CONFIDENTIALDiscussion documentDecember 2000Nokia Case Study: Winning in the U.S.FINGERPRINT NOKIA Rationale Focused on high growth categories (e.g., mobile phones, digital)Anticipated shift to digital technology in the U.S. before competitors and directed resources to optimize opportunity; tailors products to target customers (e.g., fashion covers for younger segment)Some difficulty to attracting top-tier local senior management due to glass ceiling (e.g., all senior leadership in Finnish0; Finnish managers used to manage U.S. operationsSucceeds in attracting top engineers because of attractive productsLocal managers have limited autonomy and accountability exists at the unit level, but head office retains final input Difficulty translating “The Nokia Way” to U.S. (“The culture doesnt have the same richness or value as it does in Europe”)Devotes sufficient resources to local organization to win in market (e.g., provided resources for U.S. to win in mobile phone segment)Outsources non-core technologies (e.g., microprocessors from Intel, components form Motorola) and uses standard components to save on R&D spend and react faster to changing technologies than its competitors; leverages partnerships for more efficient R&D (e.g., JV with Cisco, Geoworks, HP)N/ACreates broad distribution reach through numerous, innovative relationships with retailers and distributors (e.g., Sears, AT&T wireless services,Tandy)Develops and launches innovative marketing campaigns (e.g., first to target consumers rather than professionals)Successfully allies and acquires to gain capabilities (e.g., joint venture with Tandy for distribution, acquisition of Mobira to enter promising mobile phone area)HighLowEncourages sharing of best practices but has not been very successful at doing so to dateNOKIAKey facts Largest 1 -3 year revenues growth of competitorsLargest mobile phone manufacturer and second largest provider worldwide (behind Ericsson)Products Mobile phonesGSM/DSC networksCompetitorsEricssonMotorolaTimeline 18651990sDeveloped into conglomerate (flooring, TV, footwear, etc.) until refocusing on high growth mobile phone segment in late 1980s and 1990sDivests non-core businesses19951999AmericasROWEURRevenues$ BillionsStock appreciation (1998-99)NokiaS&PS&P cell and wireless indexCAGR %Capabilities First to use mass marketers as distributors (e.g., selling mobile phones in Radio Shack)Uses alliances for distribution channels (e.g., AT&T Wireless Services, Sears)Adopts consumer rather than professional focus in marketing, unlike competitorsUses alliances in R&D to grow development capabilities (HP, Cisco, Geoworks)Organization Autonomy provided to senior leadership in local subsidiariesTop management is all Finnish; obstacle to hiring top U.S. talentStrong emphasis on corporate values and culture with “The Nokia Way” teamwork, innovation, production; difficult to implement in U.S.Excellent opportunities for advancement-fast career tracks, early responsibility, rotation programsHierarchy and bureaucracy reducedYoung, innovative, non-rigid leadership styleRated in Fortune top 100 firms to work for in the U.S. ProductGrew mobile phone segment from 16% of total sales in 1991 to 66% in 1999Allied to gain product expertise (e.g., Motorola to standardize technology, Cisco and HP to develop network products)Technology design innovator; first to market with many product innovations Tailored product to target key customers (e.g., phones with fashionable, changeable covers to attract young segment)BackgroundLevers for success19.86.2Founded as paper mill58% CAGREnters U.S. through Tandy JVGrows mobile business in U.S.19881983Acquires Mobira1981Operates as a conglomerate1960sCONTENTSCompany overviewU.S. market entry strategyProductsCapabilitiesOrganization NOKIA COMPANY BACKGROUNDFounded 1865, in Finland, as a pulp and paper millEntered U.S. in 1983, when cellular service was just launching in the U.S.Global employees 55,260; in U.S. 10,500CEO: Jorma Ollila (Finnish)Most senior managers for U.S.: Kari-Peleka Wilska, President of Americas Rich Geruson, Head of USA Sales and Marketing for Nokia Mobile PhonesKey divisions: Mobile Phones, Nokia Networks, Communications ProductsMarket cap: $193.3 billion (as of October 27,2000)Key industry of focus: Mobile phones (65% of 1999 total sales)Number 1 mobile phone maker globallyNumber 2 GSM/DCS mobile phone networks provider globallyCompetitors: Motorola, Ericsson COMPANY EVOLUTION Source: International Directory of Company Histories1800sFounded 1865 in Finland as pulp and paper manufacturerConstructs own power plants