Assessment of Nokia Group as a Corporate Global Company

Executive Summary

As world markets change very fast making them not easy to predict, the top management organs like the CEOs, need to be flexible with their management strategies and business tactics, by making sure that their Global Companies operates within a wide visionary context, by displaying skillful tactics like delegating strategic planning to lower business units in order for them to adapt easily to shifting markets (Benjamin, 1993). However, one of the key controls for any top management is planning, not forgetting the use of IT as a center of control without any interference. Plans should be developed as needed and delegated to business units, and if strategies were to be developed likewise, then any organization will automatically have high chances of success (Clarke, 1995).

Although this will impose a different duty on the units, it will still remain the task of the senior management to guard the strategy, but remembering that it is not its main role and dictatorial creator (Amir, & Baruch, 1996). The management makes decisions as to the senior group, and engage itself fully in its revolution to convert it from the old business style of operation to a brand new online operation like the use of IT to bind the whole company into internally and externally linked by the latest technology (Benjamin, 1993). All the decisions made by the top management should be confirmed by extensive discussion with those who will implement them.

Its main aim is to close the management gap, it insists on knowing the business movements like what to do, and how it should be done, to the absolute necessity of actually getting it done (Benjamin, 1993).

Objective summary and strategy

Generally speaking for any company to achieve global success, major factors will determine its success, namely; the business environment, its management products, strategy, system, and the overall information system, however, the paper will narrow the focus to three major factors of success; the environment, its strategic system and the management accounting system (Lemola, 1996).

Introduction

The main objective of this paper is to evaluate Nokia Group as a corporate global company, which determines its success as a single case study. Nokia group presents itself extremely very well and as a unique case that has reached a substantial distinctive global success in the telecommunications industry (www.nokia.com), since this kind of global success occurs occasionally, it is therefore not easy to come up with with a clear and definite common pattern for success.

This makes it worth analyzing and documents a case like the Nokia group’s global success.

Business context, segments, products, competition, recent performance:

The history of the Nokia Group Company dates back to 1865 when Fredrik Idestein an engineer at Finish mining started a would-pulp and a manufacturing paper in the southern part of Finland. It grew steadfastly and evolved to become a conglomerate encompassing other industries like paper, chemical and rubber products (www.nokia.com). It was not until the early 1990s when it laid its first strategy into a dynamic global telecommunications company. Before the start of this strategy, it had already developed its mobile phones and telecommunications products in the late 1970s, both for domestic and international customers, and in the 1990s the Nokia group company became a global leader in digital communication technologies (Lemola, 1996).

In the open domestic telecommunication market, there has been stiff competition from other established international competitors like Motorola from the early beginning (Yin, 1994). However, it survived due to its capability to exploit the opportunities created by continuous technological and market change, this has enabled it to develop into the company that it is today (www.nokia.com).

It’s a business organization

Currently, Nokia is the leading mobile phone supplier and fixed telecommunication networks and other related customer services, it also supplies solutions and products for fixed and wireless data communications, including multimedia terminals and computer monitors (Zhan, 1998). The firm comprises three major business groups:-

1. Nokia Telecommunications,
2. Nokia Mobile phones and
3. Nokia communications products (Zhan, 1998).

The financial success of the Nokia group has been tremendous, for instance in 1198 its combined net sales of the business groups totaled EUR 13.3 billion (USD15.7 billion) (www.nokia.com). Its headquarters are in Finland and are listed on the New York (NOK), Helsinki, Stockholm, London, Frankfurt, and Paris stock exchanges. Their sales are distributed in more than 130 countries and it has a workforce of not less than 47,000 people worldwide (www.nokia.com).

Communication products

Being the leading supplier of satellite and other terminals designed for receiving digital broadcasting and multimedia applications, it collaborates very closely with program and content providers worldwide to offer their consumers attractive products and services like online education, entertainment, and shopping (Vihma, 1997). Their product development displays Nokia products and manufactured computer and other workstation monitors. These offerings include; applications for professional desktop communication and new technology display, all these industrial electronics production facilities are located in Finland, Hungary, and Sweden, while its research and development activities are located in Finland and Sweden (Johnson, et al. 1991).

