As the report said, the stock price of Nokia went down by 13% to €14.03 ($20.10), a near three-year low. It reflects the fact that since March 13th 2007, when secondary mortgage crisis in U.S exploded, it has resulted in the weak global economic till today. As a result, almost all the stock markets over the world plunged into a corner. Set Dow Jones Industrial Average Index as an example. Its index has fallen from 14164.54 to 11185.63(the open price in Sep 5th). The industry of communication equipment also is not an exception. Set Motorola Inc. as an example, its stock price fell from 18.42 to 9.06(Sep 5th).
According to the report, what sent its shares down by 13% was Nokia’s reduced outlook. In my opinion, in one hand, it is quite normal for a corporation to adjust its outlook, as both of the economic circumstance and its own operating stiuation are changing. In the other hand, informing investors of latest and real corporate information in time just shows the communication equipment Giant’s reponsibility for investors. There is also a fact that cannot be ignored that Nokia holds almost 40% share of market and it predicted that its sale will increase 10%. However, under such circumstancem, its adjustion of outlook still caused the investors to send its stock price to pludge down such a lot. The fact sufficiently showed that investors had been influenced greatly in their investing activities by the world-wide lackluster economy. The investors are losing confidence in market and the market is losing its trust of investors.
As for its price policy, I think that there may be a couple of reasons. First of all, Nokia holds the largest share of market, and it has a large amount of loyal consumers. Depite the weak economy, these consumers will continue to buy its production with an acceptalbe price. So it is not very necessary for Nokia to cut price to attract consumers. Secondly, if Nokia let its production price go down, it is very difficult to raise the price when the economy reverts. Nokia decides to maintain its long-term profit instead of shor-term profit. Addtionally, although most of its rivals have cut prices, Nokia still try to make its price remain unchanged. It shows the company’s strength and confidence in its products and sales, which will leave investors, who are struggling during the weak economy, a positive signal. Also I think Nokia is trying to make consumers believe that they bought the right products, whose value will not decrease in spite of weak economy.
In conclusion, it is obviously to see that Nokia has adopted a totally different method on price decision. Although its stock price has fallen 13% after its claim of reduced outlook, which can be explained by the special economic environment, Nokia, which has a world-wide reputation, will keep moving forward and maitain more success.
The article is available at: http://online.wsj.com/article/SB122061885061003671.html?mod=todays_us_money_and_investing
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2 comments:
I had no clue Nokia held such a large share of the market. Competition is fierce in the telecommunications sector. It seems like there is always something new coming out. I'm sure Apple's I-Phone has impacted Nokia’s sales tremendously. Also the economy is certainly influencing sales. Consumers are trying to cut costs, especially on discretionary items like cell phones. Although consumers are limiting the amount they spend on cell phones, businesses don’t seem to be cutting costs. It is in their best interest to encourage employees to get the latest and greatest technology, so they can always be accessible. I recently read an article that talked about how employees wanted their employers to start paying them overtime for the after-hours they put in on the internet and cell phones. People with smart phones tend to be connected to the office more than just 8 hours a day. Having such a reputable name will payoff in the long term; if Nokia continues to innovate they will easily maintain their market share.
In addition, I think the brand marketing strategy play a role in the price policy of the Nokia. Unlike I-phone and Sony-Erission the target group of which are mainly focus on the young and the people who keep up with fashion, Nokia not only focus on the young people but also the high end market which target group are the boss of some big company and business man who do not change their cell phone very often and also mainly concern about which kind of cell phone could better present their social status and class. I know a lot of exalted version cell phone of Nokia. Those should not cut the price otherwise they may lost the market share of their target group.
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