CASIRJ Volume 5 Issue 6 [Year - 2014] ISSN 2319 – 9202

A STUDY ON NOKIA

Ms. NEELU
ASSISTANT PROFESSOR

LAKSHMIBAI COLLEGE

UNIVERSITY OF DELHI

ABSTRACT

Nokia has been an established worldwide brand & a major market player in mobile industry. It
became a global giant in handsets market because it could foresee the huge demand for mobile
handsets which other firms could not foresee.But, since 2008, Nokia has been left behind by its
rivals in the growth oriented Smartphone market. The aim of the study is to assess the current
position of Nokia in mobile industry and the future prospects.

KEY WORDS : Mobile Industry, Market Player, Smartphone

INTRODUCTION

Nokia, headquartered in Finland, is a global company having sales in more than 150 countries.
Nokia is a public limited-liability company listed on the Helsinki, Frankfurt, and New York
stock exchanges.Nokia plays a very large role in the economy of Finland1.Nokia produces
mobile phones for every major market segment and protocol, including GSM, CDMA, and W-
CDMA (UMTS). The corporation also produces telecommunications network equipment for
applications such as mobile and fixed-line voice telephony, ISDN, broadband access, voice over
IP, and wireless LAN2. Nokia's focus on telecommunications and its early investment in GSM
technologies had made the company the world's largest mobile phone manufacturer, a position it
held until 2012. Brand 'Nokia' and customer loyalty are the main strenghts of Nokia. Between
1996 and 2001, Nokia's turnover increased almost fivefold from 6.5 billion euros to 31 billion
euros. With the introduction of Iphones and Android smartphones, the world brand Nokia came

1
http://en.wikipedia.org/wiki/Nokia
2
http://nokia-edition.blogspot.in/2007/09/nokia-introduction.html

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into a crisis and its marke t capitalization had fallen from €110 billion in 2007 to €14.8
billion in May 20123.

HISTORY

Nokia, an established worldwide brand in mobile phones, was established as Nokai Ab by

Finnish mining engineer Fredrik Idestam as a ground wood pulp mill in southwest of Finland in
1865.It has been into variety of Business including electricity generation,manufacture of Tyre,
Plastics, Aluminium, Chemicals, Rubbers,Cables, Footwears,consumer electronics, personal
computers, electricity generation machinery, robotics, Robots, Military equipments, Capacitors,
Television and several other consumer durables since its very beginning4.In 1967, Nokia
Corporation came into existence as a result of the merger of Idestam’s Nokia AB, Finnish
Rubber Works, a manufacturer of rubber boots, tires and other rubber products founded in 1898,
and Finnish Cable Works Ltd, a manufacturer of telephone and power cables founded in 1912.
The new Nokia Corporation had five businesses: rubber, cable, forestry, electronics and power
generation .Nokia first entered the telecommunications equipment market in 1960. Nokia
introduced the first fully-digital local telephone exchange in Europe followed by the world’s first
car phone for the Nordic Mobile Telephone analog standard in 1982.The first GSM call was
made with a Nokia phone over the Nokia-built network of a Finnish operator called Radiolinja in
1991. It divested its basic industry and non telecommunications operations between 1989 and
1996 to focus on telecommunications business and becoming a world leader in
telecommunications. It was only after this strategic decision of focussing only on
telecommunications business, that Nokia's sales to North America, South America and Asia
became significant.Nokia had to overhaul its entire supply chain because the worlwide response
to Nokia's mobile phones was beyond expectations and had created a logistics crisis in the mid
1990s. By 1998, Nokia was the world leader in mobile phones, a position it enjoyed for more
than a decade.In 2011, Nokia joined forces with Microsoft to strengthen its position in the highly
competitive smartphone market. Nokia adopted the Windows Phone operating system for smart
devices and through their strategic partnership Nokia and Microsoft set about establishing an
alternative ecosystem to rival iOS and Android5.Year 2013 has been transformative for NOKIA
as it purchased Siemen's share in Nokia Siemens Networks, which is now renamed as
NSN(Nokia Solutions and Networks) Nokia sold of its Devices and Services business to
Microsoft. The process started on 3rd September 2013 and completed on 25th April
2014.Thereafter Nokia has three continuing businesses :Network Business Networks (previously

3
http://www.forbes.com/sites/haydnshaughnessy/2013/03/08/apples-rise-and-nokias-fall-highlight-platform-
strategy-essentials/
4
http://news.biharprabha.com/2013/09/nokia-the-journey-of-a-company-from-paper-pulp-to-mobile-phones/
5
http://company.nokia.com/en/about-us/our-company/our-story

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Nokia Solutions and Networks, or NSN), HERE mapping and location services and
Technologies (previously Advanced Technologies) .

