Whenever you switch on any Nokia’s
legendary mobile phone, there must be one thing that everyone will find out - a
famous signature logo, holding hands with a theme song. Nokia always did its
best for more than one generation. It carries people through the mobile
revolution. However, why a business which had 148 years history would be verge
of collapse easily within few years? Before answering this question, we must
have a look on its history and background.
Nokia was established in the year of 1865
by an engineer, Fredrik Idestam who first created wood pulp mill in
South-western Finland. After that, the Nokia name was born and it was inspired from
the Nokianvirta River on the banks of which Idestam established a second mill. Furthermore,
Nokia had joint venture with the Rubber Processing Plant and Electronic Cable
factory of Finland in 1922. The foundation of Nokia’s cable and electronic
business started when Nokia set up Finish Cable Works in 1912.
The development of telecommunications
sector of Nokia was first established under the Electronics Division of Electronic
Cable factory in 1960. Then, telecommunication systems began in 1962 by Cable
Factory. Meanwhile, it started the development on radio telephones in 1963 for
the army and emergency services. When Nokia Group was established in 1967, the
Electronics department had hired 460 employees and their net sales accounted
for 3% of net sales in the whole group of major departments. Nokia became the third largest TV manufacturer
in Europe successfully. After that, Idestam worked with his close friend Leo
Mechelin to switch the company into a share company during 1971, and the Nokia
Company was born.
Additionally, Nokia launched the Mobira
Cityman, the very first handheld mobile phone for NMT network in 1987. The
phone was heavy and expensive at that time but it still gained a well feedback.
Until now the phone was still considered as a classic. In 1994, Nokia
introduced the 2100series which was the first phone featured with the Nokia
Tune ringtone. There were 20 million Nokia 2100 phones sold around the world. Furthermore,
Nokia had introduced the game of Snake in 1997 and the game was replicated on
over half a million phones nowadays (Mobile Technology Report 2013).
In 1998, Nokia became the world leader
in mobile phones sales and its turnover increased almost 500% from €6.5bn to
€31bn. The exploding global demand for mobile phones by the 90s led to a major
logistics crisis for various phone operators (Mobile Technology Report 2013). Nokia
sold its billionth phone in 2005 and it was internationally recognized as the
fifth most valuable brand around the world.
When the world industries were
optimistic about Nokia, Apple officially announced its first smart phone –
iPhone in January 2007. Thereby the market began with a brand new pattern of
smart phone. After Apple’s former CEO Steve Jobs announced its “reinvented
phone”, the worldwide industry gain a new awareness and definition on smart
phone. In 2008, Google had released its smart phone operating system – Android
and led to a new market changes. Unfortunately, Nokia dropped to the third in
the mobile phone market share as it was guided by the trend of iPhone and
Android’s smart phone into the mainstream market. Nokia reported a 30%
decreased in its third-quarter profits in 2008 and it claimed that they were
planning to cut 1,700 employees worldwide as recession hits the sales of mobile
phone (Monaghan, 2013).
Apart from that, Nokia faced several
crises in its market after 2008. For instant, the Finnish handset manufacture
had been holding in the Indian market for over ten years, and there do not have
any company or competitor which sold mobile phone that is better than Nokia at
that time. In 2005, this disruptive innovation landed Nokia with almost 60% of
the mobile phone market in the local. Thus, the brand became a synonym for
mobile phone.
However, nowadays Indians will purchase
for a “Nokia” but they may come out with a BlackBerry, Micromax or even Samsung.
According to a report in 2010 by IDC of a market intelligence provider, it
showed the market share of Nokia was 56.2 % in 2008 but only gained 32.9% in
2010 (Goyal & Jaiswal 2011).
Korean electronics behemoth Samsung took
the top position in India as it replaced the position of Nokia in India’s mobile
phone market. According to 18th annual survey ‘Voice & Data
100’, the India mobile phone market witnessed a 14.17% growth year-on-year to
Rs35,946 crore in 2012-2013 compared to Rs31,330 crore in the earlier fiscal
year on the back of increasing sale of smart phone. Samsung would rise in India
because of its extensive product portfolio catering to different group of customers.
In addition, the product quality and new features allowed the company to
attract various consumers’ attention easily too (BT Online Bureau 2013).
Samsung ended the year with revenue of
Rs 11,328 crore compared to Rs 7,891 crore last year and it showed 43.6% of growth.
Also, Samsung had become the market leader with a 31.5% market share. In
contrast, Nokia fall a rank to be arranged at number 2 in the Voice & Data
survey. The survey showed Nokia had a 27.2% market share following with a
significant 18% revenue fall. Additionally, Nokia’s revenue in India was placed
at Rs 9,780 crore in the 12 months ended March 2013 compared to Rs 11925 crore
in the previous financial year (BT Online Bureau 2013).
