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Nokia Corporation’s Financial Failure and Advice Essay


Introduction

The company Nokia was established in 1865 and focused on the manufacture of paper; at the beginning of the 20th century, Nokia became a power industry company. Only at the end of the 20th century, the company’s core business became the development, production, and sales of mobile phones. The company experienced a peak in sales and popularity in the market at the end of the 1990s and in the 2000s but had to face a decline at the end of the 2000s. In 2013, the company sold its business to Microsoft (Jia and Yin 446).

Analysis

The main failure that led to the company’s decline was its inability to adapt to the demands of the market, i.e. provide products that would be efficient in the era of the mobile Internet (Jia and Yin 447). The company was not prepared for the emergence of new technology (smartphones) and failed to understand the consumers’ needs. The company’s investment in its operational system Symbian was not successful because Google had presented a similar, if not more effective operational system Android even before Symbian became open-source software (Kerr et al. 5). In 2007, both Android and iPhone smartphones were introduced to the market, which adversely influenced Nokia’s sales: “in October 2009, Nokia reported its first quarterly loss since 1996” (Kerr et al. 5). Nokia’s inability to adapt to the new market demands and compete with the new entrants led to its decline; the company’s financial investments in the Symbian OS did not bring it any profit because iOS and Android were much more efficient and valued by the market (Jia and Yin 448). In the table below, the choices of former Nokia users are displayed in percentage (see fig. 1).

The OS former Nokia users preferred to Symbian.
Fig. 1. The OS former Nokia users preferred to Symbian (Jia and Yin 448).

The problem of failed investments in obsolete technology was a cause of another wrong approach, namely, the approach to leadership. According to Khan et al., the management of the company was not efficient enough because it was too bureaucratic and could not answer adequately to the rapid changes in the market (19). The organizational structure, compared to Apple and Google, was too complicated, and a product decision took too much time to compete with the other smartphone giants (Khan et al. 19). The last “nail in the coffin” was the new CEO Stephen Elop who blamed employees for the decline and terminated several projects, including the development of Symbian OS, which led to “a dramatic drop in Nokia’s share price” (Khan et al. 20). After that, the company was sold to Microsoft, which developed a new OS that, however, was also not able to compete with iOS and Google.

The main cause of Nokia’s failure was the inability to invest in the right technologies and the lack of strategic leadership. The company continued to invest in R&D (even more than Apple) but was unable to compete with this rival because of its inability to provide innovative products that corresponded with the market’s demands (Lerner and Seru 5). The company’s evaluation of the industry and the market was inadequate; furthermore, it was not even able to follow the competitors and develop a similar product to increase its competitive advantage (as HTC did) (Lerner and Seru 2).

It is possible to assume that Nokia’s investments in R&D were futile because it did not recognize the need to develop a new product that would not be based on Nokia’s previous products and technologies. Therefore, the failure to invest correctly and the failure to analyze the market and the industry adequately were the main causes of Nokia’s decline in the 2010s. The company’s business tactic was to support the development of Symbian; however, if the company could recognize Android’s potential from the beginning (as Samsung did), it would have acquired the chance to become one of the most successful smartphone manufacturers on the market (Jia and Yin 451). The company relied solely on Symbian’s popularity and serious profits it provided during the company’s peak. Nokia was resistant to changes and its reluctance to adjust eventually led to its decline.

Recommendations

As can be seen from the analysis, the company had to consider what technology is invested and how efficient these investments would be in the future. Therefore, the first recommendation would be to analyze the market and the industry thoroughly to understand whether the current investments are going to be profitable in the future. The next recommendation would be to provide a long-term strategy that would define the company’s steps and choices that have the potential to be profitable in the future. Since Nokia eventually recognized that Symbian was not profitable, it had to consider this possibility before the market was flooded with Android and Apple devices. The third recommendation would be to restructure the brand so that it can compete with the strong players in the market. The company has to invest more in the analysis of customer satisfaction and market demands. The fourth recommendation would be to address the users’ dissatisfactions with the new models of Nokia smartphones to ensure customer loyalty (see fig. 2).

 Customer satisfaction with Nokia phones' characteristics.
Fig. 2 Customer satisfaction with Nokia phones’ characteristics (Patel 83).

The next recommendation would be to invest in the development of mobile applications for Nokia phones on Windows OS; since more users prefer mobile Internet, effective applications are becoming a crucial part of any communication via smartphone devices. It is also possible to consider the development of an Android-based smartphone since Windows OS does not support the broad range of applications as Android does; this can lead to customer dissatisfaction with the brand (Patel 90). The company should also consider its pricing policies since Android phones can provide customers with similar characteristics but at a lower price (Patel 90). Therefore, the company can consider launching different products for low-cost and premium segments. This step will help Nokia increase its competitive advantage in the market, especially compared to Apple. Apple’s products were criticized for being extremely overpriced (Nerurkar 256).

As it was already mentioned, the R&D investments of Nokia were higher compared to Apple’s investments, but the latter became more successful. Thus, the company needs not only to invest in R&D but also to maintain control over it to ensure that customer experience can be improved via new, innovative technology. Hiring skilled professionals who can analyze the market trends and technology changes seems to be the solution.

Since the company’s decline led to decreased brand awareness, Nokia has to take more advanced steps in product promotion. For now, it cannot compete with Apple and Samsung in the advertisement’s efficiency. However, if the issue is addressed properly, and the company is ready to invest in advertisement intensively, there is a high chance that brand awareness will increase. At the same time, the advertisement will not help if the company fails to address other issues such as poor investment in innovative technology and a lack of strategic objectives.

Works Cited

Jia, Jianzhong, and Yuchan Yin. Open Journal of Business and Management, vol. 3, no. 4, 2015, pp. 446-452, Web.

Kerr, Ramana, et al. “Entrepreneurial Finance in Finland?” Harvard Business School, vol. 9, no. 140, 2013, pp. 1-22.

Khan, Sundus Tanweer, et al. International Journal of Research in Management, Economics and Commerce, vol. 7, no. 1, 2017, pp. 16-25, Web.

Lerner, Josh, and Amit Seru.2015, Web.

Nerurkar, Pranav. “Review of Data Storage by Fusion Drive in MAC.” International Journal of Advanced Research in Computer Science, vol. 4, no. 3, 2013, pp. 256-259.

Patel, Ritesh. “A Study on Consumer Behavior and Opportunities for Nokia Smart-Phones in India.” Galaxy International Interdisciplinary Research Journal, vol. 2, no. 1, 2014, pp. 68-97, Web.

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