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Finland and Nokia: Creating the World’s Most Competitive Economy

Finland and Nokia: Creating the World’s Most Competitive Economy. Team 8 Martina Martina, Adrien Monvoisin, Ronen Eckhouse. Summary of Situation in 2001: Finland. Finland is still a leading competitive nation GDP growth is declining Increased unemployment among the low skilled labors

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Finland and Nokia: Creating the World’s Most Competitive Economy

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  1. Finland and Nokia: Creating the World’s Most Competitive Economy Team 8 Martina Martina, Adrien Monvoisin, Ronen Eckhouse

  2. Summary of Situation in 2001: Finland • Finland is still a leading competitive nation • GDP growth is declining • Increased unemployment among the low skilled labors • Telecommunications cluster accounts for 6.9% of GDP • Shortage of skilled Finnish workers • Finland is the first to grant licenses to all 3G systems • National Tech. Agency facilitates the emerging digital media industry • The Finnish Venture Capital Association has been formed • First Nordic country introducing the Euro

  3. Summary of Situation in 2001: Nokia • Nokia was the leader of the Telecom industry • Market share: handsets 31%, Infrastructure 10% • Motorola lost mobile phone leadership to Nokia • Market share: handsets 15%, Infrastructure 13% • Severe downturn in the Telecom. • Slow/Delayed transition to 3G system • Nokia stock fell 38% during 2001 (MOT fell 30%) • Revenue grew by 9% in 2001 (compared to 43% in 2000) • Shortage of skilled Finnish workers • Nokia foreign employment grew 4 times faster than Finnish employment • Finnish suppliers produce highly customized inputs

  4. Porter’s Diamond: Finland/Nokia • Factor Conditions • One of the world’s most homogenous, united and stable societies • National competitive strategy • Tradition of innovative engineering and telecom industry • Sophisticated education and university system • Related and supportive industries • Local supply for highly customized inputs • Telecom cluster with more than 4,000 specialized firms • Highest public R&D spending in Europe • Many R&D centers of global companies • Venture capital forum • Tekes facilitates stake holders in the emerging digital media industry

  5. Porter’s Diamond: Finland/Nokia • Demand Conditions • NMT created the world’s largest single mobile market • First to have severe competition • Finland is a member of the European common market since 1995 • A market of early adopters with very high standards • Mobile phone is a “national symbol” • Finland amongst the world leaders in mobile penetration • Firm Strategy, Structure and Rivalry • Finnish telephone network is never monopolized by state • Traditionally, operators engage actively with equipment manufactures • A national industrial message for national competitiveness • Open market • No restrictions for foreign ownership • Serve distinct customer needs with out constraints on standards

  6. Porter’s Diamond: Finland/Nokia • Government • Very stable (6 year terms) with a long-term view • Initiatives to improve national innovative capacity • Assurance of technological neutrality • Open socialist economy • A policy of minimum interference • What else should the government do? • Remove centralized wage settings mechanisms • Encourage young and low-skilled to join the work force • Encourage more global firms to open R&D centers in Finland

  7. Economic Transformation in Finland • Early 1990s Crisis • Berlin wall fell -> dried up Finnish exports overnight • Severe economic crisis (GDP fell, high unemployment) • Finland was forced to float its currency • Mid 1990s turn-around • Lowered taxes • Government expenditures cut-back • High interest rates • Devoted resources to R&D, competitiveness and innovations • Expanded the capacity of higher education • Liberalized and opened local markets • The emergence of Finland as a telecom powerhouse • Traditional expertise (army) and traditionally not monopolized • NMT and the Nordic Region (Finland was always too small a market) • Finnish characters • Telecommunication cluster

  8. Cluster Program • Historically: pulp/paper, wood, engineering metal • Cluster goal: Strengthen Finnish competitiveness • World-wide competitive advantage through private-public partnerships • 83,000 employees, >4,000 firms, 6.9% of GDP • Operators, content providers and equipment manufacturers • Equity capital: new important source of funding • R&D focused on technology and telecommunications

  9. Nokia’s worldwide leadership • International operations in various field • Worldwide joint ventures • Highly skilled work-force • Nordic identity through the “Nokia way” • Low production cost and short product development cycle • Broad market: serves distinct customer segments with different needs • Focus on R&D (15 countries, 9% of its revenue) • Nokia is always ahead of its competitors (design, internet, software, …)

  10. Nokia Current Business • Handset is major driver with majority business comes from Europe & Asia Pacific • Nokia revenue stream: • Nokia market distribution is shown below The fastest growing regions (Q2 07) are Asia Pacific & Middle East/ Africa followed by Europe & China.

  11. Nokia vs. Motorola Overall, Nokia has grown faster and is positioned to grow faster than Motorola thanks to its broad portfolio and strong global presence especially in emerging countries

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