UNIVERSITY OF SALFORD

MARKETING MIX OF NOKIA IN RELATION TO ITS CHANGING

ENVIRONMENT

By:

Kopparaju Siva Theja

@00447134

Submitted to:

DR. Peter Reeves

Lecturer at Salford Business School

TABLE OF CONTENTS

QUESTION 1: 3

1.1 BACKGROUND 3

1.2 MARKETING ENVIRONMENT OF NOKIA 3

1.2.1 INTERNAL ENVIRONMENT 4

1.2.2 MICRO ENVIRONMENT 5

1.2.3 MACRO ENVIRONMENT 5

1.3 ANALYSIS OF MARKETING ENVIRONMENT OF NOKIA 6

1.3.1 PORTER’S FIVE FORCE ANALYSIS 6

1.3.2 PESTLE ANALYSIS 8

QUESTION 2 10

2.1 CRITICAL EVALUATION OF MARKETING MIX OF NOKIA 10

2.1.1 PRODUCT 10

2.1.2 PRICE 11

2.1.3 PROMOTION 11

2.1.4 PLACE 12

2.2 RECOMMENDATIONS FOR NOKIA 12

2.2.1 EMPHASIZE ON MARKET RESEARCH AND R&D TO TRACK AND RESPOND TO MARKET DEMANDS 12

2.2.2 FOCUS ON PROMOTION ELEMENT OF MARKETING MIX 13

2.2.3 REDUCE OVER-DEPENDENCY UPON INTERMEDIARIES 13

2.2.4 PLACE SERIOUS CONCERNS OVER TECHNOLOGICAL DEVELOPMENT 13

2.2.5 CLOSELY MONITOR THE COMPETITORS 13

REFERENCES 14

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QUESTION 1:

1.1 BACKGROUND

The Finland-based company Nokia has been able to define itself as a prominent name in the global

mobile phone industry since last four decades(Aspara et al., 2013). Over all those years, the company

experienced rapid growth as well as massive fall in the market mostly due to its failure to understand the

volatility of the marketing environment. The change in the market structure, customer’s behavior and the

presence of strong competitors has put forward critical challenges for Nokia(Hossain, 2012).

Furthermore, the company has suffered much due to poor management and strategic weakness that has

further led to the failure over the long run. Once a market leader in the global mobile phone company,

Nokia currently is outperformed by competitors like Apple and Samsung(Cord, 2014). Nevertheless, the

company can still rise back to its previous levels only if it can understand the market volatility to prepare

a strategic marketing mix.

1.2 MARKETING ENVIRONMENT OF NOKIA

The marketing environment for a company comprises of forces that have are themarkable impact on the

company’s ability to perform marketing activities(Öztaş, 2015). These forces relevant to marketing

environment possess strong ability to influence the interaction and relationship of the business with its

targeted customers. The marketing environment for Nokia comprises of three levels of environment i.e.

macro environment, microenvironment, and internal environment(Aspara et al., 2013).

Figure 1: Marketing Environment of Nokia

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Macro Environment

Micro EnvironmentInternal

Environment

1.2.1 INTERNAL ENVIRONMENT

The internal marketing environment refers to the environmental forces within the business that impact the

marketing activities of the company(Marcu and Meghisan, 2015). It includes the functions and scope of

different departments of the company. For Nokia, its internal marketing environment can be characterized

by the functions of different departments such as finance, operations, management, R&D, etc. Each of

these departments has asignificant impact on the marketing activities of Nokia. For instance, the skunk

works as one of the autonomous divisions of Nokia impacts its marketing strategies(Ropot, 2013). These

skunkworks are a group of engineers that the company has formed to innovate groundbreaking ideas. This

department, to a great extent, impacts the product mix of Nokia and is significant in product development

and modification. Similarly, the finance department, on the other hand, offers a greater level of impact

upon the marketing budget for Nokia(Icon Group International, 2010). Thus, the functional departments

of the company are a major component of the internal marketing environment. Apart from those,

organizational culture, goals and values also impact the marketing strategy as internal forces(Connor,

2015). These factors are core for defining the marketing strategies, concepts and ideas for Nokia.

Figure 2: Internal Marketing Environment of Nokia

1.2.2 MICRO ENVIRONMENT

The micro-marketing environment of Nokia comprises of those factors that influence the day to day

operation of the business. The microenvironmental forces of a company include stakeholder as well as the

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Internal Marketing

Environment

Organizational Departments

Organizational Policies

Organizational Strategies

Organizational Culture

parties with whom the company regularly interactswith business operations(Wormer, 2010).For Nokia,

forces relevant to its micro marketing environment may include marketing intermediaries, customer

markets, competitors and public. The marketing intermediaries being a microenvironmentalforce has a

great impact on the company are marketing activities(Hossain, 2012). The market intermediaries for

Nokia include financial intermediaries, physical distribution firms, etc. These intermediaries impact the

distribution mix of the company. Similarly, customers are also the part of Nokia’s microenvironment.

