Nokia with a new approach
By AZAM on March 1, 2008Nokia is taking a new approach to the mobile phone which is experiencing declining average selling price per handset. Nokia has been aggressively pursuing sales in emerging markets such as India and China resulting in lower cost handset for affordable entry level
phones for users. Nokia has been able to maintain leading market share although experiences lower margins per handset. Recently, Nokia has been acquiring companies and aim to provide services to boost revenues and margins as the landscape gets competitive and maintain an edge in as the mobile industry transforms.
The Mobile Market
Nokia Corp. said it expects the global market for mobile devices to grow 10 percent in 2008, to more than 1.2 billion units, and that its market share would increase. Also, Nokia predicts the worldwide market for Internet services would reach $145 billion by 2010. Nokia predicted there will be 4 billion mobile subscribers worldwide by 2009, moving up previous expectations that that level would not be reached before 2010.
Nokia reported in Oct results that its global market share had grown to 39 percent, from 36 percent in the third quarter of 2006, and Nokia intends to reach the goal to reach 40 percent.
Nokia expects the highest growth in the global mobile market next year 2009 of more than 15 percent will be in the Asia-Pacific region, China, Middle East, and Africa. Nokia expects slower growth of less than 10 percent will be in North America, Europe and Latin America.
Nokia has focused on the emerging markets which are experiencing fast growth with rapid deployment of network and pent up demand from new subscribers with first entry level device. Nokia estimate that the entry level market is growing 2x as fast as the overall market and has been successful in addressing the market. Nokia has captured 50%
entry level device in the Q3 of 2007. Nokia believe the entry market is critical to its success and achieves profitability through scale of operations and presents further opportunity for future replacement of devices.
Nokia has also been able to address every category through is wide array of devices for almost every category imaginable. Nokia caters to every segment in the market it serves and therefore remains competitive to other brands and their offerings. As result, Nokia has been successful in gaining the lead in market share and been able to retain through replacements and upgrades of devices from consumers.
Emerging Markets
India
India currently has 215M mobile subscribers and is growing by adding more than 7M monthly. According to estimate, Nokia commands 70 % of market share in India. India mobile phones sales are estimated between 7.5M to 8M units a month. Nokia also stands to benefit from replacement of handset and has launched 40 different models to choose
form. India represents the number 2 market for Nokia in terms of revenues.
China
China has 435M phone subscribers and is Nokia Number 1 maket. Nokia handset sales in China have grown by more than a third this year as the world’s largest mobile phone manufacturer increases its lead in the biggest wireless telecoms market by number of subscribers.
Nokia is gaining share from local vendors that dominated the market with 50 % market share Nokia sold more than 50m handsets in the first three quarters of 2007, up 39 per cent compared with the same period of last year, according to David Tang, Nokia vice-president for China sales and reached a total of 135M consumers in China
Nokia accounted for 35 per cent of the Chinese handset market by units in the third quarter, far ahead of Motorola’s 14 per cent, according to Analysys International, the Beijing-based technology research firm. Nokia has sold out of the high end N95 in China and have long waiting list for the phone.
Higher-end handsets will play a central role for Nokia’s new strategy of directly offering wireless internet services. Mr Tang said a company survey had found 15 per cent of Chinese mobile phone users already gained access to the internet through their handsets every day.
“Millions and millions of mobile users are having their first web experience through mobile phones and we believe we are in a very, very unique position to take advantage … and really help them experience the world of the internet,” Mr Tang added.
Smart Phones
A niche only a few years ago, expensive “smartphones” will account for more than a 10th of the global market this year by volume, and growth is rapid: Nokia expects the smart phone unit sales to increase by 40M to reach 180m to be sold next year, from 50m in 2005, 105m in 2006, and 140M in 2007.
The Competition
Nokia is facing competition from newer entrants in the industry and pressure on the higher end particularly from RIM and Apple. RIM has dominated the enterprise market with its push email and serving clients email servers. Apple recent launch of the iPhone has been quite successful with consumers and likely gain further traction.
BlackBerry
RIM added 1.65 M BlackBerry subscribers in Q4 quarter, raising the total to 12 million, and forecast an additional 1.8 million new subscribers in the next quarter. It shipped 3.9 million handsets, up from 3.1 million units in the prior quarter.
RIM has been successful in their consumer push of blackberry devices and now 34% of BlackBerry users are now in the consumer market. RIM is also succeeding in the overseas spreading the Blackberry brand in new markets such as Russia, India, and China. RIM overseas subscription account for 33% of the total subscribers outside of North America.