as industry becomes energy intensive1960sMerges with Finnish Rubber Works and Finnish Cable Works in 1966 as part of diversification planBegins to design and manufacture data processing, industrial automation, and communications systemsNokia conglomerate consists of integrated cable operations, electronics, tires, and rubber footwearMakes first public share offering in 19661970sOil crisis in 1973 reduces reliance on exports (timber products and machinery) to Soviet Union (12% of sales)Kari Kairamo, appointed CEO in 1975, realizes that for Nokia to grow it has to expand abroad; expands Nokia in Scandinavia and EuropeSells switching systems under license from allocated (French)Helps design worlds first international cellular system in the 1970s1980sAcquires nearly 20 electronics companies over the decade and completes key mergersAcquires Mobira (Finnish mobile phone company) in 1981, to gain foothold in growing mobile phone segmentMerges Salora (largest TV manufacturer in Scandinavia) and Luxor (Swedish-state owned electronics and computer firm) in 1984Through the 80s, manufactures OEM equipment for Hitachi; Ericsson, Northern Telecom, Granada, IBM Enters U.S., in 1983 through JV with Tandy Corporation to sell Nokia phones under Tandy nameLaunches first product (mobile phones) marketed internationally under Nokia brand name in 1986Nokia has evolved substantially since its foundation, moving from a Finnish paper mill, to a diversified Finnish conglomerate to a global wireless leader.1990sAggressively grows mobile phone business in the U.S.Buys Tandys share of JV in 1993 to fully own factories in U.S. and South KoreaSigns significant contracts to increase distribution channels (e.g., AT&T Wireless Services)Conglomerate phaseExpands in Scandinavia and EuropeAcquires and allys into mobile phones and U.S.Allys to strengthen U.S. positionTimeHorizon 1Drive core growthHorizon 2Build momentum of emerging growth enginesHorizon 3Secure future optionsProfit“We are now benefiting from the visionary technological solutions we made years ago; the long-term success of our company requires constant agility in positioning ourselves in this dynamic industry.” Jorma Ollila, CEO“To identify what is required in the long term you need the competencies and the products; getting the right focus is the tough part.” Jorma Ollila, CEO“The CEO has to understand the dynamics of each business the company is in; in order to understand where the future lies.” Jorma Ollila, CEO Source: Annual reports; press clippingsLEADERSHIP COMMITMENT ACROSS THREE HORIZONSWhen planning Nokias future development, CEO Jorma Ollila distinguishes clearly between three waves. The first wave emphasizes the continuous exploitation of Nokias core businesses. The second wave requires the identification of capabilities and products that will have impact on Nokias success in the immediate future. Finally, the third wave determines the companys future direction through setting aspirations and placing options.PLANNING ACROSS THREE TIME HORIZONSProfitHorizon 1Horizon 2Horizon 3Drive core growthBuild momentum of emerging growth enginesSecure future optionsProducts Boost mobile phone sales through brand-building efforts Make product extensions such as “Swatch-like neon-colored mobile phones” Expand product range through new features and complementary accessories, such as phone covers or different battery sizes Create R&D alliances for product development in wireless data transmission and terminal technology Increase sales of fixed and cellular network to public telecom operators Win private telecom operators as new customers Launch first wireless products (e.g., Nokia 9000 Communicator, a portable with phone, fax, email, Internet access all in one)Markets Further penetrate Scandinavia, parts of Western Europe Improve positioning in Asia/Pacific, US, other EU-countries through stronger distribution network Prepare for full deregulation of telecom industry and entry into remaining marketsTimeHorizon 1Drive core growthHorizon 2Build momentum of emerging growth enginesHorizon 3Secure future optionsSource: McKinsey analysisSENIOR MANAGEMENT Source: Annual Report Spent 6 months in the U.S. in 1999 Spends 50% of his time in Silicon Valley * As of January 2000Source: Epsicom Business Intelligence NOKIA ORGANIZATIONAL STRUCTURE “I am influenced by the American way of managing companies; solving problems through organising and motivating people, rather than seeking a technical solution.” Jorma OllilaNokia GroupJorma Ollila, CEOHead office functionsCFOInternational Trade PolicyTechnologyResearch