-competing in the third vawe: business insights

Outi Sutinen, Senior lecturer University of Applied Sciences, Department of Business and Information management

Visiting lecturer
Name: Outi Sutinen Education: MBA, Vaasa University, Finland International Business Professional Career: Senior lecturer at Oulu University of Applied Sciences, department of International Business Marketing director, Baltic States, LOral Marketing director and Exports Area Manager, sales person in various food stuff organizations in Finland and France Head of Oulu Export association

Presentation structure
Introduction Case Nokia: company presentation Market dynamics and Research & development The Nokia approach Future challenges

Introduction
Where do I come from?

Oulu a Nokia town

How Nokia and Oulu are connected?

Why Nokia came just from Finland?
teleoperator market was not concentrated to only 1 national company like in many other European countries > more competition> more innovation

Oulu University department of engineering played a central role in the developement of Nokia technology

 The founding of Oulu University in 1958 is regarded as the preparation for the Oulu high tech industrial clusters formation, and the establishment of universitys Department of Electronical Engineers in 1965 as the starting point (1975 orientated in electronics, mobile telecommunications and IT personal interests of former professors Juhani Oksman and Matti Otala)

 1973 Nokia radio producing company started in Oulu 1974 VTT National Technical Research Centre of Finland comes to Oulu
Foundation of an electric laboratory innovation environment further improved

Today Oulu is important production and R&D center for Nokia and Nokia as a anchor company has attracted a variety of other companies which together make an important IT cluster in a global level (Oulu Technology Village)

Oulu -the Finnish Phenomena

A finnish center of high tech
NOKIA TECHNOPOLIS SCIENCE PARK MULTIPOLIS-METROPOLIS NETWORK PROJECT STRONG NETWORKING BETWEEN COMPANIES, UNIVERSITY, POLYTECHNIC & VTT

What do you know Nokia?

Origins of Nokia? Procduct range Where the products of Nokia are made?

Nokia in Brief
How old is Nokia? Nokia's roots go back to 1865, when the Nokia woodpulp mill was founded. In 1967, upon the merger of three separate companies.
Some important dates: 1981 Nordic Nordic Telephone (NMT), the first international mobile phone network, is built 1991 GSM- a new mobile standard opens up Nokia equipment is used to make the worlds first GSM call

Nokia in Brief
Mobile revolution 1992-1999
1992 Jorma Ollila becomes CEO of Nokia
(access to international finance markets)

1994: Worlds first satellite call made using a Nokia GSM handset 1998 Nokia becomes the leader in mobile phones

Nokia in brief
Nokia 2000-today
2002: First 3G phone, 6650 2003: Nokia launches N-Gage mobile multiplayer game 2005: The billionth Nokia phone-a Nokia 1100-is sold in Nigeria Today: market leader (40% market share 4/4 quarter 2007 Nokias market share exceeded the combined shares of its next three biggest competitors: Samsung, Motorola and Sony Ericsson. (http://www.nytimes.com/2008/01/25/technology/25noki a.html) Is today worlds 5th most valued brand

Nokia Mobile phones production

FINLAND GB GERMANY HUNGARY ROMANIA CHINA

MEXIQUE INDIA SOUTH-COREA

BREZIL

Nokia in Brief
World largest manufacturer of mobile devices Head office in Finland Appr. 60 000 employees in 128 nationalities R & D centers in 11 countries (31% of staff work in R&D) Production facilities in 9 countries

Nokia Today

Market dynamics
Which are the market trends in mobile markets? What are the critical succes factors in winning the business?

Market trends
1. consumer taste divergence/fashion business
From high tech to fashion business customer is the key Consumers look for experience - not just technology Fragmenting market segments> more and more models

Fashion and phones

Market trends
2. Shortening life cycles
Customers tastes wary quicky > shorter product life cycles

Shortening life cycles of mobile phones

Product Life Cycles: mobilephones

Development 1-2 years

Typical life cycle 1-2 years

Product & Process R&D in the Innovation Life cycle (based on M.L. Patterson, 93)
Cash flow
Opportunity occurs Negative Cash flow Product Definition and Project Activity begins Plans freeze Product is Released to production (Mostly Product R&D) Positive Cash flow Net Profit period

Break Even time

Project Time Becomes extinct

(mostly process R&D)

First customers are satisfied

Opportunity Is perceived

3. Globalisation
Geographical and consumer diversity differences in consumer behaviour and taste Role of Asia growing, namely China and India, BRIC countries (Brasil, Russia, China and India getting stronger)
Globalisation affects business
China Phenomena > companies go to cheap labour countries India Phenomena > companies are no more just addressing costs but try to get best partners globally and see opportunities in networking ! 20% of worlds software outsoursed to India

 Companies go where the market is New division: China contributed more than 25% to global growth in 2007 (India 9%)* For example: Exports and production
Nokia sold in 2007 77.8 million cellphones in Asia, the Middle East and Africa in the quarter, nearly double the 42.3 million sold in Europe and North America. In China, Nokias fastest-growing high-volume market, it sold 20.2 million phones, an increase of 38.4 percent over a year earlier.

