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CASE #2 MISSED CALL (STRATEGIC MANAGEMENT IN ACTION SIXTH EDITION)

Do you remember your first or even second mobile phone? Chances are it might have been one made by Finnish company, Nokia Corporation. Mine was. It was a beautiful steel blue color and was, I thought, pretty slick. Nokia phones back then were quite popular with consumers and positioned the company as one of the leading mobile phone makers. In 1998, Nokia sold more than 40 million mobile phones to surpass Motorola as the world's #1 mobile phone company. During this time period, Nokia was light years ahead of its rivals with digital phones. However, "Nokia was caught sleeping in 2007 when Apple Inc.'s iPhone redefined the cellphone as a PC-like device with a touch screen and sleek software." Since that crucial time, Nokia has lost 75 percent of its market value and is struggling to catch up to Apple and Google Inc.'s Android.

Despite its failure to recognize the market-changing charac­teristics of Apple's iPhone, Nokia is still the world's largest hand­ set manufacturer by volume. Europe is the Company's largest combined market, with about a third of sales. Somewhat surpris­ ingly, China is Nokia's largest single-country market, accounting for nearly 20 percent of sales. And the United States accounts for only 4 percent of sales, and India (another important target) accounts for only 7 percent of sales. The company has been craft­ing strategies it hopes will help position it as a dominant force once again in this industry. New CEO Stephen Elop, the first non- Finnish leader and a former top Microsoft executive, pledged to turn around the struggling company.

CEO Elop's initial plans were aimed at streamlining its smart- phone operations costs and speeding delivery of new products. He said, "Nokia has been characterized as an organization where it is too hard to get things done." More than anything else, the changing market dynamics demand that we must improve our ability to aggressively lead through changes in our environ­ment." Getting its products to market faster would be a key failing that would have to be improved. In addition to the first round of 1,800 jobs cut, Elom eliminated several senior officials on the company's group executive board. He also sent a memo to Nokia employees that compared the Company's predicament in catching up to Apple and Google in smartphones to that of a man who was standing on a burning oil rig at sea. Standing there, he needed to make a choice and he decided to jump." He went on to say that "Nokia, too, had to jump metaphorically—to take bold action to make up for lost ground." And bold actions it has taken.

In February 2011, Jo Harlow, the head of smart devices at Nokia, "stood before a packed convention hall at the Mobile World Congress, the cellphone industry's most important trade show, to explain the Finnish company's new software alli­ance with Microsoft." That agreement had been announced in London only a few days earlier. But, "the need for the deal had been so urgent that Nokia and Microsoft, grasping for a foothold in a mobile computing industry that was quickly slip­ ping away from them, had gone public without a definitive legal agreement, just a handshake and a promise to work together, somehow." She told the audience that Nokia and Microsoft would produce their first phone using the Windows operating system by the end of the year—a pace two to three times faster than Nokia's past product introductions. Getting that done would "require an accelerated, effective collaboration with a completely different corporate culture in a creative endeavor so intimate that both would have to discard mutual distrust to make it work."

By mid-2011, Nokia had unveiled a new smartphone and three lower-priced handsets as initial steps in its transition to Microsoft software. Although analysts described the products as well-designed with an intuitive user interface, they also said the products would be unlikely to help improve the company's diffi­culties as there was no carrier support or apps developers. In early fall 2011, the company sold 2,000 wireless patents and patent applications to Ottawa, Canada-based Mosaid Technologies. Many technology companies are using this strategy to "essen­tially outsource the sometimes expensive process of squeezing revenue out of their patent holdings." In addition, the com­pany announced another 3,500 job cuts by closing a factory in Romania and transferring production to more efficient plants in Asia. Elop said, "We are seeing solid progress agains tour strat­egy, and with these planned changes we will emerge as a more dynamic, nimble and efficient challenger."

Now, it's do-or-die for Nokia. One year after the announce­ment of the Microsoft alliance, the company's Nokia Lumia 900 smartphone was introduced at the Consumer Electronics Show in Las Vegas in February 2012. "The high-end device marks per­ haps the company's last chance to re-establish itself as a serious player in the U.S." Will the market once again hang up on Nokia or will it take the call?

DISCUSSION QUESTIONS

1. What international strategy advantages and drawbacks can you see in this case? Discuss.

2. What do you think are the difficulties in being a market- leading competitor trying to compete in so many different geographic areas? What resources and capabilities would such an organization need? What impact would the fact that the competitor's industry is a continually changing one have on its strategies?​​​​​​​

3. What steps has Nokia's CEO taken to turn around his struggling company? Be specific.​​​​​​​

4. One of the most interesting things to me about this story is the alliance between Nokia and Microsoft. How did this get done? What do you think that process entailed?

THANK YOU!

Answer 1

1. What international strategy advantages and drawbacks can you see in this case? Discuss.

Some of the advantages would be the interdependencies among multiple countries that can be exploited, possible economies of scale and becoming a stronger competitor.

Some of the drawbacks would be potential quality issues, financial and economic risks, a complex and challenging strategic management and difficulty in identifying similarities in markets or operational capabilities.

2. What do you think are the difficulties in being a market-leading competitor trying to compete in so many different geographic areas? What resources and capabilities would such an organization need? What impact would the fact that the competitor’s industry is a continually changing one have on its strategies?

One area that Nokia needs to address is the issue of product delivery.    If Nokia plans to adjust to market changes, it must be able to get its products to customers on a timelier basis.   Nokia’s research and development will also need to look at streamlining costs by analyzing its resources as well as operation costs. In order to compete in many geographic areas, some resources that will be needed include hardware, software, and developers.    Other areas to look at would be Nokia’s capabilities to reach the various markets and to present these markets with a product that combines different mobile services that are in demand by consumers.

3. What steps has Nokia’s CEO taken to turn around his struggling company? Be specific.

In order to try to streamline costs, CEO Elop closed the plant in Romania as well as employee layoffs. Elop also entered an agreement with Microsoft in hopes that combining Nokia’s hardware and Microsoft’s software would help both companies to better compete in the changing market of mobile phones and smart phones.

4. One of the most interesting things to me about this story is the alliance between Nokia and Microsoft. How did this get done? What do you think that process entailed?

The driving force behind the alliance between Nokia and Microsoft was the belief that by working together they would be able to build an ecosystem in the mobile device industry. While both companies have a vast amount of resources and capabilities, they can complement each other by each company sharing their differences in order to develop a better product. According to the Microsoft website, there was an alliance between Microsoft and Nokia in 2009, when Elop was the Microsoft Business Division President. A broad strategic partnership between Microsoft and Nokia was announced in 2011, 5 months after Elop took over as CEO of Nokia.

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