CenterGeneral CounselHuman ResourcesCommuni-cationsInternational Trade AffairsNokia NetworksNokia Mobile PhonesNokia Communications ProductsNokia Multimedia TerminalsNokia Industrial ElectronicsNokia VenturesNokia Research CenterNokia Internet CommunicationsNokia Ventures FundInternal Venturing UnitNokia Wireless Business CommunicationsNokia Wireless Software SolutionsNokia IP Application and Connectivity PlatformWorld telecom equipment indexS&P 500NokiaNOKIA STOCK PRICE COMPARISON$ Thousands Source: Data streamValue1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999Nokia clearly outperforms the market and its competition.Asia-PacificEurope19951996199719981999NOKIA SALES BY REGIONEuro MillionsNokias sales in North America have grown dramatically in the late 90s with a CAGR of 58 percent, while European contribution to sales has diminished steadily shrinking.North America6,1916,613 8,84913,32619,772CAGRPercent34372658 Source: Annual reports100% =ROWFinland(676)1991 100% = EURO 2,600ROW1999 100% = EURO 19,772Finland (395)Nokias sales in Finland have fallen dramatically as a percentage of total sales. Source: Annual reportsEuro MillionsNOKIAS FINLAND SALES COMPARED TO REST OF WORLDNOKIAS INDUSTRY FOCUS AND PRODUCT MIXEuro Millions Source: Annual reportsSales by productConsumer electronicsCables and machineryMobile productsTelecommuni-cations1991 100% = EURO 2,600Basic industriesNetwork solutionsMobile products1999 100% = EURO 19,772Home, multimedia, and otherNokias productsMobile products full range of digital and analog cellular phones, wide-area pagers, as well as accessories and components for mobile phonesNetwork solutions telecommunication systems and equipment for both fixed and mobile networks; principal products include digital exchanges, transmission systems, and cellular systems, which are sold to PTT, public utilities, new operators, and cable TV companiesHome, multimedia and other includes PC and workstation monitors, as well as interactive digital satellite and cable terminalsIn 1998, Nokia became the worlds largest manufacturer of mobile phones, selling 40.8 million handsets, and grew sales grew 51 percent from 1998 to 1999.“Three years ago wedecided to create a telecom-orientedcompany. We have been able toimplement the changes faster thanwe expected.” Jorma Ollila, Financial Times, 09/07/1995SUBSIDIARY LOCATIONS AND RESEARCH CENTERSNOT EXHAUSTIVE(5)(2)(3)(1)(3)(14)(3)(1)(4)(1)(17)(2)(3)(1)(5)(1)(2)(1)(5)(6)(3)(1)(3)(4)(2)(2)(2)(2)(2)(1)(2)(2)(2)(6)(1)(2)(3)(3)(1)(1)(1)(9)(7)(2)(2)(1)(1)(1)(1)(1)(1)(2)(1)(1)(1)(1)(1)(6)(7)(3)(2)ResearchNokia covers an expansive geography.CONTENTSCompany overviewU.S. market entry strategyProductsCapabilitiesOrganization STORYLINEAt the beginning of the 1980s Nokia was still a diversified company, relying predominantly on Europe (particularly Scandinavia) to drive salesHowever, the company realized that significant growth would be dependent on building a major presence in the U.S. market, in high return segmentsTo do so they acquired Mobira (Finland) in 1981 to gain a foothold in the rapidly emerging mobile phone sector. They rapidly grew this opportunity in the U.S. through a series of OEM relationships (GTE, Delco, Southwestern Bell, Bell Atlantic) and a joint venture with Tandy Corporation in 1983Nokia launched their own brand mobile phone in 1986 and pursued aggressive branding and alliance strategies (e.g., Rooftop Communications, Compaq, AT&T Wireless Services) to solidify their presenceNokia was the first player to use mass market distribution channels for telecommunications equipment. Source: International Directory for Company Histories, Annual Reports, press clippings1992Begins to aggress-ively market own branded products 198319921993199519971983Cellular service launched in U.S.; JV with Tandy Corp. to sell Nokia phones through 6,000 Radio Shack stores; JV includes joint ownership of factories1992Nokia and Tandy Corp. open a mobile phone factory in Texas; North and South American markets are half of global mobile phones market199619941997CFO of Nokia deployed as Head of U.S. business; U.S. subsidiary sees immense growth from 1997-991993Acquires Tandys share in both manufacturing companies; overall, operates 5 factories; continues selling through Tandy retail formatsDe-emphasizes consumer electronics business1995New distribution facility opened in Fort Worth, TXGranted license to American Portable Telecom (private cellular network operator) for PCS 1,900 MHz product1996Signs significant contracts with AT&T Wireless Services, Sprint Spectrum, and Powertel1986Launches