Gaoiran, Analyn 202102420

Marron, Leady Mae H. 202102419

Nokia’s lack of innovation

Introduction

Nokia has found and fostered success over the years in a variety of industrial

sectors, including cable, paper goods, rubber boots, tires, televisions, and mobile

phones, from its modest beginnings as a single paper mill business in 1865. In the

1990s, Nokia started to shift its attention to telecommunications as its main industry.

In 1991, a GSM call was placed using Nokia hardware. By 1998, Nokia was the most

popular mobile phone brand in the world because of its quick rise in the mobile

phone market. Alastair Curtis of Nokia's Los Angeles Design Center created the

3210. Frank Nuovo, who created the svelte and curved Nokia 8110 in 1996, oversaw

the development. The Casio G-Shock and Sony Walkman designs served as

inspiration for the team's desire to design an "expressive" and customizable handset

that went beyond the typical business-oriented mobile phone market. Thus, the

phone gained significant influence. The Nokia 3210 weighs 151 g in total. The

phone's dimensions are 123.8 x 50.5 x 22.5 mm and have clip-on adjustable fascias.

Compared to earlier Nokia models, it was slimmer. It was the first mass-market

phone with an inbuilt antenna, following Nokia's 1998 introduction of the feature on

the high-end Nokia 8810. Although less favorable than that of its predecessor, the

3110, the reaction was nonetheless quite positive. Snake, Memory (a paired memory

game), and Rotation were the three games that were already installed. The addition

of these games stimulated strong sales within the rapidly growing youth sector.

React and Logic were “hidden” games on some 3210 models. Using a data cable

and specialized software, they were turned on. The Nokia Composer software, which
allowed users to manually "create" monotone ringtones, was first preloaded on a

smartphone with the 3210. The ringtones might be transferred to another Nokia

phone.

When a small number of large sellers control an industry, it creates an

oligopoly market structure (Pindyck & Rubinfeld, 2001). There aren't many mobile

manufacturing companies in the US. One of the big companies is Nokia. The use

and demand for mobile phones have greatly expanded as a result of information

technology breakthroughs. Therefore, there is a pressing demand to produce more

mobile phone handsets. The majority of mobile phone subscribers worldwide are in

Europe. There aren't many big companies that provide customers with handsets.

These few companies control the market. These businesses engage in trade

restrictions that make it challenging for new businesses to enter the market. With a

40.1% market share and 115.4 million units produced, Nokia. These companies use

business strategies to dominate the market, such as mergers, collusion, and market

share. They have the same power as a monopoly to raise prices and limit

production. In order to control a sizable portion of the market and set the handset

prices, several businesses are currently forming cartels. These businesses can

collude without a written agreement. They have identified market leaders who set the

prices at which other businesses must sell their mobile phones in order to compete.

As a trading bloc, the European Union represents a sizable and potential market.

The businesses work together to stabilize the market and lower the risks involved in

product development and investment. Technology for mobile phones is a very recent

development (Mingtao Shi, 1973).

Problem and Scope

There is no one, easy reason for Nokia's mobile phone decline: managerial

choices, an unwieldy organizational structure, an expanding bureaucracy, and

intense internal rivalries all contributed to Nokia's inability to recognize the move

from product-based to platform-based competition.

The following is the cause of Nokia's failure:

1. Nokia progressed far too slowly.

With its first Symbian Series 60 smartphones released in 2002, Nokia was a pioneer

in the smartphone industry, practically presenting the gadget to customers. For the

following five years, Symbian smartphones had no issue holding onto their top spot

in the smartphone field. In 2007, Apple released its iPhone, which redefined the very

concept of what a smartphone should be. With its full touch screen and app-based

operating system, the iPhone transformed the entire definition of what a smartphone

should be. Nokia, however, did not adapt to the iPhone or the associated shift in

customer demand.

2. Android paid off (for Samsung) and Windows phone hasn't yet (for Nokia)

Samsung was not just quick, it also made bets on a variety of operating systems,

including Android and Windows Phone, and it even had its own in-house operating

system, Bada, in case the others failed. However, Android ended up paying off. And

it was quite profitable. Nokia, on the other hand, devoted its attention to Symbian up

until its recent alliance with Microsoft.

3. Insufficient product innovation

Nokia's Windows phone, released in 2011, lacks certain fundamental technology that

would have boosted sales. The Lumia series from Nokia was introduced with a bang
but failed to catch on. Its design, which wasn't as appealing as Samsung phones or

the iPhone, maybe the cause. Today, a phone's ability to sell depends on how glitzy

or fashionable it seems. Putting aside aesthetics, Nokia phones weren't even 3G

capable because they lacked a front camera. Additionally, the 4G era is about to

begin. Nokia's most recent smartphones were therefore feature-ready but not future-

ready.

4. Symbian OS failure and improper handling of Windows

The lack of apps and UI are the causes of Symbian OS' demise (User Interface).

