The Reason Behind The Decreasing Trend of Nokias Profit

The Reason Behind The Decreasing Trend Of Nokias Profit

Texas A&M University- Commerce
Ahmed Kabir
Eco 595
CWID- 50162778

The Reason Behind The Decreasing Trend of Nokias Profit

Abstract
This paper analyzes how Nokia has been experiencing the downward trend of its profit since
2010. There are many significant reasons which are associated with this downfall. These reasons
affected the revenue growth of Nokia. The research will find out why Nokia is getting less profit
over the years. This paper also aims to give advice to the other cellphone companies as well as
Nokia how to overcome such downfall.
Keywords: Nokia, Cellphone Industry, Nokia Profit Loss

The Reason Behind The Decreasing Trend of Nokias Profit

1. Introduction
1.1.

Background:

Microsoft planned to take over Nokia as the company was struggling with its devices few years
ago. Nokia was doing very terrible business over the last five years although the company had
been the pioneer of the mobile industry over a decade. Nokia also gave us some very good
mobile phones when there were less mobile phone companies which could rarely compete with
Nokia. But as the cellphones started to come out smarter and sharper and thinner in size,
consumers started to change their preferences and start buying the new fancy, sharp looking
smartphones with new operating systems which are capable of doing more works than Nokia
phones. The data shows from the year 2007 to 2014 Nokia market share declined from 51% to
less than 5%. So Nokia is facing a challenge in getting much profit like before as their market
share is also declining every year.

1.2. Problem Statement

People are interested in knowing how Nokia had its downfall because how Nokia lost its position
in telecommunication industry is a lesson to learn for every telecommunication company. Nokia
is losing its revenue every year and it is almost impossible for Nokia to catching up with the
current market. The focus of the study is mostly why Nokia is losing its revenue. This proposal
will detail the factor numbers of Nokia mobile sells each year, the introduction of slim mobile
phones, Apples smartphone revolution, etc. are responsible for the decline of Nokias revenue
and how they are affecting Nokias downfall.

The Reason Behind The Decreasing Trend of Nokias Profit

1.3 Purpose of the study

The purpose of conducting this research is to get an idea about the reasons why Nokia is getting
less revenue every year. The factors are the reason behind it why they Nokia fans are now
shifting towards new phones and by conducting the research we can understand how all these
factors are affecting the revenue declining of Nokia.
1.4.1 Research Questions
A. Are the consumers more into slim mobile phones now?
B. Is the new generation is more into smartphones rather than the phones having a simple
interface?
C. Is the changing of preference into using iOS or Android reducing a number of Nokia mobile
sells?
D. Is Nokias not doing business in America makes Nokia getting less profit?
E. Is getting abandoned by the US mobile carriers also makes Nokia losing the US market?
1.4.2 Research Hypotheses
H1a: Consumers getting more into slim mobile phones arent affecting Nokias revenue.
H1b: Consumers getting more into slim mobile phones are affecting Nokias revenue.

H2a: The new generations getting interested on other smartphones arent affecting on Nokias
profit.

The Reason Behind The Decreasing Trend of Nokias Profit

H2b: The new generations getting interested on other smartphones are affecting on Nokias
profit.

H3a: The changing of preference into using iOS or Android isnt reducing the selling of Nokia
mobile phones.
H3b: The changing of preference into using iOS or Android is reducing the selling of Nokia
mobile phones.

H5a: Nokias not doing business in the American market isnt making Nokia getting less
revenue.
H5b: Nokias not doing business in the American market is making Nokia getting less revenue.

1.5 Study Limitations

The information is very limited about Nokia; all are gathered from the websites. So the study
may not address the problems accurately like it would if the information could be retrieved from
the inside of Nokia.
1.6 Budget and schedule
Prepare proposal by

3rd March 2016

Information Collection by

18th March 2016

Research proposal draft submission 26th March 2016

Completing the research framework 2nd April 2016
Complete research paper by

8th April 2016

The Reason Behind The Decreasing Trend of Nokias Profit

The proposed budget for the project is:

Transportation

$50

Lodging

$400

Supplies (Pens, papers, clipboards)

$50

Printing

$400

Foods

$150

Unexpected expenses

$50

Total

$1100

2. Review of related literature

Nokia has been doing business in cell phone industry for a very long time. But after the
introduction to a slimmer and smarter cellphones, Nokia started losing its customers. Basically,
the technology Nokia uses is not the main reason for Nokias downfall. Because Nokia is
releasing new phones every now and then like all other popular cell phone companies. But there
should be reasons behind why this market leader is lagging behind all the other cellphone
companies.
Nokia is basically a Finnish company but Nokia tried to expand or make their cellphones popular
in the Middle East and Asia. Nokia completely forgot about American Market. Because they
didnt focus on the American market, they lost a large number of customers in the first place.
Nokia thought they would do great if they do business in Europe, Asia or Middle East. But as
they ignored the richest country of the world, they also took it as a bad product from the Finnish
giant Nokia.