NOKIA IN INDIA

Mobile Phone industry made a slow start in India in 1994 when the Indian government first
opened up the country’s telecom market to private enterprise. Several private players jumped
into the fray but due to absence of an authorized telecom regulator, high licensing fees and
unfriendly government policies in telecom sector,such private players exited the market in the
initial years only. It is during this phase of unfriendly telecom policies that Nokia made an entry
in India in 1995 with the aim of tapping the Indian mobile market. Initially, Nokia had a tough
time in India as the tarrifs levied on importing mobile phones in India were as high as 27%, call
rates were rupees 16 per minute and hence there was not much demand for mobile phones. It also
had to face tough competition from players like motorola, sony etc but finally Finland-based
Nokia — forged ahead of rivals and became a leader in the Indian mobile industry.

Nokia’s glory days were largely due to the fact that the global demand surge for mobile handsets
was something leading consumer electronics firms could not foresee. So Nokia ended up
competing with two lumbering, erratic messes called Ericsson and Motorola.Nokia established
itself in the Indian market by launching new products and enhancing the products with features
designed specifically for local customers(e,g. Hindi sms facility, torchlight,music & games etc),
as well as promotional campaigns targeted at Indian audience. An extensive distribution network
helped it to take its products to rural markets in India.Four P's strategy helped Nokia grow
exponentially in India and build brand loyalty among customers.

ACHIEVEMENTS

1987 - Introduced world's first handheld phone, the Mobira Cityman 900

1991 - Worls's first GSM call was made over a nokia supplied network6

1994 - Nokia launched it’s famous ringtone through the Nokia 2110

World’s first satellite call using a Nokia phone

1995 – First mobile phone call made in India on a Nokia phone on a Nokia network

The company had commissioned India's first cellular network for Modi Telstra7.
6
Maneesh Garg,2012, “Nokia: Connecting People or Disconnecting Customers”- a case
study.

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1997 - The snake game launched

1998 – Saare Jahaan Se Acchha, first Indian ringtone in a Nokia 5110

2000 – First phone with Hindi menu (Nokia 3210)

2002 – First Camera phone (Nokia 7650)

2003 – First Made for India phone, Nokia 1100

2004 – Saral Mobile Sandesh, Hindi SMS on a wide range of Nokia phones

First Wi-fi Phone- Nokia Communicator (N9500)

Nokia chosen as most respected consumer durable company by business world

2005 - Nokia recognised as ―Brand of the year‖ by CII

Local UI in additional local language

2006 – Nokia manufacturing plant in Chennai

2007 – First vernacular news portal

Introduced Ovi, the company's new internet services brand name.

First mobile phone manufacturer to put alerts into mobile phones to remind .
people to unplug their chargers once their phones were fully charged

2010 - The Interbrand annual rating of 2010 Best Global Brands positioned

Nokia as the eighth most valued brand in the world.

Nokia Money initiative, the first commercial services called ―Mobile Money Services
by YES Bank‖ started in India.

2012 - Introduced the brand HERE , the first location cloud aiming to deliver the world’s best
maps and location experiences across multiple screens and operating systems .

Launched its first products on Windows Phone ,(Nokia Lumia 920 & Nokia Lumia
820).

7
http://www.business-standard.com/article/specials/nokia-to-invest-20m-in-india-
197052201054_1.html

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2013 - Nokia Life+ English Teacher, was created to assist primary school English teachers in
Nigeria by providing free professional development support through their mobile phones.
The service was created in partnership with UNESCO.

Completed the acquisition of Siemens' stake in Nokia Siemens Networks and the new
name and brand is Nokia Solutions and Networks, also referred to as NSN.

Gi Group, a leading Italian multinational company dedicated to the human resources

market, chose Nokia Lumia as its business smartphone, replacing BlackBerry.

Nokia Asha 305 won a GSMA Global Mobile Award for 'Best Feature Phone or Entry
Level Phone' during Mobile World Congress 2013.

