Term Paper, 2006
15 Pages, Grade: 1,0 Germany; 5 Finland
2 History of the Nokia Company
2.1 From a Pulp Mill to a Paper Industry
2.2 The Finnish Rubber Works
2.3 Cable Industry
2.4 The Merger
2.5 Information Technology and Telecommunication
3 Nokia in the Finnish Society and Economy
3.1 Nokia’s impact on the working culture
3.2 Nokiazation of Finland
3.3 Nokia and Finish Economy in Numbers
3.3.1 Nokia’s impact on the Finish GDP and labour-force
3.3.2 Nokia’s impact on the R&D expenditure
4 Future Challenges
4.2 Future of Nokia-led Finland
“Nokia-Connecting People”: this slogan is known all over the world. Nokia employs 50, 000 people in 120 countries. Currently every third mobile phone sold in the world is a Nokia.
The Nokia Company is today one of the world’s leading high tech companies. Its rapidly growth in the 1990s coincided with a basal structural change of the Finnish economy and industry. In this restructuring process Nokia played an important role. Despite the fact that Nokia is a leading multinational company, a major part of its business is located in Finland. Nokia plays a significantly role in the economic growth of Finland, which has been one of the fastest in whole Europe.
But the roots of the Nokia Company go back to the 19th century when in 1865 a forest industry enterprise in the small town Nokia in South Western Finland was established by mining engineer Fredrik Idestam. At the turn of the 20th century technology came with the founding of the Finnish Rubber Works in 1898 and the expansion of electricity into the homes and factories which led to the establishment of the Finnish Cable Works in 1912. With this development the manufacture of cables for the telegraph industry followed and supported so the new-fangled device, the telephone. The three companies (Paper, Rubber and Cables) were merged to the Nokia Corporation in 1967.
Since the 1990s the Nokia Company focuses especially the telecommunication industry.
The following essay deals with a detailed overview of the history of the Finnish Nokia company. But besides this, it is also mentioned the importance of this company for the Finnish economy. At the end of the essay I will give an overview of the future challenges for the Nokia Company and its surroundings.
At first I start with the development of the Nokia Company; from its roots as a forest industry to a world’s leading telecommunication enterprise.
The forest industry has the longest tradition of all Nokia businesses. Frederik Idestam established a pulp plant in 1865 in Nokia. Idestam's wood pulp invention was awarded a Bronze Medal in the 1867 Paris World Exposition.
Abbildung in dieser Leseprobe nicht enthalten
The industrial centre of Nokia. Pictured here is the paper mill of the old Nokia Company, now owned by Georgia-Pacific, and the energy company Nokian Lämpövoima Oy.
Source: Virtual Finland (a), A town called Nokia, [WWW document],
In 1880 the first papermaking machine was acquired for the pulp if Idestam. But the years of the First World War closed the foreign markets. The procurement of paper machinery and raw materials became difficult (the same situation in the Second World War). The close of the Russian market was tragically, because Finland had a very intensive trade relation with Russia, one reason was the status of the Grand Duchy.
After the war Nokia could expand its international business again. The main export markets were England, France, the USA, Germany and the Soviet Union.
After the merger in 1966 the new Nokia group under its President Björn Westerlund focused especially on energy politics and the cable business. The management was not interested in developing the forestry industry.
In 1970, the production was expanded to include the production of crepe paper in order to keep up with Serlachius, the main competitor. Kari Kairamo who became the in 1972 the head of Nokia’s forest industry (later in 1977 the head of the whole Nokia Group) increased the investments and implemented certain business acquisitions.
Nokia and Serlachius became 100% owners of British Tissues Ltd in 1977; two years later, Nokia bought Serlachius out. Despite these successes Nokia's management continued to disagree about the forestry business: on the one hand, the company wanted to sell it off, on the other, it was the target of large investments. Because of this fact the forestry industry started to look forward for growth opportunities as well as new acquisitions.
The economic recession in 1975-76, which was the result of the oil crisis, had an impact on the wood processing, especially on the cellulose and paper industry.
Kairamo presented in 1982 a business strategy for the paper industry. He preferred to raise the investments and to build up a second cellulose factory. But managing director Simo Vuorilehto favoured discontinuing it. This resulted in serious disagreements within the management. In the spring of 1989, Nokia sold off half of its paper industries. Nokia's tissue paper business was merged with the American James River and the Italian Ferruzzi to become the largest tissue paper company in Europe.
In 1990-1991, Nokia sold off the rest of its paper industry holdings, thus ending its involvement in the forestry industry. The main reason for the sold out was the fact that the Nokia Company wanted to focus on consumer electronics.
Eduard Polón, together with some businessmen and investors, founded the Finnish Rubber Works in Helsinki in 1898. In the 1920s the management decided to have a corporate acquisition with Nokia Ab, consisting of the wood industry and the Finnish Cable Works.
In the first years of the company the main products were shoes, boots and some clothes for industrial use. In the 1920s and 30s sports shoes, rubber toys, bike and car tires were introduced. In the following years the rubber company could expand their business. In nearly every Finnish household there was at least one product of the Nokia Rubber Works.
In the 1960s the company expanded its business to foreign markets. The number one of the export goods were the winter tires under the branch name “Hakkapeliitta” and footwear. The first winter tire was invented in 1938 in the Finnish Rubber Works. The tire industry was de-merged in the 1980s with the new name Nokian Renkaat Oy. Renkaat Oy found an ally in the Far East, the Sumitomo Company in Japan. This cooperation brought in the production of Dunlop tires. The cooperation was extended in 1988 when the company became a shareholder of Nokian Renkaat Oy. Nokia maintained a minority shareholding until early 2003 when it sold its shares to Bridgestone.
The exit from technical rubber and footwear took place in 1988-1991 through selling off of the companies.
Nokia's cable industry started with Suomen Punomotehdas Oy, established in Helsinki by Arvid Wikström in 1912. The demand for cables was increasing in the early 1900s because of the fact that electricity, telephones and telegraphs spred. Punomotehdas was the first industrialized factory which specialized in wires and cables. It started to produce wires and cables especially for power plants.
The war caused the same problems as for the wood industry, raw material for the production shrinked and the costs raised.
The 1920s and 30s were decades of considerable growth of the Cable Works so that it became a dominant player in the Finnish cable industry.
In the 50s, the Cable Works extended its product range from telephone cables to coaxial cables used in radio and TV business. The company also exported to the Middle East and other markets outside Europe.
In the 60s, the Cable Works expanded its business to include the manufacture and sales of computers. The established electronic department focused firstly the sales of computer products and secondly the R&D and production of Nokia’s own products. After the merger of the three companies in 1967, cable manufacturing was the main business, and the cable industry was the company's most profitable and independent business unit.
The oil crisis in the 1970s led cable business increase so that the company could expand to Europe, USA and Asia.
 Koivuniemi (1998), p.17.
 Koivuniemi (1998), p.20.
 Steinbock (2001), p. 9-13.
 Nokia, [WWW document].
 Koivuniemi (1998), p.33.
 Steinbock (2001), p.15-16.
 Nokia, [WWW document].
 Steinbock (2001), p.16.
 Nokia, [WWW document].
 Steinbock (2001),p.22-24.
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