Finland & Nokia Creating The World’s Most Competitive Economy Case Study Solution
External Analysis
External analysis has been done to examine the environment of the industry. The purpose of external analysis is to acknowledge the opportunities and threats present in the industry, which Nokia could use for expansion, growth and profitability.
Industry Analysis:
Industry analysis provides the understanding of economic fluctuations, information about the industry growth patterns and current business environment. The industry analysis is conducted through porter’s five forces analysis. (Bruijl, 2018).
Porter’s Five Forces Model:
Threats of New Entrants:
The threat of new entrants in telecommunication industry is considered to be moderate to low. As the various dominating players exist in the market with strong brand image, which poses a big threat for the new entrance. However, a huge capital is required to enter in the telecommunication industry. Additionally, various political and legal requirements reduces the threat of new entrants. However, growing demand of customers attracts the new comers towards the industry.
Bargaining Power of Buyers:
The bargaining power of buyers in telecommunication industry is considered to be high to moderate. As the various local and global players exist in the market, which strengthen the bargaining power of buyer. Additionally, the switching cost is considered to be zero, which is another reason behind the high bargaining power. However, the strong brand image and the loyalty of the buyers moderate the bargaining power in the telecommunication industry. Additionally, different brands have little differentiation in their products, and the quality, price and features of the products vary from brand to brand or company to company, which moderates the bargaining power of the buyers.
Bargaining Power of Supplier:
The bargaining power of suppliers in telecommunication industry is considered to be moderate to low. As various domestic and foreign players (suppliers) exist in the market, which creates an intense competition in the market, and lowers the bargaining power of supplier. Additionally, the switching cost is considered to be zero, and the products are a very little differentiated, which tends to reduce that bargaining power. The products are easily imitable and the rapid advancement in technology lowers the bargaining power. However, the prices, quality and the features of the products which the suppliers offer, tend to moderate the bargaining power.
Rivalry among Competitors:
The rivalry among the competitors in the telecommunication industry is considered to be high to moderate. As various global and domestic competitors exist in the market, which intensifies the competition. Additionally, the various competitors use different tactic in order to attract and maintain its consumer base, which is another reason contributing to the creation of an intense rivalry among the competitors. However, the brand perception and the customer loyalty also play an important role in increasing the rivalry between the competitors. The growing demand of unique features in products attracts the new entrance to enter the market, which also improves the power of rivalry among the competitors.
Threat of Substitute:
The threat of substitute in telecommunication industry is considered to be low because no apparent substitute exists in the market. However, various competitors or brands who offers variety of products with overloaded features in the market could be considered as the substitutes. Additionally, the indirect competitor is Landline phones, which doesn’t provide the mobility to the customers and considered to be old fashion.
Suggested Alternatives
After analyzing the problem, the suggested alternatives are discussed below:
Alternative 1: Skilled Labors and Increase Employment Rate
One of the suggested alternative is that the company and the country increases the employment rate and skilled labor. Finland’s education is based on quality and internationalization. However, the company is facing the challenges of lack of skilled and qualified labor, and threats of unemployment. Therefore, the country should open new universities in order to raise the level of education, and to provide more opportunities to the people for pursuing their education. This could prove to be beneficial in such a way that when the country generates skilled and qualified students, Nokia would hire the eligible employees for the company, resulting in increase in employment rate. Additionally, the country can also provide incentives internship to the students and training to the employees.
Alternative 2: Shrink Public Expenditure
Another suggestive alternative to the country and the company is to shrink the public expenditure while improving the service delivery. The main focus should be on non-critical sectors, such as redirect investment on more worthy areas like R&D, public health care, and infrastructure. A huge investment in R&D can help to overcome the crisis and increase the country’s GDP. Effective research and development department surveys the changing trends of the consumer’s preferences. The Government should monitor the mergers and acquisition in the private sector to reinforce the overall R&D’s efforts.
Alternative 3: Accelerate Diversification
One of the suggestive alternative is that the government should develop a strategy to accelerate the diversification of the electronics and mobile sectors, to sustain its growth. The purpose is to create a multi-polar economy through growing investment in other sectors, such as financial department and health care services. However, the country is less focused towards the financial and health care services, and these sectors are less amenable to automation. Therefore, the country should enhance the technology and increase the market development for the purpose of creating value-added products and services. Moreover, diversity will help Nokia to gain a competitive advantage, because it removes the barriers and conflicts between the employees.
Alternative 4: Evolution of Standards
As rapid growth industry attracts many new handset competitors, it increases fierce competition in the mobile communications industry. Many competitors with a background in consumer electronics such as Samsung, Sony, and Motorola joined the competition in the mobile industry. New standards also developed mobile internet services to enhance mobility. Finland and Nokia still maintain their position as a world’s leading economy and company, but the challenges from other competitors threaten their positions. Nokia should constantly update its standards by adopting new technologies. However, Nokia licensed some of its parts and components to other handset manufacturers in order to encourage adoption of its standards globally. Moreover, a new trend is on the verge of growth regarding smartphones, for which the company can undertake R&D department to leverage new segment..............
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