Professional Documents
Culture Documents
4. Generating income or profit: This principle clearly states that the need of the
organization is to be profitable enough to generate income for growth and to
satisfy stakeholders in the business. Although satisfying the customer is a big
part of a companies plans they also need to take into account their own needs,
such as:
There are also certain external factors that a company should be very aware of,
such as P.E.S.T factors (political, environmental, social and technological) and
also S.W.O.T (strength, weakness, opportunity
and threat). A business must take into account all these constraints when
designing and introducing a marketing strategy.
P.E.S.T:
The governmental bodies in the U.K have introduced new laws into the business
environment, which ensure that none of these procedures take place; if a
company is to be successful they must follow all of these laws.
Environmental social and ethical factors- some businesses view profits are more
valuable then a strong ethical code and this can govern behaviour and business
conduct. Some un-ethical practices are against
the law and companies can not become involved in them (I have mentioned
these above) but there are also some practices that aren't illegal by law but are
considered highly un-ethical by the consuming public, companies who engage in
these practice's can lose a lot of market share if they are found out. An example
of this is cosmetic testing on animals, it is legal but some of the consuming
public are
not happy about it and boycott Certain products because of it, companies must
be very careful about how they conduct themselves. Nokia have managed to be
quite environmentally friendly and have not
done anything that the consuming public have taken huge offence to, they have
been very careful about this and this is one of the reasons they are such a
popular brand of mobile phones.
S.W.O.T
4. There are some quite high supply chain costs that Nokia are currently paying.
Opportunity (external factors)- This is the area in which Nokia can make more
profit, or gain more market share. There are 2 ways in which Nokia can currently
do this:
1. Improve the technology that they are using to make their phones and use in
their products, for example, camera phones and advanced picture messaging
would attract new consumers to purchase phones under the Nokia brand name.
2. Using innovation to re-invent their products, change and develop within the
market to offer something none of the competitors have.
Also the fact that phone call charges are being forced to fall should prove to be
an opportunity for Nokia to sell to the people, who previously may have not
purchased a phone because of higher call
charges.
Threat (external factors)- This is looking mainly at the competition that are
taking away Nokia's current market share and also government legislations (the
total costs of 3G licensing in Europe is 110 billion
euros) that could hinder Nokia's development as a company.
For an existing product it is often useful to draw up an Ansoff's matrix, in order
for Nokia to grow as a business we must look at:
· Market penetration
· Market development
· Diversification
2. Introduce discounting
· Change times that television adverts are aired at and alter the places in which
print adverts are being displayed (this can help your products appeal to a whole
new market segmentation)
A businesses success is based on whether they can give the customer what they
want and when they want it. Market research involves the collection, collation
and analysis of data relating to the consumption and marketing of relevant
goods and services.
The purpose of market research is really to find out whether there is a gap in the
market for your product or service or whether you can make customers want
your product through persuasive adverting. We already know that there is a
market for mobile phones but the current
market gap has become saturated (or if not saturated, almost saturated) so
Nokia need to find a new market segment to aim their products at. In order to
classify the wants and needs of the consuming
population, companies need to gather information on the following:
· Buying patterns and sales trends- Organizations need to look at how buying
trends and patterns are affected by class, gender, religion and region. They also
need to understand how buying patterns change over time and what markets
are expanding and are worth trying to enter and obviously which markets are
contracting and companies shouldn't aim to enter into.
· Activities of competitors in the market- Nokia need to examine how their rivals
are adapting their prices and products to meet the consumers need's, how well
the rivals are selling and what marketing
strategies they are using.
Market research should supply the company with all the information they require
about consumers preferences, whether they buy certain products, what design
features are preferable and what kind of retail outfits are most frequently used
for purchasing certain products.
The information that companies collect through market research can be in one of
two forms, either quantitative or qualitative data.
· Telephone survey
· Postal surveys
· Consumer panels
· Observations
· Experiments
Internal sources:
· Existing reports
· Distribution data
· Shopkeepers opinions
· Stock records
· Sales records
· Accounting records
External data:
· Government statistics
· Consumer databases.
