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Discussion document
December 2000
Nokia Case Study:
Winning in the .
FINGERPRINT – NOKIA
Rationale
• Focused on high growth categories (., mobile phones, digital)
• Anticipated shift to digital technology in the . beforepetitors and directed resources to optimize
opportunity; tailors products to target customers (., fashion covers for younger segment)
• Some difficulty to attracting top-tier local senior management due to glass ceiling (., all senior
leadership in Finnish0; Finnish managers used to manage . operations
• Succeeds in attracting top engineers because of attractive
products
• Local managers he limited autonomy and accountability exists at the unit level, but head office
retains final input
• Difficulty translating “The Nokia Way” to . (“The culture doesn’t he the same richness or value as
it does in Europe”)
• Devotes sufficient resources to local organization to win in market (., provided resources for .
to win in mobile phone segment)
• Outsources non-core technologies (., microprocessors from Intel,ponents form Motorola) and uses
standardponents to se on R&D spend and react faster to changing technologies than itspetitors; leverages
partnerships for more efficient R&D (., JV with Cisco, Geoworks, HP)
• N/A
• Creates broad distribution reach through numerous, innovative relationships with retailers and
distributors (., Sears, AT&T wireless services,Tandy)
• Develops and launches innovative marketing campaigns (., first to target consumers rather than
professionals)
• Successfully allies and acquires to gain capabilities (., joint venture with Tandy for distribution,
acquisition of Mobira to enter promising mobile phone area)
High
Low
• Encourages sharing of best practices but has not been very successful at doing so to date
NOKIA
Key facts
• Largest 1 -3 year revenues growth ofpetitors
• Largest mobile phone manufacturer and second largest provider
worldwide (behind Ericsson)
Products
• Mobile phones
• GSM/DSC networks
petitors
• Ericsson
• Motorola
Timeline
1865 1990s
• Developed into conglomerate (flooring, TV, footwear, etc.) until refocusing
on high growth mobile phone segment in late 1980s and 1990s
Divests
non-core
businesses
1995 1999
Americas
ROW
EUR
Revenues
$ Billions
Stock appreciation (1998-99)
Nokia
S&P
S&P cell and
wireless index
CAGR %
Capabilities
• First to use mass marketers as distributors
(., selling mobile phones in Radio Shack)
• Uses alliances for distribution channels (., AT&T Wireless
Services, Sears)
• Adopts consumer rather than professional focus in marketing,
unlikepetitors
• Uses alliances in R&D to grow development capabilities
(HP, Cisco, Geoworks)
Organization
• Autonomy provided to senior leadership in local subsidiaries
• Top management is all Finnish; obstacle to hiring top . talent
• Strong emphasis on corporate values and culture with “The
Nokia Way” – teamwork, innovation, production; difficult to
implement in .
• Excellent opportunities for advancement-fast career tracks, early
responsibility, rotation programs
• Hierarchy and bureaucracy reduced
• Young, innovative, non-rigid leadership style
• Rated in Fortune top 100 firms to work for in the .
Product
• Grew mobile phone segment from 16% of total sales in 1991 to
66% in 1999
• Allied to gain product expertise (., Motorola to standardize
technology, Cisco and HP to develop network products)
• Technology design innovator; first to market with many product
innovations
• Tailored product to target key customers (., phones with
fashionable, changeable covers to attract young segment)
Background Levers for success
Founded
as paper
mill
58% CAGR
Enters .
through
Tandy JV
Grows mobile
business in
.
19881983
Acquires
Mobira
1981
Operates
as a
conglomerate
1960s
CONTENTS
• pany overview
• . market entry strategy
• Products
• Capabilities
• Organization
NOKIAPANY BACKGROUND
• Founded 1865, in Finland, as a pulp and paper mill
• Entered . in 1983, when cellular service was just launching in the .
