Vertu Case Study

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VERTU: NOKIA’S LUXURY MOBILE PHONE FOR THE URBAN RICH

Dr. Ken Kwong-Kay Wong wrote this case solely to provide material for class discussion. The author does not intend to illustrate either effective or ineffective handling of a managerial situation. The author may have disguised certain names and other identifying information to protect confidentiality.

Richard Ivey School of Business Foundation prohibits any form of reproduction, storage or transmission without its written permission. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Richard Ivey School of Business Foundation, The University of Western Ontario, London, Ontario, Canada, N6A 3K7; phone (519) 661-3208; fax (519) 661-3882; e-mail cases@ivey.uwo.ca. Copyright © 2011, Richard Ivey School of Business Foundation

Version: 2011-12-01

Finland-headquartered Nokia was a global telecommunications equipment manufacturer. It operated a luxury mobile phone brand called Vertu, founded by Frank Nuovo in the late 1990s, which pioneered the luxury mobile phone market by using precious materials such as diamonds, sapphires, titanium and exotic leather for phone production. The company enjoyed impressive growth in almost 70 countries and sold hundreds of thousands of phones in the eight years following its launch. On February 11, 2011, Stephen Elop, the new CEO who had been at the helm at Nokia for only five months, announced a new mobile strategy to adopt Microsoft’s new but unproven Windows Phone as its primary smartphone operating system. The market reacted poorly, and the company’s share price took a 14 per cent dive on the day of the announcement. How would Vertu respond to this new Nokia mobile strategy? Was Vertu well positioned to take the brand forward under the new Nokia? Would this UK-based wholly owned subsidiary be left alone and continue to be managed at arm’s length from Nokia? Changes to Vertu were inevitable— it was not a matter of if, but when.

THE NEW NOKIA UNDER ELOP

Elop admitted the company’s problems. In an internal memo to employees, he shared his views on Nokia’s shrinking market share and brand preference. Elop cited a lack of accountability, leadership and internal collaboration as key reasons for Nokia’s inability to deliver innovative products in a timely manner. To create a sense of urgency, Elop compared Nokia to a man standing on a “burning oil platform,” needing to take a bold and brave step quickly to survive.1 On February 11, 2011, Elop announced that Nokia had entered into a strategic partnership with Microsoft to create a new global mobile ecosystem.2 This announcement set off a flood of criticism from existing Nokia users, developers, and industry observers. 1

GSMArena, “CEO Stephen Elop admits Nokia’s poor track record, has a plan,” News, February 9, 2011, www.gsmarena.com/ceo_stephen_elop_admits_nokias_poor_track_record_has_a_plan-news-2305.php, accessed March 2011.

2
Nokia, “Nokia and Microsoft announce plans for a broad strategic partnership to build a new global ecosystem,” Press Release, February 11, 2011, http://press.nokia.com/2011/02/11/nokia-and-microsoft-announce-plans-for-a-broad-strategicpartnership-to-build-a-new-global-ecosystem, accessed March 2011.

This document is authorized for use only by Ken Nguyen in Marketing Management Exam taught by Dr Allam Ahmed from December 2012 to June 2013.

For the exclusive use of K. NGUYEN
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The investment community reacted poorly: Nokia’s American depositary shares fell 14 per cent to US$10.88 on the day of the announcement,3 and were subsequently downgraded by financial analysts.4 2010 was a challenging year for Nokia. Despite its earlier success in the market, Nokia’s leadership position in smartphone shipment volume was overtaken in Q4 2010 by...
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