To help decide what market segment to aim at companies can also look at the
buying habits of customers. In order to make decisions about the type of
products to make, what advertising to use, promotional tactics, pricing and
packaging. Nokia will need to know about the following:
There are also certain variables that can affect peoples buying
habits, they include:
1. Age
2. Gender
5. Lifestyle
6. Taste
Market segmentation
In order to plan their product Nokia must look at what area of the
market they want to aim the products at, as the current youth market
is more or less saturated Nokia will have to research into a new
market, I suggest the 55+ market as they will have lots of disposable
income and my research shows that most people aged 55+ do not
currently own a mobile device and could be persuaded to buy one by
certain promotions and a good advertising campaign, also the drop in
call prices should attract a lot of people who may have previously
been hesitant due the high costs.
Socio-economic group
% Of population
A-Upper class
2.8%
B- Middle class
18.6%
27.5%
C2- Skilled working class
22.1%
D- Working class
17.6%
11.4%
Product-The product is the centre of the marketing mix and the other
three P's are based around it. Consumers purchase goods and services
for a variety of individual reasons and a company must be aware of all
of these when selling a product (that is why they conduct market
research).
* Technical research
2. Product launch
* Test market
* Pricing
* Branding
* Packaging
3. Product promotion
* Advertising
* Merchandising
* Sales promotion
* Transportation of goods
Introduction
When mobile phones where first introduced they were low quality
technology (bad reception, poor reliability and had a short battery
life), high priced (around £100 for a basic model) and consumers had
to be persuaded to buy mobile telephones, as they were not yet
established as a necessity. When products are first released,
companies can expect high promotion fee's as the public are probably
not yet familiar with the product.
Also when mobile phones were first released they were bulky and hard
to use, as product design and development are a key figure in success,
Nokia had to design phones that were smaller and simpler for consumers
to use. As people had paid a lot for earlier, more primitive products
they were obviously not going to pay the same high prices for later
products so Nokia had to develop phones that could be sold for less
and would last longer, this is where companies can expect to pay high
production costs.
When Mobile phones were first introduced they were not such a popular
item and there weren't as many competing companies in the market. So
Nokia and a few other companies (Sony and Panasonic) could charge
higher prices then they would in the highly competitive market that
they are in today, as there aren't so many companies competing for
market share.
Growth
In the growth stage of the product life cycle companies can expect
advertising and promotional costs to be as high as in the introduction
stage as more companies will enter the market and competition for
market share will increase. Advertising is a proven way of promoting
technological advances within a market (as with the new company 3
promoting their new technology that allows people to watch video's on
their handsets) so higher advertising costs can be expected as the
technologies available get better and more advanced.
The growth stage is also the stage that companies will (hopefully)
start to make a profit, based on good market research and a strong
sense of branding and a successful marketing scheme. In the growth
stage profit isn't the only thing that will start to develop, as there
are more companies in the market it is obvious that more technology
will be developed and that will drive prices higher, this is how
companies start to make profits (because consumers have accepted the
product, in Nokia's case, mobile phones, as a necessity they will be
more willing to pay higher prices for new phones that emerge in the
market).
Maturity
Decline
This is the stage that Mobile phones have entered (Nokia had recorded
their first drop in sales earlier this year), and all the remaining
companies are trying to re-launch their products by either developing
their products or entering new markets. At this point phone sales will
be decreasing and promotion and advertising costs will start to rise
again as companies fight for the remaining market share and struggle
to make a profit.
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Sales
Time
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Sales
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Time
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With successful re-launching the product life cycle should look like
the one above.
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Branding
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Most forms of promotion are based around the idea of having an image
to go with the product. Brand imaging plays a dominant part in an
organizations marketing strategy. This is because people make a
purchase they aren't just buying a product, they are buying a
lifestyle or an image. If branding can make people believe that the
branded product is better then an un-branded product, more people will
buy it and they will also be willing to pay higher prices for the
"extra quality" and lifestyle they are receiving with the product.
Because a lot of rival products are more or less the same (Pepsi and
Coke) the main way of making your product stand out is through
aggressive branding, This is usually achieved by companies using
slogans, logos and distinctive packaging.
This involves calculating the cost of production for the product and
then adding a mark-up for profit, usually 10% so a company can make
enough profit to re-invest into the business so they can grow.
This is usually pricing products based around the customer demand for
a product, if the demand is high, the prices will rise. This is
usually used when the product is unique, for example, a football match
or concert. To use this strategy companies must carry out detailed
market research to find out what prices the consumers are willing to
pay so they don't over price their product.
