phones technology etc had given Nokia a fruitful result in 1990s.
In pursuing advantages in China’s business, Nokia went into other joint ventures. In 1991, Nokia’s main business came from Post and Telecommunication Administrators or PTA in Beijing and Fujian provinces, for it undertook network expansion services and bundled with handsets. In 1990s the start-off subscriptions had a quick and rapid take off after the economy opened for FDI and trade in China since mid 1990s. In 1992-1995, the number of subscriptions grew by 400%. The rapid growth of a new middle class is also a sign for mobile phone manufacturers.
Later on, the ministry of Post of Telecommunication (MPT) had also announced supporting development for wireless solutions instead of developing landlines, which boosted the market for both network and later on mobile phone sales. In end 1990s, Nokia continue its GSM investment in China. The action had gained them the fruitful result. By the end of the 1990s, China emerged as Nokia’s 2nd largest market after the USA, but Motorola continued to be market leader in China. Business Environment Changed (2003-2004)
Nokia’s dominance continued into the first few years of the 2000s, but it suddenly came under threat in 2003-2004, when smaller Asian vendors started making their presence felt with better products at lower prices. The company’s problems also had internal causes and one of the reasons could be that it had become too complacent with its success and lost its agility in reading and responding to market signals. The traditional strengths or advantages were melting and in reversing side. The impact after relaxing licensing regulations
By end of 1990s, the actions of Chinese government encouraged their local players, mandated a licensing system for local manufacturers of mobile phones. This has really created a huge impact to the Nokia business in later time. Most of the local manufacturers were copying Nokia’s styles and designs in no time and selling them at much lower price. These had brought the toughest challenge to Nokia’s business until today. New competitors The competition with multi-national brand Motorola was always the tough one for Nokia.
They were at one stage captured almost the same market shares in China territories. In early 2000s, the increased of rivalry Asian manufacturers like LG and Samsung were quick to respond to the demand and they came out with several new models had created a huge impact to Nokia’s sales as well. Also, the Chinese manufacturers like Ningbo Bird, Amoi, TCL etc were not far behind, and they also introduced new model phones at better prices. These had adverse repercussions for the company’s market share. Nokia was locked by own strategies.
Most of the models were tied up exclusively with some of the local operators due to bundling services with the handsets sales. These companies built an efficient distribution network to reach the rural areas. The Chinese brand like, TCL popular with involvement of manufacturing consumer durables like televisions and home appliances. They have their advantage in networking. Conservative Distribution System Initially, during early 1990s Nokia was concentrated only in the urban localities, mainly in 100 largest cities of China. They were using centralized system and focus to those tier-1 cities.
The limitation to distribute their mobile handsets via 8 national distributors on the country did not gave them much benefits, gradually the weakness has been exposed and the competitors attacked them from various directions. The economic booming in early 2000s, the demand from rural areas was strong and potential but Nokia missed the chance due to distribution system limitation. At the same time, price was also an attractive factors and the local made handsets was 25%lower than those multinational companies like Motorola and Nokia. Pricing factors
The new growing areas for handsets were mainly from rural areas. Nokia took its products into these areas could face severe competition from the local players. They were of the view at these locations. The Nokia brand would not have their value; only price would be the main consideration. At the same time, the corporation with local operators had also demanding exclusive models from Nokia. Not only that, they were also asking for additional features and specific software. All these actions incurred additional costs to make the specific models.
With these reasons, Nokia’s handset at one stage unable to compete with the local handsets in price. Lack of Flexibility in Choice Following with the cost factors, Nokia had also facing lack of choice in their handsets. The competitors came in and attacked the market aggressively during early 2000s. They introduced new models such as clamshell, color displays, phones with cameras, etc. In year 2003- 2004, the Nokia market share was melted down to 29%. Nokia did not have much to offer in this segment. It continued to produce phones in candybar model. The flexibility of the product range was disappeared.
