Nokia Case study

Nokia Case Study

Firms need to adapt themselves to market developments and they need to build on the strengths of their resource bases and activity systems’ (de Wit B and Meyer R., 2004, p249). In reality, on one hand, some argue that an organisation needs to adapt itself to its environment. Managers should take the environment as the starting point, choose an advantageous market position and then gradually set up the resource base and activity system necessary to apply this choice. On the other hand, some argue that the organisation can adapt the environment to itself. Managers are required to take the organisation’s resource base as the starting point, selecting an environment to fit with its internal strengths (de Wit B and Meyer R., 2004).

According to the first view, successful companies are externally oriented and market-driven (Day, 1990; Webster, 1994), and this view is also referred to as ‘outside-in’ due to its focus on the environment (de Wit B and Meyer R., 2004). The companies with an outside-in perspective take the environment as the starting point, set on developments in the market-place and adapt themselves to the external opportunities and threats encountered. They use the signals from customers and competitors to decide their own game plan (Jaworski and Kohi, 1993). So, ‘for these successful companies, markets are leading, and resources are following’ (de Wit B and Meyer R., 2004 p.250). Furthermore, proponents of this market-driven approach tend to emphasize that an insight into markets and industries is essential. They argue that not only the general structure of markets and industries need to be analyzed, but also specific demands, strengths, positions and intentions of all main forces need to be determined. As to Porter’s view (1980, 1985), this approach has spawned five forces, generic strategy and value chain frameworks. What’s more, many market-driven advocators suggest firms to initially lead market and industry to change, therefore, they can get the benefit from the altered rules of the 

game (de Wit B and Meyer R., 2004). Smirchich & Stubbart (1985) agreed with this opinion, and already pointed out firms can, in part, create their environments through strategic alliances with stakeholders, investments in leading technologies, advertising and a variety of other activities. Concluding the advantages of this approach, Lieberman and Montgomery (1998) argued that firms that are market-driven are always the first ones to recognize that new resources or activities need to be developed. So those firms are better positioned can benefit from the ‘first mover advantage’. More significantly, Market positioning is vital for the company’s success.

However, some argued that market positioning is vital, but must take place within the boundaries set by the resource-driven strategy (de Wit B and Meyer R., 2004). That is, the market position selected is adapted to fit the organization’s resource base. So for successful companies, they need to firstly build up a strong internal resource base, and then based on this strong resource base they can access to unfolding market opportunities in the medium and short term. In essence, this ‘inside-out’ approach assumes that competitive advantage depends upon the behavior of the organisation, rather than its competitive environment (Stonehouse and Pemberton, 2002). Moreover, the proponents of this approach stressed that the importance of a firm’s competences over its 

tangible resources (de Wit B and Meyer R., 2004). Strategists have variously referred to the basis of this strategy as ‘competence based’ (Prahalad and Hamel, 1990; Sanchez et al, 1996) or ‘capabilities –based’ (Stalk et al, 1992; Teece et al, 1990). Collis and Montgomery (1995) also pointed out that having distinctive or core competences can be a very attractive basis for competitive advantage, since rival firms normally need to take a long time to catch up. 

a) Threat of entry

• Microsoft Corp announced its decision to enter the mobile phones market, it could bring the big threat to Nokia. However, it is only an announcement. New network operators can supply the customized, operator-specific handsets. New emerging competitors from Asia
• So, Nokia will meet more intensive competition than before.

b) Threat of the substitutes

There is no direct substitute in mobile phone industry, especially for Nokia’s advanced products

c) Bargaining power of suppliers

Since Nokia is the market leader in the mobile phone sector, Nokia is in the strong position.

    d)Bargaining power of buyers

In handsets market, end users are not directly purchasing handset from Nokia, instead they purchased from the service providers. Since the market becomes more sensitive to the price, Nokia could meet the strong bargaining power from the buyers.

     e)Rivalry among existing competitors

There is intensive competition in mobile phone industry. The competitors include Samsung, LG, Sony Ericcson and other new emerging manufactures.

1