Nokia 2005 Annual Report Download - page 17

Competition in our industry is intense. Our failure to maintain or improve our market
position and respond successfully to changes in the competitive landscape may have a
material adverse impact on our business and results of operations.
The markets for our products and solutions are intensely competitive. Industry participants
compete with each other mainly on the basis of the breadth and depth of their product portfolios,
price, operational and manufacturing efficiency, technical performance, product features, quality,
customer support and brand recognition. We are facing increased competition from both our
traditional competitors in the mobile communications industry as well as a number of new
competitors, particularly from countries where production costs tend to be lower. Some of these
competitors have used, and we expect will continue to use, more aggressive pricing strategies,
different design approaches and alternative technologies. In addition, some competitors have
chosen to focus on building products based on commercially available components, which may
enable them to introduce these products faster and with lower levels of research and development
spending than Nokia.
Nokia believes that it has a cost advantage in mobile devices compared to our competitors as a
result of its market position. If we fail to maintain or increase our market share and scale
compared to our competitors, our cost advantage may be eroded, which could materially
adversely affect our competitive position and our results of operations, particularly our
profitability.
Consolidation among the industry participants could potentially result in stronger competitors that
are better able to compete as end-to-end suppliers as well as competitors who are more
specialized in particular areas. This could have a material adverse effect on our business,
operating results, and financial condition.
As a result of developments in our industry, we also expect to face new competition from
companies in related industries, such as consumer electronics manufacturers and business device
and solution providers. Additionally, because mobile network operators are increasingly offering
mobile devices under their own brand, we face increasing competition from non-branded mobile
device manufacturers. If we cannot respond successfully to these competitive developments, our
business and results of operations may be materially adversely affected. See ‘‘Item 4.B Business
Overview—Competition,’’ for a more detailed discussion of competition in our industry.
Our sales and results of operations could be materially adversely affected if we fail to
efficiently manage our manufacturing and logistics without interruption, or fail to ensure
that our products and solutions meet our and our customers’ quality, safety, security and
other requirements and are delivered on time.
Our manufacturing and logistics are complex, require advanced and costly equipment and include
outsourcing to third parties. These operations are continuously modified in an effort to improve
manufacturing efficiency and flexibility. We may experience difficulties in adapting our supply to
meet the demand for our products, ramping up or down production at our facilities as needed,
maintaining an optimal inventory level, adopting new manufacturing processes, finding the most
timely way to develop the best technical solutions for new products, managing the increasingly
complex manufacturing process for our high-end products, particularly the software for these
high-end products, or achieving manufacturing efficiency and flexibility, whether we manufacture
our products and solutions ourselves or outsource to third parties. Such difficulties may have a
material adverse effect on our sales and results of operations and may result from, among other
things, delays in adjusting or upgrading production at our facilities, delays in expanding
production capacity, failure in our manufacturing and logistics processes, failures in the activities
we have outsourced, and interruptions in the data communication systems that run our
operations. Also, a failure or an interruption could occur at any stage of our product creation,
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