Nokia’s Demise and Comeback

Just as horse and buggy whip manufacturers fell victim a burgeoning auto industry nearly a century ago, Nokia was
unable to effectively survive consumers transitioning from flip phones to smart phones. Even a $7.8 billion
acquisition by Microsoft in 2014 proved unable to save a brand that once garnered 41% of the handset market.
Microsoft wrote off the deal, selling the brand back to Nokia in 2016, leading many to believe the brand was dead.

Today, Nokia is far from dead, and in fact, has made an impressive comeback under the leadership of Finnish based
HMD Global, who bought the exclusive rights to market the Nokia brand via license in 2017.

HMD has held the rights to design and market Nokia phones since a joint deal with Foxconn to buy the Finnish
telecoms giant’s mobile unit from Microsoft in 2016. Foxconn manufactures the handsets while Nokia gets royalty
payments for each phone HMD sells.

Nokia’s comeback in Indian Markets

In its second avatar, Nokia phones—built by Foxconn, powered by Google software, and designed and marketed by
HMD Global—were re-launched in 100 countries. HMD Global is focusing on three countries—China, the U.S., and
India—but its biggest bet is on India. It makes sense to focus on India, considering following points:

1) India is the biggest smartphone market with nearly 350 million users and counting.

2) According to an Assocham-PwC study, the number of smartphone users in India is expected to reach 859 million
by 2022 at a compound annual growth rate of 12.9%.

3) The U.S. and China markets, on the other hand, are slowing down.

4) There aren’t many 100 million-plus markets that are growing at close to double digits.

5) There is huge room for growth as around 500 million Indians still use feature phones and are likely to move to
smartphones soon.

6) There is huge room for growth as around 500 million Indians still use feature phones and are likely to move to
smartphones soon.

7) The company is hoping to cash in on the sense of nostalgia that Nokia evokes among some customers whose
first phone was a Nokia.

8) Nokia is taking a multi-pronged approach to India: It is also focussing on the cheaper feature phones, a segment
where it has been very strong traditionally.

Nokia’s comeback Strategies

• Focus on Seamless Software Updates/ Enhance Performance

Differentiating Features in new Nokia Explanation

Stock Android
Regular software updates facilitating both fast
operating system and security updates
Only player other than Google which brings Google
Pixel experience and makes it accessible to every
consumer at every price point.
HMD has set itself apart by defying the industry
paradigm of depreciation and programmed
obsolescence. The phone will start getting better with

Promise of two years of OS [operating system] updates
and three years of monthly security patches.
Faster user interface
the upgrades which is different from other smartphones
which has planned obsolescence built-in and become
slower and slower until they reach a point when you
must replace them.
The updates will be irrespective of the price of your
Nokia smartphone.
as it hasn’t used a customized version of Android

• A Strong Product Offering at a Good Price

Nokia smartphone at a starting price of around 5,000 is much cheaper than an iPhone which only begins at Rs
28,000, but since when have millennial cared about prices.

Feature phones still account for a large chunk of India’s total cellphone market because they are cheap—you can
get a feature phone for less than Rs 1,000. They are especially popular among older people as well as lower middle
class, small-town, and rural customers who are looking for just basic connectivity but don’t want to fork out a lot of
money. According to Counterpoint, while the feature phone market declined 39% year-on-year in the second
quarter of 2019, Nokia grew its share to 9% while market leader Jio was at 28%. Despite that, Counterpoint calls it
a $28-billion opportunity in the next few years. IDC’s Singh says if HMD Global wants to stay in the smartphone
market for long, it should stay invested in the high volume, low-margin feature phone market because when the
time comes for a feature phone user to upgrade to a smartphone, she will often stick to a familiar brand if it has
been a good experience.

• Quick in Getting the Product to Market

Company has invested heavily in the market, with 400-plus exclusive distributors, 100,000 stores, and 350 after-
sales service outlets across the country.

• Focus on Effective Partnerships

The smartphone industry is complex in those relationships with suppliers, carriers, and retailers are instrumental
to both new product development and distribution.

On the retail side, HMD Global has paired with large retailers including Amazon and Best Buy, among others.

In addition to working closely with Google on updates, Nokia also has strong relationship with ZEISS in imaging and
works with both companies to ensure that software innovations are built effectively into the camera. The company
now offers the Nokia 9 for high end photography, with multiple taking the picture and integrating it into a single
picture.

Going forward, Nokia intends to grow strategically and continue to expand its offerings. The company sees
particular opportunity in bring a new 5G smartphone to market for approximately half the price of what exists
today. While attempts to move upmarket may prove to be challenging, the level of customer focus the company if
showing bodes well for continued growth.
Analysis:

What kind of Market Nokia is entering?

Doubt: Monopolistic Competition ? Explain how it is monopolistic competition.

What are the Targeted Segments for Nokia in Indian Market?

Who are the Competitors in the same segments?

What factors go into the pricing of Nokia Phones?

