Nokiais a Finnish multinational communications, information technology and consumerelectronics company that was founded in 1865 by Fredrik Idestam, Leo Mechelinand Eduard Polon.
It is mostly known for the production of mobile phones. Foralmost more than a decade it dominated the phone industry, but then, all of a sudden,its market share has plunged from 46.7% to just 9.5% in 7 years (Sam Oliver,apple insider). What caused such dominant firm to lose its market share that quickly?During the same year, Nokia met its new competitor, Apple.
In 2007 Steve Jobs,founder of Apple, introduced to the world a new phone called iPhone. Was thisthe main reason of Nokia’s failure? What did the Apple do that Nokia did not? Isit a failure of the Nokia brand, or maybe a result of a bad corporate strategy?This essay aims to find the main causes that caused Nokia to fail. In 2007 Nokia’s phone market share was ashigh as 49.4% according to Gartner’s research.
From that year onwards, Nokia’smarket share has been decreasing every year to 43.7% then 41.1% and 34.2% untilit reached 9.
5% in 2014 (BBC). Apple, as well as Samsung were definitely one ofthe main causes leading to that failure. Both companies just took over thephone market share. Nokia was falling behind as they rocketed. Why is Apple sosuccessful? There are many reasons why Apple is so successful compering to itscompetitors. One of the reason is that Apple’s approach is towards creation ofproducts is different. Often engineers create something becausethey can, whereas Apple engineers are creating their products for themselves.
When Steve Jobs was alive, he represented the “real consumer” of Appleproducts. What is more, Steve Jobs was innovative, he was able to see thefuture unlike his competitors. During his announcement of the first iPhone heshowed the world how easy his product is to use which actually had a hugeimpact on its success. Also, apple keep making things simple. Unlike themajority of phone makers Apple has just one product, in this case iPhone.Thanks to that it minimizes the decision making for the consumers.
Thismay seem limiting given the number of smartphones available to users however, thetruth is the revers. According to Tim Bajarin “Our company has doneconsumer research for over 30 years, and consumers constantly tell us thatwhile choice is nice, in reality they want the process of choosing a techproduct to be simple and not complicated by a plethora of choices.”Furthermore, Apple was not inventing new products but they were recreating existingproducts they just made smartphones better and were at least two years ahead ofthe competition. They had the vision of future smartphones. They wereinnovative which undoubtedly was the major key of their success.We already knowthat Apple and Samsung crushed Nokia, but are they the only reason why Nokiafailed? Did Nokia’s corporate strategy fail? What were Nokia’s decisions duringthat period. In order for a company to work it must analyse the behaviour ofcompetitors, or evaluate the company’s share price or consider different waysto expand the business.
A company must seek for strategic long-term activitiesof their business which is known as strategicmanagement. The firm needs to have competitiveadvantage which are the various factors, such as lower costs or a betterproduct (like Apple), that give a firm an advantage over its rivals. It alsoshould take into account internal strategic analysis, what stages or activitiesshould company take to help to create product value (value chain). Such asmarketing and sales, service etc. (ECON BOOK)Apple and Samsungobviously have surpassed Nokia, however Nokia at a time was surprisingly anadaptive company.
They were not falling behind with technology, they createdtheir first smartphone back in 1996. They also spent huge amount of money on researchand development, however what they were struggling with is to transform alltheir spending of research and development into something that people mightactually want to buy. Nokia lacked innovation. They could not see thefuture of smartphones and what is more, they are more of a hardware companyrather than a software company meaning that its experts building physicaldevices like etc. but not programs that could run those devices. (the new Yorker).Because of that Nokia did not see how important software will be in future soin did not increase its research in this particular field. On the contrary,Apple saw both hardware and software as really important and that they need to worktogether in order to create the perfect product, the product wanted byconsumers.
Phones were changing to quickly and Nokia could not keep up with it,it started to fall behind as it underestimated the transition to smartphones. Furthermore,Nokia overestimated its brand, it thought that it could easily catch up withtheir lateness in the smartphone game. They thought that thanks to theirhardware design customers would stay loyal to them. For some reasons Nokia couldnot progress with the technology and when it moved from Symbian software toWindows in 2011 it was already considered too late since Apple and Samsung tookover the market. (the new Yorker) Another problem that caused Nokia’s failureaccording to Quy Huy, was the inside misunderstanding between top managers andmiddle managers. Middle managers were afraid to disappoint top managers withtheir ideas.
Historically, the top managers were not really liked by the middleones. They had a bad reputation and regularly shouted at people. Because ofthat middle managers did not propose new ideas or if something was going in thewrong direction and everyone knew about it they wouldn’t tell it to the topmanagers.
(Who killed nokia).Nokia and Applesaw the world differently. Nokia’s goal was to create the best speakingdevices, whereas Apple’s goal was to reinvent the phone through therevolutionary touch interface. By that time Nokia was one of the biggestcompany and Apple was at its edge. Apple needed a break-through product sincethat was its last chance to stay in the game and in order to do that they hadto change the game. Nokia, on the other hand, had everything. It was an amazingmanufacturing company focused on the product and features and its quality aswell as prices and features of their mobile phones were unbeatable.
However, theydidn’t focus on consumers’ needs, felt too confident and stick to their Symbianoperating system instead of trying to improve, push forward. In 2002 Nokiaproduced a similar device to the iPhone but there wasn’t much about the productother than the fact that it had a touchscreen, allowed users to browse the web,find restaurants and play games. Two years after, in 2004 Apple begun the creationof iPhone by employing one thousand people to work on a secret “Project Purple”.Apple really believed that they could change the world. (Daniel Hodges)The biggest phonecompany that dominated the market share for over ten years has collapsed due tonew competition as well as bad decision making and inner problems. In 2007Apple revolutionised the phone market by introducing the iPhone that is waysmarter than any smartphone and very easy to use.
Since that year Nokia’smarket share has been decreasing each year. Nokia lacked innovation. Itscompetitions were progressing so fast that they could not catch up with it, so theystarted to fall behind. Unlike Apple, Nokia did not have the vision of futuresmartphones and focused just on making best speaking devices. They underestimatedthe importance of the transition to smartphones and failed to recognize theincreasing importance of software. Even with all the research and development Nokiawas unable to fulfil consumers’ needs.
And the inner conflict between the topand middle managers was an obstacle for Nokia to progress. The brand itselfcould not harm Nokia’s market share. Nokia, as I mentioned before was alreadythe pioneer in the phone industry, however lack of innovation as well as badcorporate strategy led to an unfortunate failure.