Nokia failed to gauge the growing demand, mainly due to the outdated product offerings from the company. They did not have much to offer at one stage. This case analyzed the up and down of Nokia business in China. The operating advantages may change as the competitors and environmental issues may defeat the original strengths. It may turn out as threats to the business at the end. Very few of competitive advantages and their strategy can last very long. However, business is engaged in a never ending search to find new angles to beat their competitors.
It’s all about finding some way of differentiating products and services from other offering. Question 2 In its heydays, Nokia was well known and recognized for its innovativeness and rapidity in introducing new products. However, one of the main reasons for its troubles in the early 2000s was that it had failed to read market signals and lagged behind in product development. What were the reasons for the company’s problems? Do you agree that complacency had taken its toll on Nokia? In 1990s Nokia started their investment in China. The new adventure had brought them fruitful result.
However, in this Nokia case, we see the changed of the government policies, competitors’ strategies, culture, consumer buying behaviour, preferences, designs, technologies etc are all related to each other and arguable in any situation. Hence, we should break the journey of Nokia in a few period of time. Each of them indicate and represent the critical reasons behind the business. There were somewhere the company system in R, distribution system, operation management, sales and marketing strategy etc did not transform well and lead to problems to the business in later on.
The influencing came from external and internal itself. Internal threats Nokia is an organization very much focussed on the product development. Hence, they have strategic interest in product design. The new product design should be closely tied to Nokia’s strategy. It is major factor in cost, quality, time-to-market, customer satisfaction and competitive advantages. However, we see an opposite situation happened in Nokia in 2003. Nokia has nothing much to offer when his competitors had came out various new models and low price mobile handsets. It was a big surprise.
Why Nokia was not aware the needs of the market? What’s wrong with the organization system? One of the reasons could be that it had become too complacent with its success during 1990s. The support from the government as well as the newly open market had created various opportunities. In that situation, it can be over developed. The business volume was kept rolling bigger and bigger. The development of the internal and external operation system was very much focused on a booming market needs. Furthermore, Nokia was so confident with the technologies they have in China.
The vast experience in Europe for GSM example had achieved an extra ordinary result after introducing to China market. In 2003, the problems exposed after the local competitors came in to the market with more features but at lower price strategy at rural areas. Those areas are the weakness point for Nokia’s strategy. The distribution system via the national distributors did not reach out the customers at rural areas. In China 2000s, the biggest group of consumers came from the middle class, those from small cities and rural areas. The centre government had announced of wireless development in all the rural areas in early 2000s.
The cities were became the most important Nokia had limited understanding in this new customer groups. They do not have any direct feedback, hand on experience at the rural areas. The needs of the customer in rural areas could be as simple as a basic phone but the most important is at lower price. Nokia’s concept was totally out of their mind. Some of them not even know Nokia brand was a European brand, they thought it was from Japan. The development of new products usually involved in cost target, quality goals, focus on customer’s needs and satisfaction etc.
A new product was based on the market feedback and the organization strategies. It was complicated but extremely important in an organization. At the same time, the corporation with local operators had also demanding exclusive models from Nokia. Not only that, they were also asking for additional features and specific software. All these actions incurred additional costs to make the specific models. With these reasons, Nokia’s handset at one stage unable to compete with the local handsets in price. In the other words, Nokia was restricted by their own marketing strategies. The lost some advantages in standardization.
In early 2000s, when Nokia was captured by the down fall, Nokia’s President Coin Giles did a market scanning. He visited some of the small towns and cities in China and interacted with the local operators, distributors and sales people. He identified the needs of the customers, as well as other factors like how well competitors addressing those needs, example product design, product features, distribution system etc. Then, he realized that the main problem was Nokia distribution system, most of their new products are unable to reach the right targeted customer. Coin Giles has then identified the basic needs of the market.