Nokia made ongoing improvements to its Symbian OS in response to competition

from iOS and Android, but it primarily copied other platforms' user interfaces rather

than coming up with anything original. Second, the business neglected to take into

account the requirement for accessible apps to increase market share. A leap of

confidence in Windows in 2011 proved to be the company's worst error when the tide

finally turned against it. The business was already in trouble at the time, and the

worst error it made was putting its confidence in Windows, a brand-new product, to

turn things around.

5. Nokia lost ground in the market for smartphones.

The second main factor leading to the collapse was the fierce rivalry between

Samsung and Apple, as well as a lack of attention to innovation. Users might

disregard the operating system, but the hardware characteristics which

In comparison to its two main rivals, Samsung and Apple, Nokia launched very

slowly. Nokia appeared to be behind the competition. Nokia was very slow to

recognize this truth, in contrast to Samsung, which suddenly entered the competition

and concentrated on innovation as its primary competency.

6. Nokia lacked style.

The Snake game on the old Nokia brick phone brings back a lot of fond memories.

It's an issue, though. Consumers, particularly those in underdeveloped nations,

connect the term Nokia with an earlier technological period. And having the most

recent and flashiest technology is what matters in today's environment.

7. Failure to implement the right umbrella strategy

Some mobile phone brands outperform Nokia due to these factors. Nokia has made

poor strategic judgments as a result of deteriorating strategy procedures. As a result

of their success, businesses that formerly promoted innovative thinking and

experimentation to foster growth have become risk-averse and less creative.

Companies who wish to expand and stay away from one of the largest disruptive

risks to their business and future will need to take these factors into account.

Identified problems using the theories

Demand

Nokia failed to reposition itself in the market and adjust to change. Consumers

witnessed what the smartphone business may provide in the future once Apple

unveiled its revolutionary device. They were more aware than Nokia of the long-term

advantages of developing mobile technology. One of the first things you should take

away from Nokia is to never rely exclusively on your brand's reputation to attract new

clients and keep existing ones. Despite user requests, Nokia continually failed by

sticking with the same subpar technology. All because it was aware that the majority

of its target markets still had a favorable opinion of the firm. Being a leader in your

field can only take you so far. If you don't alter right away when the demand for your

product declines, your reputation will suffer.

Nokia also disregarded market users' requirements. People may now use their

mobile phones to access the Internet more effectively thanks to the launch of the iOS
and Android operating systems. The simple talking and texting operations were no

longer what consumers wanted from their mobile devices; instead, they wanted

entertainment features and Internet apps that could be accessed whenever and

anywhere they wanted. Nokia continued to make significant investments in its own

operating system even as other mobile phone manufacturers started to actively

create a variety of application software based on the iOS and Android systems to

fulfill people's wants. Nokia as a result disregards the actual demands of consumers.

Supply Analysis

The vendor's mobile network sales were flat year over year at €2.3 billion, though it

noted when adjusted to constant currency terms this would have dropped 4%.

However, Nokia pointed to supply chain issues hampering sales growth in its mobile

networks business, while also highlighting a significant order backlog and

expectations of progress throughout the remainder of the year. He expressed hope

that supply shortages will lessen and cited China's progressive reopening of its

industrial facilities after lockdowns as evidence. Despite a decline in mobile network

revenues, the segment's operating profit increased due to higher margins.

Elasticity

Nokia's financial statistics make its issues and troubles very evident. Nokia declared

revenues of $34.08 billion as recently as June 2012, however as of June 30, 2015,

Nokia recorded revenues of $16.31 billion. In fact, such sales mark something of a

reversal for the business; in June 2013, Nokia recorded sales of only $8.57 billion or

a little over a fourth of the amount from the previous year. According to recent

revenue data, Nokia is retaining its market position but not expanding. Nokia

appears to lack the R&D resources that have allowed these businesses to create

new products and enter untapped areas. One reason Nokia lacks those capabilities
is that it does not have the financial resources to support significant research and

development initiatives as its rivals do. The economy of Finland, where Nokia is

based, previously experienced a recession that reduced income levels and

diminished demand for the company's products. Nokia made employment cuts and

let some of their employees go due to rising costs. In order to be prepared to face

such economic scenarios, Nokia must be aware of all of them. Social refers to

society. Changes in fashion, financial level, and taste are only a few examples of

social variables. The demand for the product is impacted by all of the

aforementioned elements; often, this occurs with luxury and fashion goods. People

today desire to have attractive, modern, and smartphones. Nokia works all over the

world with its products and takes into account the cultures of each location.