• Global employees 55,260; in . 10,500
• CEO: Jorma Ollila (Finnish)
• Most senior managers for .:
– Kari-Peleka Wilska, President of Americas
– Rich Geruson, Head of USA Sales and Marketing for Nokia Mobile Phones
• Key divisions: Mobile Phones, Nokia Networks,munications Products
• Market cap: $ billion (as of October 27,2000)
• Key industry of focus: Mobile phones (65% of 1999 total sales)
– Number 1 mobile phone maker globally
– Number 2 GSM/DCS mobile phone networks provider globally
• petitors: Motorola, Ericsson
PANY EVOLUTION
Source:International Directory ofpany Histories
1800s
• Founded 1865 in
Finland as pulp and
paper manufacturer
• Constructs own power
plants as industry bes
energy intensive
1960s
• Merges with Finnish Rubber
Works and Finnish Cable
Works in 1966 as part of
diversification plan
• Begins to design and
manufacture data processing,
industrial automation,
andmunications systems
• Nokia conglomerate consists
of integrated cable operations,
electronics, tires, and rubber
footwear
• Makes first public share
offering in 1966
1970s
• Oil crisis in 1973 reduces
reliance on exports (timber
products and machinery) to
Soviet Union (12% of sales)
• Kari Kairamo, appointed CEO
in 1975, realizes that for
Nokia to grow it has to expand
abroad; expands Nokia in
Scandinia and Europe
• Sells switching systems under
license from allocated
(French)
• Helps design world’s first
international cellular system in
the 1970s
1980s
• Acquires nearly 20
electronicspanies over the
decade andpletes key
mergers
– Acquires Mobira (Finnish
mobile phonepany) in
1981, to gain foothold in
growing mobile phone
segment
– Merges Salora (largest TV
manufacturer in Scandinia)
and Luxor (Swedish-state
owned electronics
andputer firm) in 1984
• Through the ‘80s,
manufactures OEM
equipment for Hitachi;
Ericsson, Northern Tel,
Granada, IBM
• Enters ., in 1983 through
JV with Tandy Corporation to
sell Nokia phones under
Tandy name
• Launches first product
(mobile phones) marketed
internationally under Nokia
brand name in 1986
Nokia has evolved substantially since its foundation, moving from a Finnish
paper mill, to a diversified Finnish conglomerate to a global wireless leader.
1990s
• Aggressively grows mobile
phone business in the .
• Buys Tandy’s share of JV in
1993 to fully own factories
in . and South Korea
• Signs significant contracts
to increase distribution
channels (., AT&T
Wireless Services)
Conglomerate phase
Expands in Scandinia
and Europe
Acquires and allys into
mobile phones and .
Allys to strengthen .
position
Time
Horizon 1
Drive core growth
Horizon 2
Build momentum of emerging
growth engines
Horizon 3
Secure future
options
Profit
“We are now benefiting
from the visionary
technological solutions we
made years ago; the long-
term success of ourpany
requires constant agility in
positioning ourselves in
this
dynamic industry.”
– Jorma Ollila, CEO
“To identify what is
required in the long term
you need thepetencies
and the products; getting
the right focus is the
tough part.”
– Jorma Ollila, CEO
“The CEO has to
understand the
dynamics of each
business thepany is in;
in order to understand
where the future lies.”
– Jorma Ollila, CEO
Source: Annual reports; press clippings
LEADERSHIPMITMENT ACROSS THREE HORIZONS
When planning Nokia’s future development, CEO Jorma Ollila distinguishes clearly
between three wes. The first we emphasizes the continuous exploitation of Nokia’s core
businesses. The second we requires the identification of capabilities and products that will
he impact on Nokia’s success in the immediate future. Finally, the third we determines
thepany’s future direction through setting aspirations and placing options.
