Nokia

NOKIA case study

This case study providing a brief outlook on the mobile handset industry trends and the competitiveness of Germany, it details the furor created after Nokia’s plant closure announcement while debating on whether global companies should follow country specific approaches or a company-specific approach when handling large scale restructuring moves, it brings out lessons on how to manage complexities in global issues.

Nokia is the largest mobile handset maker in the world with a 40% of market share in 2007. The mobile handset industry is marked by declining prices and depressed margins making companies look at low-cost production options. Nokia, to be more competitive, is relocating its German plant to Romania where the wages are 10 times lower. This abrupt announcement however stirs a wave of resentment with employees, trade unions, politicians and business leaders who condemned Nokia’s move. Nokia is also accused of being incentive to German culture and greedy for misusing state subsidies. However, Nokia while refusing to alter its decision says that in a repeat scenario, the company would follow exactly the same policy.

All major players of handset mobile producing companies confront cost pressure and low profitability since 2001. Until then the industry had healthy profits and high margins. Growth was predicted to slow down in 2008 because the demand in the markets of Europe and US were saturated.

The penetration rate was expected to reach 100% (from 88%) before 2011 in the eastern European market. Manufacturers started entering high - growth market areas of the Middle East, South East Asia, China, Africa and India where cheaper models were in demand and thus companies started reducing their average selling prices. Prices fell by almost 35%. For Nokia, China was the biggest market followed by India and Germany. They always stayed ahead of completion. They based their strategy on maintaining a large market...