Nokia Oyj (NOKIA) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Nokia Oyj (Italy)

Based on various researches at Oak Spring University , Nokia Oyj is operating in a macro-environment that has been destablized by – increasing household debt because of falling income levels, there is backlash against globalization, cloud computing is disrupting traditional business models, challanges to central banks by blockchain based private currencies, competitive advantages are harder to sustain because of technology dispersion, geopolitical disruptions, increasing inequality as vast percentage of new income is going to the top 1%, wage bills are increasing, technology disruption, etc

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Introduction to SWOT Analysis of Nokia Oyj

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Nokia Oyj can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Nokia Oyj, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Nokia Oyj operates in.

According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of Nokia Oyj can be done for the following purposes –
1. Strategic planning of Nokia Oyj
2. Improving business portfolio management of Nokia Oyj
3. Assessing feasibility of the new initiative in Italy
4. Making a Communications Equipment sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Nokia Oyj

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Strengths of Nokia Oyj | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Nokia Oyj are -

Training and development

– Nokia Oyj has one of the best training and development program in Technology industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.

Successful track record of launching new products

– Nokia Oyj has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Nokia Oyj has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.

Learning organization

- Nokia Oyj is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Nokia Oyj is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Nokia Oyj emphasize – knowledge, initiative, and innovation.

Operational resilience

– The operational resilience strategy of Nokia Oyj comprises – understanding the underlying the factors in the Communications Equipment industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.

Cross disciplinary teams

– Horizontal connected teams at the Nokia Oyj are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.

Strong track record of project management in the Communications Equipment industry

– Nokia Oyj is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.

Low bargaining power of suppliers

– Suppliers of Nokia Oyj in the Technology sector have low bargaining power. Nokia Oyj has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Nokia Oyj to manage not only supply disruptions but also source products at highly competitive prices.

Diverse revenue streams

– Nokia Oyj is present in almost all the verticals within the Communications Equipment industry. This has provided Nokia Oyj a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.

Digital Transformation in Communications Equipment industry

- digital transformation varies from industry to industry. For Nokia Oyj digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Nokia Oyj has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.

Ability to recruit top talent

– Nokia Oyj is one of the leading players in the Communications Equipment industry in Italy. It is in a position to attract the best talent available in Italy. The firm has a robust talent identification program that helps in identifying the brightest.

Superior customer experience

– The customer experience strategy of Nokia Oyj in Communications Equipment industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

High switching costs

– The high switching costs that Nokia Oyj has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.

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Weaknesses of Nokia Oyj | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Nokia Oyj are -

Compensation and incentives

– The revenue per employee of Nokia Oyj is just above the Communications Equipment industry average. It needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.

High bargaining power of channel partners in Communications Equipment industry

– because of the regulatory requirements in Italy, Nokia Oyj is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the Communications Equipment industry.

Slow to harness new channels of communication

– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Nokia Oyj is slow explore the new channels of communication. These new channels of communication can help Nokia Oyj to provide better information regarding Communications Equipment products and services. It can also build an online community to further reach out to potential customers.

Slow decision making process

– As mentioned earlier in the report, Nokia Oyj has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Communications Equipment industry over the last five years. Nokia Oyj even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.

High cash cycle compare to competitors

Nokia Oyj has a high cash cycle compare to other players in the Communications Equipment industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.

Skills based hiring in Communications Equipment industry

– The stress on hiring functional specialists at Nokia Oyj has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.

Aligning sales with marketing

– From the outside it seems that Nokia Oyj needs to have more collaboration between its sales team and marketing team. Sales professionals in the Communications Equipment industry have deep experience in developing customer relationships. Marketing department at Nokia Oyj can leverage the sales team experience to cultivate customer relationships as Nokia Oyj is planning to shift buying processes online.

Interest costs

– Compare to the competition, Nokia Oyj has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.

Increasing silos among functional specialists

– The organizational structure of Nokia Oyj is dominated by functional specialists. It is not different from other players in the Communications Equipment industry, but Nokia Oyj needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Nokia Oyj to focus more on services in the Communications Equipment industry rather than just following the product oriented approach.

