Porter’s 5 forces analysis 



Pankaj Saharan
September 2012

Company Information
(1)


Over the past 150 years, Nokia has evolved from a small paper mill in south-western
Finland to a global telecommunications leader connecting over 1.3 billion people.



Nokia has disrupted into various industries before becoming a telecommunications giant from making rubber boots, car tyres, generated electricity, even manufactured
TVs etc.



Nokia’s own mobile phones’ platforms included Symbian (60 & 40), MeeGo (opensource Linux based platform) and Meltemi (low end Linux based platform)



Nokia announced a Broad Strategic Partnership with Microsoft to build a new Global
Mobile Ecosystem (with Windows Phone) in Feb 2011.



Currently, Nokia’s phones strategy focusses on Windows Phone platform (for
Smartphones) and Symbian 40 (for low-end feature phones segment).



Nokia has decided not to continue development of MeeGo and Meltemi along with divesting from long time cash-cow Symbain 60 devices.



Main competitors (mobile phone manufacturers) are Samsung (took over Nokia as global mobile phones market share leader in 1Q12), Apple, RIM, HTC.

Company Information
(2)
Organization Structure

© 2012 Nokia

Company Information
(3)
Net Sales

Operating Profit

Net sales per region

© 2012 Nokia

Market Share (YoY)

© arstechnica.com

Nokia’s Strategy
Key elements of Nokia’s strategy:
 build a new winning mobile ecosystem in partnership with Microsoft
 bring the next billion online in developing growth markets
 invest in next-generation disruptive technologies  increase our focus on speed, results and accountability © 2012 Nokia

Porter’s 5 Forces Model Analysis - NOKIA
HIGH

Barriers to
Entry

Rivalry between Competitors

Power of
Suppliers

MODERATE

HIGH

LOW

Threat of
Substitutes

Power of
Buyers

HIGH

Barriers to Entry - HIGH


Market entry as a global* mobile phone manufacturer is getting extremely tough because of various reasons.
Proprietary learning curve: Mobile phone manufacturing requires patents and proprietary knowledge.
Even leading mobile phone companies are currently engaged in battles over patent issues.



Brand identity and brand switching costs: Brand value is very important for mobile phones sales. E.g. reports have suggested that HTC which has produced very good devices with excellent hardware specs on top of Android mobile platfrom are struggling to even maintain the market share. It has been established that it is because of its diminishing brand value. Brand switching is not very predominant in the industry as a typical smartphone buyer tends to keep the phone for a considerable amount of time ranging from 1-3 years depending on many factors including country, age, profession, educational level etc.



Battle of Ecosystems: As described by Nokia’s CEO and many other industry analysts that today is the age of battle of ecosystems and not just mobile phones. So companies like Apple, Samsung and Nokia are considering smartphones business as part of overall mobile ecosystem consisting of software stack, operating system, applications, application store, 3rd party developers offering etc.



High expected retaliation: Global market share is currently captured by few leading players. There is expected high retaliation if a new device manufacturer tries to enter the market and poses a threat to capture the share.



High capital requirements and Economies of Scale: Differentiation factors among mobile phone devices are getting fewer which is requiring companies investing heavily in R&D costs, marketing spend, PR costs etc. Also, mobile phone production require quite much capital in place for factory establishment with quite many raw materials, R&D budget, supply channels etc.



Complex distribution channels: Most countries have operator specific ”Walled Garden” approach where operators are the key driver for mobile phone sales are giving mobile phones along with operator connections. Leading