This case discusses the challenges faced by Nokia in the global handset market as it looks to regain significant market share it has been losing since the new millennium. Once the worldwide leader in the global handset industry, Nokia now must find new ways to reinvent itself and its products.
Between 1995 and 1999, sales for Nokia tripled while profits nearly did the same. In 1998 they sold over 40 million phones, making Nokia the number one mobile phone company in the world. Nokia was successful due to its ability to have large scale production, within its own factories, allowing them to achieve economies of scale and high profit margins. However, in 2000, the market matured and the other major players in the industry (Motorola, Sony Ericsson, Siemens AG, Samsung) have been gaining market share ever since. Due to increased pressures from consumers for each manufacturer to offer the latest in technology and features, an industry trend of outsourcing to low cost manufacturer’s and Nokia’s reluctance to embrace a ‘Clamshell’ style phone, Nokia has gone from 35% market share in 2001 to just 28.9% in 2004 (Appendix 1).
Any decision going forward would have to abide to certain Nokia principles as outlined in their “Nokia Way” program, including speed and flexibility in decision making and expanding mobile communication. With these in mind, Nokia can redefine themselves over the course of the next decade if it chooses its next endeavors wisely.
In the short term, Nokia can begin outsourcing to low cost factories in China, allowing Nokia to re-achieve economies of scale. They can ill afford to fall farther behind their competition with respect to production costs. This will allow lowering prices of their products to meet the “commodization” of cell phones and allow for increased R&D expenditures. As well, they can also start implementing a Trade Back Program, where customers could take back a used Nokia phone...