PLANNING ACROSS THREE TIME HORIZONS
Profit Horizon 1 Horizon 2 Horizon 3
Drive core growth Build momentum of emerging
growth engines
Secure future options
Products • Boost mobile phone sales
through brand-building
efforts
• Make product extensions
such as “Swatch-like neon-
colored mobile phones”
• Expand product range
through new features
andplementary accessories,
such as phone covers or
different battery sizes
• Create R&D alliances for
product development in wireless
data transmission and terminal
technology
• Increase sales of fixed
and cellular network to public
tel operators
• Win private tel operators as new
customers
• Launch first wireless products
(., Nokia 9000municator, a
portable with phone, fax, email,
Internet access all in one)
Markets • Further penetrate Scandinia,
parts of Western Europe
• Improve positioning in
Asia/Pacific, US, other EU-
countries through stronger
distribution network
• Prepare for full deregulation of tel industry
and entry into remaining markets
Time
Horizon 1
Drive core growth
Horizon 2
Build momentum of emerging
growth engines
Horizon 3
Secure future
options
Source: McKinsey analysis
SENIOR MANAGEMENT
Source:Annual Report
Spent 6 months
in the . in 1999
Spends 50% of
his time in Silicon
Valley
* As of January 2000
Source:Eps Business Intelligence
NOKIA ORGANIZATIONAL STRUCTURE
“I am influenced by the American way of
managingpanies; solving problems through
organising and motivating people, rather than
seeking a technical solution.”
– Jorma Ollila
Nokia Group
Jorma Ollila, CEO
Head office
functions
• CFO
• International
Trade Policy
• Technology
• Research
Center
• General
Counsel
• Human
Resources
• muni-cations
• International
Trade Affairs
Nokia Networks Nokia Mobile
Phones
Nokiamunication
s Products
Nokia Multimedia
Terminals
Nokia Industrial
Electronics
Nokia Ventures Nokia Research
Center
Nokia
Internetmunication
s
Nokia Ventures
Fund
Internal Venturing
Unit
Nokia Wireless
Businessmunications
Nokia Wireless Software
Solutions
Nokia IP Application and
Connectivity Platform
World tel equipment
index
S&P 500
Nokia
NOKIA STOCK PRICEPARISON
$ Thousands
Source:Data stream
Value
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Nokia clearly outperforms the market and itspetition.
Asia-
Pacific
Europe
1995 1996 1997 1998 1999
NOKIA SALES BY REGION
Euro Millions
Nokia’s sales in North America he grown dramatically in the late 90’s with a CAGR of 58
percent, while European contribution to sales has diminished steadily shrinking.
North
America
6,191 6,613 8,849 13,326 19,772
CAGR
Percent
34
37
26
58
Source:Annual reports
100% =
ROW
Finland
(676)
1991
100% = EURO 2,600
ROW
1999
100% = EURO 19,772
Finland (395)
Nokia’s sales in Finland he fallen dramatically as a percentage of total sales.
Source:Annual reports
Euro Millions
NOKIA’S FINLAND SALESPARED TO REST OF WORLD
NOKIA’S INDUSTRY FOCUS AND PRODUCT MIX
Euro Millions
Source:Annual reports
Sales by product
Consumer
electronics
Cables and
machinery
Mobile
products
Telmuni-
cations
1991
100% = EURO 2,600
Basic industries
Network
solutions
Mobile
products
1999
100% = EURO 19,772
Home, multimedia,
and other
Nokia’s products
• Mobile products – full range of digital and analog cellular phones, wide-area pagers, as well as accessories andponents for mobile phones
• Network solutions – telmunication systems and equipment for both fixed and mobile networks; principal products include digital exchanges,
transmission systems, and cellular systems, which are sold to PTT, public utilities, new operators, and cable TVpanies
• Home, multimedia and other – includes PC and workstation monitors, as well as interactive digital satellite and cable terminals
In 1998, Nokia became the world’s largest manufacturer of mobile phones,
selling million handsets, and grew sales grew 51 percent from 1998 to 1999.
“Three years ago we
decided to create a tel-oriented
pany. We he been able to
implement the changes faster than
we expected.”
