Blitz Company Case Study Free Sample

Introduction

A brilliant company that produces a diverse range of a product is prone to run in to trouble if the processes are not well designed, inefficient quality measures prevail and decision making is more prone to ad hoc basis rather than a standardized process. Blitz Company, an organization distinguished for its capability to cater the diverse needs of their customers, not only on basis of design features but also lot size, has been facing a cumulative number of issues.

To name a few, these issues range from production bottlenecks to capacity utilization to inability to reach deadlines. The analysis has indicated that these problems are just not due to process designs and the methodologies applied in executing them but can also be attributed to a varying number of haphazard managerial decisions. In order to scrutinize these process design flaws and varying managerial decisions, it is prudent to first understand the process flow and then analyze the bottle necks in detail.

The flow of this paper will be as such that I will start by first describing the process flow, then laying down the assumptions, followed by the analysis and production times of various machinery and their processes, then a look at the managerial flaws and finally ending with the recommendations. Process Flow The three main manufacturing steps at Blitz, preparation, image transfer and fabrication had quite a few processes within. Amongst them some of them were more common than the others; hence in order to draw the most common ones, we have neglected Epoxy painting, stake and soldering process.

The processes now included are, photograph, inspect and shear, drill (location holes), KPR, touch up and inspect, Plate, etch, shear, drill, configuration (Rout was popular with small lot size whereas Punch press for larger ones), Drill holes (use manual for less than 100 boards otherwise use the Green pantographic) and then finally inspect and pack. Hence from a total of 15 steps we have included 12 in our process flow, shown in Exhibit 1. The WIP boxes indicate the main bottle necks in the manufacturing process, they are, KPR, Plate, Etch and Drill Holes. Of course when we move forward, Drill Holes would top all.

Based on the popularity and the total number of boards, Epoxy Painting, Stake and Soldering Processes are neglected in designing the process flow, since they had the lowest number of orders and lot size. 2. The cycle times are based on per circuit board, i. e. time between two successive boards is calculated for all the steps; hence for the first seven steps, from Photograph to Etch, the cycle time is calculated by dividing the runtime by 8. 3. Since each step is for a board, all the units are standardized to min/board; this is for the drilling step which was originally given on per hole basis.

All calculations are in minutes. 4. Our understanding is that the drill hole run time was calculated on the basis of total holes from all the 8 machines divided by the total time, hence the cycle time 0. 1min/hole is based on the assumption that the 8 machines are running simultaneously. The same concept is applied for the KPR machines. 5. In calculating the capacity utilization, setup time is neglected based on the understanding that utilization is total run time over the total time available. 6. Taking all the days in Exhibit 6 of the case as the only working days, we use 21 days.

And with eight hours of daily workload, the total working minutes in a month are 10,080 minutes. 7. For orders that had a lot size of more than 100 boards, we have used Green Pantographic Machine whereas the manual machines are used for all those less than 100. 8. The cycle time for drilling (both manual and Green Pantographic) is highest; it will be used for the purpose of cycle of each circuit board. 9. Since the photography stage has no run time, we have omitted it in calculating the through put time. 0. Since Blitz caters to customized boards and also standard ones, we can safely assume the company to be a combination of job shop and batch processing. Analysis Production time for different lot sizes To understand how production time differs in different lot sizes we will try to calculate it in sample sizes of 8, 40, 120 and 800. Our assumption that we will need use manual drilling method for lot sizes that are less than 100, we have the following calculations for lot size 8 and 40.

The above calculations used a setup time of 185 minutes since we used Rout for configuration which is used when the lot size is small. However for calculating 120 and 800 we will have two different setup times. 120 will continue to use Rout but Green for drilling whereas 800 will be using Green for drilling and Punch Press for configuration.

The above calculations indicate that the Green Pantographic takes much lesser time than the manual method, however it is important to understand that because of high machine cost and setup time it will be feasible to use it for a bigger lot size. Taking the discussion forward we can also try to determine the feasible lot sizes for both Green Pantographic and Punch Press. Having done the calculations, with incorporation of setup time, and assuming that cost of running the machines for a shorter duration is economical, it is recommended to use Green for lot sizes of more than 7 and Punch Press for lot sizes of more than 250.

Capacity Utilization Exhibit 2 gives a good indication of the Capacity Utilization in various processes. KPR has a 72%, Punch press with a 20% and finally Green pantographic with an impressive 93. 2%. The very low utilization of punch press could be attributed to the fact that even though it has a high lot size, the little number of orders leaves the machine un operative for a long duration of time. It would be of interest however to see the capacity utilization for photography, which has not been included in exhibit 2 since it has no run time.

The setup time would prove to be pivotal here in calculating the utilization, since this is the only variable which is order based and not board.

Bottle Necks, Production and Managerial It is evident that the main bottle neck in the production is the drilling process. However the problem just doesn’t stop here, there is an entire plethora of issues that entail. The first issue of quality and comebacks can be derived from the fact there is no quality assurance department. Employees in their spare time tend to “quality” which is detrimental in maintaining consistency for Blitz, since many faulty boards pass by without any check.

