Nokia is the first brand that was in the market when we heard of the early mobile phones. For a decade, Nokia remained in the market and introduced new models of the phone every now and then. It catered all segments of society by providing the phone with different price ranges. Millennial would be able to relate with me better. With a glorifying history of the company, it gets hard to realize that Nokia is no more relevant in the mobile phone industry. But why Nokia failed?
This is a question that needs exploration, and we are going to explore the factors responsible for this drastic change in the mobile phone industry in this article. One thing to note here is that it is not about everything that Nokia did wrong; there were certain things that other companies in the industry, especially Samsung did right. Thus, the failure of Nokia is a mixture of the mistakes made by Nokia and the successful strategies that the other brands in the industry used.
Success of Nokia:
Before we start the discussion on the factors that have resulted in the failure of Nokia. It is vital to discuss Nokia as a success story. So, let’s give a quick look at the success of the company and what made Nokia successful.
Nokia emerged as one of the successful manufacturers of mobile phone in the early days of its success. In October 1998, Nokia was the best-selling mobile phone brand in the world. By 2007, it had 50% of the share from the mobile phone market. The young and energetic leadership of the company was the reason for its wide acceptance in the consumer market. Initially, the new technology, urge to digitalize and innovation were also amongst some of the reasons for success.
However, over time, the excessive growth rate, loss of agility, and the lack of innovative leadership resulted in the failure of Nokia as the company on the strategic level.
Failure of Nokia (Nokia failed):
In the year 2013, the same Nokia Company that was enjoying a 50% share in the market dropped to less than 5% share of the total market. This was the time when the management, shareholders, and the customers of the company feared Nokia’s bankruptcy. The bankruptcy was nearly certain, but the intervention of Microsoft in the market helped the company in getting back to a better position. This was done by Microsoft in order to save the Windows platform on the smartphone, but in reality, it gave a new life to the company.
Apart from revamping the smartphones of the company, it also started diversification of the business. Now, Nokia supplies network infrastructure as a significant part of the overall business. In order to highlight the factors that resulted in the plight of the company have been widely studied in Nokia’s case study. Business graduates and even the practical trainees give examples of the things that the company did wrong to teach the students and trainees of how to do the right things.
Why did Nokia fail? – What did it do wrong or its competitors did right?
Let’s get a deeper overview of the factors that have a role in the collapse of one of the largest smartphone developers of 1990s.
1. Nokia did not adapt to change:
The technological advancement in the mobile phone industry was rapid. The traditional phones changed to smartphones, but Nokia did not change accordingly. Although, it was the initiator of the early smartphones. Symbian smartphones were introduced in the year 2002, but the company could not manage with the pace of the changing technology. That is why Nokia failed.
It kept on producing the old version of the phone, whereas the competitors started to pour in the highly advanced smartphones. These smartphones got affordable for the users, and ultimately, the entire cult of society shifted to them. Even then, Nokia did not realize what was going on and did not transform its strategies. Thus, over time, with the shifting of all its target market to a newer and better version of the phone took place, leaving Nokia far behind the new entrants of the market.
2. Excessive reliance on being a first mover in the industry:
The introduction of Symbian in 2002 was a good move. Nokia became the first mover in the industry. However, the introduction of iPhone in 2007 actually spoiled the creative advantage that Nokia was enjoying. The efficient speed of the iPhone showed how the smartphone industry is going to work, and the standards of the industry changed from being a slow service provider to the efficient service provider.
3. High competition in the industry:
Gradually, the mobile phone industry became saturated with a lot of companies serving the same target market. Apple, Samsung, Blackberry, and Nokia all were the leading players striving for the target market. In this race of competition, Nokia did not improve its service and lost to the other players available in the market.
Apart from this high-end competition, in the industry, the low-end competition in the form of Huawei, HTC, and ZTE also emerged. Gradually, these companies gained significant share, especially when the market share of these company was summed up; it was a big number as a competitor for Nokia. But Nokia did not look into it timely and had to lose the lower end market as well, showing why did Nokia fail in market.
4. Perception in the consumers:
The name Nokia had a great brand reputation when it comes to mobile phones. As discussed in the start, most of us knew Nokia as one of the greatest mobile manufacturing company. We still do recognize Nokia, but we are unable to change our perception about it and the products it manufactured. All of us have set Nokia as a great brand that was available at a particular time or age. People would remember the landmark snake game, they would wonder if they could really play with it, but they won’t spend any money on buying the phone, especially for that game. Even if they do get access to Snake, they will get bored of it in no time. This is because of technological change and the perception of the entire market about the brand. Nokia did not consider this factor and had to face failure.
5. Lack of repositioning:
Considering the previous image of Nokia, it was essential that a timely decision about repositioning was to be taken. For those of you know who aren’t aware of repositioning, we are discussing it here for you. Repositioning is a term related to marketing in which the existing image of the brand or a company is changed to the newer image by highlighting the new features or the newness that the company is bringing in for the customers. Nokia did not focus its smartphone market much. Most of the people would still not be aware of Symbian. Similarly, the first manufacturer of smartphones for more of the audience would be Apple. This is where Nokia went wrong and shows why did Nokia fail.
6. Lack of a strategic plan:
Both Apple and Samsung got the hold of the excellent game plan, which Nokia could not manage to get. Apple and Samsung have created a flagship product. These companies release a new version of these products every year with additional features. The customers of these brands and the potential customers keep an eye on the new release along before it is actually in the market. This anticipation about the new product being launched with new features can enhance the interest of the consumers in the product, and this is what is happening. Even when the market of smartphones has actually become saturated, the release of a new version of the phone still gets public excitement. But in the case of Nokia, such a scenario wasn’t created, and this actually led Nokia to collapse.
