CONFIDENTIALMobile Handset Competitor Analysis: NokiaSAMSUNG ELECTRONICS CHINA (SEC China)August 20, 2001This report is solely for the use of client personnel. No part of it may be circulated, quoted, or reproduced for distribution outside the client organization without prior written approval from McKinsey it is not a complete record of the discussion.OVERVIEW OF COMPETITOR ANALYSIS FRAMEWORK1. Background information Location Registered capital Management team Equity structureStarting year Number of employees Era analysis4. Value chain strategy5. Organization and ownership6. Financial performanceFocus on Marketing, advertising and promotion Distribution (channel and sales force)Organization structure Ownership structureSales Profit 2. Strategy 3. Product/market Mission Vision Corporate strategy Market positionKey product offerings Key customers Value proposition Geographic focus Pricing2KEY ISSUES TO PROBE - NOKIAStrategyProduct/marketValue chain strategyOrganization HOWEVER IT HAS GROWN RAPIDLY TO BECOME A MARKET LEADER IN MOBILE COMMUNICATIONBackgroundImplicationLocationBased at Finland, with offices in China, e.g. Beijing China is Nokias strategic location because it is Nokias second largest market, second only to USInvestmentInvested more than USD1.7 billion in China BusinessTwo main business units: Nokia network and Nokia mobileStartingFirst office in China in 1985, first JV in China in 1994Employees60,000 staff in 130 countries More than 20 offices in China, 7 JVs, 1 WOFE and 1 R however Nokia is relatively weak in the fourth-tier citiesKEY MESSAGES - PRODUCT/MARKET12MOBILE HANDSET IS NOKIAs BIGGEST PRODUCT OFFERING AND ITS ESSENTIAL PART OF TOTAL SOLUTIONS IN MOBILE COMMUNICATIONNokia mobile handsetsNokia product offeringsNokia networkProductsNow and future Nokia 3310 for young people Nokia 8210 for fashion chaser Nokia 6210 WAP for business professional Nokia 7110 WAP with full Chinese interface Nokia 9210 as personnel communicator Nokia 8310, 6310 for GPRS and WAPMobile network Broadband network IP networkLargest mobile handset supplier in the world with above average growth in sales and more than 30% global market share Views mobile handset as a digital convergence point for multimedia services Supports blue tooth between mobile handset and PC in Nokia 6310 for mobile professional Develop WCDMA handsets with DoCoMo Develops homenet products such as multimedia terminals in Nokia ZhongxinProvides multimedia service network solutions for operators and ISP entering the mobile communication fields Nokia network covers many cities and areas in China including Beijing, Shanghai, Hong Kong and Taiwan etc. Aims to be a total solution provider for mobile communication13NOKIA EMPHASIZES ON CONSUMER-ORIENTED DESIGNS AND FUNCTIONSFashion BusinessBasicFunChangeable cover Sub-100gVoice-dial Recording Vibration Tri-band WAP Built-in modem IR-portChinese input Li-Ion battery SMS messagingGames Composable/ downloadableringer tone82106210P7689L2000V998+L2000WWWFashionClassicPrice in China (RMB)26522878236918001435*1452 Equivalent features, Nokia more fun/fashion vs. Motorola more functionsMotorola offers lower price models with similar features, tri -band and WAP *Nov. 2000 priceKey Differences14WITHIN CHINA, NOKIAs FASHION PHONES PERFORM BETTER IN SOUTH CHINA AND LARGE CITIESNorth region East region South regionChina averageBeijingShanghaiShenzhenGuangzhouMarket sharePercent, 2000 Source: McKinsey Analysis15Tier 1Tier 2Tier 3Tier 4NokiaMotorolaOthersNOKIA IS RELATIVELY WEAK IN THE IMPORTANT 4TH TIER CITY MARKET Percent market share, 2000EricssonSiemens18%19%23%40%Tier size as % of total100%=Million units6.77.08.514.8Source: McKinsey Analysis16Source:Retail Audit, McKinsey analysisAND THIS WEAKNESS IN 4TH TIER CITIES SPANS MOST PROVINCES Inner Mongolia Hunan YunnanAnhuiGuangdongFujian Zhejiang Heijongjiang JilinHenanJiangxi HebeiShanxiLiaoning SichuanShandong Jiangsu ShanxiHubeiGansuGuizhouPercent market share, NokiaMarket share PercentProvinceTier 1/2/3 cityTier 4 city17VALUE CHAIN STRATEGY1. Background information Location Registered capital Management team Equity structureStarting year Number of employees Era analysis4. Value chain strategy5. Organization and ownership 6. Financial performanceFocus on Marketing, advertising and promotion Distribution (channel and sales force)Organization structure Ownership structureSales Profit 2. Strategy 3. Product/market Mission Vision Corporate strategy Market positionKey product offerings Key customers Value proposition Geographic focus Pricing18Nokia is not regarded as a technology leader, as compared with Motorola; however, it spends a great amount of effort in understanding customer requirements and tailors its product to meet these requirements.Nokia employs P