Nokia Denmark

The Challenge

Create a strategic plan for the evolution of our product

development division

I. AnalysisI. PESTLEII. Porter’s Five ForcesIII. SWOT AnalysisIV. Value ChainV. JRD Analysis VI. FinancialsVII. Market Share

II.AlternativesIII.RecommendationIV.Implementation

.

Table of Contents

Economic• Highly competitive

industry with several global players

• Worldwide spread of mobile telecommunications

Enternal Analysis

Technological • Constant

introduction of new products

• High R & D efforts

Social • Growing popularity

of smart phones and tablets

• Strong Brand Awareness

pESTle

New Entrants

Competitive Rivalry

Substitutes

- Low threat- High cost barrier-High brand identity-High capital requirements

- Low power- Low differentiation of products- Low cost relative to total purchase- High importance of volume to supplier

- High power- High cost sensitivity- High buyer concentration- High buyer information- Low product differences

- Low threat- Low buyer propensity for substitution- Moderate relative price performance

- High rivalry- High idustry growth- High brand identity- Low switching costs- Moderate diversity of competitors

External Anaysis

Porter’s Five Forces

BuyersSuppliers

Internal Analysis

Value Chain

Research & Development• Success of

R&D activities in leading to product & process innovations

• Ability of work environment to encourage creativity & innovation

General Administration• Quality of the strategic planning system to achieve objectives• Coordination & integration of all value chain activities among all

subunits

Manufacturing• Effectivenes

s of production control systems to improve quality and reduce costs

• Productivity • Appropriate

automation of production processes

Distribution• Timeliness

and efficiency of delivery of finished goods

• Efficiency of finished goods warehousing activities

Marketing• Extent of

market dominance

• Effectiveness of market research

• Development of an image of quality and a favorable reputation

• Extent of brand loyalty among customers

Inbound logistics• Soundness of material and inventory control systems

Procurement• Procedures for procurement of plant, machinery, and buildings• Relationships with reliable suppliers

Profit Margin

Strengths• Understand how to

combine technological possibilities with commercial success*

• Integrated high-tech manufacturing and logistics

• Largest Nokia development centre outside Finland

• History of successful products and technologies

• Partnership with Microsoft Office

* Distinctive competency

Weaknesses

• Capacity issues• Distance from outsourcing

company• Declining market share

Opportunities

• Growing demand for telecommunications

• Growing market for smartphones• Constant innovation

Threats

• Strong competitive industry• Reputation of outsourcer• New industry replaces mobile

technology

Strengths• Understand how to combine

technological possibilities with commercial success*

• Integrated high-tech manufacturing and logistics

• Largest Nokia development centre outside Finland

• History of successful products and technologies

• Partnership with Microsoft Office* Distinctive competency

Weaknesses

• Capacity issues• Distance from outsourcing

company• Declining market share

Opportunities

• Growing demand for telecommunications

• Growing market for smartphones• Constant innovation

Threats

• Strong competitive industry• Reputation of outsourcer• New industry replaces mobile

technology

Strengths• Understand how to combine

technological possibilities with commercial success*

• Integrated high-tech manufacturing and logistics

• Largest Nokia development centre outside Finland

• History of successful products and technologies

• Partnership with Microsoft Office* Distinctive competency

Weaknesses

• Capacity issues• Distance from outsourcing

company• Declining market share

Opportunities

• Growing demand for telecommunications

• Growing market for smartphones

• Constant innovation

Threats

• Strong competitive industry• Reputation of outsourcer• New industry replaces mobile

technology

Strengths• Understand how to combine

technological possibilities with commercial success*

• Integrated high-tech manufacturing and logistics

• Largest Nokia development centre outside Finland

• History of successful products and technologies

• Partnership with Microsoft Office* Distinctive competency

Weaknesses

• Capacity issues• Distance from outsourcing

company• Declining market share

Opportunities

• Growing demand for telecommunications

• Growing market for smartphones• Constant innovation

Threats• Strong competitive

industry• Reputation of outsourcer• New industry replaces

mobile technology

Internal / External Analysis

SWOT Analysis

Analysis

Foxconn JRD• Started in 2007 due to capacity burdens at Nokia Denmark

• Previous supplier of electronic components • Worlds largest manufacturer of electonic components• 920,000 employees• Experienced in optimization of product development

processesAdvantages

• Relevant knowledge and expertise

• Experience in optimizing product development processes

• Helped Nokia engineers reduce product development time by 6 months

Disadvantages

• Large internal resistance among Nokia engineers

• Need to micromanage entire process

• High expenditures due to the education of Taiwanese engineers

• Controversial treatment of employees

Analysis

Financials

(All Numbers in EURm) 2010 2009 2008 2007Net Sales 42.446€ 40.984€ 51.085€ 51.058€ Gross Profit na 13.263€ 17.277€ 17.277€ Research and Development Costs -5.863€ -5.909€ -5.968€ -5.636€ Selling and Marketing Expenses na -3.933€ -4.380€ -4.397€ Administrative and General Expenses na -1.145€ -1.284€ 1.165€ Operating Profit 2.070€ 1.197€ 4.966€ 7.985€ Profit Before tax 1.786€ 962€ 4.970€ 8.268€ Profit 1.850€ 891€ 3.889€ 6.746€

Return on Capital Employed na 7% 27% 54%

Income Statement

Analysis

Market Share

Vendor 4q 2010 (Market Share) 4q 2009 Market Share Nokia 30.8% 37.2%Samsung 20.1% 20.2%LG Electronics 7.6% 10.0%ZTE 4.2% 2.8%Apple 4.0% 2.6%Others 33.2% 27.3%Total 100.0% 100.0%

