The Downfall of a Giant - An analysis Shailesh Gururani
Submitted to : Ms.Lisha Diwan Context Introduction Preview What went wrong? Bibliography
Preview Every company has to go through a life cycle. With the birth of anyorganisation, it has to go through different phases through growth todecline stage. For any company to avoid this decline stage they need tocome up with some sort of innovation or with any new product. Nokia,once a king of the mobile market, had the largest market share throughoutthe world. Now, it seems like the game is over for this company. Apple andSamsung has come up as the biggest competitor of this company. Just overa decade ago, the Finnish mobile phone maker Nokia was the darling ofthe technology sector. Smartphones are new choice of the consumers inpresent scenario. Surprisingly, Samsung has topped the chart with 32.6 %market share followed by Apple with 16.9 % market share, Nokia is in thethird place with just 6.6% market share. Whatever went wrong, but now we can see that Nokia, the Finnishmobile giant, is now in danger of becoming part of the history, which i amsure nobody wouldve expected some 4 or 5 years ago. The dramaticchange in the mobile phones market brought about by the companies likeApple, Samsung etc which gave the world millions of apps we know themas IOS and Android and it seemed like Nokia was caught unaware. eventhough they were in the smart phone market since 2002 with their Symbianplatform they couldnt capitalize on it and were lost in the highlycompetitive market. . The other platforms like IOS and Android proved tobe far superior when compared to their own Symbian. Samsung which wasnot even in the picture is now the market leader in smart phones categoryshowing their readiness to adapt to the changes happening and
adaptability towards innovations. So what lead to the downfall of Nokia is abig question everyone would be asking. Introduction Nokia Corporation is a Finnish multinational communications andinformation technology corporation headquartered in Keilaniemi, Espoo, Finland.Its principal products are mobile telephones and portable IT devices. It also offersInternet services including applications, games, music, maps,media and messaging through its Ovi platform, and free-of-charge digital mapinformation and navigation services through its wholly owned subsidiary Navteq.Nokia has a joint venture with Siemens, Nokia Siemens Networks, whichprovides telecommunications network equipment and services. Nokia has around122,000 employees across 120 countries, sales in more than 150 countries andannual revenues of around €38 billion. As of 2012 it is the worlds second-largestmobile phone maker by unit sales (after Samsung), with a global market share of22.5% in the first quarter. Nokia is a public limited-liability company listed onthe Helsinki, Frankfurt, and New York stock exchanges. It is the worlds 143rd-largest company measured by 2011 revenues according to the Fortune Global 500.Nokia was the worlds largest vendor of mobile phones from 1998 to2012. However, over the past five years it has suffered declining market share as aresult of the growing use of Smartphone, principally the Apple iPhone and devicesrunning on Googles Android operating system As a result, its share price hasfallen from a high of US$40 in 2007 to under US$3 in 2012. Since February 2011,Nokia has had a strategic partnership with Microsoft, as part of which all NokiaSmartphone will incorporate Microsofts Windows Phone operating system(replacing Symbian). Nokia unveiled its first Windows Phone handsets, the Lumia710 and 800, in October 2011.On May 4th, 2012, Nokia investors filled a classaction against Nokia because of the disappointing Windows Phone sales. OnAugust 22th, 2012, Nokia Finnish investors started considering gatheringsignatures to get CEO Elope out of the company."Nokia is the worlds leading mobile phone supplier and a leading supplier ofmobile and fixed telecom networks including related customer services." That is a
quote directly from their web site Nokia.com. That is a big statement so are theyreally as big as they claim. Especially, considering the emergence of Apple into thephone market.Nokia are a multinational corporation from Finland with a global annual revenueof over 40 billion euros and over 130000 employees worldwide. Type Public Industry Telecommunications equipment Internet Computer software Founded Tampere, Grand Duchy of Finland (1865) incorporated in Nokia (1871) Founder(s) Fredrik Idestam Leo Mechelin Headquarters Espoo, Finland Area served Worldwide Key people Risto Siilasmaa (Chairman) Stephen Elop (President & CEO) Products Mobile phones Smartphones Mobile computers Networks (See products listing) Services Maps and navigation, music,messaging and media Software solutions
(See services listing)Revenue €38.65 billion (2011)Operating € -1.073 billion (2011)incomeNet income € -1.164 billion (2011)Total assets €36.20 billion (2011)Total equity €11.87 billion (2011)Employees 122,148 (2012)Divisions Mobile Solutions Mobile Phones MarketsSubsidiaries Nokia Siemens Networks Navteq Vertu Qt Development FrameworksWebsite Nokia.com