4. Technolgy war- new technologies and constant improvements

Examples: internet convergence Non - cellular wireless Usability-customer friendliness aspect in technology growing Compatibility of technologies New added performaces just the imagination as a limit (Nokia & Free music, free navigationNokia acquired a USA based Navteq, an American maker of digital maps, and has joint-venture with Siemens in wireless networks competition today = setting standards first
(like, Microsoft , Intel.)

Challenges that Nokia has to meet and the Nokia Response

Understand consumer needs and variety
Response: decentralized R&D in 11 countries

Be first in the market and set standards

Response: Nokia has a strong history in being innovator-firsting the markets For example: 13.11.2006 worlds first commercial WCDMA*900 data call on 900 MHz band- advantages: 2-4 times larger coverage area *Wideband Code Division Multiple Access

Product innovation N95

Response: new launches, New technologies Customer friendly N95 Now attacking Us markets

Nokia fostering Innovation- how?

The vision of Nokia of Inclusive environment
emphasis on cultural/individual differences diversity was seen as a key to success > increased creativity, mirrored market place, improved attraction and retention of human resources 1997 : Nokia Code of conduct was introduced to support inclusive environment commitment to equal opportunity & openess The Nokia Way efforts to promote teamwork & individual responsability

Secrets of Nokias success

BOLD STRATEGIC INTENT - seizing the opportunities
INNOVATION THROUGH VALUE CHAIN
FLAT ORGANIZATION ENTREPRENEURIAL SPIRIT collective leadership global R & D networks competition & cooperation CUSTOMER SATISFACTION

Nokia New Values 2007 Worked Down to Top worldwide in Nokia Way Cafs
Achieving together
Trust, cooperation, sharing, openness, networking

Engaging you
Listening, client, employee, partner, consumer, development

Passion for Innovation

Dream, passion, courage, future

Very Human
Close to humanity, respect, customer friendliness

Nokia secret: flat team organisations - working with cross-functional teams

Cross-functional Team Defined Cross-functional team is a group of employees from various functional areas of the organization research, engineering, marketing, finance. human resources, and operations, for example who are all focused on a specific objective and are responsible to work as a team to improve coordination and innovation across divisions and resolve mutual problems.

Example from Nokia India Great place to work

Nokia HR department closely tracks every employee's progress. Every September, Nokia employees across mobile phones, networks and two R&D divisions set up teams comprising 6-8 employees. Each of these cross-functional teams has employees from marketing, sales and logistics, who would already have submitted a performance rating of themselves, the company, the division and so on, on various parameters. The teams are told to formulate an action plan and improve on the parameters with the lowest scores. The HR department coordinates this exercise and reviews progress every quarter.**

Nokia working with cross-functional teams

new product development projects are run by a cross-functional teams to ensure that all viewpoints are heard and given proper weight throughout the life of the project. The team is composed of people that represent the various functional areas important to the success of the product Nokia has strong networks with suppliers and research institutes, very often teams are multinational and operate mainly virtually

 Nokia Spirit supporting cross-functional teams The Nokia culture is the same world over. Sanjay Bhasin, director (India strategy) who has spent two years in Finland and a year in London observes: "Nokia is a melting pot of people, based on the egalitarian society that exists in Finland." Nokia also offers a lot of opportunity for its employees to work globally. ** Comment: Finnish culture is about taking responsability, low control, having low power distance, high trust and growing in work large responsabilities- and equalityteam leaders normally rotate in Nokia

New Focus deeper in Internet where

New business models Roles of actors are mixed Work societies and ways to work change
(Nokia follows very closely people at work> innovations)

Need for agility, knowhow and speed grow

Globalisation: China phenomena > you have to focus on costs sometimes difficult decisions Nokia response: production in 9 countries latest factory was opened in Chennai, India, move from Bochum (Germany) to Romania Jucu

Nokia manufacturing strategy cost leader

Plants in Brazil, China, Finland, India, Germany, Hungary, Mexico, the Republic of Korea and UK, new plant to be opened in Romania Flexible global manufacturing network
Quick response logistics
No inventories (moved to suppliers) Highly automatized production Focus on ITC systems and production platform flexibility Stong supplier relationships (eg. Perlos (phone cover manufacturer deliveres just on 4 hour notice) high trust

Future Challenges
Which kind of future challenches can you imagine Nokia will face? Which do you think are the worst competitors for Nokia along different criteria?
Design Price Service offering Other, which

What do you think will be happening in this market in the close future- which kind of new launches do you predict? And in Spain?

Summary
Nokia is working in a very dynamic market Attention to speed to the market >R&D
Attention to customer needs and design
Nokia excells both in low cost models as well as high end

Attention to new technologies > to set the standards> deeper to Internet and wireless innovations
New partners (Siemens, )

Attention to logistics optimation > production costs and flexible manufacturing Attention to Asia and BRIC countries CLIENT is the key (Nokia has learned its lessons) In Nokia the inspiration and spirit of organization makes the difference achieving together!
Muchas gracias!

Sources and Recommended addresses

http://www.nytimes.com/2008/01/25/technology/25nokia. html) (market share) http://www.businessweek.com/magazine/content/07_32/ b4045401.htm (brand value)
www.virtualfinland.fi www.tekes.fi www.vtt.fi www.oulu.fi *www.arvopaperi.fi/extra/esitykset/rahapaiva07/konnos_r

aoul.pdf **http://www.growtalent.com/gptw/no8.htm