MANAGERIAL DECISION MAKING RESEARCH AND ANALYSIS
Nokia Company is the leading phone manufacturer in the world. The Finland based company, has been a global leader in the sale of mobile phones until for a long period of time until recently, when its command in the smart phones, started being overtaken by other phone manufacturers like Apple, and Samsung, among others. The Nokia Company has achieved a lot of success all over the market regions which is significantly global. The company can attribute its success to the innovation of products that the company continuously ventures into. This thus answers the question of which factors attributed the success in the sales of the Nokia phones, as compared to the other phones (Moen & Jones 2011). The recent decision to use Window 8 in their phones instead of Android software is one of the issues that are projected to increase the popularity of the phone manufacturing company.
The risk factor that the Nokia Company ventured into was to bring into the market a windows phone. The success of the Nokia smart phone being the introduction of the windows phone that is intended to compete against other smart phones that do not use the windows as its operating system. The windows phone has been differentiated from other brand phones regardless of the slow pick up in the market. The Nokia Company produces mobile devices for a wide range of market segments. The company’s product covers a wide range of cost mobiles as well as utilities. The company also provides devices that provide internet access when then product are able to operate activities such as messaging, games and various applications in the operating platform known as Ovi. The company faces very stiff competition in the ever evolving technology field with its main competitors being Motorola, Samsung, and Sony Erickson.
The company has its operating production plants in Asia, Europe as well as Latin America with the major production facilities being in the Manaus in Brazil, Beijing China, Salo in Finlad, Komarom in Hungary, Chennai in China, Reynosa in Mexico, Masan in the Repuilc of Korea. In the year 2011 Nokia set up a new production plant in the Hanoi in Vietnam. The production facilities provide a global network that facilitates flexible production quantities to suite the fluctuations of the demands of the products. Each of the production plants are automated to a high state of art technology that provides uniformity throughout the globe.
The company has been able to partner with various suppliers for their production success with a wide range of global networks in the supply of various electronic machineries like chipsets, audio components, charging devices, storage devices, camera and other mechanical devices such as cover, connecting devices, antennas. It is noted that these hardware devices that are used in the phone production accounts for most of the company’s expenses and sourcing. The company is reputed for being the global leader in the production of wireless technology with a healthy portfolio in the technology domains and the CDMA2000. The standards of the Nokia Company are known to be one of the healthiest in the industry.
In comparison to the 2011 and 2012 financial reports, the Nokia group had an operating profit 4.9% to the previous year of 2.8%. Regardless of the fact that there was a voluminous increase in the in the device sales, it was noted that there was a negative impact on the profits due to voluminous momentum in the competition in the markets by rivalry companies. The first halve of the 2011 had the least sales and this could be attributed to the lack of the dual SIM handsets in the market at the time that was the growing selling point at the point in the market. The gross margin as at 2012 was rated at 29.3% which in comparison to the previous year of 30.2%. the decrease in the gross margin as at the year 2011 was attributed to the decrease in the gross margin in the devices as well as the services that can be compared to the previous year that had a fractional counterbalance by the improved gross margin in the Nokia Siemens Networks.
The cost incurred in the in the research and development amounted to EUR 5612 million for the year 2012m in relation to the year 2011 which was EUR 5836 million. This expense section cost an average of 14.5% of the total net sales for the year 2012. There was an increase in the research and development expenses for the year 2012 which was as a result of a decrease in the in the sales for the year2011 which can also be translated to a decrease in the research and development in the same year. In the year 2012, the selling and marketing expenses was at EUR 3788 million in comparison to the 2012 which was EUR 3891 with the figures representing a 9.8% and 9.1% in the year 2012 and 2011 respectively.
In the year 2012, the company operated on a loss which was EUR 1073 million in relation to an operating profit for the previous year. The decrease in the operating margin can be attributed to the weakening the goodwill which is valued at EUR 1.1 billion in the Nokia region as well as the commerce business. A reduction in the operating profit sales of the devices was also offset by the profits incurred at the Nokia Siemens Networks. A total of EUR 131 million was incurred in the Corporate Common Functions which was an increase from the previous year which totaled up to EUR 113 million. The net financial and income expenses were valued at EUR 102 million in the year 2012 in comparison to the previous year that was valued at EUR 285 million. The decrease in the expenses can be attributed to the favorable changes in the exchange rates in some of the countries. In the year 2012, the loss incurred amounted to EUR 1198 million which in relation can be compared to a profit of EUR 1768 million. A total of EUR 290 million was incurred in the year 2012 which was relatively less compared to the EUR 444 million in the year 2011.
In the year 2012, the losses incurred resulted into a non-controlling interest that was valued at EUR 324 million while the previous year got a major loss of EUR 540 million. This difference in the non-controlling assets can be attributed to the decrease in the losses in the Nokia Siemens Networks. In the year 2012, there was a loss as result to equity holders relating to the parent which totaled up to EUR 1160 million in relation to the previous year that had a profit of EUR 1851 million (Nokia Corporation, 2012 ).
The company takes care of its hazard risk by purchasing insurance that is to cover the risks that might be met by the company. This is done in the attempt to secure the financial situations, public reputation as well as other related losses that might be encountered from the by the customers. The insurances have been secured for the risks that cannot be internally prevented while the insurance markets provides a conducive terms and conditions
One of the marketing strategies, which Nokia seem to have neglected, is market research. Firstly, the research that was conducted by the company pertaining to the customers’ needs, and especially on the choice of the operating system seem to be highly misplaced. This is because the software popularity determines the choice for smart phones (Kotler 2011). Android, the Google-sponsored mobile software, has more popularity than the Windows’ software. For this reason, the Nokia Company should have first investigated the needs of the customers, especially in Asia, and Africa, where its popularity was strongly founded.
