Executive Summary

Executive Summary

For this project, we have chosen the company NOKIA. Nokia is a mobile telecommunications company, and offers far more than just mobile phones for everyday use. They offer networking solutions for businesses that help businesses stay connected and communicate with each other at all times and places. For them, Nokia also offers special mobile phones with exquisite and unique functions and options. In this project, we will first talk about what Nokia is and what they do. We will talk about their history, and how they came to where they are today. Vision, goals, and their strategy are discussed, as well as their wide variety of products and services offered for the regular consumer, businesses, and service providers. Nokia’s success benefits were some advantages they had in the market. These also include the advance technology and features, as well as services they offer to their consumers. However, like most other companies, Nokia has some weaknesses, but we consider these to be very minimal, and almost only come down to their competition. Lastly, we will talk about their informational business model. This model includes Nokia’s work organization, control system, industrial relations, human resources, business strategy, and finally, enterprise organization. We will look closely at and discuss all of these elements, and why we think that they are relevant to Nokia.

Nokia has recently undergone a major organizational restructure. As a result of this restructuring, Nokia has revised it goal, mission and strategy into clear and specific

objectives. On Nokia’s website they state, “Our goal is to be a good corporate citizen wherever we operate, as a responsible and contributing member of society. We take part in long-term projects aimed at helping young people create their own place in the world, for example through our global youth programs.” They hope to fulfill their goal by following their mission statement that is, “By connecting people, we help fulfill a fundamental human need for social connections and contact. Nokia builds bridges between people – both when they are far apart and face-to-face – and also bridges the gap between people and the information they need.” Nokia plans to achieve its goal and pursue its mission by implementing its strategy of, “Expand mobile voice, drive consumer multimedia and bring extended mobility to enterprises.” There are many different products Nokia offers within a common product line. This common product line is cellular phones and accessories. Nokia offers many different cell phones with many different features. Nokia, however, is more than just a manufacturer. In addition to its manufacturing base, Nokia offers cellular phone and digital television service though in limited areas. It may seem that Nokia has a limited product line but when include with the research and development of these areas, their service and manufacturing portfolios become more impressive. As it can be assumed the cellular phone market is very lucrative. In 2003, according to The Journal.com, Nokia had sales of $37.1 billion and profit of $4.53 billion. This encompasses all revenue and profit areas, with a market share in the phone industry of nearly 35%. This market share has declined, at least in the first quarter of this year, to 29%. Rival phone manufacturers are stealing market share away from Nokia, while Nokia failed to meet the demand for its phones in the first quarter. More recent estimations of market share where not available as of November 2004. Technology is absolutely crucial to the prosperity of Nokia. Technology is what sets Nokia apart from its competitors. As a pioneer in the development of cell phone

capabilities, Nokia uses cutting edge technology in mobile instant messaging, browsing, video, imaging, music, and emailing. Security while using the features is also one of their primary concerns. With new bluetooth technology, Nokia is providing peace of mind in information transfers. Data synchronization and wireless Internet capabilities are also part of Nokia’s advanced mobile technology. Also using advanced technology is the digital television service they provide, but pioneers in this field they are not. As can be imagined with any large employer, Nokia offers many different employment opportunities. These opportunities are available for almost every educational level, with jobs varying from janitor to research development specialist. As both a manufacturer, service provider and research development firm there are many different positions available. In the service field there are phone assistance that work with customers and their accounts, while actual technicians work in the field fixing disruptions in service and connecting accounts. The research department creates new technology for the manufacturing sector to put into production. Obviously, there are the necessary departments such as accounting and human resources that facilitate the everyday operation of the company. The management team coordinates the focus and strategy of the overall company and works to improve upon existing procedure. The entire employment structure is tiered in the fact that each member of each department is accountable to an overseeing authority. In fact, even the chief executive officer of the company is accountable to the board of directors. This accountability forces the ethical behavior of each member of Nokia, since the board is ultimately accountable to the stakeholders of the company. The entire structure is similar to and umbrella in shape, funneling together towards the peak, but then funnels back out to the stakeholder at the top. Everyone is accountable. Nokia’s group structure is slightly different than its employment structure. The business structure is entirely segmented while the employment structure is segmented but

yet connected through the manufacturing process. The structure is actually segmented with separate functions in each area (www.nokia.com).