– Jorma Ollila,
Financial Times,
09/07/1995
SUBSIDIARY LOCATIONS AND RESEARCH CENTERS NOT EXHAUSTIVE
(5)
(2)
(3)
(1)
(3)
(14)
(3)
(1)
(4)
(1)
(17)
(2)
(3)
(1)
(5)(1)
(2)
(1)
(5)
(6)
(3)
(1)
(3)
(4)
(2)
(2)
(2)
(2)
(2)
(1)
(2)
(2)
(2)
(6) (1)
(2)
(3)
(3)
(1)
(1)
(1)(9)
(7)
(2)
(2)
(1)
(1)
(1) (1)
(1)
(1)
(2)
(1)
(1)
(1)
(1)
(1)
(6)
(7)
(3)(2)
Research
Nokia covers an expansive geography.
CONTENTS
• pany overview
• . market entry strategy
• Products
• Capabilities
• Organization
STORYLINE
• At the beginning of the 1980’s Nokia was still a diversifiedpany, relying predominantly on
Europe (particularly Scandinia) to drive sales
• However, thepany realized that significant growth would be dependent on building a
major presence in the . market, in high return segments
• To do so they acquired Mobira (Finland) in 1981 to gain a foothold in the rapidly
emerging mobile phone sector. They rapidly grew this opportunity in the . through a
series of OEM relationships (GTE, Delco, Southwestern Bell, Bell Atlantic) and a joint
venture with Tandy Corporation in 1983
• Nokia launched their own brand mobile phone in 1986 and pursued aggressive branding
and alliance strategies (., Rooftopmunications,paq, AT&T Wireless Services) to
solidify their presence
Nokia was the first player to use mass market distribution channels for
telmunications equipment.
Source:International Directory forpany Histories, Annual Reports, press clippings
1992
• Begins to
aggress-
ively
market
own
branded
products
1983 1992 1993 1995 1997
1983
• Cellular service
launched in .;
JV with Tandy
Corp. to sell Nokia
phones through
6,000 Radio Shack
stores; JV includes
joint ownership of
factories
1992
• Nokia and Tandy
Corp. open a
mobile phone
factory in Texas;
North and South
American markets
are half of global
mobile phones
market
19961994
1997
• CFO of Nokia deployed as
Head of . business; .
subsidiary sees immense
growth from 1997-99
1993
• Acquires Tandy’s share in both
manufacturingpanies; overall,
operates 5 factories; continues selling
through Tandy retail formats
• De-emphasizes consumer electronics
business
1995
• New distribution
facility opened in
Fort Worth, TX
• Granted license to
American Portable
Tel (private cellular
network operator)
for PCS 1,900 MHz
product
1996
• Signs significant
contracts with
AT&T Wireless
Services, Sprint
Spectrum, and
Powertel
1986
• Launches own brand
product globally
1988
• Divests flooring,
paper, rubber, and
ventilation systems
businesses
1986 1988
Early and mid-
eighties
• Aggressively
sought and
signed OEM
deals with
numerous
(., GTE,
Delco, etc.)
TIMELINE OF KEY EVENTS IN NOKIA’S . BUSINESS
CONTENTS
• pany overview
• . market entry strategy
• Products
• Capabilities
• Organization
Nokia made big bets as to which technologies would emerge, redirecting
resources andpany focus to emphasize these categories.
PRODUCT STRATEGY
“The choice of focus is extremely important.
We constantly strive to make sure we are focused on
targeted markets in which the growth rate is much higher
than that of the total market, Nokia’s aim is to grow somewhat
faster than the targeted markets do.”
– Matti Alahuta, President, Mobile Phones
Nokia’s acquisitions in the . were primarily to broaden its product capabilities.