Market skimming
Penetration pricing
Firms who are trying to establish themselves in a new market and gain
instant market share usually use this strategy. It is a high-risk,
high cost strategy that is only an available option to the bigger
companies (like Nokia) who supply to mass markets. Penetration pricing
is based around the idea that a company will set their prices low to
encourage customers to buy their products instead of higher priced,
more established brands.
Price discrimination
* Market conditions- how much are the customers willing to pay? Can
advertising increase product image and price? Is the product aimed
at a mass market or a niche market? (a niche market refers to when
a company aims a product at a very small, select segment of the
market)
* Taxes and subsidies- VAT and customs duties will raise the price
of a product. Government subsidies will allow businesses to charge
lower prices.
Price- The phones that Nokia produce are usually sold at high prices
(new phones can be expected to enter the market at around £200+, if
they carry the latest technology). The price of the new phones usually
decreases after an introductory period, which is usually around 2
months long. Nokia's prices are usually competitor based, in such a
way as, they try to keep their prices a bit lower then those of the
closest competitors, but not as low as the "smallest" competition as
consumers do not mind paying the extra money for the "extra quality"
they will receive with a well known brand, such as Nokia.
Place- Nokia phones are generally sold at all established mobile phone
dealerships such as Carphone Warehouse and The Link, although they are
also sold at other retailers such as Dixon's and other electrical
suppliers. The products are only sold in the electrical suppliers and
stores other then dedicated phone dealerships after the introductory
period so the phones can remain limited edition, as this will
encourage younger consumers to buy them.
Product- Nokia phones tend to include all the latest technology and a
lot of the consumers favourite aspects such as text messaging and
games like Snake and Memory. When the phones came out they were big
and bulky and quite unattractive but now they are all quite sleek and
stylish with phones now getting small enough to fit in the palm of
your hand as standard. Most of the phones produced nowadays have
accessories that consumers must buy with them (carry cases, hands free
kits and in-car chargers) these generate Nokia a lot of profit, as
they are very high priced.
Nokia's marketing mix has worked very well until recently as the
market they are aiming at has become more and more saturated and after
looking at all the mobile phone sales figures, it looks as if the
phone companies can aim at this same youth market for about another 2
years until they need to change, but they should change sooner so they
can start making a bigger profit and get a head start on the
competition who will also have to change the market they are aiming
at. Nokia's current promotional strategy is working very well as they
are able to "talk to" a large number of consumers in different markets
rather then the niche markets the old promotional strategies where
restricted to.
Market segmentation
Pricing strategy
Nokia's current pricing strategy is based on 2 main theories:
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 recognisable 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.
Introduction
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
Decline
2. Their wag costs are already high, and are always rising-
To solve this they can try and invent or discover machines that can
increase productivity so that the number of staff currently employed
(The average number of employees in 2002 was 52714 and this was a
decrease from 57716 in 2001).
There are many external factors that can affect a marketing strategy
from developing; this is where you must use P.E.S.T analysis. I have
outlined P.E.S.T analysis on pages 2 and 3 but have further analysed
the effect of these external factors on the development of Nokia's
marketing schemes below:
Nokia's current marketing strategy has helped them become the biggest
selling brand in the communications market to date, but now sales are
starting to decrease with the saturation of the current market segment
so Nokia will need to do one of the following; Re-launch their
products with an aggressive promotional scheme; Target a different
segment of the market that has not been entered so Nokia can instantly
gain 100% of the market share (although this is risky as the market
might not take to their products and the demand might be low, so sales
will also be low and prices will have to be high and this will further
stop people from purchasing Nokia's products); Differentiate their
products to offer something no other company can offer to the market
or simply try and offer a different product altogether, such as
landline phones or televisions.
Market research
Nokia's business strategy (statement taken from www.nokia.com)
Their operating profit in 2002 increased by 42% and totalled EUR 4 780
million (EUR 3 362 million in 2001). Operating margin was 15.9% (10.8%
in 2001). Operating profit in Nokia Mobile Phones increased by 15% to
EUR 5 201 million (EUR 4 521 million in 2001). Operating loss in Nokia
Networks decreased to EUR 49 million (operating loss of EUR 73 million
in 2001). Operating margin in Nokia Mobile Phones was 22.4% (19.5% in
2001), while the operating margin in Nokia Networks was -0.7% (-1.0%
in 2001). Nokia Ventures Organization showed an operating loss of EUR
141 million (operating loss of EUR 855 million in 2001). Common Group
Expenses totalled EUR 231 million (EUR 231 million in 2001).