DATA

Nokia : Net Sales, Operating Profit, PBT, R&D Expenses

Devices & Services : Net Sales

2007 2008 2009 2010 2011 2012 2013

Net 51058 50710 40984 42446 38659 15400 12709

sales(Nokia
)

Operating 7985 4966 1197 2070 -1073 -821 519

profit

Profit 8268 4970 962 1786 -1198 -1179 243

before
taxes/Loss

Devices 37705 35099 27853 29134 23943 15686

&Services
(Net sales)

Research 5647 5968 5909 5863 5612 3081 2619

and
developme
nt

Note : Devices & Services is a business segment of Nokia

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60000
Net sales/R&D Expenses(Euro
50000

40000
million)

30000 Net Sales(Nokia)

20000 Net Sales(D&S)

R&D Expenses
10000

0
2007 2008 2009 2010 2011 2012 2013

Years

Source:Nokia Annual Reports 2007-2013

INTERPRETATION

NET SALES

The net sales figure for Nokia was EUR 51058 million in 2007 and a mere EUR 12709 million in
2013.The net sales declined from EUR 51058 million in 2007 to EUR 50710 in 2008 and to EUR
4098 million in 2009.The year 2010 reversed the trend previaling in Nokia for the last 3 years(as
per our study), meaning thereby, the net sales increased in 2010. The net sales increased from
EUR 40984 in 2009 million to EUR 42446 million in 2010. Again in 2011, the net sales figure
dropped from EUR 42446 million in 2010 to EUR 38659 million. The decline in net sales figure
further sharpened in 2012 and 2013 whereby the net sales figure fell from EUR 38659 million in
2011 to EUR 15400 million in 2012 and to EUR 12709 million in 2013.

2007 2008 2009 2010 2011 2012 2013

Net sales - 51058 50710 40984 42446 38659 15400 12709

Nokia(Euro
millions)

% Change 24% -1% -19% 4% -9% -22% -17%

Net sales- 37705 35099 27853 29134 23943 15686 Sold off to
Devices & Microsoft*
Services (Euro
millions)

% Change 1% -7% -21% 5% -18% -34% -

* Devices & Services segment was sold off to Microsoft in 2013.

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Growth in Net Sales (%)

30%

20%

R 10%
g
a
r
t 0%
o Nokia
e 2007 2008 2009 2010 2011 2012 2013
w -10% D& S
t
o
h -20%
f

-30%

-40%
Years

Souce : Nokia Annual Reports : 2007-2013

The above chart shows the growth in net sales in percentage terms. As can be seen, the steepest
fall in net sales came in 2008 y-o-y basis, when growth in net sales turned from +24% to -1%.In
2009, the negative trend in net sales continued and the growth in net sales figure further moved
down to -19% as compared to -1% in 2008. The reasons attributed to this turnaround are global
economic slowdown combined with unprecedented currency volatility and limited availablility
of credit and hence. reduced global consumer and corporate spending.Devices & Services net
sales also saw a downfall of 7% in 2008 and -21% in 2009 y-o-y basis.

The negative sales growth figure turned positive in 2010 when growth in net sales figure moved
from -19% in 2009 to +4% in 2010.Net sales benefitted from improved economic and financial
conditions following the significant deterioration in demand during the second half of 2008 and
2009. The year 2010 saw volume and value growth in the global mobile device market driven by
rapid growth in converged mobile devices. At the same time, the intensity of competition in the
mobile market increased tremendously and hence Nokia was adversely impacted. Nokia's device
volumes were also adversely affected in the second half of 2010 by shortages of certain
components. The overall appreciation of certain currencies relative to the Euro during 2010 had a
positive effect on its net sales.The Devices & Services net sales saw a 5% increase due to higher
volumes and a flat ASP and smaller negative foreign exchange hedging impact compared with
2009.The, volumewise, growthr rate for overall mobile devices industry stood at 13% in 2010(y-
o-y basis) and the same figure for Nokia stood at 5%.A;so as per Nokia's estimates, its market
share decreased to 32% in 2010 from an estimated 34% in 2009 .

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Growth in net sales again turned to -9% in 2011 from +4% in 2010 and thereafter remained
negative till 2013. Nokia's net sales were negatively affected by the increasing momentum of
competing smartphone platforms relative to Nokia's Symbian smartphone platform. Competetors
product portfolio included phones with varying screen sizes,affordable prices,dual sim features
etc.. which gave them a lead over Nokia. Aggressive price competition, infact, rseulted in
reduced inventories of Nokia phones with the distributors and operators. However, movement of
Euro relative to other currencies had no impact on overall net sales of Nokia in 2011.

The figure further moved down from -9% in 2011 to -22% in 2012 and moved up to -!7% in
2013 signalling that net sales declined by -17% in 2013 but the decline was less as compared to
the -22% figure in 2012. The major reason for fall in net sales of Nokia was increasing
popularity of iphones and android based smart phones relative to Nokia's symbian smartphones.
Lack of affordable touch devices from Nokia was another reason for falling sales, particularly in
the first half of 2012, when market was flourished from affordable touch devices from different
brands like samsung, micromax, sony etc.