Then he planned his strategy to revamp the distribution system from national stage to more provincial level and direct sales channels. External Threats In late 1990s, there are more mobile handsets manufacturers set up their factory in China, example, Arcatel, Sony Ericsson, BenQ, Samsung etc. All of them were direct competitors to Nokia’s business. Some of them had followed the strategy of Nokia by going through a Joint Venture with local companies, examples, Arcatel-TCL. Not only that local players like Huawei and NingBo Bird were another well known local players who were very aggressive in eveloping their business since 1990s. Huawei technology has become a symbol of China’s success in network services business in 2004. The Chinese government policy also playing an important role here, in 1998 Chinese government encouraged their local players and mandated a licensing system for local manufacturers of mobile phones. The action created a huge impact to the Nokia business in later time. Most of the local manufacturers were copying Nokia’s styles and designs in no time and selling them at much lower price. There were also illegal import activities from overseas.
The price of the mobile handsets was gradually become lower and lower. Some operators were looking for business opportunities. They used the Nokia handsets to bundle with their service and give it as “free” when the subscribers agree to use their network service. It was not a healthy trend. Different with other foreign competitors, Nokia had limited product offering beyond the GSM mobile phone family which can put the company in vulnerable position should demand for mobile phone a plateau while new services like GPRS, WAP & 3G may not take off in China as soon as anticipated.
So much so that when the company announced poor results in the first quarter of 2004, some rumours said it was the beginning of the end of Nokia’s dominance in the industry. However, Nokia was not ready to throw in the towel quite so easily. The company put up a tough fight over the second half of 2004 to recapture its lost position in the market. Nokia drew on its experience of setting up Nordic cellular networks (which were more advanced than those used by Japan, the rest of Europe, and the US at that time) to successfully adopt the GSM standard.
The company was listed on the New York Stock Exchange in 1994. Over the 1990s, Nokia became one of the most successful mobile phone manufacturers in the world and began to enter non-Scandinavian market as well. Nokia was also of the first mobile manufacturers to realize the importance of the design element in mobile phone and its phones were more aesthetically designed than those of competitors. | | Question 3 Comment on Nokia’s efforts to recover its lost market share. Do you think that the company will be able to recapture its position in the mobile phone market? Discuss in light of Nokia’s future plans.
Market Scanning and assessment: In early 2000s, when Nokia was captured by the down fall, Nokia’s President Coin Giles did a market scanning. He visited some of the small towns and cities in China and interacted with the local operators, distributors and sales people. He identified the needs of the customers, as well as other factors like how well competitors addressing those needs, example product design, product features, distribution system etc. Then, he realized that the main problem was Nokia distribution system, most of their new products are unable to reach the right targeted customer.
Coin Giles has then identified the basic needs of the market. Then he planned his strategy via the strategy process as follows: Reformulates Strategies in China Distribution system: The revamp of distribution system from centre-oriented sales models to a more cooperative system has been one of the most successful revolutions. Nokia decentralized the system from 8 to 3 national distributors, by increasing the number of provincial distributors, hiring 3rd party sales representatives, and opening Nokia-branded outlets of flagship. The switching from national base to provincial base was a huge revolution.
In year 2006, Nokia developed several of province distributors, set up 70 sales offices. The number of distribution offices increased from 8 to 50 and nearly 5000 sales representatives. The unique of the Nokia distribution system is simple and direct. They reduced the national base distributors, increased the provincial distributors can enhanced the reach out strategy to rural areas. The sales representatives most of these people approached Nokia themselves. They packed the handsets in backpack and sell it at their place. This is totally an unexpected new channel for Nokia in China.
Besides, Nokia also formed alliances with foreign distributors in China CellStar Corporation and Brightpoint Inc, which involved in value added logistic in wireless CellStar Corporation and Brightpoint Inc, which involved in value added logistic in wireless communication industry. In 2007, first Nokia flagship was set up in Shanghai. Nokia used the flagship or concept shops to cater the needs of the customers as well as creating personalize shopping experience for the customer. The store provided an interactive multimedia experience to the consumers. Nokia also placed their Nokia academy staffs to understand the realistic market.