PRODUCT ACQUISITIONS
Source:Securities Data Corporation and press clippings
CONTENTS
• pany overview
• . market entry strategy
• Products
• Capabilities
• Organization
• Developed, launched and ran innovative consumer goods marketing campaigns unlike theirpetitors
who were running professional focused campaigns
– Established brand name in the . through clever consumer segment targeting (., extensive ads
on MTV to reach younger segments)
Marketing
• Developed relationships with retailers and distributors to broaden and deepen market penetration
– JV with Tandy Corporation to sell through Radio Shack
– OEM manufacturing for GTE, Delco, Southwestern Bell, Bell Atlantic mobile systems and others
– Distribution agreement with Sears
– Distribution contracts with AT&T Wireless Service for Nokia branded mobile phones
Distribution
• R&D controlled out of Finland
• Leveraged partnerships for more efficient R&D
– Cooperation with Geoworks to develop next generation wireless products
– JVs with Hewlett-Packard, Cisco, Geoworks for high-tech product development
• Low investment, high return R&D strategy providespetitive advantage to Nokia who can react faster to
changing technologies than anypetitor
– Use of standardponents to enable outsourcing of non-core technologies (., micro processors from
Intel,ponents from Motorola, semi-conductors from AT&T)
– Similar product design allows Nokia to use the same production line for multiple products and
enables them to react quickly to changes in demand by shifting from one model to another
R&D
Alliances/partnerships provide
a large portion of Nokia capabilities
Nokia has developed a strong capability platform in the .; primarily driven
by alliances and partnerships.
CAPABILITY PLATFORM
BRAND DEVELOPMENT
Starting in 1994, Nokia increased corporate brand awareness through vigorous
advertising campaigns.
Source:Annual reports; press releases; press clippings;pany web site
Nokia 6100 Series phone
Nokia kept its advertising consumer friendly and easy to follow, in contrast to
theirpetitors who targeted professionals
NOKIAMUNICATION STRATEGY
• Since the early nineties Nokia’s value proposition to the consumer has
been single-minded on ‘simplicity’ and ‘ease’ of using mobile phones
• The proposition of ‘simplicity’ is further enhanced by the tone of voice
and visuals used in themunication
• The proposition has beenmunicated through all theirmunication efforts
both in mass media and at point-of-sale
Source:Press articles; annual reports; ECCH Collection Case Study
Nokia Motorola Ericsson
Percentage of sales
R&D EXPENDITURES 1995
Nokia spends relatively little on R&D, but
still achieves a high return on its R&D
investment through
• Numerous R&D partnerships with outsiders such
as universities, and high-techpanies
• Outsourcing of non-core technologies (.,
microprocessors from Intel,ponents from
Motorola, semiconductors from AT&T)
• Focused R&D programs concentrating
resources on future growth areas; ., cellular
data transmission
• Use of cheap industry standard products as a
base rather than more expensive systems
Every third Nokia employee works in R&D. R&D centers exist in 14 countries on
four continents.
JOINT R&D ACTIVITIES
“We do not aim to do everything
by ourselves; and when it’s
necessary we form partnerships
with other pioneers of
technology; this means focusing
on what we are best at
andplementing it with the
expertise of others.”
Partnerpany Products Start
AT&T, . GSMponents 1989
Quam, . CDMA technology 1990
Cicso, . ATM networks 1994
Geoworks, . Wireless products 1995
Psion, . Software for GSM 1996
Nokia has built extensive R&D partnerships. For example, at the beginning of
1994, Nokia signed an agreement with Hewlett-Packard to cooperate in the
development of Intelligent Network systems for telmunications operators. The
agreement centers around the integration and development of key IN
architecture elements.
Source: Press clippings; press releases; Internet homepage
NOT EXHAUSTIVE
President,
Nokia TelmunicationsÌ
Network and Access
Systems Division
Objective
To jointly develop ATM-based
(broadband) service solutions
forpetitive tel operators in deregulated
markets that provide services for
• Corporate customers: need to
increase connectivity across
thepany
• Residential customers: require
advanced data and video
(multimedia) services
Cisco
• Data and private network/corporate
applications know-how (market leader in
switched internetworking; ., routers,
LAN, and ATM switches
Nokia
• Experience in tel operator business
• Expertise in voice transmission infra-
structure and network management
“This cooperation
answers the need for faster
building of newpetencies,
faster R&D cycles, and the
right timing of product
launches.”
Source: Nokia press release; press articles
NOKIA/CISCO R&D ALLIANCE – EXAMPLE
In 1995, Nokia and Cisco Systems, ., established a strategic alliance to
develop ATM-based network products to provide total tel service solutions
topanies.
