Nokia Case Study Introduction: Both, the business environment and individual firms are dynamic systems, continuously

in flux, it is a big challenge to achieve a fit between these two systems and therefore get the competitive advantage. This essay will firstly assess and consider the balance of market- led and resource-based approaches. These two approaches should be viewed as complementary. Following the discussion, the essay just analyzes Nokias strategies and empirically justified the reciprocal and complementary relationship between these two approaches. On the process of Nokias development, the company achieved success because it could balance these two approaches well. Once it failed to do so, the company immediately suffered the fall in 2004, lost market share and decreased the revenue. However, the company quickly recovered because it followed the market trends, and simultaneously its strong internal strengths neutralized the external threats. In addition, Nokia could maintain its market share and its market leader position in the following years based on the good market opportunities in mobile phone industry and its strong internal resources basis. Secondly, this essay will assess Nokias strategies in terms of emergent and planned approaches as well. Part 1: Market-led and Resource based approaches ON ONE HAND, SOME ARGUE THAT AN ORGANISATION NEEDS TO ADAPT ITSELF TO ITS ENVIRONMENT. (EXTERNALLY ORIENTED & MARKET DRIVEN REFERRED AS OUTSIDE-IN) SO, FOR THESE SUCCESSFUL COMPANIES, MARKETS ARE LEADING, AND RESOURCES ARE FOLLOWING. Managers should take the environment as the starting point, set on developments in the market place, choose an advantageous market position and then gradually set up the resource base and activity system necessary to apply this choice. They use the signals from customers and competitors to decide their own game plan. Furthermore, proponents of this market-driven approach tend to emphasize that an insight into markets and industries is essential. They argue that not only the general structure of markets and industries need to be analyzed, but also specific demands, strengths, positions and intentions of all main forces need to be determined. Firms can, in part, create their environments through strategic alliances with stakeholders, investments in leading technologies, advertising and a variety of other activities. Firms that are market-driven are always the first ones to recognize that new resources or activities need to be developed. So those firms are better positioned can benefit from the first mover advantage. 1

ON THE OTHER HAND, SOME ARGUE THAT THE ORGANISATION CAN ADAPT THE ENVIRONMENT TO ITSELF. (COMPETENCE / CAPABILITIES BASED STRATEGY REFERRED AS INSIDE-OUT APPROACH) SO, FOR SUCCESS, RESOURCES SHOULD BE LEADING, AND MARKET FOLLOWING. Managers are required to take the organisations resource base as the starting point, selecting an environment to fit with its internal strengths. However, some argued that market positioning is vital, but must take place within the boundaries set by the resource-driven strategy. That is, the market position selected is adapted to fit the organizations resource base. So for successful companies, they need to firstly build up a strong internal resource base, and then based on this strong resource base they can access to unfolding market opportunities in the medium and short term. In essence, this inside-out approach assumes that competitive advantage depends upon the behavior of the organisation, rather than its competitive environment. Moreover, the proponents of this approach stressed that the importance of a firms competences over its tangible resources (de Wit B and Meyer R., 2004) . Strategists have variously referred to the basis of this strategy as competence based or capabilities based. Core competences can be a very attractive basis for competitive advantage, since rival firms normally need to take a long time to catch up. Even if competitors are successful at identifying the competences and imitating them, the company with an initial leading position can still upgrade its competences and stay ahead. Experts further suggest that the two approaches should be viewed as complementary, since organisations need to develop both internal and external focus to develop knowledge-based core competences and market driven strategies sensitive to customer needs. NOKIA CASE STUDY Since those early days, Nokia has evolved into a conglomerate encompassing several industries. With the collapse of the USSR in 1990, Nokia suffered the high pressure to survive in so many different areas. The mobile phone industry is faster-growing in size, with intensified competition, also becoming more complex than before. But, at the same time based on the new market opportunity the company predicted in mobile phone industry and its internal strengths-advanced technology on mobile phone sector (the company had the worlds first international cellular mobile telephone network and first producer of hand portable phones), Nokia finally decided to focus on mobile phone industry. Soon Nokia achieved the success in the

mobile phone industry and becomes the largest mobile phone company in the world. Without the external threats, the new market opportunities and its internal strengths on the mobile phone sector, Nokia may have not entered into the mobile phone industry at all. The big success Nokia quickly achieved in the mobile phone industry justified that the companys choice was right, but this choice was made on the integration of market opportunities and Nokias internal strengths. Over time, Nokia realised the importance of the design element in mobile phones. Moreover, they realised that the phone would no longer play just a functional role, but would also become fashion symbols. Since the company first broke new ground and launched its differentiating and innovative handset -8210 instead of the popular bulky and bricklike device, the company shaped the customer needs and led the market change. For Nokia, it not only achieved the first mover advantage and increased its market share, but also established a strong brand name in the mobile phone industry and gained an extensive lead over competitors in this area. Furthermore, based on the successful innovations from employees, such as text message, Nokias Navikey, internal antennae design and so on, Nokia constantly updated its competence and gradually became the market leaders. Obviously, this transition required both an inside-out capability to produce the custom products, which is differentiated with the competitors, and an outside-in capability for understanding the evolving requirements of customers and energizing the organization to respond to them. Meanwhile, it also implied that market-led strategy and resource-based strategy have a reciprocal relationship, indeed, they complement each other. Following these successes, Nokia further solidified its market position based on its strong internal resource; meanwhile, companys ability of sensitive of market trends lead the company to update its competence in a race to stay ahead. In the early 2000s, Nokia s strategy drift further justifies the importance of the integration of these two approaches. Within a period of time, Nokia just concentrated on developing the highend mobile phones and the complicated software tending to supply the technologically advanced products and surpass the competitors, while paying insufficient attention to external developments. Actually, at that time, the market was not ready for such devices. Eventually, the slow growth of customers demand for the advanced mobile phone caused Nokia to wait for the market. Thus, the companys distinct competence on technologically advanced products did not improve its performance and bring the competitive advantage due to its failure to meet the customers needs and its blunt market sense. Since Nokia realised what mistakes it had made, it soon adjusted the strategy. Following the market trends, Nokia aggressively launched several new models of phones in June 2004 based on its strong resource capability, meanwhile, reduced the price of the phone. The company emergently adjusted its strategy again, and 3

