The Rise,Dominance And Fall Of

Nokia

BY:
PRAGYA KUMARI
21001703042
MBA 1(B)
Content
 Introduction
 History
 The rise of mobile giant
 The dominance
 The early hiccups
 The epic failure
 What went wrong?
 References
INTRODUCTION
 Nokia-Connecting People: this slogan is known all over the world.
 Its rapidly growth in the 1990s coincided with a basal structural change of the Finnish
economy and industry.
 Who can forget the iconic Nokia ringtone and iconic logo.
 In 1997 Nokia launched snake, one of the most widely recognised mobile game of all
time.
 For decades, Nokia has been the talk of the town. The titanic telecom was famous for its
hardware and battery life. Nokia’s mobiles were world famous for their users
satisfaction.
 Nokia was the biggest cell phone maker company in 1998. Nokia overtook Motorola ,a
move that was hard to predict.
 At its height Nokia commanded a global market share in mobile phones of over 40
percent.
 So what exactly happened if everything was going well?
 HISTORY

 Nokia is Finland based company incorporated in

1967.
 Nokia was founded by Fredrik Idestam, a mining
engineer in 1865. The name Nokia was decided
in 1871 when he opened his second paper mill
on the bank of Nokianvirta river. Nokia started
out with making paper which incidentally was
one of the very first technologies used for
communications.
 Fredrik Idestam was the chairman of the
company till 1896 when he retired, and Leo
Mechelin took over as the chairman. Under
Mechelin, Nokia started a new business unit of
electricity generation.
 In 1898, Eduard Polon founded the Finnish
Rubber Works, which later became Nokia’s
rubber business.
 In 1912, Finnish Cable Works was established
by Arvid Wickstrom, which later became
Nokia’s cable and electronic business.
 In 1967, all three of these jointly owned
companies came together to form the Nokia
corporation.
 Nokia’s first thrust in telecommunications
came when they began developing radio
telephones for the army and emergency
services.
 During this period, the company was
involved in many businesses including paper
products, tire manufacturing, footwear's,
communication cables, televisions ,
electricity generation machinery, robotics ,
chemicals, plastics and many more.

