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Alarm Ringing: Nokia in 2010

Case Analysis

Dibas Gaudel
3/25/2017
Introduction
Nokia Corporation, known as NOKIA, is a multinational communications and information
technology company, founded in 1865. Nokia is headquartered in Espoo, Finland. In 2010,
Nokia employed 123,553 people, did business in more than 150 countries and operated under
three business segments- Device & Services, NAVTEQ, and Nokia Siemens Networks. It
operated 15 manafaguring facilities in nine countries and maintains R&D facilities in 12
different countries. Nokia had been market leader in the mobile phone market since 1998. In
June, 2006 Jorma Ollila CEO of Nokia since 1991, made Kallasvuo the head of the handsets
division. Same year Nokia merged with carrier- related operations of Siemens AG to form a new
unit called Nokia Siemens Networks which provide equipment, services, and solutions for
communications network globally. On July 10, 2008, Nokia Acquired NAVTEQ Corporation.
Nokias great strength was in the lover end of the market like China, Brazil, and India though the
company developed high-end handsets like N-series and E-series based on 3G technology to
capture a sustain share of the high-end phone market. In 2007 Nokia entered the Internet service
Space with the OVI brand, umbrella brand for a range of Internet Services offered by Nokia-
such as an online music store, online navigation, and online game store.

Problem Faced by Nokia


Though Nokia is a largest mobile phone maker with 35% market share till 2010, it starts to
losing market share in the high-end mobile phone market.

The main problems faced by Nokia are as follows:

Younger buyers of global market are interested for the smartphones, but Nokia continued
to churn out the single-piece design phones called Candy Bar.
Nokia was slow in launching smartphones with the latest version of Symbian.
Nokia also face cultural bias from management team.
Nokias does not launch expensive mobile phones except Nseries and Eseries so its
consumers upgraded to more expensive brand like iPhone.
Unsuccessful in releasing a compelling touchscreen model.
Postpond the launch of its new smartphone called N8 in 2010. The delay generated
negative image in market.
Unable to maintain long term relationship with major wireless carriers in the US.
Nokia give more priority to OVI store instead of building phones and mobile
applications.
Nokia has huge market in the low-end market; it gives negative image among
smartphones users.
To hold the global market, Nokia cut the price of its handsets and shipped move to low
price models.
The potential and innovative idea was delayed or ignored by management.
Lack of communication between different departments.
Management team member are incompetent and they dont have courage for managing
the chain.
BOD of Nokia thought Pekka Kalasvuo CEO of Nokia was responsible for falling
profitability and replacing him will solve the problem but the new CEO also take times to
understand the culture of Nokia.

Reasons for the Problem faced by Nokia


Nokia was a pioneer in the smartphone market, by introducing consumers to the smartphone with
its initial Symbian in 2002. For the next five years, Symbian phones had little trouble
maintaining a leadership position in the smartphone pack. But it is unsuccessful to release smart
phones with compelling touchscreen model but in 2007, Apple introduced its iPhone with its full
touchscreen and app-based operating system by which Nokia failed to respond to the iPhone and
the shifting consumer demand that came with it. As the years passed, the Symbian platform was
old, and that really showed when compared to iOS and Android. Also Nokias huge market in
the low-end part of the market was, in part, blamed for its negative image in more developed
markets such as the US and among people who wanted high-end phones. In the smart-phone OS
market too, competitors were catching up quickly on Nokias Symbian platform.

Nokia is too slow to develop new phones because its management team always ignored or
delayed innovative and potential idea. Nokia didnt market itself as an innovator, except
developing OVI store for. Not only did Nokia move too slowly in the smartphone market, it
didnt anticipate competition in the lower end of the market, either. Other manufacturers like
emerging in China have attacked Nokia from the low-end in developing markets like China and
India.

How Nokia can make its products competitive, foster innovation and regain
its market share.

