As a former global leader in the cell phone industry, Nokia have a history of great ability to adapt new markets with a solid strategy. Formed in 1865, Nokia started out as a lumber mill and moved on to the production of electricity and rubber. In 1992, Nokia decided to focus solely on the cell phones industry and rapidly obtained great market share, and later became pioneers of the wireless revolution which derived the smartphones. Despite this impressive past and former position in the cell phone industry, it is obvious from the case study that Nokia have several problems causing the crucial recession of its market share the past years. One of the problems is the slow decision making which halts the possibility of innovative activities.
Despite a staggering cost of 40 billion dollars on Research and Development, none of Nokia’s cell phones reached the market due to the bad decision making and internal rivalries. In the cell phone industry, it is crucial that you act fast or else you will be outrun by the competitors, which is exactly what happened with Nokia. Rothaermel, Hess (2010, p. 13) states that consistent innovation is the factor that drives the worlds successfully companies and explains that innovation is a crucial competitive advantage for companies in a harsh economic time as it allows them to change the market in their favour and hopefully become market leader. Without any changes in the decision making process and in the innovative culture, Nokia will keep declining, as their competitors such as Apple and HTC Corporation will keep being in front and control the market.
This paper will argue that, in order to achieve a bigger market share and a better competitive advantage, Nokia needs to speed up their decision making and change their innovative culture and the linkage between these activities. Relevant theory will be discussed as well as recommendations for future activities will be provided, in order to get Nokia back on track.
Analysis and Argument
The decision making process from the management of a company is a crucial process in both internal and external perspectives. It determines the current situation and the future of the company, and has to remain continuous due to the constant interactions from the environment. The decision making process determines whether the company succeed or fail when launching a new product on the market, and that is why the company has to know whether the market is ready for their product or not. Baum, J.R. and Wally, S. (2003) states that a fast pace of the decision making is crucial when competitive advantage is desired in a market, as the new product you are launching will be adopted in an early stage and enter the market quicker than your competitors.
This argument is supported by Eisenhardt (1989; as cited in Zehir, C., Mehtap, Ö. 2008 p. 1) who has conducted a study of eight high-tech firms and concluded that the most profitable of these eight firms, were the ones with the fastest decision making process. A more superior study was completed by Judge and Miller (1991; as cited in Zehir, C., Mehtap, Ö. 2008 p. 1) who stated that there is no linkage between the speed of decision making process and the performance of a company only with the exception of fast-moving environments, such as the cell phone industry, where it was discovered that these participating companies had higher performance and fast decision making processes.
The cell phone industry is a fast-moving environment due to the development of new technology and constant changes, and it is in this industry that Nokia is located. Finally, Zehir, C., Mehtap, Ö. (2008) argues in the light of the above evidence and personal studies, that a strategy with fast decision making will lead to competitive advantage. The importance of a fast decision making strategy is supported by the fortune of Nokia from the case study. With a very slow decision making and the sacking of several products, followed up by internal disagreements, the competitors in the fast-moving external environment suddenly started to outrun Nokia, which didn’t manage to address their internal abilities, such as the innovativeness.
According to Andersen, T.J. (2001; as cited in Zehir, C., Mehtap, Ö. 2008 p. 4), especially this innovativeness reflects the company’s capability to be the first in their environment to launch a product or system, and create competitive advantage and corporate performance. Han, J.K., Kim, N., Srivastava, R.K. (1998) supports this theory and believes that the innovativeness serves the purpose of being a mediator between the company’s market orientation, and the company’s performance. Nokia have used a huge amount of expenses to obtain this market orientation, so one could argue
that more efficient innovation is the key to reach better performance.
This precise opinion is what Blundell, R., Griffith, R., Van Reenen, J. (1999) states, as they also links the innovation of a company, with the achievement of greater market share and market stock value. From the above mentioned theories of faster decision making strategy and an efficient innovation performance and the associating arguments of these theories, you can argue that a relationship and cooperation between them is crucial and inevitable. This theory is supported by Zehir, C., Mehtap, Ö. (2008) who defines that the fast decision making combined with innovative performance will lead to better corporate performance. This relationship might be the key to get Nokia back on track and back at the top of the cell phone industry. Recommendation
It is recommended that Nokia change their decision making strategy immediately and become more aware of the changes in the external environment. Nokia ought to design its decision making strategy around Eisenhardt, K. M. (1999) four keys to decision making strategy. First, Nokia needs to establish collective intuition by hosting regular meetings and realistic cases for the management department, which will develop their ability to discover threats and opportunities in an early stage and more precisely. Second, they must assemble diverse teams and challenge them through heuristic and stressing situations with numerous alternatives, so the teams will improve their decision making ability under pressure.
Third, Nokia needs to discipline the timing of the decision making through paced time schedules, prototyping and consensus in the teams to maintain the momentum in the strategic choices. Lastly, emphasize a common goal and a clear set of rules, and remember to have fun. These tactics avoid that the decision makers are getting into interpersonal conflicts and waste the time on politics, which Nokia already have used incredible amounts of time doing without any luck. The execution of these four keys leads towards a more effective strategy, making the decision making process a cornerstone of the strategy. These four keys with the team based approach that is striving to create a common goal and keeping the process fun are to be transferred to the innovation department in order to optimize this as well.
Teams of innovation and development are to be established, instead of letting the employees fight an internal battle for the right to keep their jobs. This battle creates disorder in the internal community, and is discouraging the employees and affects their efficiency. Instead, it is crucial that the innovative department works towards a common goal and is continuously challenged in order for them to keep the momentum and keep improving, while they are having fun doing it. Conclusion
From the arguments presented in this paper, it is apparent that in order for Nokia to return to the top of the cell phone industry and reconquer the lost market share, they need to change the decision making strategy entirely, and develop a much faster and efficient one. This will allow them to launch new products to the market more frequently and increase the opportunity for successful products.
These frequent products will promote the innovative performance and make the company more adaptable to the many changes in the environment, and allow them to affect the market themselves. It is not possible to choose which argument that is the most suitable, as they relate to each other because a faster decision making process leads to more efficient innovative performance, which leads to better corporate performance and more market share. The snowball effect will emerge, but Nokia has to start rolling the ball. With this in mind, these changes will not do it alone. Several corporate changes in the entire organization must be performed in order for this to succeed, but the history of Nokia will help them in this challenge, as they have faced great organizational changes before and know what it takes.
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