Nokia 2012 Annual Report Download - page 89

In our Mobile Phones business, we believe our competitive advantages—including our scale, brand,
quality, design, manufacturing and logistics, strategic sourcing and partnering, distribution, research
and development and software user experience and intellectual property—continue to be important to
our competitive position. Additionally, we plan to extend our Mobile Phones offerings and capabilities
during 2013 in order to bring a modern mobile experience—software, services and applications—to
aspirational consumers in key growth markets as part of our strategy to bring the Internet and
information to the next billion people. At the same time, we plan to drive third-party innovation through
working with our partners to engage in building strong, local ecosystems.
Emergence of New Business Models
We believe that the traditional industry monetization model—capturing the value of the overall
experience through the sale of a mobile device—will continue to dominate in the near to medium term.
However, we are also seeing the emergence of new indirect monetization models where the value is
captured through indirect sources of revenue such as advertising revenue through applications rather
than the actual sale of a device. These indirect monetization models could become more prominent in
the industry in the longer-term. Accordingly, we believe that developing a range of indirect monetization
opportunities, such as advertising-based business models, will be part of successful ecosystems over
the coming years. Obtaining and analyzing a complex array of customer feedback, information on
consumer usage patterns and other personal and consumer data over the largest possible user-base is
essential in gaining greater consumer understanding. We believe this understanding is a key element
in developing new monetization opportunities and generating new sources of revenue, as well as in
facilitating future innovations, including the delivery of new and more relevant user experiences ahead
of the competition.
Supply Chain, Distribution and Operator Relationships
The industry in which we operate is one of the most innovative, with a broad range of industry
participants contributing product and technological innovations. In particular, the role of component
suppliers has grown in importance. We believe that there continues to be substantial room to innovate
in hardware. From that perspective and in order to deliver market-leading innovations and sustainable
differentiation through hardware, it is critical to have good relationships with high quality suppliers. With
good supplier relationships, allied with the strength of our world-class manufacturing and logistics
system, we believe we are well-positioned to deliver high-quality hardware as well as to respond
quickly to customer and consumer demand.
Amid rapid change in the industry, we have also seen new sourcing models emerge. Especially in
smartphones, our competitors have shifted from traditional multi-sourcing strategies where you have
multiple suppliers for each component, to more focused sourcing strategies where they integrate key
strategic suppliers closer to their operations as well as use advance cash payments to secure supply
for several quarters in advance in order to have more unique and differentiated components as well as
more predictability in their sourcing. This means that we also need to look for new and more innovative
ways of sourcing key components, particularly in our Smart Devices business unit.
As in any global consumer business, distribution continues to be an important asset in the mobile
products market. We believe the breadth of our global distribution network is one of our key
competitive advantages. We continue to have one of the industry’s largest distribution networks.
Compared to our competitors, we have a large distribution and care network.
Strategically, we want to be the preferred ecosystem partner for mobile operators. By building a global
mobile ecosystem with Microsoft and focusing on driving operator data plan adoption in lower price
points with our feature phone and Asha full touch smartphone offering, we believe we will be able to
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