Navigating Business Challenges with Strategy

Introduction

Strategic management is a sensitive functional part of any organization. The success of the organization is tied to the management's strategic decisions, and so is the failure of any business venture. This essay starts with literature analysis in which discussed areas are various academic scholarly contributions in regard to the discipline of strategic management. It herein highlights an understanding of the industry environment and analytical tools like SWOT and PESTEL analyses. It also discusses that firms must seek a competitive advantage, employ appropriate strategies at various stages of the industry lifecycle. A corporate strategy defines how a company will likely perform in the near future such as likely profitability for diversifying firms oriented towards value addition. This essay introduces a case study of Nokia in the face of new entrants to the market. The telecommunication corporations has been discussed as having risen, a declined steeply and regeneration of business activity in recent days. The case shows a live application of the theoretical literature presented in part 1. The essay ends with a conclusion. As it goes, it stands out that technological change like any other environmental changes implies a compulsory commensurate change in business practice to feature the new advancements.

Literature Analysis

Strategic management is a central and basic requirement for any business to effectively maneuver through the complicated business environment (Prajogo, 2016) through the future. By default, the entire business environment is filled with numerous uncertainties and challenges that make it unobvious for a business entity to successfully do business. Wheelen et. al (2017) state that the success of the organization depends solely upon a pre-defined set of plans which fall under the organization’s strategic planning. The top management must always clearly define the various goals, aims, and objectives that it wishes to realize both in the short run and in the long run. This must be coherent with the company’s vision and mission statements (Wheelen, 2017). The effective strategic management in any company is key to the thriving of business in the present and also in the future. Sample business challenges for organizations include the uncertainty in the industry environment, uncertain business trends, industry rivalry, buyer power among other forces in the industry. The company management must always analyze both the external and internal environments (Prajogo, 2016) of an organization to make its way out of the rather crooked environment. Michael Porter (HT, 2018) provides that there are five major competitive forces that every company faces in the course of its operations. Porter defined the five forces (Harding, 2017) as causal variables as a means of explaining exemplary business performance as well as the inferior performance of a business. Industry rivalry is one of the major threats that the organizations must work around. The existing firms in the organization exist in an environment of competitiveness, exploiting the available means to outdo each other in business. This often involves the use of a complex mix of competitive strategies (Kara, 2018) and marketing plans that aim at expanding each firm’s business reach. One serious implication of this rivalry is that firms use strategies that stretch the capacity of the other industry participants (HT, 2018). In the long run, the cutthroat competition slashes a huge portion of the business returns, lowering the profitability of the business and hence further constricting the firm’s performance. The inverse of this case would also be an experience of another company in the industry.

Consider the figure above. Michael Porter clearly expresses the state of the industry environment as consisting of the highlighted unavoidable forces which every business must cope with. For instance, the threat of new entrants in the market threatens the existing businesses since the market (plausibly) remains unchanged. Porter (2018) provides that New firms entering the market imply that the existing companies will likely lose some market share to the new entrants. This negatively impacts the existing company in the industry as its profitability is under threat of reduction. The new entrant might also introduce new and improved products thus draining the market from existing industry players and probably cause their downfall. The possession of bargaining power by the buyers in the market is also a remarkable threat in any industry. The bargaining power of the buyer (Rothaermel, 2015) depends largely on the number of sellers that there exist. The more, the higher the extent to which they have bargaining power and hence the industry firms face the risk of likely profit declines. In a similar manner, the presence of substitutes also poses discomfort for firms since they have limited power of the buyers who have the potential to switch to other products in the same line. Nonetheless, the industry life cycle cannot be underestimated in the life of an organization. The invention of a product takes a bell-shaped curve implying different phases of business progression which must also get different strategies. When a business is booming, the company management must employ appropriate strategies to maximize business gains. Applicable measures must also be implemented for organizations that have reached the peak point in the curve of its life cycle as well as at the time of the decline stage. It is even harder for managers when the business reaches its peak. Proper strategic moves must be operationalized to remain at the top while resisting and making up for the impending business decline stage. The company which is operating at its peak could employ such strategies to add value such as diversifying its activity.