own brand product globally1988Divests flooring, paper, rubber, and ventilation systems businesses19861988Early and mid-eightiesAggressively sought and signed OEM deals with numerous U.S. companies (e.g., GTE, Delco, etc.)TIMELINE OF KEY EVENTS IN NOKIAS U.S. BUSINESSCONTENTSCompany overviewU.S. market entry strategyProductsCapabilitiesOrganization Nokia made big bets as to which technologies would emerge, redirecting resources and company focus to emphasize these categories.PRODUCT STRATEGY“The choice of focus is extremely important. We constantly strive to make sure we are focused on targeted markets in which the growth rate is much higher than that of the total market, Nokias aim is to grow somewhat faster than the targeted markets do.” Matti Alahuta, President, Mobile Phones Nokias acquisitions in the U.S. were primarily to broaden its product capabilities.PRODUCT ACQUISITIONS Source: Securities Data Corporation and press clippingsCONTENTSCompany overviewU.S. market entry strategyProductsCapabilitiesOrganization Developed, launched and ran innovative consumer goods marketing campaigns unlike their competitors who were running professional focused campaignsEstablished brand name in the U.S. through clever consumer segment targeting (e.g., extensive ads on MTV to reach younger segments)MarketingDeveloped relationships with retailers and distributors to broaden and deepen market penetrationJV with Tandy Corporation to sell through Radio ShackOEM manufacturing for GTE, Delco, Southwestern Bell, Bell Atlantic mobile systems and othersDistribution agreement with SearsDistribution contracts with AT&T Wireless Service for Nokia branded mobile phonesDistributionR&D controlled out of Finland Leveraged partnerships for more efficient R&DCooperation with Geoworks to develop next generation wireless productsJVs with Hewlett-Packard, Cisco, Geoworks for high-tech product developmentLow investment, high return R&D strategy provides competitive advantage to Nokia who can react faster to changing technologies than any competitorUse of standard components to enable outsourcing of non-core technologies (e.g., micro processors from Intel, components from Motorola, semi-conductors from AT&T)Similar product design allows Nokia to use the same production line for multiple products and enables them to react quickly to changes in demand by shifting from one model to another R&DAlliances/partnerships providea large portion of Nokia capabilitiesNokia has developed a strong capability platform in the U.S.; primarily driven by alliances and partnerships.CAPABILITY PLATFORMBRAND DEVELOPMENT Starting in 1994, Nokia increased corporate brand awareness through vigorous advertising campaigns.Source: Annual reports; press releases; press clippings; company web site Nokia 6100 Series phoneNokia kept its advertising consumer friendly and easy to follow, in contrast to their competitors who targeted professionalsNOKIA COMMUNICATION STRATEGYSince the early nineties Nokias value proposition to the consumer has been single-minded on simplicity and ease of using mobile phonesThe proposition of simplicity is further enhanced by the tone of voice and visuals used in the communicationThe proposition has been communicated through all their communication efforts both in mass media and at point-of-saleSource: Press articles; annual reports; ECCH Collection Case StudyNokiaMotorolaEricssonPercentage of sales R&D EXPENDITURES 1995Nokia spends relatively little on R&D, but still achieves a high return on its R&D investment throughNumerous R&D partnerships with outsiders such as universities, and high-tech companiesOutsourcing of non-core technologies (e.g., microprocessors from Intel, components from Motorola, semiconductors from AT&T)Focused R&D programs concentrating resources on future growth areas; e.g., cellular data transmissionUse of cheap industry standard products as a base rather than more expensive systemsEvery third Nokia employee works in R&D. R&D centers exist in 14 countries on four continents.JOINT R&D ACTIVITIES“We do not aim to do everything by ourselves; and when its necessary we form partnerships with other pioneers of technology; this means focusing on what we are best at and complementing it with the expertise of others.”Partner companyProductsStartAT&T, U.S.GSM components1989Qualcomm, U.S.CDMA technology1990Cicso, U.S.ATM networks1994Geoworks, U.S.Wireless products1995Psion, U.S.Software for GSM1996Nokia has built extensive R&D partnerships. For example, at the beginning of 1994, Nokia signed an agreement with Hewlett-Packard to cooperate