Financial income totalled EUR 156 million in 2002 (EUR 125 million in
2001). Profit before tax and minority interests was EUR 4 917 million
in 2002 (EUR 3 475 million in 2001). Net profit totalled EUR 3 381
million in 2002 (EUR 2 200 million in 2001). Earnings per share
increased to EUR 0.71 (basic) and to EUR 0.71 (diluted) in 2002,
compared with EUR 0.47 (basic) and EUR 0.46 (diluted) in 2001.
Global Reach
In 2002, Europe accounted for 54% of Nokia's net sales (49% in 2001),
the Americas 22% (25%) and Asia-Pacific 24% (26%). The 10 largest
markets were US, UK, China, Germany, Italy, France, UAE, Thailand,
Brazil and Poland, together representing 60% of total sales.
People
The average number of personnel for 2002 was 52 714 (57 716 for 2001).
At the end of 2002, Nokia employed 51 748 people worldwide (53 849 at
year-end 2001). In 2002, Nokia's personnel decreased by a total of 2
101 employees (decrease of 6 440 in 2001).
During the year, Nokia launched its first WCDMA mobile phone, the
Nokia 6650, which began deliveries to operators for testing in October
2002. The company also commenced shipments of its first CDMA2000 1X
mobile phones in the Americas. These included the Nokia 6370, the
Nokia 6385, the Nokia 3585, and the Nokia 8280.
In imaging, Nokia began shipping its iconic camera phone, the Nokia
7650, expanding the scope of the mobile market from voice to visual
communications. Feedback from customers and users across the board has
been extremely positive.
For the full year 2002, Nokia volumes reached a record level of 152
million units, representing faster than market growth of 9%, compared
with 2001. Backed by Nokia's ongoing product leadership and user brand
preference, Nokia has again increased its market share for the fifth
consecutive year reaching about 38% for the full year 2002, bringing
the company closer to its target of 40%.
During the year, Nokia Mobile Phones took steps to accelerate growth
and enhance both agility and scale benefits with the introduction of a
new operational structure. From May 1, nine new business units were
each made responsible for product and business development within a
defined market segment. This allowed Nokia to optimise its activities
in these vertically focused areas, while continuing to achieve broad
economies of scale from horizontal functions such as application
software development and the company's market-leading demand-supply
network.
During the year, Nokia Networks signed 20 GSM network deals in Asia,
China, Europe and the US, including three new customers.
During the year, Nokia took measures to align its operations to better
reflect current market capacity and conditions, reducing the number of
employees in its delivery and maintenance services as well as in
production. Nokia also streamlined its professional mobile radio unit
to reflect the slower than expected take-off of this market.
Dividend
2002
%
2001
Change
EURm
EURm
23 211
77
23 158
74
Nokia Networks
6 539
22
7 534
24
-13
459
1
585
-22
Inter-business
group eliminations
- 193
- 86
Nokia Group
30 016
100
31 191
100
-4
2002
% of
2001
% of
EURm
net sales
EURm
net sales
5 201
22.4
4 521
19.5
Nokia Networks
-49
-0.7
-73
-1.0
-141
-30.7
-855
-146.2
-231
-231
Nokia Group
4 780
15.9
3 362
10.8
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Average Rating (from 1-10. 1 being the best and 10 being the worst
Battery life
Exchangeable covers
5
WAP
MMS
10
SMS
Games
Picture messaging
Organiser
Ringtone features
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Analysis of my research
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From my research I have found out that 55% of people do already own a
mobile phone, but I also found out that 100% of the student population
(aged 11-21) did already own a mobile phone and the majority of the
older people in the sample (aged around 40 and 50) didn't own a mobile
phone, and I found out that everyone over 65 did not own a mobile
phone. My results show that the current youth market has already been
capitalised on by the communications companies, and the market has
become saturated or is definitely near saturation. This is reflected
in the fact that Nokia's sales have decreased by 4% and this has been
said by many Wall Street writers to be the tip of the iceberg and they
are prophesising that sales will continue to decrease until the
marketing strategy is revised.