Harding (2017) argues that company senior management must establish sustainable plans to survive the perilous market environment lest they fall into the pit of extinction. For this purpose, the SWOT analysis must be conducted alongside other analytical models such as the PESTEL analysis (Kara, 2018) to properly identify the capacity of the firm and the factional policies it must enact to succeed in the business they do. A SWOT (Bull, 2016) analysis is useful for the organization to realize its strengths and weaknesses and thus ensure a thorough understanding of the internal environment of the organization. Based on this understanding, the strategic management then must draw on the knowledge of the external environment by studying and analyzing the opportunities and threats in the industry for action to its advantage. Kara (2018) guides that PESTEL analysis would also solve critical puzzles in the environment by exploring the political, economic, social, technological, environmental as well as legal factors that have an impact on the organization. The thorough analysis (Harding, 2017) of an organization’s environment calls upon the management of the firm to draw essential strategies to respond to the needs already highlighted. The company must decide a suitable corporate strategy that will determine the most beneficial way to create value for the organization. With the already analyzed resources profile for the business, opportunities, and threats, the firm comes up with a way to pull resource together in an informed manner to expand its profitability and essence in the industry.

A corporate entity comes up with a suitable way to allocate its resources to harness the untapped potential in the industry and even in other markets. Bowen et. al (2015) provides that a common strategy for improvement among organizations is a diversification strategy. By diversifying activities of the company, the firm achieves growth of its business activities, spreads risk and thus minimizing risks, and creates additional value. According to Grant et. al, (2016), growth-oriented diversification involves other strategic practices such as the creation of ventures in other companies. The successful implementation of a globalization strategy (Prajogo, 2016) is important in the growing needs of an organization. Other companies in a bid to increase their profitability and minimizing costs take on a cost orientation strategy. Such companies engage in activities such as retrenchment and layoffs to lower their operating costs as benefits go up. Whichever orientation the corporate entity takes, the management must ascertain that they add value to the firm and reduce any chances of decline however hostile the industry may be.

The Implication of Change in Corporate Industries: Case for Nokia Corporation

The need for thorough environmental analysis (Harding, 2017) is inevitable if a firm wants to survive in any industry in the future. The future of businesses is uncertain, and firms must accordingly act as changes emerge in the industry. While technological, legal, as well as other multiple environmental changes happen in a company’s business environment, careful attention must be availed at the changing situations. In regard to this subject matter, this paper will be discussing the case of Nokia company. Nokia is a technology company (Steinbock, 2001) which has been in existence for since the late 19th Century, venturing into mobile devices and releasing its first phone: Nokia 1011 in November 1992. The Finnish multinational corporation enjoyed a powerful position in the information communication industry for a substantial period of time. Having been the first company to produce the first commercial GSM mobile phone, the company enjoyed its position as a giant in the telecommunications sector. For many years, the company led in mobile sales with its then-popular cellular devices. Technological developments and changes in the environment are unignorably crucial for the progress of any firm. The company management must always decode what each new development means for their business. The development of the touchscreen technology for mobile phones as of the year 2008 was the beginning of a new business cycle for Nokia: a decline of their business. The telecommunication company failed (Aspara, 2011) to perceive the development of the new touchscreen as a disruptive technology. Nokia, therefore, did not embrace the technology or proceed to manufacture their touchscreen models but instead, they stuck to their already old-fashioned keypad. The uninformed company kept producing their then famous Nokia 1100 and completely disregarded the new smartphone design. The organization’s failure to adopt new technology was the beginning of the fall of Nokia (Aspara, 2011) from the mobile phone industry.

