INTERNAL ANALYSIS

One functional area that is rather strong at Nokia is their Research and Development
(R&D) teams. Nokia knows in order to compete effectively in the mobile computing and
communications industry, they have to devote a great deal of time and resources to R&D.1 As of
December 2008, Nokia had a strong R&D presence in 16 countries, employing 39,350 people in
this functional area. That number represents approximately 31% of Nokia's total workforce,
which shows the importance placed on R&D.2 The Nokia Research Center focuses on four main
areas which include Rich Context Modeling, New User Interface, High Performance Mobile
Platform, and Cognitive Radio. These four areas collaborate with one another and seek to
determine what peoples' needs will be in the future. Based upon the needs identified, the research
teams then focus on the technology and interfaces that will be used, as well what infrastructure is
necessary. Nokia knows the future will bring many changes, and they are prepared to develop the
products and services necessary to help the physical and digital worlds combine.3 In order to
strengthen their R&D function, Nokia collaborates with a group of leading institutions from
around the world which they refer to as Open Innovation. By working together they are able to
share resources and build upon each others' skills and knowledge, which benefits Nokia greatly.
The value derived from working with global experts in R&D is then ultimately passed onto
Nokia's end customers through the innovative products and services that are offered.4
Another functional area at Nokia that seems to be strong is Human Resources (HR). Their
HR team works directly with both employees and management to build a cooperative company
environment.5 Nokia realizes that their success relies on the dedication, talent, and knowledge of
their employees. Because of this, they strive to hire people from a variety of cultural and ethnic
backgrounds. In doing so, Nokia knows they are hiring individuals that will each be able to bring
their own unique skills, experiences, and viewpoints into the workplace and contribute to the
success of the company.6 Nokia wants not only a diverse group of employees with distinct skills
and backgrounds, but also individuals that fit well with the company culture. Therefore, the HR
management team developed a thorough interview process that helps the company attract the
right kind of people whose capabilities can be further developed and add to Nokia's
achievements.7 Continuous and on-the-job learning are encouraged at Nokia, and the use of
coaching is one contribution in this area. The HR team also offers employees an assortment of
training activities to help employees learn and grow. Nokia has a Learning Market Place Intranet
which provides employees with information about opportunities such as e-learning and
classroom training. Management training is also very important at Nokia, and there are various
programs available in this area.8 All the different learning/training opportunities provided by
Nokia's HR team help the company to retain employees that are dedicated, hard-working, respect
diversity, and focused on teamwork.
A weak area for Nokia is marketing/sales and R&D, however, this is in regards to the
United States only since their market shares in Europe, Asia, and Latin America are usually
around 30 percent. In March 2002, Nokia had a 35 percent share in the U.S. market. However, in
following years Nokia saw their market share drop, and in June 2009 their share was only 7
percent. The problem is that Nokia lacks a strong offering in the American smartphone market.
Both the iPhone and Blackberry are very popular phones for people in the U.S., but Nokia does
not offer a comparable product to compete effectively with these phones. Instead of designing
phones that fit American consumers' preferences, Nokia decided to mass produce devices for the

global market which enabled them to lower production costs, though this strategy resulted in
Nokia losing a significant amount of sales in the U.S. Therefore, Nokia needs to find a way to
differentiate its products to meet the needs of American consumers.9
Despite having weaknesses in some areas, Nokia does have a competitive advantage
which comes mainly from their scale-based assets and capabilities (efficiency), their well
recognized and leading brand name (quality/responsiveness to customers), differentiating their
offering through services (innovation, responsiveness to customers), and the effective
management of their supply chain (efficiency). Nokia is able to keep costs down because of their
economies of scale and effective operations. This means they can still earn profits when
competing against other companies on price. While this is a great competitive advantage for the
company and may help act as a barrier to potential entrants, other established companies already
in the mobile industry also can develop economies of scale to derive cost benefits, and they can
then compete on price as well. The fact that part of Nokia's competitive advantage comes from
their leading brand name shows that this is a sustainable advantage that can help the company
maintain and grow their market share, and it will last as long as they continue to offer quality
products that are highly valued by customers. However, some of Nokia's main competitors, such
as Motorola, Inc. and Samsung ElectronicsCo., Ltd., also have well-known brand names with a
loyal customer base. In order to take market share away from the competition, Nokia will need to
offer products that are more valuable to consumers and that provide something the competition
cannot. Differentiating their offering through services allows Nokia to provide unique
products/services that its competitors cannot, however, this aspect of their competitive advantage
may not be very sustainable. If other companies in the industry find that Nokia is gaining market
share by offering unique services, they may too begin to offer some of the same types of
services. Nokia's competitors may develop the service offerings on their own, or they may
choose to engage in mergers or acquisitions to have the capabilities to offer the same kinds of
services to customers that Nokia does. The effective management of their supply chain is another
part of Nokia's competitive advantage that is sustainable, yet like their economies of scale, this is
an area in which their current competitors may also succeed. Nokia does put a large emphasis on
environmental and social values when choosing suppliers and developing relationships within
the supply chain. They also expect the companies they work with to take a similar ethical
business approach in dealing with their own suppliers. Thus, Nokia makes sure they are working
with honest and trustworthy suppliers which helps lead to their competitive advantage in this
area. It is very beneficial for Nokia that they have existing distribution channels already in
foreign markets such as India, China, and South America. Nokia has become knowledgeable and
experienced in these markets, and this provides a competitive advantage over other companies
that do not have distribution channels set up in those areas or that do not have as much
experience in those areas of the world.10 11 12 13
One of Nokia's core competencies is their employees. This is because they take the time
to interview people in ways that help them determine if specific individuals will truly fit in with
the Nokia team. They do not look at potential employees that have just technical skills, but also
check to see what their values, attitudes, and interpersonal skills are. Nokia believes that
technology can be taught to employees fairly easily but not interpersonal skills. They look for
people that will fit well with the company culture. That means they want individuals that are
willing to work as a team but at the same time who are able to come up with their own ideas,

have their own views and opinions, and are willing to stand up for them. They want creativity,
respect for people, ability to work in a diverse environment and accept differences, risk-takers,
and people who can admit mistakes but move on and keep trying anyway. Nokia has developed a
screening and selection process which enables them to find the best people to join the company
that will help them succeed in the future, and because of this, their diverse group of employees
are a core competence of Nokia.14 Nokia's brand name is also one of its core competencies. They
have built a reputation of offering reliability, user friendliness, and sophisticated technology in
their products and services.15 Because of their strong brand name, Nokia has a leading position in
the mobile phone market. In 2008 the company held 39 percent of the market share, and this was
based on an estimated global market volume for mobile devices of 1.21 billion units.16 For 2009,
Nokia's estimated global market share was 34 percent.17 Nokia takes corporate responsibility
very seriously and strives to behave in an ethical manner in all they do. Doing so helps ensure
customer satisfaction and respect from customers and the community.18 Nokia's dedicated
commitment to corporate responsibility strengthens their brand reputation and the value upon
which their stakeholders place on it. Because of their strong brand reputation, Nokia makes it
their responsibility to build positive value into each stage of the customer experience. They strive
to develop more sustainable products and services and communicate openly with customers to
make sure they are offering products that will meet their needs.19

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