As Kevin J. O’Brien reported in his article “Nokia to Cut 4,000 Jobs at 3 Factories” on today’s New York Times, the world’s largest mobile device producer Nokia will eliminate 4,000 manufacturing jobs from factories in Komarom, Hungary; Reynosa, Mexico; and Salo, Finland by the end of this year, which is equivalent to 7 percent of its global work force. Here is the plan behind this massive layoff move:
- Nokia is transferring its device assembly line from factories mentioned above to Asia. According to Nokia’s executive vice president Niklas Savander, who is responsible for smartphone production, this move is to get closer to the suppliers and to be able to “introduce innovations into the market more quickly and ultimately be more competitive.” Therefore, factories in Masan, South Korea, and Beijing will take over the assembly of smartphone, ensuring better quality and fast delivery of supplies.
- Factories that are affected by job cuts will refocus on customizing Nokia smartphone for Europe and North America customers. According to Nokia spokesman in Espoo, these factories will work on software and local-language applications
The major force behind this job cut move is to reduce cost on production. Not only because the company is suffering great financial lost as it is transiting from Symbian-based smartphone lineup to Lumia Windows phones with Microsoft, but also to improve efficiency and to make the business sustainable. Take a look at its value chain and we can see that as a leading mobile device manufacture, the inbound logistics and operation incur the bulk of cost in their primary activities because of who they are. Nokia’s CVP can be summarized as to providing high quality and innovated telecommunication product with reasonable and fair price. From its move to collaborate with Microsoft to produce Windows Phones that will offer new experience to customers, we can see that Nokia is striving to differentiate their products to compete with other mobile device manufactures on the market, like Apple Inc. However, with its declining sales on Symbian models during the transition to Windows, Nokia is having a hard time trying to maintain their competitive strategy while making profits. Restructuring the work force and optimizing the operation is a smart move for them at this point to reduce cost and to foster innovation on their product, since the streamline operation in Asia will optimize production process and save money, leaving more resource for the company to develop customized products for their majority customers in Europe and North America. However, this job cut is still a sign of their company’s weakening financial situation, and it may affect morale and effectiveness for their workers if they have strong working culture like people in Toyota Co.
So readers, what do you think about Nokia’s decision? Thinking as a consultant, do you have other suggestions for Nokia?
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