History of Nokia
The firm named Nokia corporation was established in the year 1865, when an engineer named Fredrik Idestam founded a pulp mil within Finland and then started paper manufacturing business, expanded to a rubber factory and later attempted to shift its business line to electronics. In the year 1968, Nokia shifted to the telecommunications business and played a vital role in early fruition of the mobile phase. In 2007, the firm was known as the world’s 5th most esteemed brands (Ali-Yrkkö, Rouvinen, Seppälä & Ylä-Anttila, 2011).
Nokia was globe’s largest producer and manufacturer within mobile phone industry. But it lost its market in few years. The most vital competition that was faced by the firm was within the smartphone segment, with their own and existing operating system named “Symbian”, which they were rigid to change. All big and small players in the industry started capturing Nokia’s share in several developing nations like India and China (Linden, Kraemer & Dedrick, 2009).
Nokia’s long run dominance got challenged and the firm couldn’t survive the changes. Lowering of the ASP i.e. average sales prices and also market share had a major effect on the firm. Nokia soon was forced to re-think about its existing strategy towards the developed as well as the emerging markets. Mobile industry rapidly went through vital changes in few years and many top classes mobile suppliers were also losing market shares and many new firms were entering the market. Meanwhile people started buying more mobile phones than ever before (Cateora, Gilly, Graham & Money, 2016).
With development of smartphones, mobiles were not just phones, rather became a subcategory option of computers, GPS navigations, cameras, social networking tools, Internet terminals and much more. As Nokia didn’t alter its strategy of marketing and also was unable to change itself with changing technology, it came as a negative effect for the firm (Cateora, Gilly, Graham & Money, 2016).
Motivation for research- Nokia’s share in the market declined to 28.2% from 36.7%. It was marked as the lowest share that the firm had ever had after the year 1999. Even in the global smartphone market the share of the firm fell from 44.6% to 36.6%. Being a market leader what actually happened with the firm? Why did it fail? Why couldn’t it survive the competition? All these questions and urge to find their answers came as a motivation for this study (Paliwoda, 2013)
Factors Leading to Nokia’s Downfall
Importance of International business environment for companies- Business ecology comprises of all the facets, which affect a firm’s operations. It involves competitors, suppliers, customers, stakeholders, regulations, industry trends, social as well as economic factors and also technological facets. A business being an open system constantly interacts with its ecology. Every business intakes inputs from its environment and turns them into services or goods later sending them back to the environment. Thus, it is vitally important for every firm to properly recognize its threats, opportunities, changes, strengths, market demands and also changing technology (Surowiecki et al., 2018).
Company’s information- When iPhone was launched in the year 2007, Nokia’s share in the smart phone industry dropped to 27% from 51%. In midrange, all the phones inculcating the operating system of Google named “android” exceeded the smart phone sales of Nokia. The difficulty for the firm can be comprehended by Nokia’s CEO Stephen Elop’s statement in which he said that the firm is “standing on burning platform” and thus the firm needs to “alter its behavior ” (“Nokia saw the future, but couldn’t build it”, 2018).
“Strategy is direction and scope of the firm”, Nokia’a tactic started giving a dissimilar direction to the business in long run. To analyze the real problem one needs to understand both Micro as well as Macro environment of the firm.
Employees- the firm had properly suitable and perfect employees and later they even motivated those staffs for the business. Nokia’s major competitors like Apple, Sony Ericson and Samsung, did not have a good employee base whereas Nokia due to its supportive and flexible staff base was able to increase their business to international level (Bhatt, 2002).
- Customers-Nokia provided its buyers with extra benefits than their expectable product. Nokia provided best assortments to its market, which helped the firm in the long run
- Suppliers- the firm had regular providers of its raw materials who were very reasonable and loyal ones. Nokia also had good contractors to get all its natural resource punctually to preserve their accessibility and enhance its creditability (Jia & Yin, 2015).
- Raw materials- Nokia had all its raw materials readily available.
- Shareholders- Nokia’s business like any other firm needed all good stakeholders to enhance its development and business economy. The firm gave great share to all its staffs and stakeholders
- Media: Media helped the firm to great extent and advertised its products efficiently (Väänänen-Vainio-Mattila & Ruuska, 1999).
- Distribution channels- firm’s network for distribution and its selling strategy were very effective and well managed.
- Competitors- Main reason for Nokia’s failure were its competitors who bought in a new technology said “android” operating system because of which Nokia was required to change its operating system and the firm didn’t undertake this task thereby leading to its failure (Aspara, Lamberg, Laukia & Tikkanen, 2011).
- Political- the political ecology of mobile phone industry is very high because of security as well as privacy reasons. Nations China, Germany and Korea did great business of export and import for Nokia. The political ecology for firm was not same in all nations but Nokia coped up with all the flexible political environments properly (Brockhoff, 2003).
- Economic- this factor has an impact on each and every firm’s functioning, it affects tax rates, other ratios and also the interest rates that are to be paid by the firm. The firm was capable of maintaining their profit appropriately.
- Social: Mobile users of UK differ from that of others in nations like India and China. It affected the business. Population of family, and culture of the families within different nations also had an impact on the firm. Nokia modified itself with changing cultures (“Three reasons why Nokia failed – CIOL”, 2018).