Market Share Indian Smartphone Industry in 2019 (Jan – Dec)

https://en.wikipedia.org/wiki/List_of_best-selling_mobile_phones#2021_(Q1+Q2)

MOBILE BRAND MARKET SHARE

Samsung 19.2%
Huawei 15.6%
Apple 10.5%
Xiaomi 8.2%
Oppo 7.7%
Nokia 2.4%
Others 34.3%
Total 100%

Market share of Nokia in Mobile Phone Market from January 2019 – December 2019
Price Elasticity of Cell Phone Industry

Smartphone Segment, A survey

The price elasticity is the degree of responsiveness of the quantity demanded of a good to changes in price of a
good. A product is known to be elastic if the consumers are sensitive towards to changes in price. Conversely, a
product is inelastic when the consumers are not sensitive towards the changes in price. Smartphones, which is
considered a luxury good, has an elastic demand. This is shown when the majority of 87% respondents choose not
buy a smartphone when the price increases by 50%.

Price Elasticity of Demand = %Change in quantity demanded/%Change in Price

= 87%/50%

= 1.74

Since the value of answer is more than 1, therefore the hypothesis above is said to be proven. Smartphone has an
elastic demand, or literally indicates that the consumers are more responsive towards the changes in price.

Ref : https://nokiamob.net/2020/05/04/more-than-10-million-nokia-phones-shipped-during-q1-2020/
As inference from the graph above, Nokia saw a 39% decline in the shipments from 2019 to 2020.
The COVID-19 pandemic surely played some role, but looking at the fact that the market declined
13% and Nokia smartphone shipments 3 times that much, the virus wasn’t the only thing killing
sales.

Also, if we compare market pricing vs. sales of two consecutive years, normalizing other factors, we
can observe that when price is increased by ~5%, sales dropped by ~26%
Table 1: Price comparison of Nokia Smart phone Segment

Nokia Model Price 2019 Price 2020 % Change Price % Change Sales Elasticity
Nokia 7.2 15499 16330 5.36% 26% 4.85
Nokia 9 PureView 49999 52677 5.36% 26% 4.85
Nokia 110 1599 1684 5.32% 26% 4.89
Nokia 105 1249 1315.946 5.36% 26% 4.85

Conclusion: It’s a highly priced elastic market for both feature as well as smart phone segments
where Nokia has reentered after relaunch.

Demand Curve of Nokia

 Focus on creating differentiation basis pricing segments.
 Due to high elasticity as seen above pricing is highly dependent on competitors price points
 Demand for feature phone is higher in India due to internet illiteracy, rigidness, ease of use, low operating
cost and ease of use.
 Maximum smartphone users are in the range of 5 to 15 thousand range.
 Marginal revenue for a smart phone is greater than a feature phone.
 Category is falling under Monopolistic competition as there is no “perfect competition” and is not
“oligopoly” either
 Nokia focused on capturing segmented price points on the overall demand curve.
 The price points are used for differentiation among users for targeted set of consumer segments.
 New low-income users, who would experience mobile for the first time, will likely do it through a feature
phone first.
 Like smartphones, feature phones are also upgrading to latest technologies (e.g 4g phones). Lots of Basic
Apps which were only a part of smartphones are being made available to feature phones as well. Launch
of Jio phones have given a flip to the declining market of feature phones.

Price Segment Qty Supplied in MN PCs

<1200 33.49
<1500 20
5000-15000 7.9
<50000 5
 Demand Curve
105

50K 100

95
5-15K

90
<1500
85

< 1200 80

75

70
Jan
5 Mn Feb
7.9 20 Mar 33.49Apr

Data from Counterpoint Research : https://timesofindia.indiatimes.com/gadgets-news/nokia-sold-four-times-more-

features-phones-than-smartphones-in-2019/articleshow/73894737.cms
Supply Curve of Nokia

Price Segment in INR Qty Supplied in MLN PCs

<1200 1.5
<1500 3
5-15K 7.9
<50K 2.5

Supply Curve

50000

15000

1200 1500
1
1.5 32 3 7.9 42.5

https://www.counterpointresearch.com/india-smartphone-market-q2-2021/

There are about 450 million smartphone users as compared to 550 million feature phone users in India in
2019. About 40-45% of feature phone users own a device at less than Rs 1000. 

(https://economictimes.indiatimes.com/tech/hardware/overall-india-handset-market-growth-to-fall-in-
2020/articleshow/72950192.cms)

Equilibrium Curve

Price Segment Market Size Qty Supplied

<1200 1.5 33.49
<1500 3 20
5-15K 7.9 7.9
<50K 12 5
 Equilibrium Stage

5-15 K

Shift in Demand curve :

https://economictimes.indiatimes.com/tech/hardware/overall-india-handset-market-growth-to-fall-in-
2020/articleshow/72950192.cms
New Delhi: The Indian mobile handset market, second largest in the world, is expected to grow in single-
digits in 2020, lower than the 2019 levels, as consumers are hesitant to upgrade to entry level
smartphones and are holding onto their devices for a longer time.

Market research firm TechArc, in its forecast on 2020, said that the overall market will see 2% dip
compared to sales in 2019, attributed to continuous fall in sales of feature phones as well as smart feature
phones. Counterpoint Research predicts a 6-9% growth due to low demand of feature phones.
International Data Corp. (IDC) also expects double-digit growth will be difficult to achieve.

