Nokia Executive Summary

Executive Summary

In 2000, Nokia was the world’s leader in cell phone sales and the largest corporation in Europe by market capitalization (Walker and Wilson, 2012). By 1999, Nokia had net sales of $19.9 billion and 60,000 employees. They had come a long way from starting in wood pulp production 130 years ago to now, one of the leading electronics firm who had developed a strong brand name. Ericsson was another large telephone company that was founded in 1876. In 2000, Ericsson had net income from operations of $734 million with net sales of $25 billion. Nokia was the leader of handset business while Ericsson excelled in network sales. At the time, Nokia and Ericsson were using Philips as their supplier of semiconductor chips that were used in cell phones. In 2000, Philip’s semiconductor division manufactured on average 80 million chips every day. In the same year, a fire at the Philips plant, which lasted less than ten minutes, destroyed a certain stock of chips. Their first estimate was that production would stop for a week but news later came out that normal operations would not resume for another six weeks. This news hit Nokia and Ericsson very hard and below I will discuss how each company responded to the fire.

Successes

When Nokia had heard the news of the fire, managers actively dealt with the supply chain disruption. Tapio Markki, purchasing manager, sent word about the fire immediately to Pertti Korhonen, senior vice president of operations, logistics, and sourcing. Exactly two weeks after the fire, Philips phones Nokia and explained that the damage to the clean room was worse than expected and production would not restart for another few weeks. Nokia immediately gathered a team together to discuss a plan of action. The team looked into new suppliers for three of the five components available independently of Philips and two happened to be in the United State and Japan. They had requested inventory and they responded within five days. By the end of...