Nokia failing Case Study

Introduction to Crisis Management

Prof. Tarek Diab

Prepared by:
 Mohammad Mohsen Ahmad Kamal El-Deen
 Mohamed Nour Ayman Makki
 Hany Lotfy
 Ahmad Ezzat
Contents:

Introduction and Brief History .............................................................................................................. 3

Nokia Through the years 1865-Present .............................................................................................. 4
What Exactly Happened to Nokia? ...................................................................................................... 5

Resistance and Denial ............................................................................................................................ 8

Crisis Response and Media Communication ................................................................................... 9

Evaluation: ............................................................................................................................................... 10
Crisis management and Alternative Actions .................................................................................. 10
Final Thoughts ........................................................................................................................................ 11
Introduction and Brief History
Company Brief:
Nokia Corporation
• A Finnish multinational telecommunication, information technology, and consumer electronics company, founded in
1865. Nokia's headquarters are in Espoo, in the greater Helsinki metropolitan area.
• In 2018, Nokia employed approximately 103,000 people across over 100 countries, did business in more than 130
countries, and reported annual revenues of around €23 billion.
• Nokia is a public limited company listed on the Helsinki Stock Exchange and New York Stock Exchange.
• It is the world's 415th-largest company measured by 2016 revenues according to the Fortune Global 500, having
peaked at 85th place in 2009. It is a component of the Euro Stoxx 50 stock market index.
Nokia Through the years
1865-Present

Year Key Event

1987 Nokia launches first fully portable mobile phone

1998 Nokia becomes bestselling mobile phone

2007 Apple, launches First iPhone

2008 Google, launches First android

2008 Nokia Peak market share

2013 Microsoft Acquires, Nokia mobile business

 Stock performance over the years
60
56.45
50

40
38.51
30

Iphone released
20

10
2.39 3.49
0
1994
1995

2018
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017

2019
Stock Price

What Exactly Happened to Nokia?

In 2008, Nokia did well. A few years earlier, Nokia was about 40+ percent
of the world's handset market. At its best, the Symbian platform, which was
the Nokia smartphone operating system, had over 70 percent market
share in the world until iPhone and Android devices came from behind and
bypassed the Nokia platforms. That started the decline of the Nokia
business so that, come 2012, the situation was dark, and the press was
speculating on the timing of Nokia's bankruptcy. It was not if; it was when.

Because Nokia is – was – more than just a telecommunications company

in Finland. Its annual budget was larger than the government’s. It was a
main part of the country, certainly a source of national pride. Until the pride
was replaced by shame.

In September 2013 Microsoft had acquired Nokia at the price of 3.79 billion
euros (about 5 billion dollars), and buy Nokia’s patent license with 1.65
billion euros (about 2.18 billion dollars) in addition, so the total price of the
transaction was about 5.44 billion euros (about 7.17 billion dollars). Once
the transaction was completed, 32,000 employees of Nokia, including 4700
employees in Finland and about 18,300 manufacturing employees, would
join Microsoft; Microsoft would get Nokia’s department of device and
 service, including mobile phones, smart devices and the leading design
team.

Why this happened?

When in the past it had been them coming up with ideas that people
laughed at before fully adopting, this time it was someone else. Steve
Jobs. No buttons on his phone, just a screen that you touch and swipe,
and not just a phone but everything; your life, the love of your life “
New Trends in mobile smartphones
 Introduction of Capacitive Touch Screens
 Introduction of iOS by Apple and Android by Google
 Online entertainment platforms offering users experiences which digitalized
the benefits of desktop or classic access while take advantage of High
internet Bandwidth, ex. (online casinos, MMORG, Streaming Services)
Competition vs Nokia
 Developers such as Apple and Samsung had learned from Nokia’s success, and
put their own twist on these devices to move them ahead.
 A significant part of this came from the adoption of better operating systems.
Android and iOS were far more flexible than Nokia's Symbian OS, making them a
better fit for the age of mobile internet.
 Android and iOS Continued to evolve and improve introducing yearly updates
and features that kept customers engaged and loyal.
North America Market Ignorance
 Nokia ignored America. The company simply refused to compete energetically
and respectfully in the U.S. America was treated as an innovation afterthought.
Nokia tried to get away with preserving its market dominance in Europe and
growing its leadership in Asia. The richest country in the world was, literally and
figuratively, a third-class priority for the Finnish giant.

