Nokia's Strategy in India

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Case Details:

Case Code : BSTR174
Case Length : 19 Pages
Period : 1998-2005
Organization : Nokia India
Pub Date : 2005
Teaching Note : Available
Countries : India
Industry : Telecom

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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“The Indian market is growing rapidly and the mobile penetration rate is still low. It's got great potential.”¹

- Song Sauk-hun, Analyst at Gartner Inc. in 2004.²

“We see a great potential for the continued growth of mobile telephony in India where mobile penetration is relatively low. As the leading brand in mobile communications in India, Nokia will continue to deliver products which cater to the needs and preferences of Indian consumers.”³

- Robert Andersson, Senior Vice-president, Nokia Mobile Phones Asia Pacific, in 2003.

Nokia - Made in India

In April 2005, Nokia India, a subsidiary of Finland-based Nokia, announced that it was setting up a manufacturing facility for mobile devices in Chennai, the state capital of Tamil Nadu in southern India. Nokia planned to invest US$ 100-150 million in the facility, where the production was expected to begin in the first half of 2006.

Pekka Ala-Pietilä, President and Head of Customer & Market Operations, Nokia Corporation said, “Establishing a new factory in India is an important step in the continuous development of our global manufacturing network.”⁴ India was ideal for Nokia's new production facility. Each mobile handset has more than 400 parts and the average production capacity of each manufacturing unit of Nokia is around 20 million units.

This level of manufacturing involves a total of 8 billion components per annum, requiring strong logistical support. Nokia's manufacturing facility needed to be located close to a major international airport or sea port for quick supply of components. India met all these requirements, and also enjoyed cheap manpower costs and proximity to the rapidly growing Asia Pacific markets.

Besides, Nokia was the market leader in mobile communication devices in India. The company has been carrying out sales & marketing, customer care and research & development activities in the country. Nokia considers India to be one of its most important markets. The company's Code Division Multiple Access (CDMA)⁵ facility is located in Mumbai and provides software and technical support to CDMA consumers in India and other Asia Pacific countries. In 2004, Nokia was chosen as ‘the most respected consumer durables company'by Businessworld⁶. The magazine wrote, “This Finnish company's debut at the top of the heap says two things.

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1] “Samsung, LG Dig Deep in India's Mobile Gold Rush,” www.dailynews.muzi.com, November 25, 2004.

2] Gartner Inc. is a leading provider of research and analysis on the global information technology industry. It serves more than 10,000 clients.

3] “Nokia Supplies CDMA 2000 1X Handsets to Reliance,” www.convergenceplus.com, July 22, 2003.

4] “Nokia Selects Chennai for Manufacturing Mobile Devices in India,” www.nokia.com, April 06, 2005.

5] A method for sending multiple signals on a single frequency by assigning each signal a unique code and combining several signals into a single, complex signal that is spread across the entire channel during transmission (www.utstar.com).

6] In December 2004, Businessworld was the largest selling business magazine in India.