Key Success Factors

Nokia is upping the ante in the growing battle over digital convergence. The Finnish mobile-phone giant has staked a claim in the nascent business of wireless musicon-the-go, announcing a little-noticed deal on Aug. 9 with Loudeye a Seattle-based startup, to collaborate on technology for downloading songs over the air to mobile phones. If the partnership works, mobile phones could become stronger competitors to

portable music players such as the Apple iPod. Equally important, Nokia could help mobile operators develop a lucrative new revenue source from selling and distributing digital music. For the world's leading mobile-phone maker, this is only the latest step in a protracted effort to evolve handsets into multimedia gizmos. Nokia's phones have long included simple personal organizers and electronic games. In recent years, it has added digital cameras, FM radios, and support for downloadable ring tones and Java games. Nokia even launched a handheld videogame player last October, called the N-Gage, that doubles as a mobile phone. Indeed, the company is so serious about digital convergence that it reorganized late last year, breaking out multimedia products from conventional voice phones. The multimedia group had revenues of $3.1 billion in 2003 and should grow 63% this year, to $5.1 billion, predicts analyst Richard Windsor of Nomura Securities, vs. $20 billion in 2004 sales for conventional phones. If Nokia gets the kinks worked out, the opportunity could be enormous. Informa figures that sales of MP3-enabled phones will more than double, to 25.3 million next year, and hit 116 million by 2008. Meanwhile, operators stand to rake in big money from services. They're already doing well with downloadable ring tones that let consumers personalize the sound of their phones: Strategy Analytics figures ringtone sales last year topped $3.6 billion globally. Downloadable mobile music could be far bigger, topping $17.6 billion annually in 2009, the firm estimates (www.nokia.com). Key Weakness Factors

Nokia posted translated U.S. earnings per share of 21 cents, vs. 19 cents, in line with lowered guidance. S&P estimates a handset market share loss of over 2%, as share was hurt by a gap in the mid-range portfolio offering. To retain share, Nokia is initiating

an aggressive price-cut offensive, negatively impacting near-term margins. S&P is lowering the 2004 earnings per share estimate to 82 cents, from 97 cents. Still, the stock trades at a significant discount to peers on a price earnings and enterprise-value basis. S&P is lowering the 12-month target price to $19 from $23, on weaker growth expectations in S&P's blended valuation model (www.nokia.com).

WORK ORGANIZATION

WOR K • Overseas Allocation

SYSTEM

• Outsourcing

• Immediacy • Flexibility

CONTROL SYSTEM

• Network Management • Culture Management • Knowledge Management Relations • Relationship Management

INDUSTRIAL RELATIONS

• Segmentation • Downsizing • High trust

• Information Infrastructure

HUMAN RESOURCE PRACTICE

• Learning Organization: New Skill formation system • Integration of thinking and doing • Fluctuating wages depending upon demand

BUSINESS ORGANIZATION

BUSINESS STRATEGY

ENTERPRISE ORGANIZATION

• Mass Customization • Innovations Agile • Growth ted

• National • Global

• Networked • International • • Communica

• Integrated

WORK SYSTEM WORK ORGANIZATION We have included the following sections in Nokia’s Work Organization: Overseas allocation, outsourcing, immediacy, and flexibility. Nokia’s Head office is located in Finland, but they also have regional offices in the USA and Asia. Their work is spread over multiple organizations and multiple countries. Nokia employs over 50,000 people from more than 120 countries. The ten major countries where Nokia has most of its personnel employed are Finland, USA, China, Germany, Hungary, UK, Brazil, Mexico, Denmark, and South Korea. Since Nokia’s main focus is on developing and innovating new products and technologies, some of their business is being outsourced to other partners and suppliers. This is mainly done in the research department to better and faster develop new technology. These centers are all connected in a network, and Nokia keeps a very close relationship with them. The research and development centers are also located throughout the world and in different markets. Because of this, Nokia’s structure depends on good communication and close relationships between all of them. All departments within a business, as well as different research centers are integrated through computer software and computer networks, which allow them to work closely and more efficiently together. Good communication system allows them to share their ideas and results very

fast, which then results in better and faster development of new technologies But not only does this computer network allows them to share data immediately, this provides a great deal of flexibility to their employees and teams working on certain projects (www.nokia.com).

