Slide 1: It’s tough being #1 Jill Alvidrez, MBA Peimin Chi, EECS Nipul Chokshi, MBA Sarang Dalal, BioE Steve Sinha, EECS Rahul Shah, EECS Nancy Suh, MBA
Slide 2: It’s Tough Being #1   No, really, it is! Overview of US Handset market  Value Chain & Market Characteristics   Outlook & Key Decisions Recommendations  Opportunities/Risks 10/3/01 Marketing for High-Tech Entrepreneurs 2
Slide 3: Handset Market Value Chain Component Vendors Motorola Phillips Texas Instr. Qualcomm Cypress RF Microdevices Others Handset Makers Nokia Motorola Ericsson Siemens Samsung Others Service Providers Consumers AT&T Wireless Sprint PCS Cingular Verizon Wireless Voicestream Others Consumers don’t buy directly from Nokia Marketing for High-Tech Entrepreneurs 3 10/3/01
Slide 4: Handset Sales Volume (in mil) 500 474 450 410 400 350 280 300 250 200 167 150 106 100 50 0 1997 1999 2001E Merrill Lynch Research, April 2001 10/3/01 90 80 70 60 50 52 34 23 72 87 World 40 30 20 10 0 1997 US 1999 2001E 4 Marketing for High-Tech Entrepreneurs
Slide 5: Nokia US Market Share Motorola Mitsubishi Other Ericsson Nokia Only 2.9% of CDMA market Denso Sanyo Nokia Others Samsung 64.4% of GSM/TDMA market Source: Info-tech Trends 10/3/01 LGIC Motorola Marketing for High-Tech Entrepreneurs Kyocera Audiovox 5
Slide 6: Key marketing strategy  Respond to consumers’ preferences   Lindholm team: engineers, graphic designers, psychologists, sociologists, and a theater director to study human behavior Well-designed, high-quality, technologically advanced… all in a user-friendly package   Year 1992: CEO sheds chunks of Nokia business to focus on mobile telecommunications Pricing Strategy   Lower price on most popular models Avoid price wars 10/3/01 Marketing for High-Tech Entrepreneurs 6
Slide 7: Nokia’s Outlook: Two Extremes WORST  End of growth phase  Mobile data services  difficult intro continues  No emergence of single standard  Commoditization of handset BEST  Voice traffic will cont. to be robust  GPRS “always on” will be key enabler and driver of data-driven services  Maintain cost leadership  Sustain brand equity (e.g., Nike, Intel) 10/3/01 Marketing for High-Tech Entrepreneurs 7
Slide 8: Key Decisions Facing Nokia      Push and pull marketing First-time and replacement markets Consumers and businesses (TBD) Voice and data markets CDMA and GSM/TDMA markets 10/3/01 Marketing for High-Tech Entrepreneurs 8
Slide 9: Resist Commoditization by Push and Pull Marketing PUSH Nokia Service Provider Employer Customer Retailer PULL 10/3/01 Marketing for High-Tech Entrepreneurs 9
Slide 10: Global: New vs. Replacement Phones 500 450 Phones in Millions 400 350 300 250 200 150 100 50 0 1997 1998 1999 2000 2001E 32% 68% 61% 39% 61% 39% 59% 41% 52% Replacement New 48% Source: Merrill Lynch April 2001 10/3/01 Marketing for High-Tech Entrepreneurs 10
Slide 11: Focus on Replacement Market  Replacement market increasingly important   Penetration rate grows Replacement cycle is shortening  Replacement determined not only by demand but also by supply   Reasons to trade-in: size and battery life People are more savvy, they want more features and accessories 10/3/01 Marketing for High-Tech Entrepreneurs 11
Slide 12: Risk Factors   Economic slowdown Slowing subscriber growth Replacement market weaker than anticipated  Still mostly driven by voice; data services not rich/easy enough to use yet to encourage replacement buys  Average holding time  Globally just under 2 years (Merrill Lynch 2001) 10/3/01 Marketing for High-Tech Entrepreneurs 12
Slide 13: Data-driven Services: Opportunities to partner with Content Providers     Demonstrate value of a “feature-rich” handset Partner with AOL/Amazon/Yahoo/MSN to deliver their content over NOK handsets Note that SPs have to agree to the scheme to allow users access to content Probably the “long-shot” opportunity Marketing for High-Tech Entrepreneurs 13 10/3/01
