Nokia Case Study

In: Business and Management

Submitted By Stephanie7815
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1. Trends within the handset industry with companies such as Nokia, produce low-cost cellphones which reduce the average selling price of these handsets. The case states, “ international mobile phone prices fell 35% in recent years. In the price conscious emerging markets, the basic phones were sold below $50 and there was a growing market for $25, and even $10.” Nokia captured this trend of low cost mobile phones that are cheap and disposable for consumers. The demand for low cost manufacturing has become a necessity for Nokia to survey in this thriving market. They had tremendous pressure from costs that lead to weak profitability and other companies consolidating. This introduces the second trend within the mobile handset industry to move production to Central and Eastern Europe because their labor cost were lower. This allows Nokia to sell the mobile handsets for a lower price. Nokia’s strategy is to shift production to low cost locations because their high productivity and simple taxes. They wanted to set new standards for wages, training, workplace safety, and technology transfer that was valued within society.

2. Dependent upon Nokia's image and cultural beliefs, the backlash in Germany was justifiable. Nokia was praised for keeping their company within their own country whereas other companies had offshore production. Bochum was profitable, and it was only beneficial for Nokia to close the plant to reduce the employee expense. They did not go public before their closure to prepare their workers that they will be potentially laid off. Nokia stated that announcing the closure is not their way of doing business. The plant in Bochum was very beneficial to their economy because their unemployment rate was 10.5%, which is higher than Germany’s national average. Nokia was this area’s main source of income. Pulling out of this area was unethical on Nokia’s…...

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