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					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
  It’s Tough Being #1
      No, really, it is!
      Overview of US Handset market
             Value Chain & Market Characteristics
      Outlook & Key Decisions
      Recommendations
             Opportunities/Risks


                         Marketing for High-Tech
10/3/01                      Entrepreneurs           2
     Handset Market Value Chain

Component              Handset                    Service
                                                 Providers         Consumers
 Vendors               Makers


Motorola               Nokia                    AT&T Wireless
Phillips               Motorola                 Sprint PCS
Texas Instr.           Ericsson                 Cingular
Qualcomm               Siemens                  Verizon Wireless
Cypress                Samsung                  Voicestream
RF Microdevices        Others                   Others
Others
                  Consumers don’t buy directly from Nokia
                                 Marketing for High-Tech
  10/3/01                            Entrepreneurs                        3
        Handset Sales Volume (in mil)
 500                   474                       90                              87
 450               410                           80                        72
 400                                             70
 350                                             60
               280                                                   52
 300
                                                 50
 250                                                                                    US
                                     World 40                  34
 200      167                                    30
 150                                                   23
      106                                        20
 100
                                                 10
  50
   0                                              0
                                                      1997          1999        2001E
     1997     1999 2001E
Merrill Lynch Research, April 2001   Marketing for High-Tech
      10/3/01                            Entrepreneurs                                  4
            Nokia US Market Share
 Motorola        Mitsubishi   Other



                                                                 Only 2.9% of
Ericsson
                                                                  CDMA market
                                                  Nokia




                                       Denso Sanyo Nokia Others       Samsung
64.4% of
                                LGIC
GSM/TDMA market

                              Motorola                                      Audiovox
Source: Info-tech Trends
                                       Marketing for High-Tech
       10/3/01                             Entrepreneurs
                                                      Kyocera                   5
  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

                              Marketing for High-Tech
10/3/01                           Entrepreneurs                        6
     Nokia’s Outlook: Two Extremes

  WORST                                                 BEST
 End of growth phase                 Voice traffic will cont. to be robust
 Mobile data services                GPRS “always on” will be key enabler
 difficult intro continues          and driver of data-driven services

 No emergence of single              Maintain cost leadership
standard                              Sustain brand equity (e.g., Nike, Intel)
 Commoditization of handset


                              Marketing for High-Tech
   10/3/01                        Entrepreneurs                            7
  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



                  Marketing for High-Tech
10/3/01               Entrepreneurs         8
   Resist Commoditization
   by Push and Pull Marketing
           PUSH
                                Employer
             Service
Nokia        Provider                            Customer
                                 Retailer



                                              PULL

                    Marketing for High-Tech
 10/3/01                Entrepreneurs                   9
     Global: New vs. Replacement Phones
                          500
                          450
                          400
     Phones in Millions




                          350                                           52%
                                                                41%
                          300
                                                                                Replacement
                          250
                                                   39%                          New
                          200
                          150
                                       39%                      59%
                          100                                           48%
                                32%                61%
                          50    68%    61%
                           0
                                1997   1998        1999         2000    2001E


Source: Merrill Lynch April 2001

                                              Marketing for High-Tech
 10/3/01                                          Entrepreneurs                           10
    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


                         Marketing for High-Tech
10/3/01                      Entrepreneurs                 11
      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)



                             Marketing for High-Tech
    10/3/01                      Entrepreneurs                   12
  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
10/3/01                Entrepreneurs         13
    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
   Establish market share leadership in CDMA sales
         Current market leader is Samsung (21.7%)
         Nokia’s share is 2.9%
   Aggressively pursue partnerships with CDMA
    service providers –
         Sprint PCS
         Verizon Wireless
                         Marketing for High-Tech
10/3/01                      Entrepreneurs              14
  Conclusion
      Resist commoditization!
             Continue building brand
             Understanding customer needs
             Forging industry alliances
      Bring new products to market
             Replacement market
             Data-driven
      Long-term:
       Shift technology from TDMA  CDMA
                          Marketing for High-Tech
10/3/01                       Entrepreneurs         15
  Appendix




             Marketing for High-Tech
10/3/01          Entrepreneurs         16
            US Market Penetration
            50                                                      48
            45                                               40
            40
Percent




            35                              31
            30                25
            25       20
            20
            15
            10
             5
             0
                    1997    1998         1999           2000      2001E

   Source: Merrill Lynch, April 2001
                                   Marketing for High-Tech
          10/3/01                      Entrepreneurs                      17
           Competition


Hurting in general, Emphasizing         Secure phones

especially handsets Internet/WAP          Partnership w/

Key chip supplier to Partnership w/Sony Toshiba
industry

       Partnerships attempt to overtake Nokia in 3G race
       All competitors have weaker TDMA sales than Nokia

                             Marketing for High-Tech
         10/3/01                 Entrepreneurs              18
  Nokia’s Road to market leadership

   1989      1990          1992              1995                1998            2000


            Industry                     Ring, covers,
          benchmarks                       elliptical                         Segmentation
                                         edge designs                          by product
  Alahuhta                1st GSM                                Nokia            lines
   begins                   on a                               becomes
  branding                 Nokia                              market leader
                         CEO sheds
                         non-mobile
                       phone/network
                       business units




                                    Marketing for High-Tech
10/3/01                                 Entrepreneurs                                        19
  Nokia’s Current Strategy:
  Technology & Design
     Year 1990: Industry Benchmarks
             Nokia 2110 ~ Large screen, clean design, easy UI
     Year 1995: Frank Nuovo, Chief Designer
             Product Design with a Competitive Edge
                   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
10/3/01                               Entrepreneurs                     20
  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].”




                      Marketing for High-Tech
10/3/01                   Entrepreneurs                  21
  Nokia’s Current Strategy:
  Brand – Connecting People
      5th most valuable brand
      Value Proposition
             Cutting edge communications technology designed
              around individual human needs
      Differentiation
             Positioned as fashion accessory
      Personification of the brand
             “young, sexy, sophisticated, hip and generally
              ‘with it’.”
             Ericsson is an “austere, conservative, middle-aged
              Swedish engineer”.
                           Marketing for High-Tech
10/3/01                        Entrepreneurs                 22
  Nokia’s Current Strategy: Tactics
      Aggressive advertising and promotions
             Cut through clutter with exclusive sponsorships
             Brand the ring
             High profile events
      Club Nokia
             Customer “care and feeding”
      Classlink Programs
             Focus on youth and education

                           Marketing for High-Tech
10/3/01                        Entrepreneurs                    23
  Nokia Leverages competitors’ failures
      Motorola
             Analog lost to Nokia’s early digital phones
             Late to leverage partnerships with service
              providers
      Ericsson
             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

                            Marketing for High-Tech
10/3/01                         Entrepreneurs               24

				
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