.
 By 1990, Nokia decided to concentrate its
efforts on the fastest growing business of
telecommunications & leave all other
companies behind. They sold out all other
business divisions.
 Nokia was not a new player in
telecommunication field when they started
concentrating on it in 1990’s.
 Instead, they had the ball rolling from
1979 when they created a radio telephone
company Mobira Oy as a joint venture with
one of the leading TV maker Salora in
Finland. They started with the Nokia DX
200 which was a digital switch for
telephone exchanges.
 They worked on the development of a
version of exchange & Nordic Mobile
Telephony network was born.
 In 1987, GSM (Global System for Mobile
communications) is adopted as the
European standard for digital mobile
technology.
 The rise of a mobile giant
 The Growth of a Mobile Giant Nokia truly entered a new age GSM cell
phone time with their Nokia 1011 model which was launched in 1992.
During this time, Finland was undergoing a severe economic meltdown and
Nokia was also in a severely crunched economic situation.
 In 1994, Nokia launched their 2100 series phones which were the first
phones with the now famous Nokia ringtone in them.
 Nokia had planned a target to sell 400,000 of these phones which was a big
number at that time, but they got lucky and it turned out to be such a huge
success that they sold over 20 million devices worldwide.
 This was truly the start of the ride for Nokia atop the cellphone business.
 With a young, united and energetic leadership team at the helm, Nokia’s
early success was primarily the result of visionary and courageous
management choices that leveraged the firm’s innovative technologies as
digitalization and deregulation of telecom networks quickly spread across
Europe.
 Between 1996 and 2000, the headcount at Nokia Mobile Phones (NMP) increased 150
percent to 27,353, while revenues over the period were up 503 percent.
 This rapid growth came at a cost. And that cost was that managers at Nokia’s main
development centers found themselves under ever increasing short-term performance
pressure and were unable to dedicate time and resources to innovation.
 While the core business focused on incremental improvements, Nokia’s relatively small
data group took up the innovation mantle.
 In 1996, it launched the world’s first smartphone, the Communicator, and was also
responsible for Nokia’s first camera phone in 2001 and its second-generation
smartphone, the innovative 7650.
 The dominance
 Nokia was the clearly the gorilla in the cellphone market in 1990’s, with almost
100% market share.
 As the time, moved towards the next century competition for Nokia grew but still
they were able to hold onto their market leader position.
 From 1996 to 2001, Nokia’s turnover increased almost fivefold from EUR 6.5
billion to EUR 31 billion.
 With the start of the next century Nokia just kept on growing bigger & bigger
becoming the leader in the mobile technology.
 In 1999, Nokia launched the Nokia 7110 which was the first phone capable of
rudimentary web-based functions including emails.
 Within 2 years Nokia launched its first phone with a built-in camera and again in
September 2002 they came out with a phone capable of capturing videos i.e. the
Nokia 3650.
 During this time, there was a huge number new patented technology coming out
from the Research and Development division of Nokia, which was helping their
share prices soar to the sky.
 Nokia launched the 6650 with 3G technology in 2002 and by 2005 Nokia
had sold its billionth phone which was a Nokia 1100 in Nigeria.
 In 2003, the company launched the Nokia 1100, a budget-friendly phone that sold around
a whopping 250 million units, making it the best selling phone as well as the best selling
consumer electronics product in the world.
 Incidentally, it was also the company’s billionth phone sold later in 2005.
 In 2007, Nokia was recognized as the 5th most valued brand in the world.
 In 2007 after the release of iPhone, Nokia smartphones like Nokia N95 with Symbian OS
outsold the iPhone and had a dominating 62.5% market share in Q4 of 2007 ahead of
Microsoft’s Windows mobile.
 The Early Hiccups
 It was the year 2001, when Nokia’s profits first crumbled after becoming the top phone
maker in the world. This was primarily due to a slowdown in mobile phone market. That
downfall turned out to be short-lived, but three years later, in 2004, the company again
reported that it’s market share is sliding, despite still leading with the solid 35%.
 Another hiccup came in 2007, when the company had to recall a whopping 46 million
faulty cell-phone batteries. What’s even worse was that the batteries - which were
manufactured between 2005-end and 2006-end - appeared in a wide range of Nokia
phones, which meant that a large part of the company’s device portfolio was affected.
 In 2008 - the same year when the Android version 1.0 was launched - Nokia’s Q3 profits
nosedived 30%, while sales decreased 3.1%. On the other hand, iPhone sales sky-rocketed
by around 330% during the same period.
 While Symbian had given Nokia an early advantage, it was a device-centric system in what
was becoming a platform- and application-centric world. To make matters worse, Symbian
exacerbated delays in new phone launches as whole new sets of code had to be developed
and tested for each phone model. By 2009, Nokia was using 57 different and incompatible
versions of its operating system.
 While Nokia posted some of its best financial results in the late 2000s, the management
team was struggling to find a response to a changing environment: Software was taking
precedence over hardware as the critical competitive feature in the industry. At the same
time, the importance of application ecosystems was becoming apparent, but as dominant
industry leader Nokia lacked the skills, and inclination to engage with this new way of
working.
 The year 2009 saw Nokia laying off 1,700 employees worldwide. Later in the year, the
struggling Finnish company finally acknowledged that it was slow to react to the change in
the market, which was now slowly being taken over by the likes of Apple and BlackBerry,
and influenced by newcomers like Samsung, HTC, and LG.
 By 2010, the limitations of Symbian had become painfully obvious and it was clear that
Nokia had missed the shift toward apps pioneered by Apple.
 Not only did Nokia’s strategic options seem limited, but none were particularly
attractive.
 The epic failure
 The game was lost, and it was left to a new CEO Stephen Elop and
new Chairman Risto Siilasmaa
 Stephen Elop - who was previously head of Microsoft's business
software division - was appointed as Nokia’s new CEO. He was also
the first non-Finnish leader of the company. Although 2010 saw a rise
in profits for the company, job cuts continued.
 Desperate to come out of the ongoing crisis and better compete with
competitors, Nokia announced a strategic partnership with software
giant Microsoft to make the latter’s Windows Phone its primary
mobile OS.
 The first fruit the partnership between Nokia and Microsoft bore
were the Lumia 800 and Lumia 710 smartphones, which were announced
later in 2011.
 Although the company managed to beat market expectations by selling
over a million units of these devices in just a few months, job cuts
continued.
 Meanwhile, in an effort to save more expenses, the company also
announced that it will close its oldest factory in Finland and shift its
manufacturing to Asia, which had become its largest market by then - all
of this happened in early 2012.
 Finally, the year 2013 brought some good news as Nokia returned to profit six quarters
of bleeding money. However, revenue dropped considerably owing to the company’s
failure to make any dent in the smartphone market.
 In September 2013 Nokia announced that its hardware department would be acquired
by Microsoft in a deal worth $7.2 billion.
 CEO Stephen Elop return to Microsoft, also included the Finnish company's patents and
mapping services, although it excluded the Nokia’s Chennai factory in India as well as
the Masan factory in South Korea.
 The sale officially completed in April 2014 and with it came the end of an era.
 WHAT WENT WRONG?
 Nokia’s decline in mobile phones cannot be explained by a single, simple answer:
1. Management decisions,
2. Dysfunctional organizational structures,
3. Growing bureaucracy and
4. Deep internal rivalries
all played a part in preventing Nokia from recognizing the shift from
product-based competition to one based on platforms.
 The company took way too long to embrace the smartphone revolution and when it
finally did it made way too many errors in its strategy.
 Stephen Elop’s decisions of only carrying the Windows operating system in all of
their phones & abandoning all other operating systems did no good for the
company’s performance in the business.
 His decision of not going for the Android OS after Symbian while the other mobile
carriers such as Samsung, Sony Ericson did, eventually led to Nokia losing a major
market share.
 The sales of Nokia dropped over the period of his tenure which eventually led Nokia
being sold to Microsoft.
References: Photo credits:

 Livemint.com
 1. INSEAD Knowledge  economictimes
 2. slide share
 3. GSMARENA
 4. NOKIA
 5. Mexico documents