Finland & Nokia Creating The World’s Most Competitive Economy Case Study Solution

Threats:

  • Finland is considered to be one of the fastest-growing and competitive economies in the world, which attracts new entrants to enter into the Finnish market.
  • Various dominating playersexist in the market that causes intense competition. The major competitors of Nokia are Blackberry, Motorola, and the big player like iPhone
  • Due tointense competition, various players are stealing the market share of the mobile industry.
  • As the company has production location in 10 countries, and sales in over 130 countries so the changes in the legal acts, government regulations, and bureaucracyposed a threat to the company.
  • The company has different plants atdifferent locations, so an increase in taxes may increase the tariffs of import,whichwill ultimately increase the overhead cost and reduce the profitability of the company.
  • The threats of prices are from different companies and consumers’ switching costs. Besides which, the new entrant’ threat and substitution is low, but with an innovation in technology; it can be a threat in the future.

Financial Analysis

We have conducteda financial analysis of Nokia with its competitors Ericsson and Motorola. We have used their net income to have a comparative analysis of the best of our knowledge.

Nokia
Years 1992 1993 1994 1995 1996 1997 1998 1999 2000
Net Income (%) -2.3 3.2 9.9 6.1 8.8 11.9 13.1 13 13
   
Ericsson
Years 1992 1993 1994 1995 1996 1997 1998 1999 2000
Net Income (%) 1.4 4.5 4.7 5.5 5.6 7.1 7.1 5.6 7.7
   
Motorola
Years 1992 1993 1994 1995 1996 1997 1998 1999 2000
Net Income (%) 3.4 6 7 6.6 4.1 4 -3.3 2.6 3.5

The performance of Nokia at the start wasn’t that much well in comparison to its competitors. During 1996, the Nokia Companyrecordeda massive increase in its net income. Now, the company is at its their peak stage, which makes it more sustainable.

External Analysis

External analysis has been done to examine the environment of the industry. The purpose of the external analysis is to acknowledge the opportunities and threats present in the industry, whichNokiacould use for expansion, growth, and profitability.

Industry Analysis:

Industry analysis provides an understanding of economic fluctuations, information about the industry growth patterns, and the current business environment. The industry analysis is conducted through porter’s five forces analysis. (Bruijl, 2018).

Porter’s Five Forces Model:

Threats of New Entrants:

The threat of new entrants in the telecommunication industry is considered to be moderate to low. As the various dominating players exist in the market with a strong brand image, which poses a big threatto the new entrance. However, huge capital is required to enter in the telecommunication industry. Additionally, various political and legal requirements reduce the threat of new entrants. However,the growing demand of customersattracts newcomers towards the industry.

Bargaining Power of Buyers:

The bargaining power of buyers in the telecommunication industry is considered to be high to moderate. As the various local and global players exist in the market, which strengthens the bargaining power of the buyer. Additionally, the switching cost is considered to be zero, which is another reason behind the high bargaining power. However, the strong brand image and the loyalty of the buyers moderate the bargaining power in the telecommunication industry. Additionally, different brands have little differentiation in their products, and the quality, price,andfeatures of the products vary from brand to brand or company to company, which moderates the bargaining power of the buyers.

Bargaining Power of Supplier:

The bargaining power of suppliers in the telecommunication industry is considered to be moderate to low. As various domestic and foreign players (suppliers) exist in the market, which creates intense competition in the market and lowers thebargaining power of suppliers. Additionally, the switching cost is considered to be zero, and the products are very little differentiated, which tends to reduce that bargaining power. The products are easily imitable and therapid advancement in technology lowers the bargaining power. However, the prices, quality,and features of the products which the suppliersoffer tend to moderate the bargaining power.

Rivalry among Competitors:

The rivalry among the competitors in the telecommunication industry is considered to be high to moderate. As various global and domestic competitors exist in the market, which intensifies the competition. Additionally, the various competitors use a different tactic in order to attract and maintain its consumer base, which is another reason contributing to the creation of an intense rivalry among the competitors. However, brand perception and customer loyalty also play an important role in increasing the rivalry between competitors. The growing demand for unique features in products attracts the new entrance to enter the market, which also improves the power of rivalry among the competitors.

Threat of Substitute:

The threat of substitutes in the telecommunication industry is considered to be low because no apparentsubstitute exists in the market. However, various competitors or brands who offers a variety of products with overloaded features in the market could be considered as substitutes. Additionally, the indirect competitor is Landline phones, which don’t provide mobility to the customers and considered to be old fashion.

Pestle Analysis

The Pestle Analysis of Nokia are discussed below;

  • Political
  • Economical
  • Social
  • Technologies
  • Legal
  • Environmental

Political

Political interference has a negative impact on Nokia, due to the following reasons;

  • Political resistance on nationalizing the poorly performing private operators in the market.
  • Never materialized their policy for these poorly performed companies/operators.
  • Finland's government granted third-generation mobile network licenses without restricting the choice of standards.

Economical

Nokia face different economic issues that are discussed below;

  • In Europe, the economic turmoil hits them so hard, even the purchasing power of Nokia from their homeland was limited.
  • Nokia also lacks the economic resources available to some of its competitors.
  • Nokia lacks in research and development capabilities which results in the low development of new devices.
  • Lack of financial resources to finance its different financial project. Like research and development projects to launch new devices.

Social

The social impacts on Nokia are discussed below;

  • The change in culture affects customer behavior and not adopting the new culture affects them badly.

The growing trend of apps, especially WhatsApp, require operating systems such as Google’s Android and Apple’s proprietary iOS. But they limit themselves to utilize the Microsoft Windows phone to move them towards a huge downfall....................................................

 

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