They play a significant role in influencing the promotion mix, price mix and product mix of the company.

For instance, Nokia’s product strategy is based on the customer’s needs and expectations(Büscher, 2010).

1.2.3 MACRO ENVIRONMENT

The macro marketing environment consists of those environmental forces that are present in the external

environment of the company and puts forward significant threats and opportunities in the targeted

market(Chen and Hu, 2008). These forces are not in the control of the management and have acrucial

impact on the company’s marketing mix. In the case of Nokia, different forces in the macro environment

such as economic, political-legal, social- cultural, technological and environmental forces impact its

marketing strategies(Ropot, 2013). It is because of the volatility of the macro environment that the

company is facing adverse situations. For instance, the socio-cultural environment is characterized by the

customer’s needs, expectations(Wormer, 2010). In the market for mobile phones, Nokia failed to

understand the changing needs of the customers as a result of which it lost a greater share of its market to

its competitors such as Apple and Samsung.

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Macro Marketing

Environment

Political Environment

Economic Environment

Socio Cultural Environment

Technological Environment

Environmental Forces

Legal Environment

Figure 3: Macro Marketing Environment of Nokia

1.3 ANALYSIS OF MARKETING ENVIRONMENT OF NOKIA

1.3.1 PORTER’S FIVE FORCE ANALYSIS

The Porter’s Five Force Analysis is an analytical framework that can be used to analyze the business’s

microenvironment in attempts to identify its competitive position in the industry(Lafley and Martin ,

2013).To analyze Nokia’s competitiveness in the mobile industry, it is essential to understand the factors

or forces that impact its industry performance. This model for analyzing marketing environment takes all

the relevant forces in consideration.

Figure 4:Porter’s Five Force Analysis for Nokia

Threat of entrants

In the mobile phone industry, the threat of new entrants can be taken as a minor threat mostly because of

the high amount of capital and technological investment required to set up a new business(Fenske, 2012).

The new businesses have atough time penetrating an already mature market with such large number of

customers. Furthermore, the mobile phone industry also put greater entry barriers for new firms regarding

investment, R&D, and technology. At present Nokia possess the third highest market share in the industry

i.e. 12.4% led by Samsung and Apple with a market share of 22.8% and 23.5% respectively(Ropot,

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Competitive Rivalry

Threat of Entrants

Supplier's Bargaining

Power

Buyer's Bargaining

power

Threats from Substitutes

Competitive Rivalry

2013). For the new companies to enter such competitive market, it takes a long time and significant R&D

efforts.

Supplier’s Bargaining Power

Currently, Nokia greatly relies upon its hardware and software suppliers for the mobile phone production.

The company’s only supplier of software is Microsoft. It greatly relies upon Microsoft’s software for its

production(Aspara et al., 2013). Despite the presence of “open” OS Android, it requires a great deal of

financial and strategic risks in switching software suppliers. As a result, Microsoft has a greater

bargaining power over Nokia while negotiating for price and share(Whalley, 2012). Apart from that,

Nokia’s hardware suppliers possess comparatively lower bargaining power because of the presence of

other hardware suppliers that Nokia can switch to.

Buyer’s Bargaining Power

The mobile phone industry, at present, have seen a whopping rise in the customer’s bargaining power

mostly because of the presence of a large number of companies offering different choices(Chen and Hu,

2008). Nokia has a lot of big and small competitors that offer the customers with different value-added

services in their products. As a result to this, the industry is characterized by price sensitiveness.

Customers will choose to buy sets from Nokia’s rivals if they are not satisfied with Nokia’s

products(Cord, 2014).Thus, the customers have lower switching cost leading to greater bargaining power

on their side.

Threats from Substitutes

Mobile phones at present have been accepted the customers as devices that connect them with each other

through calls and messaging and allows to perform various functions such as clicking photos, email, file

transfer, net surfing,etc(Büscher, 2010). While mobile phones can perform all of these functions, they

also face substitutes such as PDAs, computers, cameras, etc. These substitutes offer the similar

functionalities as offered by cell phones. However, Nokia can provide its customers with all of these

functions in one single phone lowering the threats from substitutes (Icon Group International, 2010).

Competitive Rivalry

Nokia faces a greater level of competitive rivalry from rival giants such as Apple and Samsung. These

rivals have been able to shift to development and sales of smartphones while Nokia is yet to capture a

greater share of the sales of smartphones(Zhou and Ai, 2014). Moreover, the company’s failure to

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differentiate its smartphone to that of the competitors has led to increased competitive rivalry. The market

share of Nokia dropped to 12.4% in 2012 as a result of increased competitive rivalry in the market(Cord,

2014).