The management of Nokia, failing to take informed managerial analyses and decisions unknowingly engineered the corporation’s failure. The managers needed to conduct a number of analyses such as a SWOT analysis (Bull, 2016) to properly decode the changes in their business environment. A SWOT analysis, for example, would have identified the new technology development as a business opportunity for the company to pursue using its inherent strengths. Additionally, the production of the first touchscreen phone by Nokia’s competitors is viewed through SWOT as a threat to their business. The best response by Nokia would have been to imitate (Zhou, 2006) the new technology and keep manufacturing the latest mobile devices as they are. However, the then Nokia’s introduction of the Asha phone series which still included the QWERTY keypad was an odd response to a disruptive technology, particularly marked by its comfort in the status quo. Change (odnem By, 2005) is indeed inevitable. The production of the Nokia Asha series assumed that the customers are already in love with the qwerty keypad Nokia had been producing lately and that the touchscreens would soon fail as customers refuse to adopt the technology. Surprisingly and unfortunate for the resting tech giant, touchscreens became widely adopted, flushing away the keypad devices and their manufacturers. A SWOT analysis (Harding, 2017) in the case of Nokia would also highlight inherent strengths which could facilitate the exploitation of the new tech development. The company, having a substantial footing and hence possessing a wealth of goodwill, trust, technical and financial resource; was resourced enough to successfully do tech the new way. This would yield amazing benefits and give the company an immovable position in the industry against its competitors such as the then small Samsung, Huawei, Oppo, and HTC among other players.

Synchronizing the company activities with environmental changes is a good way to compete effectively in any industry (odnem By, 2005). In the recent past, Nokia started resuscitating just when the management agreed that they can only change accordingly as technology advancements imply. With the already innovative activities in the mobile industry, the corporation resumed making touchscreen smartphones, an indication that Nokia adopted imitation of the trending technology. This must always be a very immediate way to respond to tech advancements for an organization to survive current industry competition. Business activity: for instance, the production of products - must be focused on the customer (Pujari, 2006). Even though Nokia’s cellular phones were broadly adopted, the company failed to improve the customer experience in using mobile phones. Competitors in the industry such as Samsung and HTC adopted touchscreen devices using Android; a combination which provided unmatched user-friendliness whilst using the devices. For this reason, consumers switched from the non-pleasurable Nokia devices and adopted the Android devices which better served them with ease. If Nokia had closely studied the switch and understood it well, there is no doubt they would yet be giants in the mobile industry to date.

Diversification (Bowen, 2015) for the addition of value is critical for any firm. The hardware niche was a preferred choice for Nokia. However, to better serve its market, Nokia would do even better to also engage software and not hardware alone. In the technology industry, hardware and software are composites and can’t be separated whatsoever. Nonetheless, certain combinations of software and hardware produce unique experiences which can lead a company to differentiate itself simply based on that combination. Failing to take such a move and rather overlooking the software aspect of technology saw Nokia embrace its untimely downfall. A properly formulated marketing strategy is essential for the thriving of organizations. This is a key point of failure for the Nokia Corporation. Essentially, a business entity exists to provide utility to its customers so that as it satisfies the needs of the customers it serves (Pujari, 2006), the firm then establishes itself as successful. However, it must also be noted that the needs of customers evolve and are shaped otherwise by new advancements in the course of time. The one-time tech giant did not realize that its customers wanted “smarter” devices which were easier to use and would add more value to the time’s mobile experience. While Sony, Samsung, and HTC already worked to satisfy the evolved customer wants (Pujari, 2006), Nokia remained in slumber, unaware of what the customers are already earning. Hence, in a short while, the previously small companies in the industry took hold of the business, winning the hearts of the customers of the former giant as well as all their trust. Nokia then had no footing in the market and its marketing edge was way too blunt to win the customers back. Company management must therefore constantly assess the needs of the customers they serve since this is a basic managerial question they must decipher so as to remain in business. A change in customer wants must, therefore, be accompanied by a strategic move changing the product that the customer must use.

