Nokia’s Porters 5 Forces Essay

BUYER’S POWER: – Nokia had been edged out by rivals in the smartphone market who launched new and better products which resulted to Customers shifting to android phones which resulted to Nokia reducing their selling price in order to increase the rate of sales but they lost in the rate of profitability and consumer loyalty. The customer power is high; nokia is focusing on the smartphone segment because it has the biggest margin in the industry, the consumers are increasing despite the high rate of recession, product and price differentiation is getting lower which is resulting in the difficulty of buyers making a decision about the particular phone they will want to buy.

Most consumers get phones on contract and switching from one phone to another is difficult and expensive and with other brands leading in the smartphone industry, it will be difficult for consumers to switch from Samsung or iPhone to Nokia. Most of the other brands own distribution stores while nokia doesn’t really have enough distribution channels, making it difficult for buyers to reach their product easily in some countries.

COMPETITIVE RIVALRY: – Competitors were quickly catching up with Nokia’s Symbian platform. As the Symbian OS was not optimized for touchscreen devices, users were turning to the Android, Blackberry OS, and Apple’s iOS. Nokia struggled to keep pace with rivals such as Apple, Samsung, Google, and RIM in the high-end smartphone market. Nokia is not only competing with high-end manufacturers but also low end manufacturer. brand recognition is an essential factor for success in the industry, nokia’s brand name has suffered a great deal. The level of differentiation in price and product is low, making it difficult and unnecessary for customers to switch from brands, which can also create problems for new brands entering the industry to gain the attention of consumers in the smartphone industry.

The smartphones sales are providing profits for the brands, and wholesalers are focusing on brands that have the highest market shares in the industry (where nokia is lagging behind).consumers find it hard to switch from their existing handset producer to another when they are on a contract because it is difficult and expensive to change so they wait till when the contracts expires. The fact that nokia was not only slow in launching smartphones with the latest version of its Symbian operating system, development of new software services and hardware designs, but also in catching up with the touch screen technology left an open space in the industry for new brand players into the industry. It failed to gain the presence, brand recognition and customer loyalty in the USA as the consumers are known to have a strong impact in the global smartphone industry.

THREAT OF SUBSTITUTION: – The adoption of Android was growing fast and became the latest trend in the smartphone industry. The sleek touch screen look with numerous applications to go with it made the irresistible for consumers even though it wasn’t price friendly. Smartphones have become a daily necessity in our daily lifestyle so it is most unlikely for consumers to switch to a substitute products resulting to the low rate of substitution.

The ability to communicate with people and do several things at the same time will always make smartphones unique. Consumers tend to do different things on different products(for contacting people, usage of social media, emails and VOIP systems are substitutes, digital cameras for photography, TV/radio/iPod for listening music, tablets for internet browsing, reading books, emailing etc.) All these other values from substitute products can be found in a smartphone that is relatively cheaper compared to the substitute products and can be carried around with ease. Nokia had been the market leader in the mobile phone market since 1998 but in 2004, Younger buyers opted for trendier mobile phones offered by rivals such as Motorola, Samsung, and Sony Ericson.

THREAT OF NEW ENTRY: – the smartphone industry is difficult to penetrate because patents and proprietary is required so as to not get involved in legal battles over patent issues. Brand recognition is important for success and it will take a while for new players to build up their brand name. it will difficult for new players to get a share in the profitability of the market share In the industry as the few major players already account for most of the market share. The capital involved in the industry is very high owing to the funds that will be invested in areas of production, R&D, marketing budget and distribution channel in order to get to consumers. The distribution channel in the industry is very complex, without the right distribution channel, consumers can’t get access to the products.

SUPPLIER’S POWER: – Nokia doesn’t depend on suppliers leading to the moderate rate of suppliers’ power in the industry.


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