The next factor comes from the lack of utilization of the machines in different processes, this can be attributed to the fact that the distance between each process is significantly large and employees have to move around a lot, letting them to spend lesser time in working on the machines. Third factor comes in when there is a rush order or a change in schedule due to returns, the entire process gets messed up and that leads further loss in utilization.

Then the concept of shipping out towards the end of the month causes piling up of inventory, leading to high inventory cost. Continuing further, there is a concept of allowing the employees to learn on their own, if substantial time is spent in the first couple of days in training the new incoming employees, they would start performing on standard basis right away. Recommendations The recommendations could be well addresses in form of short term and long term plans. Starting with the short-term plan, it is important to right the managerial flaws.

These include, setting up a highly skilled quality assurance department (consisting of at least three employees) which would monitor the boards after the end of each of the three main operations. This would undoubtedly address the quality issue arising from the specific needs of the customers. The company should setup a small training facility that would not only help new employees to gain the skills but also allow seasoned employee like Arthur Dief to pass on his skills to other employees already working. The latter step would help the senior employees to gain more skills and develop their own batch processes for less than 10 boards, but this would come in the long term plan. Continuing with the short term, the company might want to shift operation area 1 to operation area 5 (in the layout), this would reduce employee movement time a lot and help in increase utilization. Most importantly, the company should develop a set of charter or rules on how to address return, rush orders and shipping.

For the first two issues, the company can have double shift in a week which would only cater to such things, this way the original schedule would remain unharmed and the present ad hoc nature of operations can be fully addressed. Finally for shipping, the company should ship out order as soon as it is manufactured and not pile it up. The company should also look in to the procurement channel since substantial time is spent in actually trying to find the best prices, maybe signing up a supplier would help not only in saving two days but also provide the company with economies of scale.

In the long term plan, it is suggested that the company concentrate on developing further skills in their senior and more talented employees. This is pivotal since the company makes more margins in small customized lot sizes, thus using the forecasted profit and loss statement, we can predict gains in the future which can be invested in setting some working units for the employees to work on small profitable orders in batch size. These units can be setup in the large empty areas around the building.

Secondly, the company should invest more in drilling machines, both manual and Green Pantographs. The manual ones, being cheaper and more important should be bought more in quantity. To sum up, a more standardized approach would help Blitz address numerous of its issues, leading to more margins and sales and lesser bottle necks, quality and other issues.

Abortion Ethical Dilemma

Abortion Ethical Dilemma: A young woman, who is 18 years old, faces a difficult choice – whether to proceed with her pregnancy or opt for an abortion. Her parents, who strongly adhere to religious beliefs opposing pre-marital sex, would disapprove of their daughter being pregnant. While she does not desire to terminate her baby’s life through abortion, she feels it may be the only viable option available to her. The decision regarding abortion presents a complex ethical predicament that resembles other situations where distinguishing right from wrong becomes unclear. The resolution process further complicates matters as what one person perceives as the correct choice may be viewed as incorrect by others.

In this particular case, the young woman desires to make a morally right decision by continuing with the pregnancy; however, she acknowledges that doing so will bring numerous challenges for her. It is essential to mention that Canada legally permits abortion, meaning no laws would be violated if she chooses this route. Nevertheless, she would have to accept and confront any consequences stemming from her decision. This scenario can be classified as a conflict between justice and…

The girl is confronted with a dilemma concerning mercy in the right vs. right pillar. She has conflicting desires – she wants to demonstrate mercy and spare her child’s life, but her parents seek justice and may penalize her for becoming pregnant. This situation can also be viewed as a departure from moral righteousness in the three pillars of right vs. wrong dilemmas. While it does not violate any Canadian laws, it contradicts the girl’s personal ethics. If she believes that having an abortion goes against her values, she should contemplate that it may not be morally permissible for her to make such a decision.

According to Follert (2008), individuals perceive a decision as wrong if it doesn’t feel right or good to them. In the case of the girl facing this dilemma, she has likely carefully considered her options and recognizes that each ethical dilemma has its own advantages and disadvantages. Specifically regarding abortion, the girl has several reasons supporting her decision to proceed with the procedure, primarily because of its potential impact on both her own life and the future child.

Strict and religious parents who fail to provide adequate support may lead their daughter and her child to be expelled from home, leaving them without any other means of assistance. This situation makes them realize the potential consequences of having a baby without a stable living arrangement. Consequently, after giving birth, receiving help becomes vital, and the lack of support from loved ones plays a significant role in young girls choosing abortion.

Financial stability poses a major challenge for an 18-year-old girl who desires to have a baby without assistance from her parents. The act of raising a child involves various financial obligations, and lacking support from her parents would probably result in financial struggles. Even if the father of the baby provides some monetary aid, the expenses associated with necessities like food, clothing, formula, and other essential items can rapidly accumulate. Moreover, relying solely on the earnings of two teenagers is insufficient to meet both the needs of the baby and cover living costs such as bills and rent. Ultimately, significant difficulties await both the parents and their child.