Later on, all these concept shops had also brought in customer service for warranty protection, promotion plans, fan club etc. China Specific Handset Nokia considered China as the most important market to be developed in 2000s. The market size and the volume is good. In 2002, Nokia set up their Global research Centre in China, Hangzhuo. The R&D and design teams emerging trends in terms of text input, colour etc to identify the trends for a particular market. This helped them in deciding on the wallpaper, ring tones, colour, services content for user interface, etc.
Now, Nokia are focusing to cover the majority shares in the market. They created a low pricing model but with new features phone to capture those rural market, example Nokia 1110, 1116 were predictive text input and menu in Chinese. The Nokia 3108 a stylus for writing in Chinese launched in 2003. Nokia 6108 with Chinese-English-Chinese dictionary features etc. With all these new models, Nokia gained back the shares and in fact developed further and faster than other competitors. Following by pricing strategy, most competitors did not expect Nokia can even sold Nokia 1100 at around USD50 only.
It was an outstanding plan, whereby the phone later was bundled with high-end mobile phone selling through the distributors to the retails as bundling package with ‘free basic phone”. The marketing plan was successful with years in worldwide. Besides these, bundling with service was not a new idea in 2000. Some of the telecommunication operators requested Nokia to cooperate with them by producing certain model for their exclusivity in sales only. Nokia 6102 was one of the good example uploaded with menu, shut down and start up graphic and tones as per requirement of China Mobile.
This was the first time, Nokia offering a special design for a single operator. Outstanding and Advance Technology Nokia set up R&D at Hagzhuo in 2002. In 2004 4 manufacturing plants in Beijing, Dongguan and Shouzu. All these plants, Nokia manufactured mobile devices and also switching systems, base station controllers and transcoders. Nokia had their own design team in China. The advance technology moving all to China plant showed the management wanted to create proximity advantage in China market. Nokia also established CDMA R&D facility in Beijing.
In Oct 2005, Nokia entered a joint ventured with China Putian Corporation to form a venture called Potevio. They aimed for developing the 3rd generation TD-SCDMA and W-CDMA technology. Customer Reach out Plan 1) develop portal 2) develop website NCool (youngsters) 3) develop discussion forums 4) exclusive features for Nseries only 5)improve branding by asking celebraties or partnership with Yahoo! & virgin Air 6) field marketing with their smart phone Nokia brand was no well known by the China customer at the beginning stage. In order to expand the business wider, a vast of advertisements fund had been injected to the promotion strategies.
Nokia invested heavy in A&P fund. This fund was also used as a weapon to tie up the dealership and distributor at certain extend. Nokia’s commercials accompanied the launch of new models usually focused on new features example polyphonic ringing tones, camera (pixel), video clip functions, wap, speaking alarm, colour screen etc. however the threats from the local players still loomed large, the manufacturers were non-stop copying Nokia’s new styles and designs in no time, and selling them at a much lower price. Nokia since then focused on how to differentiate with those non-Nokia phones by creating internet website www. usic. nokia. com. cn provided wide range of downloads like ringtones, news, information, interviews with celebrities etc. NCool – a campaign exclusively for Nseries and provided them the exclusive content. These actions had built a group of loyal supporter to Nokia brand. Nokia is superior to their Chinese counterparts in product and promotion. Firstly, they have strong R & D capabilities. High satisfaction and easy recognition are obtained from advanced technology, regular and careful market research and fast substitution of product generations. Therefore, they can keep a dominant position in the whole market.
Domestic competitors have to be epigones. Secondly, Nokia have perfect market segmentation which can cover all possible segmented market and take the advantage of many specific bottom-up promotion methods corresponding to different target markets. Effectively, promotion by various media helps to stimulate consumers’ purchasing desire. Compared with Nokia, the local companies do not fine-tune the market segmentation. They can only cover a few segmented markets. They promote their products by common top-down ways in all segmented markets. It cannot convey product information, let alone stimulate the purchasing desire of the consumers.
