Katharina Megerle Rise and Fall of Nokia: Impact on the Finnish Economy Bachelor of Business Administration International Business Spring 2019 Abstract Author: Megerle Katharina Title of the Publication: Rise and Fall of Nokia: Impact on the Finnish Economy Degree Title: Bachelor of Business Administration Keywords: Nokia, Finnish economy, Finland Nokia and Finland have had a special relationship. Nokia’s rise has influenced Finland in such a way as no other company did. With the company’s downfall, a part of the country was lost as well (Derek, 2015). This work aimed to examine Nokia’s influence on the Finnish economy over the last three decades. In doing so, several factors were considered. The history of the company and the country was depicted to better understand Nokia’s impact on Finland’s economy. This thesis tried to verify the following hypothesis: Nokia’s rise and downfall strongly influenced the Finnish economy. In order to demonstrate whether the hypothesis is true or not, literature was reviewed, and several statistics were taken into account. The hy- pothesis was testified as partly true. Whereas Nokia’s rise had a great impact on the Finnish economy, its downfall influenced Finland’s economy less strongly due to interventions by the country’s government and Nokia’s attempts to support dismissed employees concerning their job hunting. Though the company’s in- fluence on the Finnish economy shrank, it is still one of the most important firms in Finland. Further re- search could be done regarding the impact of Nokia’s downfall on the Finnish startup scene or about the extent to which the ICT sector in Finland is still shaped by Nokia's influence. Table of Contents 1 Introduction ......................................................................................................................... 1 2 Nokia .................................................................................................................................... 3 2.1 Transferring another text to the template .............................................................. 3 2.2 World market leader ............................................................................................... 9 2.3 The downfall .......................................................................................................... 12 2.4 The reinvention of Nokia ....................................................................................... 22 3 The Finnish economy ......................................................................................................... 29 3.1 1985 – 2000 ........................................................................................................... 29 3.2 2000 – 2007 ........................................................................................................... 36 3.3 2008 – today .......................................................................................................... 38 4 Nokia’s impact on the Finnish economy ........................................................................... 42 4.1 Before the downfall ............................................................................................... 42 4.2 During the downfall ............................................................................................... 50 4.3 Today ..................................................................................................................... 52 5 Conclusion and Discussion................................................................................................. 58 List of References ........................................................................................................................... 60 Appendices List of Abbreviations ALu Alcatel-Lucent AT Advanced Technologies BERD Business Enterprise Expenditure on R&D CEO Chief Executive Officer CIO Chief Information Officer COMECON Council for Mutual Economic Assistance EC European Community EEA European Economic Area EFTA European Free Trade Association EPO European Patent Office EU European Union GDP Gross Domestic Product GPS Global Positioning System GSM Global System for Mobile Communications HTML Hypertext Markup Language ICT Information and Communications Technology ISB Integration Steering Board KPI key performance indicator NFC Near Field Communication NMT Nordisk Mobil Telefon NSN Nokia Siemens Networks OECD Organization for Economic Cooperation and Development OS Operating System ROI Return on Investment R&D Research and Development SMEs Small and Medium Sized Enterprises UBI Universal Basic Income USSR Soviet Union (officially: Union of Soviet Socialist Republics) 2 List of Figures Figure 1 Sales of Nokia by industrial group, in % ............................................................................. 4 Figure 2 Net sales of Nokia, in billion FIM ....................................................................................... 5 Figure 3 Net sales of Nokia by market area ..................................................................................... 6 Figure 4 Nokia’s worldwide net sales in billion euros, 1999 – 2012 .............................................. 10 Figure 5 Nokia in the Top 100 Ranking of Interbrand, 2000 – 2014 .............................................. 11 Figure 6 Global market share held by the leading smartphone operating systems in sales to end users from 1st quarter 2009 to 2nd quarter 2018......................................................................... 14 Figure 7 Company structure of the new Nokia .............................................................................. 25 Figure 8 Market share of IT network vendors, 2015 – 2018 ......................................................... 27 Figure 9 Nokia's worldwide net sales in billion euros, 2012 – 2018 .............................................. 28 Figure 10 Nokia's employees in thousands as of the end of each year, 2005 – 2017 ................... 28 Figure 11 Unemployment rate (in %), persons aged 15–64 .......................................................... 30 Figure 12 GDP year-on-year change in %, 1985 – 1999 ................................................................. 31 Figure 13 Finland's exports by industry in percent of total exports .............................................. 32 Figure 14 Structure of an ICT cluster ............................................................................................. 34 Figure 15 GDP year-on-year change in %, 2000 – 2007 ................................................................. 38 Figure 16 GDP year-on-year change in %, 2008 – 2017 ................................................................. 39 Figure 17 Nokia as a share of exports and GDP, in % .................................................................... 43 Figure 18 Contribution of Nokia and the electronics industry to Finnish GDP growth, in % ........ 43 Figure 19 Share of R&D expenditures by sectors in Finland, in %, 1997 - 2009 ............................ 45 Figure 20 Nokia's cooperation network in Tekes' ETX and TLX programs ..................................... 48 Figure 21 R&D expenses as a share of GDP ................................................................................... 49 Figure 22 Nokia’s share of EPO patent applications in Finland, 1990 - 2006 ................................ 50 Figure 23 Nokia’s and Finland’s EPO patent applications and Nokia's share of Finland's EPO patent applications, 2011 – 2018 .................................................................................................. 53 Figure 24 Research and development expenditure by sector, 2010 – 2018 ................................. 54 Figure 25 Vendors' market share of cell phone unit sales to end users worldwide, 1997 – 2014 .................................................................................................................................. Appendix 1 1/1 3 List of Tables Table 1 Major global telecommunication companies in 1999 ........................................................ 7 Table 2 Nokia's share of employment in Finland, 2000 - 2008 ...................................................... 44 Table 3 Nokia's R&D expenses, 1998 – 2009 ................................................................................. 46 Table 4 Nokia employees, 2010 - 2012 .......................................................................................... 51 Table 5 Nokia's R&D expenses, 2014 – 2018 ................................................................................. 53 Table 6 Nokia employees, 2014 – 2018 ......................................................................................... 55 Table 7 Top ten of the largest companies by turnover in Finland, 2017 ....................................... 57 Table 8 Top 5 Epo applicants, 2014 -2018 ................................................................ Appendix 3 1/1 Table 9 European patent applications per mio. Inhabitant by country, 2014 – 2018 ....................... .................................................................................................................................. Appendix 3 1/1 1 1 Introduction Nokia, older than Finland itself, has impacted Finland in such a way as no other company did. The company was not just any company to Finns. It influenced their national identity and self-confi- dence. The company was a symbol of economic growth after Finland’s recession in the early 1990s. For more than a decade, Finland