Porter’s Five Forces Analysis | Developed | Emerging | Rivalry within an industry | High- Apple, Samsung, RIM- well positioned competitors | Low in the remote areas specially India, High in urban areas in other emerging countries due to influx of Chinese and Korean manufacturers. | Bargaining Power of customers | High due to switching costs being low, existence of variety of phones. | Low in rural areas and high in urban areas due to the price sensitivity. | Bargaining power of suppliers | Low- Nokia manufactures the phones themselves and controls the distribution | Low in urban areas and medium in rural areas due to dependence on local distributers | Threat of new entrants | Low- existing brand royalty and high paced innovation required. | Low in rural areas – inaccessible due to location and low marginMedium to high in urban areas due to low barriers of entry. | Threat of substitutes | High- low switching costs and not much product differentiation. | Low in remote areas as limited options availableHigh in urban areas- low switching costs and limited product differentiation |

Based on this analysis, we believe that emerging markets are more attractive than developed markets mainly because of lower threat of entrants and substitutes and lower bargaining power of suppliers and customers.
Analysis of Nokia’s strategy using functional approach | Emerging | R&D | * GSM/3G expertise * Limited range (e.g. 50 new models v 120 for Samsung) * Apps and services, e.g. Life Tools * Customisation for operators * Appropriate technology e.g. radio * Navteq- Navigation and digital map system * Nokia employed a group of anthropologists who observed human behaviours. | Marketing/Sales | * Innovative pricing. eg Reverse bundling * 'Democratizing' smartphones * Trusted quality- good brand value * Move customer up Nokia value chain * Localisation. eg 'Made for India' * Selling to poor people in rural areas | Distribution/Logistics | * Long, complex, efficient supply chain * Widespread distribution and service network * First mover eg. Africa * Efficient after sales service * Maintained good relationship with local companies | Production/Manufacture | * Limited range * Efficient production due to scale * Established factories locally | Software development | * Nokia developed completely new services such as Life Tools, Nokia Money which very relevant for the developing markets. |
The main source of their competitive advantage has been the capability to offer lower prices due to the costs advantages and the ability to develop products suiting to the needs of the emerging countries.
Recommendation
Increase presence in emerging countries and continue product development in developed countries.

Exhibit 11 states that Nokia holds 39% share of revenue in Europe which is pretty substantial which will help fund expansion in other regions. As per the graph above, Europe occupies the cash cow quadrant. The market share of Nokia in North America and Japan is 7.2% and .3% and therefore would occupy the dog quadrant.
The emerging economies predominantly Asia Pacific are the stars and Nokia should continue expansion in these areas. In countries with low market shares (Question mark quadrant), they should introduce products which may enable these market to move into the top left quandrant.
There is a huge untapped market in Asia Pacific. It’s the region with the lowest penetration of 45.5% (Exhibit 11) and the highest population. So, potentially 54.5% of the population (3.7 billion) do not use a mobile phone and this can be a huge market for Nokia to sell their basic and enhanced models especially in rural areas since this is one of their competitive advantages.
Additionally, about 26% of the current subscriber base i.e. 1.7 billion is expected to replace their handset which is again a huge opportunity for Nokia to move customers into phones preferable the ones with higher average selling price.