1.3.2 PESTLE ANALYSIS

The PESTLE analysis for Nokia comprises the analysis of the environmental forces relevant to the

external environment of the company. This analysis provides insight over Nokia’s current market

situation based on the impact of its macro environmental forces.

Forces Analysis about Nokia

Political Forces - Lack of enough support from home country’s government- Needs to adhere to government’s policies- Political unrest in China leading to the needs to shift manufacturing

to higher cost locations

Economic Forces - Economic downturns limiting the customer’s buying powers- Lack of enough economic resources i.e. capital and human resources

as compared to the competitors, leading to limited R&D and technological advancements

Socio-Cultural Forces - Failure to understand the shift of customer’s demand for phones with functional advantages to the phone with afocus on experiential factors like color, screensize, etc.

- Inability to provide the customer with variation in product line- Inability to address the needs of the young buyers

Technological Forces - Use of less popular Microsoft OS over widely used Android OS lead to customer’s reluctance in buying Nokia phones

- Software glitches in Lumina 900 brought major impact upon its sales

- Inability of Nokia to come up with breakthrough technology

Environmental Forces - Issues related to eco- friendly use and disposal of materials and wastes

- Demand for development of energy saving phones- Need to consider the environmental influence of the company’s

production plants- Needs to address the issues related to global warming and pollution

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caused by the company’s production plants

Legal Forces - Adherence to EU regulations- Compliance with laws and regulation of countries where

manufacturing and assembling plants are established

Table 1: PESTLE Analysis of Nokia

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QUESTION 2

2.1 CRITICAL EVALUATION OF MARKETING MIX OF NOKIA

To suggest appropriate marketing strategies for Nokia, it is essential to evaluate its marketing mix.

Marketing mix refers to the combination of factors such as product, place, promotion and price that

determine the offer of a product or a brand(Öztaş, 2015). It is a tool that businesses use to decide about

and form a marketing plan. Thus, marketing mix is closely related to marketing plans and strategies.

Marketing mix can be different for different segments of markets, based on the customer’s needs and

demand in that very market(Ropot, 2013). The marketing mix for Nokia is crucial in a sense that it

differentiate the company forms its rivals.

Figure 5: Marketing Mix of Nokia

2.1.1 PRODUCT

The core product for Nokia is its mobile phones(Chen and Hu, 2008). The company offers a wide variety

of mobile phones in different size, quality, colors and other specifications. To understand the product of

Nokia is it important to gain an understanding of product mix. The product mix is the summation of the

total product line that a company offers to its customers(Ingrams, 2015). Nokia serves different segments

in the market by offering the customers with different phones under different product lines. For instance,

Nokia’s N Series and E Series smartphones were targeted to the multimedia users and business- oriented

users respectively(Aspara et al., 2013). Similarly, the Windows OS based Lumia 900 targets the youth

market by offering greater connectivity and multimedia options. Thus, with its Windows-based

smartphones, Nokia attempts to serve the needs of larger segments of customers(Hsiao and Chen, 2015).

Furthermore, Nokia offers high-quality products to its customers making it one of the biggest players in

the market.

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Product Price

Promotion Place

Marketing Mix of Nokia

The design of Nokia’s mobile phone also varies according to the market trend. The designs vary from

modern touchscreen smartphones to traditional flat sets, flip sets and slide sets(Mathur, Raj and Chouhan,

2013).Despite the availability of a variety of product lines to serve different market segments, the major

lags in Nokia’s product strategy is that the company has failed to address the changing taste and

preference of the customers in the present market(Icon Group International, 2010). Nokia’s product

strategies lack enough market research and R&D considerations.

2.1.2 PRICE

Price is another crucial element of Nokia’s marketing mix. It defines the pricing strategies and methods

used to set the monetary value of the products. As explained earlier, with different types of mobile

phones, Nokia attempts to serve a larger segment of the market. Furthermore, the price of the Nokia’s

mobile phone also varies depending upon its types(Ropot, 2013). Nokia not just offer the market with

economic phones with lower end prices but also sophisticated and expensive smartphones. The company

shows remarkable variability in the price of its cell phones so that they can serve people from different

income class(Aspara et al., 2013). The company makes use of marketing strategies such as price

skimming to stimulate the demand for its mobile phones. Based on the skimming strategy for pricing,

Nokia launches its products at a higher price in the beginning and gradually decreases the price to

increase demand(Ropot, 2013).

Nokia has been able to develop an image of themselves as a company that offers customers with both

economic and expensive phones(Chen and Hu, 2008). However, other rivals in the market such as

Samsung, Sony, etc. provide the customers with phones with better specifications at a lower price. In this

context, Nokia has failed to offer its customers with better products at lower prices(Cord, 2014).

