Market segmentation refers to the different areas of the population that companies can aim their products towards. The market segment that Nokia has chosen to aim is the youth market focusing on students aimed 13-19 as market research has shown that some of the youth market are receiving large amounts of pocket money and most have no real commitments to spend it on and that means they have lots of disposable income and will be able to spend a lot money on new mobile phones.
As a big company Nokia is able to do a lot of promoting and advertising that smaller, less successful companies, may not be able to afford, such as television advertising and sponsoring lots of events that will be viewed or heard by large amounts of people in their chosen market segment (events such as music festivals and music awards are a goldmine for companies as they are viewed by millions of people worldwide). Adverts such as television and print adverts will be put into certain areas so that they can attract their chosen market segment, Nokia tend to put a lot of their print adverts in men's magazines such as FHM and Loaded so they can appeal to all of their readers instead of a smaller percentage of the readers they would attract in magazines such as Lifestyle and Good Housekeeping. Nokia's way of promoting is very good as they can appeal to mass markets and large amounts of people in their chosen market segmentation with certain advertisement's and with sponsoring large events like the ones I have previously mentioned.
Pricing strategy
Nokia's current pricing strategy is based on two main theories: 1. Penetration pricing- although this strategy is usually for companies that are trying to gain instant market share in a new market, companies who are already well known in the market still do it with new products that carry new technologies so they can take more market share from their competitors. 2. Competitor based pricing- this is used when there is a lot of competition in the market and a company is looking to take another companies market share by offering the same or similar products or a lower price, this happens a lot in the communications market and this strategy is used by every mobile phone producing company that is still in business.
Nokia's pricing strategy has proven very effective, this is down to the fact that they first sell their products for high prices and have very limited sales but make big profits on each sale, they then lower the price of their product and have lots more sales but they make less profit, but they still make a large profit due to the amount of sales, the other reason that they are so successful is that they offer high quality products and they sell them for the same price and sometimes even lower prices than the competition and have now built up the highest market share, they currently have 37.2% of the mobile phone market share and are the biggest selling mobile phone company in the world.
Branding
Nokia phones are seen as being of the highest quality and this is reflected in their massive sales figures. The fact that they are seen to be such high quality products is partly down to successful branding, they have a highly recognizable packaging style and the style of their handsets is similar in every line of production with the company name printed just above the screen and just below the earpiece. The fact that Nokia operate such an aggressive marketing strategy has elevated them above the competition as consumers are fooled into believing that branded products are "better" then un-branded products or products produced by lesser-known brands such as One Tel and other lesser-known phone producers in the market.
Product life cycle-Nokia
When Nokia phones were first introduced they required a lot of promoting and advertising as they weren't established enough to sell based on their quality and what they offer to the consumer, so this is where Nokia spent the largest amount of money promoting their products and establishing their brand as a leader in the communications market. Also when mobile phones were first available there were only a few companies as well as Nokia in the market (Sony est.) so they could charge higher prices then they can at the present time in the product life cycle because no companies would dare to enter a price war with such a new product.
Growth- This stage of the life cycle also has high promotion costs involved in it, this is due to the fact that mobile phones are becoming established as a consumer necessity and lots of other companies decide to enter the growing market, although companies do not need to assure customers that they need a mobile phone, Nokia have to assure the customers that they want a Nokia phone and this is where the high promotional costs come from.
Maturity- In this stage the promotional costs do decrease as the more popular brands, such as Nokia and Samsung, have gathered the majority of the market share and only have to show customers that they have a new model out and it will sell well, as they have been established as a quality brand and customers no-longer need to be persuaded to buy Nokia brand technology.
Decline -This is the stage that the mobile communications market, including Nokia, have recently entered, and companies are promoting, heavily, their new products to the market in an attempt to get out of decline and back into growth, with a new generation of technologically advanced phones that offer motion picture capture, camera technology and the opportunity to watch television on your handset.
Today Nokia has captured the markets of over 60 countries in the world where China, India, USA, Europe, Middle East, Africa, Asia, Australia and New Zealand having largest market shares. There are two interesting cases of entering strategy of Nokia: Indian market and Chinese market.
Nokia entered India in 1995. Since then the Nokia brand has been steadily growing and has gained wide acceptance in the Indian market. India is the third largest market for Nokia, in terms of its net sales as of 2006. Nokia is one of the most trusted brands in India and leads other cellular phone brands in terms of market share, advertising and customer service. The innovative technologies, user-friendly features and affordable prices contributed to Nokia's success in India. The case facilitates discussion on Nokia's brand building strategies in India. It also allows for discussion on the future of the Nokia brand and the cellular market in India.