When considering the option of having an abortion, there are several factors to consider for an 18-year-old girl. These include her education – if she lacks financial resources and support from her family, it may be challenging for her to balance studying with caring for a baby. If education is not the main concern, finding employment becomes necessary as she will need sufficient income to support herself alone. Additionally, the maturity levels of both the girl and the baby’s father are important in determining their ability to handle parenthood responsibilities. Moreover, if their relationship deteriorates in the future, it is crucial for the girl to independently manage things.

Although abortion is a contentious issue, society has two legitimate motives for contemplating it. The first motive arises when the fetus is diagnosed with a health issue during early pregnancy. In such situations, parents may opt against subjecting their child to potential suffering or lifelong dependence on medication. Hence, women who contemplate abortion might perceive it as an act of empathy aimed at safeguarding the welfare of the unborn child.

Supporting a woman’s choice for abortion is justified if she has been raped, as continuing the pregnancy would constantly remind her of the person who sexually assaulted her. The girl and the baby both experience negative consequences in this situation. However, some people consider abortion to be equivalent to murder because they believe that the fetus has human status. This belief not only deters them from considering an abortion themselves but also leads to anger towards those who do.

There are contrasting views on unplanned pregnancies, with some considering them as a gift from the divine. However, there are also those who believe that it is not our place to play God and decide someone’s destiny. Women who find themselves pregnant may decide to proceed with the pregnancy for different reasons, including preventing future pregnancies and avoiding the emotional distress of losing a child. The consequences of losing a child can deeply affect a woman’s life in lasting ways.

Opponents of abortion claim that unplanned teenage pregnancies have alternative options, such as adoption and support services for women in difficult situations. They also object to the use of abortion as a form of birth control by legally eligible women. However, others argue that this viewpoint is flawed and believe that instead of being exploited, abortion should be viewed as an opportunity for women who have made a mistake.

Following an unintended pregnancy, it is crucial for the woman to take necessary measures, either by employing contraceptives or refraining from engaging in sexual activity, in order to prevent future pregnancies. It is of utmost importance to empower her in assessing her ability to raise a child since she alone comprehends her unique circumstances entirely. If she encounters any of these difficulties and concludes that terminating the pregnancy would be most beneficial for her, others should honor and support her choice.

Opponents of abortion often fail to consider the different situations a pregnant woman may encounter, which makes it inappropriate for them to categorically declare that abortion is morally wrong. Sometimes, a woman may find herself in circumstances similar to those portrayed here. Even if she holds the belief that abortion is immoral, she might feel compelled to proceed with the procedure due to limited alternatives. This could occur if her parents disown her upon learning about her choice to have a child outside of marriage, contradicting their religious convictions.

Initially, many women, especially young girls, initially state their reluctance to consider abortion. However, when confronted with real-life situations, they often discover it to be the most rational decision. Some individuals ultimately choose abortion after carefully evaluating all possible choices, even if it contradicts their own moral values and desires. Considering the ethical quandary involved, it is probable that an 18-year-old girl would opt for an abortion due to the potential for a bright future ahead.

Given the girl’s religious parents, it is probable that they would not approve of their teenage daughter getting pregnant at a young age by an unmarried partner. In my view, if this situation doesn’t violate any laws and the girl has personally justified her choice, then it could be deemed acceptable for her to proceed. However, she should fully understand the potential risks and consequences that may arise from her actions. Dealing with moral dilemmas can be difficult for everyone since people often have different views on what is morally acceptable or unacceptable.

Despite personal disagreement, differing perspectives can deem something as right. It is crucial for individuals to acknowledge that ethical dilemmas require personal resolution and a strong awareness of one’s moral principles. For example, if I am conscious that my actions would infringe upon laws, I would reconsider engaging in them due to the difficulty of justifying such behavior. Nevertheless, when it comes to contentious topics like abortion, the individual involved may find justification without violating any legal statutes.

Exploring Corporate Strategy

INTRODUCTION

Nokia, the large Finnish industrial group, was founded in 1966 through a merger of three companies. The main business units at that time were pulp and paper, tyres and cables, with paper manufacturing as the oldest business, established 130 years ago. During the 1970s Nokia started to diversify through expansion in different electronic product areas.

In 1995, after twenty years of acquisitions, divestments, internationalisation and rapid growth, 99 per cent of the turnover (FIM36,810 million)1 was represented by three business units in electronics: mobile phones, telecommunications and consumer electronics. The three original businesses had been divested and 91 per cent of the turnover was derived from exports. Nokia had become one of the leading global producers of mobile phones and telecommunication systems, and the third biggest in Europe in consumer electronics, with 34,000 employees, 14,000 of them working outside Finland in 45 different countries.

The Nokia case is a remarkable corporate transformation, achieved through focusing the company’s strategic activities in the consumer electronics industry, where Nokia attained its position after a series of rapid acquisitions of ? ve different European companies between 1983 and 1992. Furthermore, for more than a decade from the mid-1970s, computers/information systems also formed a business area within electronics.

FORMULATION OF A NEW LONG-TERM VISION FOR NOKIA

During the mid-1970s, after the oil crisis in 1973, Nokia experienced strategic problems. The original core businesses, representing the main part of the corporation, were expected to have limited growth in the future. Top management felt that the company could get into serious trouble if no strategic changes were initiated.

