A STRATEGIC EXPLORATION OF

NOKIA′S SUCCESS

University: UWE Bristol

Course: Strategic Management

Author: Karime Mimoun

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Table of Content

Preface 3

Nokia′s Strategy Process 3

Nokia′s Rise in the Telecommunication-Sector 4

Nokia′s Knowledge-Competence as means for Innovation 5

From Internal to External Capabilities 7

Strategic Drifts and the Understanding of Inflection Points 9

Forecast and Challenges for Nokia 10

Finale 11

References 12

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Preface

Nokia′s became in a few decades a global player and market leader in the mobile

phone sector, its achievement is based on exclusive strategy decisions which this working

paper attempts to explore. Nokia managed to overcome its path dependency and

redefined itself continuously until it became a world leader in its core businesses; mobile

phones and network equipments. Nokia started its evolvement as wood company for

nearly 150 years and Nokia′s business portfolio covered amongst others power, cable,

rubber, toilet paper, televisions, radiophone, radar et cetera until Nokia focused on its

core businesses. The question we try to explore in this paper is; what were the strategic

key success factors which enabled Nokia to become a world leader in telecommunication.

The examination starts with the adaptive strategy process of Nokia and how the market

circumstances leveraged Nokia′s rose and success in the communication industry in the

90s. In the next step we identify Nokia′s competitive advantage based on knowledge

integration and strategic capabilities. In the course of the knowledge integration we

analyse Nokia′s network strategy and its ability to understand early inflection points to

survive the slowdown in 2000. Finally, we consider some hazards for Nokia and proof its

sustainability through its latest innovative progress.

Nokia′s Strategy Process

Nokia′s roots go back to the year 1865 in Finland, when it was founded as Forest

Company. Later on, the Finnish Rubber Works (1898) and the Finnish Cable Works

(1912) joined and assembled the Nokia Group in 1967 (Häikiö, 2002). During this period

Nokia changed its core businesses and strategy several times to divest from unprofitable

and invest in more lucrative businesses. Engine of Nokia′s evolutionary strategy process

was their dynamic strategy process and their refuse of the linear strategy process

(Chandler, 1962; Cannon, 1968) where the world is rational and can be changed by the

company/ management. Rather was Nokia′s strategy approach adaptive to the complex

and changing environment and to assess the environment to benefit from emergent

opportunities and risks (Chaffee, 1985). Thus Nokia challenged their paradigms,

overcame its path dependency and evolved from a forest company to a global leading

mobile phone producer. And still, Nokia is generating new worlds -conjecture strategy

(Chaffee, 1985)- through its innovations in their handsets which customers use in

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unpredictable forms. For instance the Snake game in handsets became so popular that

competitions are organised with rankings of the best scores. Further innovative features

in handsets are: Short Message Service (SMS), video/ -camera, MP3 Player, Internet

access, calendar et cetera which opened new markets for Nokia. This innovative and

adaptive strategy approach helped Nokia finally to grow and succeed in the technology

sector.

Nokia′s Rise in the Telecommunication-Sector

Nokia′s focus and victory in mobile phones and infrastructure is based on internal

decisions as well as external conditions; which gave rise to Nokia′s competitive

advantage. As main external reasons for Nokia′s success in the telephone sector

identifies Häikiö (2002):

N the early deregulation of the Finnish telecommunication market

N the from Nokia developed pan-European GSM (Global System for Mobile

Communication) mobile phone standard network expanded very fast

N the innovation of the cellular telephone and its triumphant launch as mass product

Through Finland′s early deregulation of the telecommunication sector in the 80s

Nokia was able to make first experiences in telecommunication commercialisation and to

develop innovative telecommunication technology. The new developed cellular

technology consists mainly of the networks and of the handsets. The infrastructure is sold

to the operator and the handset to the end-user. Nokia produced, designed and marketed

successful these products in Finland. Basically is Nokia′s image built on its mobile phone

marketing but its infrastructure business was sometimes more successful than the handset

business. The reason is that Nokia set up the first GSM network in Finland in 1991

(Häikiö, 2002) and as the telecommunication deregulation in other European countries

and America followed had Nokia already the latest technology and introduced it

internationally. As the new network equipment and phones were based on the GSM

technology, the GSM innovation became self-reinforcing (Porter, 1990); the need on the

one hand and the constantly development on the other hand pushed the innovation

process and helped Nokia to gain continuously market share.

The second major and today more essential business of Nokia is the mobile phone

unit. At the beginning of the area in 1987 it was a niche market for businessmen but

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