According to Chris Horton (2012), the
world also found out that Samsung Mobile Marketing exceeded Nokia for top
position in worldwide of mobile phone market in the first quarter 2012. Even
worldwide mobile phone shipments grow a little over 3% per year, the Korean
factory also shipped 93.5 million mobile phones in the first quarter for a 25%
share of the market. In contrast, shipments of Nokia mobile phone were decrease
24% year-to-year to 82.7 million units and giving only a 22.5% share. According
to market research firm Strategy Analytics, there were only 14% of Nokia’s smart
phones shipments compared to Samsung which has 34%. This was the first time
that Nokia was not positioning at the top in the mobile phone market since 1998
(Chris Horton, 2012). Furthermore, figures of analyst firm Gartner had shown
Nokia’s smart phone market share was a dominant in 2007 with 49.4%. In the next
few years, it was 43.7% in the beginning and it dropped to 34.2%. Also, it had
plummeted to only 3% in the first half of 2013 (BBC News, 2013).
“They
missed the importance software,” Mr. Wood says. “Nokia make great phones, they
still do. They went through this incredible decade of innovation in hardware,
but what Apple saw was that all you need was a rectangle with a screen, and the
rest was all about the software (BBC News, 2013)”. Therefore, Nokia had lagged
behind its competitors such as Samsung, Apple or even more.
Besides that, Microsoft claimed that it
bought most of the Nokia’s mobile phone units for $ 5 billion and spent another
$ 2.18 billion to get the license of Nokia’s patent portfolio. Hence, Microsoft
had spent a total of $7.17 billion to buy Nokia’s mobile phone business (Fried
2013). According to BBC News Business’s report, Nokia shares rise to 35% while
Microsoft shares dropped more than 5%. The takeover is set to be accomplished
in the early of 2014 where almost 32,000 of the Nokia employees will transfer
to Microsoft. Microsoft Chief Executive, Steve Ballmer described that the deal
was regarded as a “big, bold step forward” and said to BBC that his company was
in the process to transform itself from software and PCs to a company that
focuses on devices and services (BBC News 2013). In addition, the cooperation
between Microsoft and Nokia is expected to wrest the dominance position from
Apple and Google.
Nokia firm’s sales dropped to 24% and it
sold 53.7 million of mobile phones during the quarter which decrease to 27% in
2012. Yet, its new Lumia phone’s sales which had run a Microsoft operating
system gained a rose during the period. Mr. Menon said that the deal between
Nokia and Microsoft is able to bring the “hardware closer to the operating
system and achieve a tighter integration”. Besides, Microsoft also agreed a ten
year licensing arrangement with Nokia. Microsoft was the one who use Nokia
brand on current handset products (BBC, 2013).
However, it is hard to regard Nokia as
any other thing than a handset company. Yet, there was a peek into its history that
shows a deep-rooted skill to reinvent it. Mr. Wood claimed that he would not be
against the ‘new’ Nokia managing to pull anything off. In addition, a recent
deal shows that Nokia bought up Siemens’ share in Nokia Solutions and Networks
which was a mobile broadband company. Moreover, the remaining in Nokia’s
product portfolio was its well-regarded maps division. It was a choice of
mapping software in 80% cars which feature built-in dashboard navigation. Luckily,
Nokia’s had dominance early, so it had many crucial patents which allow the
mobile industry to rely. According to Forbes, Nokia’s portfolio is value
somewhere on the region of $4bn (Dave 2013).
In conclusion, Nokia does not blindly
chase the mainstream popularity even if various negative effects may indicate
the starting of the end for Nokia Company as a famous brand in hands of
millions. Thus, many people believe that Nokia is in good condition and moving
forward as it can be transformed into a key player behind the scenes.
Reference:
BBC News 2013, Microsoft to buy Nokia’s mobile phone unit, viewed 7 October 2013, <http://www.bbc.co.uk/news/business-23940171>
BT Online Bureau 2013, Samsung pips Nokia as Indian mobile handset
market grows 14.17% in 2012-13: Survey, viewed 7 October 2013 <http://businesstoday.intoday.in/story/samsung-tops-indian-mobile-handset-market-survey-nokia/1/197981.html>
Dave, L 2013, Nokia: The rise and fall of a mobile giant, BBC News, viewed 7
October 2013, <http://www.bbc.co.uk/news/technology-23947212>
Fried, I 2013, Microsoft to Buy Nokia’s Device Business in Deal Worth $7.17 Billion, viewed 7 October 2013, <http://allthingsd.com/20130902/microsoft-to-buy-nokias-device-business-for-7-17-billion-euros/>
Goyal, M & Jaiswal, K 2011, How Nokia fell from dominance and got pinned
down by competitors, viewed 7 October 2013, <http://articles.economictimes.indiatimes.com/2011-03-27/news/29194836_1_nokia-india-ceo-stephen-elop-nokia-c7>
IBN Live 2013, Samsung beats Nokia to take No.1 spot in Indian mobile phone market,
viewed 7 October 2013, <http://ibnlive.in.com/news/samsung-beats-nokia-to-take-no1-spot-in-indian-mobile-phone-market/416318-11.html>
Monaghan, A 2013, Nokia: the rise and fall of a mobile phone giant, viewed 7 October
2013, <http://www.theguardian.com/technology/2013/sep/03/nokia-rise-fall-mobile-phone-giant>
Mobile Technology Report 2013, The history of Nokia, viewed 7 October
2013, <http://www.mobiletechnologyreport.com/the-knowledge/the-history-of-nokia/>
