Nokia Company Analysis
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Nokia Company Analysis
2. To what extent does price or non-price competition erode the profitability of the company?
Introduction
Price or non-price competition can erode the profitability of any given company and can eventually lead to its collapse. This has an implication that companies ought to evaluate the activities of their competitors so that suitable strategic formulations can be adopted to evade organizational collapse. This paper will succinctly discuss the extent to which price or non-price competition can reduce the profit margins of Nokia Company. The scope of the paper will involve analysis of activities of the competitors of Nokia Company which influence customer purchasing decisions (Dobson, Starkev & Richards, 2004). This means that facets relating to product pricing, quality, and customer services will be evaluated to as to ascertain the extent of profit erosion from the Nokia Company.
Effect Price Competition on Nokia Company
Price competition arises when two or more companies offering similar products or services try to out do each other by lowering the prices of their commodities. Similarly, Nokia has a variety of competitors like Motorola and Techno which offer similar products to the customers. If these organizations lower the prices of their products so as to force Nokia out of the market, Nokia will also have to reciprocate by lowering its prices. This has an insinuation that it will have to incur losses because of being forced to lower its prices (Stigler, 1968). Given that the funds spent on the employees, suppliers and the manufacture of the mobile phones and their accessories remain unchanged, it is probable that the firm will lose heavily; because the expenses will outweigh the income from the sales.
If the company lowers the prices of the commodities that it offers and yet the sales do not increase, then it will be...