High dependence on Nokia Oyj ‘s star products

– The top 2 products and services of Nokia Oyj still accounts for major business revenue. This dependence on star products in Communications Equipment industry has resulted into insufficient focus on developing new products, even though Nokia Oyj has relatively successful track record of launching new products.

Employees’ less understanding of Nokia Oyj strategy

– From the outside it seems that the employees of Nokia Oyj don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.

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Nokia Oyj Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Nokia Oyj are -

Reconfiguring business model

– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Nokia Oyj to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.

Loyalty marketing

– Nokia Oyj has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.

Better consumer reach

– The expansion of the 5G network will help Nokia Oyj to increase its market reach. Nokia Oyj will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.

Leveraging digital technologies

– Nokia Oyj can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.

Redefining models of collaboration and team work

– As explained in the weaknesses section, Nokia Oyj is facing challenges because of the dominance of functional experts in the organization. Nokia Oyj can utilize new technology in the field of Communications Equipment industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.

Using analytics as competitive advantage

– Nokia Oyj has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Communications Equipment sector. This continuous investment in analytics has enabled Nokia Oyj to build a competitive advantage using analytics. The analytics driven competitive advantage can help Nokia Oyj to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

Low interest rates

– Even though inflation is raising its head in most developed economies, Nokia Oyj can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.

Building a culture of innovation

– managers at Nokia Oyj can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Communications Equipment industry.

Use of Bitcoin and other crypto currencies for transactions in Communications Equipment industry

– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Nokia Oyj in the Communications Equipment industry. Now Nokia Oyj can target international markets with far fewer capital restrictions requirements than the existing system.

Finding new ways to collaborate

– Covid-19 has not only transformed business models of companies in Communications Equipment industry, but it has also influenced the consumer preferences. Nokia Oyj can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

Manufacturing automation

– Nokia Oyj can use the latest technology developments to improve its manufacturing and designing process in Communications Equipment sector. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.

Lowering marketing communication costs

– 5G expansion will open new opportunities for Nokia Oyj in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Communications Equipment industry, and it will provide faster access to the consumers.

Learning at scale

– Online learning technologies has now opened space for Nokia Oyj to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.

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Threats Nokia Oyj External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Nokia Oyj are -

High level of anxiety and lack of motivation

– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Nokia Oyj needs to understand the core reasons impacting the Communications Equipment industry. This will help it in building a better workplace.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Nokia Oyj in Communications Equipment industry. The Communications Equipment industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.

Increasing wage structure of Nokia Oyj

– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Nokia Oyj.

Environmental challenges

– Nokia Oyj needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Nokia Oyj can take advantage of this fund but it will also bring new competitors in the Communications Equipment industry.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Communications Equipment industry are lowering. It can presents Nokia Oyj with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Communications Equipment sector.

New competition

– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Nokia Oyj in the Communications Equipment sector and impact the bottomline of the organization.

Technology acceleration in Forth Industrial Revolution

– Nokia Oyj has witnessed rapid integration of technology during Covid-19 in the Communications Equipment industry. As one of the leading players in the industry, Nokia Oyj needs to keep up with the evolution of technology in the Communications Equipment sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.

Aging population

– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.

Capital market disruption

– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Nokia Oyj.

Stagnating economy with rate increase

– Nokia Oyj can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the Communications Equipment industry.

Technology disruption because of hacks, piracy etc

– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Nokia Oyj may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Communications Equipment sector.

Instability in the European markets

– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Nokia Oyj will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.

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Weighted SWOT Analysis of Nokia Oyj Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Nokia Oyj needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants. We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –

First stage for doing weighted SWOT analysis of Nokia Oyj is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.

Second stage for conducting weighted SWOT analysis of Nokia Oyj is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.

Third stage of constructing weighted SWOT analysis of Nokia Oyj to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Nokia Oyj needs to make to build a sustainable competitive advantage.

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