in the development of Intelligent Network systems for telecommunications operators. The agreement centers around the integration and development of key IN architecture elements. Source: Press clippings; press releases; Internet homepageNOT EXHAUSTIVEPresident, Nokia Telecommunications Network and Access Systems DivisionObjectiveTo jointly develop ATM-based (broadband) service solutions for competitive telecom operators in deregulated markets that provide services for Corporate customers: need to increase connectivity across the company Residential customers: require advanced data and video (multimedia) servicesCisco Data and private network/corporate applications know-how (market leader in switched internetworking; e.g., routers, LAN, and ATM switchesNokia Experience in telecom operator business Expertise in voice transmission infra-structure and network management“This cooperation answers the need for faster building of new competencies, faster R&D cycles, and the right timing of product launches.” Source: Nokia press release; press articlesNOKIA/CISCO R&D ALLIANCE EXAMPLEIn 1995, Nokia and Cisco Systems, U.S., established a strategic alliance to develop ATM-based network products to provide total telecom service solutions to companies. Source: Press clippingsNOT EXHAUSTIVENokia used strategic alliances to gain a number of product and marketing capabilities in the U.S.; Nokia was particularly active in 2000.STRATEGIC ALLIANCES Source: Press clippingsSTRATEGIC ALLIANCES (CONTINUED)NOT EXHAUSTIVECONTENTSCompany overviewU.S. market entry strategyProductsCapabilitiesOrganization ORGANIZATIONAL LEVERS Nokia has made several moves in the past years to better align its organization Source: Annual reports; Internet homepageManaging the flowExtensive recruitingSelect set of new hires“People are the most crucial resource in managing growth; you have to constantly recruit and integrate the best people into your culture.”“Teamwork is one of the basic elements of Nokia, we stress communication and social skills, in addition to professional excellence.” Recruiting events at international universities and business schools Career opportunity ads in international and regional newspapers and on the Internet Creation of early ties through international student exchange program offering trainee placements in all Nokia business groups worldwide University degree preferably in science or business studies Academic excellence Outgoing, confident personality able to solve problems independently, while at the same time work in a team“Much effort is invested in improving induction programs; but weve got to find a way to avoid bureaucracy and maintain entrepreneurial spirit.” Quickly indoctrinate new personnel in the Nokia way of doing business Instill a spirit of continuous learning in all new employeesNokia views people as its most important asset.TALENT MANAGEMENT TECHNIQUES“We have achieved the best results in units where there has been a clear emphasis on continuous learning, improving skills and quality, ambitious goals, and also respect for the individual; ensuring that these values take root and flourish throughout the Group is a central theme permeating all of Nokias human resource development programs.” Jorma Ollila, CEO“Nokia Way” has been difficult to implement in the U.S. - “The culture doesnt have the same richness or value as it does in Europe”Customer satisfactionContinuous learningRespect for the individualAchievement Source: Internet homepage; annual reportsNOKIA VALUESNokias growth targets are well balanced with its long term values.The Nokia Way“We work hard; 10 hours and if necessary 12 hours a daywe have to make sure that we dont becomelazy.” Jorma Ollila, CEO“Nokia is an extremely tough environment; people work like hell; theres an ongoing joke that Nokia provides free eye drops, because its employees eyes are always red due to lack of sleep.”“Its a swim or sink mentality . . . but if you survive you can be president of a subsidiary after 3 years.”“Yes, Nokia is performance-driven . . . but its also a fun place to work; for example, it has rooms with pool tables where the team can go and relax for a while.”“Underperformers are not fired; they stay with Nokia, but are reassigned to less demanding tasks . . . at least in Finland; maybe thats different in foreign subsidiaries.”