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 commodity prices, geopolitical disruptions, there is backlash against globalization, supply chains are disrupted by pandemic , increasing inequality as vast percentage of new income is going to the top 1%, wage bills are increasing, increasing government debt because of Covid-19 spendings, there is increasing trade war between United States & China, banking and financial system is disrupted by Bitcoin and other crypto currencies, 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 -

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.

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.

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.

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.

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.

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.

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.

Organizational Resilience of Nokia Oyj

– The covid-19 pandemic has put organizational resilience at the centre of everthing Nokia Oyj does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

Innovation driven organization

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

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 -

Products dominated business model

– Even though Nokia Oyj has some of the most successful models in the Communications Equipment industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Nokia Oyj should strive to include more intangible value offerings along with its core products and services.

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.

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 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.

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.

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.

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.

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.

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 strategic competitive environment developments

– As Nokia Oyj is one of the leading players in the Communications Equipment industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Communications Equipment industry in last five years.

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.

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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 -

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.

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.

Identify volunteer opportunities

– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Nokia Oyj can explore opportunities that can attract volunteers and are consistent with its mission and vision.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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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 -

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

Consumer confidence and its impact on Nokia Oyj demand

– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in Communications Equipment industry and other sectors.

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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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