Slide1: MBA 290G: International Trade and Competition in High Technology Professor Charles C. Wu Biana Yelent Joshua Chao Stefan M. Seidl


Media Clips - Mobiles: Media Clips - Mobiles Choking on your handheld? Cool. Because the world's charging up to a new ring tone. Mobiles have become the 21st century equivalent of the Swiss Army knife. Major milestone reached - one billionth Nokia mobile phone sold this summer September 21, 2005


Slide3: Case Overview Economic Developments in Finland Porter‘s Diamond Telekom Cluster Program Nokia over Motorola – Why Finland – Challenges and Suggestions for Successful Future Content


Slide4: Country - Description Close ties to it‘s neighbors: Nordic Region/Europe to the West and Russia to the East In the 80‘s there was a transformation from investment-driven economy (wood/paper/machinery) to innovation driven (supported through 'Cluster'-forming) Policy was modeled for maximum impact on economy, society and government as it was understood that Finland lost ground Cluster Telekom – Description Case covers policy changes and effects of these changes from the 90‘s onwards Telekom-Cluster forming and how different parts of the value chain supplement each other Nokia Looks into Nokia and why it is so successful (Historic reasons, Good Management, Luck?) Looks into Competitors and why was and is Nokia more successful What does Nokia and Finland need to do to stay successful Finland and Nokia – Case Overview


Economic Developments in Finland: Economic Developments in Finland 1970: Dominated by Finland’s natural resources (main exports to Russia, Germany , and Sweden) 40% Pulp and Paper 16% Wood products 23% Engineered metal (e.g. Shipbuilding) 1980s: Perceived losing international economic position Rising government expenditure increasing inflationary pressure Increased spending on Randamp;D Financial markets liberalized bank lending easier and access to international capital 1990s: Severe economic crisis Export markets dried up (dissolving of Soviet Union and reunification of Germany) Cut government expenditures Continued to fund Randamp;D Implemented the Cluster Program Made venture capital available for start-up companies


Porter‘s Diamond I: Porter‘s Diamond I Factor Conditions : The nation’s position in factors of production, such as skilled labor or infrastructure, necessary to compete in a given industry. Related and Supporting Industries: The presence or absence in the nation of supplier industries and other related industries that are internationally competitive. Demand Conditions: The nature of home-market demand for the industry’s product or service. Firm Strategy, Structure and Rivalry: The conditions in the nation governing how companies are created, organized and managed, as well as the nature of domestic rivalry. Porter's Diamond of National Advantage - a framework for country comparative advantages


Porter‘s Diamond II - Cellular Phones: Porter‘s Diamond II - Cellular Phones Firm Strategy, Structure and Rivalry: Finland ++ - Historic reasons for highly competitive landscape within Finland - Strong export-centered commerce experience - Strong network andamp; links between companies, banks and government - Regional Development Act- favors intense rivalry Factor Conditions : Finland + - Investing Money into Education (1st in Pisa – European school comparison) - Uniform, market-orientated government Related and Supporting Industries: Finland + - Huge Randamp;D spending by government and companies - Strong Venture Capital, Content provider, Manufacturer network - Lots of specialized companies due to fragmented market Demand Conditions: Finland + - Sparsely populated area supports adoption of wireless devices - 1st world country with resources available to pay for services - Weather supports phone- over face-to-face conversations


Telekom Cluster Program: Telekom Cluster Program What is the Finnish Cluster Program? Introduced by the Institute of the Finnish Economy (ETLS) to strenghten Finnish Competetiveness in the 90‘s Combined effort of economic and industrial policies, education, Randamp;D efforts, private and public interactions to be world-class leader in specific content Specifically: Telekom Cluster To provide Finland with a strong world-wide competitive advantage through Public-Private Partnerships (Data: Year 2000) 4000 Firms (VC, Software/Hardware-Vendors, Manufacturing, Randamp;D) 83.000 Employees, producing 6.9% GDP


Finland – Why is telecom so successful ?: Finland – Why is telecom so successful ? Finland Specific No monopoly on any of the value chain parts of telecom, fostered healthy competition between companies… European consumer demand (e.g. roaming,…) kept Finland on edge of technologic development Market-orientated Government with close ties to Industry helped propel technology, legal and export (e.g. Mandamp;A business) Excellent education provided necessary work-force Worldwide developments Tech-hype in late 90’s helped propel technology Mobile services were seen as gateway to economic development Mobile developed to essential good (e.g. 4 bn mobiles sold so far, (source??) Nokia in 2000 is as large as the next three Mobile Equipment Manufacturer together: Nokia 31% , Motorola+Ericsson+Samsung 31% = 62% of World-Market Does Nokia need Finland and Finland Nokia?


Nokia over Motorola – Why ?: Nokia over Motorola – Why ? NOKIA‘s share-price developed significantly better than the DOW or MOTOROLLA Nokia built a brand around Mobiles as Fashion item‘s and not tech-gadgets (Nokia 2100 sold 20 million time instead of planned 400,000) environment of supportive legislature, economy, strong Randamp;D, strong content delivery industry (games, info, news) in Finland formed alliances and was part of successful GSM consortium Motorola clung on success of old technology (analog vs. digital) and didn‘t change employed resources for IRIDIUM, which failed did not see value of Brand Building


Finland Challenges / Road to Success: Finland Challenges / Road to Success Labor shortages of skilled workers Overall Growth Rates in major industries are declining Major export markets are weak Short Term Present – 5 years Long Term 5 year – 25 years Low-diversified technology concentration with few clusters, e.g. Nokia Market Cap 71% Changing socio-economic environment Challenges Road to Success Actively support clusters in high-service, low-manufacturing areas Concentrate on EU Opportunities in new member states Battle rising unemployment-rate through tougher social laws Support Entrepreneurship- and Service-Society through education business-friendly laws reduction of social services