“One important brick in building a successful company is that the workplace is fun and that everybody knows why they are working there.” Petteri Waldea, Nokia CablePerformance-driven culture . . . . . with community feel Source: Interviews with McKinsey consultants; press clippingsNokias culture is strongly oriented towards performance, tempered by a community atmosphereFOR INTERNAL USE ONLY NOKIAS GLOBAL CULTURE (EUROPEAN CULTURE)Appendix1991 annual report“Nokia is a European technology group.”1992 annual report“Nokia is an international electronics and electrotechnical group.”1993 annual report“Nokia is an international telecom- munications and electronics group”1994 annual report“Nokia is a leading international telecommunications company.”The evolving focus of the company during the inflection period is reflected in the changing annual report.COMPANY DESCRIPTIONSExistingcompetitivearenaMove into new competitive arenavs.ExistinggeographyExpansion into newgeographiesvs.Existing industry structurevs.Improvement of industry structureExisting value delivery systemvs.Innovation of value delivery system vs.Existing products and servicesInnovation of products and servicesExisting businessand capability platform Continuously strengthen position in the telecommunications market Almost 100% of business activities concentrated in telecommunications 91% of 1995 sales outside of Finland, compared to 52% in 1988 Strongest growth rate recorded outside of Europe, especially in Asia-Pacific New product development and extension of existing product line through new functionalities (e.g., push into wireless office communication through Nokia 9000 Communicator combining phone, fax, E-mail, and Internet access in one portable unit) Innovative product design attracting new customer segments First to use mass market distribution channels for telecommunications equipment out of need to quickly achieve high coverage (e.g., selling mobile phones in the U.S. through Radio Shack) Strategic alliances in R&D speeding up technological development Contributions to development of industry standards; e.g., EFR voice code developed by Nokia and the University of Sherbrooke, Canada, made industry standard for GSM and DCS in 1995Growth was fueled through pursuing multiple growth paths.Source: Annual reports; McKinsey analysis; press clippingsPURSUING MULTIPLE GROWTH PATHSSource: Annual reports, McKinsey analysisEXPANSIVE MINDSET THROUGH STRATEGIC FOCUSUnprofitable diversity in 1986A global force in telecommunications in 1996Non-telecom sales decreased from 70%30% of salesTelecom sales increased from FIM 2 billion25.8 billionManufacturing facilities in 14 countries, personnel in 45 countries, sales in 120 countriesUtilitysold 1993-95Footwearsold 1988Cablesold 1996Chemicals sold 1991TVs sold 1996TelecomequipmentElectric appliancessold 1993-94Soft tissuesold 1990FinlandFrom . . . . . . toChange from analog to digital technologyDevelopment of cellular infra-structure and equipment Growth opportunities . . . . . . captured by Nokia Strong focus on development and design of digital mobile phones to achieve high-market penetration Early entry into those markets where cellular networks were first developed to gain experience in high technical and product quality standard with relatively little competition Early commitment to GSM standard, which later became the pan-European standard cellular network Wide geographic coverage supplying customers in 35 countries with GSM/DCS-based and NMT-based cellular networksNokias tremendous growth in the past few years can largely be attributed to its ability to take advantage of technological shifts in the telecom industry. As Jorma Ollila explains: “The two things that have helped us most have been the entry of new operators into the cellular market and the shift from analog to digital.” (Financial Times, 23/09/94)Source: HBS Teaching Note; press clippingsEXPLOITING TECHNOLOGICAL SHIFTS IN THE TELECOM INDUSTRYNOKIA AN EXAMPLE OF SUCCESSFUL BRAND LAUNCHSource: Press clippings; Internet home page; annual reportsMobilephonesTiming196019751985199019921996Brand recognitionin Scandinaviaand the U.S.InternationalexpansionStrategic alliancesin marketing andR&DOperationalexcellence inmanufacturingInnovative productdevelopmentCapability platform“The Nokia Way is about keeping a balance between bureaucracy and anarchy, preserving fast, decentralized decision making.” President, Nokia Mobile Phones“Our way of operating is based on a decentralized organization and measured control; managing growth of our globalizing operations poses unique challenges to our internal communication and organization flexibilitycooperation and teamwork are the best ways of dismantling hierarchies and rigid structures, and preventing their establishment where they have thus far been avoided.” Jorma Ollila, CEO“The