Business Interests vs German Pressures
Business Interests vs German Pressures Synopsis of the Case Study Nokia is the world’s largest mobile handset maker commanding a 40% share of the global market. The telecom industry of late has seen increased competition and declining margins. The result is that more and more firms are outsourcing and offshoring. Nokia too has been moving its production to low-cost countries and already has manufacturing facilities in China, India and Brazil. The company’s 11 th plant is in Romania – an Eastern European country that joined the EU in 2007. The country was chosen for its wage competitiveness. One’s gain however is the other’s loss.
Nokia, in January 2008, abruptly announced that it would close its Bochum plant in Germany and move production to Romania. The announcement saw resistance from the employees, the trade unions, politicians and even some business leaders. There were demonstrations and calls to boycott Nokia phones. Workers protested saying that Nokia had no clear explanation for closing a profitable productive factory, trade unions objected saying that Nokia had not handled the situation the German way and politicians demanded that Nokia hand back the subsidies it had received from the state in exchange for guaranteeing job creation.
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Nokia, while refusing to alter its decision, said that if such a situation were to come again, the company would behave in the same way and not change its policy – it was essentially a Finnish company and this was how it was done in Finland. The case study, second in a two part series on Nokia, hints at the trends in the telecom industry and the subsequent changes that Nokia is making to its strategy. The competitiveness of Germany is also discussed with a mention of the exodus of companies from there.
In detail is Nokia’s announcement of the Bochum plant closure – the ensuing brouhaha and the way Nokia (mis)handled the situation. The case study enables a discussion on globalisation and the issues that go with it. To what extent should global companies like Nokia adopt local practices when managing large-scale transnational restructuring moves – particularly those as sensitive as plant closures? Lessons are also to be learnt on managing complexities and crisis management in globalised issues.