Enhancing the effectiveness of Nokia key retail channels The case of Nokia Representative Office in VN

MBMM1 Acknowledgement of commitment Acknowledgement Table of content Comments from advisor Comments from Professors 2: The establishment and development of Nokia Viet Nam 6 3: Nokia

Page 1 of 7

MBMM PROGRAM

ENHANCING THE EFFECTIVENESS of NOKIA

KEY RETAIL CHANNELS

“The case of NOKIA Representative Office in VN ”

FINAL PROJECT

MASTER IN BUSINESS & MARKETING MANAGEMENT

Tutor’s name: Dr Nguyen Dinh Tho

Ho Chi Minh City May 2007

MBMM1

Acknowledgement of commitment

I, Bui Thi Thanh Ha, prepared and conducted this business project “

Developing Nokia Key Retail Channels” as final project of our MBMM1 program

With the approval and great advices from the Marketing Director Mr Nguyen

Quyet Thang, this project has been accomplished by myself and served my current

company as a real case

I trust the legality of all references, information sources and materials using

to complete the project

MBMM1

Acknowledgements

The author wishes to express her profound indebtedness to the courtesy

advisor of Dr Nguyen Dinh Tho and for his valuable guidance, document offer

and encouragement during the course of this work His helpful suggestions,

supervision and comments have greatly improved the quality of this work

I also wish to express his faithful gratitude to Dr Tran Anh Tuan and

Professor Jean Pierre Bayens for kindly consenting to be member of my thesis

examination committee

I also convey my sincere thanks to Nokia Vietnam, Marketing and Sales

team for providing the information and general support enabling me to undertake

of the Master of Marketing and Management program, and warmest thanks to my

mentor, Marketing Director, Nguyen Quyet Thang, who offered me valuable ideas

for the final project

I hope to send my thanks to my close friends in MBMM1 who gave me lots

of practical and moral support My thanks want to send to Nokia owners 39 Le

Duan, 165 Hai Ba Trung, Mobile mart Vien Thong A, Mobile world who gave me

great ideas to finish my works

Finally, I wish to express my gratitude to my beloved family

MBMM1

Acknowledgement of commitment

Acknowledgement

Table of content

Comments from advisor

Comments from Professors

2: The establishment and development of Nokia Viet Nam 6

3: Nokia 4 Ps and Overview of Nokia’s channels 7

4: Introduction to Nokia’s key retail channels 10

5: Situation analysis of NS in year 2006 11

• Nokia store channel- Achievements 2006 12

6: Situation analysis of MM in year 2006 13

Part III: ENHANCING THE EFFECTIVENESS of NOKIA KEY

RETAIL CHANNELS

15- 26

1: Mission and Objectives of Nokia Viet Nam in year 2007 15

2: Objectives and Strategies for Key Retail Channels 17

3: Key Activities for two main channels 18

MBMM1

Abbreviations list

Tier 2 Da nang, Hai Phong, Dong nai, Can tho

Tier 3 Binh Duong, Tien giang, Nha trang, Qui Nhon,

Quang ninh, Thanh Hoa, An giang, Kien giang, Dong Thap,

TCO Total Channel Offering/Total Customer Offering

Gfk (Growth from Knowledge) GfK Asia Pte, Ltd

Nokia Care Is the service center to make guaranty for

customers Nokia Academy Is responsible for training and people

development

“Entry” Products = Low End Product with price under 100usd

“Hot” Products Product of good selling

“Mid” Products = Mid end Product from 100- 300 usd/1unit

“ High” Products = High end Product from 301usd/unit up

Executive Summary:

Nokia is the world’s largest manufacturer of mobile devices and a world leader in mobility, driving the transformation and growth of the converging Internet and communication industries Nokia offers consumers a wide range of mobile devices and increasingly is providing people with experiences in music, navigation, video, television, imaging, games and business mobility through these devices Nokia also provides equipment, solutions and service for communication networks such

as network operators, service providers and corporations

After ten years Nokia has entered Viet Nam, the market of mobile phones is more and more growing and bigger The distribution network is also developing and splitting by specific channels such as Nokia stores, Mobile mart, Shop in Shop, Electronic marts and General retail Nokia has achieved an average of 40% sales growth every year and gained around 54% of market share

