But the glowing numbers - which could well be a blip - hide a potentially serious problem area for the Finnish mobile phone company: China. Net sales in the mainland hit 2.8 billion euros in 2002, making it the third largest market behind the United States' 4.7 billion euros and the UK's 3.1 billion euros. Unlike the top two though, China is still a developing market and has enormous upside potential that will make it the largest mobile telephone market in the next decade.
In the late 1990s, Nokia appeared to have the China market all figured out. Back then, it took serious market share from the leader Motorola, which had commanded as much as 80 per cent share in the early 90s. An unmatched ability to innovate both in product features and design combined with a strong aspirational brand quality made it the most desired handphone among upwardly mobile mainland consumers.
It's an entirely different story today although the brand heavily outspends its challengers. Nielsen Media Research data showed Nokia spent Rmb 614 million in 2002 against Motorola's Rmb 534 million. Spend levels fell considerably last year, narrowing the gap between the two multinational rivals - Rmb 353 million to Motorola's Rmb 330 million.
Despite outspending Motorola, Nokia's market share appears to have stagnated to levels similar to its rival at between 15 and 20 per cent. Some analysts believe that Motorola still has the edge, perhaps a percentage point or two ahead, at least. Nevertheless, Nokia's move to introduce a matrix structure and to treat China as a single market in the same way it does North America and Europe indicates an attempt to redress lapses, while aggressively developing the company as a total communication systems and products organisation. But in the fastest-growing market of China, its biggest challenge will come from local rivals that have borrowed heavily from Nokia, innovating and branding as it has done. Among them, Panda, Bird and DBTel have turned to 4As agencies, with the first two hiking advertising spend by more than 170 per cent. At the same time, Korean vendors such as the increasingly brand-savvy Samsung and VK can be counted on to put up an equally aggressive brand fight.
For Nokia, and Motorola as well, their biggest challenge will lie in distribution. As one analyst puts it, in a shopping mall full of mobile vendors, Nokia always seems to be at the back or out of sight. But more than distribution, product innovation and getting more bang for its marketing dollars are key issues which Nokia will need to address if it is to succeed when taking on resilient and market-savvy local contenders.