In the field of mobile phone business with fierce competition, the following suggestions on product and promotion are given for domestic companies to catch up with their international competitors. Worldwide, Nokia went in for reorganization in 2004. It adopted a matrix structure comprising for business lines – mobile handsets, multimedia, networks and enterprise solutions. The strong market know-how and market intelligence lead Nokia to recover from their business. In later stage, we continue to see more and more new technologies was created and Nokia achieved their leading position by overtaking all other brands in 2006.
Nokia has achieved the position of number 1 global brand. Reading Notes The case discussed the operations of Findland-based telecom major, Nokia in China. Nokia entered China in 1990s, and initially supplied network equipment to Chinese manufacturers. Nokia entered into joint ventures with local companies, which helped it understand the local market better. By the end of the 1990s, China emerged as Nokia’s 2nd largest market after the USA, but Motorola continued to be market leader in China. By the early 2000s, the Chinese companies were making inroads into the market, and Nokia’s sales dropped drastically.
The main reasons for the reduction in sales were the limited range of handsets, and absence of clamshell models from Nokia, and limited distribution facilities, due to which the phones did not reach the rural areas where the demand was growing. Nokia was quick to react, and revamp its product, distribution, and promotional strategies. It introduced several new products specific to the Chinese market, which included models with predictive text input in Chinese, lunar calendar, handsets using a stylus to write Chinese, English dictionary, China specific wallpapers, phones with multiple address books, etc.
The changes brought out in the distribution system included decentralizing the distribution operations, increasing the number of regional distributors, hiring third party representatives, opening sales offices all across the country, and direct distribution of products to retail outlets. Several China-specific promotional campaigns were also launched. Nokia also made several investments in technology in the country. All these efforts had a positive impact on Nokia’s fortunes in China and by 2005 it had emerged as the leading handset manufacturer in the country.
China also emerged as Nokia’s largest market by the end of the year. Nokia’s strong run continued in the country, and it sold over 70 million handsets in China in 2007. By the end of 2008, though Nokia was doing well in the market, it also faced challenges in the form of new competitors like Tianyu and the changes being brought about in the Chinese telecom sector. Nokia sold 70. 7 mobile phones in the country in 2007 7, accounting for a market share of 35%. Internationally too, Nokia performed well in 2007, and announced record sales and market share for the year.
By the end of the year, its market share had crossed 40%. Sales during the year8 were at € 51,058 million against € 41,121 million in 2006, a growth of 24%9. The sales of mobile phones were at € 25,083 million. Analysts were of the view that Nokia’s leading position in the low-cost handset market and its formidable position in emerging markets like China and India were the reasons behind its success. China had been Nokia’s largest market since 2005 and continued to be so in 2007 with sales of € 5,898 million. Future Plans
Nokia planned to drastically enlarge the fraction of its product range that feature touch screens, and that it plans to offer the first Maemo 6 “mobile computer” in 2010. Nokia also stated that it has enhanced its Symbian user interface and will take away a “major product milestone” before the middle of 2010. Nokia restated its focus on services, and sustains its objective for 300 million active users of its different services, like Ovi, by the end of 2011. In terms of growth for 2010, Nokia expects the industry as a whole to grow by 10% and forecasts that it will uphold the same market share as in 2009.