Apple iPhone
The widely successful launch of the iPhone has caught the attention of consumers and competitors. The US has been traditionally lagged behind in the adoption of wireless technologies. Apple has renewed the interest in mobile device and wireless service with the phones internet functionality with easier to use browser and screen.
Apple earlier announced the sales reaching 1M units, and recent estimates are pegged at 5M on the way to goal of 10m in 2008. Apple has changed the approach of the mobile phone industry with a different business model sharing subscription fees with carriers and the shifting more revenue into mobile service such as music and content. Apple is becoming a major player in the wireless industry, and the industry expects more to come ahead from Apple. Apple is expected to come up with a newer version of the iPhone wit 3G capabilities and added features.
“The iPhone has been a wake-up call for everyone in the mobile-phone business that the user experience needs to be better,” said Ben Wood, an analyst at consulting company CCS Insight. However, with Nokia selling an average of one million cell phones every day, it has a massive advantage over Apple in terms of scale.
The Nokia New Internet Services Strategy
Nokia shifting strategy aims to answer the new challenges ahead from growing changes in consumer preferences and competitors offerings. Nokia dominates the mobile handset market with wide variety of devices for most segment and markets, and Nokia plans to move to address the growing mobile service industry.
“We are at the dawn of a new era in mobile communications driven by the rapid convergence of the Internet and mobility, and Nokia is setting the pace of change,” said CEO Olli-Pekka Kallasvuo. “We estimate that in 2010, the total Internet services market will be approximately 100 billion euros,” Kallasvuo added.
Nokia defines internet services in categories mentioned: games, music, TV/video, contacts, photo, and internet. Nokia has been aggressive in acquiring companies to build up their services offering. Nokia is moving away from being a pure device manufacture in hardware space and adding more software space with services to take advent the number of features in multimedia and convergence technologies
Comes with Music
OVI
In addition, Nokia is preparing to launch the latest update to a new Internet services environment called Ovi, which means “door” in Finnish. “We started the Ovi services rollout with the individual services in navigation, music and games, and the next step is to
provide an integrated experience,” Vanjoki explained. “The complete Ovi environment and new services will be rolled out continuously throughout 2008.”
The Nokia plan centers on Ovi.com, which Nokia will market as a “personal dashboard” where users can share photos with friends, buy music and access other third-party services like Yahoo’s Flickr photo site, Facebook, etc .
Nokia unveiled a new “Comes With Music” program that will give buyers of Nokia’s next-generation music devices one year of unlimited access to Universal Music’s portfolio. “Even if you listened to music 24 hours a day, seven days a week, you would still only scratch the surface of the music that we’re making available,” said Anssi Vanjoki,
an executive vice president at Nokia.
Mapping out the new direction
Maps
Nokia made its largest acquisition with the purchase of Navetq for 8.1B. Nokia is making a strong bet on navigation and location based services.
GPS-enabled mobile phone shipments will increase from 109.6 million units in 2006 to 444 million units by 2011. By 2011, 29.6% of all mobile phones shipped will have GPS. As a comparison, only 11.1% of phones shipped in 2006 had GPS, according to a recent report by Isuppli.
Most consumers are preferring the larger screen sizes found on a (personal Navigation Device) PND or a dedicated device that tends to remain in the car which is being sold by leading brands as Garmin and TomTom . The PNDs companies are estimated to generate $6.7 billion in sales this year, up from $2.7 billion in 2005.
In the future, an increasing number and larger portion of cell phones will have GPS chips and maps preloaded, and cell phones will have additional features and services available. Nokia will be great position to benefit from the recent acquisition and the further
development of location base services.
Also, There will be convergence services based on locations based services such as search and advertising based on gps technology. The mobile access to the internet will become increasingly more important for the handset, and search and related location based technologies will play increasing role in the internet service offering. Most
people always have the phone by their side and will likely prefer haveing services deliver via their cell phone.
Other areas of the strategy can be seen with development through the recent acquisitions in the field of interest.
Nokia Recent Acquisitions
Communications & Productivity
Avvenu remote access and communications
Intelli sync EMAIL & Device Management
Media
Twango Media Sharing
Loudeye Digital Music Platform
N Gage Mobile Gaming
Advertising
Enpocket Mobile Advertising
Navigation/Mapping & Location Based Service
Gate5 Navigation & Mapping
Navteq Location Based service
Tags : advertising, apple, blackberry, China, gate5, India, iPhone, mapping, mobile, Navteq, nokia, OVI