What went wrong?To remain competitive in the market, every organisation has to takestrategic steps time to time to achieve and sustain competitive advantageand therefore attain industry average profit. However, since both the business environment and individual firms aredynamic systems, continuously in flux, it is a big challenge to achieve a fitbetween these two systems and therefore get the competitive advantage.On the process of Nokia’s development company achieved success andwhen it failed to do so the company immediately suffered fall in 2004, lostmarket share and decreased market revenue. However, company quicklyrecovered because it followed the market trend. Now at the end of financialyear 2011-12, Nokia There were many reasons which proved to bedisastrous to Nokia.Nokia failed to create a coherent application ecosystem, and failed tocascade rich applications to mid-range and lower end phones. Nokiapioneered downloadable applications, using Java and Symbian C++, butthe platform remained horribly fragmented as individual devices wereallowed to create dozens of incompatible flavors of the platform. Nokia alsodid not create a smooth process for users to discover, purchase, and installapplications, until it was way too late. Nokia always had a good program fordevelopers, but since the application distribution model was missing, theyfaced a fragmented go-to-market model and of course struggled withfragmentation of the device base. Applications were perceived assomething crucial for the high end users, but the vision did not extend tothe large middle tier of users adopting third party apps, with the possibleexception of simple Java games.
Nokias service ambitions got into the way of embracing winning Internetservices. Part of this was a function of the US market, from which Nokiawas largely absent in the 2005-2011 period, leading in consumer Internetservice adoption and thus creating a blind spot for Nokia on whereconsumer trends were headed. The other reason was the ambitious (ormegalomaniac, depending on your point of view) belief that Nokia couldcome to become a strong player in a number of Internet service categories,including maps, music, and social networking, which made the companyvery reluctant to enable emerging leaders such as Facebook and MySpaceon its products. Other vendors such as Samsung and Apple had no suchrestraints and were quick to deliver mobile clients for these services to theircustomers. Nokia was stuck with a rigid technology management model that made itdifficult and slow to create products that did not draw heavily on existingplatform features. These platforms had been a strength between 1995-2005 and enabled Nokia to exercise unparalleled scale in the industry, butbecame an Achilles heel when the disruptive ideas such as thin, touch, andapps started to surface. Part of this was a classic innovators dilemma - theplatform was loaded with features that Nokia "knew" market wanted andwithout which a product would fail, and when RAZR and iPhone becamemarket successes without having some of these features, at least in theirfirst iterations, Nokia was genuinely shocked.There was general hubris around the company that caused it to overlookemerging competitors and downplay the importance of continuing to pushthe innovation envelope. Nokia overestimated the momentum advantagethat its brand, technology assets, and distribution network posed overcompetitors such as Apple and Samsung. Nokia had, and continues tohave, armies of very smart and visionary people who were among the firstto dream up concepts such as mobile social networking and touch screenUIs, but the lack of sense of urgency on bringing truly novel concepts to themarketplace caused these ideas to wither on the vine.
Nokia had been watching the Symbian software as it was created, sincethe mid-1990s, and licensed the operating system before Symbian waseven created. Symbian proved to have many advantages over the recentcompetition in some important areas. With its mature and well-debuggedphone stacks, it is better for phone calls than any other smartphone: itdrops fewer calls, the calls sound better, and it uses the antenna better.Symbians power consumption and performance on comparable hardwareare also best of class, despite the baroque middleware added over theyears by Nokia. Yet Nokias phones were considered uncompetitive in themarketplace, because new products from Apple and Android had raised thebar for ease of use, particularly for new data applications, and Nokias userexperience was awful. Apart from that Symbian’s development was tooslow, it was too late to the smartphone arena. In the beginning of this year in February Nokia switched to Microsoft.Switching to a new mobile operating system was always going to cause alot of necessary financial pain. Some experts say Nokia choosing Microsoftwas a wrong decision The choice was simple. Android or Windows Phone.Whichever would give Nokia the most benefit in the medium to long termwould be the sensible choice. Android would have allowed Nokia to turnaround a new handset in short order.
Share Price patterns of Nokia in last 10 yearsGoing through this figure we can easily identify that the share prices ofnokia considerably fell in the year 2009 and continues to decline till now.Future looks bleak for Nokia but recent patent war between Apple andSamsung has given some opportunity to Nokia but we are yet to seewhether Nokia will be able to grab this opportunity or not.