Continue his JV business strategy with multi-national company like Siemens. The JV was proven success in business strategy. Issues: To understand the difficulties faced by an erstwhile giant in the global mobile phone industry in 2003-2004. To appreciate the importance of innovation in a dynamic and volatile industry. To analyze the effect of changing market conditions on companies. To appreciate the importance of keeping abreast with changing market conditions and adapting to them speedily. To examine future challenges that the company faced and the various options available to it. | | | |1992 |Launched of Nokia 1101 |Precursor to all Nokia’s GSM phones | | | | | |1994 |Launched of Nokia 2100 series |The famous Nokia Tune | | | | | | | | | |1997 |Launched of Nokia 6110 |First snake game | | | | | |1998 |Top Mobile phone manufacturer in the world – | | | |under brand name “Vertu” | | | | | | | |Nokia open a research facility in Beijing to | | | |focus on research and development in future | | | |wireless and wireline technologies | | | | | | | |1998 China had emerged as the second largest | | | |market for Nokia after US with revenue $1. 5 | | | |billion | | | | | | | | | | | | | | |1999 |Introduced a WAP handset – Nokia 7110 | | | | | | |2000 |Nokia built a new factory at Xingwang Industry | | | |in Beijing | | | | | | | |Nokia has 12 production facilities across the | | | |world, 5 in China and built another at XingWang| | | |Industry during end of 2000. | | | | | | | |7 joint ventures | | | | | | |End of 1990s |Nokia’s GSM equipment was used by more than 90 |Flexibility.
Understand market needs and | | |operators across the world |product development – competitive priorities | | | | | | |Motorola, said Dataquest, retained its number | | | |one slot in analog phones, but Nokia’s growing | | | |hold on digital phones was the key to its | | | |success. | | | | | | |”Nokia has based its product strategy on a few | | | |product platforms that have been adapted to all| | | |digital standards,” said Dataquest analyst | | | |Peter Richardson. He added that the company’s | | | |designs were based on “an intelligently | | | |conceived market segmentation plan that looked | | | |to consumer desire for inspiration, not simply | | | |engineering ability. | | | | | | | | | | |2001 |2001 export from Nokia China had increased to | | | |$2. 5 billion | | | | | | |2001 Nokia opened “Xing Wang” (Star Net) | | | |International Industrial Park with Chinese | | | |Partner | | | | | | | | | | | | | | | | | | | | | | | | | | | |Launched 3G phone |Nokia 7650 & 3650 enter multimedia handset | |2002 |Nokia 6650 |market | | | | | | |Nokia 7650 – Camera Phone |Nokia would continue to implement the | | |Nokia 3650 – Video Capture Phone |localization strategy in the aspects of new | | | |product R&D and market sale to expand the | | | |market share in China. | | | | | |2002 |Decreased in revenue to $30 million |Nokia’s sales drop out of sudden due to limited| |Most critical time. Tough competition lead to | |handset design. Nokia was slow in launching | |operation change and revamp the whole |2002 Nokia set up a global research and |camera phones, clamshell, color etc. |distribution system as well as market strategy |development center at Hangzhou, Zhejiang | | | |province |Motorola, Ningbo, TCL came out a well design | | | |phone but in low cost | | |Motorola is still the leader in 2002 but reduce| | | |its share to 27% |Local players also unleashed | | |Nokia 22% | | | |TCL, Ningbo Bird and others – 19% | | | | | | | | | | |2003 |Decreased by 2% to $29 million | | | | | | |2004 |Outdated product from nokia lead to drop |From this result Nokia decided to make a new | | |drastically |strategy . | | | | | |2005 |To revamp in design – came up slider phone and |N series included video, camera, high | | |clamshell phone |resolution display and hard drive | | | | | | |Customize for service provider (competitive | | | |advantage) | | | | | | | |1st customized product was for China Mobile | | | |Communication Corporation (China Mobile). | | |Result to | | | |2005, total mobile phone subscriptions across | | | |the world surpassed the 2 billion mark and | | | |Nokia sold its billionth phone. | | | | | |2006 |Nokia Siemens Network was formed |Merging Nokia Network and Siemens for carrier | | | |mobile networks and fixed networks. | | |Venture commenced operation in 2007 | | | | | | | | | |2008 |Nokia reached almost 100% in some of the |They aimed China, India and Africa. | | |market. Looking for new development | | | | | |[pic][pic][pic] | | Distribution System Nokia original distribution system was concentrated on teir-1 cities only. It caused a centralized system but not balance. It distributed through 8 national distributors, who however did not reach the hinterlands. In 2000s, the China economic was flying high, more and more people afford to buy handsets or subscribe to the service but the growth of the usage was mainly from rural areas. They started growing aggressively in smaller towns or the rural areas.