In fact, the global market share of Nokia is minimum 60% and this leads that the

ambitious goal of Nokia Viet Nam will be 60% of market share in next years

(2007-2009) Nokia Viet Nam places “Channel Development” the most important

task and clearly defines “Channel” as KEY DRIVEN to contribute not only the growth of sales volume but also building branding

From 2006, Nokia realized that channels have not performed well in term of building branding, delivering TCO experience to consumers, achieving expected market share so Nokia has decided to enhance the effectiveness of Nokia Key Retail Channels, specifically Nokia stores and Mobile marts because Nokia stores and Mobile marts channel are contributing 41% of total sales volume with 76 stores in big cities With long goals, Nokia Viet Nam has restructured one Retail Channel Manager including 4 subordinates to be in charge for Nokia stores and Mobile marts

Nokia set clear the objectives for two key channels as follows:

• Nokia stores’ Objectives: to achieve the benchmark standard Nokia of

Service, Look and Feel, and deliver TCO experience to customers

• Mobile marts’ Objectives: to contribute sales growth in order to achieve

60% of market share and build up branding by taking the advantages to occupy the best space inside and outside of stores comparing with the competitors

• Scope: in year 2007, focus to enhance the effectiveness of Nokia stores

and Mobile marts in HCMC and HN

Theory of Marketing Research advises that it needs to understand the real problems through the quantitative research The research is proposed in the project

“to identify the level of the awareness of NS from customers and evaluate Total Customer Offering (TCO) of NS versus Samsung Plaza and Motor House and Mobile marts”

The real problems for Nokia stores and Mobile marts are as follows:

• Nokia is loosing the customers gradually because the end-user pricing list prescribed by Nokia is so high

• Mobile marts have received many supports from competitors and Nokia will loose the sales volume and space to make branding

The recommendation will be “NOKIA CLUB PROGRAM” and “KEY ACCOUNT PARTNERSHIP PROGRAM”:

• Nokia Club program: to keep the loyal customers in Nokia store channel

• Key Account Partnership program: to develop relationship with Mobile marts’ management

PART I: INTRODUCTION

With 16 million subscribers, the lower price and a wide range of end products, and the appearance of new services such as free Internet, charge decreased, … providing by operators Mobilephone, Vinaphone, S-fone, Quality should be ensured not only for the network but also for value-added services and the stability

of available telephone numbers meet the increasing demand of consumers

Nokia store is the store system selling 100% of Nokia phones (not selling any competitor mobile phone device) and is representative for Nokia to introduce Nokia phones to customers in term of Service, Look and Feel and TCO experience Until now, Nokia have received the very good feedback from consumers about Nokia stores’ service However, Nokia stores have to sell to end- users with the prescribed pricing list by Nokia That price is currently higher than end users’ price in the market about 3-7% and has affected strongly to sales achievement of all Nokia stores and may lead to the collapse of Nokia stores because the store- owners have lost margin to survive

In reality, when the consumers have demand mobile phones, they usually come to Nokia stores to enjoy the service and have experience in using live demo (try real phone) to be displayed and demonstrate by Nokia professional promoters Then, the consumers’ final decision has depended on the price, so how to keep the consumers and what are the target customers for Nokia stores who can pay higher price with the best service? What is the awareness of the customers to Nokia stores nowadays? What should the loyalty program be applicable in Viet Nam? …

By 2006, different from Nokia stores Mobile marts which are big stores in a good location of big cities have many advantages in the fierce competition environment

of mobile phones market in term of pricing, promotions, distribution and services

By Nokia, Samsung, Motorola…so the key challenges for Nokia is that how to

make a good relationship with Mobile marts’ owners and how Nokia can sell more than the competitors to achieve 60% of market share How can store staff recommend Nokia to consumers more than the competitors? How can Nokia have more space in stores and build more branding than the others?

