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Running Head: NOKIAS ROAD TO FAILURE

Creative Enterprise (Task 3) Nokias Road to Failure


[Name of the Writer]
[Name of the Institution]
[Date of Submission]

Nokias Road to Failure

Table of Contents
1.1

Introduction...........................................................................................................................3

1.2

Purpose of the report.............................................................................................................3

1.3

Situation Analysis.................................................................................................................4

1.3.1 Strengths..............................................................................................................................4
1.3.2 Weaknesses..........................................................................................................................5
1.3.3 Opportunities.......................................................................................................................5
1.3.4 Threats.................................................................................................................................6
1.4 What happened to Nokia?..........................................................................................................6
1.5 What went wrong?.....................................................................................................................7
1.6 What Nokia could have done differently?.................................................................................7
1.7 Solution......................................................................................................................................9
1.8 Action plan to implement the solution.......................................................................................9
1.9 Recommendations....................................................................................................................10
References......................................................................................................................................11

Nokias Road to Failure

1.1 Introduction

Founded in 1865, Nokia Corporation is a Finnish multinational communications and


Information Technology company headquartered in Espoo. The current CEO of Nokia is Stephen
Elop. As of 2014, Nokia had a workforce of 61,656 employees in 120 countries, reporting annual
revenue of about 12.73 billion. Nokia is a public company with limited liability and is listed on
the Helsinki Stock Exchange as well as New York Stock Exchange. It ranks at 274 in the 2013
Fortune Global 500 list of companies measure by revenues (Steinbock, 2013; Chang, 2012;
Marian, 2013).
Apple launched Iphone in 2007 and since then, its iphones and Android phones have been
competing in the rapidly growing market of Smartphones and have become the big players of the
mobile industry. In this environment driven by fierce competition, all mobile phone
manufacturing companies, such as Motorola, LG, Samsung, HTC, etc., are forced to be creative
and innovative to bring unique technology in the market (Steinbock, 2013; Chang, 2012; Marian,
2013). Nokia used to be one of the top mobile phone brands, however, with the massive boom of
the European Smartphone market, Nokia became a part of the backdrop. Once famous for its
feature and Smartphones, Nokias market shares have been declining in the European
smartphone market. According to Donnelly (2008), Nokia lost its customers to rivals and had
trouble adapting to the changing needs and demands of the target market (Steinbock, 2013;
Chang, 2012; Marian, 2013).

1.2 Purpose of the report

Nokias Road to Failure

The purpose of this report is to highlight what exactly happened to Nokia, what factors
contributed to its failure, what could Nokia have done to identify the problems before it got too
late and how could Nokia have prevented or mitigated the effects of the problems it was facing
before it was acquired by Microsoft.

1.3 Situation Analysis


To achieve the purpose of this report, a situation analysis was conducted through
secondary research. Books, journals and Internet were used to find authentic and credible
information about the internal and external environment of Nokia. A SWOT analysis combines
the internal factors that could affect organisation i.e. strengths and weaknesses and external
factors i.e. opportunities and threats (Kotler & Keller, 2009). It is important for Nokia to consider
its strengths and build their strategy by capitalising on its strengths. It also needs overcome its
weaknesses, look for opportunities to capitalise on its strengths and decide what can be done
about the threats surrounding the business.
1.3.1 Strengths

1.3.2 Weaknesses

Strong brand name


Brand awareness, familiarity and popularity among the consumers
Design and durability of its phones
Different price ranges
Brand loyal customers
Experienced workforce
Partnership with Microsoft (2011)
Higher re-sale value of mobile phones

Nokias Road to Failure

Lack of technological development in software systems and OS


Outdated software
Failure to analyse and adapt to changing needs and demands of customers
Failure to meet the market trends
Lack of innovation and creativity in products
Failure of operating system (Symbian)
Easy to use OS
Poor after sale service
Loss of market shares
Some products are too pricey
Lower profits

1.3.3 Opportunities

Popularity of Androids
Apple products as models
New features and applications
Wider range of products
Better marketing strategies

Strong competition from Iphone and Android phones


Strong competition from other mobile phone brands
Rapidly changing needs and demands of young consumers

