Political Risks That Nokia Faces in Asia, Particularly China

GLOBAL MANAGEMENT DISCUSSION

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Political risks that Nokia faces in Asia, particularly China

China is one of the superpowers in the world especially when it comes to technology but the multicultural corporations such as Nokia that have sort to expand into the economy are faced by multiple political risks (Luthans, & Doh, 2012). First, China has been greatly linked to political corruption and bribery that has slowed down its economy, not to mention, the increased restrictions imposed on local and foreign businesses. The high licensing fee required by the government, increased social pressure as well as the public relations campaigns speaking against foreign companies have all really affected the operations of Nokia in China. The impact that political rivalry and risks have had on Nokia were evident back in 2013 when China only awarded the MNC a $320 million contract out of the $3.2 billion pie (Einhorn, 2013). Considering the great innovation and reputation that Nokia has across the world and in the electronic industry, its management expected a much larger portion of the contracts. During the bidding process, Nokia offered the lowest bid in comparison to companies like ZTE, Huawei and Ericsson but was still offered a lower contract in comparison to the first two companies.

ZTE and Huawei are the main competitors of Nokia and them being Chinese companies has really given them a competitive advantage. This has been enhanced by the subsidies that the Chinese government offers to these two companies hence ensuring that they always get the lowest bids so that they can be awarded more contracts. The political game that China plays by subsidizing its companies is aimed towards creating an uneven competition as a way of eliminating the foreign companies from its market. India has also introduced some political risks for Nokia in Asia especially when it comes to imposing high taxes on the products of MNCs (Einhorn, 2013).  Capitalism has become very rampant in the world and China is one of the countries that the concept has been deeply rooted hence providing an unfavorable business environment. The government also regulates capital control measures in China and this makes it difficult for the foreign countries like China because the capital flow becomes volatile. Regardless of the efforts of Nokia to be the number one brand in China, political influences have led to its downfall and is now not even among the top 10 mobile bands in the country (Einhorn, 2013).

How Nokia can manage these risks

MNCs like Nokia are faced by multiple risks because they operate in a diversified economy and hence the need to identify some of the best strategies that will enable them to mitigate such risks and better their relations with the governments. China is filled with multiple political risks and hence, it would be in the MNC’s interests to defer any further investments in China but continue its current operations in a more innovative and relatable manner. Nokia should also consider forming an alliance with one of the big Chinese electronic companies such as Huawei as a way of both improving their relations as well as sharing the economy (Luthans, & Doh, 2012). Nokia should also conduct a thorough analysis of the electronic industry in China, compare its technological capabilities to those of the competitors as well as identify the favorable and unfavorable local conditions in the Chinese market. These strategies will not only allow Nokia to improve its management skills and philosophies, but also enhance its logistics formulation ad labor transmission.