Supply Curve : Supply of mobile phones is directly proportional to the rate of market size growing in a
particular region.
Based on the volume of shipment, the smartphone market in India is expected to expand at a compound
annual growth rate (CAGR) of ~14.56% between FY 2018 and FY 2023 to reach a value of 277 Mn units by
FY 2023. (https://www.businesswire.com/news/home/20190426005357/en/The-Smartphone-Market-in-
India-2018-to-2023---With-a-14-Yearly-Market-Growth-Since-2016-India-is-the-Fastest-Growing-
Smartphone-Market-Globally---ResearchAndMarkets.com)
India Smartphone Market, Top 5 Company, Sell-Out Units in million, Market Share,
Year-over-Year Growth, October 2020
 Source: IDC India Monthly City Level Sell Out Smartphone Tracker, October 2020
release

(https://www.counterpointresearch.com/xiaomi-leads-india-smartphone-market-reliance-jio-leads-
feature-phones-overall-handset-market/)

According to the latest research from Counterpoint’s Market Monitor service, India’s

overall mobile phone shipments grew 11% and smartphone shipments grew 10% with feature
phones growing faster than smartphones (11%). India was also the fastest-growing
smartphone market in 2018 with an annual growth rate of 10%.
References:

https://www.ukessays.com/essays/marketing/company-and-market-analysis-of-nokia-marketing-
essay.php

https://medium.com/@manjushach.isme1921/demand-and-supply-analysis-of-nokia-bca6cd99b934

https://www.forbes.com/sites/charlesrtaylor/2019/12/01/nokias-customer-focus-is-bringing-back-
smartphone-customers/?sh=4cb7e9ed3fa7
https://medium.com/@manjushach.isme1921/demand-and-supply-analysis-of-nokia-bca6cd99b934
https://www.cnbc.com/2020/08/11/nokia-phones-maker-hmd-picks-up-230-million-in-new-funding.html
https://www.forbes.com/sites/charlesrtaylor/2019/12/01/nokias-customer-focus-is-bringing-back-
smartphone-customers/?sh=4cb7e9ed3fa7
https://www.slideshare.net/hooda_27/demandsupplyanalysis-nokia
https://thesocialgrabber.com/market-segmentation-of-nokia/
https://www.statista.com/topics/1183/nokia/
https://medium.com/@manjushach.isme1921/demand-and-supply-analysis-of-nokia-bca6cd99b934
 Current market share mobile : https://www.counterpointresearch.com/india-smartphone-share/

Final References List

Nokia’s Comeback in Indian Markets :

https://www.fortuneindia.com/enterprise/nokia-the-revenant/103573

Nokia’s comeback Strategies : https://www.forbes.com/sites/charlesrtaylor/2019/12/01/nokias-

customer-focus-is-bringing-back-smartphone-customers/?sh=4cb7e9ed3fa7

Price-Elasticity
The price elasticity is the degree of responsiveness of the quantity
demanded of a good to changes in price of a good. A product is
known to be elastic if the consumers are sensitive towards to changes
in price. Conversely, a product is inelastic when the consumers are
not sensitive towards the changes in price (Muhd. Iqbal, 2013).
Smartphones, which is considered a luxury good, has an elastic
demand. This is shown when the majority of 87% respondents choose
not buy a smartphone when the price increases by 50%.

Since the value of answer is more than 1, therefore the hypothesis

above is said to be proven. Smartphone has an elastic demand, or
literally indicates that the consumers are more responsive towards the
changes in price (Muhd. Iqbal,2013)

Cross-price Elasticity
The cross-price elasticity of demand is a measurement of the quantity
of a good demanded to a change in price of another related good
(Muhd. Iqbal, 2013). We used a scenario where the price of non-
smartphones decreases by 50%, what is the behaviour of
respondents.
Figure: Will consumer switch to a cheaper phone if the price of non-
smartphone decreases by 50%?
Out of 15 respondents, 73% will not consider to switch from a
smartphone to a cheaper phone even the price of non-smartphone
decreases 50%. [Figure]
In the scenario when non-smartphone decreases by 50%:

The cross-price elasticity of demand should be more than 0 and has a

positive value because this implies that the consumers are more likely
to change their products when a substitute good change in price.
However, the respondents somehow do not change their choice to
non-smartphones. This indicates that smartphone is important to
individuals and has its unique features that the consumers will not
want to change. The usage of smartphones has become a part of
consumers’ life.

Income-Elasticity
The income elasticity of demand also indicates that the smartphone is
a luxury good. Income elasticity of demand is the measure of degree
of responsiveness of demand to changes in income (Muhd. Iqbal,
2013).

In the scenario when income increases by 30%:

In the scenario when income increases by 50%:

As shown in the calculations above, we can conclude that the answers

have a positive sign and it is more than 1. This shows that the
changes in demand for smartphones are higher changes in income. It
is simpler to explain when we compare a luxurious good to an inferior
good such as the non-smartphone. According to our results,
consumers will not buy a non-smartphone if their income increases,
even if they can afford a smartphone.

Finally, let us sum up what we have done.