Source:Press clippings
NOT EXHAUSTIVE
Nokia used strategic alliances to gain a number of product and marketing
capabilities in the .; Nokia was particularly active in 2000.
STRATEGIC ALLIANCES
Source:Press clippings
STRATEGIC ALLIANCES (CONTINUED) NOT EXHAUSTIVE
CONTENTS
• pany overview
• . market entry strategy
• Products
• Capabilities
• Organization
ORGANIZATIONAL LEVERS
Nokia has made several moves in the past years to better align its organization
Source: Annual reports; Internet homepage
Managing the flowExtensive recruiting Select set of new hires
“People are the most crucial resource
in managing growth; you he to
constantly recruit and integrate the
best people into your culture.”
“Teamwork – is one of the basic
elements of Nokia, we
stressmunication and social skills, in
addition to professional excellence.”
• Recruiting events at international
universities and business schools
• Career opportunity ads in
international and regional
newspapers and on the Internet
• Creation of early ties through
international student exchange
program offering trainee placements
in all Nokia business groups
worldwide
• University degree preferably in
science or business studies
• Academic excellence
• Outgoing, confident personality
able to solve problems
independently, while at the same
time work in a team
“Much effort is invested in improving
induction programs; but we’ve got to find a
way to oid bureaucracy and maintain
entrepreneurial spirit.”
• Quickly indoctrinate new personnel in the
Nokia way of doing business
• Instill a spirit of continuous learning in all
new employees
Nokia views people as its most important asset.
TALENT MANAGEMENT TECHNIQUES
• “We he achieved the best results in
units where there has been a clear
emphasis on continuous learning,
improving skills and quality,
ambitious goals, and also respect
for the individual; ensuring that
these values take root and flourish
throughout the Group is a central
theme permeating all of Nokia’s
human resource development
programs.”
– Jorma Ollila, CEO
• “Nokia Way” has been difficult to
implement in the . -- “The
culture doesn’t he the same
richness or value as it does in
Europe”
Customer
satisfaction
Continuous
learning
Respect for the
individual
Achievement
Source: Internet homepage; annual reports
NOKIA VALUES
Nokia’s growth targets are well balanced with its long term values.
The
Nokia
Way
“We work hard; 10 hours – and if necessary –
12 hours a day…we he to make sure that we
don’t be…lazy.”
– Jorma Ollila, CEO
“Nokia is an extremely tough environment;
people work like hell; there’s an ongoing
joke that Nokia provides free eye drops,
because its employees’ eyes are always
red due to lack of sleep.”
“It’s a swim or sink mentality . . . but if
you survive you can be president of a
subsidiary after 3 years.”
“Yes, Nokia is performance-driven . . . but
it’s also a fun place to work; for example,
it has rooms with pool tables where the
team can go and relax for a while.”
“Underperformers are not fired; they stay
with Nokia, but are reassigned to less
demanding tasks . . . at least in Finland;
maybe that’s different in foreign
subsidiaries.”
“One important brick in building a
successfulpany is that the workplace is
fun and that everybody knows why they
are working there.”
– Petteri Waldea, Nokia Cable
Performance-driven culture . . . . . . withmunity feel
Source: Interviews with McKinsey consultants; press clippings
Nokia’s culture is strongly oriented towards performance, tempered by amunity
atmosphere
FOR INTERNAL
USE ONLY
NOKIA’S GLOBAL CULTURE (EUROPEAN CULTURE)
Appendix
1991 annual report “Nokia is a European technology
group.”
1992 annual report “Nokia is an international electronics
and electrotechnical group.”
1993 annual report “Nokia is an international tel-
munications and electronics group”
1994 annual report “Nokia is a leading international
telmunicationspany.”
The evolving focus of thepany during the inflection period is reflected in the
changing annual report.
PANY DESCRIPTIONS
Existing
petitive
arena
Move into
newpetitive
arena
vs.
Existing
geography
Expansion
into new
geographies
vs.
Existing
industry
structure
vs.
Improvement of
industry
structure
Existing value
delivery system
vs.
Innovation of
value delivery
system
vs.