Nokia’s takeover by Microsoft is also a strategic management failure both to the company itself as well as in the face of the industry. Selling itself to Microsoft, the company sunk even deeper in the depths of mistrust by its customers (Aspara, 2011). This strategic move by the company welcomed many unlikely questions; for example: is the company management surely failed? Is Nokia’s capacity to operate completely diminished? While the company was surely outsmarted in the mobile industry, it was even worse to have themselves taken over by another company. In the recent past, the company has however still made somewhat successful advances under the influential management of Microsoft – a company well versed with current software and hardware technologies. Nokia is resuscitating (Tiwari, 2018) and has in the recent days begun to rise again with new quality touchscreen smartphones that are well competing with the dominant players in the industry. The rising giant is enjoying top-notch smartphones with unmatched hardware designs and high-resolution cameras which have differentiated the brand. This is a sigh that could be foreseen from the moment Microsoft chipped in with its high-end software capacity (Ciesielska, 2018). This regeneration of business activity for the recently on-performing firm is attributable to the adoption of current technology, innovation, and imitation of the products of the already performing companies such as Samsung and Oppo. By use of this strategy, Nokia’s present management has reinstated value, and differentiation of the brand particularly by its crystal-clear cameras and guaranteed progressive software updates for their devices such as the Nokia 6.1, Nokia 6 and Nokia 7 Smartphones.

Nonetheless, the Company’s recent advances in globalization (Pujari, 2006), re-establishing the global markets for the worldwide delivery of their smartphones have guaranteed a continual improvement of the organization’s turnover. The progressive production of improved phone models in intervals is also a positive sign that has contributed largely to the competitiveness of the corporation. The imitation of other high-performance devices in the industry by Brands such as Oppo has also helped Nokia resume to the front row. It is commendable that the company has also devised a marketing strategy with price emphasis, selling its middle-range and high-end devices at prices lower than the competitors offering similar featured mobile devices. The progressive Android updates offered on their middle-range and high-end devices imitate Google's Pixel pure android phone. Nokia, however, is providing these high-end device specifications at much lower devices and is thus emerging as the new brand for the middle-income earners who want exemplary devices at affordable prices (Pujari, 2006). It is for this reason that Nokia is likely to rise again to match its peers like Google Pixel, Samsung, HTC, Huawei and Oppo which have gained a firm grip over the mobile device industry.

Conclusion

In brief, a company’s corporate strategy is primary for the success of any organization to follow. The management must always be conversant with the company’s primal vision, mission, goals, and aims. The top management can only drive the company towards its vision successfully if it also takes a keen look at their customers, understanding the needs and wants that they must satisfy and track any change in the market wants. Due to the market forces that challenge the business, the strategist managers of the organization must keenly study the variables in the industry, as well as within the very own firm and perform appropriate analyses and measures. SWOT analysis, as well as PESTEL analysis, serve to unveil environmental variables that can in some way affect the firm positively or adversely. The management must then take proper measures to survive and lead the industry. Nokia’s strategic mistakes in regards to technology advancements certainly saw the company fall down to depths. Like has recently worked for the same corporation, embracing technology and change as well as enacting appropriate strategies will always keep a company at par and competitive. It is, therefore, worth saying that value addition is inevitable and successful companies must strategically enforce value addition.

References

Ciesielska, M., 2018. Nokia on the slope: The failure of a hybrid open/closed source model. The International Journal of Entrepreneurship and Innovation, 19(3), pp. 218-225.

Grant, R. M., 2016. Contemporary strategy analysis: Text and cases edition. s.l.: John Wiley & Sons.

Harding, S., 2017. MBA management models. s.l. Routledge.

HT, G., 2018. The Relevance Of Porter’s Five Forces In Today’s Innovative And Changing Business Environment., s.l.: s.n.

Kara, E., 2018. A Contemporary Approach For Strategic Management in Tourism Sector: PESTEL Analysis on The City Muğla, Turkey. İşletme Araştırmaları Dergisi, 10(2), pp. 598-608.

Prajogo, D., 2016. The strategic fit between innovation strategies and business environment in delivering business performance. International Journal of Production Economics, Volume 177, pp. 241-249.

Pujari, D., 2006. Eco-innovation and new product development: understanding the influences on market performance. Technovation, 26(1), pp. 76-85.

Tiwari, B. a. U. L., 2018. Engaging workforce in downsized firms: scenario of the Indian IT/ITES sector. Industrial and Commercial Training, 50(1), pp. 32-38.

Zhou, K. Z., 2006. Innovation, imitation, and new product performance: The case of China. Industrial Marketing Management, 35(3), pp. 394-402.