CONTROL SYSTEM Network management, Culture management, Knowledge management, Relationship management, and information infrastructure are all related closely together. Nokia’s success so far has been very much a team effort. Their management environment nurtures discussion and openness as well as encouraging entrepreneurism and risk-taking. Nokia has a lot of external partners and suppliers. Alone in Finland these are about 300 companies Nokia has a close relationship with. All of these suppliers and partners need to comply with Nokia’s values and culture. To make sure all of these requirements are met and also kept, Nokia keeps a very close relationship with them through an affective information infrastructure. But this relationship and informational infrastructure is also being maintained within the company itself. Inter-firm networking and activities produce knowledge spillovers and technology transfer. Interdependent organizations and departments develop into a cluster, which becomes more than the sum total of its parts. With technology spillovers come self-reinforcing advantages, such as the accumulation of knowledge and human capital. The company relies on the knowledge of its workforce, and it offers four fundamental elements to motivate, engage and maintain employee satisfaction and well-being at work. These are: •

Nokia way and values

•

Performance based rewarding

•

Professional and personal growth

•

Work-life balance.

Nokia is also strongly committed to the highest standards of ethical conduct, and full compliance with all applicable national and international laws. The code of conduct is introduced and reinforced to Nokia employees through induction, training, and internal communication. (www.nokia.com) INDUSTRIAL RELATIONS The following three sections where chosen for industrial relations: segmentation, downsizing, and high trust relations. We have already talked in previous sections on how much Nokia focuses on their relationships with both employees and partners. Employees are encouraged to create their own development plan and take advantage of the variety of available learning solutions and methods. On-the-job learning is also heavily encouraged. Employees take on a lot of responsibility when doing research, and they are selfmanaged. Mistakes are allowed to make, and if they have been made, everybody tries to learn from them, and maybe even turn them around to company’s advantage. Segmentation and downsizing play a significant role in Nokia’s history. Nokia has its origins in the paper industry in the 19th century. But their business expanded even further into tires, footwear, plastics, power supply, and many more. At the beginning of the 1980s, Nokia strengthened its position in the telecommunications and consumer electronics markets through the acquisitions of Mobira,Salora, Televa and Luxor of Sweden. In 1987, Nokia acquired the consumer electronics operations and part of the component business of the German Standard Elektrik Lorenz, as well as the French consumer electronics company Oceanic. In the beginning of 1990’s, Nokia has decided to concentrate only on mobile communications, and they have built the industry at the very beginning of its dramatic growth. Now, more than one in three mobile phones sold globally is a Nokia phone. Just recently, beginning January 2004, Nokia has reconstructed their business group structure, which includes the four products and

services they are offering. The following graph shows Nokia’s change from multibranch to mobile communications (www.nokia.com):

FROM MULTIBRANCH TO

Tires • Footwear • Technical rubber • Plastics • Power supply • Mobile Phones • Multimedia • Consumer electronics • Monitors • Data Telecommunications • Cables • Networks• Enterprise Solutions Aluminum • Machinery • Robotics • Engineering • Paper • Chemicals

MOBILE COMMUNICATIONS

HUMAN RESOURCES This section includes learning Organization: New skill formation system, Integration of thinking and doing, and Fluctuating wages depending upon demand. As we have already stated previously, Nokia puts a lot of trust in their employees. A high level of education and continuous learning are prerequisites for complex and demanding research work. Further studies are actively encouraged and rewarded. Nokia rewards

employees for good performance, competence development, and for overall company success. This creates a positive and encouraging environment with opportunities for employees to optimize their potential and be rewarded fairly. Higher performance and contribution will lead to higher rewards. Because of this encouragement and rewarding, people at Nokia continuously look for ways to improve their performance in order to stay at the forefront of technology and to develop their own competencies. Coaching is regarded as a vital part of continuous learning. Highly skilled colleagues at Nokia provide their employees with rich sources of experience and knowledge. Receiving coaching and participating in different teams will fuel employees´ development as well as give them the opportunity, every day, to share ideas and goals with innovators and industry leaders. Nokia employees also have access to a wide variety of training activities, as well as management training and development of leadership skills. Since Nokia encourages their employees to work on their own, and develop their own plans, they are integrating thinking and doing, and not separating it. Compensation at Nokia is tailored for each country and typically consists of elements such as annual base salary, incentives, bonuses, possible stock options, flexible Work-Life balance solutions, and other local benefits. The basic salary is set to meet market conditions, the demands of the job and individual competence and performance. The variable part may consist of incentives or bonuses and other compensation, such as overtime pay and call-out pay (www.nokia.com).