Nokia Suffering
 Nokia has suffered a series of attacks since 2012. It has been pressed by many events,
including several land- mark events Nokia announced 10,000 layoffs globally on June
15, 2012
 Nokia sold headquarters building at 17 million euro on December 5, 2012.
What was the reaction of Nokia?
Nokia Research and development (R&D)
 Nokia had dismissed touchscreens as a gimmick that used too much
battery. After which they were playing catchup and they didn’t ever
manage it. Their market share eroded.
 Nokia’s development process was long dominated by hardware engineers;
software experts were marginalized. (Executives at Apple, in stark contrast, saw
hardware and software as equally important parts of a whole; they encouraged
employees to work in multidisciplinary teams to design products.)
 What Nokia was unable to do, though, was translate all that R&D spending into
products that people actually wanted to buy.

Resistance and Denial

 Nokia also underestimated how important the transition to smartphones would
be, diverting a lot of resources into a high-end, low-volume business (which is
what the touch-screen smartphone business was in 2007) would have looked
risky
 why didn't Nokia choose to go with Android to replace Symbian when it decided
to kill that as its smartphone operating system in late 2010?
 It's known that Nokia did discuss the idea with Google - but didn't follow through
Because Nokia felt that would be going down without a fight.
 Maybe Windows Phone 7 will have those same hardware "issues" as Android but
Nokia felt it could differentiate its handsets by dropping in Nokia specific features
like their Navteq location-based services. That, they felt, would give them a leg
up.
 Now, it's hard - it's very difficult because Nokia is starting as a challenger, hence
it has to restore that credibility
Crisis Response and Media Communication
Evaluation:

First of all, as we see that Nokia’s board members and all key persons in management
team has denied all the evidences and proofs that they will lose the market share and
the company. They ignored this because of the targets and they have no time to
respond to all the evidences that will result from a technological shift in such a mobile
phone industry. So as a result Nokia falls and still have the same denial to respond to
the technological shifts and their customers’ needs to integrate with google and
introduce a mobile that operates with android. Hence, Nokia integrated with Microsoft as
a need of money and they thought that windows phone will succeed even though
google offered their android for free but they chose Microsoft because of money
payments.
Regardless Nokia has their own crisis management team or not the whole problem is in
the board of directors and their denials although the R&D team alerted them about the
risk and how it could cause crisis but the board was not convinced that there is a risk or
could cause a crisis.
Our crisis study for Nokia differs from any crisis because its technological crisis and no
one in the company was convinced that there is a risk and crisis coming.
Nokia’s decline in mobile phones cannot be explained by a single, however with simple
answer: Management decisions, dysfunctional organizational structures, growing
bureaucracy and deep internal rivalries all played a part in preventing Nokia from
recognizing the shift from product-based competition to one based on platforms.

Crisis management and Alternative Actions

If we are the crisis management team for Nokia or members in the board we would
respond differently with the launching of IPhone for (Apple) and Android for (Google) as
the following:
1- Instead of denying all the evidences we can have a try to respond to the
technological shift by introducing new touch screen mobile phone.
2- Although our R&D team was working on Symbian software we can suggest to the
board members on our behalf to offer a new mobile with android version as a trial
for the new technological shift.
3- For the communication plan we should communicate with all our customers
through the media or in a media interview that we will introduce a new era of
Nokia with specifications that will fit all our customers following the new
technological shift to maintain our customers and our market share so our loyal
customers will wait our launch for the new mobile.
Final Thoughts

 The high-tech era has taught people to expect constant innovation; when
companies fall behind, consumers are quick to punish them. Late and
inadequate: for Nokia, it was a deadly combination

 And this was, in retrospect, a classic case of a company being enthralled (and, in
a way, imprisoned) by its past success. Nokia was, after all, earning more than
fifty per cent of all the profits in the mobile-phone industry in 2007, and most of
those profits were not coming from smartphones.

 After Microsoft integration with Nokia and they failed to introduce and succeed
the windows phone, Microsoft learned that they should follow the technological
shift and trend so for an example: (All the windows users shift from internet
explorer application to Google Chrome application and Microsoft noticed this
issue then they integrated with google and introduced new application called
Microsoft Edge Beta).

 Nokia also learned from the integration with Microsoft So, HMD company bought
Nokia and introduced new era of Nokia’s Mobile phones that operating with
Android by Google Finally to regain the customers’ loyalty and market share.