Nokia Ltd: Travails of a Market Leader

Abstract

This case highlights the success journey, spread over 148 years, of a strong brand, which reached no 1 position in terms of market share. Simultaneously, the other part of story is a decline in market share and profit margins of the company due to competitors upgradation in technology. The case can be analyzed for:

Strengths, weaknesses, opportunities and threats (SWOT) analysis of the company.

Choice of an appropriate strategy on the basis of SWOT analysis.

Implementation of an appropriate strategy.

Corrective measures for feedback mechanism if strategy is not working.

SWOT Analysis of the Company

Table 1 shows the SWOT analysis of the company and simultaneously the important features and milestones the company achieved over a period of time and the strategy adopted by Stephen Elop.

Choice of an Appropriate Strategy on the Basis of SWOT Analysis

The core philosophy of the company is reliability and quality that it provides even in low price products. The company got an opportunity in the year 2000 to upgrade technology in tune with competitors; this decision could help the company to minimize its weaknesses related to operating system features. As mobile industry is technology based and over a period of time the company spent much lower on R&D than competitors, missing this opportunity created a more difficult problem for the company. The company was not able to identify the fast-changing customer needs and preferences that shifted from communication to more feature-oriented products, thereby taking the shape of threat. On the other side, competitors upgraded the technology and converted this threat into opportunity. The other appropriate decision could be to use strong partners such as China mobile and NTT DoCoMo to add more feature-oriented mobiles.

Implementation of an Appropriate Strategy

The company can go for customer segmentation on the basis of product features rather than price, because features become more important than price. The company can do the implementation of same with its strong partners such as China mobile and NTT DoCoMo. The segmentation shift can further help the company to restructure product price in tune with features. There is a need to spend more money on R&D so that company can come at par with competitors.

Corrective Measures for Feedback Mechanism if Strategy is not Working

The company needs to introduce a proper feedback mechanism after introducing a new strategy. Over a period of time, the company was not able to incorporate changes as per customer taste and preference, showing that the company did not have a proper system of feedback mechanism and corrective measures in place? Same is the situation in competitive analysis, either in R&D spending or adoption of a new technology.

Table 1.

SWOT Analysis

Company’s General Features	Strength	Weakness	Opportunity	Threat	Strategy
• 148-year-old Finnish multinational corporation • Focused on communications and information technology • In, 1985, the company marketed its first ever mobile telephone • In 1993, the first Nokia digital cellular telephone • In 1992, strategic decision to concentrate solely on telecommunications • Other division sold as rubber, cable and electronics • Top leader in telecom by 1990; revenue comes from North and South America and Asia • In 2000, it created strong supply chain by enabling technology • Revenue: 4% of Finland’s GDP • In 2009, market share fell due to touch screen smart phones • Stock price fell under $2 in 2012 over $40 in 2007 • Tie up with Microsoft in 2011 • Nokia reached the top of its industry quickly • Nokia was unwilling to challenge itself • Nokia was not located near a cluster of companies • When Google kick-started the Android revolution, Nokia market share was 50% • Nokia sale came down by 25% in 2011, in Europe, sale declined 27%, China 18% and Asia Pacific 19%	• Reliability and quality focus, even in low price product • Strong partnership with China Mobile, NTT DoCoMo of Japan	• Windows 7.5 was not apps friendly, 180,000 apps, Apple iOS 900,000 mobile apps, Google 1,000,000 apps • Long launch time for new product; Samsung, Huawei and ZTE launched new models faster • Cash reserve dipped by 24% in Q1 2012 • Failed to see changing technology trend and consumer perception • Unable to access competitor strength • Nokia has multiple products while Apple stuck to one product that reduced the cost • Multiproduct display in store, Apple displayed few products • Per product R&D cost is lesser in comparison to Apple	• In 2000, Nokia had an opportunity to invest in technology but company spent euro 27bn on dividends, share and repurchase • Apple launched iPhone, Google perfected Android	In 2008, no attention on: • upcoming platform • changing consumer preferences • technical advances in mobile processors • industry moving towards smart phones from feature phones • Android tech over Symbian • Low price end product over crowded, high-end Android and iOS Apple	• In 2010, Elop took decision to replace Symbian operating system (OS) • Differentiation strategy by adopting window-based OS Strategy was not successful due upgradation of windows 7.5 to 8 • Company cut prices of smartphones and feature phone up to cost levels • Customer segmentation on price base rather than product feature base • Elop strategy was product-focused forays and organization-linked measures • Launch of Lumia 900,610, Asha branded range of dual SIM, Nokia X, X+, XL • On organizational front, it laid off 10,000 workers, delayer 11 to 4, • Quick communication between product managers and engineers • Innovation driven by people • Goals and incentives for senior leadership • Decision-making delegation to local/national teams • Microsoft announces to acquire Nokia in September 2013

Source: Developed by author.