Moreover, having a presence in emerging markets such as China, India, Brazil, and Russia gave
it substantial foreign exchange exposure.The reason for neagtive sales growth in 2013 is majorly
attributed to lower sales of its two major business components namely NSN and HERE who
divested some of their inconsistent businesses and lower recognition of deffered revenue.
Moreover, impact of foreign currnecy fluctuation was also there.

FALL OF NOKIA

Introduction of Iphone in 2007 changed the global mobile market scenario. Iphones & android
based touch phones provided good opputunity to all existing and new market palyers in the
mobile handsets industry. Brand Nokia, which, identified a similar opputunity in early 1990's
and launched various consumer friendly phones, was too much preoccupied with its established
business and Symbian software, that it got late in identifying the direction of the wind & the
requirements of the time as compared to other market players with the resultant that it has seen a
huge decline in its market share in the past couple of years.

The introduction of Symbian series by Nokia in 2002 had a good market response. But with the
introduction of Apple IOS in 2007 and Android in 2008, the OS race was completely taken over
by the two giants. Symbian OS lagged behind in mobile applications and user interface, though
efforts were made by Nokia to improve the Symbian OS but still it could not come to pace with
other operating systems and hence the collapse of market for Symbian OS and declining market
share for Nokia. Moreover, too much reliance on Windows platform proved another costlier step
to Nokia.

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Nokia required product innovation to recapture the market. But lack of innovation resulted in late
introduction of various software and even hardware features by Nokia while other palyers had
already launched products in the market which were highly apprised by the mobile users and
thus customers switched over from Nokia to competetive brands. While Nokia was loosing
charm in high end phones, at the same time players like Micromax, HTC gave it a stiff
competition in lower segment as well. In India, local brands stole the lead on dual SIMs, low-end
Qwerty and long-battery-life phones.

While Apple was designing the iPhone and Nokia was selling half a billion phones each year,
Google bought a company called Android and announced an Open Handset Alliance, a grouping
of industry players who would come together to build an open source OS for smartphones. Nokia
was invited to join but refused to demean itself. Within a time span of 2 years, Nokia came into
crisis and its market capitalization had fallen from €110 billion in 2007 to €14.8 billion in may
2012. thus, while Nokia's symbian lost, apple and google highly accomplished in smartphones.

Considering the success of mobile apps introduced by apple and android, Nokia/Symbian also
launched an Apps Store, Horizon and its own Apps and Content store – Ovi, in 2009. But Nokia
had no real platform experience to compare with Apple’s. The platform was shaky and it tried to
launch simultaneously in 35 countries but it faced a gale of criticism for the first time8.

The partnership with Microsoft led to Nokia switching over from Symbian platform to Windows
platform, which has become the primary smartphone opertaing system for Nokia. Nokis's
hardware quality and Microsoft's software experience enabled the launch of variety of windows
based smartphones from Nokia incorporating features like dual sim, enhnaced mapping,
navigation, location based services etc in varying screen sizes and affordable ranges.

CONCLUSION

Nokia lacked experience in the choice of Operating Systems which could tempt the exixsting as
well as new employees and hence made wrong paltform choices.Due to lack of needed skill sets,
ti could not move at the required speed in the market.

Combination of complementary assets and technical skills of Nokia and Microsoft may provide a
differentiated (mobile) product portfolio as against the rivals.

Both Nokia and Microsoft enjoy strong brand image and brand awareness, hence should result in
a stonger brand image.

Significant investements in R& D, hiring expertise, technology, outsourcing, market exploration

etc may be required to innovate and grow successfully.

8
http://www.forbes.com/sites/haydnshaughnessy/2013/03/08/apples-rise-and-nokias-
fall-highlight-platform-strategy-essentials/2/
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Nokia may have a less diversified portfolio of businesses and reduced bargaining power with
counterparties as a consequence of its Devices and Sales business.

There could be potential threats of Microsoft and Nokia deal. Hence, both need to be attentive to
such threats and manage the partnership to be aligned to their long term objectives.

Nokia needs to scan the environment for the upcoming trends, identify the opputunities and
deliver innovative products timely.

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entry-level-phone-at-mobileworld-congress

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 Press Releases, 16 July, 2013, Gi Group recruits Nokia Lumia as its business smartphone
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nokia fall

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