With the instruction of my mentor as Marketing Director of Nokia, I developed a project The project will deliver the above questions and confirms:

“ The Objective of the project is to keep and to maintain the customers in order to retain Nokia store channel and how to develop a good relationship with Mobile marts’ management”

The theory of Customer Relationship Management (CRM) advises the solution

for the project will be “NOKIA STORE CLUB” which is key driven in

Marketing Plan from 2007-2009 for Nokia stores and “ Key Account

Partnership Program” which is very crucial task for Mobile marts to achieve the

market share of 60% for Nokia in year 2007

The project comprises three parts:

• Part I: INTRODUCTION

• Part II: SITUATION ANALYSIS

o Introduction Nokia Corporate, Nokia Viet Nam and Marketing mix

o Situation analysis Nokia store channel and Mobile mart channel

• Part III: ENHANCING THE EFFECTIVENESS of NOKIA KEY RETAIL CHANNELS

o Nokia Club Program

o Key Account Partnership Program

o Directions for implementation

PART II: SITUATION ANALYSIS

1 Overview of Nokia Corporate:

During 142 year history (1865-today), Nokia has evolved from its origins in the paper industry to become a world leader in mobile communications Since 1968 the newly formed Nokia Corporate is ideally positioned for a pioneering role in the early evolution of mobile communications and from 1992-1999 as mobile phone use booms, Nokia makes the sector its core business and Nokia Company is the world leader Today, approximately 850 million people from virtually every demographic segment of the population use Nokia devices for communications, business and entertainment, and as luxury items Dale Ford, Vice President of the market intelligence for iSuppli believes that mobile phones have become such an important tool for people to live and thrive that they are becoming a basic human right

In 2006, Nokia’s net sales totaled EUR 41 billion (USD54.3 billion) with about 10% of net profit At the end of year 2006, Nokia employed 68.483 people of more than 120 nationalities and sales in more than 150 Countries, Nokia had 15 production facilities in nine countries, as estimated 36% share of the global device market (mobile device volume is 347 million units)

2 The establishment and development of Nokia Viet Nam Representative

Office,

To be established in Vietnam more than ten years, Nokia representative office has achieved the top positioning in consumers’ reference and Nokia is a leader of mobile devices with 54% market share with approximate 16 million people to use mobile phones today

The key milestones in Nokia Viet Nam history are as follows:

• In 1996, with the demand of mobile devices was increasing significantly, capturing this great opportunity, Nokia has been entered Viet Nam market via a

representative office under signed by Nokia Singapore Pte Ltd Company in the first stage From 1996 – 2002, Dong Nam was dedicated exclusive nationally distributor of Nokia in Viet Nam market

3 Nokia 4Ps and overview of Nokia’s channels:

• By the end of 2006, the results of a qualitative study with 41.500 respondents across 16 countries was to understand the changing of behavior patterns and to measure the behavior and the attitude of consumers toward mobile devices, technologies and related services Nokia restructured market into 12 segments (see the definition in appendix page 27-29) Figure 1 – 12 segments

Global Segmentation Refresh

Style Leaders (17.7%)

Style Followers (9.7%) Family Providers

(15.9%)

Life Jugglers (1.1%) Pragmatic Leaders (1.8%)

Image Seekers (11.3%)

Simplicity Seekers (2.8%)

Mature Acceptors (0.6%)

LOWER INVOLVEMEN T

RATIONA L

ASPIRATIONA L

HIGHER INVOLVEMEN T

Young Explorers (8.4%) Technology Stylists (3.5%)

Life Builders (21.3%) Technology Leaders (5.9%)

• In January 2004, Nokia reorganized into four business groups - Mobile Phones, Multimedia, Enterprise Solution and Networks, to further align the company’s overall structure with its strategy; to better position each business group to meet the specific needs of new and increasingly diverse market segments; to increase Nokia’s operational efficiency; and to maintain economies of scale (see details in appendix page 31)

o Mobile Phones: connects people by providing expanding mobile voice and data capabilities across a wide range of mobile devices

o Multimedia: gives people the ability to create, access, experience and share multimedia in the form of advanced mobile multimedia computers and application with connectivity over multiple technology standards

o Enterprise Solution: offers businesses and institutions a broad range of products and solutions, including enterprise-grade mobile devices, underlying security infrastructure, software and services

o Networks: provides network infrastructure, communications and networks service platforms, as well as professional services to operators and service providers