The price was low compared with Nokia. Sometime, it can be 25% lower than those multinational companies likes Motorola or Nokia. The subsequent changes that Nokia brought in its distribution strategy included decentralizing operation, revamping the distribution channels by increasing the number of provincial distributors, hiring 3rd party sales representatives and opening Nokia-branded outlets. They had reduced the number of national distributors to 3 and added more provincial distributors in the province. Product With the maturity of the cell phone market, mobile phones have changed from a luxury product into a mass consumer product, and consumers are becoming more rational.
Therefore, it is very important to grasp the characteristics, trends of consumer demand, and produce marketable products. The localization strategies on products usually focus on the following four aspects: 1) R & D capability: research and development centers are the core departments of manufactures. Through targeted exploitation of hi-technology products, the enterprise can play a leading role in the industry and occupy the dominant position. Nokia has six R & D centers in China, owning an independent property and nearly hundreds of patent applications in the field of mobile phone design. Besides, together with Motorola, it masters 85% of the basic and core technology of mobile phone manufacture.
This effectively promotes technology innovation and localization process, strengthening its research and development capabilities. In contract, most of China’s mobile phone manufacturers adopt the ways of cooperation and OEM for their production. Bird combines their own technology with a foreign cooperation, which has, in spite of its quick development of stable and mature products to occupy the market, caused a negative impact on its own research and development capabilities, and over-reliance on cooperative manufacturers in the core technology and relevant parts, resulting in a passive position in technology. 2) Grasping the trend of products: it is the premise to increase market share that the production has to match with the needs of the customers.
Therefore, how to grasp the essential characteristics and trends in consumer demand is very important. Nokia has established an information network aimed at the product research and development, owing over 300 members of marketing in China, collecting all kinds of data and information for different market analysis groups in the market every day. This will guarantee their clear understanding of the characteristics of the local market about consumers’ demand and consumption consuetude, and the production of marketable products. Bird, however, takes its indigenous advantages by considering itself a better understanding of the needs of local consumers.
Therefore, production decision-making mostly relies on its experience, without all-round and detailed market research, making it stay within the stage of producing the products needed by consumers for the present time, unable to meet the potential needs of consumers of the future. 3) The pace of product updating: rapid innovation will help to attract new customers. The cycle of developing a new style of Nokia mobile handset is 35 days on the average, whereas the average rate of Bird product is about 70 days. Nokia’s cycle is far shorter than others’, ensuring its forerunner status in the fashionable tide. (4)The product value of customers’ feeling: the value of product is the most concern of consumers. Having a high intrinsic value means more loyal customers.
According to the survey results issued by China State Administration of Quality Supervision: the average customer satisfaction index of Bird products is 65. 73%, and that of Nokia 85%. Relying on its brand, Nokia has won many loyal customers, but Bird is weak in brand influences. (see Table 1 ): The Sixth Wuhan International Conference on E-Business – Innovation Management Track………………2239 Table 1. The difference between Nokia and Bird products Differences Brand names Proportion of owning the core technology The average speed of product updating Customer Satisfaction index Nokia 85% 35days 85% Bird 10% 70days 65% Sources: database of Saidi Company under the “mobile phone market report in the first half year of 2006 in China. 2. 2 Price
Price is a critical factor to consumer’s buying behavior, excessively high price leads to the risk of losing potential consumers, and low prices will lead to the question of product quality. In terms of price, according to its product positioning, Nokia’s product line covers almost all the markets from low price to high price, its prices range from 365 Yuan to 13,800 Yuan, in order to meet the consumer demands at different levels, and it promises not to cut prices rapidly; by understanding the nature that new mobile phone users in China are usually the low-price users, it starts to focus on low-price markets and launches a series of low price and high-quality mobile phones to compete with China’s domestic manufacturers.
