Abstract

The case discusses the operations of Finland-based telecom major, Nokia, in China. Nokia entered China in the 1990s, and initially supplied network equipment to Chinese manufacturers. Nokia entered into joint ventures with local companies, which helped it understand the local market better. By the end of the 1990s, China emerged as Nokia’s second largest market after the USA, but Motorola continued to be the market leader in China. By the early 2000s, the Chinese companies were making inroads into the market, and Nokia’s sales dropped drastically. The main reasons for the reduction in sales were the limited range of handsets, and absence of clamshell models from Nokia, and limited distribution facilities, due to which the phones did not reach the rural areas where the demand was growing. Nokia was quick to react, and revamped its product, distribution, and promotional strategies. It introduced several new products specific to the Chinese market, which included models with predictive text input in Chinese, lunar calendar, handsets using a stylus to write Chinese, English dictionary, China specific wallpapers, phones with multiple address books, etc. The changes brought out in the distribution system included decentralizing the distribution operations, increasing the number of regional distributors, hiring third party representatives, opening sales offices all across the country, and direct distribution of products to retail outlets. Several China-specific promotional campaigns were also launched. Nokia also made several investments in technology in the country. All these efforts had a positive impact on Nokia’s fortunes in China and by 2005 it had emerged as the leading handset manufacturer in the country. China also emerged as Nokia’s largest market by the end of the year. Nokia’s strong run continued in the country, and it sold over 70 million handsets in China in 2007. By the end of 2008, though Nokia was doing well in the market, it also faced challenges in the form of new competitors like Tianyu and the changes being brought about in the Chinese telecom sector.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• Analyze how Nokia became a market leader in the Chinese mobile handset market
• Study and analyze Nokia’s operational strategies in China
• Gain insights into changes that Nokia brought in its strategy to capture the market, particularly with respect to its distribution and product design
• and Examine the challenges faced by Nokia in China and explore strategies that the company can adopt.

Keywords

Operations management, International Operations, Globalization, Business environment, Distribution, Production, Product design, Promotional strategies, Joint ventures, Provincial distributors, TD-SCDMA, NCool, Nokia, China