• Introduction 4 Ps of Nokia:

X Product Categories and Segments relationship: Nokia have 4 categories

Connect (50%), Live (22%), Achieve( 20%) and Explore(8%) Figure 2

Overlay of Categories on Segments

Young Explorers

Technology Leaders Technology Stylists

Style Leaders

Style Followers Family

Providers Simplicity Seekers

Mature Acceptors Life Jugglers

Pragmatic Leaders

X Distribution of Nokia is below chart:

In year 2003-2004, Nokia terminated business contract with Dong Nam and

has established 3 regional distributors, Lucky and Thuan Phat and a joint stock company is FPT (The Corporate of Financing and Promoting technology) Figure 3: distribution chart

X Price: Figure 4 of trade price analysis

Vietnam Market by Trade Prices

Source: GfK retail audit data for Aug 06 for Vietnam.

Note: Analysis is based on value share

Nokia Samsung Sony Ericsson Motorola Others

Price Band Value Share

GR (6,490)

4%

5%

6%

Elec Mart (10)

52%33%

MobileMart (60) 32%

35%

o “Mid” products from 151 –225USD/unit and “Low” products under 150USD/unit showed the low percentage share in total pricing bands Therefore, Nokia should focus “low end” products and mid end in order to

achieve the sales target, 60% market share by Mobile mart channel

X Promotion:

o ATL: TVC, print ad, activation (coffee, Buildings ,…)

o Outdoor advertising: billboard, neon sign, sign boards

o Consumer promotion: lucky draw, premium gifts, scratch card…

o Trade promotion run by Nokia’s Field force and distributors: free products, discount on price/big quantity, merchandising contest, …

o Advertising on promotional items: uniform, raincoat, umbrella, T-shirt, cap, pen, key chain, notebook, bag

X Overview of Nokia’s channels:

Nokia device phones is distributing to the market through out 5 channels: Nokia Stores (NS); Shop in shop - Mobilemart (MM); SiS , GR- Electronic (GR-E) and General Retail (GR) Figure 5 of Channel chart

NS

SiS- Mobile Mart

(vol share: 40%, 60 stores)

SiS

(Vol share: 23%,

154 stores)

GR – Electronic Mart-new channel

(vol share 1%, 10 Stores)

GR

(vol share: 35%, 6490 shops)

100% Nokia sales & branding, full ranges – 6% with 16 stores

> 200m2, > 1,000 units/month, all brands, legitimate only – 35% with 60 stores

> 50m2, >100 units/month, all brands, legitimate & Grey, priority

> 50m2, > 600 units/month, all brands, legitimate and Grey

< 50m2, < 100 units/month, all brands, legitimate and Grey

4 Introduction to Nokia’s key retail channels:

• Nokia store channel

Nokia store channel is the channel to build the GOOD IMAGE of NOKIA to customers and owned by 3 distributors and 4 private companies Currently Nokia supports to the owners 100% budget to invest furniture, branding, merchandising POSM, marketing activities, Nokia Academy, …but the owners will follow up all

of guidelines from Nokia in term of Marketing and Sales Operations

Samsung and Motorola have the same stores like Nokia They are called Samsung Plaza stores and Motor Houses, but they are loosing the profit because they really are show room and all owned by distributors

• Mobile mart channel

Mobile mart channel is the CORE channel and growing everyday in term of the number of stores (10 stores in 2005 and 60 stores in 2006) so sales volume comes

up accordingly They owned by 12 private companies and operate these stores with their different ways Different from Nokia stores, the end user pricing is very competitive in this channel and the price war is happening In 2006, Nokia has invested 50% of the furniture, live demo and co-promotion