The change process began with the formulation of a growth vision, which implied new strategic directions for Nokia. The ambition was to enter industrial sectors with growth potential, so as to increase the share of products with growth potential in Nokia’s product portfolio.  The manufacture of televisions was to prove an important element in this. At the beginning of the 1980s, the total annual sales of TV sets in Europe were almost 20 million, about the same as in both the USA and Japan. However, the European market was much more fragmented, with several technical standards and local protectionism. The consequence was more local producers in Europe, each with a rather small production volume.

The two biggest European competitors were Philips and Thompson (France), but even these  ms had fairly local strategies. Large production volume was at this time not regarded as a major critical factor for success. Instead, the  exibility to change production rapidly from one type of TV set to another brand, model or size was a critical factor for competitiveness. Eventually, the non-European competition from the Japanese and other Far East companies led to an increased focus on price competition in Europe. With more focus on price, the small-scale orientation created vulnerability for several European companies.

NOKIA ENTERS THE CONSUMER ELECTRONICS INDUSTRY: THE ACQUISITIONS OF SALORA AND LUXOR

In the mid-1970s Nokia moved into computers, with the importation and distribution of Honeywell Bull computers, following which the then small electronic business area was divided into professional electronics and computers. At the same time, another opportunity to expand in electronics appeared when the Finnish army wanted a new type of portable radio telephone.

It invited most domestic  rms in the electronics industry to develop them, and nearly all Finnish electronics ms started to construct mobile radio telephones. The military order was eventually placed with three different companies, Salora, Televa and Nokia. The top management in Nokia thought that three domestic companies in this area were too many. As Salora was regarded as slightly ahead in its R&D activities, Nokia made an initial contact with that company. A co-operation agreement was soon signed between Nokia and Salora regarding their radio telephone businesses, and in 1980 the co-operation was extended. A joint venture on a fty-fty basis was formed – Mobira, a mobile telephone business unit.

Salora was also the biggest manufacturer of TV sets in Finland, but in the late 1970s it had problems with its TV business because of a decline in the Scandinavian market. At the same time, the company’s owners were accused of selling on the black market and were forced to relinquish their ownership.

The Consumer Electronics Business Union bank looked for new owners and Nokia was invited to acquire Salora. But the head of Nokia’s electronics division, Kurt Wikstedt, was only interested in Salora’s mobile telephone business and not at all in consumer electronics, which were not seen as high-tech products. He saw no competitive advantages for Nokia in the consumer electronics sector: In Finland we cannot produce on such a scale in this product area that we could be successful. The production scale of Salora is too small.

We should concentrate on products where the production costs are high, as in professional electronics. Nokia’s group chief executive of? cer and his corporate planner were in favour of an acquisition, as they regarded consumer electronics as a growth industry. But Wikstedt’s arguments were stronger, and instead Salora was taken over by the shipbuilding company Hollming. The dif culties in Salora continued and the company made huge losses: FIM18 million in 1980 and FIM25 million in 1981.

The president of Salora was forced to resign after only a few years in of e and Salora was put up for sale again. But Nokia did not show any interest in the consumer electronics part of Salora. It just wanted Mobira. In this situation the owners of Salora, the Hollming Group, linked the possible sale of their share of Mobira to the sale of the rest of Salora. The result was a compromise – Nokia acquired 18 per cent of the shares in Salora in order to be allowed to acquire the remaining 50 per cent of Mobira from Salora. In 1982 Mobira became a subsidiary of Nokia, and Nokia became represented in the Salora board.

Nokia later acquired Televa as well and eventually became a global leader in mobile phones. The new president of Salora, Antti Lagerroos, succeeded in improving the company’s performance in consumer electronics: 1982 was a good year and 1983 was expected to be even more successful. Markets were growing rapidly. Salora obtained two big orders for colour TV sets which gave rise to capacity problems. Lagerroos looked for more production capacity and became interested in Luxor, a Swedish competitor, which itself had survival problems in the late 1970s.

In 1979 the Swedish state saved Luxor from bankruptcy, acquiring it from the family owners for the symbolic sum of one Swedish krona, and put fresh capital into the company in an attempt to improve its fortunes. In 1983 the Swedish Minister of Industry wanted a new solution for Luxor, after having subsidised a nancial reconstruction of the company. The minister looked for a large corporation as a partner, but held the opinion that Salora was not large or strong enough. Other rms showed an interest in acquiring Luxor, but none found favour with the Swedish governmental of cials.

In this situation, Antti Lagerroos introduced a new idea to Nokia’s top managers. Although Nokia’s previous interest in Salora was lukewarm, a Salora–Luxor combination put the matter in a quite different light; after all, internationalisation was an important ingredient in the Nokia corporate vision and Finnish rms had traditionally made their initial foreign expansion in the Swedish market. Nokia had also become more interested in know-how in mass production and marketing. The production knowledge in consumer electronics was quite different from that in the production of computers, for instance.