Nokia way of operating is based on a flat, decentralized organization, in which the emphasis is on efficient teamwork and an entrepreneurial spirit; flexibility, being able to innovate, react speedily, and make fast and effective decisions are the central features of Nokias way of operating.” Jorma Ollila, CEOSource: Press clippings; annual reportsTHE NOKIA WAY: BALANCING BUREAUCRACY AND ANARCHY Nokias strong commitment to decentralization provides it with the flexibility that has been fundamental to its sustained success in a rapidly changing regulatory marketing and technological environment. This is based in cooperation and teamwork to dismantle bureaucracy but also an awareness of the dangers of the opposite extreme anarchy.“It is the question of letting the people who know how to do it, do itit was an exercise in the organization of people.” Jorma Ollila, CEOR&DSourcingProductionMarketing/salesCreation ofcross-functional teams in all unitsTo best leverage internal capabilities, Nokia actively promoted cross-fertilization of functional groups. Drawing upon R&D, sourcing, production, and sales, and marketing skills ensures that tasks are performed by those who are most suitable.“It is the people, their skills, and how they work together that matters most. Success requires the cooperation of a team of experts.” (Internet homepage)Source: Press clippingsCROSS-FUNCTIONAL TEAMWORKPRELIMINARY“Nokias development into a focused telecommunications company with global business activities requires that our organization is continuously developed; the changes to be implemented continue the development started in 1992.” Jorma Ollila, CEOTo develop its managers aware- ness for global issues in a local context, Nokia launched a 5-month project bringing together a broad mix of hundreds of employees for 3 day-long brainstorming sessions in London and FrankfurtNokiaAmericaAsia/PacificEuropeImplement group-wide regional unitsTrain managers how to act locally in foreign marketsBy 1998, the deregulation process in European telecoms will be complete. However, fertile growth space still exists in fast-growing markets such as China and India, which have recently embraced deregulation. Nokias clear focus on capturing these opportunities is demonstrated by its reorganization into global regional units. Furthermore, Nokia is training its managers to develop local market capabilities.* As of January 1, 1997Source: Press releases; press clippingsTHINK GLOBAL, ACT LOCAL . . . Nokia electronicsNokia cables and machineryNokia paper, power, and chemicalsNokia rubber and flooringsInformation systems Microcomputers Modems Point-of-sale systems Workstation networks Components (circuit boards, thick film hybrid circuits, CAD production manuals) Automation applications forthe wood processing and energy sectorsTelecommunications Digital exchanges PCM equipment Radio linksNokia Mobira Cellular handsets for NMT, AMPS, TACS, R2000 and Netz-C networks Pagers Base stations for cellular and paging networksSalora-Luxor TVs, VCRs, monitors, components Satellite transmission equipmentCables Telecom, power, and OEM cables Power projects Cable production equipment Capacitors Aluminium profiles andcontract railsMachinery Cable making machines Industrial robots Sheet metal working machines Peripheral devices for the computer industry Precision castings and mechanical components for electronic equipmentSLO (Electricity wholesale and import of electrical capital goods and consumer durables) Lighweight fixtures Electrical heaters, low and intermediate voltage equipment boards, cablesPaper Soft tissue and related consumer products Electrical energy generation and saleChemicals Bleaching agents for the wood processing industry (chlorine, sodium hydroxide, sodium chlorite, sodium borohydroxide, hydrogen peroxide) Water treatment chemicalsRubber Tires Footwear Industrial rubber products Roller coatings for printing industry Conveyor systemsComparing Nokias business portfolio in 1986 to that of 1995 illustrates the extent to which Nokia has changes. The basic industry lines such as paper, power, and chemicals as well as rubber and flooring have been completely eliminated, while the main emphasis was placed on telecom-oriented products. In 1996, this strategy continued with the withdrawal from color TV and a further reduction in the cable business.* In 1996, Nokia announced the withdrawal from color TV and a further reduction in the cable businessSource: Nokia annual reports; press clippings; The Nokia Saga, 1994NOKIA PRODUCT PORTFOLIO IN 1986 AND 1995*In production 1995