1.3.4 Threats

1.4 What happened to Nokia?

As a pioneer in the European Smartphone market, Nokia introduced consumers to its


Symbian OS Smartphone in 2002. Symbian phones worked well for the next five years and

Nokias Road to Failure

Nokia was a leading Smartphone brad. However, in 2007, Iphone was introduced by Apple Inc
which had a full touchscreen and application-based operating system which changed the
definition of Smartphone (Chang, 2012; Marian, 2013). But Nokia failed to respond to the
changing trends and consumer demands that came with the introduction of iPhone as the
consumers had started expecting similar or better features and performance from Nokia. Soon,
the Symbian software became outdated because there were so many new Smartphones available
with better features and enhanced performance. The Smartphone market exploded with new and
innovative Smartphones as consumers were increasingly opting for phones which were minicomputers, instead of Nokias feature phones which had slow WAP browsers. Nokia finally sold
itself out of the mobile industry and to Microsoft as it abandoned the technologies that could
have helped it in retaining its dominant market share and did not stray from its winning
strategies. For 7.1 billion dollars, it gave itself to Microsoft (Steinbock, 2013; Chang, 2012;
Marian, 2013).

1.5 What went wrong?

The company failed due to its slow response towards trends of redefining smart phones
with touch screen and use of software. The company felt that there is no wider scope of touch
screen in the near future; however, its expectations were overwritten by the customers. In year
2002, Symbian 60 series was launched by Nokia which had a good market response initially,
however, due to lack of UI (user interface) and applications, it collapsed (Kenney & Pon, 2011,
pp. 239). Nokia failed to create something unique after facing significant competition from
Android and iOS. There were four major reasons behind the failure of the company (Steinbock,
2013; Chang, 2012; Marian, 2013).

Nokias Road to Failure

1.

First was its wrong deal with windows and failure of Symbian OS. The

ultimate collapse of the company was led by its issue related to OS in comparison to
other competing devices.
2.
The second biggest reason of collapse was its lack of focus on innovation
and eventually the company became laggard in the smart phone market.
3.
Third, in the lower segments of phones, the company failed to notice the
stiff competition and consequently lost market share on both ends.
4.
Fourth and last, it failed to implement the right umbrella branding strategy

1.6 What Nokia could have done differently?

Nokia could have used its foresight and conducted a proper competitive analysis
beforehand to identify the current trends in the market, to see what the competitors have
achieved and what the differentiating factors in their products are. Iphone gave a whole new
definition of a Smartphone and showed the world what a Smart should be. Nokia could have
responded to Apples iPhone quickly by joining hands with Microsoft earlier than 2011 to
introduce Windows Phone. Now the response to their new Windows phone is slow (Steinbock,
2013; Chang, 2012; Marian, 2013).
In contrast, Samsung quickly responded to the iPhone and entered the Smartphone
market. While Samsung had to work its way up to the Smartphone industry, Nokia had a
comparatively more effective Smartphone platform which it would rather not give up (Chang,
2012). Samsung was faster than Nokia and had multiple platforms, such as Android, Windows
and Bada. Android turned out to be the most successful and generated substantial revenues. This

Nokias Road to Failure

is because Samsung decided to use Android at the right time as the platform had already matured
(Steinbock, 2013; Chang, 2012; Marian, 2013).
On the other hand, Nokia had a hard time letting go of Symbian and focused all its energy
on improving Symbian until it finally partnered with Microsoft. Apparently, Lumia Windows
phones have not been able to make their way into the market, primarily because the partnership
was too late i.e two years after iPhone and Androids appeared into the market and picked up the
pace (Steinbock, 2013; Marian, 2013).
Nokia could have emerged as a more stable company if its leaders would have been more
visionary. In times of disruptive market change and innovation, the leaders of Nokia were not
visionary due to which the company failed to turn its ideas into the future of the business
(Bouwman et al., 2014, pp. 5). This lack of vision was also led by its poor decision-making and
particularly bad management (Marian, 2013).