designed five new models of phones to meet the customers needs; meanwhile, the company followed the market trends and cut the price of phones. Meanwhile, the company also has planned and underwent an internal re-organisation aiming for the future sustainable growth. However, during 2003-2004, Nokia suffered the fall in the mobile phone market. Soon, the company recaptured the loss in the market share. In addition, the company gradually changed its stand and started to cooperate with the mobile network operators. These emergent strategy changes showed that Nokia no longer stuck to its previous planned strategies, while simultaneously adopted some emergent strategies in order to meet the customer needs and dynamic business environment. Actually, faced with the prospect of industry saturate and increasing international competition in the mobile industry. The company quickly recaptured its market share and increased revenue. The reason why the company recovered so soon was the ability that the company integrated again its inside-out capabilities and outside-in capabilities that matters. Based on the above analysis, marketing-led strategy and resource-based strategy both played key role in Nokias process of success. Indeed, these two approaches have a reciprocal and complementary relationship. In addition, based on Nokias internal resources and external business environment (From the supplied case information), I will assess whether it will be end of its dominance in mobile phone industry through Porters five forces (Porter, 1985, 1998) and Barneys framework (Barney, 1991) as follows. Nokia - External Analysis a) Threat of entry Microsoft Corp announced its decision to enter the mobile phones market, it could bring the big threat to Nokia. However, it is only an announcement. New network operators can supply the customized, operator-specific handsets. New emerging competitors from Asia So, Nokia will meet more intensive competition than before. b) Threat of the substitutes There is no direct substitute in mobile phone industry, especially for Nokias advanced products c) Bargaining power of suppliers Since Nokia is the market leader in the mobile phone sector, Nokia is in the strong position.

d) they

Bargaining power of buyers In handsets market, end users are not directly purchasing handset from Nokia, instead purchased from the service providers. Since the market becomes more sensitive to the

price, Nokia could meet the strong bargaining power from the buyers. e) Rivalry among existing competitors There is intensive competition in mobile phone industry. The competitors include Samsung, LG, Sony Ericson and other new emerging manufactures. Nokia SWOT analysis Internal analysis (Resource-based model) Strengths Having the advanced technology over the competitors in the mobile phone industry. Decentralized company structure, innovative and creative employees and Charismatic strong Leadership. The market leadership in the mobile industry. Strong brand name and company image in the global market Has its own manufacture and network. Product innovation. Economy of scale Weaknesses Complacency and arrogance. Few customized, operator-specific handsets. Few alliances, company sticks to its standing in the market, do not want to cooperate with the operators. External analysis (Environmental models of competitive advantage) Opportunities The emerging market in developing countries, such as China, India The emerging market for high-end mobile phone such as business user phone. Threats Facing more new competitors, especially from Asia. Stronger buyer power from the network operators. 5

 Lost market share Strong competition in mobile industry The market becomes saturated Overall Analysis Nokia had the potential to remain a major presence in the global mobile phone industry in the following years. The external mobile phone market environment is dynamic, Nokia has lost its market share due to the misinterpretation of the market trends and customer needs. But the market also brings the big potential opportunities to Nokia, such as the market in developing countries, customized business user mobile phones and so on. Moreover, the most important of Nokias internal strengths, such as the advanced technology, innovative products, economy of scale, could let it surpass the competitors and solidify its market leader position; Furthermore, Nokia can benefit further from its strong brand name and company image. While the fall in 2004, to some degree, just reminds Nokia of the need to overcome its complacency and arrogance and to be more sensitive to customer needs. Conclusion: Based on the above assessment of Nokias approaches to mobile phone industry, although the approaches present as contradictory and conceptually opposed, in practice, they actually present a reciprocal and complementary relationship to each other. Arguably, no single approach can facilitate the company achieve the success within such a dynamic and complex mobile phone industry. Therefore, the various approaches should be viewed as complementary. Because Nokia adopted the balanced various approaches in its previous time, it gradually achieved the market leader position. Since Nokia lost the control to make sense the market trends and concentrated on its planned strategy, the balance between the diff erent approaches also lost. Thus the companys market share fell immediately. As Nokia adjusted its strategy, aligned its internal strengths and external opportunities and balanced the emergent and planned strategies, the company recaptured its market share again. Therefore, if Nokia wants to get the long term development in the mobile phone industry, the four approaches are all necessary.