The term value chain was coined and became prevalent when Michael Porter came out with his 1985 bestselling book: Competitive Advantage: Creating and Sustaining Superior Performance. New York, NY The Free Press.
The idea around value chain as expound in Porter's book involves “primary activities” that are deemed as value-adding activities of an organization which include the following: inbound logistics, production, outbound logistics, sales and marketing, maintenance.
Behind the “primary activities” are what you “support activities” that also add value to the organization. These functions are: administrative infrastructure management, human resources management, R&D, and procurement. The ultimate aim of value chain is to create maximum value at minimal costs (Wikipedia, 2005).
Value chain became a recognized management's powerful analysis tool for strategic planning. Kotelnikov (2001) defined value chain as a high-level model of how businesses receive raw materials as input, add value to the raw materials through various processes, and sell finished products to customers.
Value chain is critical tool to business development because it espoused the idea that, according to Kotelnikov (2001) “success in digital economy is the implementation of an integrated value chain that extends across - and beyond - the enterprise.” Hence, multiple value chain participants- from employees to managers to suppliers and to customers- must deliver value and strive for a common goal. Value chain then helps in
promoting understanding end-to-end process, spot anomalies, eliminates redundancy and inefficiencies allowing process design, transformation and experience take place freely and continuously (Kotelnikov, 2001).
Knowing what value chain can do, it is imperative then that Nokia, being a world leader in mobile communications, should implement value chain as a part and an important tool in its corporate strategy. Nokia aims to drive growth and sustainability of the broader mobility industry. It strives to connect people through innovative and user-friendly mobile phones, devices and solutions for imaging, games, media and businesses.
Nokia has products ranging from equipment, solutions and services that also cater to network operators and corporations (Nokia, 2005).
Patterns and trends in a constantly-evolving product such as mobile phones are very important to Nokia. Being ahead of its competitors and abreast with the changing needs of its customers is what keeps Nokia at the forefront of the mobile industry. Changes in the international business scene might influence the Nokia's value chain over the next five years or so. This is so because adapting to change and making necessary allocations for it is critical for Nokia's, or any company for that matter, survival.
Also, value chain is not contained within the individual's business alone. It also pertains to the supply chains and distribution networks. Delivering a combination of products and services to the end customer will create different economic actors along the way that have its own value chain. The synchronized interactions of those local value
chains lead to an extended value chain that could sometimes be global in extent (Wikipedia, 2005).
Changes that might affect Nokia's value chain could include the following:
Ever-Growing Need for Application Differentiation
U.S. mobile operators currently offer a number of premium mobile applications, accessed through handheld devices which are from various sources, qualified or certified, then offered access to the applications through a single interface for ease of use. To get a niche of the market, mobile operators must provide application differentiation because the same applications are available to other operators as well. To do this, increased investment in research and development for premium mobile data applications that aids in increasing non-voice data revenues is likely to aid mobile operators in dominating the expanding market (Frost and Sullivan, 2005).
Properly Targeted Applications Suite to Increase Operators' Data Revenues
Total penetration of mobile services in the United States has reached 65 percent which makes it difficult to secure potential of new subscriber. Mobile operators then turn to the existing subscriber base for revenue maximization opportunities such as providing premium data services. Since the focus of premium data services adds personal productivity and informational services to entertainment, mobile subscribers are expected to become increasingly dependent on these offerings. Proactive mobile operators that
address the changing needs of subscribers are believed to gain the most from this evolution (Frost and Sullivan, 2005).
Introduction of Next-generation Mobile Data Services
Innovation is a necessity in the mobile industry's growth. It is important then to differentiate and add value to products and services at the same time maintain end-to-end interoperability. Continued innovation in services and products such as additional mobile features, new applications and handsets is required for Nokia's growth in the mobile industry.
The shift towards next-generation technologies is evident in all sectors of the market. Both device manufacturers and subscribers are expected to gain from the implementation of these nascent technologies and applications in devices, which will in turn drive the expansion of the market (Frost and Sullivan, 2005).