Existing
products and
services
Innovation of
products and
services
Existing
business
and
capability
platform
• Continuously strengthen position
in the telmunications market
• Almost 100% of business
activities concentrated in
telmunications
• 91% of 1995 sales outside
of Finland,pared to 52% in
1988
• Strongest growth rate
recorded outside of
Europe, especially in
Asia-Pacific
• New product development and extension
of existing product line through new
functionalities (., push into wireless
officemunication through Nokia
9000municatorbining phone, fax, E-
mail, and Internet access in one
portable unit)
• Innovative product design attracting new
customer segments
• First to use mass market distribution
channels for telmunications equipment out
of need to quickly achieve high coverage
(., selling mobile phones in the .
through Radio Shack)
• Strategic alliances in R&D speeding up
technological development
• Contributions to development of industry
standards; ., EFR voice code developed
by Nokia and the University of Sherbrooke,
Canada, made industry standard for GSM
and DCS in 1995
Growth was fueled through pursuing multiple growth paths.
Source:Annual reports; McKinsey analysis; press clippings
PURSUING MULTIPLE GROWTH PATHS
Source:Annual reports, McKinsey analysis
EXPANSIVE MINDSET THROUGH STRATEGIC FOCUS
Unprofitable diversity in 1986 A global force in telmunications in 1996
Non-tel sales decreased from 70%–30% of sales Tel sales increased from FIM 2 billion– billion
Manufacturing facilities in 14 countries, personnel
in 45 countries, sales in 120 countries
Utility
sold 1993-95
Footwear
sold 1988
Cable
sold 1996
Chemicals
sold 1991
TVs
sold 1996
Tel
equipment
Electric appliances
sold 1993-94
Soft tissue
sold 1990
Finland
From . . . . . . to
Change from
analog to
digital
technology
Development
of cellular infra-
structure and
equipment
Growth opportunities . . . . . . captured by Nokia
• Strong focus on development and design of digital
mobile phones to achieve high-market penetration
• Early entry into those markets where cellular
networks were first developed to gain experience
in high technical and product quality standard with
relatively littlepetition
• Earlymitment to GSM standard, which
later became the pan-European standard
cellular network
• Wide geographic coverage supplying customers
in 35 countries with GSM/DCS-based and NMT-
based cellular networks
Nokia’s tremendous growth in the past few years can largely be attributed to its
ability to take advantage of technological shifts in the tel industry. As Jorma
Ollila explains: “The two things that he helped us most he been the entry of new
operators into the cellular market and the shift from analog to digital.” (Financial
Times, 23/09/94)
Source:HBS Teaching Note; press clippings
EXPLOITING TECHNOLOGICAL SHIFTS IN THE TEL INDUSTRY
NOKIA AN EXAMPLE OF SUCCESSFUL BRAND LAUNCH
Source:Press clippings; Internet home page; annual reports
Mobile
phones
Timing
1960 1975 1985 1990 1992 1996
Brand recognition
in Scandinia
and the .
International
expansion
Strategic alliances
in marketing and
R&D
Operational
excellence in
manufacturing
Innovative product
development
Capability
platform
“The Nokia Way is about keeping a balance
between bureaucracy and anarchy, preserving
fast, decentralized decision making.”
– President, Nokia Mobile Phones
“Our way of operating is based on a
decentralized organization and
measured control; managing growth of
our globalizing operations poses
unique challenges to our
internalmunication and organization
flexibility…cooperation and teamwork
are the best ways of dismantling
hierarchies and rigid structures, and
preventing their establishment where
they he thus far been oided.”
– Jorma Ollila, CEO
“The Nokia way of operating is based
on a flat, decentralized organization, in
which the emphasis is on efficient
teamwork and an entrepreneurial
spirit; flexibility, being able to innovate,
react speedily, and make fast and
effective decisions are the central
features of Nokia’s way of operating.”