7. Excessive growth in the era 1996 – 2000:
This success can be considered as the main culprit of the failure of Nokia. The higher acceptance of the company’s mobile phones in the market between years 1996-2000, made it difficult for the company to keep its supply chain intact. With such a high growth rate, all the resources of the company were devoted to keeping the supply chain intact.
8. Lack of Innovation:
This excessive growth over the period led to the management of the company to choose between innovation and growth financing. This is why the innovation or research and development department of the company had almost no resources, and this is why the company could not manage the introduction of the latest smartphones. Usually, the features of the mobile phone in the penetration phase of the mobile phones were more or less the same except for the phones developed for business communication. It was the main reason that the competition posed by the other brands was not tackled.
9. Changing the Organizational Structure:
Nokia was operating on the mechanistic organizational structure when it suddenly though of shifting to the matrix structure. This sudden change was to be done to improve agility. But this decision was not welcomed by all the stakeholders, and this is why the top management started to leave the company. The working of the organization without the people who have brought it to this level of success wasn’t easy. And this is one of the definite reasons for the failure of Nokia Company.
10. Internal rivalries:
Another reason that is the cause of the failure of Nokia is the internal rivalry of the company. Not all the divisions or the management heads of the company worked in complete coordination. This lack of coordination created a number of operational issues, including the delays in the development of codes for Symbian. Such problems did not impact the company but indirectly contributed to the downfall of the company.
11. Lack of Vision:
In most of the companies, internal rivalries and limited resources are a problem, but a visionary leader can actually transform these problems into a bright future of the company. In the case of Nokia, apart from all the problems discussed above, lack of vision was also a problem. Because of this issue, the company’s employees never knew where they are heading. The company capitalized on the short-term growth and felt satisfied, ignoring the wide market ahead. This gave way to the new companies and competitors to enter and serve the market. And you can see those competitors of Nokia have touched the new horizons and have developed stronger brands as compared to Nokia.
12. Complacent Human resource:
Once the company achieves a considerable amount of success, then mostly the employees change their attitude. They become complacent and do not focus on work. This attitude makes the organization less efficient as a result, the decline of such a company is irrevocable. The public statements of a few executives of Nokia revealed that the company and its employees were in the same state that failed Nokia.
13. Overestimation of brand strength:
Another important factor that can be considered as a reason for the collapse of Nokia is that the brand was overestimated by the management. The management of the company continued to believe that people would keep on buying the products manufactured under its brand name irrespective of what the company produced. It was true to some extent, probably till the time when the buyers had no other choice. But with the introduction of Apple’s product and the entry of other brands like Huawei and ZTE, the buyers were not willing to purchase products from Nokia and as as result Nokia failed.
Revival of Nokia:
In 2013, Nokia was at the brink of bankruptcy. But the purchase of Nokia’s phone range by Microsoft provided a boost. It was some time before that when the management of Nokia realized the new statistics of the market. They realized how were smartphones viewed recently and what other companies have entered the mobile phone market. With all this information in hand, Nokia has started to develop new smartphones, which are better than the previous versions using Windows platform or the Symbian one. Based on all these factors, Nokia has started to develop a bit of its presence in the market again. However, it is not the same brand that once enjoyed the glory. But still, it exists and is known by people.
Important learning from the failure of Nokia:
From this Nokia case study, there are a number of things that you, as a business individual, should learn. Here are these takeaways:
1. Macro-environmental conditions:
Firstly, the importance of changing macro-environment must be understood. If all other things are changing, you can’t expect to continue your businesses as it is. You’ll need to change accordingly. Only then, you can stay in the market or your customers would abandon you as it happened with Nokia. And as a
Secondly, competition is always there, and it is of primary importance to keep a close eye on it. You can observe in this case that some small competitors did exist even at the initial stage, but the focus of the company was not to manage its competitive advantage. This gave a chance to these competitors to invest in research and innovation and gain a better position in the market.
3. Organizational Structure:
Thirdly, organizational structure, and the culture within it is an important thing to take care of. You might not think it integral in the success of the company, but in the context of Nokia, you would have observed that at least it had an indirect role. The management of the company and even the employees lost interest in the company as they thought the company has already achieved the success and they don’t require anything else to be done. With such a thought process, you won’t be able to attain long-term success, and it would definitely not help you in achieving your goals in the best possible way.
Last but not least, the vision of the leaders and the company can help in getting the right mix of strategies that would help in future growth. In case, a company is established without the vision and the future goals, then there are more chances that it would be dependent on the outside factors and these factors would either make a company a great success (less likely) or they would ruin it altogether. This is why it is essential that before you start a business, you must know what it is and where it has to reach in a particular time frame. However, don’t lose the element of flexibility while determining this aspect of your business.
This Nokia case study has explicitly explained the importance of some of the theoretical concepts that would be taught to business students. According to these concepts, the maintenance of the right kind of structure in the organization, analysis of the environment and the competition are amongst the most common factors that you should see as a business owner.
If you think we have missed out something while analyzing the Nokia case study, then just feel free to share your opinions. Why Nokia failed is an important question, so your point of view is essential. Additionally, comment on how you think that the case of Nokia can be a way to improve your business and ensure that it is on the right track. We’ll be looking forward to your opinions in the comment section.