Through improper research, the company experienced adverse competition from its competitors’ most of who used the Android software in their mobiles. Through these software differences, the smart phone manufacturers were able to increase their sales, as compared to Nokia, which experienced a negative shift in its sales. Through proper research, the company would have established a proper segmentation strategy in order to highlight the choice of each target group in the world. Through proper segmentation, the Nokia Company would have determined the needs for each continent and for this reason it would have made the proper decisions on the choice of software.
Market segmentation is also very important for companies in order to determine the various customer needs. Diversity and difference in customer needs influence the supply and production of goods. Through proper segmentation, targeting would then be initiated to focus on different groups and their unique needs. The use of Windows 7 instead of Android is one of the major choices that would have to be made in the targeting and selection of specific target groups in order to increase the sales. Without determining the right choice as per the customers’ needs, companies fail in the realization of their goals and objectives (Kotler, Cunningham & Turner 2001).
Nokia Company can therefore be said to have fallen short of making these choices and the failure to implement these concepts may have influenced the manner in which the sales were shifted. Change in the software as well as the pricing strategies might have influenced the drop in the sales. Positioning of the company amongst its competitors is an issue that could have also influenced the sales of smart phones. This was mainly due to the fact that through improper positioning, competitors take advantage of this and use it to project sales through change in prices and other marketing strategies.
The marketing concepts are also influenced by the selection and realization of the major marketing issues. These are realizing the demand for the product as well as its popularity. From the products determination and design, the Nokia Company could have exceeded the sales made by the other phone manufacturers. This is because of the need to establish a unique product with unique features to please the customers and to also meet their needs. The availability of many important features in a smart phone influences the demand for the phone and ensures that the product is sold more than that of the competitors. The product is therefore a very important aspect and by comparing this with the products of smart phones produced by Apple, Nokia should realize that its products are significantly less installed with important features. The availability of more features in Apple phones, than in Nokia phones may also have been the issues that have resulted in reduction of sales of the smart phones. It was therefore important for the Nokia Company to establish effective strategies, aimed at increasing the features in the phones, to either match or pass those of its competitors.
The price is another strategy that also influenced the sales. According to the recent report by the Nokia’s CEO, pricing has been perceived as the major blow to the sales of the company. This is because the competitors of the Nokia Company have been perceived to have implemented certain pricing strategies that have caused the Nokia Company to experience difficulties when matching the prices (Kotler, Keller, Brady, Goodman & Hansen 2009). The prices of the smart phones have been shifting significantly, especially from other manufacturers and this reduction in prices may have prompted the Nokia Company to experience challenges in determining the correct price for their smart phones.
Smart phone prices have been decreasing significantly due to the ever increasing competition. This means that determining the correct price for its phones could have cost the Nokia Company decrease in sales, as it had not projected these changes. Since production costs determine the selling price, failure to determine the expected price of the final product in order to make changes in the production strategies could have been the influencing aspect to the reduction in sales of smart phones from the Nokia Company. The company was therefore not fully set in the determination of the best competitive prices, to influence better and increased sales, to pass its competitors.
Promotion of its products is another marketing strategy that seems to have been neglected by the Nokia Company. Promoting the smart phones in both local and global scale would have been a greater strategy for the Nokia Company. This is due to the fact that promotion of products is a very important marketing strategy (Kotler, 2011). If the Nokia Company had focused on promoting its products, the smart phones could have received better market response and hence increased sales. Instead of focusing on smart phones, the Nokia Company has concentrated more on its other brands and this has resulted in a reduction in sales of the smart phones.
The place and location to conduct its business has also been an issue in the marketing management of Nokia Company. This is due to the fact that, Nokia has neglected the market needs of certain areas, and especially Africa and the Asian nations. The different market needs should have been addressed individually based on the locations (Moen & Jones, 2011). Different places require different needs and for this reason, the company should not have generalized its marketing strategies, but should have rather focused on specific strategies for specific places.
After all these evaluations, the Nokia Company should have been in a position of initiating controls, based on the implications determined. It could therefore have been effective for the Nokia Company to follow these marketing strategies in its improvement of sales, especially for the smart phones. Taking that the Apple Company is developing in a rate, set to overtake the Nokia Company as the global leader, the Nokia Company should be well versed with the appropriate marketing strategies, to spearhead it back to the position of a global leader in both the smart phones and other common mobile phones. The control strategies should have been mainly in the price of the smart phones, the features contained including the software, as well as promotion to foster growth. Failure to observe some or all of these factors may have influenced the drop in sales of smart phones and made the company to fair poorly in comparison to the competitors.
Kotler, P (2011), “Marketing Insights from A to Z: 80 Concepts Every Manager Needs to Know”, John Wiley & Sons, Hoboken, NJ.
Kotler, P, Cunningham, MH, Turner, RE (2001), “Marketing Management, Pearson Education” Canada, Ontario.
Kotler, P, Keller, K, Brady, M, Goodman, M & Hansen, T (2009), “Marketing management”, Pearson Prentice Hall, New York, NY.
Moen, A & Jones, D 2011, “Nokia warns of weaker handset sales, margins”, viewed 31 May 2011retrieved from http://www.totaltele.com/view.aspx?ID=465190 /
Nokia Corporation, (2012) “ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the fiscal year ended December 31”,
Commission files number 1-13202