5 Situation analysis of NS in year 2006

Following the section Introduction, the situation analysis for two channels is very important It helps to understand the achievements, the highlights and challenges

of these channels in order to understand the real problems:

• Overview Nokia store channel 2006

As mentioned previously, Nokia store channel is responsible for building up the benchmark Nokia standard of service, Look & Feel, and deliver TCO experience

to customers In year 2006, sales strategies for Nokia stores:

o Ensure the sales growth 40% comparing with market growth 80%

o Implement the contest “ Nokia of the month ” with clear KPIs setting to owners of the stores and reward system

o Continue to improve Look & Feel by renewing furniture, POSM,…

o Monthly run in-store activities: road show and promotions

• Nokia store channel- Achievements 2006

Sales growth is 22% comparing with year 2005 and Nokia stores did not achieve 40% of sales growth Look at below chart, Most of NS increased monthly sales volume such as store 21 THD, 39 Le Duan, but sales growth index is small Moreover, some stores C4 and 165 HBT showed unstable sales

Figure 6 of sales achievement of Nokia store

Nokia run the contest “ NS of the month” to all stores with the overall objective to make an assessment on the compliance of stores against the NOKIA Retail Services Standard (store/staff appearance, selling skills, phone demo set up) The methodology is the mystery shopping technique that shall be used to get the customer perceived the values on the basis of answers through personal observations

Monthly Sales Volume by Store

0 500 1000 1500 2000 2500

50 DBP

95 HV 163 3/2 165 HBT 39HN C4 GV VT

P1 P2 P3 P4 P5 P6 P7 P8 P9'06 P10 P11 P12

Monthly Sales Volume by Store

21 TH

25 Tha

Hoa 39 LD

Dania

P1 P2 P3 P4 P5 P6 P7 P8 P9'06 P10 P11 P12

KPIs for NS is to achieve the contest “NS of the month” minimum 90 scores and the reward for NS winner is to receive the certificate NS of the Year 2006 by Director’s signature and Special Gift and PR for the store winner

Figure 7 is the report of NS’s performance in the contest

In resulted, there are 3 stores closed so the number of Nokia stores is 13 now and the winner is store 18 Dien Bien Phu, Hanoi

Regarding to sales activities to support the channel like in-store activity new product N73 and Launch Party N8800 to attract a lot of customers to come to Nokia stores Nokia has completely renewed all stores such as signage outside and inside stores, installed or re-painted new furniture, …

Year 2006 is the difficult year for Nokia store, although Nokia supported strongly the budget and the management but the achievement of Nokia store channel is not

so good in term of sales volume The key challenge is how to enhance the performance of Nokia stores with the improvement of TCO experience to consumers

NOKIA STORES' PERFORMANCE Monthly Average Score / Store (Maximum: 100 Marks) Monthly No of Store with above 85 marks

0 10 20 30 40 50 60 70 80 90

Average Score / Store 59.1 64.5 77.6 79.1 81.4 84.8 84.9

P6 P7 P8 P9 P10 P11 P12

7/13 9/14 10/14 10/14 5/13

11/14 12/14

6 Situation analysis of MM in year 2006

When the number of subscribers reaches a certain point, the competition to win the new subscribers has never been as hard as in recent times This was also the year

of fierce sales promotions launched by all mobile providers

By 2006, market share of mobile devices has split specifically by three main players Nokia (54%), Motorola (22%) and Samsung (20%) and the key channel

“ Mobile mart” is almost big contribution of sales volume for all mobile providers and is growing day by day in term of number of stores and volume

The Key Highlights and Key challenges are as follows:

• Mobile marts usually locate in a good place with a big square around 200 m2 up and minimum 2 floors They are Vien Thong A chain, Mobile world chain, Hanoi mobile stores…

Table 8 is the trend of Mobile mart and Nokia store:

• The analysis of marketing mix in mobile marts channel:

o Price: Actually, the price war is happening everyday in all mobile mart stores In order to attract the customers, mobile marts are taking the best price to introduce to customers after deducting all promotions and keep the