At the beginning of the 1980s, computers were still mostly tailor-made. Marketing too was different. Brands and distribution channels were important success factors in consumer electronics, where a good product was not enough in order to obtain a large market share. An acquisition of both Salora and Luxor could give Nokia the possibility of supplementing the competences in R&D and small-scale production with mass production and market orientation. Relations between the group chief executive of er of Nokia, Kari Kairamo, and ministers in the Swedish government were good, and Sweden was motivated to accept the successful Nokia Group as the acquiring company.

The production capacity of a combined Salora and Luxor was expected to make it a strong unit. The acquisition took place in January 1984 and Kari Kairamo stated: Nokia’s acquisition of Salora and Luxor means that the company’s position in Sweden is now much stronger. The Luxor, Salora and Nokia venture means that Scandinavian co-operation in this important area has improved.

Nokia: The Consumer Electronics Business Kairamo saw Luxor as a ? rst step in further international co-operation, and expected that the clear boundary between consumer electronics and professional electronics would disappear in the future. Kurt Wikstedt strongly stressed the international side of the acquisition: Now we enter Europe. We begin with Scandinavia. We try with Luxor to see if we can be successful in this business, and then continue with Europe. That is the strategy. After many twists and turns, Nokia had entered the consumer electronics business and taken a serious step into the international market.

The initial result of the acquisitions was that Nokia got 58 per cent of the shares in Salora and 51 per cent of the shares in Luxor. Later in 1984, Nokia increased its share to 70 per cent of the capital stock in Luxor. In 1983 the turnover for Luxor was FIM590 million and for Salora FIM737 million. The staff of Luxor was 1,500 and of Salora 1,700. All in all, Nokia now had 8,000 employees in its electronics businesses. Nokia’s acquired market share in the TV sector was 36 per cent in the Finnish market and over 20 per cent in the Swedish market.

THE INTEGRATION OF SALORA AND LUXOR

The new consumer electronics business was organised as a separate division in Nokia, partly because of the doubt over consumer electronics expressed by the head of the electronics division, Kurt Wikstedt. The president of Salora, Antti Lagerroos, was selected as the new president for consumer electronics (Salora–Luxor), and Kurt Wikstedt stayed as president for the remaining businesses in electronics, relabelled ‘industrial electronics’. The integration of Luxor and Salora was arduous, and made no real progress until the Swedish president of Luxor was forced to leave the company in May 1985.

Besides the declining consumer electronics business, Luxor also had a successful personal computer division. Nokia closed this computer division, which of course aroused a lot of criticism. Several managers in Nokia were of the opinion that the co-ordination of activities in Salora and Luxor was not suf? cient and that the potential synergy advantages had not been fully realised. In 1985 Salora–Luxor got a new president, Heikki Koskinen, when Antti Lagerroos was appointed director in charge of consumer electronics in the top management team of the Nokia Group.

Koskinen was a spokesman for decentralisation and local autonomy. Salora and Luxor kept their own sales subsidiaries; only logistics and R&D were integrated. Still, the development of Salora–Luxor was very favourable and quite pro? table in the mid-1980s. The production of TV sets in Luxor increased rapidly, although small (14-inch) TV sets represented almost 50 per cent of all production (see Exhibit 4). In 1987, the Salora–Luxor TV brands had a market share of 35 per cent in the Nordic markets. In Finland the market share was about 45 per cent.

According to Heikki Koskinen, Salora–Luxor was the only pro? table signi? cant consumer electronics producer in Europe in 1987. Gradually, Nokia increased its ownership share in both Luxor and Salora to 100 per cent. The aim of the continued integration was to arrange production in a more optimal way, and to utilise more effectively all the possibilities of synergy, including integrating production plants in a total product planning and production system, in order to decide more ef? ciently which products should be produced where and in what quantities.

NOKIA ENTERS MAJOR EUROPEAN MARKETS

In 1986, when the Luxor–Salora integration was considered to be under control, Nokia began to think of the future. Market share was already about 40 per cent in the Nordic markets, which implied that further expansion for Salora–Luxor in Scandinavia was not possible. An alternative growth and product brand strategy, to turn to western Europe, was decided during the strategic planning process in spring 1986.

Heikki Koskinen explained the plans: We had plans to acquire two major brands in Europe, of which we intended to build a local net of brands. One of the brands was going to be more extensive to be sold in all European countries where Nokia was active in consumer electronics. There were several reasons for entering the western European markets. It was thought to be important to be in the home markets of major competitors, in order to prevent them from dumping their products on Nokia’s domestic markets. European co-operation might also prevent the Japanese and American  rms taking over the European TV markets.

The major European competitors Philips and Thompson started to co-operate within the Eureka framework (European Research Co-ordinating Agency)2 in order to develop the European HDTV (high-de nition TV) concept. This joint development was a threat to smaller European producers, which were afraid of not getting the key technology when needed. In order to become a partner in the development process of the HDTV concept, the opinion was that Nokia had to grow bigger. At this time the situation in consumer electronics in Europe had also changed. Competition had become more intensive.