My research also showed that "pay as you go" was the most popular
pricing option for the entire population, especially the youth in
which 100% of people had chosen this plan, but in the more mature
consumers they said that they would probably choose a "pay monthly"
system as they would not be bothered with the hassle of "toping up"
every time they ran out of call time. Also I found out that some 75%
of the youth market will change their payment plan to a "pay monthly"
system as the "pay as you go" system had proven to be very expensive,
due to the high call rates to other mobile networks, and because on
the "pay monthly" system you can get free text messages (SMS) and free
call time, but the amount depended on the network you had a contract
with.
My research showed that the most popular places that mobile phones are
bought in are Carphone warehouse and The link which accounted for 85%
of the sales of mobile phones to the people I questioned. Small
dealerships such as selective network outlets and major household
appliance stores, like John Lewis or the O2 stores accounted for a
very small amount of sales (less then 10%). If a phone is to be
successfully distributed it is only logical that it should be released
in the main dealerships before the other smaller outlets if it is
going to reach its maximum selling potential.
I have found out that most people do not conduct heavy research, if
they do any research at all (only 65% did research into mobile
phones), and the most common forms of research are magazines and
window-shopping. This means that it is important for a product to
stand out to the consumer and look good statistically in a magazine so
that it will stand out to the consuming population who research in
magazines, and the people who ask floor sales people for advice on
which handset to purchase.
Price was a difficult variable to analyse as my research has shown
that it was a 50-50 split between people who said price was a key
factor, and those who didn't really care about the price as long as
the phone was offering everything they wanted, although upon further
inspection most people would not like to spend over £175 on a handset,
but could be persuaded to pay a little more by a strong advertising
campaign or a good all-round package, that includes; cheap call rates,
free text messages and some free accessories, for example, a hands
free kit or an in car charger.
I have also found out that the most popular food shops are Sainsbury's
and Marks & Spencer, this gives us an idea of where to put promotional
fliers and leaflets about up and coming releases into the market, and
as people are usually bored while waiting in lines for a till, they
will want something to look at and if a flier is conveniently placed
near in the lines then that could get more customers interested in a
Nokia mobile phone instead of one of their competitors, also people
who shop in these 2 main supermarkets tend to be either middle or
upper class and will pay extra for "quality" in brand name products.
As Nokia's current sales figures are decreasing and they show no sign
of increasing again
My marketing mix
Marketing principles
Any marketing scheme that has been developed must be based around the
principles of marketing, and my revised Nokia strategy is no
different, below I have analysed how I have followed each marketing
principle:
* Customer perception- I had found out that Nokia was viewed as the
highest quality brand name in mobile communications, and it was
also the most trusted brand, 8 out of 10 people said that they
would look for a Nokia phone that they liked, before they would
look at another brand. Nokia's prices were considered a bit
expensive, and this was partly why I have decided to decrease the
prices of the new range of phones, although people said they
didn't mind paying the extra money for the quality they think they
will receive with a branded item.
There are also many external factors that can affect your marketing
style and the decision of which strategy to use, we can evaluate these
using P.E.S.T:
Environmental and Social factors- Nokia have never really had any of
these affect the way in which they operate because they have never
done anything that is really anti-environmental, the only problem is
the fact that the mobile phones let of radiation and has been said to
increase the risk of cancer in mobile phone users, but this has not
been highly documented and hasn't affected how Nokia have conducted
themselves.
Pricing strategy
Market skimming and demand based pricing- Market skimming is where the
competition in a market is slim or non-existent and a company can
charge what ever price they want because there is no other company to
offer a lower one. As Nokia will be entering a new market, we will be
able to choose whatever price we want to start selling mobile phones
at, and I think they should first be introduced at around £150, as my
market research showed that consumers in the new target market would
be hesitant to pay any higher, and this is the part that relates to
demand based pricing.
Market segmentation
The market segment the Nokia was previously aiming at had become
saturated, my research showed that 100% of students already owned a
mobile phone and where not about too buy another one in the near
future. Due to the fact that this youth market is saturated, I
analysed the Ansoffs and Boston matrixes, and decided to undertake in
market penetration. The new market that I am aiming Nokia's products
is the middle aged people, because my research showed that very few
middle aged people owned mobile phones and could be persuaded to buy a
phone if the product was what they wanted and the price was right, and
of those people who said that that didn't want a phone, most of them
said they could be persuaded by strong advertising and branding.
Evaluation