Theory of Consumer Behavior

Consumer behavior theory is the study of how people make decisions about

purchases. Predicting how and when a consumer will make a purchase, it assists

businesses and marketers in capitalizing on these behaviors. Nokia failed to grasp

the factors that influence consumer purchasing decisions, which is crucial knowledge

for any company. Consumer behaviors are changing, especially now that there are

so many cutting-edge products with superior features and a higher level of

technology than Nokia. The incapability of the operating system on Nokia phones is

seen as the company's downfall. Yi, M., and likewise Zheng, Z. Q., found a solution

for Nokia's failure by contrasting it with Apple. Yi, M., believed that pursuing

technological innovation mindlessly and ignoring the most crucial business model

innovation were the key reasons Nokia lost to Apple. Z. Q. Zheng emphasized the

need for accurately understanding consumer needs based on historical patterns of

consumer purchasing behavior. Yang, K., faulted Nokia's reluctance to pursue cost
containment over flexibility, believing that Nokia's rigidity led to hurdles. The success

of the enterprise was examined by Zeng, F. P., using Nokia as an example. It

focused on four primary areas of analysis: product innovation, management

mechanisms, marketing models, and marketing channels.

Theory of Production

Production theory outlines the guidelines by which a company must decide how

much of each item it will create, sell, and utilize, as well as how much-fixed capital

and labor it will use as raw materials. On the one hand, it describes the links

between the prices of the goods and factors of production, and on the other, it

describes the amounts of these goods and factors of production that are produced.

Only concentrating on its model, Nokia. They are obstinate and didn't consider how

to innovate their products. They produced numerous variations of their goods; they

had no idea what consumers wanted to buy. Apple, dubbed "the fruit company from

Cupertino" by a Nokia executive, Tero Ojanperä, in 2009 (Borden, 2009), dragged

Sony, the world's largest distributor of electronics and music, to its knees in the

digital music market. Apple succeeded by developing novel product ideas that

consumers did not even realize they desired. Apple established markets with its

streamlined, user-friendly packaging. Nokia, on the other hand, had created the

mobile technology industry but was trapped in a rut. Its attempt to hide its lack of

software expertise by hiring experts and firms (Ollila & Saukkomaa, 2013) failed to

address the real issue—open communication between various departments and the

creation of a wholly new type of user experience from a new technological and

software foundation. Nokia's unwillingness to challenge conventional wisdom

appears to be largely a product of its organizational culture. The managers adhered

to stringent work ethics and emphasized performance in keeping with the Protestant
ethic. Open thought and evaluations of visions that could change the world did not

fully match this cultural context. In an effort to foresee and manage change

scenarios constructed using the information at hand, decisions would be made

based on facts and analysis. The executives of the new generation lacked a general

education, according to a statement made in an interview by an old-generation Nokia

executive in 2006 (Ristimäki, 2006). They had little interest in the longer arcs of

history, culture, or politics; they were only concerned with problems that were

pertinent to the immediate outcome. Changes in the working environment are viewed

as difficulties that can be successfully overcome by further tightening the present

machinery’s hold on them.

Conclusion, Recommendation

In conclusion, Nokia failed in a variety of areas, including production, research

and development, customer purchasing behaviors, and competition. Innovation is

essential to everything, especially businesses. Nokia refused to look beyond its one

model and failed to recognize potential competitors. People favor innovative

products or technologies; they favor technology that can perform more tasks other

than making calls and sending texts. Nokia's demise was caused by its failure to

conduct research and development and to take consumer purchasing behavior into

account. They would likely be at the top right now if they had only conducted

excellent research, development, and innovation. They should be aware that the

years, things, and businesses are all moving just as we are. There is always an

opportunity for growth and innovation, two of the most essential components of a

firm that a businessman or woman should have recognized.

 Additionally, the business was hesitant to use top-notch operating systems

directly. We learn from Nokia's tale that there is no such thing as an everlasting king

—only continuous change. Consumers now have to deal with new challenges every

day due to the Internet age's fast expansion. The Internet and mobile devices are

deeply entwined. We cannot deny how quickly the market is changing. Industry

leaders must timely adapt their R&D focus to keep up with shifts in customer

demand. Manufacturers of mobile phones with competitive advantages must

constantly assess if their fundamental technology still satisfies customer demands.

The business should maintain its commitment to core competitiveness while

continuing to make investments in new technologies. Furthermore, it's critical to

create fresh competitive advantages based on customer demands. When the current

advantages will be supplanted by other businesses is unknown, much as iOS and

Android operating systems have supplanted Nokia's mobile phones. Intense rivalry

can only be survived by businesses with excellent flexibility. It is envisaged that

certain mobile phone makers would use this study as a resource. The addition of

some field research as supporting data to strengthen the conclusion will be taken

into account in the next investigation.

In this research, management challenges encountered by Nokia have been

critically examined through the examination of a case study. The inquiry has

identified substantial issues that the organization is dealing with in addition to its

main issue of losing market shares. According to the case study, Nokia spent a lot of

money on research and development, but despite this, the company was unable to

produce a smartphone that could compete in the market. According to the case

analysis's primary management challenges, Nokia hasn't been able to properly

incorporate the tactics it came up with into its goods. Second, it has demonstrated
innovation by introducing new smartphones, but those devices were not sufficiently

original to compete with iPhones and other smartphones made by Samsung. Third,

even after developing significant novel concepts, it was unable to commercialize

them. This is mostly due to Nokia's management team's inefficiency since they failed

to make an impression on the market with their Windows smartphones.