Nokia Corporation : Competitive Advantage And Strategic Target

The cost leadership strategy seeks to improve profit margins by bringing down the costs of producing while enabling the organization to still charge market prices. They also focus on increasing the market shares through lower pricing, enabling the organization to continue to reach profits because of reduced costs. As with any organization the goal is to minimize cost directly to the organization providing the delivery of products or services. According to Barney (2007) low cost leadership strategy takes pride in initiating its costs advantage abilities to charge lower prices while reaping the rewards of higher profits.

In cost leadership a firm will set out to become a low cost producer in its industry. A low cost producer must find and exploit all sources of cost advantage. If a firm can achieve and sustain overall cost leadership then it will become an above average performer within its industry. The sources of cost advantage are varied and depend upon the

Competitive Advantage: Creating and Sustaining Superior Performance, by Michael E. Porter. Author focused on three principle strategies that a firm can use to neutralize competition areas. low cost differentiation products, superior performance, and competitive technology. The profit potential of any organization can be truly determined by total 5 competition areas. 1 Jockeying for a position, 2 new competitors 3 substitute products/services threats 4 Raw materials power of suppliers 5. Organization customer bargaining power. Value chain is a tool that can be used to analyzing large number of value producing activities to determine customer segment need. Competitive advantage through low cost focus on ten major factors; economics, learning, capacity utilization, linkage within value chain, business interrelationships unit, vertical integration, Business cycles timing purchases, discretionary policies, location, and institutional factors. Two main area an organization achieve cost advantage is controlling cost drivers and two

Even if you have the most exciting idea ever, it is often difficult to enter a new market or industry and compete directly with established incumbents. You have certainly noticed how I have repeated Michael Porter’s three basic competitive strategies in every chapter. Implementing, cost leadership, differentiation, and strategic focus alone, or a blend of these three things can help any business increase its competitive advantage. For this reason I will dedicate the next few paragraphs to these three concepts.

A scholarly work that has received widespread attention and recognition in the Strategic Management area--and beyond--is Porter’s (1980, 1985) typology of generic competitive strategies: Cost leadership, differentiation, and focus. These three actually fall into two basic categories. The focus strategy calls for concentration on a niche or a narrow segment. But Porter says that success in this strategy can be achieved either via cost leadership or differentiation. Thus, cost leadership and differentiation are the two basic strategies in Porter’s typology. These two then are the subject of discussion in this paper.

According to Michael Porter competitive advantage can be gained by the use of three major strategies. The first is the cost leadership, second the differentiation of the product and the third is choosing the small segment for competing and concentrating. Narrowing the segments causes a better scope for the competitive strategy. Thus a leader with low cost, provided that the quality is delivered has a market advantage. The product must be standard, but may of the no-frills kind. With this cost factor the company will try and seek to become special in the market using a strategy of product differentiation. Thus the insistence would be on uniqueness of the product, something that differentiates or creates a separate entity in the minds of the customer. Thus the firm generally must also choose the identity and the attributes 'in which to differentiate it that are different from its rivals.' (Johnson; Scholes, 1997, p. 47)

"Cost leadership is where an organization accomplishes relatively lower costs than their rivals and competes across a broad range of divisions" Thompson, (2005). An organization must be willing to offer their products at the lowest possible price without making any compromises in the quality of the product. It does not imply that the company has to offer their product at the lowest market price as those products are often regarded as inferior. A company which concentrate on cost leadership strategy will be able to produce greater profit margins by marketing more product units. "Cost leadership can be accomplished by superior management, concentrating on cost-saving opportunities,

In cost leadership, a firm sets out to become the lowest cost producer in its industry.

The cost authority system of the organization regarding cost benefit is the capacity of the firm to start the equivalent quality item as created by contenders at a diminished cost. The strategy is ordinary for the unit

The goal of a cost-leadership strategy is to reduce the firm’s cost below that of its competitors. The cost leader, as the name implies, focuses its attention and resources on reducing the cost at which it is able to offer a product or service (and still make a profit in the long term). The cost leader optimizes all of its value chain activities to achieve a low-cost position. Although staking out the lowest-cost position in the industry is the overriding strategic objective, a cost leader still needs to offer products and services of acceptable value.

The Competitive Advantage model of Porter portrays that competitive strategy is about taking offensive or defensive action to create a defendable position in an industry, in order to cope successfully with competitive forces and generate a superior return on investment. Competitive advantage is created by using resources and capabilities to achieve either a lower cost structure or a differentiated product. A firm positions itself in its industry through its choice of low cost or differentiation. This decision is a central component of the firm’s competitive strategy.

Porter suggested four "generic" business strategies that could be adopted in order to gain competitive advantage. The strategies relate to the extent to which the scope of a business' activities are narrow versus broad and the extent to which a business seeks to differentiate its products. The differentiation and cost

His updated framework instead comprehends four groups, as depicted in figure 1. Later on, the focus strategies were divided in two variants (Hendry, 1990). The main aim of the model is to enable firms to achieve long term sustainable competitive advantage by being different from their competitors (Dobson, et al., 2004).

* A competitive advantage is one gained over competitors by offering consumers better value. You increase value by lowering prices or increasing benefits and services to justify the higher price. Differentiation and cost leadership strategies search for competitive advantage on a broad scale, while focus strategies work in a narrow market. Sometimes, businesses look for a combination strategy to please customers looking for multiple

Nokia had relatively strong bargaining abilities to its suppliers since it made a large scale of production. The management of the company also strictly controlled its manufacturing costs. The producing costs of the company were much lower than those of other competitors, such as Motorola. Nokia’s excellent research and development ability was the factor why the company could defeat other competitors as well. However, since Apple launched iPhone and Samsung cooperated with Google, the global mobile phone markets have significantly changed during these decades. The market share of Nokia had begun to decline. Its sale revenues and volumes also have sharply reduced. The management of the company tried to find strategies to address the dilemma which it faced: the sharply decreases in its profits and market values. Despite the relative responses which had been implemented, the performance of the company has still being falling during the recent years. Nokia announced its mobile systems, Meego and Symbian, to stop renewing applications in 2012 and 2013, respectively. In 2014, the company’s mobile phone segment and relative patents were sold to Microsoft. Investors and critics in capital markets argued what Nokia’s behaviours could improve its market value and operation performance. Before Apple and Samsung appeared, no one anticipated the telecommunication giant, Nokia, would fail