Vendor 4q 2010 (Market Share) 4q 2009 Market Share Nokia 28.0% 38.6%Samsung 16.1% 16.1%LG Electronics 14.5% 19.9%ZTE 9.6% 3.3%Apple 8.5% 4.5%Others 23.3% 17.6%Total 100.0% 100.0%

SmartPhone Market Share

Global Market Shares

• Potential Growth • Entrepreneurial Spirit Highly decentralized and organized to encourage creativity, entrepreneurship, and responsibility• Mission Statement “Empower everyone to share and make the most of their life by offering irresistible personal experience”• Ease of aligning projects with

organization• Financial Justification

Key Success Factors

Analysis

Alternative #1

Scale-up JRD with Foxconn

Alternatives #2

Phase out JRD with Foxconn

Alternative #3

Continue parallel organizational structure

Alternatives

Alternatives

Alternative Advantages Disadvantages

Scale-up JRD with Foxconn

• Enable focus on creativity

• Lack of control • Necessity for

micromanagement

Phase out JRD with Foxconn

• More control• Financially

justified• Highly integrated

value chain• Reduces possible

information loss

• Increased capacity requirements

Continue parallel structure

• No increase to capacity requirements

• Little growth potential

• Necessity for micromanagement

Alternatives

Alternatives

Alternatives

Scale up JRD with Foxconn

Phase out of JRD with Foxconn

Continuation of Parallel

Structure

Key Success Factors Rating Rank Total Rank Total Rank Total

Potential Growth ,25 4 1,00 4 1,00 3 ,75

Entrepreneurial Spirit ,25 1 ,25 5 1,25 3 ,75

Mission Statement ,20 2 ,40 3 ,60 2 ,40

Ease of aligning projects with organization

,20 1 ,20 5 1,00 2 ,40

Financial Justification ,10 1 ,10 2 ,20 3 ,30

Total 1.0 1,95 4,05 2,60Ranking Scale1. The alternative does not effectively address this criterion.2. The alternative may contribute to addressing this criterion.3. The alternative provides an average solution to this criterion.4. The alternative provides an above average solution for this criterion.5. The alternative effectively addresses this criterion. .

Weighted Competitive Strength Analysis

Analysis

Alternative #2

Phase out Joint Research & Development agreement with

Foxconn

Recommendation

Recommendation

• Phase out JRD agreement with Foxconn

• Reduce number of mobile phones developed each year

• Concentrate in growing smartphone market share

• Cultivate partnership with Microsoft

• Continue innovation in-house

Recommendation

Recommendation

Implementation

2009 2010 2011 2012 2013 2014 201520

25

30

35

40

45

50

Global Market ShareSmart Phone Market Share

Market Share

%

Future Market

Recommendation

2009

Smartphones53,9 Million

(38,6% captured)

Mid-priced

Low-end

2020

Smartphones &

High-end

Mid-priced

Low-end

2010Smartphones100,9 Million

(28,0% captured)

Mid-priced

Low-end

Short-TermWhat Who

Establish plan for phasing out JRD Executive StaffDetermine and cut product focus to fewer devices

Board / Executive Staff

Bring back priority items from Foxconn Entire staffImplement company image mitigation Public RelationsRelocation of ex-patriot employees HR / ManagementCut in-house items according to strategic plan Entire staff

Coordinate precise approach to cultivate Microsoft partnership

Executive Staff / Management

Implementation

Implementation

1 month 3 month 6 months 9 months

1 year

Establish plan for phasing out JRDDetermine and cut product focus to fewer devicesBring back priority items and phase out Foxconn Implement company image mitigation Relocation of ex-patriot employeesCut in-house items according to strategic planCoordinate precise approach to cultivate Microsoft partnership

Milestone Review Implementation

Short-Term

Long-TermWhat Who

Evaluate/create plan to incorporate services into devices

Product Development

Market to emerging markets MarketingEvaluate utilization of mobile technology and tablets

Product development

Implement mobile/tablet strategic plan Entire staffPhase out products with small market share Entire staffContinue innovation into new products Entire staff

Implementation

Implementation

1 year 2 years 3 years 4 years

Evaluate/create plan to incorporate services into devicesMarket to emerging markets Evaluate utilization of mobile technology and tabletsImplement mobile/tablet strategic planPhase out products with small market shareContinue innovation into new products

Milestone Review Implementation

Long-Term

Risk Level Mitigation/ContingencyFoxconn refuses to continue supplying components

Low Switch suppliers

Unable to meet capacity Moderate

Expand capacityContinue research into process improvements

Lack of skilled workers Moderate Establish internship program

Expand training program

Implementation

Contingency Plan

Risk Level Mitigation/ContingencyFoxconn refuses to continue supplying components

Low Switch suppliers

Unable to meet capacity

Moderate

Expand capacityContinue research into process improvements

Lack of skilled workers Moderate Establish internship program

Expand training program

Implementation

Contingency Plan

Risk Level Mitigation/ContingencyFoxconn refuses to continue supplying components

Low Switch suppliers

Unable to meet capacity Moderate

Expand capacityContinue research into process improvements

Lack of skilled workers Moderate

Establish internship programExpand training program

Implementation

Contingency Plan

Phase out Joint Research & Development agreement with

Foxconn

Recommendation

.

Nokia Denmark