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Nokia Corporation is a Finnish multinational communications and information technology organization that originated and is headquartered in Finland. Its main products are mobile phones and portable information technology devices. It also offers Internet services such as games, music, media, messaging, applications, as well as free map information and navigations tools through its exclusively owned subsidiary Navteq. Nokia also has a joint venture with Siemens, and Nokia Siemens Networks, a telecommunications network equipment and services company.
Nokia is a large company, with almost 100,000 employees in 120 countries, with sales in more than 150 countries; it is the world’s second largest mobile phone manufacturer, after Samsung, by 2012 unit sales. However, beginning in 2007, this organization is undergoing a major crisis that is challenging its current and future sustainability. While it was the world’s prime vendor of mobile phone from 1998 to 2012, it has suffered a declining market share over the past five years due to the outpouring popularity of smartphones from companies like Apple (iPhone) and Samsung.
Therefore, Nokia’s share price has significantly lowered from a US$40 in 2007 to under US$2 in mid-2012. After this huge downfall, Nokia decided to implement a strategic partnership with Microsoft in which Nokia smartphones will have Microsoft’s Windows Phone operating system within them, replacing Nokia’s previous operating system, Symbian. However, this decision did not prove to be a success nor save Nokia from its downfall, as the company reported six consecutive loss-making quarters before finally returning to a profit in its fourth quarter in 2012.
So what exactly happened to Nokia that has brought it to its current financial and economic state today? Is there any way that they can bounce back from this tragedy? If so, how? In this research report, I will attempt to explain how and why Nokia is now facing a severe technological challenge, as well as why it has now become an organizational and managerial failure, a sharp contrast to how successful it once was. Next, I will explain how Nokia’s failure to outsmart the competition and its poor choice of disregarding technological trends and advancements has brought it to its economic and financial state today.
I will then remark on Nokia’s current management’s actions and reactions in terms of the organization’s state and whether or not I believe these actions will lead to either sustainability or failure for the future of this company. I will then end this report by providing some suggestions on how to improve Nokia’s chance for sustainability, and hopefully, success in the near and further future. While Nokia faces sustainability, global, and technological challenges, I will focus on their technological failures which greatly attributed to their catastrophic downfall.
Nokia was once one of the worlds’ leading mobile-phone producers. However, in 2012, they failed to adjust their strategy to comply with the new ways people used their phones. By looking through Nokia’s long-running history, it comes as a shock to some as to how disastrous and despairing their situation has become. Nokia started as a riverside paper mill in south-western Finland in the year 1865. It then evolved to produce rubber products such as rubber boots and tires. It was not until 1912 that Nokia began its cable and electronics business.
Nokia’s first electronic device was a pulse analyzer for use in nuclear power plants, produced in 1962. The company’s first endeavour into telecommunications was made in 1963 when it developed radio telephones for military and emergency services. Nokia’s hugely successful period began in the 1979, beginning with the creation of a radio telephone company, and launching the Nordic Mobile Telephone (NMT) service, the “world’s first international cellular network…to allow international roaming (Nokia. com). In 1987, Nokia introduced its first handheld phone for NMT Networks and became a classic. The Global System for Mobile (GSM) communications was also implemented as the European standard for digital mobile technology. International roaming, text messaging, and high-quality voice calls were all easily available on GSM, providing Nokia with a starting point for further innovation. Nokia manufactured its first GSM phone, the Nokia 1011, in 1992. In the same year, new Nokia President and CEO Jorma Ollila made a crucial and game-changing decision to solely focus on mobile-phone manufacturing.
In 1994, Nokia began producing the 2100 series of mobile phones and by 1998, it is the world leader in mobile phones; the company’s strategic decision to focus solely on telecommunications definitely paid off. Innovation and continued success did not end there; in 1999, Nokia launched the Nokia 7110, a phone equipped with web-based capabilities such as email and web browsing, the first of its kind. They also produced a phone that included a built in camera and video capture in the early 2000s.
However, Nokia’s biggest success was in 2002, when the introduction of 3G technologies allowed them to create phones with a wide range of functions including downloading music, watching TV on the go, and so much more. In 2005, due its huge success and impact on the mobile technology industry, Nokia was named the 5th most valuable brand internationally. Things began to take a turn for the worst in 2010 when Nokia met its competitors, namely Apple and Android-based devices. The smartphone era was surging in popularity leaving Nokia behind with its “candy-bar style” phones and outdated operating system.