The Reason Behind The Decreasing Trend of Nokias Profit

Almost five years ago, Apple introduced iPhone and also Google introduced their Android
devices that took over the market so fast. As the marketing gurus say one cant be a global
innovator if he is a loser in America. If we look at Nokias market share, Nokias global market
share dropped from 47% to 38% from the year 2009 to 2010. Though Nokia is not focused on
doing their business in the American market but Nokia lost their sells in North America more
rapidly. They number dropped from 3.5% to 3%. American market only holds 7% of Nokias
business.
iPhone and Android are the smartphones that are making Nokia lagging behind the run. iPhones
market share is now almost 16% and Android is getting better day by day. Android market share
rose from 4% to 23% from 2009 to 2010. Here also the main reason is not doing business in the
worlds richest country America. Because in America both the Nokias main rivals has ten times
more market share than Nokia has.
Microsofts acquisition of Nokia seems so good for Nokia but it may not show good result in the
end. One of the biggest problems is Microsoft is an American company and it runs by the
American people who does not have any idea about a Finnish giant who never thought of doing
business in America.
Also, when the world is so eager to embrace the slim size phones, Nokia is still manufacturing
their candy shaped Lumia cellphones, even when the Motorola Razr came in the market, North
American consumers preferred slim flip phones instead of candy shaped Nokia phones. Also, the
recent smartphones are slimmer than the Nokia smartphones and consumers prefer to use those
phones rather than candy shaped Nokia phones.

The Reason Behind The Decreasing Trend of Nokias Profit

As Nokia abandoned American market, the US carriers also abandoned them. They were looking
for customized cell phones and so LG, Samsung, iPhone, they all are happy to join the carriers.
As the carriers backed away from Nokia, Nokia lost their game in America. Nokia wasnt
delivering, or not delivering quickly enough, said Tuong Nguyen. The Korean vendors could
deliver it faster, and they were able to pick up on (Nokias) weaknesses. Fu,Z.S(2010) also
analyzed that Nokias failure according to impracticable of Nokia phones operating system. Also
Yi,M. and Zheng Z. Q. (2010) had resolved Nokias failure by comparing Nokia with Apple. All
these researchers aim to find the ways for Nokias downfall which are same as this paper.

3. Methodology
In the research paper, its main goal is to know the reasons why Nokia is losing its customers. To
know the reasons, the research team will try to know the customers satisfaction in their online
website or through survey so that customers from all over the country can participate the survey.
To get more customer attraction we will set giveaway on social media websites, and also, we will
set cash discount on every Nokia purchase that will be willing to fill out the survey.
The research team will then come up with some new advice for the Nokia products that can
increase Nokia revenue. We will also advise some new generation products, products outlook
and how many different types of models needs to be produced.
For getting more idea about Nokia, the research team will analyze the previous financial report
and compare with new the predicted financial report after possible changes. The research team
will also analyze the other markets rather that US market that did well before in getting greater
revenue. The research will show the preferred outlook of smartphones the consumers want, what

The Reason Behind The Decreasing Trend of Nokias Profit

are the ages of consumers, and also find out what price range mobile phone they want, how
many of them are using iPhone or Android devices.
References

Fu, Z.S. (2010) Nokia Smart Phone Satisfaction Is Not High Operating System Closed or the
Main Reason. Communication Information
Zheng, Z.Q. (2013) Influence of Utilitarianism and Hedonism on Purchase Behavior in Mobile
PhoneNokia and Apple as an Example. Journal of Liaoning Medical College, 10, 50-52
Cheng, R. (2014, April 25). Farewell Nokia: The rise and fall of a mobile pioneer. Retrieved
April 08, 2016, from http://www.cnet.com/news/farewell-nokia-the-rise-and-fall-of-a-mobilepioneer/
Global mobile phone sales by vendor 2010-2015 | Statistic. (n.d.). Retrieved April 08, 2016, from
http://www.statista.com/statistics/263355/global-mobile-device-sales-by-vendor-since-1stquarter-2008/
Nokia income-statement 2015. (2016, April 08). Retrieved April 11, 2016, from
http://amigobulls.com/stocks/NOK/income-statement/annual
Ron. (2013, May 26). Android vs. Windows Phone, why Nokia made the right decision
(opinion). Retrieved April 10, 2016, from http://www.winbeta.org/news/android-vs-windowsphone-why-nokia-made-right-decision-opinion

The Reason Behind The Decreasing Trend of Nokias Profit

10

Steinbock, D. (2013, September 17). Behind Nokia's failure in the US, emerging markets.
Retrieved April 10, 2016, from http://www.cnbc.com/2013/09/17/nokias-failure-no-flexibility-inus-emerging-markets.html