Being the world’s largest manufacturer of mobile phones, the firm develops sophisticated mobile phones and accessories for all major digital operations like GSM, Amps, CDMA, and IDMA among other analog standards (Tahvanainen, 1999). However, one should not that as mobile phones continue to spread more and more, they must overcome one major challenge and this challenge, known as simplicity because this makes other players lose place in the competitive market; Nokia understands that it must provide phones that are easy to use, either a home or in the office (Tahvanainen, 1999).

Having surpassed this functional challenge, it has gone further to realize that a mobile phone is not a tool that is made strictly for business rather it is an item meant for everyday convenience, and as a result, Nokia offers different phone features for its different users (Hamel, & Prahalad, 1998).

Financial Success strategy

In 1989-1992, the economic situation of Nokia was poor, in fact, their net sales development and profits were not stable. Its value of the return on investment was in 1991-1992, that is, the overall profit was negative and its return on equity, i.e. the return to the owners of the company was also negative (Goold, & Marcus, 1994). The poor financial performance was even compromised by the difficult economic situation that was experienced in Finland in 1992.

The level of investments was generally low and interest rates extremely high. As a result, the Nokia Company did not have the best opportunities at its display to launch a new strategy due to the prevailing domestic economic environment; therefore it shifted its strategy towards global markets (Collis, & Cynthia, 1995). Its second strategy was established which was characterized by a life cycle of rapid growth until it stabilized and stagnated in 1996; its profitability on its investment and equity was good and in spite of rapid growth, its solidity improved (Clarke, 1995). Although its return on investment ratio did not exceed the growth rate, it was able to continually increase its solidity to the level where the ratio equity to assets was 47% by the end of 1993 (Collis, & Cynthia, 1995).

Business Environment strategy

In all industries, business environment analysis is very important especially in the telecommunications industry because changes occur very fast in this industry due to dramatic changes underlying technology for example currently; IP data is replacing voice as the basic form of data traffic (Granlund, & Lukka, 1998).

Because it is through the IP Data (Internet) model that any firm can get a clear vision of the future telecommunication industry; Nokia has moved from its current position as an equipment manufacturer to value-added services by creating new businesses in IP based networks and services (Green, & Amenkhienan, 1992), and it has been very quickly transformed into a focused telecommunications company; for instance in 1987, the Group’s turnover was 2.6 billion USD and in 1998, it was 9.8 billion USD, and the share of telecommunication in the same period grew from 17% to 100% and this includes its present mobile phones, telecom networks multimedia terminals, monitors and new ventures (Green, & Amenkhienan, 1992).

The company has grown globally, high profits have been realized, in addition, its laser-like focus on digital and networks has enabled it to boost its market capitalization from 1.5 billion USD in 1988 to 70 billion USD in 1998, and this saw the company edge past Motorola to become the world’s leading manufacturer of mobile phones (Hamel, & Prahalad, 1994).

Nokia’s market development strategy is its two main approaches to competition as a corporate multi-business firm; its emphasis on value creation, and loss prevention (Hokkanen, & Lasse, 1996). Emphasis on value creation: – it is the work of the Nokia group headquarters unit to formulate the overall strategy for the corporation and this includes the general degree of diversification organizational form (Johnson, et al. 1991). This is the main unit that manages the process of resource allocation among its constituent businesses (Kytösalmi, 2000).

Loss prevention: – Nokia reviews its business strategies with the aim of making sure that egregious logical errors are not made (Kosonen, 1995). The Nokia group headquarters has the purpose of monitoring how various business subunits operate, at the same time providing surer supervisions than its independent board of directors; it uses an administrative approach where it occasionally extracts free cash flow at a lower cost than what unaided capital markets can sometimes do (Kosonen, 1995).

In the Nokia group, the value of creation is very important than the general administration in control of the current fast-moving global business environments (Lehtinen, 1997). Although this sounds trivial, it comes in handy because of the key factor of timing, since in the new global competition, each competitor tries to achieve with technology, but the most crucial factor to success is speed because this creates the overall competition and growth (Lehtinen, 1997).

In most firms the new growth creates a very complex situation that is not easy to forecast; this is due to the complexity of the interrelated network of technology, customers, and competitors, because of too many unknown factors which are supposed to be managed concurrently and in an efficient manner (Lemola, 1996).