This downfall for this once highly successful company called for some serious changes, including the assigning of new President and CEO, Stephen Elop, a former head of Microsoft’s business division. Elop has “a strong software background and proven record change management (Nokia. com). ” It may come as no surprise then that Nokia announces its partnership with Microsoft; Nokia mobile phones will be adopting the Windows 7 operating system in order to compete with the Apple iOS and Android. Nokia launched its first Windows phone in 2011.
Since the introduction of Apple and Android devices, Nokia’s economic state has never been the same; and it is quite difficult to say whether they will ever reach that same success in the future again. There are several reasons that can be credited to Nokia’s downward spiral. Firstly, Nokia failed to respond to the changing consumer trend in technology; while consumers were moving on to smartphones with newer, faster operating systems within the likes of Apple and Samsung, Nokia’s Symbian operating platform remained the same and struggled to compete with these new “pocket-sized mini-computers.
In summary, Nokia did not react quickly enough to changing consumer demand, and therefore, were aggressively crushed by the competition in terms of capturing market share. Their late response with the introduction of the Windows phone did not occur until 2011, while Apple and Samsung have been continuously improving their devices and operating systems since 2007. With technology improving so quickly nowadays, four years is a long period for Nokia to, with any luck, catch up. The integration of Microsoft’s Windows 7 as Nokia’s mobile operating system has yet to reap rewards for the organization either.
This may be due to the fact that Apple’s iOS and Google’s Android platforms have gained popularity since their early introduction and remain the leaders of mobile operating systems. Another problem that Nokia encountered is due to its late strategic change; many people associate its classic ‘candy-bar style’, brick phone with outdated technology, just like cassette tape players, and VHS players. Today’s consumers are also very technologically savvy; they need to have the best and newest device as soon as they can get their hands on it.
Nokia also did not market itself as an innovative brand as it stuck by its brick-style phone and operating system for almost a decade before considering any major changes. While Nokia and Microsoft are both huge and strong companies, they will have to go through some rough patches before, and if, they can reach success again. As of now, they are in a financial struggle, cutting many jobs and other financial expenditures. Nokia is indeed focusing on attempting to reinvent the company, and to, hopefully, bring it back to where it once was: a leader in mobile technology.
While there are many opinions floating around the media, it is hard to say what will happen to Nokia in the near future. While they have not done anything drastic, such as file for bankruptcy, they are going through some major, rough changes right now, including cutting thousands of jobs worldwide, and the closure of several factories. In 2012, Nokia announced their plans to cut 10,000 jobs internationally by the end of 2013 as well as the closure of research and development facilities in Finland, Germany, and Canada as stock prices continue to fall.
Nokia’s market value today is below $10 billion. At the end of 2013, it is estimated that about 25,000 employees will be laid off at Nokia; this number of job cuts totals to about 36% of Nokia’s workforce. Things continue to look dim for this organization as Moody’s Investor Services downgraded Nokia’s rating to ‘junk’, further proving its dire state. Nokia’s human resource management did not play a part in its recent downfall as it was due to a technological failure, not a human resource issue.
Nokia was a large, multinational company for quite some time, and its long-run success proves that their human resources teams are nothing short of competent, effective, and diligent. The goal of their human resources management is to satisfy their customers, motivate employees, and increase the dexterity and flexibility of management to address specific HR needs. Nokia’s HR team is also responsible for creating customer satisfaction through the manufacture and delivery of products and services in order to fulfill customer needs.
They were able to do this by providing leading and innovative technology, in the past, to a wide range of clients around the world. Nokia’s intangible services, such as telephone helplines, are available 365 days a year, exemplifying dedicated and excellent customer service. Nokia also treats its employees very well. This organization works together with its employees in order to create a healthy, efficient, and successful environment so everyone can achieve their full potential. Encouragement, motivation, and keeping employees happy are vital for Nokia to perform productively.
Because Nokia is a goods manufacturer, the free flow and exchange of ideas among employees at any level is strongly encouraged. In order to encourage and motivate employees, Nokia has compensation plan consisting of an annual base salary and bonuses. Short-term incentives for both individual and group projects also exist. Overtime pay and call-out pay are also implemented, and employees are able to purchase stock or performance shares. Finally, employee health and pension benefits are compensated to Nokia’s employees to form a healthy and productive work environment.