20 stores, 2% MS

10 stores, = 1% MS

13–16 stores 5% MS

16 stores 6% MS Nokia store

100 stores 45% MS

80 stores 40% MS

60 stores, 35% MS Mobile Mart

6000

6200

6500 Total:

2008

2007

2006

minimum margin The margin of Nokia is from 1% - 5% for low end to high end whereas margin from competitors is from 5% - 10% So, Key challenge is how to set the price in order to increase mobile marts’ margin

o Promotion: Since fourth quarter of 2006, the war of promotional activities happened in this channel aggressively and stronger It makes mobile marts’ owners to become arrogant and always ask more supports Key challenge is how to work with them smoothly They have to agree the plan and support Nokia to have more advantages than competitors such as branding, sharing the information like sales report, …

o Distribution:

Distributors deliver mobile devices directly to mobile marts with the fully support in the priority like delivery time, “hot” products With the potentiality of this channel (80 stores in 2007 and 100 stores in 2008), key challenge is how to satisfy the good service to this channel to balance with other channels

o Product:

Performing a variety of product especially “entry” products to supply to customers is the top priority strategy in product development of Nokia and also competitors Nokia provides the product training to this channel by distributors’ trainers Key challenge is how to provide the professional product trainings and soft skills from Nokia Academy by Nokia trainers and to produce many “entry” products (<60$/unit)

PART III: ENHANCING THE EFFECTIVENESS of NOKIA KEY RETAIL CHANNELS

In order to define the objectives and sales strategies for two main channels, it is necessary to understand the objectives of Nokia Viet Nam:

1 Mission and Objectives of Nokia Viet Nam in year 2007:

• Mission: In a world where everyone can be connected, Nokia take a very human approach to technology “ Lead in Mobility”

• Objective: Viet Nam will consume nearly 4.7million mobile phones this

year, and roughly 6.3 million units next year (noted as a source local newspaper Investment Wednesday quoted estimation of a market research firm

as saying) Moreover, Viet Nam is expected to have 36 million mobile phone subscribers by 2010, up from some 16 million currently, according to the state-owned Viet Nam Posts and Telecommunication Group and the country with a population of 83.1 million has set targets of having 32-42 fixed and mobile phones, 10 personal computers, and 8-12 Internet subscribers for every 100 residents by 2010 Capturing with the great opportunities, Nokia set the objective:

Achieve Market Share 60% in next 3 years ( 2007 – 2009 )

• Key challenges & Key Success Factors:

o The competitors (Motorola, Samsung) are very strong in new product launch with price range $50/unit and Chinese brands are coming at 50% price cheaper with the same specifications Moreover, the potentiality of Nokia in next few years the “low” products estimate sales growth from 53% to 65%, whereas Mid range down from 39% to 30% and high range

down from 8% to 5% It leads Nokia to focus “LOW” products, especially

Mobile marts is the MAIN channel to sell a lot of “LOW” products

Based on the analysis of sales evolution (please see appendix page 31)

o In order to increase sales volume, all competitors are focusing to run promotions to Mobile mart stores aggressively The pricing war is happening everyday and consumers try to get the mobile devices with a

cheapest price So, it affects the margin of mobile marts especially Nokia

and foresee the harder of competition and there are more players in the mobile phone market

o The number of mobile phones has definitely increased and it has required the better AFTER SALES SERVICE, called “ Nokia Care” so Nokia care centers are required more professional and satisfy with consumers’ needs Actually, the half of NS is installed Nokia care center

together so How many Nokia care centers will open in all Nokia Store and

what the budget is and what plan for Mobile marts?

o With the current status, the training only supported to channels through

FPT and this has not delivered good results Nokia Academy provides

trainers and focus to train in two main channels (MM&NS)

o The service of distributors is key link between Nokia with retailers but distributors still have not performed well in delivery and service so it is

important to set KPIs to distributors in term of inventory, orders, time

delivery, credit, price protection

There are more key challenges when the quantitative research run by advised following the theory of Marketing Research, it is very crucial to understand the attitude and the behavior of consumers to NS and MM and TCO before