BUSINESS ORGANIZATION BUSINESS STRATEGY This section includes mass customization, innovations, and growth. Nokia offers more than just mobile phones. One of their great services is the mobile solutions offered for business. Nokia helps business that has their employees travel a lot, connect with each other easier, and provide them with special emailing, messaging, and uploading files on

special mobile phones created for them. Each company has different problems and different ways of doing business. Nokia works closely with their clients to develop a plan that best works for them, and they take their existing communication system to a new level. This is what Nokia’s mission is: to connect people. And they do it successfully with great new innovations and technology. Nokia spends a lot of its resources and money in research and development. Throughout the years, they have come out with some of the greatest developments in telecommunications. In 1981, Nokia introduced the first car phone on the market, and then 3 years later, in 1984, they introduced the first portable NMT car telephone. In 1992, Nokia introduced the first digital hand portable phone for GSM networks, and they also introduced the first mobile phone with userchangeable covers in 1998, and in the same year, they introduced the first mobile phone with a built-in FM radio. At Nokia, growth is encouraged in both the company level as well as individual employees. Nokia strives to be the number one company in the world in the mobile communications market. In order for them to do so, they have to be the leading company in developing new ideas and technologies as well. Since their research and development employees are the heart of this, they encourage personal growth as well. Higher education is a must at Nokia, and they offer various possibilities and opportunities for their employees to broaden their knowledge and skills (www.nokia.com).

ENTERPRISE ORGANIZATION Nokia is all, a national, international, and a global company. They produce and offer services at the national level, but they also ship their products and offer their services to other countries. However, their research and production facilities are not limited to only one country, these are located all over the world. The head office is in Finland, but they also have an office located in the USA for the American market, and one in Asia for the Asian/Pacific market. All of the company’s functions and different departments, as well as different locations are integrated in one single network. This gives them the ability to

communicate much faster and more efficiently with their different branches, as well as their suppliers and partners. This gives them the benefit of being able to finish tasks much faster and bring new products to the consumer (www.nokia.com). Self Evaluations Lindsay Salo This is the best our group has worked together. Everyone showed up at the team meetings when they said they were going to and everyone seemed positive when they were there. From these group assignments I have learned that everyone in a group does not do the same amount of work. Some people do more than others and some people do not do much at all. I feel that if this team were in the actual business world, managers would “weed-out” those that did not perform, or constantly needed assistance. I know that we are a team and we have to pick each other up when we are down, but holding someone’s hand is another story all together. I feel that for these projects I did my fair share and then some. One of the other members of our team should feel the same way, maybe with a little stronger conviction than I.

Ryan Cubit I have learned that Nokia is growing company and a very successful one at that. Nokia is at the top off its level with all of its competitor’s. The knowledge I have learned from doing this project could help later down the road for when and if I decide to invest in a company. Our team was very corporative and worked well together. We were enthusiastic about the project and took well interest into our company we choose.

Jason Lenahan I was really exited about doing this project. Yeas, some of the elements were kind of confusing, and very time consuming, and the whole preparing for the presentation almost somewhat stressful, but I was really excited about the company we picked. I, myself, am a strong Nokia believer and user. I guess, it’s one of those European things, the brand loyalty to this company. Let’s admit it, they simply have the best technology and especially the best and most user-friendly software. It’s like the Microsoft of mobile phones. The teamwork itself was definitely the best. I don’t remember the last time we worked so closely together. Meetings were very beneficial and helpful, and everybody came.

Matt Webber After working on project five, I have a better understanding of how the Industrial Enterprise transformed into the Information Enterprise. I see how organizations downsize and how team members take over the task of solving complex problems. The Information Model Work System and the Information Model Business Organization teaches the adaptation of global and network unity. The project also shows me how important working as a team can be productive and rewarding. I have much better knowledge of how the Enterprise Models function within organizations

References:

www.nokia.com