Although Bird’s prices are also guided by its product positioning, ranging from 250 Yuan to 3,950 Yuan, to satisfy the mid and low price markets, there is a great gap in the high price market. It wins consumers with low and dramatic price discount; meanwhile, it brings unstable feeling to consumers. Nokia is entering the low-price market, while Bird is trying to squeeze into high price market, and sharing high profit with foreign manufactures. 2. 3 Promotion Effective promotion should begin with clear targeting, and then establish strategy according to different targets. Nokia has divided its business into nine departments, and different departments promote particular products according to their special target market.
Such as the models beginning with the number 6 emphasizing the business function, and those beginning with the number 8 aiming at people who pursue high life taste and quality, with strong purchasing power. Bird’s market segmentation is not very refined and complete, covering only a few basic types, such as the business type, and the woman star type etc. This makes its position neither accurate nor professional. It is very difficult to convey the intended information to its target customers clearly. 2. 4 Place It is well known that distribution (place) leads to success in the mobile phone industry . Whether or not having the corporate’s own expedite distribution channel is critically important. In the beginning, Nokia adopted the top down model, building up a multiplex and mixed distribution system by consistent reforms, i. e. the form of “chief agency + provincial agency + individual branch + direct providing + FD”. The product terminal reaches the city market with a strong purchasing power preferentially, then, it turns to the village market, having extended already toward the third or fourth class markets. The place advantage has been the magic weapon for the local brand at all times. Bird takes the bottom up strategy, adopting the tactic of “setting up the service network to control the terminal”, “the small district with close management” , namely, the form of “provincial distribution branch + regional office + direct provision”. Product terminal takes the strategy of surrounding the city by the village, i. e. eveloping second and third class 2240………………The Sixth Wuhan International Conference on E-Business – Innovation Management Track markets first, completely penetrating small and medium-sized cities, and finally entering the first class market in the big cities. Through the above analysis, it is easy to find that there are great differences in the way of concrete practice based on 4P critical elements when they carry out the localization strategy (Table 2). Table 2. The differences between Nokia and Bird of localization strategy based on 4 P elements Nokia Bird Product Strong R&D capability; regular and all-round market research; fast generation ubstitute; strong brand influence; pay attention to potential needs and new trend Weak innovation capability, mainly rely on cooperation; slow generation substitute; weak brand influence; make decision depend on experience; focus on the present needs Price Covers all markets from high price to low price Concentrate on the low and medium price markets Promotion Perfect market segmentation covers all possible targets; veracious market positing; pull strategy; effective means of information express Basic market segmentation covers only few targets; blurry market positing; push strategy Place Chief agency + provincial agency + individual branch + direct providing + FD
Provincial distribution branch + regional office + direct providing Sources: Analyzed by the authors based on relevant information. Way back in 1930s, Nokia has been involved in the forest industry in China but it was not long. Until in mid-1980s , when the country had started accepting foreign direct investment, Nokia decided to increase his market share in global via aggressive business strategy in China. In 1985, Nokia set up his first office in China. In China, Nokia operated through joint venture partners, though it was required to share its technology with these partners. In China it was mandatory to transfer technology to get market access.
They were also strongly supported by the Chinese government as its provided technological know-how. Initially the company was involved in supplying GSM equipment, cable production lines and transmission systems. Nokia entered China market at a perfect timing without much competition, which had gained them the advantages in this telecommunication business. With competitive advantages in Guan Xi Wang (network relationship), infrastructures, technologies and supports from local authorities, Nokia went in their historical highest achievement in their global business. In the late 1990s, Nokia overtook then leader Motorola to emerge as a behemoth in the global mobile phone industry.