- Technological: The firm needed to change itself with the changing technology. Nokia lacked this initiative and thereby failed. With development of smartphones, mobiles were not just phones, rather became a subcategory option of computers, GPS navigations, cameras, social networking tools, Internet terminals and much more. As Nokia didn’t alter its strategy of marketing and also was unable to change itself with changing technology, it came as a negative effect for the firm.
- Environmental: “Information builds an environmental bond amid firms”, climate change had affect on firm’s business. Thus firm understood this and thereby on eve of New Year and even Christmas when people used to buy additional mobiles Nokia used to produce more and more mobiles and sell more of it (Rice & Galvin, 2006).
The firm’s trade strategy was on basis of cost leadership. Nokia carried an enormous and extraordinary product portfolio that gratified the buyers all over the globe. The firm always strived to maintain lower cost for its offerings and thereby attained economies of scale as well. Nokia used all strategic suppliers throughout its market with an aim to obtain improved subassembly gadget that were used to produce eminent and technologically advanced devices.
- Tactics- Market location for the firms were very effective for good sales. Nokia profoundly counted on its sales in all its major regions of market. Majority of its sales were made in Europe, other vital markets being China, India and all other regions in Asia-pacific.
- Defensive- With an aim to cope up with changing technology of players like Blackberry and also Apple and to just protects its share within the handset market, the firm Nokia brought in 5800 touchscreen phone. As a result at the end of first quarter of 2009, the firms market share augmented by 3%. But this was the stop for the firm. Later the firm did not match up with changing operating systems and thereby failed in the market(“Nokia CEO on predicting the future: Use data, customer feedback and instinct | FierceWireless”, 2018).
Nokia was required to emphasize on entire electrical market throughout its phase of financial crisis as the economic uproar unconditionally predisposed all the international economy. A report by the firm exposed very lower share in the device of mobile industry in 2008. Nokia saw and faced a very threatening time within entire telecommunication sector in 2009 and it was represented by an anticipation of the mobile volumes lessen by 5% and even more in the year 2008. Briefly, entire market for mobile got deteriorated. Buyer’s backing off instigated this type of position of the affairs in expenditure, lessened ease of usage of the credit from slowing down of the international economy and also legal tender randomness. Particularly, Nokia believed that incremental crash impacts the developing markets more than the other advanced markets (“Predicting industry inflections at Nokia”, 2008).
Importance of International Business Environment for Companies
Technology is seen as the soul of the telecommunication sector. This is considered as the reason of R&D becoming the need for all firms involved in telecommunication market. 3G mobiles, smart phones and also ecology friendly phones were considered the corroboration of all the technological progressing within the telecommunication sector. Research center of Nokia was unable to find the main cause of losing the market and thereby the firm was unable to change itself with changing technology leading to its downfall in smartphone sector (“Predicting industry inflections at Nokia”, 2008).
Smartphone industry started changing within no time. Like, network played a vital role and articulations in the market were brought in and were being familiarized in 2006. Sales of the firm Nokia and also its profitability got significantly exaggerated because of evolution and accomplishment of all the innovative divisions in the market, which required a dissimilar outlook as well as understanding of the industry. Nokia then lost its share in 3G phone once it started ignoring the need and significance of good network. Quite the reverse firms like Apple experienced the propensity and launched iPhones (Bhatt, 2002).
Competition went to extreme in the smartphone sector. To avoid the failure the Nokia had to headway its market position, and was required to become habituated with the alterations taking place in the market, which became difficult for the firm’s rigid and non-flexible strategy and stiff strategic design for marketing. Though Nokia was the top most firm in the market of mobile phones, other competitors like Motorola, Samsung, and Apple etc. laid up immense pressure. Nokia became unable to handle the pressure and was stuck with its strategic issues, which resulted in the failure of the firm (Bhatt, 2002).
Through my analysis, I found out few areas where the firm Nokia lacked.
- The firm could have concentrated on technological changes in a better way.
- When competitors were manufacturing better products, with enhanced features and good operating system, Nokia should have leveled the technology and quality of its goods.
- The firm could have maintained its price
- Nokia should have maintained a better R&D team which would have helped it in dealing with all the changes coming up in the industry
- Being the cellphone market leader, people had expected better from Nokia, and the firm did not stand up well on buyer’s expectations
- The firm should have maintained proper manufacturing, R&D, marketing, logistics team.
- It should have tilted its interest more towards bringing and developing better applications as well as games.
Conclusion
Nokia being number one player in the cellphone sector lacked in few areas, which proved to be a negative point for the firm, and ended up in its failure. No one in the industry could match up Nokia’s price, quality, customer service or even features that it provided in its mobiles. A mistake of rigidity and inflexible strategic marketing system lead the firm to downfall. Also a major reason found for the firm’s downfall was the economic crisis all over the globe, which Nokia couldn’t survive like other firms did. Nokia could have avoided the failure with taking few simple and flexible steps that were need of the hour.
References
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Nokia CEO on predicting the future: Use data, customer feedback and instinct | FierceWireless. (2018). Retrieved from https://www.fiercewireless.com/tech/nokia-ceo-predicting-future-use-data-customer-feedback-and-instinct
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Surowiecki, J., Klay, P., Glasser, S., Fry, N., Farrow, R., & Cassidy, J. et al. (2018). Where Nokia Went Wrong. Retrieved from https://www.newyorker.com/business/currency/where-nokia-went-wrong
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