Nokia this the main reason of Nokia’s failure?

Nokia is a Finnish
multinational communications, information technology and consumer electronics
company that was founded in 1865 by Fredrik Idestam, Leo Mechelin and Eduard
Polon. It is mostly known for the production of mobile phones. For almost more
than a decade it dominated the phone industry, but then, all of a sudden, its
market share has plunged from 46.7% to just 9.5% in 7 years (Oliver, 2014).
What caused such dominant firm to lose its market share that quickly? During
the same year, Nokia met its new competitor, Apple. In 2007 Steve Jobs, founder
of Apple, introduced to the world a new phone called iPhone. Was this the main
reason of Nokia’s failure? What did the Apple do that Nokia did not? Is it a failure
of the Nokia brand, or maybe a result of a bad corporate strategy? This essay
aims to find the main causes which caused Nokia to fail.

In 2007 Nokia’s phone
market share was as high as 49.4% according to Gartner’s research (data). From
that year onwards, Nokia’s market share has been decreasing every year to 43.7%
then 41.1% and 34.2% until it reached 9.5% in 2014 (Lee, 2013). It is Apple and
Samsung – Nokia’s biggest competitors, which were one of the main cause leading
to that failure. Both companies took over the phone market share. Nokia was
falling behind as they rocketed. What causes Apple to be so successful in
comparison to its competitors? One of the reason is that Apple’s approach
towards the creation of products is different. Apple’s engineers aim at making
products suitable and convenient for themselves, in contrast to many others who
create a product focusing mainly on the technology aspect, which apparently is
not always the key to success. Steve Jobs being a client of his own products aimed
at making them as easy and convenient to use as possible, he was representing
Apple’s real consumers. Furthermore, according to Bajarin (2012), unlike his
competitors, Steve Jobs was able to “see the future”. Hence, he was always
trying to implement his futuristic visions in his projects, being more
competitive in the innovation field. When he announced his first iPhone, it was
the easiness of the product’s usage which widely affected Apple’s success.
“Keeping things simple” appeared to be what consumers really want. Moreover,
unlike the majority of phone makers Apple has just one product, in this case
iPhone which minimizes the decision making for the consumers. Although this may
seem limiting, given the number of smartphones available to users, the truth is
the revers. While having many different alternatives seems to be what consumers
want, research shows that, in case of tech product, what they strive for is not
a plethora of choices but simplicity (Bajarin, 2012). Thus, Apple instead of
inventing new products, it is ameliorating its old versions. Apple’s innovation
is undoubtedly a major key of their success.

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We already know that
Apple crushed Nokia, but is it the only reason why Nokia failed? Did Nokia’s
corporate strategy fail? What were Nokia’s decisions during that period? In
order for a company to work, it must analyse the behaviour of competitors,
evaluate the company’s share price and/or consider different ways to expand the
business. A company must seek for strategic long-term activities of their
business which is known as strategic management. The firm needs to have competitive
advantage which are the various factors, such as lower costs or a better
product (like Apple), which give a firm an advantage over its rivals. It should
also take into account internal strategic analysis, what stages or activities
should company take to help to create product value (value chain) such as
marketing and sales, service etc. (Sloman and Jones, 2014)

Apple and Samsung have
surpassed Nokia, however Nokia at a time was surprisingly an adaptive company.
They were not falling behind with technology, they created their first
smartphone back in 1996. Moreover, Nokia had large expenses in research and
development area. Nevertheless, their inability to apply findings into real
life resulted in a failure of creating products that people want to buy – Nokia
lacked innovation. Unlike Steve Jobs, they could not see the future of
smartphones. What is more, they are more of a hardware company rather than a
software company, meaning that they have more expertise in building physical
devices rather than programs that could run those devices (Surowiecki, 2013).
Because of that Nokia did not see how important software will be in future
hence did not increase its research in this particular field. On the contrary,
Apple saw both hardware and software as important and that they need to work
together in order to create the perfect product, the product wanted by
consumers. Phones were evolving too quickly and Nokia could not keep up with
it, it started to fall behind as it underestimated the transition to
smartphones. Furthermore, Nokia overestimated its brand, it thought that it
could easily catch up with their lateness in the smartphone game. They thought
that thanks to their hardware design customers would stay loyal to them. For
some reasons Nokia could not progress with the technology and when it moved
from Symbian software to Windows in 2011 it was already considered too late
since Apple and Samsung took over the market (Surowiecki, 2013) Another problem
which caused Nokia’s failure according to Quy Huy (2015), was the inside misunderstanding
between top managers and middle managers. Middle managers were afraid to
disappoint top managers with their ideas. Historically, the top managers were
not really liked by the middle ones. They had a bad reputation and regularly
shouted at people. Because of that middle managers did not propose new ideas or
if something was going in the wrong direction and everyone knew about it they
wouldn’t tell it to the top managers (Huy, 2015).

Nokia and Apple saw the
world differently. Nokia’s goal was to create the best speaking devices,
whereas Apple’s goal was to reinvent the phone through the revolutionary touch
interface. By that time Nokia was one of the biggest company and Apple was at
its edge. Apple needed a break- through product since that was its last chance
to stay in the game and in order to do that they had to change the game. Nokia,
on the other hand, had everything. It was an amazing manufacturing company
focused on the product, its features and its quality. Their mobile phones
prices and features were also unbeatable. However, they didn’t focus on
consumers’ needs, felt too confident and stuck to their Symbian operating
system instead of trying to improve, push forward. In 2002 Nokia produced a
similar device to the yet non-existing iPhone but there wasn’t much about the
product other than the fact that it had a touchscreen, allowed users to browse
the web, find restaurants and play games. Two years after, in 2004, Apple begun
the creation of iPhone by employing one thousand people to work on a secret
“Project Purple” of which features are still unknown. Apple really believed
that they could change the world (Hodges, 2014).

The biggest phone
company that dominated the market share for over ten years has collapsed due to
new competition as well as bad decision making and inner problems. In 2007
Apple revolutionised the phone market by introducing the iPhone which is way
“smarter” than any smartphone and very easy to use. Since that year, Nokia’s
market share has been decreasing each year. Nokia lacked innovation. Its
competitors were progressing so fast that they could not catch up with it, so
they started to fall behind. Unlike Apple, Nokia did not have the vision of
future smartphones and focused just on making best speaking devices. They underestimated the
importance of the transition to smartphones and failed to recognize the
increasing importance of software. Even with all the research and development Nokia was unable to
fulfil consumers’ needs. The inner conflict between the top and middle managers
was an obstacle for Nokia to progress. The brand itself could not harm Nokia’s
market share. Nokia, as it is mentioned before was already the pioneer in the
phone industry, however, the lack of innovation as well as bad corporate
strategy led to an unfortunate failure.