Question

The Rise and Fall of Nokia in Mobile Phones

Nokia emerged from Finland to lead the mobile phone revolution. It rapidly grew to have one of the most recognisable and valuable brands in the world. At its height Nokia commanded a global market share in mobile phones of over 40 percent. While its journey to the top was swift, its decline was equally so, culminating in the sale of its mobile phone business to Microsoft in 2013.

With a young, united and energetic leadership team at the helm, Nokia’s early success was primarily the result of visionary and courageous management choices that leveraged the firm’s innovative technologies as digitalisation and deregulation of telecom networks quickly spread across Europe. But in the mid-1990s, the near collapse of its supply chain meant Nokia was on the precipice of being a victim of its success. In response, disciplined systems and processes were put in place, which enabled Nokia to become extremely efficient and further scale up production and sales much faster than its competitors.

Between 1996 and 2000, the headcount at Nokia Mobile Phones (NMP) increased 150 percent to 27,353, while revenues over the period were up 503 percent. This rapid growth came at a cost. And that cost was that managers at Nokia’s main development centres found themselves under ever increasing short-term performance pressure and were unable to dedicate time and resources to innovation. While the core business focused on incremental improvements, Nokia’s relatively small data group took up the innovation mantle. In 1996, it launched the world’s first smartphone, the Communicator, and was also responsible for Nokia’s first camera phone in 2001 and its second-generation smartphone, the innovative 7650. Nokia’s leaders were aware of the importance of finding what they called a “third leg” – a new growth area to complement the hugely successful mobile phone and network businesses. Their efforts began in 1995 with the New Venture Board but this failed to gain traction as the core businesses ran their own venturing activities and executives were too absorbed with managing growth in existing areas to focus on finding new growth.

Corporate culture is one of the strategic and competitive advantages of Nokia. “Connecting people” is the catch phrase which means the physical facilities of the company. Nokia buildings hold the strong corporate image. Nokia has four main values and principles at his heart of its corporate philosophy: customer satisfaction, respect for individuals, achievement and continuous learning. However, there are some basic differences between organisational culture and national culture. These are: leadership style, organisational policies and procedures, organisational and operational structure, recruitment and selection procedures and measuring the performance of the employees and reward systems, global team and leadership development.

Between 2001 and 2005, a number of decisions were made to attempt to rekindle Nokia’s earlier drive and energy but, far from reinvigorating Nokia, they actually set up the beginning of the decline. Key amongst these decisions was the reallocation of important leadership roles and the poorly implemented 2004 reorganization into a matrix structure. This led to the departure of vital members of the executive team, which led to the deterioration of strategic thinking. By this stage, Nokia was trapped by a reliance on its unwieldy operating system called Symbian. While Symbian had given Nokia an early advantage, it was a device-centric system in what was becoming a platform- and application-centric world. To make matters worse, Symbian exacerbated delays in new phone launches as whole new sets of code had to be developed and tested for each phone model. By 2009, Nokia was using 57 different and incompatible versions of its operating system.

At the same time, the importance of application ecosystems was becoming apparent, but as dominant industry leader Nokia lacked the skills, and inclination to engage with this new way of working. By 2010, the limitations of Symbian had become painfully obvious and it was clear Nokia had missed the shift toward apps pioneered by Apple. Not only did Nokia’s strategic options seem limited, but none were particularly attractive. In the mobile phone market, Nokia had become a sitting drop to growing competitive forces and accelerating market changes. The game was lost, and it was left to a new CEO Stephen Elop and new Chairman Risto Siilasmaa to draw from the lessons and successfully disengage Nokia from mobile phones to refocus the company on its other core business, network infrastructure equipment.

Questions

Q1. Discuss the main competitive advantages used by Nokia?

Q2. How Nokia lost its position to another competitors?

Total: (500 words).

Answer 1

1. Nokia originated from Finland as a very enthusiastic team with an excellent managerial capacity, very much focused, and capable of risk-taking. They started initiating their innovative technologies of digitalization and the deregulation of networking in the telecom sector to spread rapidly across the whole of Europe. In the mid of 1990, when the company faces a problem in its supply chain network, it tried to overcome the problem by implementing a very disciplined manufacturing system and processes. Due to this, the production shoots up, as well as there is a tremendous increase in the sales volume as well. This whole process led to a high increase in the company's number of employees ie. reducing the turn over rate. This also led to a very increment in sales volume. So, this is the area where Nokia achieved a competitive advantage over its competitors by making its production process very efficient than others. This, in turn, led to more sales and profits than the other competitors.

Another Competitive advantage is Nokia's work culture, which mainly emphasizes customer satisfaction, treating each individual with respect, trying to achieve and the urge on continuous learning procedure. Its organizational culture is very encouraging as compared to its competitors.

2. Nokia lost its position to the competitors in the following ways-

a)Nokia was reaping huge profits but due to this the mangers got busy achieving the short term goals and did not focus on innovating new technology. The management's main focus was on achieving short term goals, which are low cost and risk-taking projects. Only a few people are dedicated to innovation purposes.

b)After some of the major inventions made by Nokia regarding the smartphone, the phone has the camera, and a second-generation smartphone, the top management decided to explore the newly invented area and formed a new board to look after its operation. But it failed as the key business personnel was too much busy with their old production operation, rather than focusing or developing this new process of production.

c) When Nokia tried to reform itself from the decline, it started reimplemented the roles of the leaders and reorganizing the matrix structure. Due to this, it loses its key top personnel and the quality of strategic thinking deteriorated.

d) It continued using its same old operating system of Symbian, which by that time had become obsolete. It also delays the production of new phones.

e) Nokia lacks innovative skills in terms of technology and the ways of performing the task. It also lost its top management support, who had made Nokia achieve new heights of success. The new management was at a loss to find ways to recover the lost market. Hence, they thought to put an end to this lost game and maintain their old business of network infrastructure equipment.

Hence, in this way despite being a market leader and endless opportunity, Nokia could not hold to its position due to lack of their concentration on innovation and effective strategy making.