Wednesday, December 16, 2015

How a Giant like Nokia Fell!

It was the undisputed monarch of the global mobile telephone market till 2008 when the Finnish phone maker’s vice-like grip on the market was slowly yet surely prised open by a raft of competitors. Google’s open handset alliance kick-started the Android revolution, which subsequently turned the marketplace topsy-turvy. ‘We don’t see this as a threat. We are the ones with real phones, real phone platforms and a wealth of volume built up over years.’ That was the reaction from Nokia in 2007. Nokia perceived threats from existing players at that time like iPhone and Blackberry but not from those that did not even exist.

However, since 2009 its market share declined as a result of the growing use of touch-screen smartphones from other competitors principally the iPhone, by Apple, and devices running on Android, an open source operating system (OS) created by Internet search engine Google in which Nokia did not show enough interest or make attempt to take advantage of.

Stephen Elop, who was appointed CEO of the company in September 2010, soon found out that he stood at an inflection point of the company’s fortunes. Nokia was beset by decline in market share, financial losses and was strapped for cash flow. Because of its fuddy-duddy image the market was increasingly tending to confine Nokia to one of the great brands of the past. Just as Nokia had run the mobile phone businesses of rivals such as Ericsson and Motorola into the ground, it faced the death threat from corporate giants Apple and Google in the West and Samsung and HTC in the East. 

To meet this challenge Elop set in motion a series of initiatives, which included partnership with Microsoft to launch Windows-based smartphones, 1 new mid-range Asha series of feature phones,2 dual-SIM card phones,3 downsizing, delayering, launching Android-based smartphones as well as moving manufacturing to low-cost Asian locations. These steps, Elop thought, would initiate the process to revive the company and take it back to its past glory. Following the replacement of the Symbian system, Nokia’s smartphone sales figures, which had previously increased, collapsed dramatically. From the beginning of 2011 until 2013, Nokia fell from its position as the world’s largest smartphone manufacturers. By 2012–2013 its contribution to Finland’s GDP fell to about minus 0.2 per cent.

Nokia faced this sorry state of affairs because of its flawed approach when it was at its peak during mid-2000s. Instead of visualizing the future and investing in emerging technologies it splurged its resources on non-productive activities. 

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