Transcript Finland and Nokia: Creating the World’s Most Competitive

Finland and Nokia: Creating the
World’s Most Competitive Economy
Team 8
Martina Martina, Adrien Monvoisin, Ronen Eckhouse
Summary of Situation in 2001:
Finland
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Finland is still a leading competitive nation
GDP growth is declining
Increased unemployment among the low skilled labors
Telecommunications cluster accounts for 6.9% of GDP
Shortage of skilled Finnish workers
Finland is the first to grant licenses to all 3G systems
National Tech. Agency facilitates the emerging digital
media industry
• The Finnish Venture Capital Association has been
formed
• First Nordic country introducing the Euro
Summary of Situation in 2001:
Nokia
• Nokia was the leader of the Telecom industry
– Market share: handsets 31%, Infrastructure 10%
• Motorola lost mobile phone leadership to Nokia
– Market share: handsets 15%, Infrastructure 13%
• Severe downturn in the Telecom.
– Slow/Delayed transition to 3G system
– Nokia stock fell 38% during 2001 (MOT fell 30%)
– Revenue grew by 9% in 2001 (compared to 43% in 2000)
• Shortage of skilled Finnish workers
– Nokia foreign employment grew 4 times faster than Finnish
employment
• Finnish suppliers produce highly customized inputs
Porter’s Diamond: Finland/Nokia
• Factor Conditions
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One of the world’s most homogenous, united and stable societies
National competitive strategy
Tradition of innovative engineering and telecom industry
Sophisticated education and university system
• Related and supportive industries
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Local supply for highly customized inputs
Telecom cluster with more than 4,000 specialized firms
Highest public R&D spending in Europe
Many R&D centers of global companies
Venture capital forum
Tekes facilitates stake holders in the emerging digital media
industry
Porter’s Diamond: Finland/Nokia
• Demand Conditions
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NMT created the world’s largest single mobile market
First to have severe competition
Finland is a member of the European common market since 1995
A market of early adopters with very high standards
• Mobile phone is a “national symbol”
– Finland amongst the world leaders in mobile penetration
• Firm Strategy, Structure and Rivalry
– Finnish telephone network is never monopolized by state
– Traditionally, operators engage actively with equipment
manufactures
– A national industrial message for national competitiveness
– Open market
• No restrictions for foreign ownership
– Serve distinct customer needs with out constraints on standards
Porter’s Diamond: Finland/Nokia
• Government
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Very stable (6 year terms) with a long-term view
Initiatives to improve national innovative capacity
Assurance of technological neutrality
Open socialist economy
A policy of minimum interference
• What else should the government do?
– Remove centralized wage settings mechanisms
– Encourage young and low-skilled to join the work force
– Encourage more global firms to open R&D centers in Finland
Economic Transformation in Finland
• Early 1990s Crisis
– Berlin wall fell -> dried up Finnish exports overnight
– Severe economic crisis (GDP fell, high unemployment)
– Finland was forced to float its currency
• Mid 1990s turn-around
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Lowered taxes
Government expenditures cut-back
High interest rates
Devoted resources to R&D, competitiveness and innovations
Expanded the capacity of higher education
Liberalized and opened local markets
• The emergence of Finland as a telecom powerhouse
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Traditional expertise (army) and traditionally not monopolized
NMT and the Nordic Region (Finland was always too small a market)
Finnish characters
Telecommunication cluster
Cluster Program
•Historically: pulp/paper, wood, engineering metal
•Cluster goal: Strengthen Finnish competitiveness
•World-wide competitive advantage through privatepublic partnerships
• 83,000 employees, >4,000 firms, 6.9% of GDP
•Operators, content providers and equipment
manufacturers
•Equity capital: new important source of funding
•R&D focused on technology and telecommunications
Nokia’s worldwide leadership
• International operations in various field
• Worldwide joint ventures
• Highly skilled work-force
• Nordic identity through the “Nokia way”
• Low production cost and short product development cycle
• Broad market: serves distinct customer segments with
different needs
• Focus on R&D (15 countries, 9% of its revenue)
• Nokia is always ahead of its competitors (design, internet,
software, …)
Nokia Current Business
• Nokia revenue stream:
Nokia's Business (Q2 07)
• Handset is major driver with majority
business comes from Europe & Asia Pacific
Nokia's Handset Business (Q2 07)
Nokia
Siemens
Networks,
27%
Latin America,
8%
North America,
4%
Mobile
Phones,
47%
Enterprise
Solutions,
4%
Europe, 38%
Asia-Pacific,
25%
Multimedia
, 21%
China, 12%
Middle-East &
Africa, 13%
• Nokia market distribution is shown below
Nokia Handset Unit Growth (Q2 06 vs Q2 07)
Unit Growth (%)
40.0%
30.0%
20.0%
10.0%
0.0%
-10.0%
-20.0%
-30.0%
North
America
Latin America
Europe
China
Asia Pacific Middle East &
Africa
The fastest growing regions
(Q2 07) are Asia Pacific &
Middle East/ Africa followed
by Europe & China.
Nokia vs. Motorola
Nokia
Motorola
Strength
• Low-cost phone
• Focus on emerging market with
big investment in Infrastructure
•Broad product line to sustain longterm growth
• High-end phone (RAZR)
• But RAZR is backfired as it is
commoditized
Weakness
• Strong presence but not market
leader in smart phone
• Weak presence in North America,
which prefers to clamshell phones
• Single smash hit is not
sustainable
• Smart phone continues losing
market share
Opportunity
• Step up in multimedia-rich user
experience via acquisition
• Step up in multimedia-rich user
experience via acquisition
Threat
• Falling average selling price
• Fierce competition
• Falling average selling price
• Fierce competition
Overall, Nokia has grown faster and is positioned to grow faster than Motorola thanks
to its broad portfolio and strong global presence especially in emerging countries