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

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Nokia Oyj (Germany)

Based on various researches at Oak Spring University , Nokia Oyj is operating in a macro-environment that has been destablized by – increasing transportation and logistics costs, digital marketing is dominated by two big players Facebook and Google, challanges to central banks by blockchain based private currencies, supply chains are disrupted by pandemic , wage bills are increasing, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing household debt because of falling income levels, increasing commodity prices, geopolitical disruptions, 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 Germany
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 -

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.

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.

Ability to lead change in Communications Equipment

– Nokia Oyj is one of the leading players in the Communications Equipment industry in Germany. Over the years it has not only transformed the business landscape in the Communications Equipment industry in Germany but also across the existing markets. The ability to lead change has enabled Nokia Oyj in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

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.

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.

Analytics focus

– Nokia Oyj is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the Communications Equipment industry. The technology infrastructure of Germany is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.

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.

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.

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.

Innovation driven organization

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

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.

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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.

Need for greater diversity

– Nokia Oyj has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.

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.

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.

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.

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.

Lack of clear differentiation of Nokia Oyj products

– To increase the profitability and margins on the products, Nokia Oyj needs to provide more differentiated products than what it is currently offering in the marketplace.

Low market penetration in new markets

– Outside its home market of Germany, Nokia Oyj needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

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.

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.

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.

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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 -

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.

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Communications Equipment industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Nokia Oyj can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Nokia Oyj can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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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 -

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.

Backlash against dominant players

– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Nokia Oyj business can come under increasing regulations regarding data privacy, data security, etc.

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.

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.

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.

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.

Easy access to finance

– Easy access to finance in Communications Equipment industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Nokia Oyj can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

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.

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.

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.

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.

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.

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.

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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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