This “chaos” consequently contains the elements of success, which can only be reached by building certain capabilities that will survive if the change requires, this means the management ought to have the ability to manage paradoxes like having highly organized behavior in a highly flexible manner, and these require both entrepreneurial and administrative approaches (Lemola, 1996).

However, the difference in each of the approaches will be in how much each is used in a given situation. But it is important to note that each application technique will differ according to the business environment, its industry, in conjunction with the organization and resources of the firm (Lukka, 1999). On the basis of Nokia group mobile phones; there are three critical steps that have been created, which have seen them manage their immense high growth:

1. Their first approach is the challenge to create a framework of growth
2. Secondly, is the challenge of being able to integrate new personnel and
3. Lastly, is the challenge of being humble in the process of success? (Lukka, 1999)

This high growth has been realized in the firm because the senior management has the capability to implement the questions of its undertakings effectively and simultaneously, for this is their basic requirement for them to build all its core processes, for instance; in the process of a new product, all processes are understood as learning processes where every new information is identified in a systematic way which will be used in their future projects (Mouritsen, 1995).

In the process of strategic control and business development, the top management of the firm makes continuous assumptions about the business environment, and simultaneously test their validity, and are very careful to any sign or sense of alternative possibilities for this is critical for the firm to understand fundamental changes and crucial turning points (Mouritsen, 1995). This is because it is at this stage in the process of strategy formulation where firms end up building scenarios.

At the same time, they understand the usefulness of timing because it will be the right moment for them to take action; According to Moore “Even as early as 1987, it was said inside Nokia that ‘we must be prepared for the time when mobile phones will be sold like candies’”, in fact, history has proved this strategy to be highly successful.

Nokia has emphasized the role of design in the breakthrough of its mobile phones, this has been proven successful even in situations like the peripheral geographical position and with limited resources, it has even further proofed that it is possible for a firm to rise to industry leadership by making use of particular institutional traits like the ones in home markets (Moore, 1998).

The Nokia break though in the global market stems from the ability of the management in exploiting contextual traits in a highly competitive environment and their capability of turning them into internal capabilities of the firm (Moore, 1998).

Currently, the management has a brand new Nokia strategy, and according to the new growth brand, it now requires at least three coincidental preconditions for it to continue its global dominance in the market (www.nokia.com).

1. The management intends to lay down a solid technological infrastructure like upgrading the current standards to facilitate the firm and its growth in the industry.
2. The management intends to make new brand phones to continue with its sophisticated demands.
3. The need by the management to increase growth pattern in order to avoid any need arising from complementary assets.

This should be an example for any firm which is trying to adapt to the business environment that has been created by other players in the market. But the Nokia group industry leaders have a different challenge of creating their future, after successive years of success it has seen itself entering even into the small club of the industry with the mission of creating their future (Ollilla, 1999).

Nokia will not realize such global success without a state-of-the-art information system; the firm has a highly integrated information system that supports the management in its strategic decision-making process (Ollilla, 1999).

Even though the role of management accounting systems (MASs) in the success of Nokia globally has not been so decisive, their management information systems have been very efficient and this has been one of the major conditions for its success (Pulkkinen, 1997). According to their leaders; although efficiency alone is not sufficient, and the only reason for the success, but without it, it is almost impossible to reach an impressive high global business growth and financial success (Pulkkinen, 1997).

Its main core area of MASs is performance measurement, and it is closely related to the strategy systems (Pulkkinen, 1997). According to Rumelt, “Performance measurement system plays a key role in developing strategic plans, evaluating the achievement of organizational objectives and compensating their managers”. But many the firm managers, however, feel that traditional MASs is inefficient in the modern fast-growing technology because it does not adequately fulfill these functions, as a result, the Nokia management accounting department has implemented new and innovative MASs (Rumelt, 1995).

But what is most crucial to note is that; on the basis of Nokia’s successes, their success has already been founded before the emergence of most of these innovations. However, in its new implementations, its MASs designs and general ideas tend to converge globally on the basis of a global management accounting practice model (Shields, 1998).

