Nokia Case Study
How does a 139-year-old Finnish company whose major product lines once included diapers and rubber boots become a leading-edge technology company? When questioned by MIT economist Bengt Holmstrom, Company CEO Jorma Ollila of Nokia insists that there is "no secret code" to the success of the company based in an inhospitably cold home market of just 5 million people. The key to success for Nokia is establishing the right balance between innovation and execution. According to Ollila, "in a technology business, you need a tremendous amount of innovation, but with these volumes and growth you need to execute or it will kill you...I think we have done that better than anybody else."i Nokia Corporation is a world leader in global communications headquartered in Espoo, Finland, just outside of Helsinki. Nokia's global presence is established by its 16 manufacturing facilities and 11 research and development centers in 11 different countries around the world. Their 51,000 employees contributed to the sales of 179 million units in 2003, which translated to over $36 billion in net sales and an operating profit of $6.3 billion (appendix i). Nokia's $99.1 billion market capitalization makes it the largest company in the telecom equipment mak
In the 1990s, the European telephone companies decided to develop a common standard for digital mobile telecommunications called the Global System for Mobile Telecommunications (GSM). Thus, open standards were perceived as the best way to grow the mobile Internet market. The company has been listed on various exchanges, such as the London Stock Exchange, but it was not until 1994, that Nokia finally listed on the New York Stock Exchange under the NOK ticker symbol where the majority of their cash was generated to buy-out the antsy Finnish shareholders during their troubled early years. In 1998, Nokia surpassed Motorola to become the world's leading maker of mobile phones and has a 34% market share in 2003 (appendix ii). $800/person using land-line) since it allowed far more phones than before to be connected to public radio networks. Even though Nokia had many joint venture projects with its competitors, they still maintained a fervent independent approach in areas where competitors may attempt to license their technologies. For example, cross-business task forces were formed to address specific issues, such as developing new technical standards. Given the division's limited R&D resources, Nokia had to focus all of their efforts on just one digital standard. We have a very strong 'let's do it ourselves' culture. The company currently re-invests almost 10% of their yearly net sales and 1/3 of their employees in R&D to sustain their innovation. . To maintain order over this entrepreneurial spirit, financial discipline must be kept. Nokia's biggest cooperative venture was the WAP Forum, which was founded by Nokia, Ericsson, Motorola, and Phone. Between 1997 and 2000, the stock had increased 2,300% to the delight of their shareholders and proved that Nokia was able to adopt shareholder-value-based thinking. It was the first phone to have simple consumer-friendly features such as switchable covers, changeable ringing tones, and signal and battery indicators.
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