1.7 Solution
Nokia should exploit Microsofts expertise and resources with its own expertise and
resources to the brand and become a market leader by coming up with unique, original,
innovative and creative products.

1.8 Action plan to implement the solution

1.
value.

Increase Research and Development Budget, gross margins and stock

Nokias Road to Failure

2.
3.
4.
5.

Invest in new ventures.


Keep an eye on the market trends
Introduce new features and products by analysing the market trends
Charge premium prices for its high-end products and use optional pricing

strategy for most of its products


6.
Watch out for competition in the lower end of the market i.e. low-cost
China mobile phone brands such as HTC, ZTE, Huawei, etc.
7.
Have a broad portfolio of low-priced Smartphone to appeal to customers
who either cannot afford or do not want to invest in high-end Smartphones.
8.
Change the brand image with innovative products and creative marketing
strategies.
9.

Organize phones under a flagship umbrella brand, like Apples iPhone and

Samsungs Galaxy to create a memorable and recognizable brand, build up consumer


anticipation and drive consumer demand.
10.
Be a customer-oriented brand and produce user-friendly Smartphones
11.
Hire experts i.e. hardware and software engineers to work in
multidisciplinary teams to design the phones.

1.9 Recommendations
The company has to make the most of the creativity present, has to be more willing to
take up creative and innovative ideas and has to be risk-taking. Resources to develop products
that would address the emerging market needs were lacked by the company. For various market
segments worldwide and to develop a vast array of smart phone models, sufficient attention was
not paid by the company to the emotional undercurrents caused by internal competition for
resources. To incorporate creative and innovative ideas, a powerful research and development
budget would be required by the company in terms of resource implications. More technical staff
would also be required to be hired by the company globally. The manufacturing process should
be more environment-friendly and the company should reduce its carbon footprint.

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In the creation of its procedures being used, the processes and the products, the company
may be forced to become more creative due to the increased competition from other
organisations like Samsung and Apple. Moreover, the company would be forced to generate a
more creative environment for its employees due to the incessant changes in technology in the
present day world. The preference of customers is another external factor that may affect the
creative environment of the company. With products being preferred by individuals, there are
constant changes in the environment that could impose a significant impact on the companys
creative environment. The changes in the market would prevent managers of the company from
supporting creative ideas and taking risks, due to the cohesive Finnish culture of the company.

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References

Bouwman, H., Carlsson, C., Carlsson, J., Nikou, S., Sell, A., & Walden, P. (2014). How Nokia
failed to nail the Smartphone market, pp. 5-16.
Chang, A. (2012) 5 Reasons Why Nokia Lost Its Handset Sales Lead and Got Downgraded to
Junk. http://www.wired.com/2012/04/5-reasons-why-nokia-lost-its-handset-sales-leadand-got-downgraded-to-junk/
Kenney, M., & Pon, B. (2011). Structuring the smartphone industry: is the mobile internet OS
platform the key? Journal of Industry, Competition and Trade, 11(3), 239-261.
Marian, L. (2013) Is Nokias performance in the Smartphone market affected negatively by
marketing strategy decisions? Analysis of marketing strategy choice and implementation
for Nokia Lumia in Europe. Aarhus School of Business and Social Sciences. Available
from <http://pure.au.dk/portal/files/53734147/nokia_marketing_strategy.pdf>
Nokia Annual Report (2014) Available from
<http://company.nokia.com/en/system/files/download/investors/nokia_results_2014_q4_e
.pdf >
Shah, J. J., Kulkarni, S. V., & Vargas-Hernandez, N. (2000). Evaluation of idea generation
methods for conceptual design: effectiveness metrics and design of experiments. Journal
of mechanical design, 122(4), 377-384.

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Shalley, C. E., & Perry-Smith, J. E. (2001). Effects of social-psychological factors on creative


performance: The role of informational and controlling expected evaluation and modeling
experience. Organizational behavior and human decision processes, 84(1), 1-22.
Steinbock, D. (2013) Nokia's failure: No flexibility in US, emerging markets. Available from
http://www.cnbc.com/2013/09/17/nokias-failure-no-flexibility-in-us-emergingmarkets.html

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