2.1.3 PROMOTION

Another element of the marketing mix that plays a major role in defining the marketing strategies of a

company is a promotion. Promotion is concerned with communication the customers with the information

related to the product so that they are informed, persuaded and reinforced to buy the company’s

product(Hossain, 2012). For Nokia, promotion mix has played a crucial role in stimulating its sales and

creating a brand image. The promotion mix of Nokia comprises of its Advertising, Sales Promotion, and

Public Relations and Personal Selling activities(Ashman, 2013). In the backdrop of promotion mix for

Nokia, the company mostly uses advertisement and public relations as promotional tools. The company

advertises its products over television, radio, billboards, etc. to pass their marketing message to a large

number of customers at a time(Ropot, 2013). Furthermore, Nokia performs public relations activities

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through different seminars and talk programs to inform the customers about its products and their

specification(Watson, McCarthy and Rowley, 2013).However, Nokia has not been involved much in sales

promotion in past few years. Similarly, personal selling is also used by Nokia on distributor level by

providing its distributors with orientation and training related to the product(Watson, McCarthy and

Rowley, 2013).

2.1.4 PLACE

Place, in the marketing mix, refers to the distribution process and channels of the company. It is

concerned with the use of distribution channels and strategies so as to provide the customers with easy

access to its products(Steinbock, 2010). Unlike its competitors like Apple, Samsung, etc., Nokia lacks

direct stores of the company to sell their mobile phones to the customers. Thus, Nokia relies on the

market intermediaries for distribution of its products in the market. The company floats its products in the

market through distributors. Retailers and mobile operators play a major role in the distribution of the

Nokia’s smartphones and feature phones(Ropot, 2013).

Nokia also showcases its products at the Nokia gallery through which customers to learn about different

models and purchase them(Laanti, Salo and Abrahamsson, 2011). Nevertheless, the lack of direct store

for selling the products has kept Nokia detached from its customers. Moreover, overreliance upon the

distributors and retailers for distribution can also be of greater risk to the company(Palmberg, 2002).

2.2 RECOMMENDATIONS FOR NOKIA

Nokia had been one of the strongest players in the global mobile industry. However, presently, the

company has failed to maintain the market share it earned during its growth phase(Cord, 2014).

Furthermore, Nokia has lost a greater share of its markets to companies like Apple, Samsung, and HTC,

etc. in past decade.

2.2.1 EMPHASIZE ON MARKET RESEARCH AND R&DTO TRACK AND RESPOND TO MARKET DEMANDS

The major problem of Nokia in past was that it failed to track the customer’s needs and preferences (Cord,

2014). Thus, it needs to give more importance to market research and R&D to meet the needs of the

customers. The company has even formed a group of engineers to innovate new unique ideas that would

beat off the competitors. Nevertheless, it is evident that Nokia needs to adopt a more strategic approach to

understanding and address the needs of the market(Icon Group International, 2010).

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2.2.2 FOCUS ON PROMOTION ELEMENT OF MARKETING MIX

Nokia has been struggling to come up with a breakthrough product in other to recapture its lost market

share. In this attempt, much focus has been given to the product strategies. However, it is important for

Nokia to realize that promotion can also play a strong role in regaining the market shares(Whalley, 2012).

It should make changes in its promotion mix so as to address changing needs of the volatile mobile phone

market. Greater levels of sales promotion and public relations can be performedto do so(Zhou and Ai,

2014).

2.2.3 REDUCE OVER-DEPENDENCY UPON INTERMEDIARIES

Nokia might face a greater threat in the market due to its overreliance upon its distributors. Thus, the

company should not just solely depend upon its distributors and retailers for sales(Aspara et al., 2013).

Nokia should establish its own stores through which it canbeside its products in the market.

2.2.4 PLACE SERIOUS CONCERNS OVER TECHNOLOGICAL DEVELOPMENT

The recent incident of glitches in Lumia 900 has raised eyebrows of the customer over the brand. Such

technical glitches are costly for the company not just regarding money but also in terms of

reputation(Whalley, 2012). Thus, it is crucial for Nokia to make investments in technological

advancements to get over such technical glitches.

2.2.5 CLOSELY MONITOR THE COMPETITORS

Nokia, in past, had been reluctant to understand the impact of the competitor’s actions over its sales(Cord,

2014). This had been a major reason for the fallout of Nokia. Thus, in future, Nokia is recommended to

keep a close watch over its competitors. It is essential for Nokia to analyze the impact of each and every

move of the competitors over the company’s sales to prepare one for major market shocks(Marcu and

Meghisan, 2015).

Thus, based on the analysis of the marketing environment and evaluation of marketing mix strategies of

Nokia, it is recommended for the company to come up with changes in its overall organizational

strategies as well as the marketing mix strategies to regain its market share in the future(Ropot, 2013).

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