Philips, the biggest TV manufacturer in Europe, with a market share of 25 per cent, acquired an American ? rm and began to think more globally. Thompson, the second biggest TV manufacturer in Europe, with a market share of 20 per cent, acquired two main competitors in the USA and England. Economies of scale through mass production were now considered as very important. The Salora and Luxor factories had a capacity of only 400,000 TV sets each. Nokia was number three in Europe, but still had only 5 per cent market share.

The opinion within Nokia was that a volume of 2 million TV sets per ear was needed to be competitive with both Philips and Thompson, and the Japanese and Korean competitors. In the late 1980s, the price competition became tougher in the European consumer electronics markets because of a more aggressive penetration from Far Eastern competitors. It was also expected that the ? xed R&D costs would rise, which implied that there was going to be a volume advantage regarding R&D too.

THE ACQUISITION OF OCEANIC

Nokia’s pro tability in consumer electronics was good, especially in 1987, and it had passed Philips in market shares in all Nordic markets. In April 1987 the Nokia board of directors approved the strategic plan to acquire European TV brands. The plan was to acquire a French and a German brand, and a factory in either of these two countries. There were negotiations with different sellers, including the French company Oceanic which was for sale. Personal relationships between Nokia top management and the owner of Oceanic, the Swedish Electrolux Group, resulted in a rapid acquisition of Oceanic. Electrolux wanted to divest this business, which had no synergy with its core know-how. Through the acquisition of Oceanic, Nokia got inside the EC with the production of TV sets.

Furthermore, Nokia acquired a signi? cant market share in the French market, which was rather closed and dif? cult for an outsider to penetrate. 2 Originally, the Eureka programme was launched to serve as a European complement to the Strategic Defense Initiative launched by the Reagan administration in the United States. Another reason was that previously launched European technology development programmes were considered too bureaucratic, too slow or too narrowly de ned.

The pre-acquisition phase took less than three months and only four meetings were needed. Immediately after the acquisition, the integration process between Salora, Luxor and Oceanic was started. Oceanic had a turnover of 600 million FIM, mainly in colour TVs, and 800 employees. Oceanic’s market share of consumer electronics in France was just below 10 per cent, with the Oceanic and Sonolor brands. The strategy was to keep the French production unit apart from the other factories because of differences in standards, while accounting systems, logistics and marketing should be integrated.

The French local managers were trusted by the Finnish management and retained. The next step in the conquest of European markets was to look for other brands. Nokia was interested in Thompson’s German brands Saba, Nordwede and Telefunken. According to Heikki Koskinen, who headed the negotiations, an agreement was close for one of the brands, when the Standard Electric Lorenz possibility emerged.

NOKIA DOUBLES ITS TV PRODUCTION: THE ACQUISITION OF STANDARD ELECTRIC LORENZ

At this time, an internal struggle for power was going on between future candidates for the top position in the Nokia corporation. Top managers were traditionally recruited internally, and in 1985 a new manager for industrial electronics was appointed, Timo Koski, after close internal competition. He was seen as the probable next chief executive of? cer of Nokia. However, the earlier successful president of Salora, Antti Lagerroos, now heading the consumer electronics businesses in Nokia, had strong personal ambitions to advance to the very top of Nokia. This thirst for power became a driving force behind the next acquisition.

Parallel to Heikki Koskinen’s negotiations with Thompson, Antti Lagerroos made the initial analysis that resulted in his suggestion to acquire a very big competitor, Standard Electric Lorenz (SEL) in the former West Germany. Lagerroos then used the freedom of action given to him by Kari Kairamo, and started to negotiate with SEL and its owners on his own, partly assisted by the director of technology in Nokia. Almost at the same time, Timo Koski acquired the whole personal computer and information systems business of the Ericsson Group in Sweden – an acquisition of the same size as SEL.

Nokia became the largest information technology company in Scandinavia. Ericsson’s large-scale production of terminal systems and established position in systems for commercial, industrial and banking sectors, together with Nokia’s intelligent workstations and retail systems, were expected to enhance the Nokia Group’s competitiveness in the information technology sector. The signi cantly enlarged division led by Timo Koski was named Nokia Data. Both Antti Lagerroos and Timo Koski had now extended their internal domains signi? antly in the struggle for further power in Nokia.

However, in 1987 Timo Koski suddenly died of a heart attack. The acquisition of SEL from the US conglomerate ITT was made early in 1988, just a couple of months after the Oceanic acquisition. The product on capacity increased from 1 million TV sets annually to almost 2. 5 million. The chief executive of? cer, Kari Kairamo, attached great importance to this acquisition. The opinion was that SEL completed Nokia’s consumer electronics business both technically and regionally. SEL was ahead of Nokia in digital TV technology.

And regionally Nokia now became strong not only in France, but also in German-speaking Europe (15 per cent market share) and even in southern Europe as SEL exported to Italy, France, Spain and Portugal. The net sales of SEL were FIM4. 9 billion in 1988, with an annual production of 1. 2 million colour TVs, 1. 7 million picture tubes and 350,000 video recorders. The main production facilities for SEL’s colour TV sets and video recorders were located near Bochum in the Ruhr region. The picture tube factory was located near Stuttgart, and the loudspeaker factory was in Bavaria.

