Edoardo Morra

CASE STUDY - NOKIA

What were the factors that enabled Nokia to establish market leadership in the mobile phone
business?

Nokia can be considered as an early mover in the telecom market, this characteristic conferred the
company some advantages that, together with a fast response to shifting markets and engineering
innovation, made the company world leader in mobile phone manufacturing in 1998.
The most crucial of these advantages were:
- high potential customer base: they could reach a lot of non-users;
- few entry barriers, and possibility to establish new ones by investing in IP and patents;
- head start on competitors because of early deregulation of Finland’s telecom infrastructure;
- low production cost: thanks to logistics and vertically integrated system.
Moreover, a key strategy that allowed Nokia to gain unconventional popularity was the consumer-
products company behaviour. This also allowed the company to differentiate in a market where all
major players had the same technology.

What was the firm’s technology and market strategy?

After Ollila decision to focus on mobile phones, technology decision shifted on GSM network, where
Nokia could exploit economies of scale. Leveraging on logistics, they could sustain low production
costs, and, by expert marketing research, they could exploit low-end markets of Asian countries
(considering Nokia’s strong positioning they were pretty safe). In the years to come they could
exploit their patents in order to explore different technologies and find the most suitable as their
competing environment changed. Nokia market strategy was also very concerned on design, offering
iconic products with both tangible and intangible features like gadgets and ringtones.
After the threat of iOS and Android OS, the company developed with Siemens, Ericson and Motorola
the alternative OS Symbian, which will be than dropped in favour of Microsoft Windows Mobile OS.

How could have the firm better prepared itself for the smart phone era?

I think the main reason why Nokia could not succeed in the smartphone era lies in his culture and
capabilities. As we studied, companies at high maturity levels have deep expertise, but also deeper
problems in corporate culture renovation.
In order to better prepared to the smartphone era they should have implemented a more flexible
and agile structure. One first step to accomplish this could have been to shift from a vertical
structure (successful in the quieter GSM, CDMA markets) to a more horizontal structure, where
outsourcing plays an important role. For example relying on chip producers such as Qualcomm
instead of self-production, could have allowed to focus more on software innovation.
Another step they should have taken was switching to Android OS, like in the previous case, the
main reason why this didn’t happen was stubborn corporate culture. If they would have been able to
make this switch, many opportunities in digital comprehensive product and apps would have been
available for both the company and his customers.
To manage the cultural problem they could have created a decentralized division with his own
resources and vison, composed of a network structure in order to give the opportunity to boost
innovation. This could have helped R&D to stop focusing on obsolete design development, in order
to concentrate in Innovative usability features.
What decisions would you have made differently and when?

By the mid-2000s, business users became a new potential market for handsets. In this occasion
Nokia could have suddenly shifted into this market, like BlackBerry did. This could have helped to get
used to software implementation. Thanks to their strong IP expertise, Logistic and economies of
scale they could have begun to aggressively invest in R&D in order to create barriers for new
entrants before the disruptive player arrived. Similarly, leveraging on the popularity of flip phones
around 2004, would have brought great profit, considering the difference of models offered by
younger competitors such as Samsung (63) against the 2 Nokia models.
In 2007, Nokia decided to implement a new U.S. strategy, in my opinion this was a wrong decision.
They should have focussed on the Asian market, in which they were more successful. Thanks to their
numerous IP right, their popularity with Nokia 2112 and 110, and their expertise, they could have
exploited core competences in the Asian market, targeting the low-end segments by supplying
cheap but durable and reliable product, and by investing in targeted comprehensive products and
functions. This would have been possible by relying on outsourcing instead of keeping a strict
vertical integration, another decision I would have not taken.