Corporate Strategy
Exploring Corporate Strategy
CLASSIC CASE STUDIES
Nokia: The Consumer Electronics Business
Martin Lindell and Leif Melin
The case describes the entry of the Finnish company, Nokia, into the consumer electronics market – resulting in a significant reorientation of the company. It describes the internationalisation of the Nokia Group from a Finnish company, to a Nordic company, to a European company and finally to a global player in world markets. The case raises three main questions. Why and how did Nokia acquire consumer electronics businesses? Why was the integration process of acquisitions so difficult? And why, after a decade of investment, did Nokia divest its consumer electronics businesses in 1996? The case can be used to explore the difficulties of integration in terms of management, culture and strategy. l l l
INTRODUCTION
Nokia, the large Finnish industrial group, was founded in 1966 through a merger of three companies. The main business units at that time were pulp and paper, tyres and cables, with paper manufacturing as the oldest business, established 130 years ago. During the 1970s Nokia started to diversify through expansion in different electronic product areas. In 1995, after twenty years of acquisitions, divestments, internationalisation and rapid growth, 99 per cent of the turnover (FIM36,810 million)1 was represented by three business units in electronics: mobile phones, telecommunications and consumer electronics. The three original businesses had been divested and 91 per cent of the turnover was derived from exports. Nokia had become one of the leading global producers of mobile phones and telecommunication systems, and the third biggest in Europe in consumer electronics, with 34,000 employees, 14,000 of them working outside Finland in 45 different countries. The Nokia case is a remarkable corporate transformation, achieved through focusing the company’s strategic activities in the consumer electronics industry, where Nokia attained its
CLASSIC CASE STUDIES
Nokia: The Consumer Electronics Business
Martin Lindell and Leif Melin
The case describes the entry of the Finnish company, Nokia, into the consumer electronics market – resulting in a significant reorientation of the company. It describes the internationalisation of the Nokia Group from a Finnish company, to a Nordic company, to a European company and finally to a global player in world markets. The case raises three main questions. Why and how did Nokia acquire consumer electronics businesses? Why was the integration process of acquisitions so difficult? And why, after a decade of investment, did Nokia divest its consumer electronics businesses in 1996? The case can be used to explore the difficulties of integration in terms of management, culture and strategy. l l l
INTRODUCTION
Nokia, the large Finnish industrial group, was founded in 1966 through a merger of three companies. The main business units at that time were pulp and paper, tyres and cables, with paper manufacturing as the oldest business, established 130 years ago. During the 1970s Nokia started to diversify through expansion in different electronic product areas. In 1995, after twenty years of acquisitions, divestments, internationalisation and rapid growth, 99 per cent of the turnover (FIM36,810 million)1 was represented by three business units in electronics: mobile phones, telecommunications and consumer electronics. The three original businesses had been divested and 91 per cent of the turnover was derived from exports. Nokia had become one of the leading global producers of mobile phones and telecommunication systems, and the third biggest in Europe in consumer electronics, with 34,000 employees, 14,000 of them working outside Finland in 45 different countries. The Nokia case is a remarkable corporate transformation, achieved through focusing the company’s strategic activities in the consumer electronics industry, where Nokia attained its