1.1.Conceptual Framework and Study Design
2.An overview about Nokia
2.1.Facts and Figures
3.Problems and Causes
3.2.Causes of Problems
4.Analysis Tools, applied for Nokia
4.1.Porter Competitor Analysis
4.2.Porter’s Five Forces Analysis
4.4.Scenario based planning
5.Possible Solutions for Nokia
5.1.Strengthen Nokia’s Research & Development Department 5.2.Find allies in the US American market
5.3.Behave more global
5.4.Realign the Board of Directors
5.5.Replace the CEO
List of References
Exhibit 1: Nokia’s worldwide market shares in 2012 5
The basis of this paper is a case study about the Finnish mobile phone giant „Nokia“. The case study was written by Syeda Maseeha Qumer from the IBS Center for Management Research in Hyderabad, India and it covers an analysis of Nokia’s downturn over the last decade due to the company’s failure to adapt to the smartphone market.
In the mid-nineties, when the boom on the mobile phone sector started, Nokia became market leader and held its position from 1998 until now. As the customer’s demands changed quickly in the industry, both the development of new products and the entry of new competitors endanger existing companies. Especially in this industry, the former greatest strengths of a company can turn into disadvantages - this is exactly what the so-called “Icarus Paradox“ describes. Similar to the fall of the Icarus, a figure in Greek mythology, companies may fail if they only concentrate on their core competencies and neglect their environment (Cummings & Wilson, 2003: 267). Cummings & Wilson (2003: 267) state that companies in a highly competitive environment not only need to have the ability for single loop, but also for double loop learning.
Nokia relied upon their strategy to build solid, high quality mobile phones with basic features at a competitive price. They failed to notice, that mobile phones evolved to lifestyle accessories, which were much more than tools to take phone calls.
This paper covers an analysis of the reasons for Nokia’s problems that are described in the case study, a theoretical approach, as well as possible solutions. Another part of the paper represents a critique of the company’s management strategy. Frequent changes of CEOs, in particular when they change the direction of a company, may also have serious impact on the culture.
1.1. Conceptual Framework and Study Design
A profound analysis of the case study constitutes the basis for the further research. To understand the reasons that led to the current situation of the company, an analysis of the main facts and figures as well as a classification of Nokia’s former strategy was necessary.
As Nokia’s main problem was the entry of new competitors and its failure to offer competitive products, a competitor analysis is recommendable. We considered the “Porter Competitor Analysis“ as appropriate as it is a dynamic tool that does not only consider the strengths and weaknesses of the current competitors, but also their next steps and future initiatives (Porter, 1980: 49).
The next step of this paper represents a “Porter 5 Forces“ analysis. According to Porter (1980: 29), the „state of competition in an industry depends on five basic competitive forces (…). The collective strength of these forces determines the ultimate profit potential in the industry (…)“. These five forces are the current competitors, potential new competitors, buyers, substitutes, and suppliers in an industry (Porter, 1980: 29). This tool illustrates the importance of recognizing and considering competitive forces in the rapidly changing mobile phone industry.
Furthermore, the “Strategy Clock“ from Johnson Scholes Whittington allows a classification of Nokia’s pricing strategy. Nokia is still market leader in emerging markets like China and...