The Dominance of the Finnish Corporation, Nokia, on the Mobile Market

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. 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.