SEL also had four other smaller production facilities in West Germany. The SEL acquisition included assembly plants in Spain and Portugal as well, and shares in joint ventures in Hungary, Malaysia and Italy. With the incorporation of SEL, Nokia’s position as Europe’s third largest colour TV manufacturer was strengthened.

POST-ACQUISITION INTEGRATION BECOMES PROBLEMATIC

In January 1988, Simo Vuorilehto, the chief operations of cer of Nokia, was of the opinion that all Nokia’s consumer electronics units should be consolidated within a wholly new division with its headquarters in Continental Europe. Signi? ant investments in upgrading and modernisation of production technology and logistics were needed in the new division that was formed, which was named Nokia Consumer Electronics.

The integration and co-ordination of Salora–Luxor, Oceanic and SEL started in February 1988 with the appointment of an integration group led by Antti Lagerroos. The group was working hard during spring 1988 with the aim of integrating administration and production in all four acquired consumer electronic units, a total of ten factories, within six months. The purpose was to be able to present an integrated structure for the new division in the summer of 1988.

But the timetable could not be met entirely. The chief executive of cer, Kari Kairamo, was worried that Nokia did not have enough internationally experienced personnel, and believed that many new managers were needed, especially in the consumer electronics business. This opinion was further strengthened by some analysis carried out by external consultants in early 1988. Furthermore, Antti Lagerroos could not implement the necessary changes fast enough and lost Kari Kairamo’s con dence to lead Nokia Consumer Electronics into Europe. Instead, he was appointed president of Nokia’s Mobile Phones (previously Mobira).

He soon wanted to merge Nokia Consumer Electronics and Nokia Mobile Phones, but did not get any support for that. Antti Lagerroos eventually left the Nokia Group in February 1990. In June 1988 a new president, Jacques Noels, was appointed for Nokia Consumer Electronics. Head hunters found him in France at Thompson – one of Nokia’s large competitors in consumer electronics. Before that he had been working for many years in European units of large US companies in the electronics industry. Jacques Noels had to start to organise the consumer electronics division from scratch, and at least half a year of integration was totally lost.

Furthermore, ten senior managers in SEL had left the company. Initially, Noels rented an of ce in Paris for three months and brought his secretary with him from Thompson. The  rst task was to build a new management team with the right mixture of competence. A new head of ce for Nokia Consumer Electronics was established in Geneva (regarded as ‘neutral ground’) in order to facilitate further recruitment and the establishment of a truly international division. In 1989, Jacques Noels presented a new organisation structure for Nokia Consumer Electronics, more than one year after the latest acquisition.

During that time Nokia’s market share of TV sets had declined from 14 to 11 per cent in the European markets. Not only the consumer electronics business but the whole group showed weak results. The relations between the chairman of the Nokia board and the chief executive of cer, Kari Kairamo, became more and more strained. The external directors were expected to suggest some changes in the top management structure of Nokia. In this situation, Kari Kairamo suddenly died (suicide, according to the media) in December 1989.

After Kari Kairamo’s tragic death, Simo Vuorilehto became the new chief executive of er. According to him, the key factors in the consumer electronics strategy were marketing, design and production: We are not at all the kind of company that could develop semiconductors or picture tubes in the future. But we can be competitive and ahead of other competitors in marketing, design and production. In production we perhaps cannot be superior to our competitors, but we can at least be at the same level. We cannot develop everything ourselves, which was a mistake in the ?rst integration plans.

Heikki Koskinen, responsible for strategic planning in Jacques Noels’ new management team, emphasised similar competitive advantages of Nokia Consumer Electronics: Our strength is in rapid application of new technology. When technologies shift you have to forecast the trends and minimise the investment costs. Our competitive advantage is in the brain of the engineers. That is especially true in application issues. He had never fully understood the volume thinking behind the acquisition of SEL: The only advantage you reach by large-scale production is that you can control the material costs.

The manager in charge of export sales also held the opinion that too much emphasis had been put on production costs: I cannot understand that acquisitions are made based on production advantages. In our acquisitions there were no synergies between the brands. When you combine factories and brands you take away a large part of the turnover. I am astonished that Nokia had not made clear the future brand policy before the acquisitions. That was the greatest problem. Jacques Noels’ strategy was to become big in some niches, not in the whole market. Nokia should concentrate in high-quality and high-technology TV sets, with good pro? margins. According to him, the market share of the total market was therefore not as important.

The group had telecommunication, mobile phones, information systems, computers and consumer electronics, and more and more synergies were expected to emerge between these different business areas. The border between professional and consumer electronics was expected to disappear.

According to Jacques Noels, Nokia already had a strong technological capacity and good management resources. But he saw some disadvantages compared with the main competitors: I think they have a different position, because they have very strong brands. Telefunken is a much stronger brand than, for example, Graetz [an SEL brand]. They have also much stronger corporate brands, e. g. Philips compared to Nokia. Their strategy can be very different; they can let almost every brand have its own life. Grundig can have its own strategy, nobody has to know that it is owned by Philips.

