Nokia Oyj (0HAF) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Nokia Oyj (United Kingdom)

Based on various researches at Oak Spring University , Nokia Oyj is operating in a macro-environment that has been destablized by – talent flight as more people leaving formal jobs, increasing government debt because of Covid-19 spendings, customer relationship management is fast transforming because of increasing concerns over data privacy, geopolitical disruptions, wage bills are increasing, central banks are concerned over increasing inflation, there is increasing trade war between United States & China, cloud computing is disrupting traditional business models, increasing inequality as vast percentage of new income is going to the top 1%, 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 United Kingdom
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 -

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.

High brand equity

– Nokia Oyj has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Nokia Oyj to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

Sustainable margins compare to other players in Communications Equipment industry

– Nokia Oyj has clearly differentiated products in the market place. This has enabled Nokia Oyj to fetch slight price premium compare to the competitors in the Communications Equipment industry. The sustainable margins have also helped Nokia Oyj to invest into research and development (R&D) and innovation.

Highly skilled collaborators

– Nokia Oyj has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Communications Equipment industry. Secondly the value chain collaborators of Nokia Oyj have helped the firm to develop new products and bring them quickly to the marketplace.

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.

Innovation driven organization

– Nokia Oyj is one of the most innovative firm in Communications Equipment sector.

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.

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.

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.

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.

Effective Research and Development (R&D)

– Nokia Oyj has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Nokia Oyj staying ahead in the Communications Equipment industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.

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.

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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 operating costs

– Compare to the competitors, Nokia Oyj has high operating costs in the Communications Equipment industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Nokia Oyj lucrative customers.

Capital Spending Reduction

– Even during the low interest decade, Nokia Oyj has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the Communications Equipment industry using digital technology.

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.

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.

Ability to respond to the competition

– As the decision making is very deliberative at Nokia Oyj, in the dynamic environment of Communications Equipment industry it has struggled to respond to the nimble upstart competition. Nokia Oyj has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

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.

High dependence on existing supply chain

– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Nokia Oyj supply chain. Even after few cautionary changes, Nokia Oyj is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Nokia Oyj vulnerable to further global disruptions in South East Asia.

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.

High bargaining power of channel partners in Communications Equipment industry

– because of the regulatory requirements in United Kingdom, 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.

Workers concerns about automation

– As automation is fast increasing in the Communications Equipment industry, Nokia Oyj needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.

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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 -

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Nokia Oyj to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Nokia Oyj to hire the very best people irrespective of their geographical location.

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.

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Nokia Oyj can use these opportunities to build new business models that can help the communities that Nokia Oyj operates in. Secondly it can use opportunities from government spending in Communications Equipment sector.

Creating value in data economy

– The success of analytics program of Nokia Oyj has opened avenues for new revenue streams for the organization in Communications Equipment industry. This can help Nokia Oyj to build a more holistic ecosystem for Nokia Oyj products in the Communications Equipment industry by providing – data insight services, data privacy related products, data based consulting services, etc.

Buying journey improvements

– Nokia Oyj can improve the customer journey of consumers in the Communications Equipment industry by using analytics and artificial intelligence. It can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects Nokia Oyj can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

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.

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.

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.

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, Nokia Oyj can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help Nokia Oyj to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.

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.

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.

Developing new processes and practices

– Nokia Oyj can develop new processes and procedures in Communications Equipment industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.

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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 -

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.

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.

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.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Nokia Oyj can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate Nokia Oyj prominent markets.

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.

Regulatory challenges

– Nokia Oyj needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Communications Equipment industry regulations.

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.

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.

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.

High dependence on third party suppliers

– Nokia Oyj high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.

Shortening product life cycle

– it is one of the major threat that Nokia Oyj is facing in Communications Equipment sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

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.

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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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