Nokia Rise of Electronics: 1980s

Nokia's most important focus was development of the electronics sector. Over the course of the 1980s, the firm acquired nearly 20 companies, focusing especially on three segments of the electronics industry: consumer, workstations, and mobile communications. Electronics grew from 10 percent of annual sales to 60 percent of revenues from 1980 to 1988.

In late 1984 Nokia acquired Salora, the largest color television manufacturer in Scandinavia, and Luxor, the Swedish state-owned electronics and computer firm. Nokia combined Salora and Luxor into a single division and concentrated on stylish consumer electronic products, since style was a crucial factor in Scandinavian markets. The Salora-Luxor division was also very successful in satellite and digital television technology. Nokia purchased the consumer electronics operations of Standard Elektrik Lorenz A.G. from Alcatel in 1987, further bolstering the company's position in the television market to the third largest manufacturer in Europe.

In early 1988 Nokia acquired the data systems division of the Swedish Ericsson Group, making Nokia the largest Scandinavian information technology business.

Although a market leader in Scandinavia, Nokia still lacked a degree of competitiveness in the European market, which was dominated by much larger Japanese and German companies. Kairamo decided, therefore, to follow the example of many Japanese companies during the 1960s (and Korean manufacturers a decade later) and negotiate to become an original equipment manufacturer, or OEM, to manufacture products for competitors as a subcontractor.

Nokia manufactured items for Hitachi in France, Ericsson in Sweden, Northern Telecom in Canada, and Granada and IBM in Britain. In doing so it was able to increase its production capacity stability. There were, however, several risks involved, those inherent in any OEM arrangement. Nokia's sales margins were naturally reduced, but of greater concern, production capacity was built up without a commensurate expansion in the sales network. With little brand identification, Nokia feared it might have a difficult time selling under its own name and become trapped as an OEM.

In 1986 Nokia reorganized its management structure to simplify reporting efforts and improve control by central management. The company's 11 divisions were grouped into four industry segments: electronics; cables and machinery; paper, power, and chemicals; and rubber and flooring. In addition, Nokia won a concession from the Finnish government to allow greater foreign participation in ownership. This substantially reduced Nokia's dependence on the comparatively expensive Finnish lending market. Although there was growth throughout the company, Nokia's greatest success was in telecommunications.

Having dabbled in telecommunications in the 1960s, Nokia cut its teeth in the industry by selling switching systems under license from a French company, Alcatel. The Finnish firm got in on the cellular industry's ground floor in the late 1970s, when it helped design the world's first international cellular system. Named the Nordic Mobile Telephone (NMT) network, the system linked Sweden, Denmark, Norway, and Finland. A year after the network came on line in 1981, Nokia gained 100 percent control of Mobira, the Finnish mobile phone company that would later become its key business interest as the Nokia Mobile Phones division. Mobira's regional sales were vastly improved, but Nokia was still limited to OEM production on the international market; Nokia and Tandy Corporation, of the United States, built a factory in Masan, South Korea, to manufacture mobile telephones. These were sold under the Tandy name in that company's 6,000 Radio Shack stores throughout the United States.

In 1986, eager to test its ability to compete openly, Nokia chose the mobile telephone to be the first product marketed internationally under the Nokia name; it became Nokia's "make or break" product. Unfortunately, Asian competitors began to drive prices down just as Nokia entered the market. Other Nokia products gaining recognition were Salora televisions and Luxor satellite dishes, which suffered briefly when subscription programming introduced broadcast scrambling.

The company's expansion, achieved almost exclusively by acquisition, had been expensive. Few Finnish investors other than institutions had the patience to see Nokia through its long-term plans. Indeed, more than half of the new shares issued by Nokia in 1987 went to foreign investors. Nokia moved boldly into Western markets; it gained a listing on the London exchange in 1987 and was subsequently listed on the New York exchange.