Slide 14: Long-term: Focus on CDMA market in US  CDMA represents another growth opportunity  MOT lost market share to NOK b/c they were slow on converting from analog to digital Current market leader is Samsung (21.7%) Nokia’s share is 2.9%  Establish market share leadership in CDMA sales    Aggressively pursue partnerships with CDMA service providers –   Sprint PCS Verizon Wireless Marketing for High-Tech Entrepreneurs 14 10/3/01
Slide 15: Conclusion  Resist commoditization!    Continue building brand Understanding customer needs Forging industry alliances Replacement market Data-driven  Bring new products to market    Long-term: Shift technology from TDMA  CDMA Marketing for High-Tech Entrepreneurs 15 10/3/01
Slide 16: Appendix 10/3/01 Marketing for High-Tech Entrepreneurs 16
Slide 17: US Market Penetration 50 45 40 35 30 25 20 15 10 5 0 48 40 31 25 20 Percent 1997 1998 1999 2000 2001E Source: Merrill Lynch, April 2001 10/3/01 Marketing for High-Tech Entrepreneurs 17
Slide 18: Competition Hurting in general, Emphasizing especially handsets Internet/WAP Key chip supplier to Partnership w/Sony industry    Secure phones Partnership w/ Toshiba  Partnerships attempt to overtake Nokia in 3G race All competitors have weaker TDMA sales than Nokia 10/3/01 Marketing for High-Tech Entrepreneurs 18
Slide 19: Nokia’s Road to market leadership 1989 1990 1992 1995 1998 2000 Industry benchmarks Alahuhta begins branding 1st GSM on a Nokia CEO sheds non-mobile phone/network business units Ring, covers, elliptical edge designs Nokia becomes market leader Segmentation by product lines 10/3/01 Marketing for High-Tech Entrepreneurs 19
Slide 20: Nokia’s Current Strategy: Technology & Design  Year 1990: Industry Benchmarks  Nokia 2110 ~ Large screen, clean design, easy UI Product Design with a Competitive Edge    Year 1995: Frank Nuovo, Chief Designer  Customizable rings and covers Elliptical Designs  Year 2000: Effective Segmentation     Nokia 6250 ~ Rugged & durable Nokia 8890 ~ Sophisticated metal case Nokia 3300 ~ Colorful models Watching customers in action, in traffic, at work, etc. Marketing for High-Tech Entrepreneurs 20 10/3/01
Slide 21: Nokia’s Current Strategy: The importance of the brand “Is the handset industry following in the footsteps of the PC industry?” Nokia argues no. “We’re selling branded consumer goods, not a [commodity].” 10/3/01 Marketing for High-Tech Entrepreneurs 21
Slide 22: Nokia’s Current Strategy: Brand – Connecting People   5th most valuable brand Value Proposition  Cutting edge communications technology designed around individual human needs Positioned as fashion accessory “young, sexy, sophisticated, hip and generally ‘with it’.” Ericsson is an “austere, conservative, middle-aged Swedish engineer”. Marketing for High-Tech Entrepreneurs 22  Differentiation   Personification of the brand   10/3/01
Slide 23: Nokia’s Current Strategy: Tactics  Aggressive advertising and promotions    Cut through clutter with exclusive sponsorships Brand the ring High profile events Customer “care and feeding” Focus on youth and education  Club Nokia   Classlink Programs  10/3/01 Marketing for High-Tech Entrepreneurs 23
Slide 24: Nokia Leverages competitors’ failures  Motorola   Analog lost to Nokia’s early digital phones Late to leverage partnerships with service providers Weak branding price wars Widely regarded as unfashionable (…but has recently partnered with Sony, whose brand is associated with strong design) Contract manufacturing to Flextronics, Singapore  Ericsson    10/3/01 Marketing for High-Tech Entrepreneurs 24