book.chapter Nokia's evolution

Finland is endowed with a wealth of resources, but fundamentally, it relies on two key assets: its people and its vast forests. The nation's prosperity hinges on its ability to sell goods overseas, ensuring that the domestic quality of life is maintained. This necessitates a deep-seated proficiency in international commerce, which is currently the most significant challenge facing Finns due to their limited experience in this area. This sentiment was echoed by Kari Kairamo, the managing director of Nokia in 1981, who emphasized the critical nature of exports for Finland's future. Contrary to the common misconception that Nokia is a Japanese entity, owing to the phonetic resemblance of its name, it is in fact the largest corporation in Finland. Nokia's journey to becoming a global titan in mobile communications is a remarkable one, beginning in 1865 as a modest forestry enterprise. The evolution of Nokia can be categorized into three distinct eras, each marked by the company's ability to leverage its strategic capabilities from the previous phase to build new competitive advantages. This adaptability and strategic flexibility have been the cornerstone of Nokia's success. The inception of Nokia dates back to May 12, 1865, during a boom in Finland's lumber industry. Its founders, engineer Fredrik Idestam and prominent politician Leo Mechelin, who played a pivotal role in Finland's quest for independence from Russia, established the company near the Nokia River. Initially funded by private investors, Nokia's operations expanded from a small mill to include a pulp factory, a paper factory, an electrical power generator, and other facilities by the 1890s. The founders ensured that Nokia mastered the entire value chain, a focus that has been maintained throughout its history. Post-World War I, Nokia transitioned from a family-owned business to a public company, diversifying into new sectors such as electrical power generation. The relocation of Finnish Rubber Works to the Nokia area in the 1930s, followed by Finnish Cable Works, led to discussions about merging the three companies, which finally materialized in 1967, forming the restructured Nokia Corporation with four major divisions: forestry, rubber, cable, and electronics. During the 1960s, Nokia capitalized on a trade agreement with the Soviet Union, balancing its sales across various regions and product lines to avoid overreliance on a single customer. This foresight proved invaluable when the Soviet Union collapsed in the 1990s. Kari Kairamo's leadership in the late 1970s and 1980s was instrumental in Nokia's transformation, as he sought to expand into international markets and leverage Nokia's strategic assets, including technology, customer information, and corporate culture. Nokia's aggressive expansion through acquisitions, such as Salora Oy, Luxor AB, and Oceanic, positioned it as Europe's third-largest television manufacturer and laid the foundation for its future in mobile communications. By the end of this period, Nokia had amassed a revenue base of $2.7 billion, employed 27,600 people, and achieved a market capitalization exceeding $1 billion. The company's global focus from the 1920s to the 1980s set the stage for its next phase, which began in the 1980s with a concentration on mobile information. Despite facing financial challenges and a national recession, Nokia's cellular business flourished. The appointment of Jorma Ollila as CEO marked a pivotal moment, as he steered the company to focus exclusively on wireless technology, leading to a reorganization that emphasized product innovation, flexibility, and rapid responsiveness. Nokia's growth in the late 1990s was a testament to its strategic decisions: concentrating on a few businesses with global reach, understanding local markets, building the Nokia brand, and focusing on the burgeoning wireless market. These efforts positioned Nokia as a leader in the mobile phone industry, with a 30-percent market share by the end of the 1990s. Entering the 21st century, Nokia shifted its focus to the mobile digital economy, recognizing the potential of combining mobility with the Internet. This led to increased R&D efforts, involvement in setting industry standards, and strategic alliances. Nokia's vision for the future was to pioneer the mobile digital economy, an industry that was still in its infancy. Nokia's commitment to this vision involved building its brand, refining business processes to better fit customer needs, developing global segmentation expertise, transitioning from OEM sales to direct marketing, and enhancing design capabilities. These strategic moves were aimed at positioning Nokia at the forefront of the mobile digital economy, ready to capitalize on the opportunities presented by the convergence of mobility and the Internet.