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NOKIA: BUSINESS INTERESTS VS GERMAN PRESSURES

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Elaine Tran

on 18 March 2014

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Transcript of NOKIA: BUSINESS INTERESTS VS GERMAN PRESSURES

What are the trends in the mobile handset industry?
Originally, majority of the market was within developed nations.

2001 - stunted growth in industry

2003-2008 - Newly accessible market with high growth - the developing nations

2008 - Developing nations made up 2/3 of the mobile handset industry market (Euromonitor, 2008)

NOKIA: BUSINESS INTERESTS VS GERMAN PRESSURES
NOKIA: BUSINESS INTERESTS VS GERMAN PRESSURES

Group 1

Georgina Liney 42863651
Jessica Ters 41479823
Elaine Tran 42863279

Positive Views
From Nokia's perspective relocating to a low-cost manufacturing plant would enable the company to:

escape the tremendous cost pressures faced in Germany

improve the company's overall productivity and financial circumstances

remain competitive in the long term

Conclusion
Analysis of Alternative Solutions
Identification of Major Stakeholders and their Problems
Concerns
Nokia's Bochum plant closure added to Germany’s existing high number of restructures in their telecommunications sector

The Bochum regions unemployment rate was also affected by the closure

Introduction
Analysis of the Nokia Case Study - Week 2 - International Social Responsibility, ethics and culture

Content:
Georgie - Question 1 (Background & Nokia's strategy)

Elaine - Questions 2 & 3 (Objectives, Concerns and Positive and Negative Views)

Jessica - Questions 2 & 3


Recommended Solutions
Negative Views

Nokia's unethical decision to apply Finland ethics of doing business was politically unpopular and sparked indignation in Bochum:

Wittke (cited in Kallasvuo 2008) stated Nokia failed to legitimize their decision and take social responsibility

They ignored the principle of collective bargaining and the socialist market concept in Germany

The Bochum people saw Nokia’s plans as inhuman and socially unacceptable

Nokia were accused of behaving irresponsibly and union action took place outside their Bochum plant


Objectives
Aid Nokia’s long-term competitiveness

Shift production to a low-cost location

Increase production capacity and supply phones to Europe, the Middle East and Africa

Managerial Implications
Possible Positive Views

If Nokia followed German practices and procedures prior to announcing the closing of their Bochum plant:

they would have retained Germany’s highly skilled, very productive and well-educated workforce

the German backlash would not have been as harsh because the public would have been informed and prepared for their announcement

the company could have legitimized their decision and

Nokia could have maintained the company's reputation and customer-friendly image amongst the German people





Negative Views from Nokia's Perspective
Nokia believe even if the Bochum plant had additional investments allocated for its renewal it would have:

negatively impacted the company's finances and long-term competitiveness

never "operated in a way that meets the requirements for global cost efficiency and flexible capacity growth" (Sundback cited in Carson 2008)

"Nokia had to think about global operations and international staff not just Germany" (Akras cited in Kallasvuo 2008).
Industrial action outside Nokia's Bochum production plant (2008)
Germany Unemployment Rate (2008)
Bitterness at plant closure in Bochum has drawn thousands of visitors in show of support (Fong 2008)
Nokia's Corporate Social Responsibility
Nokia’s code of conduct:
Nokia is strongly committed to the highest standards of ethical conduct and full compliance with all applicable national and international laws

Nokia’s human rights approach:
Nokia applies the local legislation relating to labour relations and human resources

Nokia believe companies have a responsibility to respect human rights

Employees have access to grievance channels and right to remedies


What is Nokia's strategy and how has globalisation changed its way of operation?

Nokia penetrated China and India
Globalisation forced Nokia to become globally competitive with prices
Changed strategy:
To provide low cost handsets, reduced ASP by 35%
Move operations to Romania for cheaper more flexible operations
To be within a developing market

Major Stakeholder problems:
Employees
Community - Suppliers
Government
Customers & Shareholders
Mobile phone subscriptions in millions and per 100 inhabitants in major markets: 2008

http://www.portal.euromonitor.com.simsrad.net.ocs.mq.edu.au/Portal/Pages/Search/SearchResultsList.aspx
Main issue found is a "culture difference" - Juha
Akaras, Senior vice president for Human Resources

Ethnocentric Approach?
Nokia could follow BenQ Mobiles 2006 closure approach.
• Seek professional advice from industry leaders from the mobile handset industry who have relocated their production plants

• Becoming transparent in future decisions

• Adopt a consultative approach with affected stakeholders such as employees, suppliers, trade unions and government authorities
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