While the HR strategy and structure at Nokia seem sustainable, some may argue that Nokia’s current and most recent President and CEO, Stephen Elop, has contributed to its present dismal state. Before working for Nokia, Elop worked for Microsoft from 2008 to 2010, and was responsible for Microsoft Office products as a member of the organization’s senior leadership team. The controversy surrounding Elop when he first joined Nokia was the release of his internal company memo titled “Burning Platform” which was immediately leaked to the media.
The memo compared Nokia’s current situation, failing within the flourishing smartphone industry, to a person on a burning oil platform. The reception received from the media was mixed, some stating that Nokia needed that harsh wake-up call to make some drastic changes in strategy, while others called it “the costliest management memo ever written (Ahonen, 2011),” believing he should be fired due to Nokia’s severe and rapid disasters since his arrival. In 2011, Elop made the decision for Nokia to discontinue their in-house mobile operating systems and replace it with Microsoft’s Windows Phone operating system.
The plan was to be carried out gradually in the next few years, with Elop expecting a full discontinuation of the previous Symbian platform by 2016. Technology writers have criticised Elop for this decision by stating that it was done in bad timing and with a lack of communication; later, Elop himself admitted to the damaging effects of his Burning Platform memo. Ahonen has also stated that, because of this memo and Elop’s lack of communication to Nokia employees, the organization “is doing the most rapid death in the shortest period of time ever, for a global market leader Fortune 500 company. So what’s next for Nokia? Throughout all the journals, newspaper articles, blogs, and interviews, it is quite obvious what the main message for Nokia is: do something, and fast. While it is apparent that Nokia faces all three challenges of sustainability, technology, and global endurance, technology is and will remain to be their biggest challenge. Unless Nokia succeeds through technology, being a mobile phone manufacturer, they will not be able to overcome or accomplish the other two challenges of global endurance and sustainability.
It is quite unfortunate that Nokia, once a world leader in its field, failed to meet the technology challenge of keeping up with the current, fast-moving trends of technology and consumers. Nokia’s slow reaction to the shifting trends and the reactions they have made to support themselves have negatively impacted the company’s current economic state, as well as the state of their human resources. Elop’s poor strategic decisions in the hopes of saving Nokia have yet to bear fruit; instead, Nokia has been forced to cut thousands of jobs, and close some of their facilities worldwide.
While these decisions are crucial for Nokia’s short-term survival, serious changes need to be implemented to obtain long-term sustainability, besides partnering with Microsoft. Nokia is a huge, well-known company, and its brand is something everyone knows of; their challenge is to change the way people think about and look at the company: not as an old, obsolete form of mobile technology, but a new, state-of-the-art organization that can adjust to the ever-changing technological tendencies. Elop still has some time to redeem himself as the President and CEO of Nokia, but unless he makes some rastic, positive changes to Nokia, other forms of recovery should be considered. One suggestion for Nokia would be to change its operating system from Microsoft’s Windows Phone to Google’s Android. One of Nokia’s mistakes leading to failure was making the unpopular choice of using Windows as its operating system; they should have realized that choosing Android as their platform would have reaped huge benefits for them as its surging popularity and success have made brands such as Samsung and LG skyrocket to economic prosperity.
Technology experts, such as one engineering executive has even stated that they “don’t understand why Nokia couldn’t develop Android phones—even in parallel with Microsoft’s Windows phones. ” Choosing Windows instead of Android as their new operating system is a huge opportunity Nokia definitely missed out on. Another recommendation would be to sell the company to a successful brand, such as Samsung, who has now redeemed themselves to become Apple’s leading, and closest rival.
By putting themselves under Samsung’s wing, Nokia will gain Samsung’s competitive advantage of being a visionary and innovator, and a fast mover in capturing modern technological trends. While it is never an easy task to admit defeat, selling Nokia to a prosperous company just may be what this organization needs to save itself from further fiascos. A merger with a strong, competitive company, with massive market share and organizational resources may just be what Nokia needs to bring itself back up to what it used to be: an innovative, mobile communications giant with shareholder value, technological advancement, and worldwide success.