A NEW ORGANISATION STRUCTURE AND CULTURE

Jacques Noels wanted strong functional centralisation and stressed the importance of a competent and powerful management team. This was the  rst priority because the management team was seen as the motor of the organisation. But it took time to put together the new team. Both old and new managers were tested by external consultants. Eventually, about 35 people were working at the head of ce in Geneva. All decisions concerning production, R&D and marketing were made there. Finance and strategic planning were centralised as well.

All acquired companies became pure production plants, separated from the sales and marketing activities, but with some R&D activities decentralised to these plants. Jacques Noels especially emphasised the connection and co-operation between R&D and marketing: We have regrouped the marketing and R&D centres so that the head of marketing and the head of R&D work side by side in Geneva, because we believe that they have to work closely together on new models. Production is only how to manufacture as cheap as possible, when the products have been developed.

He highlighted the cultural dif culties in integrating the different units and nationalities. A new integrated culture for Nokia Consumer Electronics needed to be built on new management principles, but it had to emerge over several years. The tools for cultural integration were an international management group, circulation of leaders between countries, and a ‘Euro-manager’ programme. Young and recently employed graduates from all countries involved were taken into this Euro-manager programme, developed in 1989–90.

The creation of this new pan-European culture was planned to continue after 1990 for another three to ? ve years. But Jacques Noels did not have an easy task in seeking to create a ‘Europeanised’ business unit out of Nokia Consumer Electronics: If you make two major acquisitions in three months, you get many problems regarding product strategy; sales channels; general management, etc. There is nothing that works by itself. You have to struggle and that is what we did. First we worked out a product strategy in order to concentrate our R&D efforts. Then, from the middle of 1989, we put a lot of efforts in new brand, sales and marketing policies.

MARKETING AND PRODUCTION STRATEGIES WITHIN NOKIA CONSUMER ELECTRONICS

In 1989 Nokia Consumer Electronics launched a universal brand, ITT–Nokia, that would be positioned as a middle-range product. The ITT–Nokia brand would then be combined with one or two other and more local Nokia brands in each local market, including a ‘high-end’ brand representing higher quality and/or more exclusive design. For the integration of product development and manufacturing, a ‘Euroline-concept’ was launched.

Nokia Consumer Electronics reduced the number of chassis from 25 to 10, and the goal was to come down to three or four product chassis. All R&D centres were supporting this product concept, but it was modi? ed in accordance with the country and the brand characteristics. The Exploring Corporate Strategy by Johnson, Scholes & Whittington 10 Nokia: The Consumer Electronics Business different centres were concentrated on different levels in the product range, from low-end to high-end chassis. The marketing strategy was to be achieved through an integrated sales, product and distribution strategy.

Marketing of the brands was the most important part. All acquired brands were local brands, and Nokia as a brand was unknown within the distribution channels. The problem after the acquisition of SEL was to convince the distribution channels that the brand ITT–Nokia had a future. The solution was to combine the innovation image of ITT and resource image of Nokia3 in this new brand ITT–Nokia, with the intention of later dropping ITT. There were many discussions and different opinions about the wisdom of using the Nokia name.

Many managers were sceptical about the possibilities of transferring the ITT image to the Nokia name. However, ITT–Nokia was introduced as the pan-European brand in the medium range; a modern brand with modern technology, which was going to compete with Philips. Salora was marketed as high-range brand, while the other brands were used as local brands. Jacques Noels stated: Our strategy is to have three brands per country. The major brand, in the beginning, has to be the established local brand. But this is short term. Gradually we are introducing Nokia as the major European brand.

But we want to do that gradually, not brutally. In all countries we are also supporting the original brand. That is why we support Luxor in Sweden, Salora in Finland, ITT–Nokia in Germany and Oceanic in France, and then gradually introduce Nokia as a complementary brand. A brand strategy with three brands means three different channels. The specialised independent retailers are very important. They want to have their local brands. Then we have the large specialised channels that are only selling electronics. Finally we have the supermarkets, big stores, they want to have one brand, one styling, easy to recognise.

Some managers were critical of using acquisition as a means of growth and also sceptical of the possibility of transferring the image of one brand to another. The brand Salora had a quite good image. Investigations by Nokia showed that Salora had some recognition in England, Italy, France, Netherlands, Belgium, Austria and Switzerland, and much more recognition than the new brand Nokia. Finally, Jacques Noels distinguished between three different production strategies: Today we have two or three complementary strategies. One is volume; it is clear that the volume in TV assembling is important.

We are working with that in Germany, where our Bochum plant is one of the largest in Europe; one million TV sets. The second strategy is to specialise, when a plant only produces one product and we can extend that product line. We are doing that in Salo where we are producing our high-end chassis. In Luxor we are producing all our decoders and satellites, and there we also have the technical expertise for these products. In those products the technical expertise is what makes the cost, not so much the production volume, but also how well and quickly we can introduce our products.

We have a factory in Portugal, where labour cost is an important factor. We are trying to rationalise our production by stage of the product life, labour cost, volume and engineering. Those are the four criteria and they give different answers for different products.

error: Content is protected !!