Nokia is a leading company in mobile phone market but because of different reason it loses its
market and decreases the share price. In 2008, Nokias net sales was 50,710 but in 2009,
Nokias net sales decreases by 19% to 40,984. Till 2010 Nokia capture only 40% of smartphone
market.
As Nokia main problem was its operating system that is Symbian and new innovation. Nokia
mostly fails to release new technology like smartphones and touchscreen. Nokia focuses its
mobile phones for only low level market. But low level market also wants smartphones.
Nokia should use smartphones technology like Android rather than Symbian because smartphone
segment was the most profitable and faster growing segment in the global mobile phone market.
Nokia focus the low level market and they did not focus for high level market and they also
decrease the price of the mobile phones which also decrease the profitability of the Nokia. To
increase the profitability and gain the market share Nokia should focuses on High end market by
developing latest version of smartphone and added new features rather than focus on low level
market.
Nokias presence and brand recognition in the US market which is fastest growing market in
smartphones, was very low so they have to maintain long term relationship with major wireless
carriers in the US to capture the US market. And also give the more priority for the new and
innovative idea to develop the new smartphones. Management team of Nokia should be more
innovative and communicate channel for each other department should be improve so every
department can communicate with each other for developing the phones and maintain relation
with other department. Communication also helps them to share the innovative idea to other.
Nokia also have to appoint new CEO who have good experience in software and market sector
but he dont have any kind of experience in mobile device so they should appoint a CEO who
have knowledge in smartphones and mobile devices.

The Challenges Faced by Elop


Elop, first non-Finn CEO of Nokia had early been president of MBD, worked in Microsoft also
had served as CEO of Juniper Network and also worked as CEO of graphic software
development at Macromedia later became president of worldwide field operations at Adobe
System. He also worked as a CIO at Boston Chicken. Elop have very broad software experience
and deep knowledge of North American market.
When Elop entered in Nokia, Nokia already started to lose its market share so Elops main
responsibility to increase the market share of Nokia and make the positive image and brand in
the market. And also one of the most important task for Elop was develop a challenger to iPhone
as the smartphone maker and steer Nokia in a new and innovative direction and build up the
brand image of the company. The mobile phone market was already capture by iPhone and
Android but he did not make research to know the market taste rather he make strategy for the
company and build an efficient OS and invest huge amount of money of R&D but new version
of Symbian also did not work in the smartphone market.
Elop have deep knowledge of North American market so he has another challenge to establishing
Nokias presence in North American market but he failed to design and develop an interface that
suited in US market as the typefaces, screen layouts, and hardware designs of Nokia phones.

As a first non-Finnish CEO of the company, adjusting to Nokias culture would also be a
challenge for Elop. The long process of Nokias product creation right from concept to design
was very Finnish, usually characterized by long approval processes. But Elop made strategy
suitable for him but it is very hard for him to implement his strategy Nokia because of cultural
differences and lack of leadership in every department of Nokia. He also suffered froi cultural
bias from chairman and long standing management team.

Strategy that Elop could adopt in these difficult times


Nokia loses the market share because it cannot adopt latest smart technology i.e. operating
system and touch screen. Also it fails to release its mobile device on promised time. As a CEO of
Nokia, Elop have many challenges to increase the market share of Nokia.
Nokia already spend huge amount of money in R&D but it had meet with failure to design and
develop the new device and also interest of the consumer on Symbian phones manufactured by
Nokia was decreases so Elop had to made acquire strategy to use Android system developed by
Google rather to invest money to develop new operating system.
Nokia only focused on low level market by developing low cost mobile and also decreasing the
price of the product, but the consumer are upgraded to more expensive model so Elop have to
make product differentiation by focuses on expensive mobile phones with latest technology like
touchscreen. He could make the strategy to build long term partnerships with major wireless
carriers in the US by making contract or deal with them to capture the US market to make
presence and brand recognition of Nokia.
Elop could maintain the relationship with the management team and departments and make
communication channel stronger. He should have to understand the culture of Nokia and make a
short chain for decision making process.
Elop should make also marketing strategy to capture the new market and gives market presence.

Recommendations and suggestions


The firms top priority should be to focus on pushing manufacturing and sales of its smartphones
in emerging markets because low-cost Android phones have eaten into the companys basic
phone sales, it should look to sell lower-cost versions of its Lumia range there, he adds. Nokia
needs to build the best phone on the market. They need to build a phone with specs at least on
par with the leaders today (Samsung and iPhone), then make it thinner, make it lighter, give it a
good quality camera (12 - 15 megapixels at best, not 41), maybe some other bells and whistles
like wireless charging, and sell it at a reasonable price.

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