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Nokia benefiting from tendency to stick with a brand whose products consumers have already learned how to use

Models such as the 550 euro ($759) N95 are paying off as customers trade up from starter phones in India and China. The shift is restoring profit margins that Chief Executive Officer Olli-Pekka Kallasvuo sacrificed last year when he focused on cheaper phones to win sales in those countries, where Nokia is the dominant brand.

As customers move up in price range, Nokia is benefiting from the users’ tendency to stick with a brand whose products they have already learned how to use, analysts and investors including Heikkilae said.

Replacement phones will make up 60 percent of emerging- market sales this year, up from 50 percent in 2006, according to Nokia. Globally, the replacement market is expected to climb to 80 percent by 2010 from current 65 percent.According to Business week Nokia’s sales in China and the Asia-Pacific region each jumped 39 percent last year.The former producer of rubber boots and timber, which famously made a risky decision in 1992 to focus on mobile technology, seems to be doing everything right these days. Nokia’s supply-chain management may be the best of any company in the world. It has a big head start in fast-growing markets such as China and India. And it has $9.5 billion in cash and practically no debt, so it can invest far more than rivals on developing new products or conquering new markets—and thus build even more intimidating economies of scale. “We are about to report our billionth customer, so we must be doing something right,” says Anssi Vanjoki, a Nokia executive committee member responsible for multimedia devices. One lesson Nokia learned was that it doesn’t pay to rely too heavily on a few top-selling models. Motorola, by contrast, became overly dependent on the Razr. Nokia has nailed both the high and low ends of the market and pretty much everything in between. For affluent buyers who want the latest technology, the $750 top-of-the-line N95 includes an Internet browser, music player, GPS satellite receiver, and the ability to connect to Wi-Fi networks as well as standard cellular services. Even Nokia’s entry-level phones offer extras that appeal to Mumbai tea sellers and vast numbers of other low-income people enjoying their first taste of telecommunications.   

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July 20, 2007 - Posted by | Best mobiles, Nokia

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