They don’t expect any long-term and sustainable competitive advantages to be reached by even novel but thorough a well know MASs alone. The firm was among the first company to implement modern approaches, in fact, the firm has its own MASs. This should mean that on average its MASs has not been worse than any of its competitors, it might even be assumed for the sake of originality, that it contains the same amount of additional value to success creation (Shields, 1998).

Telecommunications

Even though Nokia has built, a solid reputation for its high stylish high quality, manufactured mobile phones, it will be impossible for them to function without networks; this is where its telecommunications comes in (Shibata, 1993). Being a leader in telecommunications technology globally, its telecommunications develops and manufacturer equipment and systems like analog and digital wireless networks and fixed access networks that are needed to run communications networks (Shibata, 1993). They have dedicated network products that include switching transmission, network management, and intelligent network (IN) solutions (Shibata, 1993).

These are properly designed products meant to meet the diverse needs of wireless, fixed, and convergent environments. Since they realize that they cannot operate individually, they work closely with other telecom operators, and this has enabled them to serve their customers even better. It offers its operators a full range of network equipment, and services like all tools for transmission, network management, and network planning (Silberman, 1999).

Operators use the provided tools to contracts an efficient network that meets both customer needs and their own business objectives. Moreover, the firm realizes that in order for them to be competitive, their networks must provide value at a reasonable lifetime cost; as a result, all their products are designed to be modular and inherently flexible (Silberman, 1999). This has two main benefits for its operators; they can start small and then slowly develop their networks as their customer base grows at the same time, they can rapidly introduce new networks elements in response to market opportunities. The system also provides their operators with progressive upgrades and expansions and enables them to avoid over-investments and preserve their initial outlay (Tahvanainen, 1999).

For example, this has enabled it to have a lion share in GSM-based infrastructure which is over 20% and it has as well as achieved success in the US market with its GSM 1900 products, and being able to retain its lead in NMT analog systems (Vihma, 1997). Nevertheless, its customers have benefited from their well-proven total systems capability, that is to say, it is a top manufacturer of mobile phones and has unsurpassed network testing and integration facilities (Tahvanainen, 1999).

It’s Vision

Being a global company its two main areas of growth are wireless and wireline telecommunications. Currently, it is the leading mobile phone supplier and the top supplier of fixed telecom networks and services. Moreover, it creates solutions and products for fixed and wireless data communications (Tuomi, 1998). It is a big challenge for most companies to simplify these techniques that are meant for the future and be able at the same to offer such feature-rich products, but in Nokia, it accepts it as an everyday goal. It is not even surprising that its “connecting people” brand sales, it is not just a slogan, but it is actually their mission of business (Taipaleenmäki, 1999).

Its future targets are very clear with its aims of making the right decisions at the right time, this is its main belief of breeding success besides determination and ability to foresee developing markets opportunities as well as being courageous in creating new markets and opportunities (Tahvanainen, 1999). The following are the characteristics of Nokia’s strategic vision.-

1. A well and clearly defined objects and goals,
2. Right timing of decisions,
3. It is determined and ready to take risks,
4. It foresees and makes use of rising market opportunities,
5. Its ability to create the future (Tuomi, 1999).

Conclusion

In its news management paradigm, Nokia was forced to change its strategy very fast in the 1990s, as a result, it built a conceptual framework that was geared towards helping the top management to turn the company around with this new strategy (Vihma, 1997), and this includes:

• Intellectual leadership,
• management of migration,
• Competition in market share.

It also strives for leadership in the most attractive global communications segments by

1. Creating high speed in anticipating and fulfilling emerging customer needs.
2. Maintaining quality in their processes and products and it is open with people to its new ideas and solutions (Zhan, 1998).

And following the foregoing discussions, it is useful to classify MASs into two main categories; unofficial and official systems. As regards Nokia, one of its unofficial management accounting systems is undoubtfully the way information should be created and communicated(Yin, 1994). It has achieved this by emphasizing that the key factors to success are; – knowledge creation, supply, and last but not least is the efficient use of systematic knowledge management as this will help to create insights into future organizations and products which is the basis of new product development (Zhan, 1998).

It believes in investing in people, and use of customer-based information through the process of continuous learning, functional rotation which is essentially cross-functional teams and inter-team learning, and the decentralization of controllership which increases customer orientation and is at the same time cost consciousness, which results to eventual business and profit consciousness (Yin, 1994).

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