Since 1985, Nokia had been fighting hard to establish a strong presence in the Chinese cell phone market that had grown significantly during the 1990s. Despite investing heavily in research and development and manufacturing facilities, Nokia had been facing tough competition not only from foreign companies like Motorola and Samsung but also from domestic players like TCL and Ningbo Bird. The market share of domestic players had increased from a mere 5% in 2000 to 56% in 2003.
There are six types of entry barriers to international markets according Michael Porter. They are listed below (Porter, 1980). (1) Loyalties among buyers and sellers established previously. (2) Customers' switching costs (any customer who wants to switch from one Supplier to another faces varying costs). (3) Access to distribution channels (available channels might not be imaginable or they may be controlled by competitors). (4) Scale effects (the entrant may need large volumes and low costs). (5) Extensive need for resources (e.g. management capacity and capital) in order to be firmly established. (6) Important costs independent of scale.
In order to overcome the above barriers Nokia adopted strategies such as mergers, acquisitions and partnering or collaborating with market leaders in those specific countries/industries.
4. Foreign Direct Investment
This section analyzes what kind of strategy Nokia took in terms of FDI.
Foreign direct investment (FDI) occurs when a company directly invests in production and/or marketing of products in a foreign country. FDI can be categorized in to two. 1. Greenfield Investments, when established as a new operation in a foreign country. 2. Acquiring and merging with existing firms of a foreign nation (Joint Ventures).
Horizontal FDI is when the company is starting business in the same industry in the foreign nation. Dubai based Telecommunication Corporation buying over Tigo Sri Lanka in Oct 2009 to enter into the Sri Lankan market is a good example (Arab News, 2009).
Vertical FDI takes place when a multinational corporation (MNC) owns some shares of a foreign enterprise, which supplies input for it or uses the output produced by the MNC (Hill & Jain, 2007).
In terms of motives, Foreign Direct Investment can be categorized as: 1. Market seeking FDIs 2. Resource seeking FDIs 3. Efficiency seeking FDIs
FDIs that are undertaken to strengthen the existing market structure or explore the opportunities of new markets can be called 'market-seeking FDIs.' 'Resource-seeking FDIs' are aimed at factors of production which have more operational efficiency than those available in the home country of the investor. FDI activities may also be carried out to ensure optimization of available opportunities and economies of scale. In this case, the foreign direct investment is termed as 'efficiency-seeking.
For Nokia it was more or less a mix of all of the above three motives. Some of the key examples for NOKIA can be listed as follows: Mergers, Collaborations and Acquisitions by Nokia * Nokia Siemens Networks (NSN) - To develop a portfolio of products and service solutions to help operators run their networks more efficiently. * NAVTEQ acquisition. To get in to the Maps and navigation technology, which have become tremendously popular services on mobile devices. (NAVTEQ's advanced map capabilities are critically important, as we believe that the next phase of Internet services will be defined by local relevance and your "social location". Nokia is well-positioned to take leadership here). * Collaborate with The Symbian Operating System to broaden the definition of the smartphone, by expanding smartphone features into the mid-range, and into new categories. * Working together with certain competitors, new players and partners in new ways to tackle global environmental issues. * Agreements with Microsoft and IBM for corporate e-mail services. * Collaborate with Qualcomm to develop smartphones for the North American markets. * Nokia and Broadcom are cooperating on technologies a next generation 3G baseband, radio frequency (RF) and mixed signal chipset system supplier for worldwide markets., including Nokia modem technology (Tolkoff, 2009).
In the 1990s, Nokia internationalized its R&D function, by setting up research centers abroad. By 1998, half of the company's R&D was conducted outside of Finland. Some of these centers, located in regional clusters of scientific excellence (e.g. Silicon Valley), have helped Nokia tap knowledge from rivals and foreign markets. In addition, Nokia has forged collaborations with leading universities in Finland and abroad (e.g. Massachusetts Institute of Technology) and has participated in various international R&D projects, in view of expanding the scope of its long- term technology development. By the end of the 1990s, co-operation with other companies, research institutes and universities had become a central part of Nokia's global R&D strategy. This approach triggered two-way knowledge transfers, enabling Nokia to exploit external expertise and technology.
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