– Jorma Ollila, CEO
Source:Press clippings; annual reports
THE NOKIA WAY: BALANCING BUREAUCRACY AND ANARCHY
Nokia’s strongmitment to decentralization provides it with the flexibility that has
been fundamental to its sustained success in a rapidly changing regulatory
marketing and technological environment. This is based in cooperation and
teamwork to dismantle bureaucracy but also an awareness of the dangers of the
opposite extreme – anarchy.
“It is the question of letting the people
who know how to do it, do it…it was an
exercise in the organization of people.”
– Jorma Ollila, CEO
R&D Sourcing Production Marketing/sales
Creation of
cross-functional teams in all units
To best leverage internal capabilities, Nokia actively promoted cross-fertilization
of functional groups. Drawing upon R&D, sourcing, production, and sales, and
marketing skills ensures that tasks are performed by those who are most
suitable.
“It is the people, their skills, and how they work together that matters most.
Success requires the cooperation of a team of experts.” (Internet homepage)
Source:Press clippings
CROSS-FUNCTIONAL TEAMWORK PRELIMINARY
“Nokia’s development into a
focused telmunicationspany with
global business activities requires
that our organization is
continuously developed; the
changes to be implemented
continue the development started
in 1992.”
– Jorma Ollila, CEO
To develop its manager’s aware-
ness for global issues in a local
context, Nokia launched a 5-
month project bringing together a
broad mix of hundreds of
employees for 3 day-long
brainstorming sessions in London
and Frankfurt
Nokia
America Asia/
Pacific
Europe
Implement group-wide regional units
Train managers how to act locally in foreign markets
By 1998, the deregulation process in European tels will beplete. However, fertile
growth space still exists in fast-growing markets such as China and India, which he
recently embraced deregulation. Nokia’s clear focus on capturing these opportunities
is demonstrated by its reorganization into global regional units. Furthermore, Nokia is
training its managers to develop local market capabilities.
*As of January 1, 1997
Source:Press releases; press clippings
THINK GLOBAL, ACT LOCAL . . .
Nokia electronics Nokia cables and machinery
Nokia paper, power,
and chemicals Nokia rubber and floorings
Information systems
• Micrputers
• Modems
• Point-of-sale systems
• Workstation networks
•ponents (circuit boards,
thick film hybrid circuits, CAD
production manuals)
• Automation applications for
the wood processing and
energy sectors
Telmunications
• Digital exchanges
• PCM equipment
• Radio links
Nokia Mobira
• Cellular handsets for NMT,
AMPS, TACS, R2000 and
Netz-C networks
• Pagers
• Base stations for cellular and
paging networks
Salora-Luxor
• TVs, VCRs, monitors,
ponents
• Satellite transmission equipment
Cables
• Tel, power, and OEM cables
• Power projects
• Cable production equipment
• Capacitors
• Aluminium profiles and
contract rails
Machinery
• Cable making machines
• Industrial robots
• Sheet metal working machines
• Peripheral devices for the
puter industry
• Precision castings and mechanical
ponents for electronic
equipment
SLO (Electricity wholesale and
import of electrical capital goods
and consumer durables)
• Lighweight fixtures
• Electrical heaters, low and
intermediate voltage equipment
boards, cables
Paper
• Soft tissue and related
consumer products
• Electrical energy generation
and sale
Chemicals
• Bleaching agents for the wood
processing industry (chlorine,
sodium hydroxide, sodium chlorite,
sodium borohydroxide, hydrogen
peroxide)
• Water treatment chemicals
Rubber
• Tires
• Footwear
• Industrial rubber products
– Roller coatings for printing
industry
– Conveyor systems
paring Nokia’s business portfolio in 1986 to that of 1995 illustrates the extent to which
Nokia has changes. The basic industry lines such as paper, power, and chemicals as well
as rubber and flooring he beenpletely eliminated, while the main emphasis was placed
on tel-oriented products. In 1996, this strategy continued with the withdrawal from color
TV and a further reduction in the cable business.
*In 1996, Nokia announced the withdrawal from color TV and a further reduction in the cable business
Source:Nokia annual reports; press clippings; The Nokia Saga, 1994
NOKIA PRODUCT PORTFOLIO IN 1986 AND 1995* In production 1995
