Professional Documents
Culture Documents
Submitted By:
Group 5 Section B
OBJECTIVE
Our aim with this project is to examine the intricacies behind the fall of
the Nokia Corporation from its position as a market leader in the global
mobile phones market from 2003 to 2013. Nokias dethronement and
the downward spiral with Symbian are interesting as Nokia had been a
model for technology companies in terms of process optimization and
product cost management. We will outline how Nokia had both the time to
react to market changes and the technological capabilities to counterattack its challengers, but it failed to do so despite an organizational
architecture that was designed to prepare Nokia to respond to market
disruptions. We will explain this paradox by identifying the pitfalls related
to organizational agility and decision-making speed, particularly the
disadvantages of having a complex internal matrix structure. In
other words, we will also focus on how the organizational structure that was initially
conceived to speed up decision-making and to make Nokia more agile than its competitors,
also led Nokia to shoot itself in the foot, with coherent decision making paralysed. In this
process the traditional mobile phone market matured rapidly, and the launch of smartphones
brought a strong and immediate disruptive innovation in the upper end of the market.
Consequently, another aspect that we hope to address is the key strategic decisions taken by
Nokia that prevented the corporation from creating an iPhone killer during the opportunity
window it had between 2007 and 2009. Thereafter, it was too late for Nokia to regain the
ground that it had lost. We will try to analyse these decisions within the scope of the WeitzelJonnsons Model of Organizational Decline (Given Below).
BACKGROUND
Nokia was established in 1865 as a pulp and paper mill in Finland. During
the 1960s, they expanded into the rubber and cable industries through a
series of mergers. Continuing on this entrepreneurial streak, in 1975, they
expanded into many industries such as computers, consumer electronics,
and cell phones. In 1979, Nokia and Mobria entered into a joint venture,
which Nokia later took over to design and manufacture mobile phones.
But by the turn of the 1980s and the 1990s, Nokia Corporation faced
severe crises and was forced to make a significant corporate turnaround.
In the process, the company underwent a first major restructuring and
shifted its focus and concentrated on mobile phones and telecom
networks, and by the mid-1990s it had divested dozens of other lines of
businesses. By 1982 Nokia had introduced the worlds first car phone for
the Nordic Mobile Telephone (NMT). In 1991 the GSM standard for digital
cellular networks was adopted as the pan-European digital standard
,Nokia having had a key role in the related technology development and
standardization process. While mobile communications evolved rapidly
throughout the 1990s and the early 2000s, Nokia established itself as the
global market leader in mobile handsets with sales peaking in 2007, and
remained in that position until the second quarter of 2008.
In June 1998, Nokia, Ericsson, Motorola and Psion established Symbian
Ltd. which became the developer of the operating system Symbian OS.2
Nokia 9210 Communicator was the first Symbian OS phone released in
2000. The main strategic focus of the company during the early 2000s
was to expand to mobile voice market and consumer multimedia
business. The year 2006 brought a shift in the companys strategy. The
top management team saw that the success of the company might be
threatened by the maturing mobile device market and therefore identified
a need to diversify the companys activities. The new strategy included
expansion to consumer Internet services and network solutions, an
increase in enterprise services and in the existing mobile device market
strategies. Thus, Nokia centrally aimed to build a functioning business
ecosystem on the Symbian software platform by offering downloadable
online content.
After
the
introduction
of
Apples
iPhone
in
2007
and
Googles
platform
MeeGo
that
would
support
multiple
hardware
architectures.
In the autumn of 2010 the former head of Microsoft Business Division
Stephen Elop was appointed new CEO. The strategic intent of Elops new
top management team was to quickly regain leadership in the smartphone
market and to retain the market leader position in low-end mobile phones.
Contrary to earlier strategic decision, the decision was made to adopt
Windows Phone operating system as the primary smartphone platform for
Nokia devices for (at least) three years. This meant that the TMT publicly
admitted that its extensive focus on Symbian OS and later Meego had
been major strategic mistakes. In September 2013, after two years of
close
cooperation
between
Nokia
and
Microsoft,
the
companies
STAGE 1: BLINDED
Organizations are unable to recognize the internal and
external threats that threaten their long-term survival
Nokia was the dominant player in mobile phones industry between 200308 ( See Table ) but it failed to anticipate underlying shifts in the
paradigms of the industry.
The shift in the industry happened when software became the dominant
order winner of the mobile device. In the 1990s and the early 2000s the
hardware designs were evolving rapidly and Nokia was the first to bring
advanced phones with integrated FM radio, color display and camera to
market. Around 2005 downloadable content became more important,
although at the time it only meant customized ringtones and screen
savers. However, those developments also marked the shift in consumer
preferences and paved a way to the rise of customized software content,
and applications. Thus, as good as the hardware designs were, they lost
their functionality if not coupled with attractive software.
The original iPhone was technologically inferior to Nokia devices it did
not have 3G, it only had a very poor camera, and a short battery life, but
it was revolutionary in the sense that it allowed a great deal of flexibility
and customizability to the consumers. But the sales of iPhone in 20072008 were not nearly as good as of Nokia devices:
[...] at Nokia when we were seeing this competitor coming to the
market, people understood that this is going to be the future, but then
they were seeing the sales figures for the first year and they were
thinking that we have the right strategy we are selling hundreds of
millions and they are selling peanuts - (Ex- Nokia Executive)
The business that Nokia was involved in, with Symbian phones being
globally sold and being extremely popular and profitable, overshadowed
the rising problems in the high-end of the market. Even though it was
apparent that the technological convergence was already occurring, the
exemplary sales numbers created an impression that Nokia was too big
to fail and was still at the forefront of the current mobile trends.
STAGE 2: INACTION
Despite
clear
signs
of
deteriorating
performance,
top
game companies], they were all based on the fact that they abandoned
Symbian as a development platform and started to develop for Apple and
Android subsequently - (Industry expert)
Nokias relationship with network operators is critical in understanding its
position in the new competitive landscape. Historically, Nokia had been
heavily involved in developing and building GSM, 3G and later on 4G
networks
in
collaboration
with
network
operators.
The
operators
organizational
structure
was
that
the
matrix
organization
serving functional units on the other. While the core rationale behind this
decision may have been sound and in line with Nokias agile image, the
result was the emergence of two serious functional problems: a
cannibalistic
internal
competition
between
business
units
and
easy to see who would be the owner of all the organizational changes
that were continuously implemented (See below)
processes and procedures were explicitly defined and monitored. All this
resulted in slow almost paralysed coherence in decision making and
implementation from 2006 onward.
CONCLUSION
As our preceding historical analysis demonstrates, Nokia had a two- or
three-year window of opportunity to defeat Apple and Google in the
mobile phone market and the excess technological capabilities to create
one product and the ecosystem to match its competitors offering.
Evidently, Nokia failed to use its resources in a timely manner. The
reasons for this failure originate in the organizational architecture and
strategy of Nokia and its top management. The following depicts this
failure process and the mechanisms resulting in the end of one
competitive era.
APPENDIX
Jari Ojala (2014). The Curse of Agility: Nokia Corporation and the
Loss of Market Dominance 2003-2013